Conflict of Laws .net

An interesting article written by Giesela Rühl has recently been published in the German legal journal Rabels Zeitschrift (71 RabelsZ 2007, 559 et seq.):

“Die Kosten der Rechtswahlfreiheit: Zur Anwendung ausländischen Rechts durch deutsche Gerichte”

Here’s the English abstract:

Free choice of law has been the focus of the economic analysis of law for several years. However, most of the contributions have concentrated on one aspect of choice-of-law clauses only, namely their efficiency. In contrast, few authors have taken note of other economic problems that free choice of law might pose. One of these problems is the fact that choice-of-law clauses – at least if they call for application of foreign law – incur significant costs. After all, domestic courts will have to apply a law that they do not know and whose application, therefore, is more expensive than the application of domestic law. In economic terms, these additional costs can be classified as negative external effects. They may result in inefficiencies unless the parties – when making their choice consider and, thus, internalise the additional costs associated with the applicationof foreign law. Unfortunately, under current German law no such internalisation takes place: Courts have to determine the content of foreign law ex officio. And the parties neither have to support the courts in this endeavour nor to bear all the costs involved. This article, therefore, discusses several proposals for legal reform designed to provide the parties with an incentive to consider the additional costs when making their choice of law. More specifically, it discusses the economic advantages and disadvantages of adopting a lex fori approach, of requiring the parties to plead and proof foreign law and of increasing the court fees in cases where the parties have chosen a foreign law. It comes to the conclusion that the last option complies best with economic and legal requirements and, therefore, suggests to change German law accordingly.

Chris Knight (St John’s College Oxford [BCL]) has written a short article in the Cambridge Law Journal entitled, “Owusu and Turner: The Shark in the Water?” (2007, 66: 288-301). Here’s the abstract:

An important current issue in the conflict of laws is how to deal with the decision of the European Court of Justice in Owusu v. Jackson. It has left numerous unanswered questions on the scope of the Brussels I Regulation and the future is deeply uncertain. Much could be written on whether Owusu is correct, and even more on where one should progress from the current position. But the concern of the present article is more limited: how does the decision in Owusu interact with the previous decision of the European Court of Justice in Turner v. Grovit? Before addressing that question, however, it is necessary to introduce both decisions, and, in particular, the different views of where the future after Owusu may lie.

Those with access to the CLJ can download it from here; otherwise, you can purchase the article for £10.00.

A critical article on the Rome II Regulation has been written by Helmut Koziol and Thomas Thiede (both Vienna) and is published in the latest issue of the Zeitschrift für vergleichende Rechtswissenschaft (ZVglRWiss 106 (2007), 235 et seq.):

“Kritische Bemerkungen zum derzeitigen Stand des Entwurfs einer Rom II-Verordnung”

Koziol and Thiede criticise the general rule provided in Art.5 of the Proposal (COM(2006) 83 final (now Art.4 of the Regulation)) for focusing solely on the interests of the injured party by designating the law of the country in which the damage arises or is likely to arise and not taking into account the interests of the liable party sufficiently.

The authors argue that this rule neglected the basic principles of liability law, the main purpose of which is the compensation of the damage suffered by the injured party. Since - according to the rule of casum sentit dominus - everybody has to bear the risk within one’s own sphere, a special justification was necessary to transfer liability to others. This was only the case if the other party is “closer” to the damage. Thus, not only the interests of the injured party, but also the interests of the liable party should be taken into account and should be balanced. Further, special rules derogating from the general rules in a large number of cases, as provided in Art.5 (2) and (3) of the Proposal (now Art.4 (2) and (3) of the Regulation), are not regarded as desirable since those might result in the consequence that either the general rule was applied in cases not included in the special rules without good reason or that the special rules were applied analogously which might lead to the result that the general rule is not applied anymore.

Therefore, the authors conclude that a general rule which designates in principle the law of the country in which the event giving rise to the damage occured - except cases where the occurrence of the damage could have been foreseen by the liable party - would have been preferable. As an alternative, which is more similar to the existing rule, the authors suggest a rule which designates the law of the country where the damage occurs, providing for an exception for cases where the damaging effects were not foreseeable for the tortfeasor.

Davor Babić has published an article on the choice-of-court and choice-of-law clauses in the cross-border contracts involving immoveables (“Izbor nadležnog suda i mjerodavnog prava u ugovorima o nekretninama s međunarodnim obilježjem”) in the July edition of the Croatian monthly journal Pravo i porezi, pp. 47-58.

The summary states that the author deals with the contents and limits of party autonomy when prorogating competence of a foreign court or arbitral tribunal, as well as when choosing the applicable law for the contracts concerned with immoveables. Both issues are analyzed, first under the Croatian private international law de lege lata, and then under the unified rules of acquis and quasi-acquis in the field of private international law. The latter is important particularly due to the fact that following the potential Croatian membership in the EU, the analyzed national legal sources would be to a great extent replaced by the European ones.

Perhaps not as fresh news as possible but still worth noting is the second most recent edition of the Croatian journal Law in Economics, vol 46, no. 2, which brings together some of the proceeds from the 14th Croatian Arbitration and Conciliation Days held on 30 November and 1 December 2006 in the Croatian Chamber of Economy in Zagreb. The number of renewed foreign and Croatian legal experts and practitioners gathered at this annual meeting to present current developments in arbitrations of several legal systems and institutional rules, including Austrian, Croatian, Italian, Serbian and Swiss. The contributions published in the cited journal are as follows:

Krešimir Sajko: On Conciliation as an Alternative Way of Settling Private International Law Disputes – The Existing Situation and the Solutions De Lege Ferenda, pp. 7-18.
Nina Tepeš: Activities and Practice of the Conciliation Centre of the Croatian Chamber of Economy, pp. 19-26.
Mihajlo Dika: Legal Position of Institutional and Ad Hoc Arbitration in Croatian Law De Lege Lata and De Lege Ferenda, pp. 27-37.
Hrvoje Sikirić, Zagreb Rules and the Arbitration Act in Practice of the Permanent Arbitration Court at the Croatian Chamber of Economy – Selected Issues, pp. 38-70.
Miljenko A. Giunio, Compétence de compétence – A Preliminary Decision or an Award?, pp. 71-89.
Eduard Kunštek, Authority of the ICSID Arbitration Court for Stay of Enforcement of an Award, pp. 60-101.
Aleksandra Maganić, Arbitrability in Non-Contentious Matters, pp. 102-133.
Boris Stanić, Arbitral Settlement of Disputes Arising Out of the Agreements on Association of the Attorneys-at-Law, pp. 133-150.
Gašo Knežević, New Serbian Law on Arbitration, pp. 151-161.
Arsen Janevski/Toni Deskoski, Law on International Arbitration in the Republic of Macedonia, pp. 162-177.

The papers by foreign authors will be published in the next edition of the Croatian Arbitration Yearbook.

In a recent decision, Richman v Ben-Tovim 2007 2 SA 283 (SCA); [2007] 2 All SA 234 (SCA), the Supreme Court of Appeal of South Africa decided that the mere physical presence of the defendant in the foreign jurisdiction at the time process was served is a sufficient basis for international jurisdiction in the context of the recognition and enforcement of foreign judgements sounding in money. (The judgement under neutral citation [2006] SCA 148 (RSA) may be downloaded from www.supremecourtofappeal.gov.za. The decision of the court a quo was reported as Richman v Ben-Tovim 2006 2 SA 591 (C) (per Van Zyl J).)

There was some uncertainty in this regard as in Purser v Sales; Purser v Sales 2001 3 SA 445 (SCA) it was stated by the same court that South African private international law only accepted domicile or residence within the foreign jurisdiction and submission to the jurisdiction of the foreign court as grounds for international jurisdiction in this context. But in the Richman case, it was held: “There are compelling reasons why…, in this modern age, traditional grounds of international competence should be extended, within reason, to cater for itinerant international businessmen” (par 9; per Zulman JA). “[P]ublic policy would require the recognition by a South African court of a lawful judgment given by default by an English court where personal service in England had taken place” (par 12; per Zulman JA). Reading the Purser and Richman decisions together, it may be stated that the following grounds for international jurisdiction in respect of judgements sounding in money are recognised in South African private international law today: (1) domicile, residence or physical presence of the defendant within the foreign jurisdiction at the commencement of the proceedings; and (2) submission to the jurisdiction of the foreign court.

Arbitral awards remain delocalized under the French law of international arbitration. They can be recognised and enforced in France irrespective of the decision of the court of the seat of the arbitration to set them aside. F.A. Mann, and many in England are of the opinion that arbitration only exists if the seat of the arbitration allows it. Lex facit arbitrum. The French disagree and believe that arbitration is a private activity, which can be considered favorably or unfavorably, but certainly does not need to be empowered by any state ex ante. Thus, if the court of the seat nullifies the award, this does not mean that it cannot be recognised in another legal order. Would any court think of nullifying a road accident?

This delocalization doctrine builds on the Hilmarton precedent. On June 29, 2007, the French Supreme Court for Private Matters (Cour de cassation) confirmed in a case where the award had been set aside by the High Court in London. It held that the arbitral award did not belong to any state legal order, and that, as a consequence, it was an “international decision”, the effect of which was a matter for the courts where recognition or enforcement was sought. In other words, it was not an “English award” for the sole reason that it had been made by a tribunal seating in England. As usual, the Cour de cassation relied on article VII of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards to justify the application of the French law of arbitration when it is more favorable than the NY Convention.

The dispute had arisen between French company Est Epices and Indonesian company PT Putrabali Adyamulia. Putrabali had sold white peper to Est Epices, but the goods were lost during the carriage by sea. Est Epices refused to pay, and Putrabali initiated arbitral proceedings in London under the aegis of the International General Produce Association. In 2001, an arbitral panel found that Est Epices was entitled not to pay the price. Putrabali challenged the award before the English High Court, appealing on a point of law as the 1996 Arbitration Act allowed it to. The challenged was admitted and the award partially set aside. A second award was made in 2003, and found in favor of Putrabali, ordering Est Epices to pay Euro 163,086.

Est Epices sought recognition of the first 2001 award in France. The 2001 award was declared enforceable by the Paris court of appeal in March 2005. Putrabali appealed to the Cour de cassation. In a first judgment of June 29, 2007, the Court dismissed the appeal on the grounds given above.

At the same time, Putrabali had sought the recognition of the second 2003 award. In November 2005, the Paris Court of Appeal held that it could not be declared enforceable. In a second judgment of June 29, 2007, the Cour de cassation confirmed. It held that the recognition of the first award precluded the recognition of the second, as the first had res judicata. This was already held 13 years ago in Hilmarton.

The rationale behind the French solution is to limit the influence of local peculiarities. So, if a local mandatory rule obliges some witnesses to swear in a particular religious form, this should not be let jeopardize the whole arbitral process. In Putrabali, the award had been set aside as a consequence of a review of its merits. From France, this certainly looked like a shocking local peculiarity.

Two annotations discussing the judgment given by the European Court of Justice on 3 May 2007 on Article 5 (1) (b) Brussels I Regulation in Color Drack have been published in German legal journals:

Stefan Leible/Christian Reinert (both Bayreuth), EuZW 2007, 372 and

Burghard Piltz (Gütersloh), NJW 2007, 1801.

See with regard to the Advocate General’s opinion and the judgment also our older posts which can be found here and here.

Christian Heinze (Hamburg) has published an article on the enforcement of English world-wide freezing injunctions in a foreign jurisdiction (“Grenzüberschreitende Vollstreckung englischer freezing injunctions”) in the latest issue of “Praxis des Internationalen Privat- und Verfahrensrechts” (IPRax 2007, 343 et seq.).

An English abstract has kindly been provided by the author:

In recent years, the English freezing (former Mareva) injunction has become an important instrument of international litigation. Worldwide freezing orders were subject to enforcement proceedings in several European countries (e.g. Germany, France and Switzerland) and have recently served as a model for Art. 9 (2) of the directive 2004/48/EC on the enforcement of intellectual property rights. Under English law, the cross-border enforcement of freezing orders is normally not automatically permitted after such an order is granted, but rather subject to the permission of the English court to seek to enforce the order in a country outside England and Wales (Civil Procedure Rules Part 25 Practice Direction Annex Schedule B paragraph 10). In Dadourian Group International v. Simms (11 April 2006, [2006] 1 WLR 2499 = [2006] 3 All ER 48), the Court of Appeal has set out guidelines how to exercise its discretion to permit a party to enforce a worldwide freezing order in a foreign jurisdiction. The article discusses these guidelines and their implications with reference to the enforcement of freezing orders in Germany and Switzerland. As a result of the Dadourian Guidelines, evidence as to the applicable law and practice in the foreign court and the nature and terms of foreign relief might become more important (see guidelines 4 and 5) which would create a practical need for comparative studies in the field of enforcement.

Here the Dadourian Guidelines of the Court of Appeal:

Guideline 1: The principle applying to the grant of permission to enforce a worldwide freezing order (WFO) abroad is that the grant of that permission should be just and convenient for the purpose of ensuring the effectiveness of the WFO, and in addition that it is not oppressive to the parties to the English proceedings or to third parties who may be joined to the foreign proceedings.

Guideline 2: All the relevant circumstances and options need to be considered. In particular consideration should be given to granting relief on terms, for example terms as to the extension to third parties of the undertaking to compensate for costs incurred as a result of the WFO and as to the type of proceedings that may be commenced abroad. Consideration should also be given to the proportionality of the steps proposed to be taken abroad, as well as the form of any order.

Guideline 3: The interests of the applicant should be balanced against the interests of the other parties to the proceedings and any new party likely to be joined to the foreign proceedings.

Guideline 4: Permission should not normally be given in terms that would enable the applicant to obtain relief in the foreign proceedings which is superior to the relief given by the WFO.

Guideline 5: The evidence in support of the application for permission should contain all the information (so far as it can reasonably be obtained in the time available) necessary to enable the judge to reach an informed decision, including evidence as to the applicable law and practice in the foreign court, evidence as to the nature of the proposed proceedings to be commenced and evidence as to the assets believed to be located in the jurisdiction of the foreign court and the names of the parties by whom such assets are held.

Guideline 6: The standard of proof as to the existence of assets that are both within the WFO and within the jurisdiction of the foreign court is a real prospect, that is the applicant must show that there is a real prospect that such assets are located within the jurisdiction of the foreign court in question.

Guideline 7: There must be evidence of a risk of dissipation of the assets in question.

Guideline 8: Normally the application should be made on notice to the respondent, but in cases of urgency, where it is just to do so, the permission may be given without notice to the party against whom relief will be sought in the foreign proceedings but that party should have the earliest practicable opportunity of having the matter reconsidered by the court at a hearing of which he is given notice.

An interesting divided judgment of the Full Court of the Federal Court of Australia has considered the non-justiciability of political questions and the decision in Buttes Gas [1982] AC 888.

The appellant was a PNG national who sought joinder as a party to an Australian native title claim over an area in the Torres Strait abutting PNG. The respondents successfully opposed that joinder at first instance because of a concern that the appellant would use the proceedings to agitate political matters concerning the maritime boundaries treaty between Australia and PNG. Significantly, the Australian government did not oppose the joinder so long as those political questions were not raised.

Gyles J, with whom Sundberg J agreed, allowed the appeal and held that the appellant should have been joined. Gyles J held that:

The appellant does not need to put any argument based upon the [political issues] to establish his interests for the purposes of the case. The docket judge can control the proceeding to prevent truly irrelevant or inappropriate arguments or material being advanced by a party. Counsel for the Commonwealth indicated that there should be no problem if the case is approached along those lines. The Commonwealth should be in a good position to judge that situation. … An appropriate term could have been constructed imposing conditions upon a grant of leave to be joined.

Kiefel J dissented. Her Honour summarised the non-justiciability principle as being that “negotiations and agreements between Australia and another country are not to be the subject of judicial determination for the reason that they might cause embarrassment and affect relations between the countries.” Although the Australian government was not actually “embarrassed” by the potential joinder, her Honour considered that “it is the nature of the question for the Court which renders it non-justiciable”, and not the presence of actual embarrassment.

Gamogab v Akiba [2007] FCAFC 74 (18 July 2007)

A German monograph on the evolving concept of the public policy exception from a national level into a European perspective has been recently published by Mohr Siebeck. It has been written by Ioanna Thoma (Brunel University, London): Die Europäisierung und die Vergemeinschaftung des nationalen ordre public (The Europeanization and Communitarization of National Public Policy).

The English presentation reads as follows (a longer version is available in German on the publisher’s website):

Ioanna Thoma deals with the influence of the ECHR and EU law on the public policy exception in private international law. In spite of the harmonization of substantive laws in many areas, especially within the context of the EU, there is still room for the application of the public policy exception. She portrays the way in which the content of national public policy is gradually changing under the normative effect of the ECHR and EU law. By referring to seminal decisions of the European and national courts, Ioanna Thoma proves that the public policy exception is no longer purely national.

Ioanna Thoma, Die Europäisierung und die Vergemeinschaftung des nationalen ordre public, 2007. XX, 288 pages (Studien zum ausländischen und internationalen Privatrecht 182). ISBN 978-3-16-149351-5. Available from Mohr Siebeck.

Burgundy University in Dijon will host a conference on the Rome II Regulation on September 20th, 2007.

Speeches will be delivered in French. The speakers will be mostly French academics, but will also include a member of the European commission. The program can be found here.

The conference will take place in the castle of Saulon-la-Rue, in the vicinity of Dijon.

An interesting annotation by Angelika Fuchs on the decision of the German Federal Supreme Court asking the European Court of Justice for a preliminary ruling on the interpretation of Article 11 (2) and Article 9 (1) (b) of Regulation No 44/2001/EC has been published in the latest issue of the German legal journal Praxis des Internationalen Privat- und Verfahrensrechts (IPRax 2007, 302 et seq.).

The facts of the case are as follows: The claimant, who is habitually resident in Germany, suffered an accident in the Netherlands and brought a direct action in Germany against the other party’s insurer the latter of which is domiciled in the Netherlands. Here the question arose whether German courts have international jurisdiction for this claim on the basis of Articles 11(2), 9 (1) (b) Brussels I Regulation.

This question was answered in the negative by the first instance court (Amtsgericht Aachen) dismissing the action on the grounds that German courts lacked international jurisdiction. However, the court of appeal (Oberlandesgericht Köln) held in an interim judgment that the action was admissible. The case was subsequently referred to the Federal Supreme Court (Bundesgerichtshof) which pointed out that the crucial question was whether the injured party can be regarded as a “beneficiary” in terms of Article 9 (1) (b) Brussels I Regulation or whether the term “beneficiary” refers only to the beneficiary of the insurance contract (this has been so far the point of view of the prevailing opinion in German doctrine). In the latter case, the injured party could not sue the insurer at his/her (i.e. the injured party’s) domicile.

One of the main arguments in favour of the jurisdiction of the courts at the injured party’s domicile is Recital 16a of Directive 2000/26/EC which has been suggested in Directive 2005/14/EC and reads as follows:

Under Article 11(2) read in conjunction with Article 9(1)(b) of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, injured parties may bring legal proceedings against the civil liability insurance provider in the Member State in which they are domiciled.

Even though the Supreme Court attached some importance to this recital, the Court had nevertheless doubts whether an autonomous and uniform interpretation of the rules in question was possible on this basis. Thus, the Federal Supreme Court referred with judgment of 26 September 2006 the following question - its first on the Brussels I Regulation - to the ECJ:

Is the reference in Article 11 (2) of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters to Article 9 (1) (b) of that regulation to be understood as meaning that the injured party may bring an action directly against the insurer in the courts for the place in a Member State where the injured party is domiciled, provided that such a direct action is permitted and the insurer is domiciled in a Member State?

Fuchs examines in her annotation whether the well-established methods of interpretation militate in favour of the jurisdiction of the courts in the State where the injured party is domiciled and argues that the wording of Articles 11(2), 9 (1) (b) Brussels I Regulation does not support the assumption of jurisdiction since - while the injured party is referred to in Article 11 (2) - this is not the case in Article 9 (1) (b) Brussels I Regulation. In her opinion also a historic interpretation does not lead to another result since the Jenard Report illustrated that a forum actoris of the injured party was not intended. This situation had not been altered in the course of the communitarisation of the Brussels Convention. With regard to teleologic arguments, Fuchs states first that there was no need to protect the injured party by admitting direct actions before the courts of his/her domicle and secondly that this additional head of jurisdiction might have undesirable consequences such as forum shopping or a race to the court. With regard to a systematic interpretation she refers inter alia, in addition to the mentioned Recital 16a of Directive 2000/26/EC (which, however, is not regarded as a conclusive argument), to the Rome II Regulation. Here a special rule for traffic accidents had been discussed - but not been accepted (see for the adopted version of Rome II our older post which can be found here). Thus, according to Fuchs only the systematic argument which is based on an analogous application of Article 9 (1) (b) Brussels I Regulation might be used - notwithstanding substantial reservations - in favour of admitting direct actions before the courts of the injured party’s domicile.

The referring decision can be found (in German) at the Federal Supreme Court’s website. See with regard to the reference also our older post which can be found here.

The University of Aberdeen invites applications from suitably qualified candidates for a post at Lecturer level in the School of Law. The Law School received a rating of 5B in the 1996 and 2001 Research Assessment Exercises and candidates should demonstrate an aptitude for research commensurate with that high ranking. In the 2001 RAE a ‘substantial’ proportion of those submitted produced publications of ‘international’ quality. The Law School will welcome applications from candidates in any field of law but will give a preference to someone who can teach on the new LLM programme in Private International Law that commences in February 2008. The starting date is 1 February 2008.

Informal enquires may be made to Professor Beaumont (tel: 01224 272439, e-mail p.beaumont@abdn.ac.uk ).

Online application forms and further particulars are available from here. Alternatively email jobs@abdn.ac.uk or telephone (01224) 272727 (24-hour answering service) quoting reference number FLS426A for an application pack.

The closing date for the receipt of applications is 27 July 2007.

The Supreme Court of Victoria has recently addressed the choice of law implications of claims for contribution within the Australian federal context. The decision will be of particular interest to UK readers. The Victorian contribution statute under consideration, Part IV of the Wrongs Act 1958 (Vic), is materially identical to the Civil Liability (Contribution) Act 1978 (UK), but the Court declined to follow the view of the UK courts regarding the choice of law consequences of the statute.

The case concerned a claim for contribution brought in Victoria by Fluor Australia Pty Ltd against ASC Engineering Pty Ltd, relating to the breach of a contract governed by the law of Western Australia. In Victoria, as in the UK, the statutory right to contribution covers all forms of liability. In contrast, in WA (and all Australian jurisdictions except Victoria) contribution is governed by equitable principles in conjunction with a limited and gap-filling statutory right to contribution between tortfeasors.

Section 23B(6) of the Victorian Act provides that:

References in this section to a person’s liability in respect of any damage are references to any such liability which has been or could be established in an action brought against that person in Victoria by or on behalf of the person who suffered the damage and it is immaterial whether any issue arising in any such action was or would be determined (in accordance with the rules of private international law) by reference to the law of a place outside Victoria.

Fluor argued that this constituted a statutory choice of law rule in favour of the Victorian lex fori, notwithstanding that common law rules of private international law might have directed the application of WA law. This reasoning was said to be supported by a series of decisions on the equivalent section of the UK Act. In each of those cases, English courts applied the UK Act to claims for contribution regardless of whether those claims would have been governed by English law according to the common law choice of law rule for contribution claims.

Bongiorno J declined to follow this view, holding that it would “encourage forum shopping to the detriment of the whole Australian legal system [and] would be antipathetic to the federal compact itself, with obvious consequences for state sovereignty and the integrity of individual state legal systems.” Rather, common law choice of law rules for contribution applied. Section 23B(6) of the Victorian Act was held to be merely “facultative”, its role being to confirm that if the common law choice of law rules for contribution directed the application of the Act, the fact that the “underlying liability” of the person from whom contribution is sought to the person who suffered the loss would be governed by the law of another jurisdiction would not preclude application of the Act.

Although there is uncertainty in Australia as to the applicable common law choice of law rule – both a delictual analysis (favouring the contribution law of the place of commission of the wrong by the person from whom contribution is sought) and a restitutionary analysis (favouring the contribution law of the place with the closest connection to the contribution claim) having been previously posited by Australian courts –his Honour considered that whichever rule applied, the Victorian Act did not apply to Fluor’s claim against ASCE. Consequently, his Honour did not express a preference for either possible rule and Australian lawyers are therefore no closer to knowing the applicable common law rule for choice of law in contribution claims.

Fluor Australia Pty Ltd v ASC Engineering Pty Ltd [2007] VSC 262 (17 July 2007)

(Note: Both Perry Herzfeld and I were involved in this case while at Allens Arthur Robinson.)

An article by Katrin Lantermann and Hans-Bernd Schäfer (both Hamburg) has recently been released on SSRN:

“Jurisdiction and Choice of Law in Economic Perspective“.

Here is the abstract which can be found on the SSRN website:

This article looks at choice of law rules from an economic perspective.The aim is to understand whether particular choice of law norms are wealth creating or wealth destroying and which of different norms should be preferred from this point of view. In this article we do not try to understand the forces that generate and sustain particular choice of law rules. We restrict ourselves to an efficiency analysis of existing or proposed choice of law rules. In the first part of the paper we argue that a free choice of law should be granted, whenever the choice causes no third party effects. We show that this criterion would extend free choice beyond the present scope. Free menu choice of law increases the wealth of the parties and creates institutional competition. It should be extended to fields of the law other than contract and tort law. In the second part we proceed with choice of law rules if the choice leads to positive or negative third party effects. To take care of these effects mandatory choice rules are sometimes but not always necessary. Methodologically choice of law rules should be market-mimicking rules, which reflect the interests of a grand coalition of the parties and all third parties affected by the choice rule. In the third part of the paper we discuss existing rules for the choice of tort law and refer to the discussion on a draft proposal for a European Council regulation of the law applicable to non-contractual obligations . In the fourth part we discuss whether the German or the US approach of international comparative law is preferable from an economic perspective. The US approach gives more judicial discretion for the choice of law than the German approach. We argue that the choice of law rules should lead to precise and clear legal commands with escape clauses for the judiciary only in exceptional and obvious cases. As Guzman pointed out it is striking that choice of law scholars have paid virtually no attention on how choice of law rules affect individual behaviour. But any economic analysis has to focus on this aspect as otherwise the social consequences of legal norms remain unknown and consequently little can be said about whether the consequences of one rule are socially better than those of another rule .

The full PDF version of the article can be downloaded here.

In its last meeting under the German Presidency (12/13 June 2007), the JHA Council has adopted the text of the Regulation establishing a European Small Claims Procedure (ESCP), accepting in their entirety the amendments voted by the European Parliament at first reading.

The reasons for the successful outcome of the negotiations at the very first stage of the codecision procedure are expressed in a Council’s note, stressing that

In accordance with the joint declaration on practical arrangements for the codecision procedure, informal talks have been held between the Council, the European Parliament and the Commission with a view to reaching an agreement at first reading. The European Parliament delivered its first-reading opinion on 14 December 2006, adopting 105 amendments to the Commission proposal. The outcome of voting in the European Parliament broadly reflects the compromise agreement reached between the institutions […].

The main features of the ESCP are presented as follows in a summary of the Parliament’s amendments (see the OEIL page of the Regulation):

[T]he procedure should apply only to cross-border cases, rather than be available also for claims within individual Member States as originally proposed by the Commission. […]

Accordingly, the Regulation will apply, in cross-border cases, where the value of a claim does not exceed EUR 2000 at the time when the claim is received by the competent court or tribunal, excluding all interest, expenses and outlays. It shall not apply, in particular, to revenue, customs or administrative matters or the liability of the State for acts and omissions in the exercise of state authority (”acta iure imperii”). The Regulation will not apply, inter alia, to maintenance obligations; tenancies of immovable property, except actions on monetary claims; violations of privacy and rights relating to personality, including defamation.

The ESCP will be a written procedure. The Regulation provides for a specific form, available in all EU official languages, to be used to submit a claim under the ESCP. It would also facilitate the recognition and the enforcement of an ESCP judgment in all Member States by eliminating any intermediate measures required by a Member State to enforce the decision. The claim form will include a description of evidence supporting the claim and be accompanied, where appropriate, by any relevant supporting documents. The claim form, the response, any counterclaim, any response to a counterclaim and any description of relevant supporting documents shall be submitted in the language of the court or tribunal. If any other document received by the court or tribunal is in a language other than the language in which the procedure is conducted, the court or tribunal may require a translation of that document only if the translation appears to be necessary for rendering the judgment. The Member States shall ensure that the parties can receive practical assistance in completing the forms.

[…] The court or tribunal must render the judgment within 30 days of any hearing or after having received all information necessary for delivering the judgment. The court may hold a hearing through a video conference or other communications technology if the technical means are available.

Parliament substantially amended the enforcement procedure, the refusal of enforcement and stay of enforcement. The enforcement procedures will be governed by the law of the Member State of enforcement. A judgment delivered in a European Small Claims Procedure will be enforced under the same conditions as a judgment handed down in the Member State of enforcement. Under no circumstances may the judgment be reviewed as to its substance in the Member State of enforcement.

After the signature by the President of the European Parliament and the President of the Council, the ESCP Regulation will be soon published in the Official Journal. It will apply in all Member States, with the exception of Denmark, from 1 January 2009.

Burkhard Hess and David Bittmann (both Heidelberg) have published a very interesting article on the possibilities for an increase of efficiency of the procedure for a declaration of enforceability according to the Brussels I-Regulation (”Die Effektuierung des Exequaturverfahrens nach der Europäischen Gerichtsstands- und Vollstreckungsverordnung”) in the latest issue of the “Praxis des Internationalen Privat- und Wirtschaftsrecht” (IPRax 2007, 277 et seq.).

An English abstract has kindly been provided by David Bittmann:

The article evaluates possible ways to increase the efficiency in cross-border enforcement proceedings according to the Brussels I-Regulation. This contribution is based on a comparative study of the application of the Regulation in 25 Member States conducted by the Institute for Private International Law and Business Law of the University of Heidelberg (Prof. Dr. Burkhard Hess and Prof. Dr. Thomas Pfeiffer) in cooperation with Prof. Dr. Peter Schlosser (University of Munich). The study has been supervised by the European Commission. In the first part of the article, the authors show possible ways forward to accelerate the time for obtaining a declaration of enforceability by shifting the competence for granting the declaration from the presiding judge of the Landgericht (Regional Court) to a court’s clerk (Rechtspfleger). A comparison is drawn with the proceedings according to the Regulation creating a European Enforcement Order for uncontested claims and to the national proceedings for obtaining a warrant of execution. These proceedings lie already, in most of the Member States evaluated in the article, in the hands of a court’s clerk. As a consequence, the same procedure should be chosen for the declaration of enforceability. The second part deals with possible improvements of the procedure of exequatur. The authors suggest an extension of the standard form in Annex V of the Brussels I-Regulation. The standard form should be drafted in accordance with the standard form of the new Regulation creating a European Payment Order, which entails all necessary details for an immediate enforcement of the foreign title, such as interest or the maturity of the claim. The result of such an extension was, that the time-consuming procedure for obtaining a declaration of enforceability would no longer be necessary, at least for the enforcement because of money debts. The foreign bailiff could start enforcement proceedings without the interference of the court, because all details concerning the foreign claim can be taken directly from the form. The standard form would have the effect of a “judicial passport”.

In Okmyansky v. Okmyansk, 2007 ONCA 427 (available here) the court answered three questions about its jurisdiction to hear different types of family law issues.

It held that under the (federal) Divorce Act it did not have jurisdiction to hear an application for spousal support following a valid divorce in a foreign jurisdiction (in this case Russia).  The divorce had to have been a Canadian divorce for the court to be able to address support.  On this issue the court’s decision is in line with recent British Columbia authority and is contrary to recent authority from Quebec.

It held that under the (provincial) Family Law Act it equally did not have jurisdiction to hear an application for spousal support following a foreign divorce. 

It held that under the Family Law Act it did have jurisdiction to hear a claim for equalization of the family assets following a foreign divorce.  Accordingly, this claim was allowed to proceed in Ontario.

On each issue the analysis focuses mainly on statutory interpretation and the fact that under the Canadian constitution the federal government’s ability to make laws governing support (otherwise a provincial matter) is only ancillary to its exclusive ability to make laws about divorce.

The second issue of the French Journal du Droit International for 2007 was released a few days ago. As a journal covering the whole spectrum of international law, it contains articles on topics related to public international law, European Union law and European human rights. For a complete table of content in French, see here.

The Journal also contains a few articles dealing with conflicts issues, all written in French.

The first was written by Gian Paolo Romano and wonders how one can reconciliate the choice of the UNIDROIT Principles by contracting parties with mandatory rules (Le choix des principes UNIDROIT par les cocontractants à l’épreuve des dispositions impératives). The English abstract reads:

The intensity of the internationally mandatory character of a legal rule varies depending on the strength of the ties existing between the State and the contract. A rule which is mandatory with respect to a given contract may be no longer mandatory with respect to another contract. To the extent that it aims to protect the contracting parties, such rule then gives up its internationally mandatory character thereby becoming either “internationally dispositive”, if the State from which it emanates is the one whose law would be applicable in the absence of choice, or, if not, “internationally available” to the parties, who may freely let themselves be governed by it. If the rule is, with respect to a particuler contract, internationally dispositive or available to the parties within the proposed definition, it can hardly be maintained that the State has an interest in applying it to such a contract notwithstanding the choice of the UNIDROIT Principles by the parties. While questioning the practical importance of the dichotomy “substantive - conflict autonomy”, the present study allows itself to venture into the realm, still little explored, of the internationally dispositive scope of application of a mandatory rule.

The second article is authored by Philippe Singer and Jean-Charles Engel, who are members of the staff of the European Court of Justice (for Mr Singer) or the Court of First Instance (for Mr Engel). Its title is the Importance of Comparative Research for Community Justice (L’importance de la recherche comparative pour la justice communautaire). The English abstract reads:

More than a passage required in certain cases by the Treaties or the expression of a concern to avoid a denial of justice, recourse to comparative law constitutes for the Community judge a real step in deciding a case. If this importance attached to comparative research in Community justice is well-known, its concrete realization and its formalization are perhaps a little less so. The “research notes” requested by the “research and documentation” Service testify, however, to the institutionalization of this method in the heart of the Community Court.

The third article was written by Francois Melin, who lectures at Amiens Faculty of Law. It deals with the applicable law to set off in European insolvency proceedings (La loi applicable à la compensation dans les procédures communautaires d’insolvabilité). The English abstract reads:

The role of set off in case of insolvency is particularly important. The EC Regulation on insolvency proceedings alludes therefore to it in two provisions. Article 4.2.d indicates that the law of the State of the opening of the proceedings shall determine the conditions under which set off may be involved. Article 6 states that the opening of insolvency proceedings shall not affect the right of creditors to demand the set off of their claims against the claims of the debtor, where such set off is permitted by the law applicable to the insolvent debtor’s claim. The difficulty consists in establishing the relationship between these two provisions.

Articles of the Journal cannot be downloaded.

The decision on appeal of the Full Court of the Federal Court in Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International NV (2007) 157 FCR 558; [2007] FCAFC 43 has now been reported in the authorised Federal Court Reports (available online to subscribers to Lawbook).

The case arose out of a claim by Spirits and a related company in relation to the ownership of certain registered trademarks, including marks incorporating the words ‘Stolichnaya’ and ‘Moskovskaya’.  FKP, as the second respondent to the claim, filed a cross-claim against Spirits and the first respondent seeking the transfer or cancellation of registration of the disputed trademarks.  (Related proceedings have been brought in other countries.)  FKP is an economic entity existing under the laws of the Russian Federation.  Another such entity, Federal Public Unitary Enterprise External Economic Union Sojuzplodoimport (FGUP VO), was joined as a second cross-claimant.

FKP and FGUP alleged that, prior to 1992, the disputed trade marks were owned by an entity existing under the laws of the former Soviet Union and that, following the dissolution of the former Soviet Union in 1992, the marks were wrongfully appropriated by certain individuals and ultimately came to be held by Spirits.   Spirits sought discovery of certain documents from the Russian Federation pursuant to the provision of the Federal Court Rules permitting the Court in its discretion to order discovery from non-parties.  The trial judge concluded that the Russian Federation was the ‘real’ party to the cross-claim brought by FKP and FGUP, and ordered that it should make the discovery sought and that, unless it did so, the cross-claim would be stayed.

The Full Court set aside the trial judge’s orders.  The Court noted that it had been conceded (and the Court apparently agreed with the view) that the trial judge had power to make an order for discovery against a non-party foreign state, even if the foreign state was not the ‘real’ party to the litigation.  However, the Court said that the trial judge did not ‘act with the caution that the principled exercise of the discretion requires where there is an intrusion upon the sovereignty of a foreign state.’  Even though the intrusion upon the sovereignty of the Russian Federation was only indirect ‘and possibly only as a matter of perception’ (in the sense that the only sanction for non-compliance was a stay of the cross-claim), ‘comity dictated that caution be exercised before making the order’.   The Court concluded that the Russian Federation should first be given the opportunity to provide the discovery sought voluntarily and in cooperation with FKP and FGUP.

Heilbrunn v Lightwood PLC [2007] FCA 433 is a recent Federal Court of Australia decision which evidences the breadth of rules for service of originating process outside of Australia in tort cases, which are common to all Australian superior courts except the Supreme Court of Western Australia. 

A vintage Vauxhall motor car made in 1921, owned by the Australian-resident plaintiff, was damaged while being loaded into a container in England by an employee of the English-based defendant.  The Vauxhall had been shipped to England from Australia to participate in a celebration of the centenary of production of Vauxhalls and the damage occurred while it was being loaded for the return journey.  Repairs to the car were undertaken in Australia upon its return.

The plaintiff sought leave to serve the defendant, which did not carry out business in Australia, in England pursuant to the provision of the Federal Court Rules permitting service overseas in a proceeding ‘based on, or seeking the recovery of, damage suffered wholly or partly in Australia caused by a tortious act or omission (wherever occurring)’.  Unlike the rules of some other Australian superior courts, the Federal Court Rules require leave of the Court before service can be made out of the jurisdiction.

Following the interpretation adopted in relation to similar rules by other Australian courts, the Federal Court held that the rule did not require that the injury which completed the tort occur in Australia, but only that the disadvantage or detriment suffered by the plaintiff as a result of the tort occur in Australia.  This can be satisfied where a degree of personal suffering or expenditure has occurred within the jurisdiction, as took place in this case by virtue of the fact that the repairs to the car were undertaken and paid for by the plaintiff in Australia.

On the basis of the broad interpretation of the rule evidenced by this case, Australian courts have jurisdiction based on service overseas in many tort cases where the only connection to Australia is the fact that the plaintiff has come to Australia (even where they were not previously resident in Australia) and personal suffering or expenditure has occurred in Australia.  Indeed, the Federal Court Rules make it clear that service out is permitted where a tort claim causing damage in Australia is only one of several causes of action alleged in a proceeding, even if service out would not be authorised in respect of the other causes of action.  The rules of some other Australian superior courts are narrower on this point, requiring that service out be authorised in respect of each of the causes of action alleged. 

Or course, even if an Australian court would have jurisdiction based on service overseas, it may decline to exercise jurisdiction on the basis that the court is a clearly inappropriate forum pursuant to the narrow Australian doctrine of forum non conveniens, but this is a relatively difficult test to satisfy: see the High Court of Australia decision of Regie National des Usines Renault SA v Zhang (2002) 210 CLR 491; 187 ALR 1; [2002] HCA 10.

While the long-term practical effect of Sinochem on the American doctrine of forum non conveniens remains to be seen, the Federal Courts of Appeals are beginning to shape the landscape in the first six months since the Court’s decision.

The most significant forum non conveniens decision since Sinochem was recently handed-down by the Seventh Circuit. In Gullone v. Bayer Corp., 484 F.3d 951 (7th Cir. 2007), a group of U.K.-based plaintiffs were among those that sued defendant drug companies for allegedly being exposed to the HIV or Hepatitis C virus during blood transfusions. Judge Diane Wood, writing for a unanimous panel, reviewed the current state of the forum non conveniens doctrine in U.S. courts, and affirmed a district court’s dismissal of U.K plaintiffs on forum non conveneins grounds in favor of an English forum:

Although we find it a close call, largely because the district court placed surprisingly little weight on the interest of . . . the original forum in this litigation and it may have overestimated the administrative difficulties in keeping the case in the United States, we conclude in the end that the court acted within its discretion when it dismissed the case.

While Judge Wood engaged a scoping review of English case law regarding Plaintiff’s causes of action, in particular the recent decision of the House of Lords in Fairchild v. Glenhaven Funeral Servs., Ltd., (2003) 1 A.C. 32 (H.L.), the decision tends to presage that the ultimate battleground for forum non conveniens will rest in the U.S. district courts. Sinochem’s strong authorization of trial-court discretion over this fact-based inquiry will continue to scare appellate courts from more intense review. The Seventh Circuit website has a link to the oral argument in Gullone.

For sure, Gullone is not the only FNC dismissal in favor of a foreign forum in the wake of Sinochem; other circuits have similarly affirmed such dismissals, though in unpublished decisions. See, e.g., Gilstrap v. Radianz, Ltd., No. 06-3984, 2007 U.S. App. LEXIS 13686 (June 11, 2007) (dismissing a tortious interference claim in favor of an English forum).

Of the most interesting unpublished decisions applying the actual holding in Sinochem, the Third Circuit has ironically moved to the forefront. In Davis Int’l, LLC v. New Start Group Corp., Nos-06-2294/2408, U.S. App. LEXIS 12032 (3rd Cir., May 23, 2007), a group of Russian defendants were sued in the District Court for the District of Delaware, and sought to dismiss the claims based on, inter alia, subject-matter jurisdiction, personal jurisdiction, and direct estoppel of a prior federal decision. The latter motion was based on a 2000 decision by the Southern District of New York that dismissed indentical claims against the Defendants on forum non conveniens grounds in favor of a Russian forum. The District of Delaware dismissed the new claims “by reason of the estoppel effect of another court’s forum non conveniens decision, without first deciding [Plaintiff’s] subject-matter and personal jurisdiction motions.” The Third Circuit (per judge Debevoise, sitting by designation) affirmed this course “in light of” Sinochem . Davis thus represents a slight expansion of Sinochem; not only are forum non conveniens dismissals proper before jurisdiction is established, but so are estoppel dismissals based on a prior forum non conveniens determination

After the adoption by the Council in the session of 28 June, the joint text of the Rome II Regulation has been approved on 10 July 2007 by the plenary session of the European Parliament, in a vote by a show of hands on the legislative resolution attached to the Report prepared by Diana Wallis (the debate held in the EP’s session is available here: it is worth mentioning that the Rapporteur and other MEPs consider the text agreed upon in the conciliation stage as “an initial roadmap”, stressing the importance of the review clause and of the studies that shall be submitted by the Commission on the matters that were set aside in the conciliation stage).

The Rome II Regulation, after the signing of the Presidents of the Council and of the Parliament, will be soon published in the Official Journal.

It will enter into force on the twentieth day following its publication in the O.J., and will apply, to events giving rise to damage occurred after its entry into force (Art. 31), from 18 months after the date of its adoption (Art. 32).

Some readers of this site may be interested in the following:

 Vaughan Black, “The Hague Choice of Court Convention” (2006) 6 Canadian International Lawyer 181-195 (an account of the proposed treaty’s principal provisions and discussion of differences with existing Canadian law)

 Elizabeth Edinger, “New British Columbia Legislation: The Court Jurisdiction and Proceedings Transfer Act; The Enforcement of Canadian Judgments and Decrees Act” (2006) 39 U.B.C.L. Rev. 407-421 (review of the main provisions of two provincal statutes that codify, but also change, the law on jurisdiction and on recognition and enforcement)

Richard Frimpong Oppong, “Enforcing Foreign Non-Money Judgments: An Examination of Some Recent Developments in Canada and Beyond” (2006) 39 U.B.C.L. Rev. 257-286 (focuses on the Court of Appeal decision in Pro Swing but also advances general arguments and comparative analysis)

Janet Walker, “Castillo v. Castillo: Closing the Barn Door” (2006) 43 C.B.L.J. 487-500 (analysis of Supreme Court of Canada decision on choice of law and limitation periods)

I cannot provide links to these, but at least some should be available through various on-line subscription sites.

The conclusions included in the CLIP papers on Intellectual Property in Brussels I and Rome I Regulations posted on the web site of the Max Planck Institute for Comparative and International Private Law and previously reported at the conflict of laws.net have been published in two law journals.

First is the publication of the comments on Rome I Proposal in the International Review of Intellectual Property and Competition Law, Vol. 38, No. 4, 2007, pp. 471-477.

Second published is the article titled “Intellectual Property and the Reform of Private International Law - Sparks from a Difficult Relationship” that an be found in the July 2007 edition of the Praxis des Internationalen Privat- und Verfahrensrechts at