Posts Tagged Unamar
Tobias Gosch and Venus Valentina Wong have excellent overview of T v O (why o why do States feel the need the hide the identity of companies in commercial litigation) in which the Austrian Supreme Court (Oberster Gerichtshof) ruled on whether potential claims under the Austrian Commercial Agents Act (Handelsvertretergesetz) can be brought before an Austrian court even if the underlying agency agreement contains an arbitration clause and is governed by the laws of New York.
The contested part of the litigation, as Tobias writes, concerns the following: the Agent conducted the procurement of sea freight business in Austria and other countries of the European Union for the Principal. Whilst the territorial scope of the Agent’s activities complies with the conditions for the international overriding mandatory applicability of the compensation provisions of the Directive as set out by the ECJ in Ingmar, the procurement of business is not covered by the relevant definition in the Directive, which only refers to the sale or purchase of goods. Including the procurement of business therefore is a form of gold-plating and the national law’s decision to do so does not uncontestedly fall under the protection of overriding mandatory law. In other words it does not necessarily override parties’ choice of law and ensuing choice of court.
The judgment refers inter alia to Unamar to justify its direction. Rather like, as I reported at the time, the Belgian Supreme Court, the Austrian Supreme Court, too, fails properly to assess whether the Austrian legislator intended the Austrian provisions to be of overriding mandatory law character per Rome I: “1. Overriding mandatory provisions are provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under this Regulation.
The European Court of Justice’s general statement in Unamar that gold-plated provisions may fall under overriding mandatory law, looks set by national courts to be turned into a matter of fact priority. That surely at some point ought to be disciplined by the CJEU.
As Valentina points out, the judgment betrays lack of confidence in commercial arbitration. ‘It is arguable whether the arbitration agreement is really ineffective or inoperable (under Article II(3) NYC or section 584 ACCP respectively) just because it provides for arbitration in New York and New York law as applicable substantive law. A prudent arbitral tribunal seated in New York may very well be able to decide a matter in compliance with (mandatory) EU or national law on commercial agents, in particular if the future award will have to be enforced in a EU member state.’
(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 3, Heading 220.127.116.11.
Fern v Intergraph: High Court takes a narrow view of mandatory requirements on choice of law and court viz Commercial Agents Directive
In  EWHC 2908 (Ch) Fern v Integraph, Mann J was asked whether a clear Texas governing law and Texas jurisdiction clause should be set aside, jurisdiction upheld by the English courts and applicable law to be held to be English law, on the basis of an alleged infringement of the UK implementation of the Commercial Agents Directive. (The procedural context is one of permission to ‘serve out of the jurisdiction’).
Fern was the agent of Intergraph in the EU. Fern claims compensation for breach of the Commercial Agents Regulations (UK), which implement the Commercial Agents Directive. Some core EU law considerations pass before the High Court, including Marleasing, Faccini Dori, von Colson and Inter-Environnement. The High Court’s main pre-occupation would seem to have been with the rescue of choice of court and of governing law as much as possible, even within the constraints of the ECJ’s decision in Ingmar. In that judgment (which was confined to choice of law; the jurisdiction of the English courts was not sub judice), the ECJ held
‘It must therefore be held that it is essential for the Community legal order that a principal established in a non-member country, whose commercial agent carries on his activity within the Community, cannot evade those provisions by the simple expedient of a choice-of-law clause. The purpose served by the provisions in question requires that they be applied where the situation is closely connected with the Community, in particular where the commercial agent carries on his activity in the territory of a Member State, irrespective of the law by which the parties intended the contract to be governed.’ (in the case at issue, a choice of law clause had been inserted which made the contract applicable to the laws of California).
However, the operative part of the ECJ’s decision in Ingmar focussed on the compensation element only: ‘Articles 17 and 18 of Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents, which guarantee certain rights to commercial agents after termination of agency contracts, must be applied where the commercial agent carried on his activity in a Member State although the principal is established in a non-member country and a clause of the contract stipulates that the contract is to be governed by the law of that country.’
In the case at issue, the High Court seems to have leapt at the more narrow operative part in Ingmar (and its non-consideration of choice of court) in an effort to uphold the choice of court and governing law agreement: the right to compensation derives from statutory law, not from contractual obligations. Whence it does not affect aforementioned clauses. In reaching that conclusion, however, Mann J effectively refused to consider effet utile of the Commercial Agents Directive when interpreting English rules of civil procedure for serving out of jurisdiction. Effet utile does resurface, however, for parties have been given time to submit their views on whether the right to compensation as a statutory right, infringement of which would amount to a tort, would fall outside the scope of the relevant contractual clauses and would lead to jurisdiction in the English courts.
Even if this will be the eventual decision of the High Court after re-submission of arguments, it is likely that the confines of that jurisdiction in England will be narrowly defined. (Viz the right to compensation only). This is a striking difference with e.g. the German courts. (I have previously posted on the view of the Bundesgerichtshof: a much swifter and absolute rejection of choice of court and governing law ex-EU in the context of the commercial agents Directive).
A rather complex and as yet unfinalised ruling.
Wahl AG in Unamar: national gold-plating of Union law does qualify as lois de police under the Rome Convention
I flagged earlier that regardless of the outcome for the Unamar case itself, an important consideration would be what the Court’s eventual answer will teach us about the Rome I Regulation on the applicable law for contracts (as opposed to its Treaty predecessor, the Rome Convention, which applies to the case at issue). Wahl AG’s Opinion was published this morning (as often, the English version was not yet available at the time of writing). It focuses almost entirely on the Rome Convention – for which from a legal point of view it cannot be faulted.
Belgium’s stronger protection of the agent, long held by Belgian law to be of overriding mandatory rules calibre, gold plates the regime of the Commercial Agents Directive, Directive 86/653. In Unamar, parties have agreed on Bulgarian law being applicable law (as well as incidentally on the case having to go to arbitration in Bulgaria first, attempting to circumvent Belgian law which proscribes the use of arbitration for disputes such as those at issue; the AG notes that this issue was not actually part of the questions referred by the Hof van Cassatie, hence he does not entertain it). The question therefore arises as to whether Belgian law, the lex fori, can justifiably trump Bulgarian law of which no suggestion is being made that it does not meet the minimum standard of the precited Directive.
In view of the minimum harmonisation character of the commercial agents Directive, and of there being no indication that such application leads to infringement of primary EU law, the AG suggests that Belgium courts are justified to qualify the Belgian gold-plating as being of overriding mandatory character.
As I noted when I flagged the reference, in my view the answer would have to be different under the Rome I Regulation. In the absence of a reference to gold plating in Article 9, and (arguably) its presence in Article 3, effect utile requires that the allowance for national rules of overriding mandatory nature, does not cover gold plating. However in the Rome Convention which is applicable to the case referred, EU law as mandatory law does not figure at all, and the room for overriding rules is much wider than it is in the Rome Regulation.
One will have to wait for the ECJ’s judgment to assess whether the Court itself will reveal anything on its position vis-a-vis the Regulation.
The Court of Justice has an opportunity to clarify the exact relationship between mandatory and overriding mandatory provisions of EU and national law under the Rome Convention on applicable law to contracts (! do note that the issue is formulated differently in the Rome Regulation).
‘Overriding mandatory provisions’ is what French and Belgian private international law refers to as ‘lois de police‘, also known as lois d’application immédiate or lois d’application nécessaire. Lois de police is the term used in the French version of the Regulation. In Arblade, which concerned free movement of services and the application of lois de police in Belgian legal practice, the Court of Justice described ‘public order legislation’ as
national provisions compliance with which has been deemed to be so crucial for the protection of the political, social or economic order in the Member State concerned as to require compliance therewith by all persons present on the national territory of that Member State and all legal relationships within that State
In the Rome I Regulation on applicable law for contracts, room is made for overriding mandatory provisions as follows:
Overriding mandatory provisions
1. Overriding mandatory provisions are provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under this Regulation.
2. Nothing in this Regulation shall restrict the application of the overriding mandatory provisions of the law of the forum.
3. Effect may be given to the overriding mandatory provisions of the law of the country where the obligations arising out of the contract have to be or have been performed, in so far as those overriding mandatory provisions render the performance of the contract unlawful. In considering whether to give effect to those provisions, regard shall be had to their nature and purpose and to the consequences of their application or non-application.
Under the Rome Convention, which ratione tempore applies to the contract at issue, room for manoeuvre for the forum was wider:
Article 7 – Mandatory rules
1. When applying under this Convention the law of a country, effect may be given to the mandatory rules of the law of another country with which the situation has a close connection, if and in so far as, under the law of the latter country, those rules must be applied whatever the law applicable to the contract. In considering whether to give effect to these mandatory rules, regard shall be had to their nature and purpose and to the consequences of their application or non-application.
2. Nothing in this Convention shall restrict the application of the rules of the law of the forum in a situation where they are mandatory irrespective of the law otherwise applicable to the contract.
Belgium’s stronger protection of the agent, long held by Belgian law to be of overriding mandatory rules calibre, gold plates the regime of the Commercial Agents Directive, Directive 86/653. In Unamar, parties have agreed on Bulgarian law being applicable law (as well as incidentally on the case having to go to arbitration in Bulgaria first, attempting to circumvent Belgian law which proscribes the use of arbitration for disputes such as those at issue). The question therefore arises as to whether Belgian law, the lex fori, can justifiably trump Bulgarian law of which no suggestion is being made that it does not meet the minimum standard of the precited Directive.
Were the case to be decided under the Rome I Regulation, I would argue in view of effet utile, that in the absence of a reference to gold plating in Article 9, and (arguably) its presence in Article 3, that the allowance for national rules of overriding mandatory nature, does not cover gold plating. However in the Rome Convention which is applicable to the case referred, EU law as mandatory law does not figure at all, and the room for overriding rules is much wider than it is in the Rome Regulation.
A reference of this kind is long overdue. What remains to be seen as what the Court’s eventual answer will teach us about the Rome Regulation (as opposed to the Convention).