The Hungarian Supreme Court on conduct in litigation resulting in implied choice of law.

An overdue post on the Hungarian Supreme Court’s judgment 2020.3.72.a, finding an implied choice of law pro Hungarian law, made by a Serbian and Hungarian party to a contract for agency and business counseling. In the absence of choice of law, per Article 4 Rome I, applicable law would have been Serbian law. Yet the SC held that the conduct of the Serbian business party in the litigation, made for implicit choice of law.

Under Rome I, choice of law may be made and changed at any time during the course of the contract. Whether it can also be made by conduct of litigation is somewhat disputed. Arguments pro rely heavily on a parallel with impromptu choice of court in Brussels Ia, by submission. The Hungarian courts had assessed the merits of the case on the basis of Hungarian law, and the Serbian defendant had engaged in that discussion in a detailed, substantive statement of defence without any objections to Hungarian law being the lex contractus. This, the courts held and the SC agreed, meant parties had made an implied choice of law by their conduct. A change of heart by defendant upon appeal was a unilateral change of law, which cannot bind the parties.

Richard Schmidt sent me the judgment and has additional analysis here– on which I relied for I do not read Hungarian. Scholarship has engaged with the issue and this SC judgment will be highly relevant material for that discussion.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 3, Heading 3.2.4.

 

 

Aspen Underwriting: The Supreme Court overrules on the issue of economically weaker parties in the insurance section.

I wrote earlier on the judgments at the High Court and the Court of Appeal in Aspen Underwriting v Kairos Shipping. The Supreme Court held yesterday and largely upheld the lower courts’ decisions, except for the issue of whether an economically equal party may nevertheless enjoy the benefit of the insurance section of Brussels Ia.

Reference is best made to my earlier posting for full assessment of the facts. The Supreme Court considered four issues.

Issue 1: Does the High Court have jurisdiction pursuant to the exclusive English jurisdiction clause contained in the Policy? This was mostly a factual assessment (is there a clear demonstration of consent to choice of court) which Lord Hodge for the SC held Teare J and the Court of Appeal both had absolutely right. Lord Hodge refers in support to a wealth of CJEU and English (as well as Singapore) courts on assignment and contractual rights v contractual obligations.

Issues 2 and 3: Are the Insurers’ claims against the Bank matters ‘relating to insurance’ (issue 2) within section 3 of the Regulation and if so, is the Bank entitled to rely on that section (issue 3)?

On issue 2, Teare J and the Court of Appeal had held that the Insurers’ claim against the Bank was so closely connected with the question of the Insurers’ liability to indemnify for the loss of the Vessel under the Policy that the subject matter of the claim can fairly be said to relate to insurance.

On this issue the insurers had appealed for they argued that a claim can be regarded as a matter relating to insurance only if the subject matter of the claim is, at least in substance, a breach of an obligation contained in, and required to be performed by, an insurance contract. They referred in particular to Brogsitter and also to Granarolo and Bosworth.

Lord Hodge disagreed with claimant, upholding Teare J and the CA: the need for restrictive interpretation is mentioned (at 38) and at 35 it transpires that of particular relevance in his analysis, is the very wording of the title of the insurance section: unlike all other special jurisdictional rules of interest, it does not include ‘contracts’. Further (at 36),

‘the scheme of section 3 is concerned with the rights not only of parties to an insurance contract, who are the insurer and the policyholder, but also  beneficiaries of insurance and, in the context of liability insurance, the injured party, who will generally not be parties to the insurance contract.’

At 40 he holds that in any event the Brogsitter test is met:

‘The Insurers’ claim is that there has been an insurance fraud by the Owners and the Managers for which the Bank is vicariously liable. Such a fraud would inevitably entail a breach of the insurance contract as the obligation of utmost good faith applies not only in the making of the contract but in the course of its performance.’

[Of note is that the ‘related to’ issue was discussed in Hutchinson and is at the CJEU as C-814/19, AC et al v ABC Sl as I flag in my review of Hutchinson].

However (issue 3) both Teare J and the CA eventually held that the insurance title failed to provide the bank with protection for they argued (as I noted with reference in particular to CJEU Voralsberger) that protection was available only to the weaker party in circumstances of economic imbalance between the claimant insurer and the defendant.

Here the SC disagrees and overrules. Lord Hodge’s reasons are mentioned at 43 ff, and I will not repeat them fully here. They include his view on which he is entirely right and as I have pointed out repeatedly, that recitals may be explanatory but only the rules in the Regulation have legal effect). Bobek AG’s Opinion in C-340/16 Kabeg features with force. Hofsoe is distinguished for, at 56,

‘In none of these cases where the CJEU has relied on the “weaker party” criterion to rule on applications to extend the scope of the section 3 protections beyond those parties who were clearly the policyholder, the insured, the beneficiary or the injured party, did the court call into question the entitlement of those expressly-named persons to that protection by reason of their economic power.’

That assessment is not entirely consistent for as Lord Hodge himself notes, and the CJEU acknowledges, in KABEG, Vorarlberger, Group Josi and GIE the jurisdiction of the forum actoris had been extended under articles 11(1)(b) and 13(2) to include the heirs of an injured party and also the employer who continues to pay the salary of the injured party while he was on sick leave.

All in all, it agree following Lord Hodge’s convincing review of the cases, that it is acte clair that a person which is correctly categorised as a policyholder, insured or beneficiary is entitled to the protection of section 3 of the Regulation, whatever its economic power relative to the insurer. (Even if particularly following Hofsoe the application of the section as a whole might need a more structured revisit by the CJEU). In the case at hand the Bank is the named loss payee under the Policy and therefore the “beneficiary” of that Policy (at 60).

In conclusion: Under A14 BIa the Bank must be sued in The Netherlands.

Finally, whether claims in unjust enrichment fall within article 7(2) (answered by Teare J in the negative) ‘does not arise’ (at 60). I am not entirely sure what this means: was it no longer challenged or was Teare J’s analysis on this straightforward? A different reply than that of Teare J would have required overruling Kleinwort Benson Ltd v. Glasgow City Council (No. 2) [1999] 1 AC 153 (HL), that a claim in unjust enrichment for mistake was neither a matter ‘relating to contract’ nor a matter ‘relating to tort’ for the purposes of EU private international law – an issue I discussed in my earlier posting in particular in its relationship with Rome I and II. With the SC’s refusal to entertain it, that authority therefore stands.

One does wish that the CJEU at some point have an opportunity further to clarify the insurance section and will do so in a holistic manner. The SC judgment here is one big step in the good direction.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 2.2.11.1, Heading 2.2.11.2.

Canadian Supreme Court gives go ahead for consideration of the CSR issues in Nevsun Resources.

I have reported earlier on the issues which yesterday led to the decision of the Canadian Supreme Court 2020 SCC 5 Nevsun Resources Ltd. v. Araya, in which the Supreme Court was asked whether there should be a new tort of breach of international law, and whether the “act of state” doctrine prevents adjudication in the case at issue. The case does not have jurisdictional issues to consider so I shall leave the substantive public international law analysis (not my core area) to others: Dr Ekaterina Aristova’s Twitter feed referenced below should give readers plenty of pointers, as does (which came out just as I was finalising this post) Stephen Pitel’s analysis here.

The case does raise the kinds of questions upon which the US Supreme Court (Kiobel; Jesner) refused to be drawn, particularly issues of corporate culpability under public international law. Again, this is not my area of core expertise and my thoughts here are merely that.

Three Eritrean workers claim that they were indefinitely conscripted through Eritrea’s military service into a forced labour regime where they were required to work at a mine in Eritrea. They claim they were subjected to violent, cruel, inhuman and degrading treatment. The mine is owned by a Canadian company, Nevsun Resources Ltd. The Eritrean workers started proceedings in British Columbia against Nevsun and sought damages for breaches of customary international law prohibitions against forced labour, slavery, cruel, inhuman or degrading treatment, and crimes against humanity. They also sought damages for breaches of domestic torts including conversion, battery, unlawful confinement, conspiracy and negligence.

Nevsun brought a motion to strike the pleadings on the basis of the ‘act of state’ doctrine, which precludes domestic courts from assessing the sovereign acts of a foreign government. Nevsun also took the position that the claims based on customary international law should be struck because they have no reasonable prospect of success.

The act of state doctrine is “a rule of domestic law which holds the national court incompetent to adjudicate upon the lawfulness of the sovereign acts of a foreign state” (R. v. Bow Street Metropolitan Stipendiary Magistrate, Ex parte Pinochet Ugarte (No. 3), [2000] 1 A.C. 147 (H.L.), at p. 269) (Lord Millett). The doctrine exists in Australian and English common law (with plenty of discussion) but is not part of Canadian common law. At 30 Abella J for the majority explains the connections and differences with the doctrine of state immunity. [The doctrine was also at stake in [2018] EWHC 822 (Comm) Reliance v India on which I reported earlier].

The motion was dismissed by the Court of Appeal and the Supreme Court in majority has now agreed, arguing  (ia at 44-45)

The act of state doctrine and its underlying principles as developed in Canadian jurisprudence are not a bar to the Eritrean workers’ claims. The act of state doctrine has played no role in Canadian law and is not part of Canadian common law. Whereas English jurisprudence has reaffirmed and reconstructed the act of state doctrine, Canadian law has developed its own approach to addressing the twin principles underlying the doctrine: conflict of laws and judicial restraint. Both principles have developed separately in Canadian jurisprudence rather than as elements of an all‑encompassing act of state doctrine. As such, in Canada, the principles underlying the act of state doctrine have been completely subsumed within this jurisprudence. Canadian courts determine questions dealing with the enforcement of foreign laws according to ordinary private international law principles which generally call for deference, but allow for judicial discretion to decline to enforce foreign laws where such laws are contrary to public policy, including respect for public international law.

Nor has Nevsun satisfied the test for striking the pleadings dealing with customary international law. Namely it has not established that it is “plain and obvious” that the customary international law claims have no reasonable likelihood of success.

Of note is at 50 the insistence with reference to authority that ‘deference accorded by comity to foreign legal systems “ends where clear violations of international law and fundamental human rights begin” ‘, and the majority’s opinion’s references to the stale nature of the established concept that public international law exists for and between States only.

Clearly the case is not home and dry for the lower courts will now have to address the substantive issues and may still hold for Nevsun. Moreover claimant’s case is based on parts of international law traditionally considered ius cogens – of less use in other corporate social responsibility cases involving environmental issues or more ‘modern’ social rights other than the hard core ius cogens category. Hence in my initial view the precedent value of the case may not be as wide as one might hope. However the clear rejection of the act of state attempt is significant.

Of interest finally is also the judgment at 75 and at 109 citing Philippe Sands’ (KU Leuven doctor honoris causa) formidable East West Street in support.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 8, Heading 8.3.

 

 

The French Supreme Court on fraus (abuse) and international adoptions.

Thank you Pailler Ludovic for signalling the French Supreme Court’s judgment in 18-24.261  A and X v et al B and Y et al. The Court annulled the Court of Appeal’s (Versailles) decision which had accepted for recognition and enforcement a Cameroonian judgment in a Cameroonian-French adoption case.

Legal basis for the refusal is Article 34 of the relevant 1974 FR- Cam Treaty. Specically, the classic ordre public international hurdle to recognition and enforcement: ‘Elle ne contient rien de contraire à l’ordre public de l’Etat où elle est invoquée ou aux principes de droit public applicables dans cet Etat.’

The Supreme Court held that absence of Agrément does not infringe French ordre public international (Agrément is required by French adoption law and needs to be sought by the prospective adoptant). Yet fraus (fraude à la loi) might and needs to be properly examined, which the Court of Appeal had failed to do. Suggestion is made in the case that the adoption was engineered with the sole purpose of facilitating the French rights of residence of the adopting father’s partner, who is the mother of the children.

The case emphasises the relevance of fraus omnia corrumpit. Whether of course fraus will be proven in the new proceedings before the Paris Court of Appeal remains to be seen.

Geert.

 

 

 

Happy Flights v Ryanair. Belgian Supreme Court (only) confirms proper lex causae for validity of choice of court under Article 25 Brussels Ia.

Thank you alumna and appreciated co-author Jutta Gangsted for flagging Charles Price’s (former learned colleague of mine at Dibb Lupton Alsop) and Sébastien Popijn’s alert on the Belgian Supreme Court’s ruling of 8 February last in C.18.0354.N Happy Flights v Ryanair. Happy Flights are a Belgium-based online claim agency to which disgruntled passengers may assign claims for compensation under Regulation 261/2004.

At issue is the validity of Ryanair’s choice of court in its general terms and conditions, referring consumers to Irish courts. The Brussels Commercial court on 30 May 2018 seemingly first of all did not assess whether the agency may be considered a ‘consumer’ within the terms of Irish consumer protection law (itself an implementation of Directive 93/13), having been assigned the consumers’ claims. The May 2018 decision itself is unreported <enters his usual rant about the lack of proper reporting of Belgian case-law>.

The Supreme Court (at 2, line 47) notes this lack of assessment by the lower court. It does not however complete the analysis sticking religiously to its role to interpret the law only, not the facts. Per CJEU Schrems mutatis mutandis I would suggest an affirmative answer (the agency having been assigned the consumers’ rights).

Do note that the use of the word ‘consumer’ in this context must not confuse: the consumer title of Brussels Ia itself does not apply unless the contract is one of combined travel and accommodation (or other services); the Regulation excludes contracts for travel only, from the scope of application of the consumer title.

The Brussels Commercial court subsequently and again from what one can infer from the Supreme Court’s ruling, discussed the validity of choice of court under Article 25 Brussels Ia, reviewing its formal conditions (formation of consent) yet judging the material validity under the lex fori, Belgian law, not the lex fori prorogati, Irish law. This is a clear violation of A25 juncto recital 20 Brussels Ia. The Supreme Court suggests that the relevant Irish implementation of the unfair consumer terms Directive 93/13 does imply invalidity of the clause (again: if the claim is held to fall under the consumer title, this analysis will become superfluous).

Note that the SC omits recital 20’s renvoi instruction, keeping entirely schtum about it: clearly misapplying the Regulation.

The Court’s judgment unlike the understandably enthusiastic briefing by Happy Flight’s counsel does not quite yet mean that Ryanair’s terms and conditions on this issue have been invalidated. However it is likely they will be upon further assessment on the merits – with hopefully the Court of Appeal not omitting Brussels Ia’s renvoi instruction. As I note above first up there will be the issue of assignment rather than the issue of A25.

For your interest, I gave a Twitter tutorial on a related issue (consumer law, lex causae, compulsory referral to arbitration) recently.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 2, Heading 2.2.9, Heading 2.2.9.4.

French Supreme Court on cover by Lugano of legal fees in criminal proceedings – and the proper limits of the ordre public test.

Thank you Hélène Péroz (by now a firmly established reliable source for French PIL case-law) for alerting me to French Supreme Court Case no. 17-28.555, judgment issued late January.

The criminal courts at Geneva have condemned claimant, domiciled at France, to pay a criminal fine of 3,600.00 Swiss Francs, a well as 36,000.00 Swiss Francs towards defendant’s legal fees. The latter were incurred given that defendant in current legal proceedings had entered a civil claim in the Swiss criminal proceedings: a claim which the Geneva judge ordered to be settled through the Swiss courts in civil cases.

Upon fighting the request for exequatur, claimant first of all argues that the French courts’ acceptance of exequatur via the Lugano Convention is outside the scope of that Convention. The matter, he argues, is not civil or commercial seeing as the civil claim was not even entertained.

This of course brings one to the discussion on the scope of application of Lugano (and Brussels Ia) and the perennial difficulty of focusing on nature of the claim v nature of the underlying facts and exercised powers. Now, for civil claims brought before criminal courts there is not so much doubt per se, seeing inter alia that Article 7(3) Brussels Ia (Article 5(4) Lugano 2007) has a specific head of jurisdiction for such civil claims. Claimant’s point of argument here evidently is that this should not cover this particular claim seeing as the legal representation at issue turned out to be without purpose. Not being privy to the discussions that took place at the Geneva court, I evidently do not know the extent of discussion having taken place there (there is no trace of it in the Supreme Court judgment) however one assumes that the Geneva proceedings in theory could have dealt with the civil side of the litigation yet for a factual or legal reason eventually did not. Over and above the intensity of discussions being difficult to employ as a decisive criterion, one can also appreciate the difficulty in separating the civil from the criminal side of the argument made by defendant’s lawyers.

Of perhaps more general interest is the Supreme Court’s rebuke of the lower courts’ treatment of ordre public. Exequatur was granted because, the lower courts had held, the judge in the substantial proceedings has the sovereign right to establish costs under the relevant national procedure. This, it was suggested by these lower courts, shields it from ordre public scrutiny – a clear misunderstanding of the ordre public test. Part of the ordre public considerations had also been that the relative slide in the strength of the Swiss Franc v the Euro, and the generally higher costs of living in Switzerland, put the cost award in perspective. Moreover the judges found that there was insufficient information on the length of the proceedings in Switserland, and the complexity of the arguments. That, however, is exactly the kind of data which the judge in an exequatur assessment ough to gauge.

Geert.

(Handbook of) European Private International Law, 2n ed. 2016, Chapter 2, Heading 2.2.2.2.

Ordre Public in Bankruptcy. The Dutch Supreme Court confirms non-recognition of Yukos liquidation order.

The Dutch Supreme Court late in January has confirmed the lower court’s decision (see my report here) in Yukos, not to recognise the Russian liquidation order of 1 August 2006 regarding OAO Yukos Oil Company. The decision to recognise or not evidently is based on residuary Dutch conflict of laws (the Insolvency Regulation is not engaged).

At 4.1.3 the Supreme Court emphasises that the principle of mutual trust does not apply, as it would do between EU jurisdictions. It then does not perform the entire ordre public exercise from scratch, rather assesses whether the lower court properly carried out said analysis (as befits its role as a Supreme Court). Which it finds, the Court of Appeals did. Its ordre public check did not in the abstract test Russian court proceedings, rather tested whether the precise conduct of all involved parties led to use of the judicial system in a way which compromises the core Dutch legal order (see for more detail on that, my earlier post).

Textbook ordre public.

Geert.

Nevsun Resources Ltd. v. Gize Yebeyo Araya, et al. Some of the unanswered Kiobel and Jesner Bank issues now at the Canadian Supreme Court.

Plenty of goings-on in the Corporate Social Responsibility /mass torts category, as regular readers of the blog and /or my Twitter-feed will know. Thank you Jutta Brunnée for alerting us to Nevsun Resources v Gize Ybeyo et al, currently making its way through the Canadian Supreme Court. Thank you also Cory Wanless for pointing out the core of the issue: Nevsun are not contesting jurisdiction (its existence is secure; much like in the EU context) e.g. on forum non conveniens grounds. Rather, the Supreme Court is asked whether there should be a new tort of breach of international law, and whether the “act of state” doctrine prevents adjudication.

The first question undoubtedly will lead to a discussion of similar issues raised in Kiobel, where they were not discussed by the USSC, and in Jesner Bank, where the USCC refused to be the dealmaker on public international law. The second issue is likely to imply consideration of the very foreign poicy considerations which featured heavily in circuit considerations prior to Kiobel.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 8, Heading 8.3.

Chevron /Ecuador: Ontario Court of Appeal emphasises third parties in piercing the corporate veil issues.

Update 5 April 2019. The Supreme Court yesterday refused leave to appeal hence the Court of Appeal’s judgment now stands firmly.

In Chevron Corp v Yaiguaje, the Canadian Supreme Court as I reported at the time confirmed the country’s flexible approach to the jurisdictional stage of recognition and enforcement actions. Following that ruling both parties files for summary judgment, evidently advocating a different outcome.

The Ontario Court of Appeal have now held in 2018 ONCA 472 Yaiguaje v. Chevron Corporation that there are stringent requirements for piercing the corporate veil (i.e. by execution on Chevron Canada’s shares and assets to satisfy the Ecuadorian judgment) and that these are not met in casu.

Of particular note is Hourigan JA’s argument at 61 that ‘the appellants’ proposed interpretation of the [Canadian Corporation’s] Act would also have a significant policy impact on how corporations carry on business in Canada. Corporations have stakeholders. Creditors, shareholders, and employees, among others, rely on the corporate separateness doctrine that is long-established in our jurisprudence and that is a deliberate policy choice made in the [Act]. Those stakeholders have a reasonable expectation that when they do business with a Canadian corporation, they need only consider the liabilities of that corporation and not the liabilities of some related corporation.’ (emphasis added by me, GAVC)

Blake, Cassels and Graydon have further review here. Note that the issue is one of a specific technical nature: it only relates to veil piercing once the recognition and enforcement of a foreign ruling is sought.

Geert.

(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 8.

 

 

 

WTO examiners: at ease! Canadian Supreme Court holds in R. v. Comeau (New Brunswick restrictions on alcohol trade).

Fellow faculty about to examine students on the Law of the World Trade Organisation, have their exam sorted (especially if it is an oral exam). In 2018 SCC 15 R v Comeau the Canadian Supreme Court held last week. At issue is New Brunswick’s restrictive regime on the import and sale of alcoholic beverages. Greg Tereposky and Daniel Hohnstein have background to the case.

Despite the Province’s regime having clear trade impact, the SC held that it was not illegal under Canada’s internal free trade rules – with occasional reference to GATT and WTO. For comparative and exam purposes, the interesting angle is clear: has the Supreme Court adopted the kind of aims and effects test which the WTO is no fan of?

Copy of the judgment. 15 mins prep. And Bob’s your (oral exam) uncle.

Geert.

(Handbook of) The law of the World Trade Organisation, forthcoming at OUP with Demeester, Coppens, Wouters and Van Calster.