Posts Tagged US

OCEAN Rig: COMI shopping cautiously welcomed by US Bankruptcy Court.

I have often argued that the European Commission and by extension the EU’s Insolvency Regulation is wrong in taking as a starting point that forum shopping in insolvency matters as a rule needs to be discouraged. This aversion towards forum shopping is one of the main reasons for the UK and other Member States to keep Schemes of Arrangement and other restructuring devises well out off the reach of the Regulation. (The Brussels I recast for instance allows for much more strategic choice of court use).

Thank you Debra Dandeneau for flagging the US Bankruptcy Court, Southern District of New York’s decision in Ocean Rig. The Court essentially argues that to use forum shopping in a restructuring /insolvency case is absolutely acceptable provided it is done in good faith, particularly with a view to maximizing chances of survival and /or maximal recovery by the creditors. Note that the Court, in determining COMI for the various companies in the group, pays specific attention to the ascertainability, by third parties, of COMI.

A judgment to be applauded. And this posting, incidentally, is the 500th on this blog. To 1000 and beyond!

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.1, Heading 5.4.6.

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Spizz v Goldfarb. Applying the US presumption against extraterritoriality in bankruptcy cases.

Charles Oellermann has excellent analysis of Spizz v. Goldfarb Seligman & Co. (In re Ampal-Am. Israel Corp. 562 B.R. 601 (Bankr. S.D.N.Y. 2017). The U.S. Bankruptcy Court for the Southern District of New York ruled that the avoidance provisions of the Bankruptcy Code do not apply outside the U.S. because, on the basis of the language and context of the provisions, Congress did not intend for them to apply extraterritorially. In so holding, it applied the Morrison test which was central to the United States’ Supreme Court ruling in Kiobel, which of course has been the subject of repeated analysis on this blog.

Whether an avoidance action (which in civil law jurisdictions would be tackled by an actio pauliana) is extraterritorial in and of itself, is not easily ascertained. In his review, Charles has superb overview of case-law applying a centre of gravity test: depending on the facts of the case, parties’ action does or does not take place outside the US in relation to the parties’ domicile, the subject of the transaction, etc.  He also rightfully highlights that courts are aware that even if one were to apply the provisions extraterritorially, a US judgment might not be easily enforced against foreign debtors.

Case-law is evidently not settled and one imagines that the extraterritoriality of bankruptcy laws will in some form further end up at the USSC.

Geert.

 

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Rincon. Overriding mandatory law or ‘lois de police’ in California.

Rincon ((2017) 8 Cal. App 5th 1) is another case suited to comparative conflicts classes. It applies California’s restrictive regime on waiver of jury trial to a contract governed by New York law and with choice of court for New York.

‘Lois de police‘, also known as lois d’application immédiate or lois d’application nécessaire,  are included in the EU’s Rome I Regulation (on applicable law for contracts) in Article 9. (I reported earlier on their application in Unamar).

Jason Grinell has background to the case. Parties had made choice of law and choice of court in favour of New York. The link with New York was real (in EU terms: this was not a ‘purely domestic’ situation), inter alia because of the involvement of New York-based banks, parties being sophisticated commercial undertakings, and the contract having been negotiated in NY. However the real estate development is located at San Francisco, giving CAL a strong link to the case. Under CAL law,  parties generally cannot waive a jury trial before the commencement of a lawsuit unless they use one of two methods approved by the legislature. New York law does not have the same provision and choice of court clauses in favour of New York do not include reference to the only options available under CAL law.

In the case at issue, the boilerplate choice of court clause was set aside by the Court of Appeal. The lower court had denied a substantial enough Californian interest in the case – the CA disagreed. The relevant part of the judgment runs until p.22.

That comparative conflicts binder is filling out nicely.

Geert.

 

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The Pfizer /Allergan collapse: An end to Celtic Cash and a source of inspiration for EU rules on outgoing corporate mobility?

I shall keep this post short for otherwise it risks developing into a book. In a week which also saw the Panama papers blow a hole in the use of tax havens for individuals, the collapse of the Pfizer Allergan merger may be the beginning of the end for the Irish (and similar) corporate tax Nirvana. The US treasury’s new rules on outgoing corporate mobility mean re-incorporation in Ireland has become an awful lot less attractive.

I realise there are caveats and one may be comparing cheese and chalk. Also, tax lawyers no doubt will have to chew over this, yet: may this not also be the moment for the EC to reconsider similar issues in EU law, kicked off some time back by the Daily Mail case?

Geert.

(Handbook of) European Private International Law 2nd ed 2016 Chapter 7.

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Digital import suffices for jurisdiction of the US International Trade Commission in patent infringement

Update November 2015 the CA reversed the finding of jurisdiction on 10 November 2015, confining it to material items. However its judgment was not unanimous (one dissent) nor unequivocal in argument. The case is likely therefore to be continued.

Update 26 August 2015 the CA reportedly was skeptical of the jurisdictional line taken by the ITC, citing in particular enforcement challenges as well as seperation of powers: extension of jurisdiction such as in this case may have to be determined by Congress, not by a regulator.

Update 4 August 2015: the US Court of Appeals will hear arguments on the case mid August.

The US International Trade Commission has held (in re Align Technology Inc, 337-TA-833) that electronic /digital import of plans and manuals with a view to producing moulds for dental aligners (braces) suffices to give the ITC jurisdiction. As I understand the case, the companies violating Align Technology’s patents were based in Pakistan, without domestic residence of any kind in the United States. The data were then used by US-based dental practices to produce the braces.

The foreign residence of the patent infringers fed into arguments made by defendants that a cease and desist order by the ITC would be very difficult to enforce, an argument against upholding jurisdiction in the first place. The ITC was not swayed.

I understand Google, among others, argued that digital data do not qualify as ‘articles’ under relevant US law. Reminiscent to some degree of the dismissal of Google’s arguments by JÄÄSKINEN AG in  Google Spain, the ITC disagreed: digital data are very real articles as, I would argue, the massive market for digital download already amply illustrates.

Geert.

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RERA: a weee chance of US Basel ratification?

Many thanks to Gideon Kracov for pointing this out to me: the proposed Responsible Electronics Recycling Act (a private member’s Bill) would install an EU-type regime on the export of electric and electronic waste outside of the US. The US have signed but not  ratified the Basel Convention : RERA would amount to implementation of the Convention in practice. The Bill also recognises the relevance of recovering the many rare earth materials contained in WEEE.

Here’s the blurb (the official summary of the Bill, in fact):

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Introduced in House (07/23/2013)

Responsible Electronics Recycling Act – Amends the Solid Waste Disposal Act to: (1) prohibit the export of restricted electronic waste to countries that are not members of the Organization for Economic Cooperation and Development (OECD) or the European Union (EU), or Liechtenstein; (2) require the Administrator of the Environmental Protection Agency (EPA) to develop and promulgate procedures for identifying certain electronic equipment as well as additional restricted toxic materials contained in such equipment which poses a potential hazard to human health or the environment; and (3) establish criminal penalties for knowingly exporting restricted electronic waste in violation of this Act. Allows certain exceptions to such export ban.

Defines “restricted electronic waste” to include electronic equipment (excluding parts of a motor vehicle), such as computers, televisions, printers, copiers, video game systems, telephones, and similar used electronic products, that contain cathode ray tubes, batteries, switches, and other parts containing lead, cadmium, mercury, organic solvents, hexavalent chromium, beryllium, or other toxic ingredients.

Requires persons who handle restricted electronic wastes to permit appropriate EPA and state officials access to such wastes upon request.

Directs the Secretary of Energy to establish a competitive research application program to provide grants for research in the recovering and recycling of critical minerals and rare earth elements found in electronic devices.

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The TTIP and the EU’s regulatory standards: Do BITs require an environmental guarantee?

Consultancy Ecologic have released a report which they have prepared for the European Parliament. It reviews the impact which the Transatlantic Trade and Investment Partnership (TTIP) might have on the environmental ‘acquis’ of the European Union (the collected body of EU environmental law). A wide range of issues are discussed – best have a look at the report for all the details. Included are the risks associated with standing for private companies under classic BITs, which as I reported earlier, the EC have recently defended.

The report downplays the impact which the TTIP might have on ECJ case-law [‘The Court of Justice of the European Union (ECJ) has consistently held that international trade and investment agreements only have direct effect within the EU in very limited circumstances. Thus, in past ECJ cases, private companies have not normally been able to rely on e.g. WTO law for invalidating an EU action or claiming damages from the EU. This is likely to apply to TTIP as well.’] That I believe is a touch incautious. The ECJ might qualify its case-law, in particular given that the extent of integration of a trade agreement, is part of the reason for the ECJ to reject direct effect. If the TTIP eventually will include the type of deep(ish) integration forecast, the Court might well find it to have direct effect in certain circumstances.

The report suggests the EP keep a close eye on the provisions in the agreement with an impact on environmental law. This includes the type of regulatory co-operation which the TTIP might yield: a focus on process or on outcome, as neatly summarised by Simon Lester. It makes me wonder whether the Agreement might do with an Article 193 TFEU-type ‘environmental guarantee’.

Geert.

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