Posts Tagged Verordening 44/2001
Many of you will have already seen (e.g. via Giesela Ruehl) the German Supreme Court (Bundesgerichtshof – BGH)’s refusal to recognise and enforce a Polish judgment under the Brussels I Regulation (application was made of Brussels I but the Recast on this issue has not materially changed). The BGH argued that enforcement would violate German public policy, notable freedom of speech and freedom of the press as embodied in the German Constitution.
Giesala has the necessary background. Crux of the refusal seemed to be that the Court found that to require ZDF to publish by way of a correction /clarification (a mechanism present in all Western European media laws), a text drafted by someone else as its own opinion would violate ZDF’s fundamental rights.
Refusal of course is rare and in this case, too, one can have misgivings about its application. The case however cannot be decoupled from the extremely strong sentiment for freedom of speech under German law, for obvious reasons, and the recent controversy surrounding the Polish law banning the use of the phrase ‘Polish concentration camps’.
I am very pleased to have been given approval by professor Burkhard Hess to publish the succinct comment on the case which he had sent me when the judgment was issued. I have included it below.
European private international law, second ed. 2016, Chapter 2, 184.108.40.206.1, 220.127.116.11.4
The German Federal Civil Court rejects the recognition of a Polish judgment in a defamation case under the Brussels I Regulation for violation of public policy
Burkhard Hess, Max Planck Institute Luxembourg
In 2013, the German broadcasting company ZDF (a public body) broadcast a film about Konzentrationcamps. In the film, it was (incorrectly) stated that Auschwitz and Majdanek were “Polish extermination camps”. Further to the protests made by the Polish embassy in Berlin, ZDF introduced the necessary changes in the film and issued an official apology. However, a former inmate of the KZ, brought a civil lawsuit in Poland claiming violation of his personality rights. With his claim he sought remedy in the form of the broadcasting company (ZDF) publishing on its Internet home page both a declaration that the history of the Polish people had been falsified in the film and a statement of apology. Ultimately, the Cracow Court of Appeal ordered the publication of the declaration on the company’s home page. While ZDF published the text on its website visibly for one month, it did not post it on its home page.
Consequently, the plaintiff sought the recognition of the Polish judgment in Germany under the Brussels I Regulation. However, the German Federal Court denied the request for recognition on the grounds that it would infringe on German public policy (article 34 No 1 Regulation (EU) 44/2001). In its ruling, the Court referred to the freedom of the press and of speech (article 5 of the Constitution) and to the case-law of the Constitutional Court. The Court stated that the facts had been incorrectly represented in the film. However, it held that, under German law, ordering a declaration of apology qualifies as ordering a declaration of opinion (Meinungsäusserung) and that, according to the fundamental freedom of free speech, nobody can be obliged to make a declaration which does not correspond to his or her own opinion (the right to reply is different as it clearly states that the reply is made by the person entitled to the reply). As a result, the Polish judgment was not recognized.
BGH, 19 July 2018, IX ZB 10/18, The judgment can be downloaded here.
To my knowledge, this is one of the very rare cases where a foreign judgment was refused recognition in Germany under article 34 no 1 of the Brussels I Regulation (now article 45 (1) (a) Brussels Ibis Regulation) because substantive public policy was infringed.
Speaking frankly, I’m not convinced by the decision. Of course, the text which the ZDF, according to the Cracow court, had to make as its own statement represented a so-called expression of opinion. Its imposition is not permissible under German constitutional law: requiring the ZDF-television to making this expression its own would have amounted to an infringement of the freedom of speech as guaranteed by article 5 of the Constitution.
However, it corresponds to well settled principles of the recognition of judgments to substitute the operative part of the foreign judgment by a formula which comes close to it. This (positive) option is totally missing in the formalistic judgment of the Federal Civil Court. In this respect I’m wondering why the BGH did not simply order that the operative part of the Polish judgment as such was declared enforceable. My proposed wording of a declaration of enforceability would be drafted as follows: “According to the judgment of the Appellate Court of Krakow the ZDF is required to publish the following decision:…”
This solution would have solved the problem: No constitutional conflict would have arisen and the political issues would have mitigated. Seen from that perspective, the judgment appears as a missed opportunity.
For the facts of the case, and the reasoning of the AG in C-559/14 Meroni, I refer to my earlier posting. At the end of May (I am indeed still hoovering up the queue) the Court held very much alongside Kokott AG’s Opinion, I shall therefore not repeat its reasoning here. The CJEU does insist that if third parties rights are directly affected with the intensity as in the case at issue, that third person must be entitled to assert his rights before the court of origin (which English courts provide for), lest one runs the risk of the injunction being refused recognition under ordre public. As I had feared, the Court does not address the AG’s concern whether Mareva orders actually constitute a ‘judgment’ for the purposes of the Regulation.
Post Brexit, this considerable attraction of English courts in interlocutory proceedings might become a lot less real. (Like many of us, I am working on a short review of Brexit consequences for European private international law).
(Handbook of) European private international law, second ed. 2016, Chapter 2, 18.104.22.168.1, 22.214.171.124.4
Schemes of arrangement: No scheming, and no hastily arranging, please. The High Court adjourns hearing in Indah Kiat.
I have reported before on various schemes of arrangement which the English Courts gave the go-ahead even when they concerned non-English companies (I should flag that in two of those, Apcoa and Van Gansewinkel, I acted as expert). Thank you Arie van Hoe for bringing Indah Kiat to my attention some weeks ago.
Indah Kiat is a Dutch BV seeking an order convening a single meeting of its scheme creditors to consider and if thought fit approve a scheme of arrangement pursuant to Part 26 of the Companies Act 2006. The application is strenuously opposed by one of the Scheme Creditors, APP Investment Opportunity LLC (“APPIO”), which contests the jurisdiction of the court to entertain or sanction the Scheme. Such opposition is different from the other schemes which I mention in my previous postings.
In the first instance, APPIO simply seeks an adjournment of the Scheme Company’s application on the grounds that inadequate notice has been given to Scheme Creditors. However, it also raises a significant number of other issues concerning the adequacy of the evidence and disclosure by the Scheme Company, together with questions concerning the procedure and scope of the court’s jurisdiction to sanction creditor schemes for foreign companies in relation to debts governed by foreign law.
The Scheme Company is a special purpose vehicle which was incorporated for financing purposes in the Netherlands. It sought the COMI way to enable English courts to obtain jurisdiction over the scheme. English jurisdiction, required to carry out the Scheme, usually rests on either one of two legs: COMI, or making English law the governing law of the underlying credit agreements (if necessary by changing that governing law en route).
The COMI route to jurisdiction in many ways defies the proverbial impossibility of having one’s cake and eating it. For the establishment of a company’s centre of main interests, the courts and practice tend to refer to the EU’s Insolvency Regulation. Yet that schemes of arrangement do not fall under the Insolvency Regulation is a crucial part of the forum shopping involved in attracting restructuring advice to the English legal market. This is especially so for the aforementioned second route to jurisdiction (a change in governing law). however it is also true for the first form. Snowden J refers to that at para 85-86 of his judgment.
Indah Kiat has effected its change of COMI (rebutting the presumption of COMI being at its registered seat) by notifying its creditors via a number of clearing houses for the Notes concerned. APPIO contest that this notification sufficed for change in COMI. There are not enough relevant facts in the judgment to consider this objection thoroughly, however APPIO’s misgivings would not seem entirely implausible.
Snowden J notes that whilst protesting the jurisdiction, in the first instance APPIO simply seeks an adjournment of the convening hearing on the grounds that inadequate notice has been given of it to Scheme Creditors. It contends that given the complex nature of the Scheme and the factual background, there is no justification for an urgent hearing of the application. The Court agreed and the convening hearing (different from the sanction hearing, which follows later) was adjourned until 3 March. Snowden J further gave extensive argument obiter as to why the Scheme’s information was insufficient in the form as it stood at the hearing.
He then revisits (82 ff) the jurisdictional issue, which I have already signalled above: what role exactly COMI should play, how the Brussels I recast intervenes, what the impact is of likely recognition of the sanction (if any) in Indonesia, The Netherlands, and the US; and what if any role the relevant US judgments in the case should play: there will be plenty of points for discussion at the convening and sanction hearing. (I mentioned above that the convening hearing was scheduled around 3 March; I have not heard from the case since however if anyone has, please do let me know).
I do not think Indah Kiat has made the jurisdictional hurdle higher for Schemes of Arrangement involving foreign companies. Rather, the fierce opposition of an important creditor has brought jurisdictional issues into sharper perspective than had been the case before.
(Handbook of) EU Private International Law, Chapter 5, Heading 5.4.2).
Kokott AG on the notion of ‘judgment’ and the compatibility of Mareva orders with EU law (ordre public).
In Kokott AG’s words, ‘following the West Tankers case…in the present case the Court is once again confronted with a specific procedural feature of the Anglo-American legal system.’
Article 34 of the Brussels I Regulation (Article 35 in the recast) enables a court, by way of derogation from the principles and objectives of the Regulation, to refuse to recognize a judgment given by a court of another Member State. The whole starting point of the Regulation and its antecedents was to avoid much recourse to refusal of recognition. Free movement of judgments lies at the very core of the foundations of European private international law.
Little wonder then that the Regulation leaves limited freedom for Member States authorities (including courts) who are asked to recognise and enforce another State’s judgment. As I noted at the time, in Trade Agency the CJEU insisted that refusal of recognition on the basis of ordre public is only possible after review of the individual merits of the case. Courts in other EU Member States may not decide that the English system as such as contrary to public policy in the state of enforcement. Relevant case-law was most recently summarised by (the same) Kokott AG in fly LAL and also in Diageo.
The exequatur procedure of the Brussels I Regulation has been amended in the Brussels I Recast. However it is exactly on issues of the rights of the defence that exequatur can never be entirely automatic, even among EU Member States.
In Case C-559/14 Meroni, at issue are Mareva injunctions: (sometimes) worldwide freezing orders issued by English courts (among others), designed to prevent a creditor being deprived of access to the debtor’s assets as a result of a prior disposal of those assets. However, as is often the case, the reputation of Mareva injunctions far exceeds their actual bite. There is no one size fits all such injunction and a number of tools are at the disposal of both the debtor affected, and third parties, to have the order varied or indeed lifted. The rights of third parties in particular are quite relevant in the current review with the CJEU. Part of the injunction are often the debtor’s participations in companies: for the recalcitrant debtor may find all sorts of useful ways to spirit value away from his companies and into vaults safe from prying English or European eyes – especially if the debtor is sole or majority shareholder.
In the case at issue, Mr A.L. is prohibited, inter alia, from disposing of assets which can be attributed directly or indirectly to his property. The injunction extends to interests in the Latvian company VB. Mr A.L. has a direct interest in that company with only one share. According to the referring court, however, he is also the ‘beneficial owner’ of shares in at least one other company (‘Y’), which itself has substantial interests in VB. Mr Meroni is part of the management of Y. Following a seizure ordered by the relevant Latvian office, he also acts as the bailee for the interests in Y. for which Mr A.L. is the beneficial owner. Mr Meroni claims that the freezing injunction prevents the shareholder Y. from exercising its voting rights in respect of VB. This affects constitutionally protected property rights, especially since the company was not heard in the English proceedings. This, it is argued, is contrary to the principle of the right to a fair trial.
The AG Opined differently. At 44, she argues that it is not clear to what extent that injunction might be contrary to basic principles of Latvian substantive law or procedural law, especially since, as the referring court acknowledges, the Latvian legal order does permit judgments as provisional measures without a prior hearing of the party against whom enforcement is sought. Consequently measures such as Mareva orders cannot be said to be fundamentally against the Latvian ordre public. At 45: ‘ Aside from this, the English freezing injunction at issue does not provide for any irreversibly drastic measures for its enforcement overseas, in particular in so far as third persons who were not parties to the proceedings in England are concerned. Rather, the freezing injunction claims legal effects on third persons resident in other countries — and thus the companies controlled by Mr A.L. — only subject to strict requirements: first, it is to have legal effects on a without notice basis only where this is permitted by the foreign law; second, anyone served with the freezing injunction may apply to the court to vary or discharge it; and, third, compliance with contractual obligations in other countries is still to be possible notwithstanding the freezing injunction.‘ (footnotes omitted)
There is no evident breach of basic principles of the legal order of the State in which enforcement is sought – breach of ordre public must therefore be rejected.
Now, earlier in the judgment, the AG also considers albeit more or less obiter (the CJEU is certain not to entertain it) what may in fact be the more important (for it tends to be less sub judice at the CJEU) part of her Opinion: whether the Mareva orders actually constitute a ‘judgment’ for the purposes of the Regulation. Ms Kokott suggests that the Denilauler criteria (easily fulfilled in the case at issue: see para 31) ought to be relaxed under the Regulation, as opposed to the stricter approach under the 1968 Convention. That is because following judgment in ASML, notwithstanding defects in service, if the person concerned fails to commence proceedings in the State of origin of the judgment to challenge the judgment issued upon default, when it was possible for him to do so, recognition may not be refused. The AG suggests to extend the ASML rule to provisional measures.
European private international law, second ed. 2016, Chapter 2, 126.96.36.199.1, 188.8.131.52.4
And the winner is….National law. Saugmandsgaard ØE AG in Austro-Mechana on Tort and reproduction rights.
Determining whether a legal relationship is one in tort, for the purposes of (now) Article 7(2) of the Brussels I Recast Regulation, is in principle subject to autonomous interpretation. National law ought not to feature (emphasised ia in Melzer). In the Brussels I Regulation, Article 5(3) features alongside Article 5(1)’s jurisdictional rule for contract. (In the Recast Regulation, Artt 7(1 and (2)). Sometimes, as in Brogsitter, both are present between two contractual parties and one needs to be separated from the other. In Kalfelis, the CJEU defined ‘tort’ as ‘all actions which seek to establish the liability of a defendant and which are not related to a “contract” within the meaning of Article 5(1).‘
Tobias Lutzi’s review is very useful in reminding us of the need to distinguish the two tracts of the Kalfelis definition. Just focusing on Brogsitter might lead one into thinking that Article 5(1) and 5(3) [7(1) /7(2)] ‘dovetail’: i.e. if it is not the one, it is the other (with tort being the subordinate category). That is however clearly not the case: that it may have looked like this in Brogsitter is due to liability being present in any case: the issue was there where contractual liability stops and liability in tort takes over.
Article 5(3) therefore requires an ‘action which seeks to establish the liability of a defendant’ which leads the Advocate General here into lengthy review of the Austrian implementation of EU law on copyright levies. With respect, I do not think that is what is either called for or justified. Article 5(3) requires an autonomous, EU interpretation. Too much interference of national law spoils that broth – a point also made in Melzer. Moreover the application of the jurisdictional categories is just that: it determines jurisdiction only. Once that settled, the national courts regain their authority to requalify and indeed may still decide that there is no liability in tort (or contract, as the case may be) at all, but rather one in contract (or tort, as the case may be) or indeed none at all.
I feel Sharpston AG’s centre of gravity etc. modus operandi, suggested by her re distinguishing between Rome I and II in Ergo but (probably) not accepted by the Court, would have come in handy at the jurisdictional level in Austro Mechana, too.
The CJEU’s judgment here is one to look out for.
European private international law, second ed. 2016, Chapter 2, Heading 184.108.40.206
Gazprom, arbitral Antisuit Injunctions and the Judgments Regulation: Wathelet AG gets one or two things off his chest
Wathelet AG opined yesterday in Gazprom, Case C-536/13, re the fate of arbitral anti-suit injunctions. (See my posting on the application, for context). He takes the opportunity to add to the chorus of criticism of the ECJ’s West Tankers ruling, at considerable length; and to review the ‘new’ regime under the Brussels I recast, in light of recital 12 of that Regulation.
His review of the ‘new’ regime of the Brussels I recast, and the contrasting positions of the EC and a number of Member States, support my proposition that the recast, by incorporating a summary of previous case-law in its recitals, has certainly not clarified things beyond discussion. Wathelet in fact suggest that the recitals do rebuke the ECJ and return application of the Regulation to the Rich scenario – however I am not convinced that Rich itself necessarily clarifies things. (It, too, like Van Uden and like the current recital, uses a confusing variety of criteria. I have a paper forthcoming on the Brussels I recast (already in a Dutch version should readers be interested) which looks into this).
At any rate, the lengthy review of the position under the recast evidently is outside the scope of the preliminary review, since the recast does not apply to it, and the ECJ is certain not to entertain the AG’s review of the recast and his rebuke of West Tankers at all. (Although his critical views are not likely to endear him to the Court).
Returning to the actual questions, the AG suggests the Court reply that that the Brussels I Regulation is not applicable in the present case (it falling exclusively within the scope of the 1958 New York Convention) and that, in any event, (what is effectively) an anti-suit injunction issued by an arbitration tribunal is not contrary to that Regulation. Finally, that under the New York Convention, a Member State cannot classify Brussels I’s jurisdictional regime as being ‘ordre public’ and hence capable of leading to refusal of recognition of an arbitral award.
The AG decisively supports arbitration in this opinion, however the ECJ is bound to be much shorter (and perhaps less sympathetic) in its judgment. To be continued….
Granted, only Monday mornings arguably may excuse such lame pun in a blog’s posting. However the slightly lousy title should not take away from the relevance of Celtic Salmon v Aller Acqua in which the Irish High Court partially refused recognition of a Danish judgment.
Hogan J summarised the issue as follows: Where a defendant in foreign proceedings governed by the Brussels Regulation (Council Regulation No. 44/2001 EC) fails to advance and maintain a counter-claim for damages for (sic) in those proceedings, is that party then barred by the doctrine of res judicata or by the provisions of the Brussels Regulation itself from re-litigating that counterclaim for damages for breach of contract and negligence in existing proceedings in this jurisdiction where it sues as plaintiff?
Celtic Salmon used Aller Ireland, the Irish subsidiary, as anchor defendant. The mother company, Aller Denmark, was duly joined to the proceedings. Vets, commissioned by Celtic Atlantic, had established a deficiency in the feed supplied by Aller Denmark. The dispute between the parties then started with a letter sent by Celtic Atlantic in July, 2008 claiming damages for the (allegedly) defective fish feed. Aller Denmark responded by denying liability, but also claimed for unpaid invoices in respect of the fish feed. In November 2008, aller Denmark fired the first shot in litigation, suing in Denmark. There were two separate claims. First, Aller Denmark claimed in respect of certain unpaid invoices for the fish feed (“claim 1”). (It also reserved its position to make further claims in this regard. The claim taken forward only related to a fraction of the feed actually supplied). Second, it sought an order that “Celtic be ordered to admit that the delivered feed on which Aller Acqua’s claim is based is in conformity with the contract.” (“claim 2”).
Celtic’s Irish solicitors, according to the judgment, advised that it would be unwise to bring a counter-claim in the Danish proceedings, because to do so “would preclude us from bringing proceedings in Ireland for damages for breach of contract.” In May 2009, Irish proceedings were brought by Celtic. These amounted to a claim for damages for negligence and breach of contract by reason of the allegedly defective nature of the fish feed.
The Danish courts accepted jurisdiction on the basis of Article 5 based upon (whether this had been agreed was disputed between parties) delivery (incoterm) ex works /ex factory. This is the point were procedural difficulties started (hence the relevance of lexi fori). The reports earlier commissioned by Celtic, turned out not to be admissible (or at the very least would be regarded with suspicion) by the Danish courts given that under Danish civil procedure, the court appoints its own experts. However at the time this would have been carried forward, both fish and fish feed were no longer. Celtic Atlantic elected not to pursue the counterclaim in respect of the defective feed, and reserved the right to do so at a later date (without specific reference to Danish or Irish courts).
The Danish court eventually sided with Aller in respect of two claims: claim 1 for debt in respect of the two unpaid invoices in the sum €58,655 plus interest. Claim 2” that “Celtic [Atlantic] be ordered to admit that the delivered feed on which Aller [Denmark]’s claim is based is in conformity with the contract. There was subsequently discussion among Danish experts in the Irish courts, whether the Danish judgment was in default of appearance, given the absence of defence against at least part of it.
The question now sub judice was the fate of the Irish proceedings, Hogan J justifiably concluded that Article 27 JR (the lis alibi pendens rule) no longer had any relevance, given that the Danish proceedings had come to an end. Rather, whether Celtic’s claims in the Irish courts were the same as those entertained in Denmark (and hence continuing them in Ireland, per se abusive, ia given comity) and /or whether Aller could waive the Danish judgment in defence of the Irish claims. The latter would imply recognition of the Danish judgment.
[The High court carries out a review of the Danish court’s jurisdiction under Article 5(1) and 3, with reference as for the latter inter alia to Folien Fischer however in doing so I would argue it surpassed its brief: other than for exclusive jurisdictional rules, under the current Brussels I regime, there is no room for other courts to second-guess the application of the Regulation by other courts].
Article 34(1) of the Brussels Regulation provides that “A judgment shall not be recognised: 1. If such recognition is manifestly contrary to public policy in the Member State in which recognition is sought…..” Hogan J emphasises procedural rights per Krombach, and the Charter, and concludes that by reason of the manner in which the Danish Administration of Justice Act operated in this case, the effective procedural rights of Celtic Atlantic were violated so far as claim 2 is concerned. He insisted that (only) on ‘the special and particular facts of this case, the existence and operation of the Danish law operated (…) as an “insuperable” procedural obstacle which barred the effective prosecution of its claim.’ (at 124).
A considerate judgment and one which, if only because of its rarity and the insight it offers into procedural and tactical considerations in entertaining, or not, counterclaims, stands out in national case-law on the Brussels I- Regulation.
Update 19 September 2019 the relevant Greek Court of Appeal has refused to recognise the judgments awarding damages, on account of ordre public. Appeal with the Supreme Court and CJEU reference seem likely.
I have reported before on the lis alibi pendens issue in the Alexandros litigation. (The left-over claims as identified in my previous post were, I understand, dropped, and hence the need for ECJ referral subsided – Hill Dickinson have a good summary of the various proceedings here). The Court of Appeal on the 18th of July held on the now (following the Supreme Court’s intervention) remaining issue of declarations, damages and indemnities in respect of the owners’ proceedings in Greece seeking damages from the insurers, despite proceedings for sums due under the relevant insurance policies having been settled in England pursuant to a choice of forum clause. (Apologies for this all being a bit dense – reading my previous post helps). (Greek courts in fact rejected the claims in April).
The left-over issue essentially boils down to the question whether despite the ECJ’s prohibition of anti-suit injunctions for subject-matter falling within the Brussel I-Regulation, Member States courts are free to award damages to the party suing elsewhere in the EU in spite of a choice of court agreement between parties. The Court of Appeal held that they are. It justifiably, in my view, distinguished Turner v Grovit . In Turner v Grovit, the ECJ is concerned with mutual trust and allowing (and indeed trusting) the courts in the other Member States to make their own, proper application of the Regulation. Turner and Grovit does not uphold jurisdiction for the other court: it upholds the opportunity for that other court properly to apply the Regulation, which may or may not lead it to uphold jurisdiction.
The judgment of the Court of Appeal re-enforces the attraction of English courts as a destination of choice: parties wishing to torpedo (a prospect less likely in the Brussels I-bis Regulation) may or may not succeed in convincing alternative courts of their jurisdiction. English courts since Turner cannot issue anti-suit. However they may still hold party liable for having breached the choice of court agreement.
In Bank St Petersburg, the High Court issued an anti-enforcement injunction on 14 May. The Bank had obtained a number of Russian judgments in their favour (in interlocutory proceedings), which they aimed to have enforced in France and Bulgaria. Following the Russian judgments however parties agreed to have their core dispute (the control over a Russian company against the background of a restructuring operation of the Arkhangelskys’ financial interest) judged exclusively by the English courts. The anti-enforcement injunction bans the Bank from having the judgments enforced in France, Bulgaria, or anywhere else.
Prima facie the injunction escapes all attention under the Brussels I Regulation: the judgments, enforcement of which is sought, originate from outside the EU. The choice of court clause is agreed between two parties domiciled outside of the EU, whence also falling outside the Regulation in its current version (this will change following the Brussels I-recast). (Notwithstanding Article 23(3)’s limited protection by instructing courts not named in the clause to desist – however Article 27’s lis alibi pendens rule would still protect the courts who despite this instruction hear the case anyway). Of particular note is also the subject-matter of the underlying dispute, which might be caught, if the Regulation were applied reflexively (such as the High Court did in Ferrexpo), by reflexive application in favour of the Russian courts of the exclusive Jurisdictional rule of Article 22(2).
These are altogether not very forceful points of entry for the Brussels I-Regulation to have a calling in the matter. Therefore this also rules out that the injunction might be caught by the ECJ’s general aversion vis–a-vis ‘anti-suit’ injunctions.