Posts Tagged Scope of application

Kubicka: Narrow CJEU interpretation of the ‘property law’ exception.

When the ‘Bolkestein’ Directive on the free movement of services was eventually adopted some years back, some of us referred to it as the ‘hairdressers’ Directive (no disrespect): the scope of application was so narrowed down that few professions seemed still to be covered by it. Similarly, the EU’s Succession Regulation Member States wanted to ensure that the recognition and enforcement of rules on succession /estate would not upset national property law on rules held dear, such as numerus clausus. The Regulation to that effect excludes from its scope of application ‘the nature of rights in rem; and any recording in a register of rights in immoveable or moveable property, including the legal requirements for such recording, and the effects of recording or failing to record such rights in a register.’

In C-218/16 Kubicka the Court of Justice held last week. Ms Kubicka wishes to include in her will a legacy ‘by vindication’, which is allowed by Polish law, in favour of her husband, concerning her share of ownership of the jointly-owned immovable property in Frankfurt an der Oder. She wishes to leave the remainder of the assets that comprise her estate in accordance with the statutory order of inheritance, whereby her husband and children would inherit it in equal shares.  She expressly ruled out recourse to an ordinary legacy (legacy ‘by damnation’), as provided for by Article 968 of the Civil Code, since such a legacy would entail difficulties in relation to the representation of her minor children, who will inherit, as well as additional costs. A notary’s assistant refused to draw up a will containing the legacy ‘by vindication’ stipulated by Aleksandra Kubicka on the ground that creation of a will containing such a legacy is contrary to German legislation and case-law relating to rights in rem and land registration.

In the present case, both the legacy ‘by vindication’, provided for by Polish law and the legacy ‘by damnation’, provided for by German law, constitute methods of transfer of ownership of an asset, namely a right in rem that is recognised in both of the legal systems concerned. Therefore, the direct transfer of a property right by means of a legacy ‘by vindication’ concerns only the arrangement by which that right in rem is transferred at the time of the testator’s death. It is not covered by the exception.

Member States and practitioners who suggested an interpretation of the exception beyond its limited scope, were therefore rebuffed. That is a good thing. Property law often for no apparent reason is considered immune from conflict of laws, both in terms of jurisdiction and applicable law. The CJEU’s judgment in Kubicka puts a hold to too wide an interpretation of the rei sitae exception.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 6, Heading 6.2.2.1.

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Sabbagh v Khoury. The Court of Appeal struggles on merits review for anchor defendants.

Sabbagh v Khoury at the High Court was the subject of a lengthy review in an earlier post. The Court of Appeal has now considered the issues at stake, in no lesser detail.

In line with my previous post (readers unfamiliar with it may want to refer to it; and to very good Hill Dickinson summary of the case), of particular consideration here is the jurisdictional test under (old) Article 6(1) Brussels I, now Article 8(1) in the Recast, in particular the extent of merits review; and whether the subject matter of the claim comes within the succession exception of Article 1(2)(a) of the Brussels I Regulation.

As for the latter, the Court, after reviewing relevant precedent and counsel argument (but not, surprisingly, the very language on this issue in the Jenard report, as I mention in my previous post) holds in my view justifiably that ‘(t)he source of the ownership is irrelevant to the nature of the claim. ..The subject matter of the dispute is not whether Sana is an heir, but whether the defendants have misappropriated her property.‘ (at 161).

With respect to the application of Article 6(1) – now 8(1), the majority held in favour of a far-reaching merits review. Lady Justice Gloster (at 166 ff) has a minority opinion on the issue and I am minded to agree with her. As she notes (at 178) the operation of a merits test within Article 6(1) does give rise to risk of irreconcilable judgments, which can be demonstrated by reference to the present facts. She successfully, in my view, distinguishes the CJEU’s findings in Kolassa and in CDC, and the discussion at any rate one would have thought, merits CJEU review.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.12.1

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On ‘civil and commercial’, and, again, notaries as courts. The CJEU in Pula Parking.

Issued on the same day as Zulfikarpašić, Pula Parking Case C-551/15 deals with similar core issues, with a few extras thrown in. Pula Parking, a company owned by the town of Pula (Croatia), carries out, pursuant to a decision of the mayor of that town, the administration, supervision, maintenance and cleaning of the public parking spaces, the collection of parking fees and other related tasks. In September 2010, Mr Tederahn, who is domiciled in Germany, parked his vehicle in a public parking space of the town of Pula. Pula Parking issued Mr Tederahn with a parking ticket. Since Mr Tederahn did not settle the sums due within the period prescribed, Pula Parking lodged, on 27 February 2015, with a notary whose office is in Pula, an application for enforcement on the basis of an ‘authentic document’. A notary issued a writ of execution on 25 March 2015, on the basis of that document.  In his opposition, Mr Tederahn put forward a plea alleging that the notary who issued the writ of execution of 25 March 2015 did not have substantive and territorial jurisdiction on the ground that that notary did not have jurisdiction to issue such a writ on the basis of an ‘authentic document’ from 2010, against a German national or a citizen of any other EU Member State.

Does the Brussels I recast apply at all? And does it relate also to the jurisdiction of notaries in the Republic of Croatia?

On the temporal scope of the Brussels I Recast, the Court repeats its (Brussels Convention) Sanicentral (Case 25/79) finding: the only necessary and sufficient condition for the scheme of the Regulation to be applicable to litigation relating to legal relationships created before its entry into force is that the judicial proceedings should have been instituted subsequently to that date. Accession timing is irrelevant to the case: per C-420/07 Apostolides the Act of Accession of a new Member State is based essentially on the general principle that the provisions of EU law apply ab initio and in toto to that State, derogations being allowed only in so far as they are expressly laid down by transitional provisions.

On the substantial scope of the Brussels I Recast Regulation, for the issue of ‘civil and commercial’ the Court refers to its standing case-law (particularly most recently Aertssen and Sapir). In casu, it would seem (the national court is asked to confirm) that the parking debt claimed by Pula Parking is not coupled with any penalties that may be considered to result from a public authority act of Pula Parking and is not of a punitive nature but constitutes, therefore, mere consideration for a service provided. Brussels I applies.

However, notaries in casu do not act as courts: in a twin approach with Zulfikarpašić, the Court holds that the writ of execution based on an ‘authentic document’, issued by the notary, is served on the debtor only after the writ has been adopted, without the application by which the matter is raised with the notary having been communicated to the debtor. (at 58) Although it is true that debtors have the opportunity to lodge oppositions against writs of execution issued by notaries and it appears that notaries exercise the responsibilities conferred on them in the context of enforcement proceedings based on an ‘authentic document’ subject to review by the courts, to which notaries must refer possible challenges, the fact remains that the examination, by notaries, in Croatia, of an application for a writ of execution on such a basis is not conducted on an inter partes basis.

Geert.

European private international law, second ed. 2016, Chapter 2, Heading 2.2.16.1.1. Chapter 6, Heading 6.2.1.

 

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Siemens: Debt arising from the unjustified repayment (by the authorities) of a fine for infringement of competition law excluded from Brussels I.

The Court held in C-102/15 Siemens just before mine and their summer break. It had escaped my attention. At issue was whether debt arising from the unjustified repayment of a fine for infringement of competition law falls within the scope of application of the Brussels I Recast. It does not. The Court distinguished flyLAL: while private actions brought to ensure compliance with competition law fall within the scope of the Regulation, a penalty imposed by an administrative authority in the exercise of the regulatory powers conferred upon it under national legislation comes within the concept of ‘administrative matters’, excluded from the scope of Regulation No 44/2001 in accordance with Article 1(1) thereof.(at 35).

An action in unjust enrichment related to the interest due, following to and fro, imposition and rescinding, ending finally in confirmation of the fine, is intimately bound up with that fine and therefore follows it in the exclusion.

A judgment of note for those who wish to keep complete overview.

Geert.

(Handbook of) European private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.2.2 ff.

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KA Finanz. The CJEU finds it does not need to entertain the corporate exception in European PIL and turns to EU corporate law instead.

Thank you, Matthias Storme, for alerting me late last night that judgment was issued in Case C-483/13 KA Finanz AG. The CJEU is asked to clarify the ‘corporate exception’ to the Rome Convention and subsequent Regulation on the law applicable to contractual obligations. The two main questions ask whether the ‘company law’ excepted area includes (a) reorganisations such as mergers and divisions, and (b) in connection with reorganisations, the creditor protection provision in Article 15 of Directive 78/855 concerning mergers of public limited liability companies, and of its successor, Directive 2011/35. I have a little more on the background in previous posting and I expressed my disappointment with Bot AG’s Opinion here.

The Court, like the AG, justifiably rejects a great deal of the questions as inadmissible, mainly due to the secondary law, interpretation of which is sought, not applying ratione temporis, to the facts at issue. It then in essence simply turns to European company law, in particular Directive 2005/56, to settle the issue. Why exhaust oneself with analysis of the corporate exception, if a different piece of EU law exhaustively regulates the issue? At 56 ff

It is stated in Article 2(2)(a) of Directive 2005/56 that a merger by acquisition is an operation whereby one or more companies, on being dissolved without going into liquidation, transfer all their assets and liabilities to another existing company, namely the acquiring company.

As regards the effects of such an operation, it is stated in Article 14(2)(a) of Directive 2005/56 that a cross-border merger brings about, from the date when the merger takes effect, the transfer of all the assets and liabilities of the company being acquired to the acquiring company.A merger by acquisition therefore entails the acquisition by the acquiring company of the company being acquired in its entirety, without extinguishing the obligations that a winding-up would have brought about, and, without novation, has the effect of substituting the acquiring company for the company being acquired as party to all of the contracts concluded by the latter. Consequently, the law which was applicable to those contracts before the merger continues to be applicable after the merger. It follows that EU law must be interpreted as meaning that the law applicable following a cross-border merger by acquisition to the interpretation of a loan contract taken out by the acquired company, such as the loan contracts at issue in the main proceedings, to the performance of the obligations under the contract and to how those obligations are extinguished is the law which was applicable to that contract before the merger.

(here: German law).

I appreciate the narrow set of facts upon which the CJEU holds allows one to distinguish. The spirit of the Court’s judgment in my view must however be what I have advocated for some time. Other than for a narrow set of issues immediately surrounding the very creation, life and death of the merged company, for which lex societatis applies, European private international law upholds lex contractus (often: lex voluntatis: the law so chosen by the parties) for the considerable amount of contractual satellites involving a merger and similar operations. Rome I is fully engaged for these contracts, including its provisions on third party impact of a change in governing law (this is relevant where the parties to the merger, decide to amend applicable law of the inherited contracts).

Geert.

 (Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.6.5, Chapter 3, Heading 3.2.2 .

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Winkler v Shamoon. Another High Court look at the ‘wills and succession’ exception.

In Winkler v Shamoon [2016] EWHC 2017 Ch Mr Justice Henry Carr broadly follows Mrs Justice Susan Carr in Sabbagh v Khoury (which I have reviewed earlier) on the interpretation of the ‘wills and succession’ exception in the Brussels I Recast (and the Lugano convention). [The Justices themselves, incidentally, are neither related nor married, I understand]. In so doing, Sir Henry follows Dame Susan’s approach vis-a-vis the exclusions in the Brussels I Recast.

Ms Alexandra Shamoon accepts that she is domiciled in the UK for the purposes of the Brussels Regulation.  However, she applies for an order on essentially the same basis as that set out above, contending, in particular, that the claim relates to succession and therefore falls outside the scope of the Brussels Regulation. Brick Court have summary of the case and hopefully do not mind me borrowing their heads-up of the facts:

the case concerns the estate of the late Israeli businessman, Sami Shamoon.  Mr Shamoon owned and controlled the Yakhin Hakal Group of Israeli companies and was known in his lifetime as one of the wealthiest men in Israel.  The claim was brought by Mr Peretz Winkler, formerly the Chief Financial Officer and manager of Yakhin Hakal, against Mrs Angela Shamoon and Ms Alexandra Shamoon, the widow and daughter respectively of Mr Shamoon and the residuary legatees under his will.  In his claim Mr Winkler alleged that prior to his death Mr Shamoon had orally promised to transfer to him certain shares worth tens of millions of dollars.  On the basis of the alleged promise Mr Winkler claimed declarations against Angela and Alexandra Shamoon as to his entitlement to the shares (which they are due to receive under Mr Shamoon’s will).  Angela and Alexandra challenged the jurisdiction of the English Court to hear the claim on the basis that it was a matter relating to “succession” within article 1(2)(a) of the Brussels Regulation and therefore fell outside its scope (and that England was not the natural or appropriate forum for the dispute).

If the claim does fall within the scope of the Regulation, jurisdiction is quite easily established on the basis of the defendant’s domicile – albeit with contestation of such domicile in the UK by Mr Shamoon’s widow and daughter.

Carr J held that the claim was one relating to succession and therefore fell outside of the Brussels I Recast (at 53 ff). While I may concur in the resulting conclusion, I do not believe the route taken is the right one. Sir Henry follows Mrs Justice Carr’s approach in applying the excluded matters of the Brussels I Recast restrictively. I disagree. Exclusions are not the same as exceptions: Article 24’s exclusive rules of jurisdictions are an exception to the main rule of Article 4; hence they need to be applied restrictively. Article 1(2)’s exclusions on the other hand need to be applied solely within the limits as intended. Lead is also taken from Sabbagh v Koury with respect to the role of the EU’s Succession Regulation. Even if the UK is not party to that Regulation, both justices suggest it may still be relevant in particular in assisting with the Brussels I Recast ‘Succession’ exception. If the approach taken in Winkler v Shamoon is followed it leads to a dovetailing of the two Regulations’ respective scope of application. Not a conclusion I think which is necessarily uncontested.

The High Court concludes (at 72) ‘this claim is excluded from the Brussels Regulation and the Lugano II Regulation as its principal subject matter is “succession” within the meaning of Article 1(2)(a).  In particular, it is a claim whose object is “succession to the estate of a deceased person” which includes “all forms of transfer of assets, rights and obligations by reason of death”. It is a succession claim which concerns “sharing out of the estate”; and it is a claim within the definition of “succession as a whole” in Article 23 of the Succession Regulation, as a claim whose principal subject matter concerns  “the disposable part of the estate, the reserved shares and other restrictions on the disposal of property upon death”: Article 23(h); and an “obligation to …account for gifts, …when determining the shares of the different beneficiaries”: Article 23(i).

Intriguingly, of course, had the UK be bound by the Succession Regulation, and given the dovetailing which the judgment suggest, the next step after rejection of jurisdiction on the basis of the Brussels I Recast, would have been consideration of jurisdiction following the Succesion Regulation. It is ironic therefore to see the Regulation feature as a phantom piece of legislation. Now you see it, now you don’t.

Geert.

(Handbook EU Private international law, Chapter 2, Heading 2.2.2.10).

 

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Winter has truly arrived. Bot AG skates around lex societatis issues in KA Finanz.

In Case C-483/13 KA Finanz AG, the CJEU is asked to clarify the ‘corporate exception’ to the Rome Convention and subsequent Regulation on the law applicable to contractual obligations. The two main questions ask whether the ‘company law’ excepted area includes (a) reorganisations such as mergers and divisions, and (b) in connection with reorganisations, the creditor protection provision in Article 15 of Directive 78/855 concerning mergers of public limited liability companies, and of its successor, Directive 2011/35. I have a little more on the background in previous posting. The Opinion itself has a complete overview of the issues at stake.

I suggested in my previous posting that lest the complete file posted with the Court give more detail, quite a few of the preliminary questions might be considered inadmissible due to a lack of specification in the factual circumstances.

Bot AG, who opined yesterday (at the time of posting, the English version of the Opinion was not yet available), has considerably slimmed down the list of questions eligible for answer, due to the (non-) application ratione temporis of secondary EU law at issue: this includes the Rome I Regulation. However he also, more puzzlingly, skates around the question concerning the application of the corporate exception of the 1980 Rome Convention, despite the judgment which is being appealed with the referring court, having made that exception the corner piece of its conflicts analysis. In particular, it considered that the consequences of a merger are part of the corporate status of the company concerned and that the transfer of assets within the context of a merger consequently need to be assessed viz-a-viz the company’s lex societatis: Austrian law, and not, as suggested by claimants, German law as the lex contractus relevant to the assets concerned (bonds issued by the corporate predecessor of the new corporation).

The AG focuses his analysis entirely on the specific qualification of the contract at issue (conclusion: sui generis), and on Directive 2005/56. In paras 47-48, he suggests that contractual obligations of the bank’s predecessor, per Directive 2005/56, are transferred to the corporate successor, including the lex contractus of those agreements. One can build an assumption around those paras, that the AG suggests a narrow interpretation of the corporate exception to the Rome Convention, etc. However it is quite unusual for one to have to second-guess an AG’s Opinion. Judicial economy is usually the signature of the CJEU itself, not its Advocate Generals.

I am now quite curious what the CJEU will make of it all.

Geert.

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