In his remarkable, path-breaking new book, Peter Sparkes takes stock of the development of a distinctive body of European land law, within an internal market composed of 30 countries (the EU-27, including Bulgaria and Romania, and the EEA-3), whose property systems differ so markedly and which reflect such widely differing cultures. Yet the internal market has already effected a gradual equalisation and standardisation across Europe as foreign capital spreads to create equality of yield. ‘We all become better off by joining a larger trading block but the social consequences will be profound: Brits will need to emigrate to the continent to afford a home, Bulgarians will need to make way for them along the Black Sea coast, and title deeds will be reshuffled all over Europe on a giant Monopoly board’ writes the author in his preface, before embarking on a dispassionate examination of the beginning of that process of profound change. The opening chapters are devoted to an explanation of how the internal market has created a substantive European land law. Chapter 3 examines the rise of a distinctive European land law, and the development of conflicts principles applying to recovery of land. Chapters 5 to 9 on the marketing and sale of land focus upon Community competence on consumer protection. The decision to treat land as a product like any other in the Unfair Commercial Practices Directive will have wide ranging and far reaching implications and, apart from marketing of land and of timeshares, other chapters deal with conveyancing, contracting and the emerging market in mortgage credit. The book concludes with a miscellany of conflicts rules which are gradually coalescing and form the elements from which a substantive European land law can be forged. A number of topics which it is not possible to cover in detail (VAT, other taxes, environmental controls and agriculture) are touched on briefly, and the same is true of international aspects of trusts and succession.
European Land Law Peter Sparkes
Oxford and Portland, Oregon 2007
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© Peter Sparkes 2007 Peter Sparkes has asserted his right under the Copyright, Designs and Patents Act 1988, to be identified as the author of this work.
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Typeset by Forewords, Oxford Printed and bound in Great Britain by TJ International Ltd, Padstow, Cornwall
CO N TEN TS
Contents CO N TEN TS
Preface Table of Cases — European Table of Cases — United Kingdom Table of Cases — Foreign Table of Legislation — European Table of Legislation — United Kingdom Table of Legislation — Foreign Table of Reports Land as a European Commodity
xi xvii xxxi xli xlv lxv lxxvii lxxxi 1
Market Culture Capital Club Outside the Capital Club Other Europes Cross-border Transactions Capital Freedom Land as Capital Land Transactions Nomenclaturised Movement of Landowners Factors Generating Movement of Buyers Business Rights to Buy Land Workers Self-supporters Market Elements
1 5 12 16 18 22 25 28 35 38 42 49 56 61
Controls on European Buyers
63
Restrictions and Controls Military Regions Second Homes Agricultural Land and Forests Direct and Indirect Controls
63 65 68 76 79
vi
Contents Justification of Controls Authorisation and Declaration Schemes Swiss Controls
81 87 90
Towards a European Land Law?
95
National and European Laws Immovables The Site Selection of Land Law Property of the European Institutions Respect for Territoriality Subsidiarity Fundamental Rights in the EU Specific Fundamentals Convergence A Substantive Miscellany Value Added Tax Single Farm Payment Special Agricultural Regimes Dairy Towards What?
95 97 101 104 108 109 118 120 123 126 130 137 141 147 150 153
Actions Affecting Land
155
Europeanisation of Actions European Conflicts Club Provisional Measures Exclusive Forum over Land Trespass Used to Assert Title Public Registers Tenancies, Holiday Lets and Timeshares Personal Actions
155 156 162 163 172 177 178 186
Marketing Land
191
Pointillism Consumption of Land Unfair Commercial Practices Affecting Land Doorstep Selling of Land
191 194 200 202
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vii
Distance Rentals Unfair Marketing Practices Unfair Advertising and Statements Internet Advertising (e-Commerce) Information in an Invitation to Purchase Information about Distance Contractors Withdrawal Rights Credit Cancellation Remediation and Reform
211 216 223 228 230 231 234 240 245
Timeshare
247
Regulation of Timeshare Marketing Timeshares and Timeshare-likes Information Withdrawal Rights Timeshare Vehicles Unregulated Aspects Cross-border Timesharing Reform
247 254 261 265 269 275 281 283
Conveyancing
285
Conveyancers and Lawyers Practice Rights and Qualification Mechanics of Transfer Registration Laundering Activity Confiscation Orders Conveyancers as Launderers Conveyancers as Cops Customer Due Diligence Reporting Internet Advertising by Conveyancers
285 292 300 301 306 312 315 316 319 325 331
Contracts
333
Advanced E-Signatures Simple E-Signatures Buying Land from Websites
333 341 345
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Unfair Terms Legislation Unfairness of Terms European Contract Law The Contract/Property Interface
347 354 360 367
Mortgages and Debt
377
Mortgage Credit European Mortgage Markets Information Rights Consumer Protection Security Mortgage Procedures Primary and Secondary Lending Secured Rights on Cross-border Insolvency Main (Europe-wide) Insolvency Secondary (Territorial) Insolvency Judgment Debts in the Judgment State Judgment Debts in the Enforcing State
377 381 387 392 396 401 406 412 416 424 426 430
Contract Conflicts
437
Conflicts and Land Contracts Property Core Choice of Site-based Law Site-based Selection Non-site Contracts Choice of Law and Forum Anti-contractual Claims Home Court Forum
437 439 443 444 448 458 462 468
Family Property
475
Europeanisation of Family Law Connection to the Family Family Law Formality for Testation Patterns of Testation Succession Trust Vehicles
475 480 483 487 489 493 499
Contents
ix
Trust Forum Trust Law Interaction of Trust Law and Forum
502 509 518
Outro
521
Index
525
PR EFACE
Preface PR EFACE
In matters European I have been an opsimath, one who begins to learn late in life. My legal education had already begun when the United Kingdom at last lunged into the EEC and so I was in the very final cohort to escape that torture which is the study of European law, and found little need to lose my innocence through the succeeding years spent writing on English land law. My first book cited article 295 for the proposition that the EC Treaty1 is not to ‘prejudice the rules in Member States governing the system of property ownership’ and from that I drew the conclusion that, like the Euro-sceptics of Mrs Thatcher’s cabinet, ‘property lawyers have a licence to be dry’.2 But, as that book adumbrated and as this book explains at length, this is a half-truth. No European element enters into the basic structure of ownership rights in land, conveyancing systems, succession on death, and family law. Equally certainly, Brussels has constructed a law capable of flooding into all the nooks and crannies of our domestic property system,3 simply because the workings of the internal market are immune from the article 295 proscription. Hence the epiphany which occurred when I realised the potentiality of a continent-wide property law, and since then, like most converts, I have become more European than the Europeans. So too did Arthur Cockfield when Mrs Thatcher sent him to Brussels as a Commissioner to clip the wings of Jacques Delors but who responded with a detailed blueprint for successful implementation of the internal market; he was not selected to serve a second term.4 Nor is this the only warning to be drawn from great European lives. Cardinal Wolsey fell foul of the Tudor monster, Henry VIII, but it is a shock to realise that the specific crime of which he was convicted was praemunire and that the charge sheet included the grave offence of having imported aspects of civil law into England.5 Worse, I think, Étienne Aubert left the comfort of his position as a professor of civil law at Toulouse to be elected Pope under the name Innocent VI.6 How he must have longed to get back to teaching property! Casanova, on the other hand, declined in his career as a rake to such an extent that he was reduced to attempting the seduction of women by pretending to be a property
1 EC §295 ex §222; see below [3.18ff]. (I use ‘Treaty of Rome’ to refer to the Treaty in its original form). 2 P Sparkes A New Land Law (Oxford, Hart, 1999, 1-84113-013-3) 34. 3 HP Bulmer v J Bollinger [1974] Ch 401 CA, 418 Lord Denning MR. 4 Obituary Guardian January 11th 2007. 5 The speed of the fall is most terrifying; Wolsey presided as Lord Chancellor in Chancery on October 9th 1529 but by October 22nd he had been stripped of all his property. 6 C Hibbert Rome — the Biography of a City (London, Viking, 1985) 106.
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lawyer,7 but surely the reverse technique — pretending not to be a property lawyer — would have yielded better results. If the Papacy has, perhaps, passed me by, the other fates must terrify anyone daring to describe themselves as a purveyor of European Land Law. When setting out I intended to write a book that would embrace the land law of the European Union and property aspects of the European Convention on Human Rights,8 and even the substantive land laws of European countries.9 Large enterprises are often driven by a touch of naiveté,10 and it soon became apparent just how vast was the seam of material waiting to be mined11 and how greatly my scale had to be limited to create a manageable volume. Like Caesar arriving to subdue Gaul, I found a terrain divided into three parts, differing from each other in language, customs and law.12 The opening chapters (1 and 2) are devoted to an explanation of how the internal market, specifically the internal market in capital agreed at Maastricht and implemented at the start of 1994, has created a substantive European land law. Previously land law had to hang to the tail of the business freedoms, and we are indebted specifically to the Austrian equivocation about the impact of the free market on Alpine homes for the rich seam of cases derived from Konle.13 From there I move on in chapter 3 to the development of a distinctive European land law, beginning here the survey of conflicts principles which is continued into chapter 4 where actions for recovery of land are the subject, the conflicts principles thoroughly Europeanised and to the eyes of a common lawyer thoroughly messed up. I have maintained throughout a distinction between site-based and non-site rules, a prism through which the initial policy decision of the European Court of Justice to limit site-based rules seems misguided.14 I move to a group of chapters (5 to 9) on the marketing and sale of land, much of it relying for Community competence on consumer protection. I adopt the B2B and B2C jargon for business and consumer transactions.15 The decision to treat land as a product like any other in the Unfair Commercial Practices Directive16 will have wide-ranging and 7 G Casanova Memoirs of Jacques Casanova de Seingalt (London, Eles, 1894, ed A Machen); though, if one accepts the recent reinterpretation by a female Belgian psychoanalyst, Casanova was really the model of a new man and woman the seducing sex: L Flem Casanova or the Art of Happiness (London, Allen Lane, 1998, 0-713-99248-4). 8 I abbreviate Human Rights as HR and Fundamental Rights as FR, and the various institutions as indicated below [1.19]. 9 BA Hurndall Property in Europe (London, Butterworths, 1998, 0-406-01309-8); S Van Erp Ius Commune Casebook: Property Law (Oxford, Hart, forthcoming 2007); CU Schmid & C Hertel Real Property Law and Procedure in the EU (Florence, European University Institute,
, 2005); the author was privileged to act as rapporteur for England and Wales in the latter study. 10 H Kissinger Diplomacy (London, Simon & Schuster, 1992, 0-671-65991-X), 470. 11 The EU acquis amounts to around 45K pages of text: Monitoring Report, COM (2006) 549 final, Appendix I [3]. 12 Julius Caesar Gallic War (many editions) Book I, I. 13 C-302/97 Konle v Austria [1999] I ECR 3099 ECJ; and numerous other cases involving Austria discussed in [ch 1], [ch 2]. 14 See below [4.20ff]. 15 See below [5.05]. 16 See below [5.12].
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far-reaching implications and, apart from marketing of land and of timeshares, other chapters deal with conveyancing, contracting and the emerging market in mortgage credit. The book concludes (chapters 10 to 11) with a miscellany of conflicts rules which are gradually coalescing and form the elements from which a substantive European land law can be forged. My intention is to plough new ground and so there is only the merest sketch (in chapter 3) of a number of topics to which I would be unable to add anything useful to existing accounts, these areas including VAT, other taxes, environmental controls and agriculture, and I touch only very briefly (in chapter 11) on international aspects of trusts and succession. Nor can this book be a practical primer nor a substitute for proper tax advice. There can be no doubting the power of the beast unleashed in 1994. Methods of land-holding permitted by a legal system both shape and reflect the attitudes of the landowners and society in general.17 What is quite unpredictable is the impact of an internal market imposed on a Community of 30 consisting of EU-27, including Bulgaria and Romania, and the EEA-3,18 their property systems differing so markedly at the outset and which reflect such widely differing cultures. The power of the capital market is still constrained by transitional limits on the free movement of persons, and this is just as well. We British brought to the Maastricht table the most sophisticated property market in the European Community.19 An internal market effects a gradual equalisation and standardisation across an area in which foreign capital is spread around to create equality of yield. We all become better-off by joining a larger trading block but the social consequences will be profound: Brits will need to emigrate to the continent to afford a home, Bulgarians will need to make way for them along the Black Sea coast, and title deeds will be reshuffled all over Europe on a giant Monopoly board. In this book I attempt to describe the beginning of that process of profound change while standing aloof from judgment. On a technical level20 there is one matter of serious concern as this process of transformation gets under way. Whatever others may think of it, English is emerging as the language of commerce and the language of legal enactment.21 Brussels is a Dantesque vision of the Inferno in which supposed friends fail to understand one another, where 1.6K translators are needed for business meetings at a cost of €1 billion (€2 for every person every year).22 English property terminology is losing its purity and precision. Our subject is European Land Law and HW Wilkinson ‘Towards 1992: the European Property Market’ [1990] Conv 409–412. For an explanation of the EU-27, EEA-3, EEA-30 and EFTA, see below [1.04ff]. 19 Edward Erdman Property (London, WH Allen, Mercury, 1990) quoted by Wilkinson (n 14). 20 I have used the publisher’s citation style as supplemented by OSCOLA but with the following additional abbreviations: ECL for European Current Law; ECLYB for the European Current Law Year Book; ELJ for the European Law Journal; ERPL for the European Review of Private Law; and ILP for International Legal Practitioner. 21 G Alpa ‘European Commission Resolution and Codification of Private Law’ (2000) 8 ERPL 321–334, 332. 22 Translation in the Commission (DG for Translation, MEMO/06/173) gives slightly lower figures than these reported in the press. 17 18
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Preface
not European Real Property, a matter not of linguistic fashion but of right and wrong. European lawyers trained across the Atlantic often talk about ‘real estate’, an Americanism which carries the suggestion that our lean and efficient conveyancing system is as poor and flabby and antiquated as the American system, one of the worst in the world. European mortgage terminology inaccurately describes the home as ‘collateral’, when it should be the ‘security’, and uses ‘foreclosure’ to describe enforcement procedures involving sale.23 It will soon be an unfair commercial practice to use undue influence on a consumer,24 but the malpractice that is prohibited is about as far divorced from our common law conception of undue influence as it is possible to be. We need a new language for pan-European development.25 I hope all readers of this book will rail aloud whenever they encounter our cherished terminology being mangled in the European machine. Abe Lincoln once observed that of the eight hours available for felling a tree, six hours should be devoted to sharpening the axe.26 The Research Assessment Exercise is not conducive to that wisdom, and favours unjustly the small detailed sketch over the broader canvas. I owe, therefore, a great debt of gratitude to my employers at Southampton for allowing me the time needed to complete this book.27 In her novel Mistral’s Daughter, so I am told, Judith Krantz nailed the lie of the writer who complains of the loneliness of his work, for in truth: there are few places less lonely than that privileged space in which the mind is free to concentrate on its work.28
The space that I have enjoyed has, I hope, been well used. By Ruskin’s test the end product should be worthwhile, for any ornament faced from him the single question, ‘Was it done with enjoyment?’29 My pleasure during the carving is of course no guarantee of quality, and this book inevitably falls short of the high ideal I had in mind, ‘the cleverest [law] book imaginable’, for one cannot contradict the rule of nature by which ‘like gives birth to like’.30 All the grind is as nothing compared to the forbearance that Helen has once again shown during the time it has taken to write this book. When the Wife of Bath took over the reins of her fifth husband’s household, if Chaucer is to be believed, she made him burn his book on the spot, and from that day they never
Green Paper on Mortgage Credit, COM (2005) 327, Annex III; see below [9.37]. See below [5.11]. 25 V Hütger ‘Towards a Common European Legal Understanding’ [2005] London Law Review 205–213. 26 An internet search reveals many quotations or misquotations of this aphorism, but no source, so this may be an apocrypha, another modern American myth. 27 Joy Caisley, the Law Librarian, has invariably been able to find materials that had left me stumped. 28 J Krantz Mistral’s Daughter (London, Sidgwick & Jackson, 1983) 357. 29 J Ruskin ‘The Lamp of Life’ ch V in The Seven Lamps of Architecture (London, 1849) Essay IV. Like him ‘I could have done something if I had not had books to write’. 30 Miguel Cervantes Don Quixote (many editions) Author’s Preface. 23 24
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had a quarrel, ‘so help me God’.31 Helen has adopted a more benign approach to this volume as a rival for my affections, and I am deeply indebted to her for her support. People interested in studying or researching in comparative or European land law (in English) are invited to contact the author at Southampton. [email protected] New Forest April 200732
31 32
Geoffrey Chaucer Wife of Bath’s Prologue (Oxford, OUP, 1964, ed D Wright) 239. I have included selected updating to August 2007.
TA B L E O F CA SES — EUR O PEA N
Table of Cases — European TA B L E O F CA SES — EUR O PEA N
C-453/03 Opinion 2/94 Case 31/59 Case 107/83
E-2/03 C-423/98 C-81/98 C-295/03 C-384/93 C-289/02 C-281/98 C-47/02 C-309/96 C-6/01 C-1/02SA C-4/03 C-369/96 etc C-18/01 C-107/94 C-54/99
Case 220/84 C-403/98 C-251/98 C-204/90 C-386/02
Abna v Secretary of State for Health [2005] I ECR 10423 ECJ . . . . . . . . 3.38 Accession to the European Convention [1996] I ECR 1759 ECJ . . . . . . . 3.33 Acciaeria di Breschia [1960] ECR 71 ECJ . . . . . . . . . . . . . . . . . . . . . . . . 3.40 Advocats de Paris v Klopp [1984] ECR 2971 ECJ . . . . . . . . . . . . . . . . . . 7.10 Aid by Charleroi Airport to Ryanair Commission Decision 2004/393/EC, [2004] OJ L137 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.20 Akaeruvaldid v Ásgeivsson [2003] December 12 EFTA Ct . . . . . . . . . . . 3.33 . . . . . . 1.21, 1.22, 1.33, 1.46, 1.74, 2.06, 2.38, 2.44 Alcatel Austria [2006] I ECR 7671 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . 3.57 Alessandrini v Commission EC [2005] I ECR 5673 ECJ . . . . . . . . . . . . . 3.38 Alpine Investments v Minister van Financien [1995] I ECR 1141 ECJ. . 7.15 Amok Verlags [2003] I ECR 15059 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . 7.13 Angonese v Cassa di Risparnio di Bolzano [2000] I ECR 4139 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.24, 1.63 Anker v Germany [2003] I ECR 10447 ECJ . . . . . . . . . . . . . . . . . . . . . . . 1.87 Annibaldi v Sindaco del Gamme di Guidonia [1997] I ECR 7493 ECJ . 3.24 Anomar v Portugal [2003] I ECR 8621 ECJ. . . . . . . . . . . . . . . . . . . . . . . 1.23 Antippas v Commission EC [2003] I ECR 2893 ECJ . . . . . . . . . . . . . . . . 9.89 Antriebstechnik v Lamellen [2006] FSR 145 ECJ . . . . . . . . . . . . . . 4.20, 4.23 Arblade [1999] I ECR 8453 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . 10.07, 10.21 Arkkitehtuuritoimisto [2003] I ECR 5321 ECJ . . . . . . . . . . . . . . . . . . . . 3.57 Asscher v Staatssecretaris van Financien [1996] I ECR 3089 ECJ . . . . . 1.22 th
1.27, 1.28, 1.29, 1.44, 1.53, 2.35 2.38, 2.42, 2.44, 2.45, 2.47 Autoteile Service v Mahle [1985] ECR 2267 ECJ . . . . . . . . . . . . . . 4.16, 9.80 Aziende Agricola Monte Arcosu v Sardegna [2001] I ECR 103 ECJ . . . . 3.68 Baars [2000] I ECR 2787 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.53, 1.63 Bachmann v Belgium [1992] I ECR 249 ECJ . . . . . . . . . . . . . . . . . 2.36, 2.41 Baldinger v Pensionsversicherungsanstalt der Arbeiter [2004] I ECR 8411 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.38
C-7/98 C-364/01
9.76, 9.86, 10.21 Barbier’s Heirs v Inspecteur van de Belastingdienst Particulieren [2003] I ECR 15013 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.22, 1.47, 2.41, 3.13
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Table of Cases — European
C-413/99 C-185/95 C-45/96 C-355/97 C-284/03 C-269/95 C-208/98 C-256/00 Case 150/77 C-512/03 C-346/95 C-352/85 C-20/00
Case 234/95 C-265/04 C-61/89 C-384/00
C-157/85 C-213/04 C-390/99
Baumbast v Secretary of State for Home Department [2002] I ECR 7091 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.83, 1.92 Baustahlgewebe v Commission EC [1998] I ECR 8417 ECJ . . . . . . . . . . 3.41 Bayrische Hypotheken -und Wechselbank v Dietzinger [1998] I ECR 1199 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.26 Beck’s Application [1999] I ECR 4977 ECJ . . . . . . . . . . 1.21, 1.33, 2.18, 3.23 Belgian Golden Share see Commission EC v Belgium Belgium v Temco Europe [2004] I ECR 11237 ECJ . . . . . . . . . . . . . . . . . 3.62 Benincasa v Dentalkit [1997] I ECR 3767 ECJ 5.05, 5.07, 8.37, 10.30, 10.32 Berliner Kindl Brauerei v Siepert [2000] I ECR 1741 ECJ . . . . . . . 5.05, 9.26 Besix v Wasserneienguurbau Alfred Kretzschmar [2002] 1 ECR 1699 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.12, 10.22 Betrand v Paul Ott [1977] ECR 1437 ECJ . . . . . . . . . . . . . . . . . . . . . . . . 5.01 Blanckaert v Inspecteur van de Belastingdienst [2005] I ECR 7685 ECJ 2.41 Blasi v Finanzamt München [1998] I ECR 481 ECJ . . . . . . . . . . . . . . . . 3.62 Bond van Adverteerders v Netherlands [1988] ECR 2085 ECJ . . . . . . . . 7.15 Booker Aquaculture v Secretary of State for Scotland [2003] I ECR 7411 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.34 Bordessa see Ministero Fiscal Bosphorus v Irish Ministry of Transport [1996] I ECR 3953 ECJ . 3.33, 3.37 Bouanich v Skatteverket [2006] I ECR 923 ECJ . . . . . . . . . . 1.37, 1.44, 2.41 Bouchoucha, Re [1990] I ECR 3551 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . 1.22 Bredemeier v Landwirtschaftskammer Hannover [2002] I ECR 4517 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.84 British American Tobacco see R(JR) British American Tobacco Brugna [1986] ECR 2013 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.34, 2.36 1.33, 2.15, 2.17, 2.50
Canal Satélite Digital v Spain [2002] I ECR 607 ECJ . . . . . . . . . . . . . . . 1.33 Cantor Fitzgerald see Customs & Excise C-541/99 etc Cape SNC v Idealservice [2001] I ECR 9049 ECJ . . . . . . . . . 5.06, 5.09, 8.37 C-60/00 Carpenter v Secretary of State for Home Department [2002] I ECR 6279 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.63, 1.83 Case 203/80 Casati v Italy [1981] ECR 2595 ECJ . . . . . . . . . . . . . . . 1.35, 1.51, 2.35, 2.47 Case 120/78 Cassis de Dijon [1976] ECR 181 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.44 Case 15/74 Centrafarm v Sterling Drug [1974] ECR 1147 ECJ . . . . . . . . . . . . 3.28, 3.29 C-386/04 Centro di Musicologia Walter Stauffer v Finanzamt München für Karperscahften [2006] I ECR 8203 ECJ . . . . . . . . . . . . 1.46, 1.63, 1.71, 2.41 C-212/97 Centros v Erhvervs -og Selskabsityrelsen [1999] I ECR 1459 ECJ . 1.65, 2.38 Charleroi Airport see Aid by Charleroi C-434/03 Charles v Staatssecretarias von Financien [2005] I ECR 7037 ECJ . . . . 3.61 Case 60/84 etc Cinéthèque [1985] ECR 2065 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . 2.44, 3.34 C-94/04 etc Cipolla Fazari [2007] 1 CMLR 4 @ 139 ECJ . . . . . . . . . . . . . . . . . . . . . . 7.03 C-350/96 Clean Car Autoservice v Landeshauptmann van Wien [1998] I ECR 2521 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.15
Table of Cases — European C-400/00 C-19/89 C-264/02 C-330/03 C-138/02 C-107/04 C-147/03 C-320/03 C-478/98 C-503/99 C-110/02 C-265/95 C-483/99 C-23/99 C-334/02 C-57/95 Case 153/78 Case 427/85 Case 249/86
xix
Club Tour v Garrido [2002] I ECR 4051 ECJ . . . . . . . . . . . . . . . . . . . . . 6.18 Cnl-Sucal v HAG II [1990] I ECR 3711 ECJ (‘HAG II’). . . . 3.26, 3.27, 3.28 Cofinga Merignac v Sachithananthan [2004] I ECR 2157 ECJ . . . . . . . 9.19 Colegio de Ingenieros de Caminos v Administracion del Estado [2006] I ECR 801 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.19, 7.20 Collins v Secretary of State for Work and Pensions [2004] I ECR 2703 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.79, 1.80 Comite Andaluz [2005] I ECR 7137 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . 3.79 Commission EC v Austria (Access to Higher Education) [2005] I ECR 5969 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.96 Commission EC v Austria (Ban on Lorries) [2005] I ECR 9871 ECJ . . . 1.68 1.20, 1.27, 1.28, 1.29, 1.33, 2.35, 2.36, 2.38, 2.39, 2.40, 2.41, 2.47 Commission EC v Belgium (Golden Share) [2002] I ECR 4809 ECJ. . . 1.44, 2.44, 2.47, 3.21, 3.22 Commission EC v Council EU (Aid to Pig Farmers) [2004] I ECR 6333 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.56 Commission EC v France (Agricultural Blockades) [1997] I ECR 6959 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.35 Commission EC v France (Golden Share) [2002] I ECR 4781 ECJ1.44, 2.42, 2.45, 2.47, 3.21 Commission EC v France (Goods in Transit) [2001] I ECR 7653 ECJ . . 3.29 Commission EC v France (Income Tax on Investments) [2004] I ECR 2229 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.41 Commission EC v France (Pensions Fund Communication) [1997] I ECR 1627 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.31 Commission EC v Germany (Imported Meat) [1979] ECR 2555 ECJ . . 3.28 Commission EC v Germany (Lawyers’ Services) [1988] ECR 1123 ECJ 7.07 Commission EC v Germany (Workers’ Living Conditions) [1989] ECR 1263 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.87
Case 305/87 C-62/96 C-401/98 C-358/97 C-134/05 C-174/04 Case 63/86 C-212/99 Case 3/88 C-279/00 C-32/95 C-367/98
1.21, 1.23, 1.63, 1.68, 1.73, 1.74, 1.80, 1.87, 2.05, 2.38, 2.43 Commission EC v Greece (Ship Registers) [1997] I ECR 6725 ECJ . . . . 1.73 Commission EC v Greece (Timeshare Transposition) [1999] I ECR 5543 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.07 Commission EC v Ireland (VAT on Road Tolls) [2000] I ECR 6301 ECJ 3.62 Commission EC v Italy (Debt Collection Services) [2007] July 18 ECJ . 1.71 Commission EC v Italy (Golden Share) [2005] I ECR 4933 ECJ . . . . . . 2.42 Commission EC v Italy (Housing Aid) [1988] ECR 29 ECJ . . . . . 1.41, 1.73, 1.74, 1.87, 2.38 Commission EC v Italy (Language Assistants) [2001] I ECR 4923 ECJ . 7.15 Commission EC v Italy (Public Contracts) [1989] ECR 4035 ECJ . . . . . 2.38 Commission EC v Italy (Recruitment Agencies) [2002] I ECR 1425 ECJ1.63 Commission EC v Lisrestal [1996] I ECR 5373 ECJ . . . . . . . . . . . . . . . . 3.41 Commission EC v Portugal (Golden Share) [2002] I ECR 4731 ECJ . . 2.42, 2.44, 2.47, 3.19, 3.20, 3.21, 3.22 th
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Table of Cases — European
C-463/00
Commission EC v Spain (Golden Share) [2003] I ECR 4581 ECJ . . . . . 1.27, 1.37, 2.35, 2.47, 3.21 C-135/03 Commission EC v Spain (Use of ‘Bio’) [2005] I ECR 6909 ECJ . . . . . . . 3.79 C-478/99 Commission EC v Sweden (Unfair Terms Transposition) [2004] 1 ECR 4147 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.45 C-349/03 Commission EC v UK (Gibraltar Exemption from VAT) [2005] I ECR 7321 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.05 1.23, C-98/01 1.27, 1.28, 1.63, 1.68, 2.43, 2.47 C-466/98 etc Commission EC v UK (Open Skies) [2002] I ECR 9427 ECJ . . . . . . . . . 3.49 C-30/90 Commission EC v UK (Patent Licensing) [1992] I ECR 829 ECJ . . . . . 3.18, 3.19, 3.27, 3.28, 3.29 C-30/90 Commission EC v UK (State Aids) [1992] I ECR 829 ECJ . . . . . . . . . . . 3.22 Opinion 1/03 Competence of the EC to Conclude a New Lugano Convention [2006] I ECR 1145 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.07 C-473/00 Confidis v Fredant [2002] I ECR 10875 ECJ . . . . . . . . . . . . . . . . . . . . . . 8.46 (see also Case 56/64 etc Grundig-Consten) . . . . . . . . . . . . . . . . . . . . . . . . . 1.69, 3.19, 3.22, 3.27, 3.28 C-387/98 Coreck Maritime [2000] I ECR 9337 ECJ . . . . . . . . . . . . . . . . . . . . . . . 10.35 Case 6/64 Costa v Ente Nazionale per l’Energia Elettrica [1964] ECR 585 ECJ . . . 3.20 C-453/99 Courage v Crehan [2001] I ECR 6297 ECJ. . . . . . . . . . . . . . . . . . . . . . . . 3.53 Case 186/87 Cowan v Trésor Public [1989] ECR 195 ECJ. . . . . . . . . . . . . . . . . . 1.80, 2.38 5.18, 5.19, 5.28, 5.77, 5.83, 5.86, 5.88 C-229/04 C-410/96 Criminal Proceedings v Ambry [1998] I ECR 7875 ECJ . . . . . . . . . . . . . 1.53 C-369/96 Criminal Proceedings v Arblade [1999] I ECR 8453 ECJ . . . . . . . . . . . . 1.69 C-370/05 Criminal Proceedings v Festersen [2007] 2 CMLR 7 ECJ. . . . . . . . 2.19, 2.27 C-243/01 Criminal Proceedings v Gambelli [2003] ECLYB [160] ECJ. . . . . . . . . . 1.73 C-448/98 Criminal Proceedings v Guimont [2000] I ECR 10663 ECJ . . . . . . . . . . 1.24 C-151/04 Criminal Proceedings v Nadin [2005] I ECR 11203 ECJ. . . . . . . . . . . . . 1.87 C-232/01 Criminal Proceedings v Van Lent [2004] 3 CMLR 23 @ 465 ECJ. . . . . . 1.87 C-108/99 Customs & Excise Commissioners v Cantor Fitzgerald International [2001] I ECR 7257 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.62 C-122/99P C-376/03 C-224/98 C-8/98 C-268/03 Case 14/76 Case 143/78 Case 120/79 C-406/04 C-381/05 Case 42/76
D v Council EU [2001] I ECR 4319 ECJ . . . . . . . . . . . . . . . . . . . . 3.40, 11.01 D v Inspecteur van de Belastingdienst [2005] I ECR 5821 ECJ . . . 1.37, 2.41 D’Hoop v Office National de l’Emploi [2002] I ECR 6191 ECJ . . . . . . . 1.79 Dansommer v Götz [2000] I ECR 393 ECJ. 4.16, 4.21, 4.38, 4.40, 4.43, 4.46 De Baeck v Belgium [2004] I ECR 5961 ECJ . . . . . . . . . . . . . . . . . . . . . . 2.40 De Bloos v Bouyer [1976] ECR 1497 ECJ . . . . . . . . . . . . . . . . . . 10.12, 10.35 De Cavel (No 1) [1979] ECR 1055 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . 11.02 De Cavel (No 2) [1980] ECR 731 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . 11.02 De Cuyper v Office National de l’Emploi [2006] I ECR 6947 ECJ . . . . . 1.80 De Landtsheer Emmanuel v Comité Interprofessionel du Vin de Champagne [2007] 2 CMLR 43 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.55 De Wolf v Cox [1976] I ECR 1759 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . . 9.77
Table of Cases — European C-120/95 Case 149/77 C-234/89 Case 12/86 Case 125/79 Case 148/84 Case 78/70 C-37/02 etc Case 267/83 T-148/99 C-31/00 Case 288/82 C-297/88 C-15/95 C-412/97 Case 38/81 E-8/04
Case 341/87 C-27/02 C-116/02 Case 260/89
C-341/04 C-540/03 C-451/05
C-446/04 C-279/93 C-135/92 C-128/93 C-290/04
xxi
Decker v Caisse de Maladie des Employ [1998] I ECR 1831 ECJ . . . . . . 2.44 Defrene v Sabena [1978] ECR 1365 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . 3.37 Delimitis v Henninger Brau [1991] I ECR 935 ECJ. . . . . . . . . . . . . . . . . 3.54 Demirel’s case [1987] I ECR 3719 ECJ. . . . . . . . . . . . . . . . . . 1.84, 3.34, 3.39 Denilauler v Couchet Frères [1980] ECR 1553 ECJ. . . . . . . . . . . . . . . . . 9.81 Deutsche Genossen [1985] ECR 1981 ECJ . . . . . . . . . . . . . . . . . . . . . . . . 9.84 Deutsche Grammophon v Metro [1971] ECR 487 ECJ . . . . . . . . . . . . . . 3.28 Di Lenardo [2004] I ECR 6911 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.38 Diatta v Land Berlin [1985] ECR 567 ECJ . . . . . . . . . . . . . . . . . . . . . . . 1.84 Diputación Floral de Álavar v Commission EC [2002] II ECR 1275 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.56 Dreessen [2002] I ECR 663 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.18 Duijnstee v Goderbauer [1983] ECR 3663 ECJ . . . . . . . . . . . . . . . 4.20, 4.36 Dzodzi v Belgium [1990] I ECR 3763 ECJ . . . . . . . . . . . . . . . . . . . . . . . . 1.24 EARL de Kerlast [1997] 1 ECR 1961 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . 3.85 ED v Italo Fenocchio [1999] I ECR 3845 ECJ . . . . . . . . . . . . . . . . . . . . . 2.39 Effer v Kantner [1982] ECR 825 ECJ . . . . . . . . . . . . . . . . . 4.04, 10.49, 10.52 EFTA Surveillance Authority v Liechtenstein [2005] July 1 EFTA Ct. . . 7.15 Église de Scientologie see Association Église . . . . . . . . . . . . . . . . . . . . . . . . . . . ELISA see Européenne et Luxembourgoise d’Investissements . . . . . . . . . . . . . EMI Electrola v Patricia Im- und Export [1989] ECR 79 ECJ . . . . 3.19, 3.27 Engler v Janus Versand [2005] I ECR 481 ECJ . . . . . . . . . . . . . . 10.02, 10.30 Erich Gasser v MISAT [2004] I ECR 14693 ECJ . . 4.18, 10.37, 10.58, 10.59 ERSA see Friuli-Venezia ERT case [1991] I ECR 2925 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.34 Euro Port v Denmark Commission Decision 94/119/EC [1994] OJ L55 52. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.55 Eurobonds see Commission EC v Belgium Eurofoods IFSC [2006] I ECR 3813 ECJ . . . . . . . 9.56, 9.57, 9.58, 9.59, 9.64, 9.65, 9.66, 9.67 European Parliament v Council EU (Family Reunification) [2006] I ECR 5769 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.86, 3.34, 3.40 Européenne et Luxembourgoise d’Investissements v Directeur General des 1.44, 1.46, 2.41 Impots (ELISA) [2007] April 26th, AG Mazak st
Family Reunification see European Parliament Festersen see Criminal Proceedings v Festersen FII Group Litigation v Commissioners of Inland Revenue [2006] STI 2750 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.25, 1.37, 1.44, 2.41 Finanzamt Koln-Altstadt v Schumacker [1995] I ECR 225 ECJ. . . . . . . 7.15 Fiskano v Commission EC [1994] I ECR 2885 ECJ . . . . . . . . . . . . . . . . . 3.41 Fisscher [1994] I ECR 4583 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.84 FKP Scorpio Konzertproduktionen v Finanzamt Hamburg-Eimsbüttel [2006] STI 2274 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.69
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E-1/04 C-334/00
Fokus Bank v Norway [2004] November 23 EFTA Ct . . . . . . . . . . 1.07, 1.44 Fonderie Officine Meccaniche Tacconi v Heinrich Wagner Sinto Maschinenfabrik [2002] I ECR 7357 ECJ . . . . . . . . . . . . . . . . . . 10.02, 10.45 Food Supplements see R(JR) Alliance for Natural Health C-265/02 Frahuil v Assitalia [2004] I ECR 1543 ECJ . . . . . . . . . . . . . . . . . . . . . . 10.02 Case 188/80 etc France v Commission EC (State Aids) [1982] ECR 2545 ECJ. . . . . . . . . 3.20 C-202/88 France v Commission EC (Telecommunications Terminals) [1991] I ECR 1223 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.20, 3.25 C-237/02 Freiburger Kommunalbauten v Hofstetter [2004] I ECR 3403 ECJ. . . . 8.26, 8.29, 8.34, 8.37, 8.47 French Golden Share see Commission EC v France French Telecoms see France v Commission EC Friuli-Venezia Giulia (ERSA) v Ministero delle Politiche Agricole e Forestale [2005] I ECR 3785 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.37, 3.38 C-250/95 Futura Participations v Administration des Contributions [1997] I ECR 2471 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.38 C-518/99 C-55/94 Case 36/59 etc Case 280/93 C-233/94 C-376/98 C-234/01 C-440/97 C-257/00
T-199/94 Case 133/78 C-249/96 C-321/95 C-412/98
C-184/99 C-210/96
C-280/90
rd
Gaillard v Chekili [2001] 1 ECR 2771 ECJ . . . . . . . . . . . . . . . . . . . . . . 10.50 Gebhard v Avocati di Milano [1995] I ECR 4165 ECJ . . . . . 1.65, 2.38, 7.10 Geitlung Case [1960] ECR 423 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.37 Germany v Council EU (Bananas) [1994] I ECR 4973 ECJ . . . . . . . . . . 3.37 Germany v Council EU (Deposit Guarantee Directive) [1997] 1 ECR 2405 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.31 Germany v European Parliament (Tobacco Advertising) [2000] I ECR 8419 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.31, 8.55 Gerritse v Finanzamt Neuköln-Nord [2004] I ECR 5933 ECJ . . . . . . . . 2.41 GIE Groupe Concorde v Sukadiwarno Panjan [1999] I ECR 6307 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.22 Givane v Secretary of State for Home Department [2003] I ECR 345 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.80, 1.84 Gloszczuk see R(JR) Gloszczuk Goed Wonen see Stichting ‘Goed Wonen’ Gosch v Commission EC [2002] II ECR 391 CFI. . . . . . . . . . . . . . . . . . . 3.84 Gourdain v Nadler [1979] ECR 733 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . 9.63 Grant v South West Trains [1998] I ECR 621 ECJ. . . . . . . . . . . . . . . . . . 3.36 Greek Border Regions see Commission EC v Greece Greenpeace v Spain (1998) 19 HRLJ 376 ECJ . . . . . . . . . . . . . . . . . . . . . 3.33 Group Josi Reinsurance Co v Universal General Insurance Co [2000] I ECR 5925 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.10 Grundig-Consten iv/a–004–03344 [1964] OJ 2545. . . . . . . . . . . . . . . . . 3.28 Grzelczyk v Centre Public d’Aide Sociale Ottignies-Louvain-la-Neuve [2001] I ECR 6193 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.79, 1.96 Gut Springheide v Oberkreisdirektor des Kreises Steinfurt [1998] I ECR 4657 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.43 Hacker v Euro-Relais [1992] I ECR 111 ECJ . . . . . . . . . . . . . 4.21, 4.46, 4.47
Table of Cases — European
HR 11855/85 C-1/93 C-28/91 Case 44/79 C-481/99
xxiii
HAG II see Cnl-Sucal Håkansson v Sweden (1991) 13 EHRR 1 E Ct HR . . . . . . . . . . . . . . . . . 2.46 Halliburton Services [1994] I ECR 1137 ECJ. . . . . . . . . . . . . . . . . . . . . . 2.41 Handte Case [1992] I ECR 3967 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.02 3.20, 3.33, 3.37, 3.38
5.16, 5.17, 5.18, 5.19, 5.26, 5.27, 5.28, 5.83, 5.84, 5.85, 5.86, 5.88, 9.25 Heirs of van der Heijden v Inspecteur can de Belastingdienst [2006] STI 535 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.37, 2.41 C-78/95 Hendrikman v Magentra Druck [1996] I ECR 4943 ECJ . . . . . . . . . . . . 9.86 C-98/91 Herbrink [1994] I ECR 223 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.85 C-99/96 HH Mietz v Intership Yachting Sneek [1999] I ECR 2277 ECJ . . . . . . . . 4.11 Case 46/ 87 etc Höchst v Commission [1989] ECR 2859 ECJ. . . . . . . . . . . . . 3.35, 3.37, 3.39 C-238/98 Hocsman v French Ministrie d’Emploi et de la Solidarité [2000] I ECR 6623 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.19 Case 145/86 Hoffmann v Kreig [1988] ECR 645 ECJ . . . . . . . . . . . . 9.84, 9.85, 9.86, 9.88 1.44, 2.41 C-157/05 Holbock v Finanzamt Salzburg-Land [2007] May 24 ECJ C-513/03
th
E-1/00 C-9/93 HR 42389/98 C-381/98 Case 11/70 C-230/01
Case 32/65
C-97/98 C-26/91 C-268/99 C-222/84 T-231/99 E-8/97 C-466/00 Case 189/87 C-117/01
Icelandic State Debt Management Agency v Islandsbanki [2000] July 14 EFTA Ct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.48, 2.32, 2.38 IHT v Ideal Standard [1994] I ECR 2789 ECJ. . . . . . . . . . . . . . . . . . . . . 3.28 Ilić v Croatia [2000] September 19 E Comm HR . . . . . . . . . . . . . . . . . . 1.56 3.12, 4.09, 10.07, 10.21, 10.40 3.33, 3.35, 3.37, 3.38 Intervention Board v Penycoed Farming Partnership [2004] I ECR 937 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.83 Italian Competition Agreements see Italy v Council EC Italian Housing Aid see Commission EC v Italy Italy v Council EC (Competition Agreements) [1966] ECR 389 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.20, 3.27, 3.28, 3.29 th
th
Jägersköld v Gustafsson [1999] I ECR 7319 ECJ . . . . . . . . . . . . . . . . . . . 1.20 Jakob Handte v Societe Traitements Mecano-Chimiques des Surfaces [1992] I ECR 3967 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.44 Jany v Staatssecrtaris van Justitie [2001] I ECR 8615 ECJ . . 1.63, 1.65, 1.66, 1.92, 2.39 Johnston v Chief Constable RUC [1986] ECR 1651 ECJ . . . . . . . . . . . . . 9.86 Joynson v Commission EC [2002] II ECR 2085 CFI . . . . . . . . . . . . . . . . 3.53 JV 1000 Sverige v Norway [1998] June 12 EFTA Ct . . . . . . . . . . . . . . . . 3.33 th
Kaba v Secretary of State for S Home Department [2003] I ECR 2219 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.55, 1.83 Kalfelis v Schröder [1988] ECR 5565 ECJ . . . . . . . . . . . . 10.44, 10.54, 10.60 KB v NHS Pensions Agency [2004] I ECR 541 ECJ . . . . . . . . . . . . . . . . . 3.40
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Table of Cases — European
C-513/04 Case 144/81 C-73/04 C-346/93 Case 166/80 Case 115/78 C-302/97
C-109/04 C-19/92
Case 39/86 C-305/88 C-363/93 C-343/04 C-479/04 C-189/92 Case 152/79 C-443/03 C-168/00 C-315/02 C-356/04 C-292/93 HR 15318/89 Case 29/76 Case 286/82 etc C-168/98 C-269/03 C-39/02 C-315/00 C-106/95 C-190/01 T-112/98 C-319/02 C-446/03 C-344/98 C-250/03R
Kerckhaert-Morres v Belgium [2006] STI 2508 ECJ . . . . . . . . . . . . . . . . 2.41 Keurkoop v Nancy Kean Gifts [1972] ECR 2853 ECJ . . . . . . . . . . . 3.19, 3.28 4.16, 4.21, 4.37, 4.47, 5.41, 6.02, 6.06, 6.14, 6.40, 6.54, 6.66, 10.44, 10.49 Kleinwort Benson v Glasgow CC [1995] I ECR 615 ECJ . . . . . . . 4.08, 10.50 Klomps v Michel [1981] ECR 1593 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . 9.87 Knoors v Secretary of State for Economic Affairs [1979] ECR 399 ECJ . 1.22 Preface 1.06, 1.21, 1.24, 1.33, 1.63, 1.68, 2.08, 2.15, 2.16, 2.17, 2.42, 2.43, 2.47, 2.48, 2.49, 2.50, 3.21, 3.22, 3.23, 3.29 Kranemann v Land Nordrhein-Westfalen [2005] I ECR 2421 ECJ . . . . 7.20 Kraus v Land Baden-Württemberg [1993] I ECR 1663 ECJ. . . . . . . . . . 1.22 Krombach (Nos 1 & 2) see Bamberski v Krombach Lair v Univeristat Hannover [1988] ECR 3161 ECJ . . . . . . . . . . . . . . . . 1.79 Lancray v Peters und Sickert 1990] I ECR 2725 ECJ . . . . . . . . . . . . . . . . 9.87 Lancry [1994] I ECR 3957 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.23 Land Oberosterreich v EZ [2006] I ECR 4557 ECJ. . . . 4.04, 4.06, 4.25, 4.27 Laserdisken v Kulturministeriet [2006] I ECR 187 ECJ . . . . . . . . . 3.28, 3.33 Le Nan [1994] I ECR 261 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.85 Lee v Minister of Agriculture [1980] ECR 1495 ECJ . . . . . . . . . . . . . . . . 3.68 Leffler [2005] I ECR 9611 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.57 Leitner [2002] I ECR 2631 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.55 Lenz v Tirol [2004] I ECR 7063 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.40 Lidl Belgium v Franz Colruyt [2007] 1 CMLR 9 @ 269 ECJ. . . . . . . . . . 5.55 4.16, 4.22, 4.37, 4.38, 10.49 Loizidou v Turkey (1997) 23 EHRR 513 E Ct HR . . . . . . . . . . . . . . . . . . 4.31 LTU v Eurocontrol [1976] ECR 1541 ECJ . . . . . . . . . . . . . . . . . . . . . . . 11.02 Luisi v Italian Ministero del Tesoro [1984] ECR 377 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.35, 1.37, 1.67, 2.47 Luxembourg v European Parliament (Practice as a Lawyer) [2000] I ECR 9131 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.16 Luxembourg v Kirckberg [2004] I ECR 8067 ECJ . . . . . . . . . . . . . . . . . . 3.64 Maersk Olie & Gas v De Haan & De Boer [2004] I ECR 9657 ECJ . . . 9.77, 9.87 Maierhofer [2003] I ECR 563 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.62 Mainschiffahrts-Genossenschaft v Granières Rhénanes [1997] I ECR 911 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.09, 10.22, 10.35 Mannermannrohren-Werke v Commission EC [2001] July 28 ECJ . . . . 3.41 Mannermannrohren-Werke v Commission EC [2001] II ECR 729 CFI. 3.41 Manninen [2004] I ECR 7477 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.41 Marks and Spencer v Halsey [2005] I ECR 6443 ECJ . . . . . . . . . . . . . . . 2.41 Masterfoods v HB Ice Cream [2000] I ECR 11369 ECJ. . . . . . . . . . . . . . 3.24 Mauri v Ministero della Giustizia [2005] I ECR 1267 ECJ. . . . . . . . . . . 7.16 th
Table of Cases — European C-462/98 Case 23/78 HR 10522/83 C-267/95 C-123/91 Case 21/76 T-362/04 C-358/93 etc
xxv
Case 120/86 C-104/89 C-313/99 C-125/92 C-253/00
Mediocurso v Commission EC [2000] I ECR 783 ECJ. . . . . . . . . . . . . . . 3.41 Meeth v Glacetal [1978] ECR 2133 ECJ. . . . . . . . . . . . . . 10.35, 10.60, 11.47 Mellacher v Austria (1990) 12 EHRR 391 E Ct HR . . . . . . . . . . . . 1.19, 3.36 Merck v Pridedean [1996] I ECR 6285 ECJ . . . . . . . . . . . . . . . . . . 3.28, 4.14 Minalmet v Brandeis [1992] I ECR 5661 ECJ . . . . . . . . . . . . . . . . . . . . . 9.87 Mines de Potasse d’Alsace [1976] ECR 1735 ECJ . . . . . . . . . . . . . 4.51, 10.45 Minin v Commission EC [2007] January 31 ECJ. . . . . . . . . . . . . . . . . . . 3.30 1.25, 1.28, 1.31, 1.33, 1.51, 2.40, 2.44, 2.47 Mirror Group v Commissioners of Customs and Excise [2001] I ECR 7175 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.62 Modelo v Diretor-General dos Registros e Notariados [1999] I ECR 6427 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.03 7.18, 7.19, 7.20 Mulder [1988] ECR 2321 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.84 Mulder v Council EC [1992] I ECR 3061 ECJ . . . . . . . . . . . . . . . . . . . . . 3.84 Mulligan v Minister for Agriculture & Food [2002] I ECR 5719 ECJ. . . 3.85 Mulox IBC v Hendrick Geels [1993] I ECR 4075 ECJ . . . . . . . . . . . . . . . 4.01 Muñoz v Frumar [2002] I ECR 2289 ECJ . . . . . . . . . . . . . . . . . . . . . . . . 3.68
Case 59/85 HR 13710/88 C-413/01 Case 4/73 C-136/97
Netherlands v Reed [1986] ECR 1283 ECJ. . . . . . . . . . . . . . . . . . . . . . . . 1.83 Niemitz v Germany (1993) 16 EHRR 97 E Ct HR . . . . . . . . . . . . . . . . . 3.35 Ninni-Orasche [2004] I ECR 13187 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . 1.80 3.22, 3.28, 3.29, 3.33, 3.37, 3.38 Norbury v Customs & Excise Commissioners [1999] I ECR 2491 ECJ. . 3.64
C-240/98 C-258/04 HR 19441/92 C-36/02 C-305/05 C-452/01 C-465/00 C-351/89
Océano Grupo Editorial v Quintero [2000] I ECR 4941 ECJ. . . . . 8.37, 8.47 Office National de l’Emploi v Ioannidis [2005] I ECR 8275 ECJ . . . . . . 1.79 Ohg v Austria (1994) 18 EHRR CD107 E Comm HR . . . . . . . . . . . . . . 2.46 Omega [2004] I ECR 9609 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.69 Ordre des Barreaux Francophone [2007] June 26 ECJ . . . . . . . . . . . . . . 7.63 1.06, 1.07, 1.33, 2.17, 2.27, 2.49 Osterreichischer Rundfunk [2003] I ECR 4989 ECJ . . . . . . . . . . . . . . . . 3.40 Overseas Union Insurance v New Hampshire Insurance [1991] I ECR 3317 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.18 Owens Bank v Bracco [1994] I ECR 117 ECJ. . . . . . . . . . . . . . . . . . . . . . 9.80 Owusu v Jackson [2005] I ECR 383 ECJ . . . . . . . . . . . . . . . . . . . 10.56, 10.59
C-409/98 C-56/98 C-313/01
C-129/92 C-281/02 T-116/01 C-442/03P C-327/02 Case 24/67
st
th
P&O European Ferries (Vizcaya) v Commission EC [2003] II ECR 2957 CFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.20, 3.56 P&O European Ferries (Vizcaya) v Commission EC [2006] All ER (D) 06 (June) ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.20 Panayotova v Minister voor Vreemdelingenzaken en Integratie [2004] I ECR 11055 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.63 Parke Davis v Probel [1968] ECR 55 ECJ . . 3.18, 3.19, 3.20, 3.22, 3.27, 3.28
xxvi
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C-79/01 Case 228/81 Case 34/82 C-92/92 HR 41087/98 E-10/04 C-44/01 C-473/04 Case 59/75
E-2/01
Payroll Data Services (Italy) [2002] I ECR 8923 ECJ . . . . . . . . . . . . . . . 1.69 Pendy Plastic v Pluspunkt [1982] ECR 2723 ECJ . . . . . . . . . . . . . . . . . . 9.87 Peters v Zuid Nederelandse [1983] ECR 987 ECJ. . . . . . . . . . . . 10.02, 10.44 Phil Collins v Imtrat [1993] I ECR 5145 ECJ . . . 1.63, 3.22, 3.27, 3.28, 3.29 Phillips v UK (2001) 11 BHRC 280 E Ct HR. . . . . . . . . . . . . . . . . . . . . . 7.40 Piazza v Schurte [2005] July 1 EFTA Ct . . . . . . . . . . . . 1.07, 1.48, 1.63, 2.39 Pippig Augenoptik [2003] I ECR 3095 ECJ. . . . . . . . . . . . . . . . . . . 5.52, 5.55 Plumex v Young Sports [2006] ILP 13 ECJ. . . . . . . . . . . . . . . . . . . . . . . 10.57 Portuguese Golden Share see Commission EC v Portugal Pubblico Ministero v Manghera [1976] ECR 91 ECJ. . . . . . . . . . . . . . . . 3.25 Public Service Compensation Commission Decision 2005/842/EC, [2005] OJ L312 67 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.20 Pucher, Re [2002] July 1 EFTA Ct . . . . . . . . . . . . . . . . . . . . . . . . . . 7.15, 7.17 st
st
Quintero see Océano Grupo Editorial
Case 7/78 C-109/01 C-154/04 etc C-292/89 C-257/99 C-2/92 C-491/01 C-221/89 C-257/99 etc C-372/98 C-192/99 C-37/98 C-210/03 C-16/05 E-3/98 C-106/91
R(CP) Criminal Prosecutions R(CP) v Thompson [1978] ECR 2247 ECJ . . . . . . . . . . . . . . . . . . . 1.35, 1.51 R(JR) Judicial Review cases R(JR) Akrich v Secretary of State for Home Department [2003] I ECR 9607 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.83 R(JR) Alliance for Natural Health v Secretary of State for Health (Food Supplements) [2005] I ECR 6451 ECJ. . . . . . . . . . . . . . . . . . . . . . . 3.33, 3.38 R(JR) Antonissen v Immigration Appeal Tribunal [1991] I ECR 745 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.79 R(JR) Barkocki v Secretary of State for Home Department [2001] I ECR 6003 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.67 R(JR) Bostock v Ministry of Agriculture Food & Regional Affairs [1994] I ECR 955 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.67 R(JR) British American Tobacco (Investments) v Secretary of State for Health [2002] I ECR 11453 ECJ. . . . . . . . . . . . . . . . . . . . . . . 3.29, 3.31, 3.33 R(JR) Factortame v Secretary of State for Transport [1991] I ECR 3905 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.65 R(JR) Gloszczuk v Secretary of State for Home Department [2001] I ECR 6369 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.63, 1.67 R(JR) JH Cooke & Sons v Ministry of Agriculture Fisheries & Food [2000] I ECR 8683 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.78 R(JR) Kaur v Secretary of State for Home Department [2001] I ECR 1237 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.55 R(JR) Savas v Secretary of State for Home Department [2000] I ECR 2927 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.17 R(JR) Swedish Match v Secretary of State for Health [2004] I ECR 11893 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.38 R(JR) Tum v Secretary of State for Home Department [2004] 1 CMLR 33 @ 1012 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.67 Rainford-Towning [1999] 1 CMLR 871 EFTA Ct . . . . . . . . . . . . . . . . . . 7.15 Raurath [1992] I ECR 3351 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.73
Table of Cases — European C-115/88
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4.23, 4.25, 4.36, 4.47, 10.43, 10.44, 10.50
C-261/90 C-515/99
Case 2/74 C-152/03 Case 182/83 T-25/99 C-94/00 C-241/83 C-363/89 Case 48/75 C-241/91P C-314/89 T-187/94 C-113/89 Case 136/75 C-118/96 C-300/01 Case 5–11 etc Case 73/77 C-439/97 Case 25/79 C-163/94 C-522/03 Case 158/87 C-112/00 C-419/92 Case 265/87 C-350/03 C-269/00 Case 40/64 Case 266/85
9.80, 11.40 1.07, 1.21, 1.23, 1.24, 1.27, 1.28, 1.29, 1.33, 1.35, 1.37, 1.41, 1.46, 1.49, 1.63, 1.64, 1.65, 1.74, 2.17, 2.39, 2.43, 2.48, 2.49, 2.50 Reyners v Belgium [1974] ECR 631 ECJ . . . . . . . . . . . . . . . . . . . . . 1.63, 7.07 Ritter-Coulais v Finanzamt Germersheim [2006] I ECR 17111 ECJ . . . 2.41 1.20, 1.21, 2.27, 2.40, 3.23, 3.29, 3.36 Roberts v Commission EC [2001] II ECR 1581 CFI . . . . . . . . . . . . . . . . 3.53 Roquette Frères v Directeur Général de la Concurrence de la Consummation et de la Répression des Frauds [2002] I ECR 888 ECJ . . . . . . . . . . . . . . . 3.39 3.13, 4.16, 4.37, 4.38, 4.40, 4.41 Roux [1991] I ECR 273 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.73 Royer [1976] ECR 497 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.73 RTE v Commission EC [1995] I ECR 743 ECJ. . . . . . . . . . . . . . . . . . . . . 3.28 Ruah [1991] I ECR 1647 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.84 Rudolph v Council EU [2002] II ECR 391 CFI . . . . . . . . . . . . . . . . . . . . 3.84 Rush Portuguesa v Office National d’Immigration [1990] I ECR 1417 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.64 Rutili v French Minister of Interior [1975] ECR 1219 ECJ . . . . . . 2.44, 2.45 Safir v Skattemyndighete I Dalarnaslän [1998] I ECR 1897 ECJ . 1.63, 1.68 1.07, 1.21, 1.23, 1.33, 2.17, 2.18, 2.48, 2.50 San Michele v European Coal and Steel Community [1962] ECR 449 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.39 4.21, 4.37, 4.39 1.22, 1.28, 1.31, 1.37, 2.32, 2.36, 2.40, 2.41, 2.47 Sanicentral v Collin [1979] ECR 3423 ECJ. . . . . . . . . . . . . . . . . . 4.36, 10.35 1.25, 1.28, 1.31, 1.37, 1.44, 1.51, 2.35, 2.36, 2.40, 2.42, 2.44, 2.45, 2.47, 3.22 Scania Finance France v Rockinger Spezialfabrik für Anhangerkupplungen [2005] I ECR 8639 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.57 3.11 Schmidberger [2003] I ECR 5659 ECJ. . . . . . . . . . . . . . . . . . . . . . . 3.33, 3.35 Schnitzer see Staatsanwaltschaft Augsburg . . . . . . . . . . . . . . . . . . . . . . . . . . . Scholz v Opera Universitaria di Cagliari [1994] I ECR 505 ECJ . . . . . . 1.22 Schräder [1989] ECR 2237 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.38 5.18, 5.19, 5.21, 5.28, 5.83, 5.86, 5.88 Seeling v Fin Starnberg [2004] 2 CMLR 32 @ 757 ECJ. . . . . . . . . . . . . . 3.62 Sgarlata v Commission [1965] ECR 215 ECJ. . . . . . . . . . . . . . . . . . . . . . 3.37 Shenavai v Kreisher [1987] ECR 239 ECJ . . . . . . . . . . . . . . . . . . . . . . . 10.12
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C-68/93 C-42/95 Case 35/76 C-275/01 C-414/92 C-159/89 C-350/92 C-145/04 C-159/90 HR 8790/79 C-463/93 C-104/03 C-215/01 C-35/98 C-1/04 C-326/99 Case 1/58 Case 29/69 C-484/93 E-2/02 Case 5/77 Case 119/75 Case 35/87 Case 71/76 C-401/99 C-112/99 C-329/03 C-423/97 C-456/02 C-222/97 C-159/02 C-84/94
Shevill v Presse Alliance [1995] I ECR 415 ECJ . . . . . . . . . . . . . . . . . . . . 4.04 Siemens v Nold [1996] I ECR 6017 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . 3.37 Simmenthal v Italian Minister of Finance [1976] ECR 1871 ECJ . . . . . 3.28 Sinclair Collins [2003] I ECR 5965 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . 3.62 Solo Kleinmotoren v Boch [1994] I ECR 2237 ECJ . . . . . . . . . . . . . . . . . 9.77 Spagl [1990] I ECR 4539 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.84 Spain v Commission EC (Medicinal Products) [1995] I ECR 1985 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.19, 3.20, 3.22, 3.25, 3.27, 3.28, 3.29 Spain v UK (European Elections) [2007] 1 CMLR 3 @ 87 ECJ . . . . . . . 1.05 Spanish Golden Share see Commission EC v Spain SPUC Ireland v Grogan [1991] I ECR 4685 ECJ . . . . . . . . . . . . . . . . . . . 3.34 Sramek v Austria (1985) 7 EHRR 351 E Ct HR . . . . . . . . . . . . . . . . . . . 2.46 St Martinus Elten [1997] I ECR 255 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . 3.85 St Paul Dairy Industries v Unibel Exser [2005] I ECR 3481 ECJ . . . . . . 4.14 1.65, 1.66, 1.69, 1.74, 1.91 Staatssecretaris van Financien v Verkooijen [2000] I ECR 4071 ECJ . . . 2.44 9.60, 9.65, 9.70 Stefan see West Deutsche Landesbank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stichting ‘Goed Wonen’ v SS for Finance [2001] I ECR 6831 ECJ . 3.62, 3.63 Stork v ECSC [1959] ECR 17 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.37 Strauder v Ülm [1969] ECR 419 ECJ . . . . . . . . . . . . . . . . . . . . . . . 3.33, 3.37 1.25, 1.37, 1.48, 2.32, 2.36 Technologien Bauschaftsberatung v EFTA [2003] June 19 EFTA CT . . . 3.33 Tedeschi v Denhasit [1977] ECR 1555 ECJ . . . . . . . . . . . . . . . . . . . . . . . 3.28 Temco Europe see Belgium v Temco Europe Terrapin (Overseas) v Terranova Industrie [1976] ECR 1039 ECJ. . . . . 3.28 Thetford v Fiamma [1988] ECR 3585 ECJ . . . . . . . . . . . . . . . . . . . 3.19, 3.28 Thieffry v Carisel de Avocats de Paris [1977] ECR 765 ECJ . . . . . . . . . . 7.19 Thompson see R v Thompson Thomsen v Amt für landlichte Ramme Husum [2002] I ECR 5775 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.85 Toshiba Europe [2001] I ECR 7945 ECJ. . . . . . . . . . . . . . . . . . . . . . . . . . 5.55 Trapeza tis Ellados v Banque Artesia [2005] I ECR 9341 ECJ . . . . . . . . 1.44 4.47, 5.16, 5.19, 5.20, 5.21, 5.77, 5.78, 6.06, 6.14, 6.20, 6.33, 6.35, 6.54, 6.66 Trojani [2004] I ECR 7573 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.80 1.03, 1.21, 1.22, 1.25, 1.37, 1.41, 1.46, 1.49, 1.51, 2.33, 2.42, 2.45, 7.27, 9.28, 9.36 Turner v Grovit [2004] I ECR 3565 ECJ . . . . . . . . . . . . . . . . . . . . . . . . 10.58 th
UK v Council EU (Working Time Directive) [1996] I ECR 5755 ECJ . . 3.31 UK Golden Share see Commission EC v UK UK Patent Licensing see Commission EC v UK
Table of Cases — European
xxix
Case 222/86 C-134/95 C-38/98
UNECTEF v Heylens [1987] ECR 4098 ECJ . . . . . . . . . . . . . . . . . . . . . . 1.26 Unito Socio-Sanitaria Locale 4 v di Biela [1997] I ECR 195 ECJ . . . . . . 1.23 Usines Renault v Maxicar [2000] I ECR 2973 ECJ . . . . . . . . 4.05, 9.84, 9.86
T-274/01 C-44/89 Case 41/74 C-391/95 C-203/99 C-315/92
Valmont Nederland v Commission EC [2005] II ECR 3145 CFI . . . . . . 3.56 Van Deetzen II [1991] I ECR 5119 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . 3.84 Van Duyn v UK [1974] ECR 1337 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . 3.34 Van Uden v Deco Line [1998] I ECR 7091 ECJ . . . . . . . . . . . . . . . . . . . . 4.11 Veedfald [2001] I ECR 3569 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.26, 5.28 Verband Sozialer Wettbewerb v Clinique Labatories SNC and Estee Lauder Cosmetics [1994] I ECR 317 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.43 Verdoliva v Van de Hoeven [2006] I ECR 1579 ECJ . . . . . . . . . . . . . . . 10.57 Verein fut Konsumenteninfomation v Henkel [2002] I ECR 8111 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.46, 10.44 Vlassopoulou [1991] I ECR 2357 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.19 Volvo v Erik Veng [1988] ECR 6211 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . 3.28
C-3/05 C-167/00 C-340/89 Case 238/87 Case 5/88 C-294/92
Wachauf v Germany [1989] ECR 2609 ECJ 3.28, 3.29, 3.33, 3.34, 3.37, 3.38 2.34, 4.21, 4.36, 4.50, 11.39, 11.40, 11.44, 11.45, 11.47
C-464/98 C-506/04 C-306/93
1.21, 1.37, 1.41, 1.49 7.12, 7.13, 7.16 Wizersekt [1994] I ECR 5555 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.38
C-200/98
X & Y v Riksskatteverket [1999] I ECR 8261 ECJ. . . . . . . . . . . . . . 1.53, 2.38
T-306/01
Yusuf v Council EU [2005] II ECR 3533 CFI . . . . . . . . 3.35, 3.41, 7.40, 7.41
Case 56/97 C-200/02
Zelger v Salinitri [1980] ECR 89 ECJ. . . . . . . . . . . . . . . . 10.11, 10.12, 10.22 Zhu v Secretary of State for Home Department [2004] I ECR 9925 ECJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.64, 1.83, 1.92 Zino Davidoff v A&G Imports [2001] I ECR 8691 ECJ. . . . . . . . . . . . . . 3.28
C-414/99
TA B L E O F CA SES — UN I TED KI N G DO M
Table of Cases — United Kingdom TA B LE O F CA SES — UN I TED KI N G DO M
A, Re [2003] EWHC 2911 (Fam), [2004] 1 All ER 912 Sumner J . . . . . . . . . . . . . . . . . . 11.13 Adams v Cape Industries [1990] Ch 433 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.86 Adams v Clutterbuck (1883) 10 QBD 403 QBD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.13 Adams v National Bank of Greece [1961] AC 255 HL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.05 Adams, Re [1982] July 31 Browne-Wilkinson VC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.30 Adams, Re [2004] EWHC 2739, [2004] Times December 6 , Lightman J . . . . . . . . . . . . . 7.42 Admiral Palliser’s Case discussed in Mostyn v Fabrigas (1774) 1 Cowper 161, 180 Lord Mansfield MR, 98 ER 1021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.04 Aeolian Shipping v ISS Machinery Services [2001] EWCA Civ 1162, [2002] 2 Lloyd’s Rep 641 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.40 Agassi v Robinson [2006] UKHL 23, [2006] 1 WLR 1380 . . . . . . . . . . . . . . . . . . . . . . . . . 3.01 Agnew v Länsforsäkringsbolangens [2001] 1 AC 223 HL . . . . . . . . . . 4.07, 10.28, 10.43, 10.52 Agnew v Usher (1884) 14 QBD 78 QBD; (1885) 51 LT 752 CA . . . . . . . . . . . . . . . . 4.28, 4.38 AIC v Federal Government of Nigeria [2003] EWHC 1357 Admin Stanley Burnton J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.85 AIG Capital Partners v Kazakhstan [2005] EWHC 2239 (Comm), [2006] 1 WLR 1420 9.85 Air Foyle v Center Capital [2002] EWHC 2535, [2003] 2 Lloyd’s Rep 753 Gross J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.13 Alfred Dunhill v Diffusion Internationale de Maroquinerie de Prestige [2001] CLC 949 QBD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.44, 10.45 Ali v Secretary of State for Home Department [2006] EWCA Civ 484, [2006] ELR 423 . 1.64, 1.92 Allcard v Skinner (1887) 36 Ch D 145 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.15 Allen Wilson Shopfitters v Buckingham [2005] EWHC 1165 (QB) . . . . . . . . . . . . . . . . . . 5.09 Allgemeine case [1980] QB 390 CA Donaldson J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.37 Amin Rasheed Shipping Corporation v Kuwait Insurance Co [1984] AC 50 HL . 10.28, 10.41 Annesley, Re [1926] Ch 692 Russell J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.29 Anstruther v Adair (1834) 2 Mylne & Keen 513, 39 ER 1041 Lord Brougham LC. . . . . 11.60 Anziani, Re [1930] 1 Ch 407 Maugham J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.28 Apostolakis see Standard Bank of London Arglasse v Muschamp (1682) 1 Vern 75, 23 ER 322 Lord North LK. . . . . . . 4.48, 10.49 11.44 Ark Therapeutics v True North Capital [2005] EWHC 1585, [2006] 1 All ER (Comm) 138 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.27 Arkwright Mutual Insurances v Bryanstone Insurance Co [1990] 2 QB 649 Potter J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.27 4.38, 9.63, 11.41 Ashurst v Pollard [2000] 2 All ER 772 Jacob J; [2001] Ch 595 CA Assets Recovery Agency v Creaven [2005] EWHC 2726, [2006] 1 WLR 622, Stanley Burnton J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.43 st
th
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Assets Recovery Agency v Singh [2005] EWCA Civ 580, [2005] 1 WLR 3747 . . . . . . . . . . 7.43 Assets Recovery Agency v Szepietowski [2006] EWHC 2406, [2006] Times October 25 Silber J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.43 Assunzione, The [1974] P 150 CA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.09 Att-Gen v Drapers Co [1894] 1 IR 185 CA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.39 Att-Gen v Jewish Colonisation [1901] 1 QB 123 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.56 Att-Gen v Johnson [1907] 2 KB 885 Bray J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.54 Att-Gen v M’Kenzie (1822) 11 Price 284, 147 ER 474. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.08 Att-Gen v (Lord) Sudeley [1897] AC 11 HL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.05 Autologic [2005] UKHL 54, [2006] 1 AC 118 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.41 th
Bairstow Eves London Central v Smith [2004] EWHC 263, [2004] 2 EGLR 25 Gross J . 8.38, 8.44 Baker v JE Clark & Co (Transport) [2006] EWCA Civ 464, [2006] Pension Law Reports 131 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.25 Balabel v Air India [1988] Ch 317 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.64 Banco Nacional de Comercio Exterior v Empressa de Telecommunications de Cuba [2007] EWCA Civ 662, [2007] 21 LSG 22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.73 Bank of Africa v Cohen [1909] 2 Ch 129 CA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.13, 11.44 Bank of Dubai v Abbas [1997] ILP 308 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.54 Bank of Scotland v A [2001] EWCA Civ 52, [2001] 1 WLR 751 . . . . . . . . . . . . . . . . . . . . 7.63 Barclays Bank v O’Brien [1994] 1 AC 180 HL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.26 Barclays Bank v Quistclose Investments [1970] AC 587 HL . . . . . . . . . . . . . . . . . . . . . . . 11.35 Barratt International Resorts v Martin [1994] SLT 434 Court of Session OH. . . . . 4.39, 4.47 Barton decd, Re [2002] EWHC 264, [2002] WTLR 469 Lawrence Collins J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.56, 11.60 Base Metal Trading v Shamurin [2004] EWCA Civ 1316, [2005] 1 WLR 1157 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.54 Bates v Microstar [2003] EWHC 661 (Ch), [2003] Times April 15 . . . . . . . . . . . . . . . . . . 9.81 Batthyany v Walford (1886) 33 Ch D 624 affirmed (1887) 36 Ch D 269 CA in Ch . . . . 4.16, 10.44, 10.49 Baybut v Eccle Riggs [2006] All ER (D) 161 (Nov) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.44 Berchtold, Re [1923] 1 Ch 192 Russell J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.04, 11.54 Birtwhistle v Vardill (1840) 7 Clark & Finnelly 895, 7 ER 1308 . . . . . . . . . . . . . . . . . . . . 11.28 Bols Distilleries v Superior Yacht Services [2005] UKPC 45, [2007] 1 WLR 12. . . . . . . . . 4.08 Bowman v Fels [2005] EWCA Civ 226, [2005] 1 WLR 3083 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.45, 7.46, 7.59, 7.62, 7.64 Boys v Chaplin [1971] AC 356 HL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.46 Brae Rent-A-Car International, Re [2003] EWHC 128 (Ch), [2003] 2 All ER 201 . . . . . 9.59 Bree v Narescaux (1881) 7 QBD 434 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.23 Bristow Helicopters v Sikorsky Aircraft Corporation [2004] 2 Lloyd’s Rep 150 . . . . . . . . 10.59 British South Africa Co v Companhia de Moçambique [1893] AC 602 HL, [1892] 2 QB 4.30, 11.44 358 CA Bryen & Langley v Boston [2004] EWHC 2456 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.37 th
C v S [1999] 1 WLR 1551 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.63
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C Inc v L [2001] CLC 1054 Aikens J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.81 Caithness, Re (1891) 7 TLR 354 Chitty J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.05 Caledonia Subsea v Micoperi [2002] SLT 1022 Ct of Session IH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.09, 4.27, 10.26, 10.27, 10.28 Cambridge Gas Transport Group v Navigator Holdings [2006] UKPC 26, [2006] 3 WLR 689 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.49, 9.54 Canada Trust Co v Stolzenberg (No 2) [1996] 1 WLR 547 CA, [2002] 1 AC 1 HL4.05, 4.07, 5.05, 10.54, 10.57 Canterbury v Wyburn [1895] AC 89 PC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.44 Carapiet, Re [2002] EWHC 1304, [2002] WTLR 989 Jacobs J . . . . . . . . . . . . . . . 11.04, 11.56 Carnegie v Giessen [2005] EWCA Civ 191, [2005] CP Rep 24 . . . . . . . . . . . . . . . . . . . . . . 9.89 Carter v Lotus Leisure Group [2002] 2 P & CR 2 @ 26 CA . . . . . . . . . . . . . . . . . . . . . . . . . 4.46 Cartney, Re (1840) Montagu & Chitty 239 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.13 Casey v Arnott (1876) 2 CPD 24 Denman J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.23 Casio Computer Co v Sayo (No 3) [2001] EWCA Civ 661, [2001] ILP 43 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.48, 11.42 Castelli see (R(JR) Castelli Chase Manhattan Bank v Israel-British Bank (London) [1981] Ch 165 Goulding J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.48 Chatfield v Berchtoldt (1871) LR 7 Ch App 192 CA in Chancery. . . . . . . . . . . . . . . 3.04, 4.28 Chelleram v Chelleram (No 2) [2002] EWHC 632, [2002] 3 All ER 17. . . . . . . . . . . . . . 11.04 ci4net.com, Re [2004] EWHC 1941 (Ch) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.61 Cigala’s ST, Re (1877) 7 Ch D 351 Jessel MR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.54 Cohn, Re [1945] Ch 5 Uthwatt J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.01 Collier v Rivaz (1841) 2 Curteis 855, 163 ER 608 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.29 Collins v Secretary of State for Work & Pensions [2006] EWCA Civ 376, [2006] ICR 1033 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.79 Commission for the New Towns v Cooper (GB) [1995] Ch 259 CA . . . . . . . . . . . . . . . . . . 8.15 Commissioner for Stamp Duties, Queensland v Livingston [1965] AC 694 PC . . . . . . . . 11.55 Compagnie d’Armement Maritime v Compagnie Tunisienne de Navigation [1971] AC 572 HL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.42 Cookney v Anderson (1863) 1 De Gex Jones & Smith 365, 46 ER 146. . 3.07, 3.08, 3.13, 4.28, 10.24, 11.21, 11.44 Coppin v Coppin (1725) 2 Peere Williams 291, 24 ER 735 . . . . . . . . . . . . . . . . . . . . . . . . . 3.05 Cottage Holiday Associates v Commissioners for Customs and Excise [1983] QB 735 Woolf J 6.20, 6.46, 6.48 Countess Derby’s case (c1502) Keilwey 202, 72 ER 381 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.30 Cranstown (Lord) v Johnston (1796) 3 Ves 170, 30 ER 952 Arden MR . . . . . . . . . . . . . . 10.24 Credit Lyonnais v New Hampshire Insurance Co [1997] 2 Lloyd’s Rep 1 CA . . . . . . . . . 10.27 Crehan see Inntrepreneur Pub Co Cricklewood Property & Investment Trust v Leighton’s Investment Trust [1945] AC 221 HL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.03 Crown Prosecution Service v Richards [2006] EWCA Civ 849, [2006] 2 FCR 452 . . . . . . 7.42 Cutcliffe’s WT, Re [1940] Ch 565 Morton J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.28, 11.54 Cyganik v Agulian [2006] EWCA Civ 129, [2006] 1 FCR 406. . . . . . . . . . . . . . . . 10.54, 11.21
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Daisyteck-ISA, Re [2004] BPIPR 30 Ch D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.59, 9.65 Deschamps v Miller [1908] 1 Ch 856 Parker J . . . . . . . . . . . . . . . . . . . . . . . . 4.30, 10.24, 11.44 Dexter v Harley [2001] Times April 2 Lloyd J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.48 Director General of Fair Trading v First National Bank [2000] 1 All ER 240 Evans-Lombe J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.31, 8.36, 8.40, 8.41 Director General of Fair Trading v First National Bank [2000] QB 647 CA . . 8.31, 8.36, 8.41, 8.46 Director General of Fair Trading v First National Bank [2001] UKHL 52, [2002] 1 AC 481 8.31, 8.36, 8.39, 8.42, 8.44, 8.46 Downie v Downie’s Trustee (1866) 4 Macpherson (Session Cases) 1067 . . . . . . . . . . . . . 3.05 Dresser UK v Falcongate Freight Management [1992] 1 QB 502 CA . . . . . . . . . . . . . . . . 10.57 Duncan v Lawson (1889) 41 Ch D 394 Kay J. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.04, 3.05, 3.13 nd
Earl of Derby, Re (1611) 12 Coke’s Report 114, 77 ER 1390. . . . . . . . . . . . . . . . . . . . . . . . 4.48 Egon Oldendorff v Liberia Corp [1996] 1 Lloyd’s Rep 350 Clarke J . . . . . . . . . . . . . . . . . 10.42 El Ajou v Dollar [1993] 3 All ER 717 Millett J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.48 Electricity Supply Nominees v IAF Group [1993] 1 WLR 1059 QBD . . . . . . . . . . . . . . . . . . . 8.30 Elitestone v Morris [1997] 1 WLR 687 HL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.04 EMM Capricorn Trustees v Compass Trustees [2001] WTLR 997 Royal Ct of Jersey . . . 11.47 Ennstone Building Products v Stanger [2002] EWCA Civ 916, [2002] 1 WLR 3059 . . . 10.28, 10.45, 10.59 Evans v Cherry Tree Finance [2007] April 13 , [2007] WL 2186988 Ch D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.07, 9.03, 9.04 th
Fagins Bookshop, Re [1992] BCLC 118 Harman J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.35 Falco Finance v Gough [1998] October 28 Macclesfield CC . . . . . . . . . . . . . . . . . . . . . . . 8.36 Favorke v Steinkopff [1922] 1 Ch 174 Russell J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.54 Ferguson v Ferguson [1990] SLT Sh Ct 73 . . . . . . . . . . . . . . . . . . . . . . . . 4.23, 4.35, 9.63, 11.41 First National Bank see Director General of Fair Trading Fitzgerald v Williams [1996] QB 657 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.39 Flightline v Edwards [2003] 3 All ER 1200 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.81 Formula One Holdings (No 2) see Speed Investments Fourie v Le Roux [2007] UKHL 1, [2007] 1 All ER 1087 . . . . . . . . . . . . . . . . . . . . . . . . . . 9.73 Freke v (Lord) Carbery (1873) LR 16 Eq 461 Lord Selborne. . . . . . . . . . . . . . . . . . 3.05, 11.27 Front Comor, The [2007] UKHL 4, [2007] ILP 20 (ECJ reference) . . . . . . . . . . . . . . . . . 10.38 th
Gaines-Cooper v Revenue & Customs Commissioners [2006] UKSPC 568, (2006) 9 International Trust Law Reports 274.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.07 Gammell v Sewell (1860) 5 Hemmings & Miller 728, 157 ER 1371 . . . . . . . . . . . . . . . . . 3.13 Ghana Bank v C [1997] Times March 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.48 Gienar v Meyer (1796) 2 Hy Bl 603, 126 ER 728 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.40 Global Marketing Europe v Berkshire Trading Standards Department [1974] July 21 Div Ct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.38 Grassi, Re [1905] 1 Ch 594 Buckley J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.29 rd
st
Harding v Wealands [2006] UKHL 32, [2006] 3 WLR 83 . . . . . . . . . . . . . . . . . . . . . . . . 10.46
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Harries v Barclays Bank [1977] 2 EGLR 15 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.84 Harrods (Buenos Aires), Re [1992] Ch 72 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.59 Havair v Vile [2000] CLYB [848] County Ct. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.17 Havenridge v Boston Dyers [1994] 2 EGLR 73 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.30 Hawthorne, Re (1883) 23 Ch D 743 Kay J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.30 3.13, 4.35, 9.63, 11.02, 11.37, 11.41 Hayward, Re [1997] Ch 45 Rattee J Hernando, Re (1884) 27 Ch D 284 Pearson J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.30 Hesperides Hotels v Aegean Turkish Holidays [1979] AC 508 HL. . . . . . . . . . . . . . . . . . . . 4.31 Hog v Lashley (1791) 3 Paton 247 Ct of Session . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.28 Holding v Haling (1685) 3 Keble 150, 84 ER 646 Hales CJ . . . . . . . . . . . . . . . . . . . . . . . . . 4.38 Holman v Johnson (1775) 1 Cowper 41, 98 ER 1120 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.48 Hoyles, Re [1910] 2 Ch 333, [1911] 1 Ch 179 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.05 HP Bulmer v J Bollinger (No 2) [1974] Ch 401 CA. . . . . . . . . . . . . . . . . . . . Preface 3.01, 3.30 Hugh le Pape v Florence Merchants in London (1280–1281) 8–9 Edward I. . . . . . . . . . . . 4.29 Hussien v Chong Fook Ham [1970] AC 942 PC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.61 Ikimi v Ikimi [2001] EWCA Civ 873, [2002] Fam 72 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.09 Inntrepreneur v Boyes (1994) 68 P & CR 77 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.52 Inntrepreneur Pub Co v Crehan [2006] UKHL 36, [2006] 3 WLR 148; [2004] EWCA Civ 637, [2004] 3 EGLR 128; [2003] EWHC 1510 (Ch) Park J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.53, 3.54 Inntrepreneur v Mason (1994) 68 P & CR 53 QBD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.52 Inntrepreneur Pub Co (CPC) v Sweeney [2002] EWHC 1060 . . . . . . . . . . . . . . . . . . . . . . 3.53 Interdesco v Nullfire [1992] 1 Lloyds Rep 180 Phillips J . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.84 Interfoto Library v Stiletto [1989] QB 433 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.40 J Fernandes Pereira v Mehta [2006] EWHC 813 (Ch), [2006] 1 WLR 1543 Judge Pelling QC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.14 Jackson v Petrie (1804) 10 Ves 164, 32 ER 807 Eldon LC . . . . . . . . . . . . . . . . . . . . . . . . . 10.24 Jarrett v Barclays Bank [1999] QB 1 CA 4.05, 4.16, 4.21, 4.37, 4.39, 4.40, 4.44, 4.46, 4.47, 6.16, 6.20, 6.45, 10.31 Jerningham v Herbert (1828) 4 Russ 388, 38 ER 851. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.05 Jordan Grand Prix v Baltic Insurance Group [1999] 2 AC 127 HL. . . . . . . . . . . . . . . . . . 10.35 JP Morgan Europe v Primacom [2005] EWHC 508 (Comm), [2006] ILP 11 4.18, 10.37, 10.37, 10.58 Cooke J K v National Westminster Bank [2006] EWCA Civ 1039, [2006] 4 All ER 907 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.61, 7.63 Kakkar v Szelke [1988] FSR 97 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.39 Kaur v Lord Advocate [1980] 3 CMLR 79 CS OH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.37 Kenburn Waste Management v Bergmann [2002] EWCA Civ 98, [2002] Times February 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.12 Keppel-Palmer v Exus Travel [2003] EWHC 3529 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.18 Khatun see Newham LBC v Khatun Kindlance v Murphy [1997] High Ct of Northern Ireland . . . . . . . . . . . . . . . . . . . . . . . . . 8.36 King v Crown Energy Trading [2003] EWHC 163, [2003] ILP 28 . . . . . . . . . . . . . . . . . . 10.54 th
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Kleinwort Benson v Glasgow CC [1999] 1 AC 153 HL; [1996] QB 678 CA 4.08, 10.43, 10.50 Kolchmann v Meurice [1903] 1 KB 534 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.53 Kuwait Airways v Iraqi Airways [2002] 3 All ER 209 HL . . . . . . . . . . . . . . . . . . . . . . . . . . 3.07 Kuwait Airways Corporation v Iraqi Airways Co (Nos 4 and 5) [2000] Times November 21st CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.86 Kuwait Oil Tanker Co v Qabazard [2003] UKHL 31, [2004] 1 AC 300 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.15, 4.53, 9.89 Lewis v Eliades (No 1) [2002] EWHC 335 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11 London Helicopters v Heliportugal [2006] EWHC 108, [2006] ILP 28 . . . . . . . . . . . . . . 10.45 London North Securities v Meadows [2005] EWCA 956 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.24 Lysaght v Edwards (1876) 2 Ch D 499 Jessel MR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.21, 8.59 Macdonald v Macdonald (1932) SC HL 79. . . . . . . . . . . . . . . . . . . . . . . 3.02, 3.03, 3.05, 11.27 MacMillan v Bishopsgate Investment Trust (No 3) [1996] 1 WLR 387 CA. . . . . . . 3.02, 10.48 Mahme Trust Reg v Lloyds TSB Bank [2004] EWHC 1931 (Ch), [2004] 2 Lloyd’s Rep 637 Morritt VC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.10, 10.53 Mark v Mark [2004] EWCA Civ 168, [2005] Fam 267 . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.09 Marks & Spencer v Commissioner of Customs and Excise [2003] EWCA Civ 1418, [2004] STC 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.31 Maronier v Larmer [2002] EWCA Civ 774, [2002] 3 All ER 848 . . . . . . . . . . . . . . . . . . . . 9.87 Mazur Media v Mazur Media [2004] EWHC 1566, [2004] 1 WLR 2966 Lawrence Collins J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.07, 10.57 7.53 McPhail v Doulton [1971] AC 424 HL Mehta see J Fernandes Pereira Messier-Dowty v Sabena [2000] 1 WLR 2040 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.59 MG Rover Espana, Re [2006] EWHC 3426 (Ch), [2005] BPIR 1162 . . . . . . . . . . . . 9.62, 9.71 Micoperi see Caledonian Subsea Midleton’s Settlement, Re [1947] Ch 583 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.54 Miliangos v George Frank (Textiles) (No 1) [1976] AC 433 HL . . . . . . . . . . . . . . . . . . . . . 9.89 Miller v Miller [2006] UKHL 24, [2006] 2 AC 618 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.13 Minwalla v Minwalla [2004] EWHC 2823, [2005] 1 FLR 771. . . . . . . . . . . . . . . . . . . . . 11.35 Molins v GD [2000] 1 WLR 1741 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.57 Montagu Evans v Young [2000] SLT 683 Ct of Session OH . . . . . . . . . . . . . . . . . . . . . . . 10.12 Montila see R(CP) v Mority v Stephan (1885) 58 LT 850 North J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.53 Mostyn v Fabrigas (1774) 1 Cowper 161, 98 ER 1021. . . . . . . . . . . . . . . . . . . . 3.04, 4.04, 4.30 Motorola Credit Corp v Uzan (No 1) [2002] EWCA Civ 989, [2002] 2 All ER (Com) 945 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.81 Motorola Credit Corp v Uzan (No 6) [2003] EWCA Civ 752, [2004] 1 WLR 113 . . . . . . 9.81 Mount Albert BC v Australian Temperance and General Mutual life Assurance Society [1938] AC 224 PC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.09 Munckenbeck & Marshall v Harold [2005] EWHC 356 QBD . . . . . . . . . . . . . . . . . . . . . . 8.38 National Carriers v Panalpina (Northern) [1981] AC 675 HL . . . . . . . . . . . . . . . . . . . . . . 3.03
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Navigators Insurance Co v Atlantic Methanol Production Co [2003] EWHC 1706, [2004] Lloyds Rep IR 418 David Steel J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.42 Nelson (Earl) v Bridport (Lord) (1846) 8 Beaven 547, 50 ER 215 . . . . . . . . . 2.04, 3.13, 11.28 Neste Chemicals v DK Line (‘The Sargasso’) [1994] 3 All ER 180 CA . . . . . . . . . . . . . . . 10.57 Newham LBC v Khatun [2004] EWCA Civ 55, [2005] QB 37 5.12, 8.24, 8.26, 8.28, 8.29, 8.35 Newlands v Chalmers (1832) 11 Shaw & Dunlop 65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.28 Ngyuyen v Searchnet Associates [1999] 3 CMLR 413 Scottish CS . . . . . . . . . . . . . . . . . . . 2.39 Norris v Chambres (1861) 3 De Gex Fisher & Jones 583, 45 ER 1004, on appeal from (1861) 29 Beav 246, 54 ER 621 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.25 O’Donoghue, Re [2004] EWHC 176 Lightman J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.42 Official Solicitor v Stype Industries (Jersey) [1983] 1 WLR 214 Whitford J . . . . . . . . . . 11.39 Olafsson v Gissurarson [2006] EWHC 3162 (QB), [2006] All ER (D) 345 Mackay J . 10.57 Ophthalmic Innovations International (UK) v Ophthalmic Innovations International [2004] EWHC 2948, [2005] ILP 10 Lawrence Collins J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.27 4.32, 9.87 Orams v Apostolides [2006] EWHC 2226, [2007] 1 WLR 241 Jack J P v P [2003] EWHC 2260 (Fam), [2004] Fam 1 Butler-Sloss P. . . . . . . . . . . . . . . . . . . . . 7.63 Paget v Ede (1874) LR 18 Eq 118 Bacon VC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.53 Paragon Finance v Nash [2001] EWCA Civ 1466, [2002] 1 WLR 685. . . . . . . . . . . . . . . . 9.48 9.48 Paragon Finance v Pender [2005] EWCA Civ 760, [2005] 1 WLR 3412 Parry v Edward Geldard (No 2) [2001] PNLR 44 Jacob J . . . . . . . . . . . . . . . . . . . . . . . . . . 3.84 Passmore v Morland [1999] 1 CMLR 1129 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.52 PB v Secretary of State for Home Department [2005] Imm AR 586 Immigration Appeal Tribunal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.83 Pearce v Ove Arup [2000] Ch 403 CA; [1997] Ch 293 Lloyd J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.05, 4.27, 10.10, 10.46, 10.57 Peer International Corp v Termidor Music Publishers (No 1) [2003] EWCA Civ 1156, [2004] Ch 212 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.07, 9.85 Penn v Lord Baltimore (1750) 1 Ves Sen 444, 27 ER 1132 Hardwicke LC . . . . . . . . . . . . 10.24 Pepin v Bruyère [1902] 1 Ch 24 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.05 Philipson-Stow v IRC [1961] AC 727 HL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.54 10.57 Phillips v Symes [2006] EWCA Civ 654, [2006] 1 WLR 2598 Phull v Secretary of State for Home Department [1996] Imm AR 72 CA 1.20, 1.55, 3.25 Picardi v Cuniberti [2003] BLR 487 Judge Toulmin QC . . . . . . . . . . . . . . . . . . . . . . . . . . 8.37 Piercy, Re [1895] 1 Ch 83 North J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.13, 11.44 Polly Peck International (No 2), Re [1998] 3 All ER 812 CA. . . . . . . . . . . . . . . . . . . . . . . . 4.31 Prazic v Prazic [2006] EWCA Civ 497, [2007] ILP 31 . . . . . . . . . . . . . . . . . . . . . . . 4.50, 11.40 Price v Dewhurst (1839) 8 Simon 617, 59 ER 244 Shadwell VC . . . . . . . . . . . . . . . . 3.05, 4.28 Primacom see JP Morgan Provimi v Aventis Animal Nutrition [2003] EWHC 961, [2003] ECLYB [262] . . . . . . . . . 10.44 R(CP) Criminal Prosecutions on Indictment Da Silva 2006 EWCA Crim 1654, 2006 2 Cr App R 35 . . . . . . . . . . . . . . . . . . . . . . . . . 7.61
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Duff 2002 EWCA Crim 2117, 2003 1 Cr App R (S) 88 . . . . . . . . . . . . . . . . . . . . . . . . . 7.60 Goodenough 2004 EWCA Crim 2260, 2005 1 Cr App R (S) 88 . . . . . . . . . . . . . . . . . . 7.40 Griffiths 2006 EWCA Crim 2155. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.60 7.35, 7.39, 7.45 Montila 2004 UKHL 50, 2004 1 WLR 3141 Olubitan 2003 EWCA Crim 2940, 2004 2 Cr App R (S) 14 (also known as Olupitan) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.42 Omar 2004 EWCA Crim 2320, 2005 1 Cr App R (S) 86. . . . . . . . . . . . . . . . . . . . . . . . 7.42 Palmer (No 1) 2002 EWCA Crim 2202, 2003 1 Cr App R (S) 112 . . . . . . . . . . . . . . . . 6.52 Palmer (No 2) 2002 EWCA Crim 2683, 2003 2 Cr App R (S) 2 . . . . . . . . . . . . . . . . . . 6.52 Rezvi 2002 UKHL 1, 2003 1 AC 1099 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.40 7.39 Saik 2006 UKHL 18, 2006 1 AC 18 Soneji 2005 UKHL 49, 2006 1 AC 340 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.40 Szepietowski [2007] EWCA Civ 766, [2007] July 24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.43 R(JR) Judicial review cases Castelli v City of Westminster (1996) 28 HLR 616 CA . . . . . . . . . . . . . . . . . . . . . 1.41, 1.87 Countryside Alliance v Att-Gen 2006 EWCA Civ 817, 2006 3 ELR 97 . . . . . . . . . . . . . 1.63 Eastside Cheese Co v Secretary of State for Health 1999 3 CMLR 123 CA . . . . . . . . . . 3.34 Else (1982) v International Stock Exchange of UK and Republic of Ireland 1993 QB 534 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.05 H v Secretary of State for Work & Pensions 2004 EWHC 1097, 2004 3 CMLR 11 @ 236 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.82 Loutchansky v First SS 2005 EWHC 1779, 2005 3 CMLR @ 43 Moses J . . . . . . . . . . . 1.64 Mohtasham v Visitor of Kings College London 2003 EWHC 2372, 2004 ELR 29 Richards J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.33 Professional Contractors Group v Inland Revenue Commissioners 2001 Times April 5 Burton J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.38 UMBS Online v Serious Organised Crime Agency [2007] EWCA Civ 406. . . . . . . . . . 7.63 R Griggs Group v Evans [2005] Ch 103 Ch D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.23, 4.30 R v International Trustee for Protection of Bondholders [1937] AC 500 HL . . . . . . . . . . 10.40 R v R [2003] EWHC 2113, [2005] 1 FLR 386 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.13 Raiffeisen Zentralbank Osterreich v Five Star General Trading [2001] EWCA Civ 68, [2001] QB 825. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.02, 4.09, 10.20 10.30, 10.31, 10.45 Rayner v Davies [2002] EWCA Civ 1880, [2003] ILP 15 Revenue and Customs Prosecution Office v Hill [2005] EWCA Crim 3271, [2005] Times December 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.41 Riverside Housing Association v Revenue & Customs Commissioners [2006] EWHC 2383, [2006] STC 2072 Lawrence Collins J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.66 Robertson’s Electrical v Customs & Excise Commissioners [2007] STC 612 . . . . . . . . 3.53, 5.31 Rogers v Dove (1652) Style 331, 82 ER 752 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.48 Ross, Re [1930] 1 Ch 377 Luxmoore J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.29 Ross v Ross’s Trustee (1809) Faculty College July 4 (1815 ed) 377 . . . . . . . . . . . . . . . . . . . 4.28 Royal Bank of Canada v Cooperatieve Centrale Raiffeisen-Boerenleenbank [2004] EWCA Civ 7, [2004] 1 Lloyds Rep 471 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.35 Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44, [2002] 2 AC 773 . . . . . . . . . . 9.26 Royal Brunei Airlines v Tan [1995] 2 AC 378 PC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.48 th
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Rucker, Ex p (1834) 3 Deacon & Chitty 704. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.28 Sabah Shipyard (Pakistan) v Pakistan [2002] EWCA Civ 1643, [2002] 2 Lloyd’s Rep 57 9.85 Saik see R(CP) Samcrete Egypt Engineers and Contractors v Land Rover Exports [2001] EWCA Civ 10.27, 10.28 2019, [2002] CLC 533 Sarrio v Kuwait Investment Authority [1999] 1 AC 32 HL . . . . . . . . . . . . . . . . . . . . . . . . 10.48 Saunders v Vautier (1841) 4 Beaven 115, 49 ER 282, affirmed Craig & Phillips 240, 41 ER 482 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.46, 11.56 Seegert, Re (2005–2006) 8 ITELR 1 Royal Court of Jersey . . . . . . . . . . . . . . . . . . . . . . . . 11.17 Seton v Slade (1802) 7 Ves 265, 32 ER 108 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.30 Shamil Bank of Bahrain EC v Beximco Pharmaceuticals [2004] EWCA Civ 19, [2004] 1 WLR 1784 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.41 Shierson v Vlieland-Boddy [2005] EWCA Civ 974, [2005] 1 WLR 966 9.56, 9.58, 9.60, 9.62, 9.64, 9.65, 9.67, 9.70 SISRO v Ampersand Software [1994] ILP 55 CA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.79 Skjevesland v Geveran Trading (No 4) (1546 of 2000) [2002] EWHC 2898, [2003] BCC 391 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.58, 9.59 Smallwood v Sheppards [1895] 2 QB 627 Wright J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.46 Snookes v Jami-King (GB) [2006] EWHC 289, [2006] ILP 19 Silber J . . . . . . . . . . . . . . 10.35 Société Eram Shipping Co v Companie Internationale de Navigation [2003] UKHL 30, [2004] 1 AC 260. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.53, 9.89 Source v TUV Rheinland Holding [1998] QB 54 CA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.44 Speed Investments v Formula One Holdings (No 2) [2004] EWCA Civ 152, [2005] 1 WLR 4.07, 4.08, 4.18, 4.35, 10.54 1936 Spiliades Maritime Corp v Consulex [1987] AC 460 HL . . . . . . . . . . . . . . . . . . . . . . . . . . 10.59 Squirrell v National Westminster Bank [2005] EWHC 664 (Ch), [2006] 1 WLR 637 Laddie J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.61, 7.63 Standard Bank London v Apostolakis (No 1) [2000] ILP 766, Longmore J; (No 2) [2001] 5.07, 8.31, 8.36, 8.37, 10.30, 10.32 Lloyd’s Rep Bank 240 Steel J Star Rider v Inntrepreneur Pub Co [1998] 1 EGLR 53 Blackburne J . . . . . . . . . . . . . . . . . . . . 8.30 Starmark Enterprises v CPL Distribution [2001] EWCA Civ 1252, [2002] Ch 306 . 8.28, 8.35 Stolzenberg (No 2) see Canada Trust Street v Mountford [1985] AC 809 HL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.62 Sudeley (Lord) v Att-Gen [1897] AC 11 HL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.54, 11.55 Swift v Dairywise Farms (No 2) [2001] EWCA Civ 145, [2003] 1 WLR 1606n; [2000] 1 3.84 WLR 1177 Jacob J T & N (No 2), Re [2005] EWHC 2990 (Ch), [2006] 1 WLR 1792. . . . . . . . . . . . . . . . . . 10.01 Tasarruff Mevduati Sigorta Fonu v Demirel [2007] ILP 8 Lawrence Collins J . . . . . . . . . 9.81 Tassell v Hallen [1892] 1 QB 321 Coleridge LCJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.38 Tavoulareas v Tsavliris (No 1) [2004] EWCA Civ 48, [2004] ILP 29 . . . . . . . . . . . . . . . . 10.57 Tavoulareas v Tsavliris (No 2) [2005] EWHC 2140, [2006] ILP 14 . . . . . . . . . . . . . . . . . . 9.83 Tavoulareas v Tsavliris (No 3) [2005] EWHC 2643, [2005] 2 CLC 848 Andrew Smith J; [2006] EWCA Civ 1772, [2006] 2 CLC 1034 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.85, 10.57
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Tavoulareas v Tsavliris (No 4) [2006] EWHC 414, [2006] 1 CLC 466; [2006] EWCA Civ 1772, [2006] 2 CLC 1034 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.84, 9.87, 10.57 Tayeb v HSBC Bank [2004] EWHC 1529, [2004] 4 All ER 1024 Colman J . . . . . . . . . . . 7.63 Three Rivers DC v Bank of England [2004] UKHL 48, [2005] 1 AC 610. . . . . . . . . . . . . . 7.64 Toller v Carteret (1705) 1 Salkend 404, 91 ER 351 Wright LK . . . . . . . . . . . . . . . . . . . . . . 4.53 Tsn Kunststoffrecycling v Jurgens [2002] EWCA Civ 11, [2002] 1 All ER (Comm) 282 . . 9.87 Viking Line v International Transport Workers’ Federation [2005] EWHC 1222, [2006] ILP 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.63 Vita Food Products v Unus Shipping Co [1939] AC 277 HL . . . . . . . . . . . . . . . . . . . . . . . 10.40 Vitale v Secretary of State for Home Department [1996] Imm AR 275 CA . . . . . . . . . . . . 1.79 W v Secretary of State for Home Department [2006] EWCA Civ 1404, [2007] 1 CMLR 17 @ 558 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.92 Walsh v Lonsdale (1882) 21 Ch D 9 CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.59 Wellington (Duke of), Re [1947] Ch 506 Ch D, [1948] Ch 118 CA . . . . . . . . . . . . . . . . . 11.30 Wermuth v Wermuth [2003] EWHC 3049, [2003] 1 FLR 1022 Bracewell J . . . . . . . . . . 11.13 Westminster Building Co v Beckingham [2004] EWHC 138, [2004] BLR 163 . . . . . . . . . 8.34 White v Hall (1806) 12 Ves 321, 33 ER 122 Erskine LC . . . . . . . . . . . . . . . . . . . . . . . . . . 10.24 Williamson v Bank of Scotland [2006] EWHC 1289 (Ch), [2006] BPIR 1085 Judge George Bompas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.09, 8.37 WPP Holdings Italy v Benatti [2007] EWCA Civ 263, [2007] ILP 33 . . . . . . . . . . . . . . . 10.57 Zealander v Laing Homes (2000) 2 TCLR 724 QBD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.34
TA B L E O F CA SES — F O R EI G N
Table of Cases — Foreign TA B L E O F CA SES — F O R EI G N
Australia Paramasivan v Flynn (1998) 160 ALR 203 Federal Ct . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.48
Austria A v N [1998] BGE III 103, [1999] ECLYB [2314] I Zivilabteilung . . . . . . . . . . . . . . . . . . 3.13 Oberster Gerichtshof 6 Ob 124/Q92 [2000] wbl 86, [2000] ECLYB [483] . . . . . . . . . . . 7.15 Oberster Gerichtshof 1 Ob 12/00 x [2001] ECLYB [491] . . . . . . . . . . . . . . . . 1.33, 1.63, 2.16 Oberster Gerichtshof 1 Ob 216/02 z [2003] ECLYB [322] . . . . . . . . . . . . . . . 1.33, 2.16, 2.48 Oberster Gerichtshof 5 Ob 58/04 x [2005] ECLYB [273] . . . . . . . . . . . . . . . . . . . . . 1.33, 2.16 Verwaltungsgerichtshof 2002/04/0066 [2003] ECLYB [288]. . . . . . . . . . . . . . . . . . . . . . . 2.39
Belgium A v B [2003] JT 55, [2003] ECLYB [1355] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.14 Cour d’Arbitrage [2005] JT 787, [2006] 06 ECL [51] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.64
Canada Green v Jernigan (2003–2004) 6 ITELR 330 Supreme Court British Columbia . . . . . . 11.47
Denmark Agder Lagmannsrett (93-830 K) [1994] RG 1258, [1995] ECLYB [2250] . . . . . . . . . . . 10.23 Frederiksvaerk Kommune v Sorensen B-4022-05 [2006] UfR 27940, [2006] 12 ECL [113] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.06, 4.23, 10.28 Hjertviksten v Dansommer B-1500-00 [2001] UfR 2556, [2002] ECLYB [1228] . . . . . . . 4.40 King v Fødevare-Og Landbrugsministerei R-3660-97 [2000] Uf R 1276, [2000] ECLYB [466] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.27, 2.40 King v Ministeriet for Fødevarer Landburg og Fiskeri [2001] UfR 1249, [2001] ECLYB 493 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.27, 2.40 M v H B-1024-03 [2003] UfR 18970, [2003] ECLYB [896] . . . . . . . . . . . . . . . . . . . . . . . 11.13
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Mørk v Ejendomsmaalglerfimach Esner Ved Torben Eisner [2000] UfT 631, [2000] ECLYB [1204] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.19 Royal Classic Rumaensk Vinimport v Sörensen B-57-04 [2004] VfR 1404, [2004] ECLYB [218] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.46 Słresnsen v Pedersen B-581-04 [2005] ECLYB [150]. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.23 T v Justitsministereit 195/2005, [2007] UfR 99H, [2007] 03 ECL [54] . . . . . . . . . . . . . . . 2.19
France American Trading Company v Quebec Steamship Co (1911) Rev Crit 395 Cassation . . 10.40 Fondation Guggenheim v Helion [1997] ILP 457 Cassation . . . . . . . . . . . . . . . . . . . . . . . 10.23 Ford Soloman [1997] ILP 457 Cassation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.23 Fourgeau v Conseil de l’Ordre des Avocats au Bureau de Bayonne [2002] Dalloz Jurisprudence 121, [2002] ECLYB [498] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.19 Gilgert v Commerzbank [2001] Rev Crit DIP 135, [2001] ECLYB [1072] . . . . . . . . . . . 10.31 Le Meilleur v Trehout [2001] II JCP 10620, [2002] ECLYB [1188] . . . . . . . . . . . . . . . . . . 3.13 Moussard v Ballestrero [2000] Dalloz Jur 539, [2000] ECLYB [2337] Cassation . . . . . . 11.20 Pordea v Times Newspapers [2000] ILP 763 Cassation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.83 UFC v Papeterie Tissot [1999] II JCP 10205, [2000] ECLYB [2216] Cassation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.09, 8.30, 8.34
Germany Amtsgericht Munich 1501 1E2 1276/04 [2005] ECLYB [283]. . . . . . . . . . . . . . . . . . . . . . 9.59 Bavarian Court of Appeal December 12 1952, I Z 247/1952. . . . . . . . . . . . . . . . . . . . . . 11.05 Bayerisches Oberlandesgericht 2Z BR 7/02 [2003] ECLYB [1930]. . . . . . . . . . . . . . . . . . 4.18 Bezirksgericht Erfurt 2 T 12/92 [1992] NJ 417, [1992] ECLYB [5677]. . . . . . . . . . . . . . . 7.02 Bundesgerichtshof October 12 1989, 1990 IPRAX 318. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.45 V ZR 184/94, [1996[ ECLYB [2091] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.44, 6.49 IV ZR 171/99, [2000] N Jus 546, [2000] ECLYB [2239] . . . . . . . . . . . . . . . . . . . . . . . . 3.04 IX ZB 23/97, [2001] ECLYB [2062] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.87 XI ZR 91/99, [2002] ECLYB [417] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.87 IX ZB 104/00, [2003] ECLYB [119] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.34 IX ZB 104/00, [2003] ECLYB [874] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.82 XI ZR 151/99, [2003] ECLYB [265] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.87 II ZR 327/04, [2005] ECLYB [1573] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.18 XI ZR 169/05, [2006] 06 ECL [7] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.05 VIII ZR 48/05, [2006] 06 ECL [8]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.43 XI ZR 255/04, [2006] 08 ECL [64] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.18 VII ZR 249/04, [2006] 09 ECL [62] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.31 1 ZR 124/03, [2006] 12 ECL [45] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.55 Bundesvervaltungsgericht 3C 35/03 [2005] 06 ECL 43 . . . . . . . . . . . . . . . . . . . . . . 3.84, 3.85 Claim for Payment for a Timeshare, Re [1997] ILP 524 District Court Damstadt . . . . . . 4.47 th
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Kammergericht Berlin 2 U 1947/99 [20001] ECLYB [1071] . . . . . . . . . . . . . . . . . . . . . . 10.12 Landgericht Berlin 26 0 530/02 [2006] 05 ECL [47] . . . . . . . . . . . . . . . . . . . . . . . 10.35, 10.52 Oberlandesgericht Bremen ZU 20/02, [2006] 07 ECL [37] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.88 Düsseldorf 2001 RIW 63, [2001] ECLYB [1019]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.40 Düsseldorf 2001 RIW 380, [2002] ECLYB [1207]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.23 Düsseldorf 2005 3W 91/03, [2005] ECLYB [236] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.87 Frankfurt am Main 2000 Iprax 525, [2001] ECLYB [1055] . . . . . . . . . . . . . . . . . . . . 10.55 Frankfurt am Main 5UF 11/99, [2001] ECLYB [1563] . . . . . . . . . . . . . . . . . . 11.09, 11.13 Frankfurt 2002 Iprax 523, [2003] ECLYB [878] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.81 Karlsruhe 1999 RIW 538, [2000] ECLYB [494]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.87 Köln 2W 82/01, [2003] ECLYB [890]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.58 München 19 U 3717/04, [2006] 04 ECL [63] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.28 Saarbrucken 2001 Iprax 238, [2001] ECLYB [1036] . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.77 Verfassungsgerichtshof G 79/04 [2005] Ecolex 660, [2006] 01 ECL [48]. . . . . . . . . . . . . 2.27 Verwaltungsgerichtshof Mannheim 9 S 31/05 [2006] 03 ECL [56]. . . . . . . . . . . . . 7.13, 7.20
Greece Areois Pagos [2001] NV 49/230, [2002] ECLYB [1232] . . . . . . . . . . . . . . . . . . . . 11.29, 11.37 Mikropolis-Infomedica v Amstrad [2005] ILP 27 Areios Pagos . . . . . . . . . . . . . . . . . . . . . 9.87 Monomeles Protodikeio 8181/2002 [2002] 8 DEE 493, [2002] ECLYB [419]. . . . . . . . . 3.52 Polimeles Protodikeio Athens 8032/2001 [2003] ILP 29 . . . . . . . . . . . . . . . . . . . . . 5.07, 8.37
Ireland Maher v Ministry of Agriculture F&RD Case 340/2000 [2000] 2 CLMR 48 Supreme Ct . . 3.84
Italy Agea v Malzani [2002] Foro it No 5 I col 1335, [2002] ECLYB [386] Cassation . . . . . . . 3.83 Allianz Subalpina v Contino [2001] Foro it 12, I, col 3587 . . . . . . . . . . . . . . . . . . . . . . . . 10.32 PNP Italia v Agenzia del Terrirotira [2005] Foro It 9 I 2515, [2006] 01 ECL 49 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.24
Luxembourg Central Bank Of Iraq v OS [2000] Pas Lux 2, [2003] ECLYB [1920] CA . . . . . . . . 4.11, 11.02 V v R 784/00 [2003] ECLYB [876] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.85
The Netherlands Arrondismentsrechtbank Amsterdam Chamber 1B, November 25th 1975. . . . . . . . . . 10.23
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Bus Berzelius Umwelt Service v Chemconserve Reakt C99/245/HR [2004] ILP 9 Hoge Raad. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.45 Hof Arnheim [2001] NJ 622, [2002] ECLYB [409] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.45 Hof Gravenhage [2001] NJ 87, [2001] ECLYB [1056] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.81 Hoge Raad [2001] NJ 375, [2001] ECLYB [1029]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.53 NAP v Christophery [1970] April 1 1970 CA of Amsterdam . . . . . . . . . . . . . . . . . . . . . . 10.28 Société Nouvelle des Papèteries de l’Aa v Machinefabriek (1992) Nederlandse Jurisprudenti 750 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.27 st
Spain B v XX [2002] J Aran 3107, [2002] ECLYB [1227] Tribunal Supremo . . . . . . . . . . . . . . . 3.14 Denney v Denney [1999] May 21 Tribunal Supremo . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.30 Gaspar Peral v Vinalmar [2000] RJ 766, [2000] ECLYB [493] Tribunal Supremo. . . . . . 9.82 Mustang Rent a Car v Holiday Autos [1999] RJ 8864, [2000] ECLYB [492] . . . . . . . . . . . 9.87 RP v Registrar of Torrevieja [2003] RJ 2199, [2004] ECLYB [1709] DGR . . . . . . . . 1.41, 2.33 Sparkasse Tulzer Land v XX [2000] RJ 4382, [2001] ECLYB [1038] . . . . . . . . . . . . . . . . . 9.80 Star Gemini Navigation Co v X [2001] J Aran 9419, [2002] ECLYB [401] Tribunal Supremo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.81 Transportes Font v XX [2000] RJ 8058, [2001] ECLYB [1067] . . . . . . . . . . . . . . . . . . . . . . 9.82 U v XX [2001] J Aran 3968, [2002] ECLYB [398] Tribunal Supremo. . . . . . . . . . . . . . . . 4.08 XX v XX [2002] J Aran 3286, [2003] ECLYB [261] Tribunal Supremo . . . . . . . . . . . . . 11.13 YV v YV [2002] J Aran 4875, [2003] ECLYB [1935] Tribunal Supremo . . . . . . . . . . . . 11.36 st
Sweden Swedish Law Society v H Ö 386-99 [2000] NJA 214, [2000] ECLYB [528] . . . . . . . . . . . . 7.20 Tob v Styrelsen Für Sveriges Advokatsaufund Ö 2906-01 [2002] NJA 130. . . . . . . . . . . . . 7.19
Switzerland [1996] BGE III 213, [1997] ECLYB [1995] Cour Civile . . . . . . . . . . . . . . . . . . . . . . . . . . 11.02 Baciocchi v Banque Cantonale de Geneve [2000] II JCP 10248, [2000] ECLYB [1074] . . 4.53 M v Statthalteramt Des Bezirkes Zurich [1997] BGE IV 167, [1998] ECLYB [2345] Kassationshof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.51
United States of America Erie RR v Tompkins (1938) 304 US 64 Supreme Court . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.07 Massie v Watts (1810) 10 US (6 Cranch) 148 Supreme Court. . . . . . . . . . . . . . . . . . . . . 11.44 Swift v Tyson (1842) 41 US 1 Supreme Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.07
TA B LE O F LEG I SLATI O N — EUR O PEA N
Table of Legislation — European TA B LE O F LEG I SLATI O N — EUR O PEA N
Abolition of Restrictions on Freedom of Establishment, General Programme (1962) OJ (English Special Edition, Second Series) IX 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.65 Accession Act of Malta, Cyprus and 8 Eastern European States [2003] OJ L236 33 (‘Accession+10’) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.08, 2.24 §24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.82 §37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.29 §57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.67 Annexes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.82, 2.24, 2.25, 2.29, 2.31 Protocol 6 [2003] OJ L236 947 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.21 Protocol 10 [2003] OJ L236 955 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.32 Accession Act of Bulgaria and Romania [2005] OJ L157 11 . . . . . . . . . . . . . . 1.09, 2.26, 2.30 Protocol [2005] OJ L157 58. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.75 Accession Partnership with Turkey Council Decision 2006/35/EC [2006] OJ L22 394 . 1.15 Association Agreement Croatia COM 2001 371 final [2005] OJ L26 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.12 FYR Macedonia [2004] OJ L84 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.12 Turkey [1973] OJ C113 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.15 Banking (Second) Directive 89/646/EEC [1989] OJ L386 1 . . . . . . . . . . . . . . . . . . . . . . . 9.28 Brussels Convention [1978] OJ L304 36 (original), [1998] OJ C27 1 (final version) . 4.06, 6.65, 10.01, 11.37 §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.38, 11.16, 11.41 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.53 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.51, 10.01, 10.22, 10.44 §5[3] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.36 §5[6] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.36, 11.38 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.26 §13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.30, 10.31 §14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.31 §15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.31 §16[1]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.14, 4.16, 4.20, 4.22, 4.27, 4.37, 4.41, 9.80 §16[3] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.35 §16[4] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.20, 11.40 §17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.35, 10.55, 11.47 §18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.17, 4.18, 10.34, 10.55 §20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.58 §21–§22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.57
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§23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.19 §24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.11 §§25–49 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.76 §25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.77 §27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.83, 9.86, 9.87 §28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.83, 9.85 §29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.84 §31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.82 §32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.82 §33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.83 §34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.82, 9.83, 9.84, 9.86 §35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.83 §38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.82, 9.84 §39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.83, 9.84 §42 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.77 §43 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.80 §45 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.83 §§46–48 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.82 §53 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.38 §54 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.06 §59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.85 Brussels I Proposal [1998] OJ C33 22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.82 Brussels Protocol on the Interpretation of the Rome Convention by the ECJ [1998] OJ C27 52 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.09 CAP see Single Farm Payment Capital Directive First Capital Directive 60/62/EEC [1960] OJ L43 921 . . . . . . . . . . . . . . . . . . . . . . . . . 1.27 Second Capital Directive 86/566/EEC [1986] OJ L332 22. . . . . . . . . . . . . . . . . . . . . . 1.27 Third Capital Directive /361/EEC [1988] OJ L178 5. . . . . . . . . . . . . . . . . 1.07, 1.28, 2.08 §1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.28, 1.35 §6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.07, 1.28, 1.29, 2.08 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.28 Annex I (‘Capital Nomenclature’). . . . . . . . . . . . . . . . 1.28, 1.29, 1.35, 1.37, 1.44–1.53 Recitals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.07, 1.28, 2.08 Civil Jurisdiction Regulation (‘Regulation on Civil Jurisdiction’) (‘Brussels I’) (EC) 44/2001 [2001] OJ L12 1 . . . . . . . . . . . . . . . . . . . . 3.01, 4.04, 5.07, 9.62, 9.76, 10.01, 11.02 §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.06, 9.63, 10.38, 11.02, 11.37 §1[2] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.02, 11.16, 11.41 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.53 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.51, 10.01, 10.11, 10.22 §5[1] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.01 §5[3] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.44 §5[5] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.54
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§5[6]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.30, 10.31, 11.36, 11.38 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.26, 10.60 §13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.47 §15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.07 §16ff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.07, 10.31, 11.47 §18ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.19, 11.47 §22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.44, 4.45, 6.14, 9.80, 10.11 §22[1]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.14, 4.20, 4.22, 4.27, 4.37, 4.41 §22[3] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.35 §22[4] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.39 §23ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.34, 10.35, 10.55, 11.47 §25ff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.17, 4.18, 10.58 §27ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.18, 9.85, 10.35, 10.57, 10.60 §31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.11 §32ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.76, 9.77 §33ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.79, 9.83, 9.84, 9.86 §34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.87, 4.14 §38ff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.82, 9.83, 9.84 §53ff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.82 §57ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.06, 9.78 §59ff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.54, 11.36, 11.38 §66 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.06, 9.76 §67ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.06, 4.08 §76 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.04 Annexes as amended. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04, 9.78, 9.82, 9.83 Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.04, 4.05, 4.06, 9.82, 9.84, 9.85 Explanatory Memorandum COM (1999) 348 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.06, 4.44 Civil Jurisdiction Amendment Regulation (EC) 1496/2002 [2002] OJ L225 13 . . . . 4.04 Civil Jurisdiction Amendment Regulation (EC) 1937/2004 [2004] OJ L334 3 . . . . . 4.04 Commission Implementing Measures (Money Laundering), Directive 2006/70/EC [2005] OJ L309 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.49, 7.55, 7.56 Common Organisation of Market Agricultural Markets Proposal COM (2006) 822 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.82 Cotton etc Proposal COM (2003) 698 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.71 Fruit and Vegetable Proposal COM (2007) 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.82 Milk Proposal February 15 2007 IP/07/195. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.83 Comparative Advertising see Misleading and Comparative Advertising Consumer Credit (First) Directive 87/102/EC [1987] OJ L42 48 . . . . . . . . . . . . . . 5.02, 9.02 §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.05, 5.85, 9.03, 9.19, 9.20 §1a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.19, 9.20 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.10, 5.85, 8.32, 9.03, 9.14 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.03, 9.14 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.19 §8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.23 th
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§12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.41 §15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.04, 9.03 Annexes I–III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.19 Consumer Credit (Second) Directive 90/88/EEC [1990] OJ L61 14 . . . . . . . 9.03, 9.19, 9.20 Consumer Credit (Third) Directive 98/7/EEC [1998] OJ L101 17 . . . . . . . . . . . . . . . . . . 9.19 Consumer Credit Proposal COM (2002) 443 (Original), COM (2005) 483 (Second Revised). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.04 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.04, 9.26 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.19, 9.26 §13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.25 §15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.23 §16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.23 §18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.19, 9.20 §19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.41 §20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.23, 9.41 Annex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.19 Consumer Sales and Associated Guarantees Directive 1999/44/EC [1999] OJ L171 12 5.05, 5.10 Contracts Negotiated Away from Business Premises see Doorstep Selling Directive Convention for the Protection of Human Rights and Fundamental Freedoms see European Convention of Human Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.19, 3.01, 3.33 Convention on Laundering, Tracing, Seizure and Confiscation of Proceeds of Crime (Council of Europe, 1990). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.34 Convention on Protection of the EC’s Financial Interests [1995] OJ C316 49 . . . . . . . . 7.36 Council EEC Programme (Establishment) December 18 1961 [1962] JO 32 . . . . . . . . . 1.73 Council EU Decision 2004/368/EC (Enlargement Packages) [2004] OJ L130 1. . . . . . . . . . . . . . . . . . . . . . . 3.75 2004/926/EC (Schengen Acquis) [2004] OJ L395 70 . . . . . . . . . . . . . . . . . . . . . . . . . 1.91] 12582/04 (Free Movement EU-Switzerland) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.54, 2.56 2005/790/EC (EC-Denmark) [2005] OJ L299 61 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.06 2006/35/EC (Turkish Accession) [2006] OJ L22 34 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.15 2006/79/EC (EU Accession to Hague Convention) [2006] OJ L297 1 . . . . . . . . . . . 11.03 2006/145/EC (Croatian Accession) [2006] OJ L55 30 . . . . . . . . . . . . . . . . . . . . . . . . . 1.12 COM (2007) 387 (New Lugano) July 6 2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07 Council EU Conclusions Tampere SI (1999) 800 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.48 Council (Justice and Home Affairs) Conclusions JHA/15801/06 Brussels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.48 JHA/13758/01 Laeken . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.48, 8.58, 11.05 Council (Justice and Home Affairs) Framework Decisions on Money Laundering 2000/642/JHA [2000] OJ L271 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.34, 7.59 2001/500/JHA [2001] OJ L182 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.36, 7.40 2002/475/JHA [2002] OJ L164 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.38 2003/577/JHA [2003] OJ L196 45 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.34, 7.44 2005/212/JHA [2005] OJ L68 49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.35, 7.40, 7.43 Council (Justice and Home Affairs) Joint Action th
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98/699/JHA [1998] OJ L333 1 (money laundering) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.36 98/733/JHA [1998] OJ L351 1 (organised crime) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.36 Credit Transfer Directive see Cross-border Credit Cross-border Credit Transfer Directive 97/5/EC [1997] OJ L43 25. . . . . . . . . . . . . 7.29, 7.30 Cross-border Payments in Euros Regulation (EC) 2560/2001 [2001] OJ L344 13 . . . . . 7.31 De Minimis Aid EC Regulation §§87–88 (EC) 1998/2006 [2006] OJ L379 5 . . . . . . . . . 3.56 Declaration on EC §73d (Residence-based Taxation) [1992] OJ C192 99. . . . . . . . . . . . 2.40 Declaration re Portugal (Insolvency Proceedings) [2000] OJ C183 1 . . . . . . . . . . . . . . . 9.71 Direct Support Schemes under the Common Agricultural Policy Regulation see Single Payment Direct Support Schemes Regulation (EC) 1259/1999 [1999] OJ L160 113 . . . . . . . . . . . 3.70 Directive see substantive topic Distance Marketing of Financial Services Directive 2002/65/EC [2002] OJ L271 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.02, 5.30, 8.32 §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.30, 5.47 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.05, 5.30, 5.31, 5.64 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.52, 5.65, 5.70, 5.75, 5.76 §4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.52, 5.65 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.32, 5.70, 5.71, 5.74 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.34, 5.74, 5.75, 5.76, 5.81 §6[7] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.38, 5.76, 5.81 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.74, 5.76 §8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.73 §9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.47 §10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.49 §11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.76 §12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.04, 8.32 §15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.74 §16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.89 §17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.74 §18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.30 Recitals [1ff] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.04, 5.30, 5.89 Recitals [10ff] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.30, 5.31, 5.32, 5.47 Recitals [20ff] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.47, 5.64, 5.65, 5.74 Recitals [30ff] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.04 Distance Selling Directive 97/7/EC [1997] OJ L144 19 . . . . . . . . . . . . . . . . . 5.02, 5.30, 6.12 §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.31 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.05, 5.31, 5.32 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.30, 5.32, 5.33, 5.36, 5.37 §4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.52, 5.64, 5.65, 5.70 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.52, 5.64, 5.71, 6.36 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.38, 5.68, 5.71, 5.72, 5.73, 5.81, 5.84 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.37, 5.73
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§8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.73 §9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.47 §10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.49 §12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.04, 8.32 §13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.65 Annex I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.32 Annex II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.30 Recitals [1ff] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.04, 5.31, 5.32 Recitals [10ff] Recitals [20ff] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.04, 5.47, 5.64, 5.65, 5.73 Doorstep Selling Directive, the Contracts Negotiated Away from Business Premises Directive 85/577/EEC [1985] OJ L372 31 . . . . . . . . . . . . . . . . . . . . . 5.02, 5.17, 5.77, 6.33 §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.05, 5.16, 5.17 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.05, 5.17 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.19, 5.22, 5.24, 5.26, 5.27 §4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.77, 5.84 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.77, 5.78, 5.84 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.04 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.78 Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.26, 5.29, 5.77 Draft see Substantive Topic E Conv HR see European Convention EC (Treaty Establishing the European Community) [2002] OJ C325 33 EC §2 ex §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.63 EC §3 ex §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.29 EC §4 ex §3A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.26 EC §5 ex §3b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.30 EC §6 ex §3c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.49 EC §12 ex §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.74, 2.38 EC §14 ex §7a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.26, 1.63 EC §17 ex §8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.55 EC §29 ex §48 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.79 EC §30 ex §36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.27, 3.28 EC §33 ex §39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.73 EC §39 ex §48 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.02 EC §40 ex §49 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.78 EC §42 ex §51 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.80 EC §§43–48 ex §§52–58. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.65, 1.68, 1.73, 2.05 EC §§45 ex 55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.02, 7.09, 7.18 EC §49–§55 ex §§59–66. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.66 EC §§55 ex 66 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.02, 7.09 EC §56 ex §73b . . . . . . . . . . . . . . . . . . . . . . . . . 1.25, 1.29, 1.31, 1.33, 1.34, 1.39, 2.33, 2.39 EC §§57–60 ex §§73C–73h. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.25, 1.35, 2.38, 2.40, 2.44
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EC §§61–69 ex §§73i–73q . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.33, 1.55 EC §61 ex §73i . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.76 EC §62 ex §73j . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.76 EC §65 ex §73m. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.25, 4.01 EC §67 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.07 EC §81 ex §85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.24, 3.28, 3.51, 3.52, 3.53 EC §82 ex §86 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.24, 3.28, 3.55 EC §§84–85 ex §§88–89. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.53 EC §86 ex §90 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.20 EC §87 ex §92 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.56 EC §88 ex §93 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.56 EC §§174–176 ex §§130r–130t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.49 EC §282 ex §211 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.17 EC §295 ex §222 . . . . . . . . . . . . . . . . . . . . . . Preface 3.01, 3.18, 3.29, 6.16, 8.55, 8.62, 9.76 EC §308 ex §235 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.30 EC Annex I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.07, 3.69 EC Protocols Protocol 1 (Secondary Residences in Denmark) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.56 Protocol 2 (Secondary Residences in Åland Islands) . . . . . . . . . . . . . . . . . . . . . . . 2.56 Protocol 30 (Subsidiarity) [1992] OJ C342 105. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.31 E- see Electronic E-Commerce see Electronic Commerce E-Signatures see Electronic Signatures EEA see European Economic Area Electronic Commerce Directive (‘E-Commerce Directive’) 2000/31/EC [2000] OJ L178 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.05, 5.56, 7.66, 8.01, 8.10 §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.61, 7.66, 8.11 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.13, 5.56, 5.61, 5.62, 7.66, 8.21 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.61, 8.11, 8.20, 8.21 §4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.56, 5.61, 8.20, 8.21 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.56, 8.20, 8.21 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.62 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.62 §8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.66 §9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.13 §9[1] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.11, 8.12, 8.16, 8.20 §9[2] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.11, 8.12, 8.20 §9[3] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.11 §10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.22 §11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.23 §12–§15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.61 Annex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.61, 8.11, 8.21 Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.56, 5.61, 8.11, 8.21, 8.22, 8.23 Electronic Signatures Directive 1999/93/EC [2000] OJ L13 19. . . . . . . . . . . . . . . . . . . . 8.01
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§1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.02, 8.09, 8.12, 8.17 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.06, 8.07, 8.13 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.08 §4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.08 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.01, 8.09, 8.17 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.08 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.08 Annex I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.08 Annex II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.08 Annex III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.06 Annex IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.06 Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.08, 8.09 Energy Performance of Buildings Directive 2002/91/EC [2002] OJ L1 65 . . . . . . . . . . . 3.50 Establishment Directive 67/43/EEC [1967] OJ (English Special Edition) 3. . . . . . . . . . 1.65] EU Charter of Fundamental Rights [2000] OJ C364 1 . . . . . . . . . . . . . . . . . . . . . . 3.01, 3.33 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.40 §9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.40 §14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.96 §15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.79 §16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.65 §17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.19, 1.65, 1.66, 2.46, 3.36 §§20–23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.41 §34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.80 §45 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.55 §47 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.41, 4.03 §51 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.34 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.33, 3.35 §53 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.33 European Coal and Steel Community Treaty §83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.20 European Constitution (Draft) [2004] OJ C310 1 . . . . . . . . . . . . . . . . . 1.30, 3.18, 3.31, 3.33 European Convention of Human Rights (Rome, 1950, CETS 5) §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.41 §8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.86, 3.40, 4.03 §46 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.19 Protocol 1 (Paris, 1952, CETS 9) §1 . . . . . . . . . . . . . . . . . 1.19, 1.56, 2.46, 3.35, 5.23, 8.28 European Economic Area (EEA) EEA Agreement [1992] OJ L12 13 . . . . . . . . . . . . . . . . . . . . . . . 3.18, 6.01, 6.63, 8.10, 9.03 Adjusting Protocol [1994] OJ L1 572 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.06 Enlargement Agreement [2004] OJ L130 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.06 §28ff, Annex V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.55, 1.78, 1.79 §31ff, Annexes VIII–XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.65 §36ff, Annexes IX–XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.66 §40ff, Annex XII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.07 §43 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.07
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§53ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.51 §54 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.55 §61ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.56 §72 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.01, 6.01, 6.63 §73 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.49 §126 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.20 Annex XIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.01, 6.01, 6.63, 8.10 Annex XX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.49 EEA Council Decision 1/95 (Liechtenstein) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.07 84/2003 (Consumer Protection) [2003] OJ L257 41. . . . . . . . . . . . . . . . . . . . . . . . 9.14 European Enforcement Order for Uncontested Claims Regulation (EC) 805/2004 [2004] OJ L143 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.90 European Order for Payment Procedure Regulation (EC) 1896/2006, [2006] OJ L399 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.91 European Parliament Motion 2005/214 (INI) . . . . . . . . . . . . . . . . . . . . . 11.01, 11.02, 11.12, 11.17, 11.25, 11.33 Resolution [1997] OJ C115 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.05 Resolution A2–157/89 [1989] OJ C158 400 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.48 Resolution A3–0329/94 [1994] OJ C205 518 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.48 Resolution B5–0228–0229–0230 [2000] OJ C377 323 . . . . . . . . . . . . . . . . . . . . 8.48, 8.58 Resolution 96–TA (2006) 109 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.48 Resolution on Timeshares PS–TA (2002) 0368, (2000/2208 1Nl) . . . . . . . . . . . 6.06, 6.65 [1]–[10] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.19, 6.34, 6.35, 6.40, 6.50, 6.55 [11]–[20]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.19, 6.33, 6.40, 6.51, 6.54, 6.58, 6.61 [21]–[30] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.23, 6.30, 6.51, 6.57 Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.07, 6.57, 6.58, 6.60 Europol Convention [1995] OJ C316 95 and Protocols 1996 and 1997. . . . . . . . . . . . . . 7.34 Family Reunion Directive 2003/86/EC [2003] OJ L251 12. . . . . . . . . . . . . . . . . . . . 1.86, 1.94 Financial Action Task Force 40 Recommendations , 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.34, 7.52 FATF 40 [1] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.36 FATP 40 [2a] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.35, 7.45 FATF 40 [3] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.35, 7.40, 7.43 FATF 40 [4] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.61 FATF 40 [5] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.51, 7.57 FATF 40 [10] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.57 FATF 40 [12] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.49 FATF 40 [14] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.63 FATF 40 [16] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.49, 7.64 FATF 40 [18] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.56 FATF 40 [26ff] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.59 FATF 40 Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.36, 7.47, 7.53 FATF 40 Terrorist Financing 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.38
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First see substantive topic First Capital Directive see Capital First Consumer Credit see Consumer Credit First General System see Recognition of Professional Qualifications First Money Laundering Directive see Money Laundering Directive Guidelines Application of EC §81[3] (Size of Market Share) [2004] OJ C101 8 . . . . . . . . . . . . . 3.51 Applicability of EC §81 (Horizontal Cooperation Agreements) [2001] OJ C3 2 . . . 8.52 Hague Conference on Private International Law . . . . . . . . . . 11.03 Hague Convention XI (Testamentary Form 1961) . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.17 §1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.17, 11.18 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.17 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.18 §4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.17 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.17 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.18 §8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.17 §9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.18 §10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.18 §11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.18 §13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.17 Hague Convention XII (Legalisation, 1961) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06 Hague Convention XIV (Service Abroad, 1965). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.57 Hague Convention XXV (Matrimonial Property, 1978) . . . . . . . . . . . 11.03, 11.10, 11.16 §1[2] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.20 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.16 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.03, 11.10, 11.16 §4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.10, 11.16 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.10 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.03, 11.10, 11.16 §§7–8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.10, 11.16 §9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.16 §13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.10, 11.16 §14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.16 Hague Convention XXX (Trusts, 1985) §1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.04, 11.48 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.12 §3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.53, 11.63 §4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.53 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.56 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.60 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.56
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§8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.56 §§9–10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.56 §11ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.57, 11.60 §11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.57 §12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.57 §13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.58, 11.60 §14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.57, 11.60 §15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.50 11.56 §16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.50, 11.56 §17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.04, 11.36, 11.50, 11.56 §18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.36, 11.57 §19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.56 §20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.53, 11.63 §21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.57, 11.60 §22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.04 §§23–24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.04, 11.50 Hague Convention XXXII (Succession, 1989) §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.03 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.11 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.03 §14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.24 §15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.33 Implementation of Cross–Compliance etc Regulation (EC) 796/2004 [2004] OJ L141 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.70, 3.76, 3.80, 3.81 Indication of Prices of Products offered to Consumers Directive 98/6/EC [1998] OJ L80 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.10 Infrastructure for Spatial Information in the Community ‘INSPIRE’ Proposal 2004/175 (COD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.28 Injunctions Directive 98/27/EC [1998] OJ L166 51 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.89 Insolvency Proceedings Regulation (‘Insolvency Regulation’) (EC) 1346/2000 [2000] OJ L160 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.49, 9.57 §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.62 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.50, 9.62, 9.70 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.50, 9.56, 9.57, 9.59, 9.71, 9.74 §4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.55, 9.67 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.51, 9.52, 9.53, 9.69 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.52 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.52, 9.69 §8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.55 §§9–12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.67 §11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.55 §13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.67 §14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.55 §16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.66, 9.71
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§17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.66, 9.71 §18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.69 §19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.68 §20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.69 §§21–22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.68 §§25–26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.66, 9.71 §27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.71 §28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.71 §29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.71 §30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.71 §32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.68, 9.69 §36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.74 §37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.74 §38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.62, 9.73 §39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.68 §40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.68 §41 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.54, 9.68 §42 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.68 §§43–44 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.49, 9.56 Annexes A–C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.62 Recitals [1ff] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.56, 9.62, 9.64 Recitals [10ff] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.56, 9.57, 9.58, 9.62, 9.71, 9.73 Recitals [20ff] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.54, 9.65, 9.67, 9.69 Recitals [30ff] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.56, 9.62 Regulation (EC) 603/2005 [2005] OJ L100 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.62 Regulation (EC) 694/2006 [2006] OJ L121 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.62 Insurance Companies Directive 91/674/EEC [1991] OJ L374 7 . . . . . . . . . . . . . . . . . . . . 3.56 Land Purchase in Accession States Commission Proposal IP/01/645. . . . . . . . . . . . . . . . 2.28 Late Payments Directive 2000/35/EC [2000] OJ L200 35 . . . . . . . . . . . . . . . . . . . . . . . . . 3.58 Law Applicable to Contractual Obligations Proposal for a Regulation ‘Rome I Proposal’ COM (2005) 650 final . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.02, 3.12, 3.16, 4.09, 4.27, 10.01 Law Applicable to Non-contractual Obligations (‘Rome II’) Proposed Regulation COM/2003/0427 final, COM (2006) 83 final . . . . . . . . . . . . . . . . . . . . . . 4.09, 4.52, 10.01 Lawyers’ Establishment Directive 98/5/EC [1998] OJ L77 36 . . . . . . . . . . . . . . . . 7.01, 7.10 §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.10 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.10 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.11 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.02, 7.11, 7.12 §6ff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.11 §10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.11 §12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.10 Recitals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.11 Lawyers’ Services Directive 77/249/EEC [1977] OJ L78 17. . . . . . . . . . 7.01, 7.07, 7.09, 7.13
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§1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.02, 7.07, 7.08 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.07 §4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.07 §4–7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.07 §13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.07 Life Insurance Directive 90/619/EC [1990] OJ L330 50. . . . . . . . . . . . . . . . . . . . . . . . . . . 5.74 Lugano Convention on Civil Jurisdiction and Judgments (EEA/EFTA states) [1988] OJ L319 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.07, 6.65, 9.76, 11.37 §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.38, 11.16 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.53 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.51, 10.01, 10.10, 10.22, 10.53 §5[3] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.44 §5[6] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.38 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.26 §13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.30, 10.31 §14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.31 §15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.31 §16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.14, 4.20, 4.40, 10.23 §16[1] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.22, 4.27, 4.37, 4.41, 4.44 §16[2] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.18 §16[3] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.35 §16[5] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.89 §17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.34, 10.35, 11.47 §18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.55 §19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.55 §20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.58 §§21–22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.57 §23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.17 §24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.11 §25–§49 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.76 §53 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.38 §54B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.07, 9.85 Protocol 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.07 Lugano Convention Revision (‘New Lugano’) COM (2007) 387 Annex . . . . 4.07, 4.41, 4.44 Matrimonial Jurisdiction Regulation (EC) 2201/2003 [2003] OJ L338 1 11.02, 11.09, 11.13 §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.02 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.02, 11.09, 11.13, 11.14 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.09, 11.13 §14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.02, 11.14 §§17–22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.13, 11.14 §§24–27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.14 §37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.14 §39, Annex 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.14
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§41 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.13 Milk Levy Regulation (EC) 1788/2003 [2004] OJ L375 1 . . . . . . . . . . . . . . . . . . . . . . . . . 3.83 Milk Levy Regulation (EC) 1406/2006 [2006] OJ L265 8 . . . . . . . . . . . . . . . . . . . . . . . . . 3.83 Misleading Advertising Directive 84/450/EEC [1984] OJ L25017 (see also Misleading and Comparative Advertising Directive). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.02, 5.51, 5.55 Misleading and Comparative Advertising Directive 84/450/EEC [1984] OJ L25017, as amended by 97/55/EC, [1997] OJ L290 18 . . . . . . . . . . . . . . . . . . . . . . . . . 5.02, 5.51, 5.55 §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.51, 5.52, 5.55 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.05, 5.51, 5.55, 5.59 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.51 §3a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.54, 5.55 §4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.52, 5.89 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.89 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.51, 5.55 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.51, 5.55 Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.51, 5.55 Misleading and Comparative Advertising Proposal COM (2006) 222 final . 5.02, 5.04, 5.09, 5.51 Money Laundering Directive (‘First Money Laundering Directive’) 91/308/EEC [1991] OJ L166 77 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.33 §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.35, 7.36, 7.45 §1[A]–[E]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.35, 7.36, 7.37, 7.49 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.36 §2a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.47, 7.49 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.36, 7.50, 7.51, 7.52, 7.54, 7.56 §4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.57 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.56 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.58, 7.59, 7.64 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.58, 7.62 §8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.63 §9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.61 §12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.47 §15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.60 Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.34, 7.47, 7.51 Money Laundering Directive (‘Second Money Laundering Directive’) 2001/97/EC [2001] OJ L344 76 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.33 §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.35, 7.36, 7.37, 7.45, 7.49 §1[1] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.35 §1[2] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.47, 7.49 §1[3] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.50, 7.51, 7.52, 7.54, 7.56 §1[4]–[8] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.57, 7.59, 7.61, 7.62, 7.63, 7.64 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.33 §5–6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.58 Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.36, 7.47
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Money Laundering Directive (‘Third Money Laundering Directive’) 2005/06/EEC, [2005] OJ L309 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.34, 7.36 §1[1] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.36, 7.38 §1[2] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.35, 7.36, 7.37, 7.39, 7.45 §1[3] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.36 §1[4] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.38 §1[5] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.35, 7.45 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.47, 7.48, 7.49, 7.55 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.35, 7.38, 7.49, 7.51, 7.53, 7.56 §4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.49 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.36, 7.51 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.51 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.47, 7.51 §8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.50, 7.51, 7.52, 7.53 §9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.51, 7.52 §10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.49, 7.55 §11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.54, 7.55 §12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.54, 7.55 §13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.56 §§14–19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.54 §20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.60, 7.64 §22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.59 §23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.58, 7.64 §24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.62 §26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.59, 7.61 §27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.61 §28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.63, 7.64 §§30–32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.57 §33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.34, 7.57 §34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.38, 7.59 §35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.59 §37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.37, 7.53 §39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.34, 7.36 §41 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.34 §44 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.34 Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.34, 7.36, 7.38, 7.47, 7.49, 7.54, 7.60, 7.64 Third Money Laundering Directive Proposal 2004/0137 (COD), Explanatory Memorandum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.47, 7.51, 7.60, 7.61 Mountain and Hill Farming Directive 75/268/EEC [1975] OJ L128 1 . . . . . . . . . . . . . . . 3.74 Movement and Residence Directive see Residence Directive Organic Food Regulation (EC) 1804/1999 [1999] OJ L222 1 . . . . . . . . . . . . . . . . . . . . . . 3.79 Organic Production Regulation (EEC) 2092/91/EEC [1991] OJ L198 1 . . . . . . . . . . . . . 3.79 Package Travel Directive 90/314/EEC [1990] OJ L158 59 . . . . . . . . . . . . . . . . 5.52, 6.18, 6.55
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Payments in Euros Regulation see Cross-border Payments Pre-Contractual Information About Home Loans, Commission Recommendation 2001/193/EC [2001] OJ L 69 25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.14 Processing of Personal Data Directive 2002/58/EC [2002] OJ L201 37 . . . . . . . . . . . . . . 5.62 Product Liability Directive 85/374/EEC [1985] OJ L210 29 . . . . . . . . . . . . . . . . . . . . . . . 5.10 Protection of the Community’s Financial Interests Proposal COM/2001/0272 [2001] OJ 240E 125 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.34 Protocol on Privileges and Immunities of the ECs [1967] OJ 152 13. . . . . . . . . . . . . . . . 3.59 Public Procurement Directive 2004/18/EC [2004] OJ L134 114. . . . . . . . . . . . . . . . . . . . 3.57 Recognition of Professional Qualifications First General System Directive 89/48/EEC [1989] OJ L19 16. . . . . . 7.18, 7.19, 7.20, 7.66 Second General System Directive 92/51/EC [1992] OJ L209 25. . . . . . . . . . . . . 7.18, 7.66 Recognition of Professional Qualifications Directive 2005/36/EC [2005] OJ L255 22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.10, 7.18, 7.20 Regulation see substantive topic Regulation on Civil Jurisdiction see Civil Jurisdiction Regulation Residence Directive (Movement and Residence by EU Citizens and their Family Members) 2004/38/EC [2004] OJ L229 35. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.17, 1.54 §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.55, 1.64, 1.79 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.54, 1.55, 1.83 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.83 §§4–5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.84, 1.91, 1.92 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.55, 1.84, 1.91 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.55, 1.84, 1.92, 1.93, 1.96 §8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.80, 1.84, 1.92, 1.96 §§12–15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.79, 1.84, 1.91, 1.92 §§16–21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.55, 1.81, 1.92, 1.93 §23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.93 §26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.92 §27ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.56, 1.92 §35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.83 Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.56, 1.83, 1.91, 1.92 Right of Residence for Nationals Proposal COM (79) 215 final . . . . . . . . . . . . . . . . . . . . 1.92 Rome Convention on the Law Applicable to Contractual Obligations (‘Rome I’) [1980] OJ L266 1 (original), [2005] OJ C334 1 (consolidated) . . 3.02, 3.12, 4.09, 8.53, 10.01, 11.15 §1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.12, 10.02, 10.08, 10.38, 10.42, 11.15, 11.48 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.09, 4.27 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.06, 10.40 §4[1]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.11, 10.09, 10.13, 10.18 §4[2] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.27 §4[3]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.16, 4.45, 10.13, 10.18, 10.26, 10.27 §4[5] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.18, 10.26, 10.27 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.54 §5[1] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.33
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§5[2] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.64 §5[4]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.16, 4.45, 10.15, 10.33 §5[5] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.16, 10.15, 10.33 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.09, 8.54, 10.07, 10.21, 10.41 §8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.19, 10.40 §9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.06, 10.40 §10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.09, 10.19 §11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.19, 10.40 §12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.19 §13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.20 §14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.19 §16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.21 §19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.09 §20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.53, 10.07, 10.21 §21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.07, 10.21 §22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.21 §30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.10 §32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.53 Rome I Proposal see Law Applicable to Contractual Obligations Rome II Proposal see Law Applicable to Non-Contractual Obligations Sales Promotions Proposed Regulation COM (2002) 585 final . . . . . . . . . . . . . . . . . . . . 5.46 San Sebastian Convention (Accession of Spain and Portugal to the Brussels Convention on Civil Jurisdiction and Judgments) [1989] OJ L285 1 . . . . . . . . . . . . . . 4.06, 4.26, 4.41 Schengen Acquis [2000] OJ L239 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.91 Schengen Borders Proposal 2004/127 (COD) Second see substantive topic Second Banking see Banking Directive Second Capital see Capital Directive Second Consumer Credit see Consumer Credit Second Money Laundering Directive see Money Service Regulation (EC) 1348/2000 [2000] OJ L160 37. . . . . . . . . . . . . . . . 4.02, 10.57, 10.58 Services Directive 2006/123/EC [2006] OJ L376 36 . . 1.66, 1.70, 1.71, 1.72, 7.01, 7.07, 7.09 Single Area Payment Scheme Envelopes Regulation (EC) 864/2004 [2004] OJ L161 48 3.75 Single Area Payment Scheme Envelopes Regulation (EC) 118/2005 [2005] OJ L24 15 . 3.75 Single Europe Act 1986 [1987] OJ L169 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.63 Single Payment Regulation (Direct Support Schemes under the Common Agricultural Policy Regulation) (EC) 1782/2003 [2003] OJ L270 1 . . . . . . . . . . . . . . . . . . . . 3.67, 3.70 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.68, 3.69 §3ff, Annex III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.80 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.69, 3.78 §§10–12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.73, 3.81 §§17–27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.69, 3.70 §33ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.70, 3.71, 3.76, 3.77
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§37ff, Annex VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.77 §41, Annex VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.77 §§43–46 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.77, 3.78 §47 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.82 §53ff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.78 §58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.74 §63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.74 §64ff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.82 §66, Annex IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.78 §70 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.74 §71 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.71, 3.82 §71a ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.75, 3.78, 3.83 §88ff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.78 §§72–94 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.82 §§95–97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.83 §98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.74 §§107–108 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.76, 3.78 §111ff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.82 §121ff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.82 §§127–128. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.82 §§133–136. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.82 Annexes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.81, 3.82 Recitals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.71 Single Payment Implementation Regulation (EC) 795/2004 [2004] OJ L141 1 . . 3.70, 3.74, 3.77, 3.78, 3.83 Single Payment Scheme Amendment Regulation (EC) 319/2006 [2006] OJ L158 32 . . 3.67, 3.82 Single Payment Scheme Amendment (Date) Regulation (EC) 1540/2004 [2004] OJ L79 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.83 Single Payment Scheme Eastwards Accession Regulation (EC) 583/2004 [2004] OJ L91 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.75, 3.76, 3.78, 3.82, 3.83 Single Payment Scheme (Financial Envelopes) Regulation (EC) 118/2005 [2005] OJ L24 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.75, 3.82 Support Schemes Implementation Regulation (EC) 1973/2004 [2004] OJ L345 1. . . . . 3.78 Sixth VAT Directive see Value Added Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.60–3.64 Small Claims Procedure Proposal COM (2005) 87 final Statement by the Council and the Parliament re §6[1] (Distance Selling) [1997] OJ L144 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.72 TCN see Third Country National Technical Standards Information Directive 98/34/EC [1998] OJ L204 37. . . . . . . . . . . . 5.61 Technical Standards Information Amendment Directive 98/48/EC [1998] OJ L217 18 5.61 Third see substantive topic Third Capital see Capital Third Consumer Credit see Consumer Credit
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Third Money Laundering see Money Laundering Third Country National Long-term Residence Directive 2003/109/EC [2004] OJ L16 44 (TCN). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.85, 1.94 Timeshare Directive 94/47/EC [1994] OJ L280 83. . . . . . . . 5.02, 5.10, 6.01, 6.05, 6.07, 6.51 §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.11, 6.12, 6.40 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.05, 6.11, 6.12, 6.13, 6.16, 6.17, 6.18, 6.20, 6.48 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.52, 6.25, 6.28 §4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.24, 6.26, 6.28 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.31, 6.35, 6.36 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.34 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.38, 6.38, 6.55 §8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.07, 6.65 §9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.47, 6.63, 6.65 §11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.04, 6.07 Annex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.26, 6.27, 6.28, 6.35, 6.55 Recitals [1ff] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.24, 4.47, 6.07, 6.16, 6.25, 6.40, 6.60 Recitals [10ff] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.24, 6.31, 6.34, 6.38, 6.40, 6.65 Timeshare Proposal [1992] OJ C222 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.31 Timeshare and Long-term Holiday Products Proposal COM (2007) 303 final . . . 6.01, 6.66 Trade in Agricultural Products Regulation (EC) 1184/2006 [2006] OJ L214 7. . . . . . . . 3.51 Trade in Agricultural Products Regulation (EC) 1683/2006 [2006] OJ L314 18. . . . . . . 3.75 Treaty of Rome (Rome 1957) §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.63 §§52–58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.63 §§59–66 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.63 §§67–73. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.22, 1.25, 1.29, 1.35, 1.39 Treaty on European Union (Maastricht, 1992) [1992] OJ C191 1 §1 ex §A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.31 §2 ex §B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.26, 1.33, 3.30, 7.29 §6 ex §F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.14, 3.33 §8 ex §G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.29, 1.35, 1.55 §49 ex §O . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.14 Protocol 1 (Acquisition of Property in Denmark) [1992] OJ C191 68 . . . . . . . 1.05, 2.19 Protocol (Enlargement of the EU) [2001] OJ C80 51 §4 . . . . . . . . . . . . . . . . . . . . . . . 1.12 Treaty to Settle Questions Relating to the Saar (Franco-German) (Luxembourg, October 27 1956, UNTS 1053 3) Annex 12 §49 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.14 TV Without Frontiers Directive 89/552/EEC [1989] OJ L298 23 . . . . . . . . . . . . . . . . . . . 5.56 th
UN Conventions Illicit Traffic in Narcotic Drugs and Psychotropic Substances (Vienna, 1988) . 7.34, 7.36 Suppression of Financing of Terrorism (New York, 1999). . . . . . . . . . . . . . . . . . . . . . 7.38 Transnational Organised Crime (Palermo, 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.34 Unfair Commercial Practices Directive (‘Unfair Practices Directive’) 2005/29/EC [2005] OJ L149 22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.02, 5.04, 5.09, 5.14, 6.11, 6.12, 6.52, 6.54 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.05, 5.11, 5.40, 5.42, 5.43, 5.48, 5.63, 5.89
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§3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.11, 5.14, 5.15, 5.40 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.40, 5.43, 5.46, 5.47, 5.48, 5.53, 5.58, 5.59 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.43, 5.44, 5.51, 5.52, 5.54, 5.59 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.43, 5.52, 5.63 §8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.43, 5.47, 5.48 §9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.05, 5.43, 5.48, 5.51, 5.52, 5.59 §10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.59, 5.89 §11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.59, 5.89 §14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.05, 5.54, 5.55, 5.89 §15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.47 §17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.59 §19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.14 Annex 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.46, 5.47, 5.50, 5.53, 5.58, 6.06 Annex II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.52 R[6ff]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.09, 5.11, 5.15, 5.40, 5.43 R[10ff]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.14, 5.40, 5.41, 5.43, 5.47, 5.52, 5.63 R[15ff] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.43, 5.46, 5.47, 5.48, 5.53, 5.58 R[20ff] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.59, 5.89 Unfair Practices Common Position 2003/0134 (COD) . . . . . . . . . . . . . . . . . . . . . . . . 5.14 Unfair Practices Explanatory Memorandum (‘EM’) COM (2003) 356 final . . . . . 5.02ff Unfair Practices Proposal 2003/0134 (COD), EM COM (2003) 356 final . . . . . . . . . 5.14 Unfair Practices Parliamentary Amendments TA–PROV (2005) 0048 . . . . . . . . . . . 5.14 Unfair Terms in Consumer Contracts Directive 93/13/EEC [1993] OJ L95 29 . . . 5.02, 8.24 §1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.09, 8.44 §2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.06, 8.35 §3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.39, 8.41, 8.45 §4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.44, 8.45 §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.43 §6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.37, 8.46 §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.46 §8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.04, 8.47 Annex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.41, 8.45 Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.25, 8.37, 8.41, 8.44, 8.45 Utilities Procurement Directive 2004/17/EC [2004] OJ L134 1 . . . . . . . . . . . . . . . . . . . . 3.57 Value Added Tax (Sixth) Directive 77/388/EC [1977] OJ L145 1 . . . . . . . . . . . . . . 3.60–3.64 Vines Regulation (EEC) 1162/76 [1976] OJ L135 32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.37 Wire Transfers Regulation (EC) 1781/2006 [2006] OJ L345 1 . . . . . . . . . . . . . . . . . . . . . 7.31
TA B LE O F LEG I SLATI O N — UN I TED KI N G DO M
Table of Legislation — United Kingdom TA B LE O F LEG I SLATI O N — UN I TED KI N G DO M
Accession (Immigration and Worker Registration) Regs 2004, SI 2004/1219 . . . . . . . . . 1.82 Accession (Immigration and Worker Registration) (Amendment) Regs 2004, SI 2005/2400 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.82 Accession (Immigration and Worker Authorisations) Regs 2006, SI 2006/3317. . . . . . . 1.82 Accession (Immigration and Worker Registration) (Amendment) Regs 2007, SI 2007/475 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.82 Accommodation Agencies Act 1953, c 23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.11 Act to Empower His Majesty to Regulate Trade and Commerce To and From the Isle of Malta 1801, 41 Geo III (1801) ch 103. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.08 Administration of Estates Act 1925, c 23, ss 1–3 . . . . . . . . . . . . . . . . . . . . . . . . . . 11.25, 11.27 Administration of Justice Act 1970, c 31, s 36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.37 Administration of Justice Act 1973, c 15, s 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.37 British Nationality and Status of Aliens Act 1914, c 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05 Building (Amendment) Regs 2001, SI 2001/3335. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.17 Business Advertisements (Disclosure) Order 1977, SI 1977/1918 . . . . . . . . . . . . . . . . . . 5.58 Business in the Regulated Sector Order see Proceeds of Crime Act (Business etc) Business Protection from Misleading Marketing Regs 2007 (Draft) in Consultation on Draft Consumer Protection from Unfair Trading Regulations 2007 (London, DTI, 2007, URN 07/1047) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.02, 5.09, 5.52 Cancellation Information Order 2003 see Timeshare (Cancellation Information) Order 2003 CAP see Common Agricultural Policy Caravan Sites and Control of Development Act 1960, c 62 . . . . . . . . . . . . . . . . . . . . . . . . 6.12 Charging Orders Act 1979, c 53 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.89 Civil Jurisdiction and Judgments Act 1982 (‘CJJA’), c 27 . . . . . . . . 9.76, 10.01, 10.50, 11.38 s 2–3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.05 s 3B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.07 s 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.83 s 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.80 s 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.31, 11.38, 11.39 s 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.82 s 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.82 s 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.05 ss 18–19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.76 s 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.08 s 22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.59
lxvi
Table of Legislation — United Kingdom
ss 24–25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.11, 9.81 ss 27–28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.11 s 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.30 s 32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.35 s 34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.85 s 35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.76 ss 41–44 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.54 s 45. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.38 s 49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.59 s 52 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.08 sch 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.04, 4.06 sch 3C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.07 sch 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.08, 4.11, 4.15, 4.17, 4.26, 4.51, 9.76, 10.01 sch 4 para 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.53, 11.39 sch 4 para 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.05, 10.01, 10.44 sch 4 paras 7–9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.30, 10.31 sch 4 para 11. . . . . . . . . . . . . . . . . . . . . . . 4.08, 4.14, 4.15, 4.18, 4.20, 4.22, 4.35, 4.37, 4.41 sch 4 para 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.34, 10.35, 11.38, 11.47 sch 4 para 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.55 sch 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.08, 11.39 Civil Jurisdiction and Judgments Act 1991, c 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07 Civil Jurisdiction and Judgments SIs Civil Jurisdiction and Judgments (Authentic Instruments and Court Settlements) O 2001, SI 2001/3928 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.90 Civil Jurisdiction and Judgments O 2001, SI 2001/3929 . . . . . . . . . . . . . . . . . . . . . . . 4.04 Civil Jurisdiction and Judgments Act 1982 (Amendment) O 1990, SI 1990/2591 . . 4.06 Civil Jurisdiction and Judgments Act 1982 (Amendment) O 2000, SI 2000/1824 . . 4.08 Civil Partnership (Jurisdiction and Recognition of Judgments) Regs 2005, SI 2005/3334 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.01 Civil Procedure Rules, SI 1998/3132 as amended 6.19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.04, 4.28, 10.49, 10.57, 11.38 6.20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04, 4.11, 4.51, 10.24, 10.45, 10.49, 10.57, 11.38 6.21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.57 6.24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.57 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.15, 10.35 74 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.76, 9.78, 9.80, 9.82, 9.90 Practice Direction 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.04, 4.28, 10.57 Practice Direction 74 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.76 Practice Direction 74B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.90 CJJA see Civil Jurisdiction and Judgments Common Agricultural Policy (‘CAP’) CAP Single Payment and Support Schemes (Integrated Administration and Control System) Regs 2005, SI 2005/218 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.70 CAP Single Payment and Support Schemes Regs 2005 SI 2005/219 3.74, 3.76, 3.77, 3.83
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CAP Single Payment and Support Schemes (Amendment) Regs 2006, SI 2006/239 3.74, 3.76, 3.77, 3.78, 3.83 CAP Single Payment Scheme (Set-aside)(England) Regs 2004, SI 2004/3385 . . . . . . 3.78 CAP Single Payment Scheme (Set-aside)(England) (Amendment) Regs 2007, SI 2007/633 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.78 CAP Single Payment Scheme etc (Cross Compliance)(England) Regs 2004, SI 2004/3196 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.80 CAP Single Payment Scheme etc (Cross Compliance)(England) (Amendment) Regs 2005, SI 2005/918 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.80 Commonhold and Leasehold Reform Act 2002, c 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.41 Consumer Credit Act 1974, c 39 s 67 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.38 s 74 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.85 s 126. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.03 s 137–s 140 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.24, 9.48 ss 140A–140B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.24, 9.48 Consumer Credit Act 2006, c 14, ss 19–22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.24, 9.48 Consumer Credit SIs Consumer Credit (Agreements) (Amendment) Regs 2004, SI 2004/1482 . . . . . . . . . 9.14 Consumer Credit (Early Settlement) Regs 2004, SI 2004/1483 . . . . . . . . . . . . . . . . . . 9.23 Consumer Credit (Advertisements) Regulations 2004, SI 20004/1484. . . . . . . . . . . . 9.21 Consumer Credit (Advertisements) (Amendment) Regulations 2007, SI 2007/827. 9.21 Consumer Protection Act 1987, c 43 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.58 Consumer Protection (Cancellation of Contracts Concluded Away from Business Premises) Regs 1987 (Doorstep Selling) (‘Contracts away from Business Premises Regs’), SI 1987/2117 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.02, 6.33 reg 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.23, 5.79 reg 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.05, 5.16, 5.17, 5.22, 5.23, 5.24, 5.29 reg 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.79, 5.85 regs 4A–4H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.17, 5.79 reg 5ff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.77, 5.78, 5.79 reg 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.85 reg 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.04 reg 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.79 sch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.79 Consumer Protection (Cancellation of Contracts Away from Business Premises)(Amendment) Regs 1998, SI 1998/3050. . . . . . . . . . . . . . . . . . . . . . . . 5.17, 5.79 Consumer Protection (Code of Practice for Traders on Price Indications) Approval Order 2005, SI 2005/2705 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.58 Consumer Protection (Distance Selling) Regs 2000 (‘Distance Selling Regs’), SI 2000/2334 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.02, 5.30 reg 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.05, 5.31, 5.32, 5.81, 5.89 reg 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.30, 5.32, 5.33, 5.36 reg 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.38 reg 7–20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.38
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reg 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.65, 5.70 reg 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.64, 5.71 reg 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.71 reg 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.71, 5.73 reg 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.73 reg 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.73 reg 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.73, 5.81 reg 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.81 reg 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.73 reg 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.38, 5.73 reg 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.73 reg 24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.47 reg 25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.04 Consumer Protection (Distance Selling) (Amendment) Regs 2005, SI 2005/689 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.71, 5.74, 5.81 Consumer Protection from Unfair Trading Regulations 2007 see Unfair Trading Regs (Draft) Consumer Transactions (Restrictions on Statements) O 1978, SI 1978/127 . . . . . . . . . . 5.58 Consumers, Estates Agents and Redress Act 2007, c 17`, s 59 . . . . . . . . . . . . . . . . . . . . . . 5.25 Contracts (Applicable Law) Act 1990, c 36 . . . . . . . . . . . . . . . . . . . . . . 3.02, 3.12, 4.09, 10.01 s 2(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.07, 10.19, 10.21 Contracts (Applicable Law) Act 1990 (Amendment) O 1994, SI 1994/1900 . . . . . . . 4.09 Contracts (Applicable Law) Act 1990 (Commencement) O 1991, SI 1991/707 . . . . 4.09 Contracts (Applicable Law) Act 1990 (Amendment) O 2000, 2000/1825 . . . . . . . . . 4.09 Contracts (Applicable Law) Act 1990 (Commencement No 2) O 2004, SI 2004/3448 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.09 Contracts Away from Business Premises (Doorstop Selling) see Consumer Protection Control of Misleading Advertisements Regs 1988, SI 1988/915. . . . . . . . . . . . . . . . 5.02, 6.07 Control of Misleading Advertisements (Amendment) Regs 2000, SI 2000/914 . . . . . . . 5.02 Criminal Justice Act 1988, c 33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.33, 7.39, 7.59 Criminal Justice Act 1993, c 36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.33 Criminal Justice (International Co-operation) Act 1990, c 5, s 9 . . . . . . . . . . . . . . . . . . . 7.44 Cross-border Credit Transfer Regs 1999, SI 1999/1876 . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.29 Cross-border Payments in Euros Regs 2003, SI 2003/488 . . . . . . . . . . . . . . . . . . . . . . . . . 7.31 Dairy Produce Quotas SIs Dairy Produce Quotas Regs 2005, SI 2005/465 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.83, 3.85 Dairy Produce Quotas (Amendment) Regs 2006, SI 2006/120 . . . . . . . . . . . . . . . . . . . . . 3.83 Dairy Produce Quotas (Amendment) Regs 2007, SI 2007/106 . . . . . . . . . . . . . . . . . . . . . 3.83 Dairy Produce Quotas (General Provisions) Regs 2002, SI 2002/458 . . . . . . . . . . . . . . . 3.83 Dairy Produce Quotas (General Provisions) (Amendment) Regs 2005, SI 2005/466. . . 3.83 Distance Selling see Consumer Protection (Distance Selling) Doorstep Selling (Property Repairs) Bill 2004. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.25 Doorstep Selling Regs see Consumer Protection (Cancellation of Contracts Concluded away from Business Premises) Regs
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Draft see substantive topic Draft Bill see Unfair Contract Terms Draft ML Regs see Money Laundering Drug Trafficking Act 1986, c 32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.33, 7.59 Drug Trafficking Act 1994, c 37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.33 EC (Jurisdiction and Judgment in Matrimonial and Parental Responsibility Matters) Regs 2005, SI 2005/265 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.02 EC (Lawyers’ Practice) Regs 2000, SI 2000/1119. . . . . . . . . . . . . . . . . . . . . . . . 7.07, 7.13, 7.14 EC (Lawyers’ Practice) (Amendment) Regs 2004, SI 2004/1628 . . . . . . . . . . . . . . 7.07, 7.17] EC (Recognition of Professional Qualifications) Regs 1991, SI 1991/824 . . . . . . . . . . . . 7.18 E- see Electronic E-Commerce see Electronic Commerce E-Communciations see electronic Communications E-Signature see Electronic Signature Electronic Commerce SIs E-Commerce (EC Directives) Regs 2002, SI 2002/2013 . . . . . . . . . . . . . . . . . . . 8.10, 8.22 E-Commerce Directive (Financial Services and Markets) Regs 2002, SI 2002/1775 . 5.61 E-Commerce Directive (Financial Services and Markets) (Amendment) 2002, SI 2002/2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.10 E-Commerce Directive (Financial Services and Markets) (Amendment No 2) Regs 2002, SI 2002/2157 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.10 E-Commerce Directive (Financial Services and Markets) (Amendment) Regs 2004, SI 2004/3378 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.61 Electronic Communications Act 2000, c 7, ss 7–10 . . . . . . . . . . . . . . . . 8.03, 8.05, 8.18, 8.19 Electronic Signatures Regs 2002, SI 2002/318. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.08 Enterprise Act 2002, c 40. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.15, 5.89, 9.62 Enterprise Act 2002 (Part 8 Community Infringements of Specified UK Laws)Order 2003, SI 2003/1374 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.15 Estate Agents Act 1979, c 38. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.11, 7.48 European Union (Accessions) Act 2006 c 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.09, 1.82 Exchange Control Act 1947, c 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.34 Fair Trading Act 1973, c 41 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.58 Finance Act 2003, c 14, s 71–72 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.13 Finance Act 2005, c 7, s 94. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.13 Finance Act 2006, c 25, ss 156–157. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.35 Financial Services (Land Transactions) Act 2005, c 24. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.35 Financial Services and Markets Act 2000, c 8. . . . . . . . . . . . . . . . . . . . . . 5.35, 5.61, 9.13, 9.18 Financial Services (Distance Marketing) Regs 2004 (‘FS Distance Marketing Regs 2004’), SI 2004/2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.02, 5.30, 8.45 reg 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.05 reg 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.31, 5.64, 5.89 reg 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.89 reg 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.47
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reg 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.65, 5.70 reg 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.32, 5.71 reg 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.75, 5.76 reg 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.74, 5.75 reg 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.74, 5.81 reg 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.81 reg 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.74, 5.76 reg 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.73 reg 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.47 reg 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.04 reg 25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.30 sch 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.65 sch 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.70 Financial Services (EEA State) Regs 2007, SI 2007/108 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.18 Foreign Judgments (Reciprocal Enforcement) Act 1933, c 13 . . . . . . . . . . . . . . . . . 4.33, 9.76 Forfeiture Act 1870, 33 & 34 Vict c 23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.04 FS Distance Marketing see Financial Services (Distance Marketing) Hill Farm Allowance Regulations 2005, SI 2005/154 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.74 Home Information Pack (No 2) Regs 2007, SI 2007/1667. . . . . . . . . . . . . . . . . . . . . . . . . 3.50 Housing Act 1961, c 65, ss 32–33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.46 Human Rights Act 1988, c 42 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.19 Immigration (EEA) Regs 2006, SI 2006/1003 . . . . . . . . 1.55, 1.78, 1.83, 1.84, 1.92, 1.96, 2.54 Inheritance (Provision for Family and Dependants) Act 1975, c 63 . . . . . . . . . . 11.22, 11.23 Insolvency Act 1986, c 45 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.49, 9.57, 9.62, 9.71 Insolvency Act 1986 (Amendment) Regs 2002, SI 2002/1037 . . . . . . . . . . . . . 9.49, 9.57, 9.71 Insolvency Act 2000, c 39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.49 Insurance Companies Act 1982, c 50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.22 Land Registration Act 1925, c 21 s 75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.23 s 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.05 Land Registration Act 2002, c 9 s 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.41 s 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.46 s 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.46 ss 91–95, sch 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.36, 8.05, 9.35 ss 96–98, sch 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.23 Landlord and Tenant Act 1985, c 70, ss 11–17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.46 Law of Property Act 1925, c 20 s 1–s 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.63 s 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.64 s 34–s 36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.41
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s 52–s 55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.33, 5.36, 8.04 s 85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.29 s 101. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.37 s 205 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.33, 5.36 Law of Property (Miscellaneous Provisions) Act 1989, c 34 s 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.04 s 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.36, 8.04, 10.06 S 2A (Draft). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.05 Law Society Practice Rule 10.01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.14 Lawyers’ Practice Regs see EC (Lawyers’ Practice) Local Government Act 2003, c 26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.08 Local Government Finance Act 1992, c 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.08 Misrepresentation Act 1967, c 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.40 ML Regs see Money Laundering Mock Auctions Act 1961, c 47. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.11 Money Laundering Regulations Money Laundering Regs 1993, SI 1993/1933. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.59 Money Laundering Regs 2003, SI 2003/3075. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.33 reg 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.36, 7.48, 7.49, 7.51 reg 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.50, 7.51 reg 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.64 Money Laundering Regs 2007, SI 2007/2157 . . . . . . . . . . . . . . . . . . 7.34, 7.49, 7.51, 7.54 reg 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.36, 7.51 reg 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.47, 7.49, 7.63 reg 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.49, 7.55 reg 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.51 reg 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.51, 7.53 reg 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.51, 7.52 reg 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.51 reg 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.49 reg 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.49 reg 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.52, 7.56 reg 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.53, 7.54 reg 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.54, 7,557 reg 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.56 reg 19–21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.56, 7.5849 reg 22ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.49 reg 45ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.38 sch 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.49 sch 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.58 Notary (Qualification) Rules 1998 7.02
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Package Holiday Regs 1992, SI 1992/3288 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.18, 6.63 PIL (Miscellaneous Provisions) Act 1995 see Private International Law PoCA see Proceeds of Crime Act Practice Direction on Enforcement 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.89 Practice Direction see Civil Procedure Rules Price Indications (Method of Payment) Regs 1991, SI 1991/199 . . . . . . . . . . . . . . . . . . . 5.58 Private International Law (Miscellaneous Provisions) Act 1995, c 42 ss 1–4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.80 ss 9–15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.30, 4.52, 10.01, 10.44, 10.46 Proceeds of Crime Act 2002 (‘PoCA 2002’), c 29. . . . . . . . . . . . . . . . . . . . . . . 7.33, 7.39, 7.59 s 1–s 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.41 s 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.41 s 6ff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.41 s 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.42 s 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.42 s 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.42 s 41 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.41 s 45 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.41 ss 45–53 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.42 s 77 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.42 ss 82–84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.42 s 239. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.35 s 240ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.43 ss 241–242 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.42 s 245A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.41, 7.43 s 308. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.43 s 327. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.35 ss 327–329 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.37, 7.39, 7.59, 7.64 s 328. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.35, 7.46, 7.64 s 329. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.35 s 330. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.48, 7.60, 7.64 ss 330–332 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.37 s 331. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.59 s 333. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.63 s 335. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.62 s 338 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.61, 7.62 s 339. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.59 s 340. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.35, 7.39, 7.45 s 342. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.63 sch 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.42 sch 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.48, 7.59 Proceeds of Crime Regs PoCA 2002 (Business in the Regulated Sector) Order 2003, SI 2003/3074. . . . . . . . . 7.48 PoCA 2002 (Business in the Regulated Sector) Order 2006, SI 2006/2385 . . . . 7.48, 7.59
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PoCA 2002 (Business in the Regulated Sector ) Order 2007, SI 2007/208 . . . . . . . . . 7.47 PoCA 2002 (Moneylaundering) (Exceptions to Overseas Conduct Defence) Order 2006, SI 2006/1070 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.37 PoCA 2002 and Moneylaundering Regs 2003 (Amendment) Order 2006, SI 2006/308 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.64 Property Misdescriptions Act 1991, c 29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.11 Property Repairs (Prohibition of Cold Calling) Bill 2004 . . . . . . . . . . . . . . . . . . . . . . . . . 5.25 Recognition of Trusts Act 1987, c 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.12, 11.04, 11.58 s 1(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.04, 11.50 s 1(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.04, 11.50 s 1(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.50 s 1(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.04, 11.50 s 1(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.04 Recognition of Trusts SIs Recognition of Trusts Act 1987 (Overseas Territories) O 1989, SI 1989/673 11.04, 11.50 Recognition of Trusts Act 1987 (Commencement) O 1987, SI 1987/1177 . . . . . . . 11.04 Regulation of Financial Services (Land Transactions) Act 2005, c 24, s 1 . . . . . . . . . . . . 9.13 Requirements of Writing (Scotland) Act 1995, c 7, s 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.36 Rules of the Supreme Court Order 11 rule 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.28 Sale of Goods Act 1979, c 54, s 61. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.23 Scotland Act 1998, c 46 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.47 Settled Land Act 1925, c 18, s 75(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.54 Singe Payment see Common Agricultural Policy Social Security (Persons from Abroad) Regs 2006, SI 2006/1026 . . . . . . . . . . . . . . . . . . . 1.82 Serious Organised Crime and Police Act 2005, c 15 s 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.59 ss 93–98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.41, 7.43, 7.44 s 102. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.37 ss 104–105 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.59, 7.60 Statute of Frauds 1677, 29 Charles II c 3, s 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.14 Statute of Frauds (Ireland) 1695, 7 & 8 William III c 22 . . . . . . . . . . . . . . . . . . . . . . . . . . 5.36 Stop Now Orders (EC Directive) Regs 2001, SI 2001/1422 . . . . . . . . . . . . . . . . . . . . . . . . 5.89 Supply of Beer (Loan Ties) Order 1989, SI 1989/2258. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.52 Supreme Court of Judicature Act 1873, 36 & 37 Vict c 66. . . . . . . . . . . . . . . . . . . . . . . . . 4.28 Taxation of Chargeable Gains Act 1992, c 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.08 Terrorism Act 2000, c 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.36 Timeshare Act 1992, c 35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.38, 6.01, 6.08, 6.31, 6.53 s 1(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11, 6.12, 6.13, 6.14, 6.18, 6.20, 6.21, 6.63 s 1(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.11, 6.21 s 1(3A) ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.16, 6.17, 6.38 s 1(7–7B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.63, 6.64 s 1A–1E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.08, 6.16, 6.24, 6.25, 6.26, 6.28
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s 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.16, 6.28, 6.31, 6.32, 6.39 s 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.16, 6.38, 6.39 s 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.17, 6.38, 6.39 s 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.32, 6.39 ss 5A, 5B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.16, 6.34, 6.35 s 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.39 s 6A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.16, 6.38 s 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.39 s 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.28 s 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.28 s 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.28 s 10A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.08 s 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.28 s 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.07, 6.08, 6.24, 6.36, 6.38, 6.63, 6.65 sch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.28 Timeshare SIs Timeshare Act 1992 (Cancellation Notices) Order 1992, SI 1992/1942 . . . . . . . . . . . 6.08 Timeshare Act 1992 (Repayment of Credit on Cancellation) Order 1992, SI 1992/1943 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.08 Timeshare Regulations 1997, SI 1997/1081. . . . . . . . . . . . . . . 6.01, 6.08, 6.47, 6.63, 6.64 Timeshare Act 1992 (Amendment) Regs 2003, SI 2003/1922. . . . . 6.01, 6.32, 6.63, 6.64 Timeshare (Cancellation Information) Order 2003, SI 2003/25796.01, 6.08, 6.32, 6.39 Tourism (Sleeping Accommodation Price Display) Order 1977, SI 1977/1877. . . . . . . . 5.11 Trade Descriptions Act 1968, c 29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.09, 5.58, 6.06 Trading Schemes Regulations 1997, SI 1997/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.46 Treaty of Union 1707 §XVIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.47 Trustee Act 2000, c 29, s 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.50 Trusts of Land and Appointment of Trustees Act 1996, c 47. . . . . . . . . . . . . . . . . . . . . . 11.54 Unfair Contract Terms Act 1977, c 50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.08, 5.40, 8.24 s 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.09, 5.10 sch 1 para 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.09, 5.10, 5.12, 8.30 Unfair Terms Bill attached to Unfair Terms in Contracts (see Reports) 5.08, 8.24, 8.30, 8.37, 8.39, 8.44, 8.46 Unfair Terms in Consumer Contracts Regs 1994, SI 1994/3159 . . . . . . . . . . . 5.06, 5.12, 8.24 reg 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.30 reg 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.46 reg 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.43 reg 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.37 Unfair Terms in Consumer Contracts Regs 1999, SI 1999/2083 3.24, 5.02, 5.12, 5.40, 8.24, 8.30 reg 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.06, 5.07, 5.09, 8.35 reg 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.06, 8.39, 8.44 reg 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.39, 8.45 reg 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.44, 8.45
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reg 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.43 reg 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.46 reg 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.37 reg 10–15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.46 sch 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.45 Unfair Terms in Consumer Contracts (Amendment) Regs 2001, SI 2001/1186 . . 5.02, 8.24 Unfair Trading Regs 2007 (Draft), the Draft Consumer Protection from Unfair Trading Regulations 2007 in Consultation on Draft Consumer Protection from Unfair Trading Regulations 2007(London, DTI, 2007, URN 07/1047) . . . . . . . . . . . . . . . . . . . . 5.02, 5.09 reg 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.14, 5.42, 5.43, 5.63 regs 3-7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.14, 5.43 reg 20ff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.89 reg 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.15 reg 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.41, 5.45 reg 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.43, 5.52, 5.44, 5.59 reg 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.43, 5.52, 5.63 reg 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.43, 5.47 reg 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.41 regs 8-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.15, 5.89 sch 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.14, 5.45, 5,47, 5.53, 5.59 sch 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.14, 5.15, 5.59 schs 2–4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.89 sch 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.11, 5.14 Value Added Tax (Place of Supply of Services) Order 1992, SI 1992/3121 . . . . . . . . . . . 3.60 Value Added Tax Act 1994, c 23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.60–3.66
TA B LE O F LEG I SLATI O N — F O R EI G N
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Austria Agriculture (Amendment) Law 2005 2004/102, 2003/35 . . . . . . . . . . . . . . . . . . . . . . . . . 2.27 Salzburg Grundverkehrsgesetz (‘GVG’). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.17 Timeshare Law 1997 Bundesgesetzblatt 1-167 [1997] ECLYB [390] . . . . . . . . . . . . . . . . 6.44 Tyrol Grundverkehrsgesetz (‘GVG’) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.33, 2.16, 2.46, 2.48
Bulgaria Forests (Amendment) Law 2005 [2005] ECLYB [426]. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.30 Land Ownership Law [2007] DV 24, [2007] 05 ECL [70] . . . . . . . . . . . . . . . . . . . . . . . . . 1.09
Cyprus Circular of the Ministry of the Interior to District Officers September 30th 1999 . . . . . 2.23 Decision 50.228 of the Council of Ministers August 25th 1999 . . . . . . . . . . . . . . . . . . . . 2.23 Land Acquisition by Aliens Law c 109 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.23 Laws 52/1969, 55/1972 and 50/1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.23 Timesharing Act 2001 [2001] EE I 3496, 3517, [2002] ECLYB [1382] . . . . . . . . . . . . . . . 6.07
Czech Republic Act 229/1991 Coli on Ownership of Land and Agricultural Property, as amended . . . . 2.29 Foreign Exchange Act 219/1995 Sb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.24, 2.29 Foreign Exchange Act 229/1991 Sb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.29
Finland Law on Land Purchase by Non-residents [1993] ECLYB [4069] . . . . . . . . . . . . . . . 2.07, 2.20
France Civil Code §§2, 7ff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.15
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Decree 2005-1450 [2006] JORF 18364, [2006] 01 ECL [54] . . . . . . . . . . . . . . . . . . . . . . . 5.30 French Fiducie Law 2007-211. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.52 Government Declaration May 23rd 1966 (controls of foreign purchase) . . . . . . . . . . . . 2.02 Law 2004-1123 [2004] JORF17825, [2004] ECLYB 340. . . . . . . . . . . . . . . . . . . . . . . . . . . 7.17 Timeshare Law 86/1986. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.57 Timeshare Law 98-566 [1998] JO 10486 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
Germany [2000] BGBL (D) I 182, [2000] ECLYB [616] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.02 [2000] BGBL (D) I 897, [2000] ECLYB [580] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.30 [2002] BGBL (D) I 564, [2002] ECLYB [552] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07 Bürgerliches Gesetzbuch (Civil Code) §312 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.87 §313 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.05 §358ff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.87 §491 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.87 §631ff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.10 §641 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.26 §873 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.05 §925 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.05 Code of Civil Procedure, 1990 BGBl I, 2840 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.85 Consumer Credit Act §9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.87 Estate Agents and Building Companies Law (Makler- und Bautragerverordnung) §7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.26 Federal Act on Lawyers (HAG) §16(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.02 Gesetz über den Widerruf von Haustaugeschaften, BGBl I 122, §1 . . . . . . . . . . . . . . . . . 5.27 Gesetz über Verbraucherkredite, VerbrKrG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.85 Haustürwiderrufsgesetz (HWiG) §5[2]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.85 Property Ownership in Respect of Flats Law (WEG) §31 . . . . . . . . . . . . . . . . . . . . . . . . . 6.44 Timeshare consolidation [2000] BGBL (D) I 2452 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.47 Timeshare Law [1997] Bundesgesetzblatt 1-167 [1997] ECLYB [390]. . . . . . . . . . . . . . . 6.64 Timeshare Sales Law [1996] I Bundesgesetzbtatt 2154, [1997] ECLYB [406]. . . . . 6.64, 6.47
Greece Civil Code §§29, 40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.37 Emergency Law 1366/1938, amended by Laws 1629/1939 and 21123/1939 . . . . . . . . . . 2.05 Presidential Decree 293/2001 [2001] Fek A 205. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07 Presidential Decree June 22nd to 24th 1927 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
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Hungary Land (Acquisition by Foreign Nationals) Government Decree 1996 [1996] ECLYB [2042] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.24, 2.29
Ireland Companies Act 1963, No 33/1963, s 220 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.64 Land Act 1965 s 45 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.02
Italy Law 898/1976 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.06 Law 104/1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.06 Law 218/1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.31 Legislative Decree 1998/427 [1998] Gazzetta Ufficiale (Serie Generale) 291, 48. . . . . . . 6.07
Luxembourg Decree July 19th 1983 (Fiducairy Contracts) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.51
Malta Distance Selling Regulations 2001 [2001] ECLYB [589] . . . . . . . . . . . . . . . . . . . . . . . . . . 5.30 Immovable Property (Acquisition by Non-residents) Act 1974 as amended, c 246 . . . . 2.21
The Netherlands [2000] Stb 617, [2001] ECLYB [553] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.30 Dutch Civil Code §48C as amended in 1997, (1997) Staatsbiad 287/8 [1997] ECLYB [408] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.31
Norway Timeshare Law [1997] Norsk Lovtidend 1129, [1997] ECLYB [405] . . . . . . . . . . . 6.31, 6.65
Poland Acquisition of Land by Foreigners Law March 24th 1920 . . . . . . . . . . . . . . . . . . . . 2.24, 2.31 Acquisition of Land by Foreigners Amendment Dz U 1996 54, poz 245 . . . . . . . . 2.24, 2.31
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Portugal Decree 22/2002 [2002] ECLYB [624] (Timeshare). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07 Decree 275/93 (Timeshare) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.07, 6.55 Decree May 22nd 1999 (Timeshare) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.43, 6.49 Law 22/2002 (Timeshare) [2002] DR 880, [2002] ECLYB [624]. . . . . . . . . . . . . . . . . . . . 6.43 Law 355/81 (Timeshare) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.43 Law 368/83(Timeshare). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.43 Special Declaration [2000] OJ C183 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.74
Romania Constitution §44 as amended in 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.09
Slovakia Act 95/1999 Sb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.29 Foreign Exchange Act 202/1995 Coli . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.29
Spain Civil Code §§9, 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.30 Civil Code §1255 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.36 Decree [2000] RCL 2555, [2001] ECLYB [585] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.26, 8.02 Doorstep Selling Law 26/91, Boletin Oficial del Estado November 26th 1991 . . . . . . . . 5.78 Judicial Powers Law §22[1] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.14 Mortgages (Reglamento Hipotecario) §92 as amended in 1982 . . . . . . . . . . . . . . . . . . . . 2.33 Timeshare Law 42/1998 (1998) 300 Boletin Oficial del Estado 42076 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.02, 6.11, 6.12, 6.14, 6.18, 6.28, 6.34, 6.42, 6.57 Timeshare Law 47/2002 [2003] ECLYB [350]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.30
Switzerland Acquisition of Land by Foreign Residents 1961 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.51 EU-Switzerland Bilateral Agreement on Free Movement [2002] OJ L114 7 . . . . . 2.54–2.56 Federal Law 1988, FL SR 211.412.41 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.51 Lex Koller, Federal Law on Acquisition of Real Estate by Foreigners . . . . . . . . . . . . . . . . 2.51 Ordinance 1984 OFL SR 211.412.411 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.51
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First citation in each chapter Action Plan on Contract Law COM (2003) 68 final [2003] OJ C63 1 . . . . . . . . . . . . . . . 8.48 Annan, Kofi Comprehensive Settlement of the Cyprus Problem (UN, November 21 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.33 Applicable Law and Jurisdiction in Divorce Matters Green Paper (‘Rome III’) CP 18/05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.01 Application of the Directive on E-Commerce COM (2003) 702 final . . . . . . . . 5.56, 7.66, 8.10 Application of the Timeshare Directive (‘Timeshare Transposition Report’) SEC (1999) 1795 final . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.01ff Attachment of Bank Accounts SEC (2006) 1341. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.76 st
Borras Report (Matrimonial Jurisdiction) [1998] OJ C221 27 . . . . . . . . . . . . . . . . . . . . . 4.06 Bowman v Fels Guidance (London, Law Society, 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.62 Case-law Concerning Unfair Contractual Terms (CLAB, ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.47 Code of Conduct on Pre-contractual Information for Home Loans (CML website 2005, revised 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.14 Commission Communication on Competition in Professional Services COM (2004) 83 final . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.07 Commission Communication see substantive topic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commission Staff WP on Family Law COM (2005) 82 final . . . . . . . . . . . . . . . . . . . . . 11.02 Committee of the European Parliament on Legal Affairs Report A5-0384/2001 (Contract Law) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.58 Common Classification of Territorial Units for Statistics ‘NUTS’ COM (2001) 83 final [2001] OJ C180E 108 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.28 Common Frame of Reference, Second Progress Report COM (2007) 447 final . . . . . . . . 8.50 Communication see substantive topic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Competition in Professional Services, Commission Communication, COM (2004) 83 final;. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.09 Consumer Complaints in Respect of Distance Selling and Comparative Advertising COM (2000) 127 final . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.38 Contract Communication see European Contract Law and the Revision of the Acquis: The Way Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contract Law Green Paper COM (2001) 398 final [2001] OJ C 255 1 . . . . . . . . . . . . . . . 8.48 Cross-border Credit Transfer Report, COM/2002/0666 final . . . . . . . . . . . . . . . . . . . . . . . 7.30 Cruz, Real & Jenard Report (San Sebastian Convention) [1990] OJ C189 35 . . . . . . . . . 4.06
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Defining Home Reversions (HM Treasury, 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.35 Distance Contracts Commission Communication COM (2006) 514 final. . . . . . . . . . . . 6.33 Distance Marketing of FS COM Commission Communication (2006) 161 final . . . . . . 5.30 Distance Selling Complaints March 2000 COM (2000) 127 final. . . . . . . . . . . . . . . . . . . . 5.49 Doorstep Selling and Cold Calling (DTI 2004/1331) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.11 Dörner, H & Lagarde, P Comparative Law Study on the Rules governing Conflicts of Jurisdiction and Conflicts of Laws in Wills and Succession in the EU (Berlin, German Notary Institute, 2004, 3-931199-19-3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.07 Dumortier, J, et al The Legal & Market Aspects of Electronic Signatures (DG Information Society C 28-400, Leuven, Katholieke Universiteit, Leuven, 2006) . . . . . . . . . . . . . . . 8.01 E-Commerce Report see Application E-Commerce: Formal Requirements in Commercial Transactions (Law Commission, 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.03 Effect of Interest Rate Controls in Other Countries, The (DTI, 2004) . . . . . . . . . . . . . . . . . 9.24 Enlargement Strategy Progress Report, COM (2005) 561 final . . . . . . . . . . . . . . . . . . . . . 1.15 Eurobarometer 56 Public Opinion in the EU (2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.06 Eurobarometer 60.2 Financial Services (2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.02, 9.06 Eurobarometer 65 Public Opinion in the EU (2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.09 European Contract Law and the Revision of the Acquis, Second Working Document, (DT\623512EN.doc, 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.50 European Contract Law and the Revision of the Acquis: The Way Forward (‘the Contract Communication’) COM (2004) 651 final . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.48 European Neighbourhood Policy Strategy COM (2004) 373 final 8 . . . . . . . . . . . . . . . . . . 1.16 Exemption Clauses, Second Report (Law Commission 69, 1975) . . . . . . . . . . . . . . . . . . . 8.35 Extension of Civil Jurisdiction Regime to Denmark COM (2005) 145-2, 2005/0055/ CNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.06 Financial Services — Meeting Consumers’ Expectations Green Paper COM (96) 209 final . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.30 Financial Services Policy 2005–2010 (White Paper, Internal Market DG, December 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.70, 7.09 Future Status of the EU Charter (HL Paper 48, Session 2002–2003). . . . . . . . . . . . . . . . . 3.33 Giuliano Lagarde Report (Rome Convention) [1980] OJ C282 1 . . . . . . . . 3.02, 4.09, 10.01 Green Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Applicable Law and Jurisdiction in Divorce Matters (‘Rome III’) CP 18/05 . . . . . . . 11.01 Contract Law COM (2001) 398 final 2001 OJ C 255 1 . . . . . . . . . . . . . . . . . . . . . . . . . 8.48 Mortgage Credit in the EU COM (2005) 327 final . . . . . . . . . . . . Preface, 7.24, 7.27, 9.01 Review of the Consumer Acquis COM (2006) 744 final . . . . . . . . . . . . . . . . . . . . 5.90, 8.49 Succession and Wills SEC (2005) 270 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01 Handbook on Implementation of the Services Directive (EC, 2007) [2.1.2] at 14 1.71, 7.02 Harpum, C Electronic Conveyancing — A Draft Order (Lord Chancellor’s Department, 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.05
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Housing Statistics in the EU 2004 (National Board of House Building and Planning, Boverkot, 2005, 91-7147-865-5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.06 Implementation of the Directive on Unfair Terms COM (2000) 248 final . . . . . . . . . . . . . 8.34 Implementing the EU Directive on Unfair Commercial Practices (DTI, December 2005, URN 05/1815) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.02, 6.11 Implementing the Third ML Directive — a Consultation Paper (HM Treasury, 2006) . 7.34ff Implementing the Third ML Directive — Draft Money Laundering Regulations (HM Treasury, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.34 Implementing the Unfair Practices Directive (URN 06/2121, 2006).. . . . . . . . . . . . . 5.02, 6.06 Integration of EU Mortgage Credit Markets (Brussels, DG Internal Market, 2004) (‘Mortgage Credit Forum Group Report’) . . . . . . . . . . . . . . . . . . . . . . . . . 1.58, 7.24, 9.05 Intra-EU Investment Commission Communication [1997] OJ C220 15 . . . . . . . . . . . . . 1.44 Jenard Report (Brussels Convention) [1979] OJ C59 1 . . . . . . . . . . . . 1.73, 3.13, 4.01, 10.30 Jenard-Möller Report (Lugano Convention) [1990] OJ C189 57. . . . . . . . . . . . . . . . . . . 4.07 Land Registration for the Twenty-first Century: A Conveyancing Revolution (Law Commission 271, 2001) part XIII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.35 Lea, MJ, Welter, R & Dobel, A ‘Study on the Mortgage Credit in the EEA’ (EEA, Tender No XXIV/96/U6/21, DG XXIV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.09 Legal Nature of the EU Charter of FR in the EU Communication COM (2000) 644 final . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.33 London Economics Report: The Costs and Benefits of Integration of EU Mortgage Markets (Brussels, London Economics for DG Internal Market, 2005) . . . . . . . . . . . . . . 7.24, 9.01 Madelin, R A Common Frame of Reference for a More Coherent European Contract Law (DG Health & Consumer Protection, 2004) 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.48 Mercer Oliver Wyman Study Financial Integration of European Mortgage Markets (Brussels, European Mortgage Federation, 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.06 Milk Quotas Report SEC (2002) 789 final . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.83 Monitoring Report (Bulgarian and Romanian Accession) COM (2006) 214 final . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Preface 1.08, 1.09, 1.58 Monitoring the Uptake and Effectiveness of the Voluntary Code of Conduct on Pre-contractual Information for Home Loans (Hamburg, Institut für Finanzdinstieistungen, 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.17 Mortgage Credit Forum Group Report The Integration of EU Mortgage Credit Markets (Brussels, DG Internal Market, 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.58, 7.24, 9.05 Mortgage Credit in the EU Green Paper, COM (2005) 327 final . . . . Preface 1.58, 7.24, 9.01 Operation of the Directive Concerning Consumer Credit, Report, COM (95) 117 final . . 9.24 Our Countryside: The Future (London, Cm 4909, 2000) (‘Rural White Paper’) . . . . . . . 2.13 Payment Services in the Internal Market Proposal COM (2005) 603 final. . . . . . . . . . . . . 7.31 Private International Law: Choice of Law in Tort and Delict (Law Commission 193, 1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.30 Problem of Consumer Indebtedness, The (London, ORC Marco, 2001). . . . . . . . . . . . . . . 9.33
lxxxiv
Table of Reports
Regulating Home Reversion Plans (HM Treasury, 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . 5.35 Review of the Consumer Acquis Green Paper COM (2006) 744 final . . . . . . . . . . . . 5.90, 8.49 Review of the Timeshare Directive (EU Commission, 2006) see Timeshare Directive Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.01 Rights Brought Home (Cm 3782, 1997).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.19 Rome I Green Paper COM (2002) 654 final . . . . . . . . . . . . . . . . . . . . . . . . . . 3.02, 4.09, 10.01 Rural White Paper 2000 Our Countryside: The Future (London, Cm 4909, 2000) . . . . . 2.13 Schlosser Report (UK etc Accession to the Brussels Convention) [1979] OJ C59 71 . . 4.15, 7.21, 9.52, 10.23, 11.36 Schmid, CU Conveyancing Services Market, COMP/2006/D3/003, (Zentrum für Rechtspolitik, University of Bremen, 2007 forthcoming) . . . . . . . . . . . . . . . . . . 7.01, 7.03 Schumann Declaration May 9 1950 ‘Symbols of Europe’, . . . . . . . . . . . . . . . . . . . . . . . . . 3.20 Scottish Committee on Jurisdiction and Enforcement (Maxwell Report, HMSO, 1980) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10.57 Second Commission Report on Moneylaundering COM (2006) 72 . . . . . . . . . . . . . . . . . . 7.40 Segré, C Development of a European Capital Market (Brussels, EEC Commission, 1966). . . 9.29 State Aid Elements in Sales of Land and Buildings by Public Authorities Commission Communication [1997] OJ C209 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.56 Succession and Wills Green Paper SEC (2005) 270. . . . . . . . . . . . . . . . . . . . . . . . . . 4.36, 11.01 th
Timeshare and Long-term Holiday Products Proposal, Explanatory Memorandum and Impact Assessment COM (2007) 303 final . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01 Timeshare Consultation CCP 007/02 DTA (DTI, 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08 Timeshare Consultation Responses (Health & Consumer Protection Directorate website) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.01 Timeshare Directive Review (EU Commission, 2006) see Review . . . . . . . . . . . . . . . . . . . . . . Timeshare Sales Improving the Protection of Consumers Summary of Responses to Consultation (Department of Trade and Industry, 2002). . . . . . . . . . . . . . . . . . . . . . . 6.08 Timeshare Transposition Report Application of the Timeshare Directive SEC (1999) 1795 final . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.01 Tourism and the Internet in the EU (Eurostat 20/2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.56 Towards the National Spatial Address Infrastructure (ODPM, 2005) . . . . . . . . . . . . . . . . 7.28 Translation in the Commission (DG for Translation, MEMO/06/173) . . . . . . . . . . . . Preface Ukraine Action Plan EU-UA-1051/05. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.14 Unfair Terms in Contracts and Unfair Contract Terms Draft Bill (Law Commission 292, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.08, 8.24 Unfair Terms in Tenancy Agreements (London, OFT, 2005). . . . . . . . . . . . . . . . . . . . . . . . 8.35 Updating and Simplifying the Community Acquis Commission Communication COM (2003) 71 [2002] OJ C137 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.50 VAT Notice 742 Land and Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.62 VAT Notice 742A Option to Tax Land and Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.64
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Virgos, M & Schmidt, E Report on the Convention on Insolvency Proceedings (EC) 6500/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.51, 9.53, 9.55, 9.68 Von Bar, C & Drobnig, U Study on Property Law and Non-Contractual Liability Law as it Related to Contract Law (DG Health & Consumer Protection, SANCO B5-1000/02/00574) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.10, 9.30, 11.35 Western Balkans on the Road to the EU COM 2006 27 final. . . . . . . . . . . . . . . . . . . . . . . . 1.13 White Paper Financial Services Policy 2005–2010 (Internal Market DG, December 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.09
LA N D A S A EUR O PEA N CO MMO DI TY
1 Land as a European Commodity Market Culture. Capital Club; Ouside the Capital Club; Other Europes. Cross-border Transactions. Capital Freedom: Land as Capital; Land Transactions Nomenclaturised. Movement of Landowners: Factors Generating Movement of Buyers; Business Rights to Buy Land; Workers; Self-supporters. Market Elements.
MA R KET CULTUR E
Market Culture 1
Ont- and other ologies
[1.01] Many legal commentators admire Craig Raine’s A Martian Sends a Postcard Home in which the visitor of the title observes our world without any comprehension, causing him to misconstrue familiar phenomena such as books, weather, cars and watches. When we sleep we are not in fact watching television in colour, but dreaming about a holiday home on the Med.1 So when he, this Martian — but it would be just the same for a Venusian — gets hold of the wrong end of the stick it is because he, or she or it, lacks the common knowledge necessary for an understanding of how we interpret these things. There is a serious risk that a Bulgarian seller and an English buyer may approach each other as extra-terrestrials, each with their own separate assumptions and unable to guess what the other is thinking. Buyers and sellers of land need common ideas about the way the world is to remove the need for constant renegotiation. Ontology is our knowledge of the essence of objects, activities and actions, in particular something about the constitution, function, form or origin of an entity. Duina and Breznam2 stress the importance in market building of common 1 From a volume of the same title (Oxford, OUP, 1979, 0-19-211896-X); H Peto & C Stoakes ‘A Martian Sends a Postcard Home’ (1998) 18 Litigation 2–9, an unkind take on the legal aid reforms; it is a shame that Raine has not applied the same technique to give us a picture of life within the colleges of his home city, Oxford. 2 F Duina & N Breznam ‘Constructing Common Cultures: the Ontological and Normative Dimensions of Law in the EU and Mercasur’ (2002) 8 ELJ 574–595; J Basedow ‘A Common Contract Law for the Common Market’ (1996) 33 CMLR 1169–1195, 1180; G Alpa ‘European Commission Resolution and Codification of Private Law’ (2000) 8 ERPL 321–334, 327 (can be constructed by mimicking economic laws).
2
Land as a European Commodity
ideas about what is being exchanged and a shared perception of what are properly treated as commodities. Creation of an internal market in European land requires an articulation of a pre-existent supranational market culture or else, since ontological notions can be created by market actors, the development of common ideas as the market forms and grows. Methods of land-holding permitted by a legal system reflect the attitudes of the landowners and society so it helps when buying or selling in a market to know where the other party is coming from. Deontic or normative notions are also needed to guide a legal system about conceptions of desirability using common concepts, shared principles and value judgments, and a legal regime carries the risk of failure if it lacks moral authority. In terms of the theory of the method of law Van Gerven has concluded that it is epistemologically feasible to build a European private law,3 and this can only be because Europeans already share a sufficient commonality of moral purpose. So normative matters can wait while this first chapter conducts a search for the basic building blocks of a European market in land. Already it seems superfluous to ask whether there exists a European market in land, the more relevant issues being the volume of cross-border transactions and the extent to which the market reveals homogeneity and a European identity distinct from its national components. This chapter then tries to settle on an agreement about what we mean by ‘Europe’, nails down the main pattern of transactions with land — capital movement and purchase by a consumer — and then identifies economic migrants and self-supporters as the main players in the market. These then are the themes of this first chapter.
2
Ownership and nesting
[1.02] One might, just, guess the identity of the two EU-25 states with the highest and lowest percentages of home ownership — Hungary and Germany — but who other than an expert would put Hungary highest and Germany lowest? Mass privatisations in eastern Europe have resulted in some 90 per cent of Hungarians becoming owner occupiers, a significant contrast with the plight of the poor old capitalist heartland of Germany, where only 42 per cent of Germans own their own homes.4 Of course, the comparison would have yielded quite different results before the lifting of the socialist yoke when east was east and west was west.5 Home ownership is also much more deeply entrenched around the shores of the Mediterranean than in the hard borrowing, Protestant, north, and somewhere in the middle is the EU-15 average of 64 per cent.
3 W Van Gerven ‘Codifying European Private Law? Yes If ’ (2002) 27 EL Rev 156–176, 161; on normative notions see W Van Gerven ‘The Future Meeting the Past?’ (2001) 9 ERPL 485–503, 494–495, 499. 4 F Earley ‘What Explains the Differences in Homeownership Rates in Europe?’ [2004] 09 Housing Finance International 25–30. 5 ‘And never the twain shall meet’: R Kipling The Ballad of East and West (1889).
Market Culture
3
Central and Eastern Europe has embraced market-based solutions, but from a base of standards of living far below those in the West. If owner occupation now predominates, the living accommodation is small6 and high rise.7 Further, there is inadequate investment in construction, house building is low even by UK standards, and there is an urgent need for structural funding.8 Only a smug minority of 15 per cent of Western Europeans respond in a positive way to financial matters, looking on their money benignly, the same percentage that attaches financial priority to buying a house,9 while far more (65 per cent) struggle simply to cover the bills. Buying a house is big in the UK (22 per cent), and also in Italy and Spain, but has a curiously low priority in Scandinavian countries. The urge to nest declines as one gets older, when those who will buy have done so, and there is a strong correlation to standards of education. No doubt it is a general aspiration but financial imperatives also respond to cultural, economic and legal diversity and in particular to patchy national markets.10
3
Market rises
[1.03] Much of our wealth is in homes, the collective weight of which dwarfs the value of British business, a legacy of crazy inflation of house prices, one league which we can expect to win comfortably most years. So strong has the pressure been that the Royal Institution of Chartered Surveyors described the market as ‘faltering’ in 2005 when prices rose by no more than 11 per cent.11 France, Spain and Ireland have also briefly experienced double digit inflation in house prices, but most of Western Europe is divided between a middle tier running at around 5 per cent 12 and a lower tier with inflation in the 0–2 per cent band.13 Mathematical certainty of stable land values is a lost world.14 Over time the highest rises have occurred in Ireland, the Netherlands, EU-15 84 sq m living space; eastern accession states 58 sq m. In the UK 2.4% of households live in high rise as against 15% in EU-15 and 35% in the eastern accession states, a figure even higher in Poland: Housing Statistics in the EU 2004 (National Board of House Building and Planning, Boverkot, 2005, 91-7147-865-5) Table [2.5]. 8 M Ball European Housing Market Review 2005 (London, RICS, 2005) ch 3; M Ball European Housing Market Review 2006 (London, RICS, 2006); M Ball ‘Restructuring Housing Provision and Central and Eastern Europe’ ch 5 in Markets and Institutions in Real Estate and Construction (Oxford, Blackwells, 2006, 978-1-405-11099-0); J Palacin & RC Shelburne ‘Private Housing Market in Eastern Europe and the CIS’ (UNECE, Discussion Paper 6, 2005) 37–38 (significant growth will improve fiscal situation). 9 Financial Services (Eurobarometer, 2004) 60.2 [1.1], [1.3] (figures for EU-15). It may be as well that Eurobarometer is yet to test the water on European Land Law. 10 Eurobarometer 60.2 [1.2.4]; Quarterly Statistics (European Mortgage Federation, ). 11 Market Review 2005 (n 8 above) 5; Market Review 2006 (n 8 above) 2–4; by 2005 this had dropped to 4% and the torch had passed to Estonia (28%), Denmark (22%) and Spain (15%). 12 Belgium, Sweden, Finland, Italy and Denmark. 13 The Netherlands, Switzerland, Germany, and Austria; Greece was the one EU-15 state where prices fell in 2004; the next year prices were static in Austria and falling in Germany. 14 C-222/97 Trümmer’s Application [1999] ECR 1661 ECJ, AG[15] Pergola. 6 7
4
Land as a European Commodity
Spain and the United Kingdom, but it is unclear why differential growth is manifested.15 Into this heady mix one must add the two island economies of Cyprus and Malta in 2004, eight states of central Europe in 2004 followed by Romania and Bulgaria in 2007, the last ten mentioned recently emerged from post-Socialist transitions and exposed to a forcible alignment with western land regimes, which is causing explosive growth stimulated by western capital.16 Hence in the most recent year prices in the Latvian capital Riga grew by 39 per cent, more than anywhere else in Europe, with a pre-accession Bulgaria flying on 19 per cent.17 It is unclear whether price rises can be sustained and if not whether European markets are in for a sharp correction. English readers scarcely need reminding of the unique environment that they inhabit. It is quintessentially English to be obsessed with estate agents’ windows and private home ownership.18 We are used to chains, the property ladder, stock turnover of 7% a year and moving every few years.19 Much of our wealth is in homes, the collective weight of which dwarfs the value of business. We British brought to the Maastricht table the most sophisticated property market in the EC, rivalled only by Ireland, the Netherlands and Denmark and, as Erdmans reported: no other property market in the EC can compare in terms of liquidity, institutional involvement, transparency and ease of trading.20
A subsequent chapter will demonstrate how old-fashioned many European markets look to English eyes, and the pressure building for some standardisation of conveyancing systems.21 An internal market effects a gradual equalisation and standardisation across an area in which foreign capital is spread around to create equality of yield but the signs of convergence are low, even within the Eurozone. A larger trading block leads to greater wealth but only at the price of profound social consequences. Brits will need to emigrate to the continent to afford a home, Bulgarians will need to make way for them along the Black Sea coast, and title deeds will be reshuffled all over Europe on a giant Monopoly board. This book describes the
15 Housing Review 2006 (n 8 above) 9–13; M Ball ‘House Price Cycles’ ch 3 in Markets and Institutions (n 8 above). 16 The Costs and Benefits of Integration of EU Mortgage Markets (Brussels and London, Economics for DG Internal Market, 2005) [A2]; Salans ‘European Accession and Beyond in Central Europe’ (2004) 40 European Lawyer 59–61; M Babin & C Rose ‘From Privatisation to Private Equity’ (2004) 37 European Lawyer 32–33; M Lea ‘Housing Finance in the Accession States’ (2004) 135 Mortgage Finance Gazette 36–38. 17 Knight Frank Guardian November 21st 2006; Market Review 2006 (n 8 above) 2 found Estonia to be on top at 28%. 18 J Paxman The English (London, Michael Joseph, 1998, 0-718-14263-2) 120–123. 19 Compared to a mere 1–2% in Scandinavia. 20 Edward Erdman Property (London, WH Allen, Mercury, 1990); HW Wilkinson ‘Towards 1992: the European Property Market’ [1990] Conveyancer 409–412. 21 See below [7.01ff].
Capital Club
5
framework under which those profound changes will occur, while standing aloof from judgment.
CA PI TA L CLUB
Capital Club 1
The internal market in capital
[1.04] A fundamental tenet of the European Community after implementation of the Maastricht reforms in 1994 is that there is an internal market in which all participants are free to acquire land, that freedom extending across an European Economic Area of 30 states consisting of EU-27 plus EEA-3.22 Market players are free to move capital across that internal market and one of the major uses of that freedom has been to buy land. A subsequent chapter describes the extent of this freedom and the possibility of retaining national controls.23 There can be no doubting the power of the beast unleashed at Maastricht. Its effect was to create a European land law.24 Free movement of capital is not unconstrained. All states attempt to limit market freedoms and those rules which survive European testing for justification may continue to operate in the internal market and other states enjoy transitional protections against outside buyers of second homes and agricultural land.25
2
The Maastricht Capital Club (EU-12)
[1.05] In its treatment of capital, Europe has come to display an uncommon geometrical unity26 applying across a current market of 30 states, consisting of EU-27 plus EEA-3. That is a static snapshot and what is needed is a dynamic view because land transactions often fall for scrutiny many years after they are concluded and the best investment opportunities and strongest new markets are opened up by accession so account must be taken of periods for adaptations. It is convenient to start tracing the evolution of the Community at the time that the Maastricht realignment opened up the internal market in capital across the Community. The European club had originally been formed by the six countries which signed the Treaty of Rome in 1957 — France,27 Italy and West Germany with the See below [1.07]. See below [ch 2]. 24 See below [1.29ff]. 25 See below [2.19ff], [2.28ff]. 26 JA Usher The Law of Money and Financial Services in the EC (Oxford, OUP, 2nd edn, 2000, 978-0-198-29877-9) ch 9. 27 Also French overseas territories which are départements of the French Republic. 22 23
6
Land as a European Commodity
three Benelux countries, Belgium, Luxembourg and the Netherlands. The United Kingdom finally overcame the French ‘non’ in 1973,28 an expansion which also brought in the Euro enthusiasts of Ireland29 and a second recalcitrant partner in Denmark,30 a sign of things to come being the Danish insistence on maintaining existing controls on second homes.31 Norway stayed out after a referendum.32 Greece joined in 1981 and Spain and Portugal were added in 1986.33 This last accession brought to the fore the awkward situation of Gibraltar, seized by force and later ceded to Britain by the Treaty of Utrecht 1713, a usurpation never accepted in Spain. United Kingdom jurisdiction has consistently and understandably been challenged in Spain, for example in relation to the extension of the conflicts club to Gibraltar.34 It was Nelson’s base just before Trafalgar and Gibraltarians are staunch supporters of a continuing British link, at least as long as the Barbary apes remain. A recent thaw in relations has allowed the border to be opened more freely, enabling the airport to operate as a tourist portal and a means of servicing the hinterland in Spain.35 Reunification of Germany in 1990 following demolition of the Berlin wall brought in the Länder36 of eastern Germany, the former German Democratic Republic. The east had to sign up to western law which had long since removed all restrictions on the land market, so there was nothing to stop western money flooding in to buy up prime real estate and nothing to encourage money into the ghettos where social investment was most needed. Around €1.5 trillion has flowed east37 but social divisions persist, driven by high unemployment and little new job creation.38 A fifth of bingo-playing Britons define the fall of the Berlin Wall as the most significant moment in all history39 but a quarter of West Germans (the Wessis) and an eight of East Germans (the Ossis) would like the wall back. This then was the EU-12 between whom capital movement was liberalised. Land purchase across national boundaries within that western core has, since the
28 European Communities Act 1972, c 68. This included the sovereign base areas of the UK in Cyprus but not the Channel Islands. 29 Support for the EU in 2006 ran at 77% compared to 42% in Britain and 55% in EU—25: Eurobarometer 65 [2.2]. 30 Excluding the Faroes and, since 1985, Greenland: JA Jensen ‘Greenland and the Faroe Islands within the Danish Realm’ (2003) 9 European Public Law 170–178. 31 Treaty on EU Protocol 1 [1992] OJ C191 68; see below [2.19]. 32 It is now part of the EEA; see below [1.07]. 33 Including in the Atlantic the Azores, Madeira and the Canaries and also two tiny Spanish enclaves in northern Africa. 34 C-349/03 Commission EC v UK (Gibraltar Exemption from VAT) [2005] I ECR 7321 ECJ; C-145/04 Spain v UK (European Elections) [2007] 1 CMLR 3 @ 87 ECJ; see below [4.08]. 35 Guardian September 19th 2006. 36 Regions or states. 37 Guardian November 15th 2006. 38 Times September 21st 2004; Observer April 3rd 2005. 39 Independent April 20th 2005 ‘Statistic of the Day’ citing a National Bingo Game Association survey.
Capital Club
7
end of 1993, involved, and must be determined primarily as, a movement of capital.
3
Austria and the fifth expansion (EU-15)
[1.06] Austria, Sweden and Finland40 joined in 1995, giving a 15-member Western Europe. In our narrative of European land law the good Europeans of Sweden and Finland are bit players, like all goodies, but the Austrians are of central importance because their battle to retain controls on second home ownership in the Alps figures in so many of the cases. Land of Mozart, Sigmund Freud, and Arnie Schwarzenegger, the decision to accede was a surprise and half-hearted and the country has since proved deeply sceptical about the European project.41 Mountainous areas predominate, where land available for housing or development is at a premium and there is severe pressure from tourism and outsiders wanting to acquire second homes. A free-for-all risked destabilising the economic and ecological structure of these fragile mountain fringes. Second home acquisition was controlled in many rural parts of Austria and this control was tested for EU compatibility and found wanting in Konle.42 Without the Austrian legislators European land law would be poor in case law indeed. These three countries had formed part of the European Economic Area in the brief period between its coming into existence in 1994 and their defection to the EU in 1995.43 EEA states participate in the internal market and the four fundamental freedoms as well as some collateral aspects of the Community. At the time that Austria was a party, the EEA Agreement reflected the Third Capital Directive,44 then the cutting edge of analysis and exposition but which has proved to be a half-way stop on the way to full liberation of capital. At that intermediate stage, controls over second homes were allowed to continue and several important capital freedom cases litigated by Austria have involved this interim period.45 Contemporaneous with these developments the pre-Accession Agreements were being implemented by Austria and its two companion states with a gradual move to full EU rules.
4
European Economic Area (EEA-3)
[1.07] The European Economic Area enables the rump of the European Free Trade Association to participate in the internal market. Three of the original 40 Land purchase is controlled in Finland generally and particularly in the Åland Islands, see below [2.20]. 41 Support for EU-25 in Austria ran at 34% in 2006: Eurobarometer 65 [2.2]. 42 C-302/97 Konle v Austria [1999] I ECR 3099 ECJ; see below [1.33], [2.15ff]. 43 For remaining states see below [1.07]. 44 See below [1.28]. 45 Eg C-452/01 Ospelt [2003] 1 ECR 9743 ECJ, J[31–36].
8
Land as a European Commodity
seven — Austria, Finland and Sweden — left to join the EU within a year, and Switzerland stayed out altogether after rejection of the negotiated terms in a referendum.46 This leaves an EEA-3 consisting of Norway,47 Iceland and Liechtenstein,48 the last a principality sandwiched between Switzerland and Austria so small that the Berne to Vienna express whistles through without stopping; after long being considered by the OECD to be ‘uncooperative’ in money laundering issues it has now been pulled into line.49 For those three states the Oporto Agreement50 had to be adjusted51 in order that it could come into force in 1994 and it has again required amendment in 2004 to reflect the eastwards expansion of the EU.52 EEA-3 states participate in the internal market as well as ‘flanking areas’ such as social policy, consumer protection, environment, company law, and statistics, areas which collectively include most of European land law and in which EC legislation is incorporated by decision of a Joint Committee. Excluded are all the contentious political and monetary aspects, notably the Common Agricultural Policy, fishing, customs union, justice and home affairs and monetary union. EU legislation may be extended to the EEA either in a pure form or adulterated by modifications or derogations, and the institutional structure is quite different: a dispute involving EEA facts will go to the EFTA Court whereas an EU-EEA case goes to the European Court of Justice.53 Foreign ownership of land has been liberalised to EU standards.54 Reluctance to agree to this was one of the factors motivating Swiss repudiation of the terms of entry. Free movement of capital applies to the EEA-30 under the terms of an annex to the EEA Agreement. When it was first negotiated the EEA Agreement55 followed the terms of the Third Capital Directive56 then the cutting edge of analysis and exposition, allowing capital to move across this area without nationality-based or residence-based discrimination, and freeing current payments, though with power to introduce temporary measures to overcome exchange rate difficulties57 and controls on second homes.58 Adjustment of the See below [2.51ff]. LM Bargen ‘Norway and EEA’ [1997] ECLYB xxiv–xxvii. 48 EEA-3 accounts collectively for 2% of world trade. 49 The current position can be found from the website of the Financial Action Task Force: . 50 Oporto Agreement on the EEA [1992] OJ L21 3 () in force January 1st 2004; F Webb ‘A Legal Still Life’ [1992] Yearbook of European Law 385–431. 51 Adjusting Protocol [1994] OJ L1 572. 52 EEA Enlargement Agreement [2004] OJ L130 3, in force May 1st 2004; further agreements dated respectively March 24th 2006 and August 10th 2006 reflect Bulgarian and Romanian accession. 53 Ospelt (n 45 above) J[27–31]; C-300/01 Salzmann [2003] 1 ECR 4899 ECJ, J[58], J[65]; C Bauddenbacker ‘The EFTA Court’ (2003) 28 EL Rev 880–899. 54 See below [ch 2]. 55 EEA Agreement (n 50 above) Annex XII. 56 Third Capital Directive, Directive 88/361/EEC for the implementation of EC §67 [1988] OJ L178 5, Annex 1; E-1/04 Fokus Bank v Norway [2004] November 23rd EFTA Ct, J[25]; Salzmann (n 53 above); see below [1.28]. 57 EEA Agreement (n 50 above) §§40–43. 58 These had been preserved in the original form: EEA Agreement (n 50 above) Annex XII, [1](e); Third Capital Directive (n 56 above) R[6–7], §6[4]; see below [2.08]. 46 47
Capital Club
9
Agreement during the protracted adoption process led to a restructuring to reflect the full EU capital freedom,59 freeing second homes, movements to and from third countries, and the case of serious turbulence in the domestic economy or external money markets.60 Capital freedom within EEA-3 is now the same as in EU-2761 and conferring rights directly on market players in the same way.62 Land markets within EEA-3 should no longer be compartmentalised on national lines.63 Transitional periods were allowed for the continuation of domestic EEA state legislation regulating ownership of capital investments by foreign nationals or non-residents, varying from state to state and from investment to investment. The most important category for our narrow focus is investments in ‘real estate’ situated on national territory, where the deadlines for complete freedom were the start of 1995 for Norway, 1996 for Iceland and 1999 for Liechtenstein.64 Controls were allowed which existed when the EEA Agreement came into force, but treatment less favourable than that benchmark was prohibited. These transitional periods have now been overtaken but retain relevance when assessing past transactions.
5
Central and Eastern Europe (EU-25 and EU-27)
[1.08] Europe is bounded by three clear and obvious borders — the Atlantic, the Arctic Ocean, and the Mediterranean — while the Ural mountains provide a clear and distant parameter to block off the eastern extremity. On a hillock some 15 kms north of the Lithuanian capital, Vilnius, at 54 degrees 54 minutes of latitude and 25 degrees 19 minutes of longitude, is a stone marking the heart of Europe. This may be limited as a day out, even in summer, though the visit may be improved by the planned sculpture park.65 Geography thus joins statistics on the list of disciplines accused of lying to us. The facts can be made to fit more comfortably with our preconceptions by eliminating Russia and the Caucasus which are unlikely ever to participate in the European project beyond UEFA football tournaments and the Eurovision Song Contest.66 This pulls the centre of Europe further south and west but still a long way from the EU corridors of
EEA Agreement as adjusted and amended (nn 50–52 above) §§40ff. EEA Agreement as adjusted and amended (nn 50–52 above) §43. 61 Fokus Bank (n 56 above) J[23]; E-10/04 Piazza v Schurte [2005] July 1st EFTA Ct, J[33]. 62 Fokus Bank (n 56 above) J[25]; Piazza (n 61 above) J[32]. 63 C-515/99 Reisch v Burger Meister Der Landeshauptstadt Salzburg [2002] I ECR 2157 ECJ, AG[46] Geelhoed. 64 EEA Agreement as adjusted and amended (nn 50–52 above) Annex XII; EEA Council Decision 1/95 allowed Liechtenstein the right to a review at the end of the transitional period. 65 Independent on Sunday December 24th 2000. 66 Azerbaijan, Armenia and Moldova though Georgia is a more likely long-term candidate; a partnership has been formed with each of these states. 59 60
10
Land as a European Commodity
power in Brussels,67 and this fact helps to focus our attention on the eastwards march of the Union. Winston Churchill was the first to observe publicly how an iron curtain was descending across the continent after the Second World War,68 and the Soviet bloc formed a barrier to eastwards development of the European vision. Around the time that the Community was transmogrifying itself into the European Union, the path to the east was opened by the collapse of Soviet power. Formal expression of the eastward-lookingness was given in May 2004 when ten new members were admitted, the biggest enlargement to date and probably for ever.69 Poland is the largest new entrant in economic terms, a core part of the old Warsaw Pact along with the Czech Republic,70 Slovakia, and Hungary, along with the post-Socialist Baltic republics of Estonia, Latvia and Lithuania; the 2004 expansion also brought in two Mediterranean islands — Malta71 and Cyprus72 — and the EU secured a tentative first toehold in the Balkans73 in Slovenia. These newcomers add, collectively, the economic clout of another Netherlands, but more tempting are 80 million new consumers and extra lebensraum amounting to 22% of the total land area, and all those cheap holiday homes. These are protected along with farmland and forestry from the full blast of capital freedom for a transitional period, as explained in a later chapter.74 Eastern leaders were so keen to join that they accepted second class terms and delayed access to western labour markets in the expectation of securing a ‘full envelope’ later.75 [1.09] Next in from the old Soviet bloc are Bulgaria and Romania, after a fraught accession process76 culminating in entry at the start of 200777 despite
67 The geographical heart of EU-25 seems to be very roughly around Frankfurt, and of EU-27 around Prague. 68 Winston Churchill address at Westminster College, Fulton, USA, March 5th 1946. In our happier times it is to be converted into a footpath, though completing it will involve a challenge of no less than four million one-metre paces: Independent September 14th 2005. 69 Accession Act of Malta, Cyprus and eight Eastern European states [2003] OJ L236 33; K Lenaerts & D Gerard ‘The Emperor is Getting Dressed’ (2004) 29 EL Rev 289–322, 289; SL Kaleda ‘Immediate Effect of Community Law in the New Member States’ (2004) 10 ELJ 102–122; K Inglis ‘The Union’s Fifth Accession Treaty’ (2004) 41 CML Rev 937–973. 70 O Humlova-Ueltzhoffer ‘Real Property Acquisition by Foreign Investors in the Czech Republic’ (2001) 26 ILP 2–3. 71 This merely reiterates what our Parliament had already enacted: ‘that the said Island of Malta and Dependencies thereof shall be deemed… to be Part of Europe for all Purposes [notwithstanding] any Law…, Usage or Custom… to the contrary’: An Act to Empower his Majesty to Regulate Trade and Commerce To and From the Isle of Malta 1801, 41 Geo III ch 103; see Att-Gen v M’Kenzie (1822) 11 Price 284, 302–303, 147 ER 474. 72 J Theodore & G Pantelides ‘EU Pre-accession Agreements and their Impact on the Cyprus Tourism Industry’ (2001) 29 International Business Law 204–206. 73 See below [1.12]. 74 See below [2.22ff]. 75 The 2007–2013 budget finds increased aid for eastern states within a reduced overall budget. 76 Monitoring Report COM (2006) 214 final [4.1.4] (capital provisions generally ready); Z Kühn ‘Application of EU law in Central European Candidate Countries’ (2003) 28 EL Rev 551–560. 77 Accession Act of Bulgaria and Romania [2005] OJ L157 11 Annex VI [3]; EU (Accessions) Act 2006 c 2 s 1.
Capital Club
11
Germany wariness about enlargement fatigue.78 These countries bring lots of land, smallish economies and average incomes well below the EU standard. Specific land law concerns in both countries are the implementation of a land parcel identification system to facilitate agricultural payments79 and enforcement of the legislative structures targeted at money laundering.80 Agreement to proceed with accession is grudging, Bulgaria being the worst prepared addition to date,81 and facing continuing and significant reform and the possibility that legal judgments will not be recognised because of concerns about corruption. In the property field there is a boom in building apartments close to the Black Sea, Bubble-like rises in values of 40% a year, and extreme volatility in exchange rates and inflation.82 Rentals in Sofia at £70 a square metre compare favourably to the £1K a square metre common in London,83 and many western property firms are in the process of investing. Substantial transition periods are to be allowed for adaptation of land law during which existing controls can be maintained against EU/EEA citizens on acquisition of agricultural lands, forests and forestry for seven years until the end of 2013, and second homes for five years until 2011.84 Romania is reportedly better prepared.85 The state has emerged from its communist phase86 and re-privatisation procedures with a private market in dwellings87 with clear methods of ownership and use. By European standards a high percentage of the workforce is employed in agriculture.88 Farming has high costs and low yields, and privatisation has led to excessive fragmentation calling for a programme of consolidation of holdings. A new law on private property rights for foreign citizens, homeless persons and foreign companies will be in force at the time of accession, though still requiring Romanian residence, and register and cadastre (that is, a geographical survey) are being developed. The Accession Treaty provides for capital movements to be liberalised in full.89 Substantial transition periods are to be allowed for adaptation of land law during which existing controls can be maintained against EU/EEA citizens on acquisition of agricultural lands, forests and forestry for seven years until the end of 2013, and second homes for five years until the end 2011.90 For one hundred Eurobarometer 65 [2.2] (45% support in EU-25); Guardian August 23rd 2006. Monitoring Report (n 76 above) [2.2], [3.3.2]. 80 Monitoring Report (n 76 above) [2.1], [3.3.1], Annex I [1.2] and [2.3.2] (Bulgaria), Annex I [4.1.4] (Romania still falling short on enforcement). 81 RL Slaidin et al ‘Enforcement in the New Europe’ (2004) 44 European Lawyer 42–45. 82 Independent March 23rd 2005. 83 Independent May 15th 2006; property law is reformed by the Land Ownership Law [2007] DV 24, [2007] 05 ECL [70]. 84 See below [2.22ff], [2.28ff]. 85 Monitoring Report (n 76 above) [4.1.4]. 86 Emergency legislation was needed to return property confiscated by the former communist regime after the Constitutional Court blocked an earlier form of the legislation: Independent July 9th 2005. 87 Monitoring Report (n 76 above) Annex II [2.1]. 88 Guardian September 27th 2006, 14. 89 Accession Act of Bulgaria and Romania (n 77 above) Annex VII [3]. 90 See below [2.26], [2.30]. 78 79
12
Land as a European Commodity
years Romanian land has been preserved for Romanians, with a direct prohibition on foreign ownership, though it never applied to buildings nor to ‘dismemberments’ such as usufructs, a basic prohibition which was copied out into the first post-Soviet era Constitution in 1991. Restriction of ownership to Romanian citizens was easily side-stepped by the vehicle of a Romanian company. A revised version of the Constitution91 will allow foreign citizens and stateless persons to own land, to buy, sell or inherit, but only on the basis of reciprocity; of course, that reciprocity will exist with EU states after accession, so the new ownership law will bite in 2007. Workers from both states face a delay of seven years before gaining full access to European labour markets.92
O UTSI DE THE CA PI TA L CLUB
Outside the Capital Club 1
Territorial unity
[1.10] Legal empires find it easy to achieve a general sense of unity, but it takes a long time to squeeze out enclaves, bring in exclaves, and achieve a uniformity approaching territorial integrity. The process is by no means complete in Europe.93 Within the United Kingdom the offshore islands retain a marginal status, half in but technically out of the EU, as does the Isle of Man.94
2
Switzerland
[1.11] Switzerland is a particularly important enclave of independence and prosperity in the heart of Europe, which loiters in the EFTA but outside the EU and EEA.95 It now participates in selected aspects of the internal market under bilateral agreements negotiated to cover seven areas, notably free movement of persons, via the mechanism of a Joint EU-Swiss Committee. In order to share continued access to the internal market Switzerland ought to be required to shoulder the responsibilities of membership. Opening of property markets is considered elsewhere.96 A desire to keep Switzerland pure in terms of property using the highly restrictive Lex Friedrich was one of the factors fuelling Swiss reluctance to take the plunge into Europe, though secondary to protection of 91 Romanian Constitution §44 as amended in 2003, described as a ‘succinct’ text: Salans (n 16 above) 59–61. 92 See below [1.82]. 93 HCW Lindahl ‘The EU’s Claim to Territorial Unity’ (2004) 29 EL Rev 461–484. 94 A Pearce ‘When is a Colony not a Colony?’ (2003) 32 Common Law World Review 368–398. 95 L Goetschel ‘Swiss Relations with the EU’ (2003) 8 European Foreign Affairs Review 313–330. 96 See below [2.52].
Outside the Capital Club
13
Swiss banking secrecy. The very strictest controls have been watered down, victims of the stagnation caused by excessive concern to control landownership, so under the Lex Koller freer — freer rather than free — access is now allowed to EU and EEA state nationals whilst an impenetrable barrier remains for non-Europeans. These matters are all described as a postscript to the chapter on controls.97
3
Reassembling the Balkans
[1.12] Slovenia provides a tentative EU foothold in the Balkans, but all of the remaining states are potential targets for EU expansion,98 beginning with stabilisation and association to secure the economic reforms which are a precondition for membership discussions. Top of the list are Croatia and the Former Yugoslav Republic of Macedonia. Progress is stalled not least by the need to secure new constitutional arrangements when the EU reaches 27.99 Croatia,100 apparently a new and more affordable version of Tuscany,101 has adopted reciprocal free trade and moved towards internal market freedoms including complete freedom to make current account payments and direct investments in companies, to liquidate and repatriate the proceeds of investments, and service provision by or to residents, as well as longer-term loans and credits. Portfolio investments and loans and credits of shorter maturity will be freed within four years. The acquisition of land in Croatia by EU nationals should be freed subject to some exceptions — presumably second homes and agricultural land — but after four years Croatians and other EU nationals must be treated equally.102 Full capital freedom is tempered by the possibility of new restrictions on the movement of capital and the scope for temporary measures to protect exchange rates and monetary policy, as well as the possibility of more favourable treatment by bilateral agreement, pending consultation and a review leading to full implementation.103 Permission is required to buy land at present and there is a substantial backlog of applications by EU nationals as well as slow progress on identification of agricultural land parcels.104 Accession is stalled by Croatian failure to co-operate with the International War Crimes Tribunal. Capital freedom has also been agreed with Macedonia, which now has candidate status. Current liberalisation of payments and capital is very similar to See below [2.51ff]. D Phinnemore ‘Stabilisation and Association Agreements: the Western Balkans’ (2003) 8 European Foreign Affairs Review 72–103. 99 Treaty on EU Protocol [2001] OJ C80 51 §4. The current aim is to reach agreement by the end of 2007! 100 Association Agreement with Croatia COM 2001 371 final [2005] OJ L26 3 59–61, in force February 1st 2005. 101 Guardian August 8th 2006. 102 Association with Croatia (n 100 above) Annex VII (review at the end of the fourth year). 103 Association with Croatia (n 100 above) §§60–61. 104 Council Decision 2006/145/EC [2006] OJ L55 30. 97 98
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Land as a European Commodity
Croatia though with a bar on new restrictions other than temporary measures to protect exchange rates and monetary policy. Internal market rules are to be implemented in full at the end of the first stage.105 [1.13] Further potential additions include Albania, Bosnia and Herzegovina, Serbia and Montenegro. These last two formed a single state after EU intervention106 but a subsequent referendum has caused Montenegro to break away, against EU wishes. The two new countries continue to argue about their place in the Eurovision Song Contest, surely a sacrifice our Government could make in the cause of European unity? Reunification of Yugoslavia within the EU remains a work in progress.107
4
Soviet republics
[1.14] Russia is an important friend and strategic partner but unlikely Union member,108 but four states remain in Eastern Europe that might join. Kaliningrad is a tiny Russian exclave on the Baltic coast sandwiched between Poland and Lithuania, safely out of sight of the Kremlin, where the black economy apparently accounts for 50% of gross domestic product and the state is said to be riddled with poverty, disease, pollution and crime. The EU looks on disapprovingly, unable to do anything beyond offer to buy out the Russian interest in this unwelcome neighbour. Ukraine109 and Georgia are currently neighbours and potential candidate countries — no doubt some years in the future, given the ennui that greets Romania and Bulgaria. Belarus is the outsider which, uniquely, remains aloof from the Council of Europe, a New Labour and new-look Conservative paradise in which the state disdains the need to observe the European Convention on Human Rights. Adherence to human rights principles is, however, an essential precondition for membership of the EU and nothing will happen there in advance of democratic elections.110 Asian states are not eligible for membership, though this certainly does not preclude limited partnership and friendship.111
105 Association Agreement with the FYR (Former Yugoslav Republic) of Macedonia [2004] OJ L84 13, §§59–60; candidate status was granted in December 2005. 106 N Tocc ‘EU Intervention in Ethnopolitical Conflicts: Serbia Montenegro’ (2004) 9 European Foreign Affairs Review 551–573. Again, progress is stalled by the issue of war criminals. 107 Western Balkans on the Road to the EU COM 2006 27 final. 108 A strategic partnership involving four common spaces was agreed at St Petersburg in May 2004, but there is no timetable for approximation of market regulations. 109 Ukraine Action Plan EU-UA-1051/05 [2.3.3] provides for direct investments and the repatriation of proceeds, with future consultation on a wider liberalisation of capital. Prices in Kiev are said to have risen six-fold in three years: Independent January 6th 2007. 110 Treaty on European Union §6 ex §F, §49 ex §O. 111 B Berdiyev ‘The EU and Former Soviet Central Asia: Partnership and Co-operation Agreements’ (2003) 22 Yearbook of European Law 463–481.
Outside the Capital Club
5
15
Turkey
[1.15] Turkey first applied for membership of the EEC in 1954, secured a form of Partnership as long ago as 1970, and was finally recognised as a candidate in 2004,112 at which time its Association Agreement was revised.113 Obstacles are French and German opposition, enlargement fatigue, human rights abuses, Turkish support for the unrecognised regime in northern Cyprus, and the refusal to open Turkish ports to Greek shipping and public hostility.114 The most that can be said is that there has been no ‘train crash’, that enlargement is not yet completely off.115 Existing Association arrangements116 have liberalised payments but not yet direct investments, and it is merely an aspiration to consider capital movement in an internal market. A reciprocity principle was established for purchases of land by foreigners in 2003, but registrations had to be suspended after this was annulled by the Constitutional Court in March 2005. Reform of foreign ownership laws have taken place in 2001 and 2005.117 The first of these opened up the possibility of foreign ownership, which had previously been barred, and the 2005 reforms have introduced freedom to citizens of states offering reciprocity to Turks. Over 50K homes are owned by foreigners, around a fifth of them in British hands. Foreigners are free to buy in any city, town, or village over 2K inhabitants, except in designated military zones,118 but rural property is restricted and there is an absolute limit of 30 hectares beyond which acquisition requires the consent of the Council of Ministers. Acquisition by foreign individuals or companies is subject to reciprocity except for residents of three years’ standing, stateless persons, and the acquisition of ancillary rights such as mortgages or servitudes. Eventual Turkish entry could create a free-for-all in property, a Mecca of easyJet destinations and cheap second homes close to the Mediterranean replete with cash-rich tourists.119 Is Turkey really, really sure that it wants to join?
6
The Mediterranean rim
[1.16] The Barcelona Process led to a partnership in 1995 with a number of states on the southern shores of the Mediterranean, mainly very poor, to which the EU is offering the prospect of short-term improvement in the investment Independent December 16th 2004. Accession Partnership with Turkey Council Decision 2006/35/EC [2006] OJ L22 34. 114 Eurobarometer 65 [2.2]. 115 Margaret Becket, Foreign Secretary, quoted in Independent December 12th 2006. 116 Association Agreement with Turkey [1973] OJ C113 6 §§19–20; Enlargement Strategy Progress Report, COM (2005) 561 final, 62–63; Council Decision 2006/35/EC Annex [3.1]. 117 Independent Property September 27th 2006, 15; Salans (n 16 above) 59–61. 118 Turks are prohibited from buying in first degree areas, foreigners also in second degree areas. 119 Times February 18th 2005. 112 113
16
Land as a European Commodity
climate and a longer-term stake in the internal market.120 Agreements are little more than an agreement to talk about capital liberalisation in the cases of Egypt, Jordan, Palestine, Tunisia and Morocco, and even looser than that in the case of the most powerful economy, Israel, as well as Algeria, Lebanon and Syria. Libya is currently an observer. A decision has recently been taken to downgrade the Middle East policy.121
O THER EUR O PES
Other Europes 1
EEA-30 movement club
[1.17] A right to buy land is of limited value without the right to move to occupy the land after it has been bought. Most people buying land abroad do so to make use of it as a home — or it might be a shop or a farm or an office — so capital value and investment need to be coupled with use value and rights of free movement.122 Europe is uncommonly unified in its geometry, with a basic movement club of EEA-30. Nationals from a home state within EEA-30 should be able to use land in a host state also within the EEA-30, though there is a requirement to be either economically active or self-sufficient and workers from eastern accession states will not receive full freedom until the end of a lengthy transition period.
2
Conflicts clubs
[1.18] Europe remains a mass of variant property laws kept in harmony by conflicts rules. These have two functions: to allocate the law to be applied to a particular matter and to allocate a disputed case to a particular forum for resolution. The site of the land is used to determine both law and forum for pure property matters, but this will not necessarily apply to contractual obligations. Further complexity is introduced because the rules are sectoral, with land, civil jursidiction, contract, trust, tort, family, succession and trusts, not to mention procedural aspects such as service, the enforcement of foreign judgments and insolvency. The geometry of Europe is simple in outline but complex in detail. 120 European Neighbourhood Policy Strategy COM (2004) 373 final 8, 16; Mediterranean Association Agreements and Actions Plans on the EC Commission website: ; G Harpaz ‘When East Meets West’ (2006) 43 CML Rev 993–1022; J Kelley ‘New Wine in Old Wineskins’ (2006) 44 Journal of Common Market Studies 29–55; R Dannreuther ‘European Neighbourhood Policy’ (2006) 11 European Foreign Affairs Review 183–201. 121 Guardian July 17th 2006. 122 Movement and Residence Directive 2004/38/EC (Movement and Residence by EU Citizens and their Family Members) [2004] OJ L229 35, R[2]; see below [1.54ff].
Other Europes
17
The basic conflicts club is EU-27, though some variants apply to EEA-3 states, and to a greater or lesser extent Denmark, the United Kingdom and Ireland opt out of particular parts of the community conflicts rules and Hague Conventions are used for some sectors not yet covered by European legislation.123
3
European Convention on Human Rights
[1.19] ‘Convention rights’ are those imposed continent-wide by the European Convention on Human Rights,124 which is supervised by the Council of Europe rather than the EU and which is administered judicially by the European Court of Human Rights whose seat is in Strasbourg. The Convention is observed by all European states other than Belarus and all citizens enjoy the right of individual petition to the court.125 However, many cases raise temporal issues and so it may be important to determine when a state acceded and when the right of individual petition was ceded. A substantive guarantee of property rights is provided by article 1 of the First Protocol to the Convention126 in three interlocking paragraphs which127 are, in order of application, rights to: 앫 freedom from arbitrary deprivation of possessions; 앫 freedom from unjustified controls on the use of property; and 앫 peaceful enjoyment of possessions. Three ancillary and procedural protections are also particularly important in property law: the article 6 guarantee of fair trial of claims to property rights and other civil claims, the article 8 right to respect for the home and for family life, and the article 14 freedom from discrimination in the exercise of Convention rights. None of these rights is absolute since interferences with the rights may be, and commonly are, justified in the wider public interest and the possibility of public interest justification is the usual human rights battleground. The Human Rights Act 1998128 ‘brought home’129 rights so that they became enforceable in the UK courts. This aligns our domestic law with the constitutional arrangements in most continental countries. This book does not attempt to replicate the existing excellent accounts130 but confines itself to a brief consideration of the extent to which fundamental property See below [ch 4] (actions), [ch 10] (contracts), [ch 11] (family). Convention for the Protection of Human Rights and Fundamental Freedoms (Rome, 1950, CETS 5); a table of ratifications (every European state except Belarus) is available on the Council of Europe website . 125 E Conv HR (n 124 above) §46; the CoE website (n 124 above) has a table of national declarations. 126 E Conv HR Protocol 1 (Paris, 1952, CETS 9) §1; the table of ratifications (CoE website n 124 above) excludes Andorra, Monaco and Switzerland as well as Belarus. 127 HR 10522/83 Mellacher v Austria (1990) 12 EHRR 391 E Ct HR 408, now a Strasbourg cliché. 128 Human Rights Act 1988, c 42, in force October 2nd 2000 but prospective only in civil matters. 129 Rights Brought Home (Cm 3782, 1997). 130 D Rook Property Law and Human Rights (Oxford, Blackstones, 2001, 978-1-84174-154-3); AR Çoban Protection of Property Rights and Human Rights (Aldershot, Ashgate, 2004, 0-7546-2387-4). 123 124
18
Land as a European Commodity
rights are part of the European legal system via case law of the European Court of Justice and the promulgation of the European Charter of Fundamental Rights.131
CR O SS-B O R DER TR A N SACTI O N S
Cross-border Transactions 1
Internal matters
[1.20] European law has no impact on the internal affairs of nation states, including the rules laid down by member states for property ownership by its own nationals.132 It is only when a national boundary is crossed that European rights are in play.133 The market is ‘internal’ to the EU, not to constituent parts, so an Irish landholding company cannot claim a European-derived right to set up business in Ireland.134 How should we transfer these platitudes to the specific context of land? Essentially, if land is sited in Austria (state A) a transaction between people from Austria is internal,135 as is the case of Finns fishing in Finnish waters,136 but it becomes a European matter when one or more of the parties is a national of, or is resident in, Belgium, or any other state B from among the EEA-30 states. Suppose it is a cottage in the Dordogne, part of that golden strip of south western France which Henry II received as a dowry when he married Eleanor of Aquitaine, a land of contentment long since reclaimed by France. If the cottage is sold by one local to another the matter is French, and so it is in the more likely situation in which it is sold to a Parisian as a holiday home. Regulation of French land owned by its citizens and paid for with French funds is a matter for the French state. That these run of the mill cases are archetypically national shows how peripheral and tangential is the future Europeanisation of property law.
2
Cross-border land transactions
[1.21] Land is inherently different from goods as an object of European property law because, as two Brights have observed:
EU Charter of Fundamental Rights [2000] OJ C364 1, §17[1]; see below [3.33]. Phull v Secretary of State for Home Department [1996] Imm AR 72 CA, 75–77 Leggatt LJ. 133 NN Shuibhne ‘The Wholly Internal Rule’ (2002) 39 CML Rev 731–771; C Ritter ‘Purely Internal Situations’ (2006) 31 EL Rev 690–710. 134 Case 182/83 Robert Fearon & Co v Irish Land Commission [1984] ECR 3677 ECJ, AG[8] Darmon; C-478/98 Commission EC v Belgium (Eurobonds) [2000] I ECR 7587 ECJ, AG[26] Jacobs, J[16–17]. 135 See below [1.23]. 136 C-97/98 Jägersköld v Gustafsson [1999] I ECR 7319 ECJ, J[49]; A Biondi ‘In and Out of the Internal Market’ [1999–2000] 19 Yearbook of European Law 469–491. 131 132
Cross-border Transactions
19
land is immoveable and consequently not something that itself requires marketopening measures to allow cross border trade.137
An internal market in cars calls for the lifting of customs barriers and elimination of quotas, so that cars can be imported physically in order to be sold in competition with home grown production. Market players must move to the site of the land. The concern is to ensure that a foreign national who wants to lease a shop in Paris can do so on the same terms as a local Parisian, that the market on the Costa del Sol is open to Balts (from Latvia, Lithuania or Estonia) on the same terms as Spaniards. It is necessary to open up capital markets to allow the means of payment for a purchase to be brought to the country where the price is to be paid,138 and steps are also needed to ensure that the market is non-discriminatory and to eliminate unnecessary restrictions on purchase. How different then if our cottage in the Dordogne is sold to an English couple, a not unlikely outcome when one considers that the people complaining about Anglo-Saxon emigration to the Dordogne are the Brits who have already arrived and not the French who long since sold out. Then European law is engaged by crossing a national boundary, the key to Community competence, and the precise cross-border element needs to be isolated to ascertain the width of EU competence. Divergence of nationality is clearly sufficient139 and the pattern in most reported cases is of land in state A sold by a national of A to a national of state B resident in B.140 State A must not discriminate against foreign nationals.141 Divergence of residence is equally clearly sufficient as a Europeanising factor,142 a point demonstrated most potently by loans between companies in different EU states.143 It also includes a non-resident national returning to buy land back home144: a Brit living in Paris investing in a house back in London or a Dutch national resident in Belgium transferring legal title to investment land in the Netherlands.145 A national may be caught by the laws of his own state and
137 C Bright & S Bright ‘Europe, the Nation State and Land’ ch 14 in S Bright & J Dewar Modern Studies in Property Law (Oxford, OUP, 1998, 0-19-876455-3) 356. 138 C-423/98 Re Albore [2000] I ECR 5965 ECJ, AG[9–10] Cosmas. 139 Robert Fearon (n 134 above) AG[6] Darmon; L Gormley ‘Owning Land in the Emerald Island’ (1985) 10 EL Rev 47–48. 140 Konle (n 42 above); C-355/97 Beck’s Application [1999] I ECR 4977 ECJ; Case 305/87 Commission EC v Greece (Border Regions) [1989] ECR 1461 ECJ; Trümmer (n 14 above); C-464/98 West Deutsche Landesbank Girozentrale v Stefan [2001] I ECR 173 ECJ; Albore (n 138 above). This excludes the internal cases Reisch (n 63 above) and Salzmann (n 53 above), discussed below [1.24]. 141 See below [2.38]. 142 Treaty of Rome §67 talked of residence but the reshaped EC §56 talks of movements of capital between EU states; Trümmer (n 14 above) AG[10] Pergola. 143 C-439/97 Sandoz v Finanzlanderdirecktion für Wien [1999] I ECR 7041 ECJ, J[31–38], AG[9] Léger; see also below [2.39]. 144 Albore (n 138 above) AG[39] Cosmas. 145 C-364/01 Barbier’s Heirs v Inspecteur van de Belastingdienst Particulieren [2003] I ECR 15013 ECJ.
20
Land as a European Commodity
can pray European law in his aid.146 Some cases may depend upon how the transaction is analysed but emigration and immigration in their nature are border-crossing activities.147 It remains to be seen whether the source of funds, the currency used,148 or the place of execution of the transfer149 is a sufficient cross-border element.
3
Attacks on internality
[1.23] Our fantasy cottage and hectarage in the Dordogne shows that French land transferred between French people using French-sourced funds is dealt with by national law and EU law is held at bay. Two qualifications illustrated by Reisch may enable the EU dogs to snap back. Consideration of internal cases may take place in the European Court of Justice under a peculiarity of jurisdiction150 which allows a domestic court to refer an issue for decision in Luxembourg. Since the European Court decides issues of law without investigating the facts it is not until the case is sent back to the referring court that it becomes apparent that the reference was a waste of time and money. This labyrinthine procedure makes it possible in a case of slack pleading for a European adjudication upon a case which is internal in character since the European remit covers any case where there is a mere possibility of facts that would raise a legitimate issue. Thus in Reisch151 an Austrian wanted to buy a second home in Salzburg, and the decision invalidated legislation to the prejudice of the internal party (Reisch) not on his account but because of a hypothetical Swede or Greek who might be hindered by the existence of the legislation.152 This is not an isolated lapse since Salzmann involved an internal squabble concerning a plot at Fuâach in the Austrian canton of Vorarlberg sold by an Austrian man Schneider to an Austrian woman Salzmann.153 [1.24] Reverse discrimination allows EU principles to be internalised. It occurs where a non-national (B) has a particular right in EU law superior to the right applied internally to a national A. Party A can now use domestic 146 Case 115/78 Knoors v Secretary of State for Economic Affairs [1979] ECR 399 ECJ; C-61/89 Re Bouchoucha [1990] I ECR 3551 ECJ; C-19/92 Kraus v Land Baden-Württemberg [1993] I ECR 1663 ECJ; C-419/92 Scholz v Opera Universitaria di Cagliari [1994] I ECR 505 ECJ; C-107/94 Asscher v Staatssecretaris van Financien [1996] I ECR 3089 ECJ. 147 See below [1.52]. 148 Trümmer (n 14 above) J[18–19], J[25–26], J[34]. 149 Sandoz (n 143 above) AG[12–13] Léger. 150 C-134/95 Unito Socio-Sanitaria Locale 4 v di Biela [1997] I ECR 195 ECJ, J[19]. 151 Reisch (n 63 above) AG[88] Geelhoed; C-6/01 Anomar v Portugal [2003] I ECR 8621 ECJ; C-98/01 Commission EC v UK (Golden Share) [2003] I ECR 4581 ECJ, J[41–43]; Greek Border Regions (n 140 above); L Flynn ‘Coming of Age’ (2002) 39 CML Rev 773–805, 784; Biondi (n 136 above) 483ff. 152 Reisch (n 63 above) AG[102] Geelhoed, J[25]; C-363/93 Lancry [1994] I ECR 3957 ECJ, J[29]. 153 Salzmann (n 53 above) J[23], J[28–36]; Konle (n 42 above) J[33]; C-281/98 Angonese v Cassa di Risparnio di Bolzano [2000] I ECR 4139 ECJ, J[18].
Cross-border Transactions
21
non-discrimination rules to insist that he is treated as well as the offcomed-un154 B, litigating not in Luxembourg but in the domestic courts, nationals gaining in this way a domestic right to invoke EU law. In Reisch155 restrictions on second homes in Austria breached European law, but Reisch’s personal position was left to the Austrian courts where he would be able to take advantage of Austrian reverse discrimination principles. Few states will wish to legislate more harshly for their own citizens than for European outsiders, so the rule against European involvement in internal matters is a time-wasting fatuity. A guarantee should be provided against reverse discrimination156 which would expunge the cross-border requirement for internal market transactions, to the general benefit.
4
Movements from inside to outside the EU
[1.25] Capital is free to move ‘between member states and third countries’157 and payments to third countries should be without restriction.158 Transfers to non-EU states are treated generously,159 and third-country nationals can enforce capital freedom with direct effect,160 but they are still treated less favourably than EC nationals. Sanz de Lera161 was stopped by French police when he was driving from his home in Spain to Switzerland, the car stuffed full of almost 20 million pesetas in notes which he was going to deposit at his bank in Geneva. Spanish law required prior authorisation before the export of notes of this quantity, but that proved to be irreconcilable with his right to move capital, including banknotes, from Spain (an EU state) to Switzerland (a non-EU state). Some restrictions were allowed on direct investment, but the moving of money as notes was not an investment in this sense and was unrestricted.162 However, movements to non-EU members are less secure than when both payer and recipient are within the Union since the Treaty framework imposes some limitations.163 Restrictions can continue if they existed under national or
154 The author reveals his Yorkshire ancestry (never before acknowledged in public); spelling from . 155 Reisch (n 63 above) AG[114–115] Geelhoed; RCA White Workers, Establishment and Services in the EU (Oxford, OUP, 2004, 0-19-826776-2) 42–46. 156 C-448/98 Criminal Proceedings v Guimont [2000] I ECR 10663 ECJ; C-297/88 Dzodzi v Belgium [1990] I ECR 3763 ECJ; Ritter (n 133 above). 157 EC §56[1] ex §73b[1]; Flynn (n 151 above) 785 ff; C Peters & J Gooijer ‘Capital and Third Countries’ (2005) 45 European Taxation 475–481; Usher (n 26 above) 231–238. 158 EC §56[2] ex §73b[2]. 159 Trümmer (n 14 above) AG[9] Pergola. 160 C-163/94 Sanz de Lera v Spain [1995] I ECR 4821 ECJ, J[44–45]. 161 Sanz de Lera (n 160 above); S Mohamed ‘Recent Case Law in the Field of Free Movement of Capital’ (2001) 3 Journal of International Banking Regulation 178–191; C-358/93 Ministerio Fiscal Spain v Bordessa [1995] I ECR 361 ECJ, J[23ff]; C-484/93 Svensson [1995] I ECR 3955 ECJ. 162 Sanz de Lera (n 160 above) AG[12–18] Tesauro. 163 EC §§56–60 ex §§73b–73g.
22
Land as a European Commodity
community law at the end of 1993164; these could relate to direct investment (including in real estate), establishment, the provision of financial services or the admission of securities to capital markets.165 Temporary emergency measures may be needed to control flows of capital to or from non-EU states to avert serious difficulties arising from economic and monetary union.166 Relations may be suspended with a particular country as an aspect of foreign policy or security policy Europe-wide167 or unilaterally by a particular EC state for serious and urgent political reasons.
CA PI TA L F R EEDO M
Capital Freedom [1.26] A capital movement occurs when payment is made to buy land and again when it is sold and the proceeds of sale are received and disbursed and if a cross-border element is involved and the capital must be free to flow unhindered within an internal market,168 an area without internal frontiers in which the free movement of goods, persons, services, and capital is ensured in accordance with the provisions of this Treaty.169
These freedoms are often said to be ‘fundamental’, a strange expression of priorities when compared to core human rights such as respect for life and freedom from arbitrary arrest.170 A common market in goods was realised in the period after the signing of the Treaty of Rome in 1957 and significant progress was also made towards freeing the movement of workers and securing the right to establish a business or to provide services freely across Europe,171 but the free market in capital lagged behind, as an aspiration. Starting with a Directive in 1988 and proceeding through the adaptations of the Treaties agreed at Maastricht and the practical implementation of the Treaty provisions, something resembling a free market in capital was created in 1994. At the same time it was recognised that controls on landownership affected the free movement of capital and thus that sale and purchase and most other transactions with land involved capital movements. Hence the dawn of 1994 represented the birth of European land law, a Midnight’s Child. The process of securing capital freedom is now described. 164 EC §57[1] ex §73c[1]. The Council may act unanimously to impose new controls: §57[2] ex §73c[2]. Original EC members pledged themselves to ‘progressively abolish’ (sic) restrictions, but there was no mechanism for enforcement: Treaty of Rome §67[1]. See now C-445/04 FII Group Litigation v Commissioners of Inland Revenue [2006] I ECR 11753 ECJ, J[174ff]. 165 EC §57[1] ex §73c[1]. 166 EC §59 ex §73f; EC §60 ex §73g. 167 EC §60[1] ex §73g[1]. 168 AG Toth Law of the Internal Market (Oxford, Clarendon, 2005, 0-19-825600-0); C Barnard Substantive Law of the EU (Oxford, OUP, 2004, 0-19-925135-5) ch 17. 169 EC §4 ex §3A; EC §14 ex §7a, [2]; Treaty on EU §2 ex §B. 170 Case 222/86 UNECTEF v Heylens [1987] ECR 4098 ECJ, J[14]. 171 See below [1.65ff].
Capital Freedom
1
23
Capital unchained — to Maastricht and beyond
[1.27] In the past, European law scarcely seemed to scratch the surface of domestic land laws, or, as one complacent little Englander commented, ‘property lawyers have a licence to be dry’.172 Capital investment was, up until Maastricht, the runt of the litter, with only ten cases litigated in 35 years.173 Since then it has become an equal partner with equivalent development, strong cross-fertilisation and a pre-eminent role in developing land law. This odyssey must now be chronicled.174 Although the Treaty of Rome articulated the aspiration of achieving a free market in capital, it imposed no duty on states to open up their frontiers to foreign land grabbers.175 Early attempts to flesh out this skeleton by Directive176 were largely nugatory.177 Activities in line for the greatest liberalisation were set out in two lists, of activities freed immediately and of those for which a general permission was at first granted, though this second list was soon amalgamated into the first and added to.178 Wide restrictions remained in two further lists setting out respectively matters for which restrictions could be maintained subject to justification179 and capital movements that were not to be liberalised at all — deposit accounts, the physical import and export of cash and securities, and personal loans.180 [1.28] Major steps towards a free market in capital were taken by the Third Capital Directive in 1988,181 which instructed states to abolish restrictions on movements of capital,182 a term undefined but accessible in its meaning through a Nomenclature which describes those activities which were to be classed as capital movements.183 Comprehensive liberalisation as envisaged in its sweep was less than complete,184 given that controls on second homes would continue, that freedom for capital from non-EC countries remained aspirational and subject to reciprocity, and a get-out was left in cases of serious turbulence in the domestic or external money markets.185 The Directive was in force between mid-1990 and the end of 1993 when the Maastricht reforms were implemented, but this narrow 172 P Sparkes A New Land Law (Oxford, Hart, 1st edn, 1999, 1-84113-012-5) 34. The reference is to Mrs Thatcher’s division of her cabinet into pro-European wets and Euro-sceptic dries. 173 Flynn (n 151 above) 773 fn 1. 174 C-463/00 Commission EC v Spain (Golden Share) [2003] I ECR 4581 ECJ, J[3–7], J[51]. 175 C-54/99 Association Église de Scientologie de Paris v French Prime Minister [2000] I ECR 1335 ECJ, AG[2] Saggio. 176 First Capital Directive 60/62/EEC [1960] OJ L43 921; UK Golden Share (n 151 above) J[2]. 177 Eurobonds (n 134 above) AG[9ff] Jacobs; Reisch (n 63 above) AG[46–48] Geelhoed. 178 First Capital Directive (n 176 above) Annex 1 Lists A & B; these were combined into a single List A by Directive 86/566/EEC [1986] OJ L332 22. 179 First Capital Directive (n 176 above) Annex 1 List C, redesignated B as above (n 178 above). 180 First Capital Directive (n 176 above) Annex 1 List D, redesignated C as above (n 178 above). 181 Third Capital Directive (n 56 above). 182 Third Capital Directive (n 56 above) §1[1]. 183 Third Capital Directive (n 56 above) Annex 1. 184 UK Golden Share (n 151 above) J[4–6]. 185 Third Capital Directive (n 56 above) §§6[4], 7[1–2]; on second homes see below [2.08].
24
Land as a European Commodity
window attracted a number of cases, moths drawn to this bright new light, including Sanz de Lera heard on backward-looking facts.186 Despite its effect the European land market remained compartmentalised on national lines, its time not quite ripe.187 [1.29] The European Union agreed in 1992 to create the largest market in the world, outstripping the United States of America by a ratio of 6:5,188 and it has since expanded further.189 This major realignment was accomplished by the Treaty of European Union agreed at Maastricht, taking effect at the start of 1994. This swept away the earlier distinct category of payments for goods and services,190 prohibited all substantial restrictions on capital movements,191 and imposed a scheme for the progressive abolition of controls192 bolstered by effective implementation of an approximation of national laws and procedures.193 A caveat left by the Third Directive about combined controls on second homes was removed.194 It paved the way for the partial implementation of a monetary union. Abolition of all exchange controls has provided a strong stimulus to cross-border investment, as was anticipated at the time in Portugal and Sweden and elsewhere,195 the overall effect being a doubling of intra-community investment in a decade196 but with plenty of unrealised scope. The single market in land was further advanced by effective policing of the intended freedoms of movement of persons and establishment of business. [1.30] A proposal to integrate capital freedom into the text of the Constitution is in abeyance as a consequence of the French ‘non’.197
2
Direct effect of capital freedom
[1.31] If land law is to have any meaning on a Europe-wide scale, European legislation must have direct effect binding on and benefiting individuals and companies as landowners or potential landowners can take advantage of them. 186 Sanz de Lera (n 160 above) J[13], AG[9] Tesuaro; Bordessa (n 161 above); Église de Scientologie (n 175 above) AG[13] Saggio; Eurobonds (n 134 above) AG[9ff] Jacobs. 187 Reisch (n 63 above) AG[46] Geelhoed; Sandoz (n 143 above) AG[7], Léger. 188 P Anderson ‘Under the Sign of Interim’ in P Gower & P Anderson The Question of Europe (London, Verso, 1997) quoted in JHH Weiler The Constitution of Europe (Cambridge, CUP, 1999, 978-0-521-58473-9) 325. 189 See above [1.04ff]. 190 Treaty of Rome §§67–73; see below [1.35]. 191 Treaty on EU §8 ex §G. 192 EC §56[1] ex §73b[1]; Reisch (n 63 above) J[4]; Église de Scientologie (n 175 above) AG[4] Saggio; Eurobonds (n 134 above) AG[16] Jacobs. 193 EC §3[1] ex §3[1], paras (c), (g)–(h). 194 Third Capital Directive (n 56 above) §6, Annex I [4]. 195 A Bonte ‘Focus on Portugal’ [1990] EG Supp March 10th, 122; J Berney ‘Focus on Sweden’ at 114. 196 IP/97/477. 197 Draft European Constitution [2004] OJ C310 1, Pt II §III–45ff.
Land as Capital
25
The Treaty of Rome merely expressed ambitions about capital movements198 which suffered the fate of most good intentions.199 Direct effect was achieved by the pre-Maastricht Third Directive200 and is clear beyond argument201 in the Treaty provisions as rewritten at Maastricht.202 So the capital provisions can be enforced in a vertical direction by an individual landowner against the state, national law being brushed aside to allow enforcement of the European right. It is a further short step to allow horizontal enforcement between one citizen wishing to assert his European right in an action against another citizen — that is, to treat a citizen as an addressee of the fundamental economic freedom to move capital — which will equate the current Treaty provisions on capital203 to the other fundamental economic freedoms, but there is as yet no jurisprudence204 to confirm this huge leap towards a functioning European land law.
L A N D A S CA PI TA L
Land as Capital 1
Capital and movements
[1.32] Ever since the EEC was formed in 1957 the Treaties have fought shy of defining their terms, an omission which continues even after Maastricht and is compounded by a dearth of specialist literature, only recently corrected.205 The concept of capital movement shows the widest possible scope for European land law, though its actual width is much narrower because of the possibility of justified controls.206
2
Land as capital
[1.33] It was first decided that investment in land abroad was a capital affair, a Flynn (n 151 above) 773. Rights were insufficiently precise to be enforced directly: cf Marks & Spencer v Commissioner of Customs and Excise [2003] EWCA Civ 1418, [2004] STC 1. 200 Bordessa (n 161 above) J[33]; Sanz de Lera (n 160 above) AG[21] Tesauro, J[40ff]; Usher (n 26 above) 24–25. 201 C-57/95 Commission EC v France (Pensions Fund Communication) [1997] I ECR 1627 ECJ, J[20]; Sandoz (n 143 above) AG[6] Léger; Flynn (n 151 above) 786–787. 202 EC §56 ex §73b. 203 Sanz de Lera (n 160 above) J[43]; Flynn (n 151 above) 786–787, 787; P Oliver & W-H Roth ‘The Internal Market and the Four Freedoms’ (2004) 41 CML Rev 407–441, 421ff. 204 R Mastroianni ‘Vertical and Horizontal Direct Effects’ (1999) 5 European Public Law 417–435; M Lenz ‘Horizontal What?’ (2000) 25 EL Rev 509–522; D Colgan ‘Triangular Situations’ (2002) 8 European Public Law 545–568; T Tridimas ‘Black, White and Shades of Grey: Horizontality of Directives Revisited’ [2002] Yearbook of European Law 327–354. 205 Now being rectified: Flynn (n 151 above); A Landsmeer ‘Movement of Capital and Other Freedoms’ (2001) 28 Legal Issues of European Integration 57–69; Mohamed (n 161 above). 206 See below [ch 4]. 198 199
26
Land as a European Commodity
truly momentous jurisprudential leap, in Konle v Austria,207 a leading case in two separate senses since it both decides a truly vital issue and it also ushered in a host of pale imitators, a second cadre of litigators seeking to exploit the breach thus created. Konle’s purchase of a plot of land in the Austrian Tyrol in 1994 was well-timed, just before Austrian accession to the EU and soon after the Maastricht liberalisation of capital,208 though it took ten years for the legal aspects of the purchase to reach the European Court of Justice. By then the focus had shifted from business freedoms to capital and the Tyrol GVG209 requiring a non-Austrian to obtain administrative authorisation for the purchase of land in the Tyrol was struck down as a hindrance to the free movement of capital.210 This opened the way for the use of capital in connection with any investment in the purchase of land.211 Konle, a German, bought his plot from the Lienz District Court at a judicial auction but his application for the authorisation needed to hold on to it was rejected and final authorisation was delayed until 1998. A capital movement was manifest, and the main issue in the case was the justification for, or as the court found the unjustified nature of, the Austrian rules on second homes.212 There are a number of subsequent domestic decisions,213 cases arising during the accession process,214 a discussion of the similar controls on the acquisition of farmland,215 and considerable explication of variant procedures involving declarations of intended use of land subsequent to the purchase as opposed to prior authorisation.216
3
Capital and income
[1.34] Capital seems to have been transformed in the cauldron that was Maastricht so that a new autonomous meaning of this word ‘capital’ has emerged217 which is far from conventional English. When Marx wrote Das Kapital he was thinking of a factor in economic production, what the capitalist laid out in order to reap profits in future, in other words an investment capable of yielding income.218 That economic orthodoxy is also a commonplace of 207 Konle (n 42 above); A Lengauer ‘Konle Judgment’ (2000) 37 CML Rev 181–190; Barnard (n 168 above) 472–474; Eurobonds (n 134 above) AG[24] Jacobs. 208 EC §§56–69 ex §§73b–73q; Treaty on EU §2 ex §B. 209 Grundverkehrsgesetz (Land Transfer Law). 210 Konle (n 42 above) AG[18] Pergola; Bordessa (n 161 above); Albore (n 138 above). 211 Konle (n 42 above) J[3–4], J[22]. 212 Konle (n 42 above) J[3–4]; see below [2.15ff]. 213 Oberster Gerichtshof 1 Ob 216/02 z7 [2003] ECLYB [322]; Oberster Gerichtshof 1 Ob 12/00 x [2001] ECLYB [491]; Oberster Gerichtshof 5 Ob 58/04 x [2005] ECLYB [273]. 214 Beck (n 140 above); Salzmann (n 53 above) J[53ff]; see above [1.06]. 215 Ospelt (n 45 above); see below [2.27]. 216 C-213/04 Burtscher v Stauderer [2005] I ECR 10309 ECJ; Konle (n 42 above) J[40]; C-390/99 Canal Satélite Digital v Spain [2002] I ECR 607 ECJ, J[33], Reisch (n 63 above) J[33], Salzmann (n 53 above) J[42]; see below [2.47ff]. 217 EC §56 ex §73b. 218 K Marx Das Kapital (Hamburg, Meissner, 1867).
Land as Capital
27
English legal dialogue, for example when a receipt is directed to be taxed either to income tax or capital gains tax, when long-term spending is deducted from business profits as a capital allowance, when a trustee has to decide whether trust income or the capital fund is to be debited with particular items of expenditure, or when landlord and tenant dispute whether a payment is for a repair or an improvement. Capital is a resource which can be invested to yield an income.219 [1.35] The Treaty of Rome encapsulated this distinction when it divided the totality of payments between two separate chapters, one for capital movements and the other for current payments for the cost of goods and services.220 Equality of treatment was required by the Third Directive in terms of exchange rate conditions as between capital movements and current transactions,221 implying that the two remained otherwise distinct. This over-intricacy was removed at Maastricht, where it was agreed to assimilate capital and income payment by amalgamation of the two categories.222 ‘Capital’ has become a portmanteau word covering both a means of payment223 and an investment designed to yield an income or capital growth.224 For ‘capital’ read ‘capital and income’ — assets, readies — a wondrous new beast for which even the capacious English language fails to yield a precise, concise equivalent any more euphonious than ‘capital (new sense)’. [1.36] Land transactions are often capital in the conventional sense: a freeholder buys land for a capital sum and a long leaseholder buys the use of the land for a capital premium, even if he must also keep the lease on foot with annual payments of rent and service charge. There are many other transactions with land of an income character, notably a rack rental which cedes possession for a shortish period in return for an annual payment of an income character called a rent, the essence of the rack rent being that it matches the market value and so leaves no capital value in the leasehold interest. The common law lease has a beautiful malleability, stretching from long leaseholds virtually equivalent to ownership to short-term rack rental arrangement, which, once upon a time, European law would have mangled, treating one as a capital investment and the other as a provision of services to the tenant. No more since all these transactions now fall within the portmanteau sense of capital. How much easier this makes the mortgage! A borrower receives a capital advance on which he makes income payments called interest and gradually repays what he has borrowed by making periodical payments (a mix of capital and income) called instalments, but now
219 C Whitehouse Revenue Law — Principles and Practice (London, LexisNexis UK, 21st edn, 2003, 0-75-452154-0) [3.43], [41.3]. 220 Treaty of Rome §§67–73; Case 286/82 etc Luisi v Italian Ministero del Tesoro [1984] ECR 377 ECJ, J[2]. 221 Third Capital Directive (n 56 above) §1[2], Annex I. 222 EC §§56–60 ex §§73b–73g; Treaty on EU §8 ex §G; Flynn (n 151 above). 223 Case 7/78 R v Thompson [1978] ECR 2247 ECJ; Case 203/80 Casati v Italy [1981] ECR 2595 ECJ. 224 Reisch (n 63 above) AG[39] Geelhoed; Flynn (n 151 above) 776.
28
Land as a European Commodity
we can see the whole caboodle as a single transaction using the portmanteau sense of capital. Capital is now so broad that it could embrace any consideration paid for any transaction affecting land.
LA N D TR A N SACTI O N S N O MEN CLATUR I SED
Land Transactions Nomenclaturised 1
A redundant Nomenclature
[1.37] Movements of capital are not defined in the Treaties,225 an omission continued even after the Maastricht realignment. For guidance we must go back to the superseded and repealed Third Directive,226 for what survives of it is a Nomenclature, or classification, of capital movements. This was adopted as a point of reference in Trümmer and its use is now standard practice.227 Capital movements were classified into 13 categories according to the economic nature of the assets and liabilities in issue, but of course the Nomenclature needs considerable tweaking to make it helpful as a basis for analysing transactions with land, and it leaves a lot to be desired because a mass of descriptive detail conceals the lack of coherent statements of principle. Changes between the Third Directive and the Maastricht Treaty render some of the basic points of taxonomy redundant,228 especially given the new portmanteau use of the word capital, so the Nomenclature is best seen as a map of the total ambit of ‘capital movement’ rather than as a categorisation of sub-movements. Accession and association agreements have often been drafted with one eye looking back to the Nomenclature when liberalisation of capital activity is agreed at differential speeds.
2
Transactions or flow of funds?
[1.38] Those drafting the Nomenclature fudged one vital issue, which is the basic nature of capital movements, and whether they are switches of value, flows of funds, or transactions. The first is easily dismissed, but the Nomenclature hovers between the second and third, creating an indiscriminate mixture of flows
Luisi (n 220 above) J[21]; Trümmer (n 14 above) J[20]; Sandoz (n 143 above) AG[33] Léger. Third Capital Directive (n 56 above) Annex 1. 227 Trümmer (n 14 above) J[21]; Sanz de Lera (n 160 above) AG[15] Tesauro; Sandoz (n 143 above) AG[34] Léger; Svensson (n 161 above) J[37]; Stefan (n 140 above) J[3–6]; Reisch (n 63 above) AG[39] Geelhoed, J[30]; Spanish Golden Share (n 174 above) J[53]; C-376/03 D v Inspecteur van de Belastingdienst [2005] I ECR 5821 ECJ, J[24]; C-265/04 Bouanich v Skatteverket [2006] I ECR 923 ECJ, J[29]; C-513/03 Heirs of van der Heijden v Inspecteur can de Belastingdienst [2006] STI 535 ECJ J[39]; FII Group Litigation (n 164 above) J[179ff]. 228 See above [1.28]. 225 226
Land Transactions Nomenclaturised
29
of funds and transactions by which they are generated, but the third (transaction-based) analysis is generally to be preferred. [1.39] At first sight it might be attractive to limit the concept of capital movement to a switch of value. However, the sale of a Tuscan villa worth €1 million for €1 million effects no overall shift in economic power, since a change in the form of asset held by each party in no way alters the net worth of either party. Nor does much change if mortgage finance is thrown in, because the finance provided by the bank is matched by the borrower’s correlative obligation to repay the loan over time with interest. These transactions call to mind the Lawsonian analysis of overreaching the beneficial interest under a trust229 which emphasises that a beneficial interest is an interest in a fund since it makes no difference whether the assets held by the trustees are land or shares or money. Clearly this is not what the EC Treaty is getting at when it talks about capital moving230 and our definition must include run-of-the-mill commercial sales. Capital movement may involve either movement of value or switches of value between investments. [1.40] Flows may seem the most natural equivalent of ‘movements’, but analysis of land purchase in this way is problematic since it causes the fission of a single transaction into constituent pieces, an artificial over-refinement of analysis which can lose the cross-border elements needed to bring EU law into play. These are more obvious with a larger picture. Suppose a family falls in love with a house in Marbella while on holiday and decides on the spur of the moment to buy it. They would need to find a notary in Marbella and to arrange for the necessary funds to be wired out to his office in Andalucia. The sellers, buyers and the notary then sit down at the notary’s office in Marbella to complete the purchase. The first step, the movement of funds, is clearly a capital movement, one which crosses a state line and which should therefore be unimpeded. How is the sale itself to be handled? When the sale is completed, funds pass from the British couple via the notary to the Spanish sellers and the economic value in the houses passes in exchange under the escritura. The whole transaction has a cross-border flavour, given the non-residence of the buyers, but the flow of funds on completion is not. The camera is too close in and we need to pan out and switch to a wider angle to capture the fullest and most meaningful picture. Clearly, this transaction does have a European flavour. [1.41] A more satisfactory general picture is obtained by looking at a land purchase as an overall transaction including, as the Nomenclature suggests, all ancillary transactions.231 A commercial deal should not be broken down into technical legal parts at the risk of losing cross-border elements. Thus an 229 FH Lawson & B Rudden Introduction to the Law of Property (Oxford, Clarendon, 3rd edn, 2002, 0-19-829993-1) 44–46. 230 EC §56 ex §73b; Treaty of Rome §67. 231 Flynn (n 151 above) 777. Thus, an Italian who had come to London in search of work had the right to be considered for temporary housing accommodation: R(JR) Castelli v City of Westminster (1996) 28 HLR 616, CA; Case 63/86 Commission EC v Italy (Housing Aid) [1988] I ECR 29 ECJ.
30
Land as a European Commodity
arrangement to buy a house in Marbella, secure the funds from home, and complete the transaction creates a single continuum, including marketing, instruction of lawyers, finance, transmission of funds, completion, taking possession and the process of registering title.232 Investment in land could include the process of acquisition, its use during the period of ownership and its subsequent disposal.233 That a transaction includes ancillary activities causes one to think of a transaction in the widest terms. [1.42] In its judgments the European Court of Justice generally analyses whether there is a capital movement before deciding whether there is a restriction on the freedom to move capital and, if so, whether it is justified. A single transaction could be dissected in different ways and sequential analysis obscures the fact that the control under discussion helps to identify what movement of capital has occurred. If a host state imposes exchange controls a transfer of funds needs to be isolated from the completion of the purchase. On the other hand, a control limiting the acquisition of host state territory by outsiders —limiting second homes in Connemara to speakers of Irish — is better seen as a package since this imposes the widest European control. A loan and mortgage security needs to be separated from the purchase being financed. The intention is to sniff out restrictions and controls,234 especially ones which are disguised, and to compel a justification to be provided, a process best accomplished by flexibility in identifying a movement of capital.
3
Nomenclature
[1.43] Almost any transaction with land involves a movement of capital within European land law and we now enumerate those of the 13 categories of the Third Directive Nomenclature235 which might affect land purchase.
4
Business acquisition of land
[1.44] Direct investment236 is investment in a business, for example paying to establish a new business abroad, opening new branches, buying out an existing business or acquiring a controlling shareholding237 in an undertaking. Long-term 232 Trümmer (n 14 above); Stefan (n 140 above) J[19]; RP v Registrar of Torrevieja [2003] RJ 2199, [2004] ECLYB [1709], DGR Spain. 233 Reisch (n 63 above). 234 For terminology, see below [4.01]. 235 Capital Nomenclature in Third Capital Directive (n 56 above) Annex I; Usher (n 26 above) 17–22. The Nomenclature is now repealed but remains indicative, see above [1.37]. 236 Église de Scientologie (n 175 above) AG[2] Saggio; FII Group Litigation (n 164 above) J[180]; C-157/05 Holbock v Finanzamt Salzburg-Land [2007] May 24th ECJ, J[33ff]; C-451/05 Européenne et Luxembourgoise d’Investissements v Directeur General des Impots (ELISA) [2007] April 26th, AG[65] Mazak.
Land Transactions Nomenclaturised
31
loans to businesses — exceeding five years — are also properly treated as direct investments.238 All forms of investment may be carried out by a natural person or any kind of undertaking or a public body, but this category requires a lasting and direct link between the person providing the capital and the entrepreneur to whom it is made available.239 The purchase of land could well be part of the deal, for example when an existing business in a different EU country is acquired with a chain of local convenience stores or a branch network of a bank. A business acquisition amounting to a direct investment [I]240 is excluded from land purchase [II] (to be described next),241 a matter of the greatest importance in accession and association arrangements where the freeing of direct investment often occurs far in advance of the freeing of the land market.242 Two patterns are provided of cross-border activity by way of direct investment: [I]A is investment on national territory by non-residents and [I]B is investment abroad by residents. Investment in an undertaking by acquiring a shareholding or securities constitutes direct investment if a controlling interest is bought but a lesser stake will fall into a series of categories dealing with shares and other types of bonds,243 as the various Golden Share cases illustrate.244
5
Private acquisition of land
[1.45] Shame on the translator but Category [II]245 appears to have transported mysteriously across the Atlantic since it is ‘investments in real estate’, by which the translator obviously means land, a term to include the purchase of buildings, the purchase of land and the construction of buildings, whether for gain or for personal use. These activities may be carried out by private persons (individuals) or by legal persons (companies), but it excludes land purchases in the course of establishment of a business which is properly a direct investment in the earlier category [I].246 Emphasis is placed on the ‘private’ character of the party, to the exclusion of public bodies, possibly because public acquisitions across state For smaller stakes in companies see n 243 below. Examples are loans (1) by a company to its subsidiaries, (2) to part-owned companies, (3) linked to a profit-sharing arrangement, and (4) by financial institutions with a view to lasting economic links. 239 Sanz de Lera (n 160 above) AG[14] Tesauro. 240 Capital Nomenclature (n 235 above) [I]. 241 Capital Nomenclature (n 235 above) [II]. 242 See below [1.12ff]. 243 Capital Nomenclature (n 235 above) respectively [I] and [III]–[V]; C-329/03 Trapeza tis Ellados v Banque Artesia [2005] I ECR 9341 ECJ (liquidation of bonds bought under First Capital Directive); Fokus Bank (n 56 above) J[38] (no dividend credit for non-resident company); Bouanich v Skatteverket (n 227 above) (resale of shares to issuing company). 244 C-483/99 Commission EC v France (Golden Share) [2002] I ECR 4781 ECJ, J[5ff]; C-503/99 Commission EC v Belgium (Golden Share) [2002] I ECR 4809 ECJ, J[38]; Commission Communication on Intra-EU Investment [1997] OJ C220 15. 245 Capital Nomenclature (n 235 above) [II]. 246 See above [1.44]. 237 238
32
Land as a European Commodity
boundaries are thought to be unlikely. Investment in land includes all operations necessary to bring to fruition a capital movement, including the transaction itself, the conclusion of the transaction, its performance, and any related transfers, since all these aspects need to be scrutinised to ensure that capital is free to move across national boundaries. ‘Real estate’ is to be read expansively as including subsidiary rights in land such as usufructs,247 servitudes (easements) and building rights. [1.46] Typical transactions involve residents of different European states — for example an English person buying a holiday home in Spain — but a cross-border activity by a single person on his own account is also covered when, for example, an English person transmits money to his own account in Spain to provide the funds for an intended purchase; sub-categories are [II]A, purchase of land on national territory by non-residents, and [II]B, purchase of land abroad by residents. Exchange control regulations of each state were used to determine residence or non-residence.248 When the time comes to sell, operations to liquidate the asset or to deal with the proceeds are all protected by the same basic freedom including, for example, resale, assignment, repatriation of the proceeds of sale249 or spending the proceeds. So an English person who has bought a second home in Spain has the right, later on, to sell it and to send the proceeds back to England. A doubt may arise if the original transaction was not a capital movement, for example where an English person inherited a house in Spain before Spanish accession to the Union. Liquidation means the sale of land and its reconversion into money. Proceeds are extended by European exegesis to any capital appreciation, repayment of any loan, and any proceeds from execution of a judgment. Trümmer250 discusses whether a purchase of land is itself a capital movement so as to give a right of sale, but this is clearly so251 since all operations are included which are necessary for the purposes of a capital movement, including operations to liquidate or assign assets built up, the repatriation of proceeds of liquidation thereof and the immediate use of such proceeds.
6
Personal gifts
[1.47] Personal transactions are capital movements,252 and these must be freed, notably loans, gifts, endowments, dowries, inheritances and legacies, including of course all cases where the subject matter of the gift is land. A transfer of ie a civilian right of use for life. This is obsolete after Maastricht. On IIA see C-386/04 Centro di Musicologia Walter Stauffer v Finanzamt München für Karperscahften [2006] I ECR 8203 ECJ, J[23] (capital freedom covers both purchase and active management of land); ELISA (n 236 above) AG[68] Mazak. 249 Proceeds include any capital appreciation, repayments, proceeds from execution of judgments, etc. 250 Trümmer (n 14 above) J[13], J[22]; Albore (n 138 above) AG[6] Cosmas; Reisch (n 63 above) J[29]; also most of the other cases discussed in this chapter. 251 Capital Nomenclature (n 235 above) notes to [II]. 252 Capital Nomenclature (n 235 above) [XI] heads A–D. 247 248
Land Transactions Nomenclaturised
33
beneficial entitlement or of legal entitlement without the beneficial interest is also a capital movement.253
7
Loans etc
[1.48] Loans made by financial institutions such as banks and building societies are capital movements254 where the advance finances commercial transactions, services, financial leasing, note-issuance or, in our particular context, mortgage loans and consumer credit.255 European case law makes clear that loans are indeed a form of capital movement, so issues calling for European scrutiny are the terms of a state guarantee of loans,256 and state interest rate subsidies on loans for home construction.257 The movement created by the loan includes all activities associated with the grant of the loan, the provision of security and subsequent repayments.258 Loans are divided into sub-species on a scale from 1 to 3 according to whether they are short-term (less than one year), medium-term (one to five years) or long-term (for five years or more). A separate category [IX] acts as a repository for sureties, guarantees and pledges, as well as the provision of security for litigation costs.259 [1.49] We must address suggestions that no capital movement is discernible when a mortgage is created, but only to dismiss them. Trümmer’s Application260 provides the fullest analysis of capital movements which occur when a loan is provided to finance an acquisition of land. Trümmer and Meyer had sold a share of a property in Rosenthal, Austria, leaving the price of 13K German marks outstanding but secured by a mortgage. This they wanted to register. Domestic law of the time only allowed registration of a mortgage denominated in the national currency, Austrian schillings, but the mortgage to secure the purchase price of land was itself a movement of capital,261 even if not specifically nomenclaturised, and so the national rule prohibiting registration fell as a prohibited restriction on the movement of capital. Mortgages are the classic method of securing a loan linked to a sale, intricately linked to that sale, and constituting a Barbier’s Heirs (n 145 above). Capital Nomenclature (n 235 above) [VIII]. Included elsewhere are [I] loans to acquire an establishment, VII] credits related to commercial services and [XI] personal, non-institutional, loans. There are minor exceptions: Flynn (n 151 above) 776. 255 Capital Nomenclature (n 235 above) notes to [VIII]. 256 E–1/00 Icelandic State Debt Management Agency v Islandsbanki [2000] July 14th EFTA Ct; Flynn (n 151 above) 778ff. 257 Svensson (n 161 above). 258 Capital Nomenclature (n 235 above) notes to [VIII]. 259 Piazza v Schurte (n 61 above) J[36]. 260 Trümmer (n 14 above); A Landsmeer ‘Capital Movement’ [2000] Legal Issues of Economic Integration 195–200; S Cámara-Lapuente ‘Comparative Remarks on Land Registers within the Frame of European Private Law’ (2005) 6 ERPL 797–839, 803. 261 Trümmer (n 14 above) J[19]; doubts were expressed in AG[9] Pergola and Reisch (n 63 above) AG[74] Geelhoed (finance was service provision). 253 254
34
Land as a European Commodity
capital movement.262 Forcing a lender to accept a registration in Austrian schillings could diminish the value of the loan as against German marks and hence also reduce the security and its priority, a potentiality of reduced effectiveness sufficient to say that capital movement has been restricted.263 Stefan264 makes clear that the right of registration in a foreign currency is a new right attributable to the Community. [1.50] Cross-border loans have two patterns: [VIII]A is a loan granted by a non-resident to a resident and [VIII]B is the reverse, granted by a resident to a non-resident.265
8
Means of payment
[1.51] A capital movement leading to an investment in foreign land will generally take the form of a transfer of the price across national boundaries preparatory to the purchase,266 and this will be categorised according to the transaction being paid for.267 Money transferred via a bank account falls into Category [VI], since it includes any activity involved in the operation of a current or deposit account with a financial institution. So a person who wishes to buy abroad must be free to open and run an account in a foreign country to facilitate the delivery of the purchase price for land. A third possibility is the physical import and export of financial assets such as securities or means of payment of every kind.268 A Brit with his eye on a second home in Spain can sell shares to provide the readies for his purchase, or can carry notes or coins in a suitcase if he prefers.269 Sanz de Lera270 was doing more or less that when he was stopped by French police and found to have in his car almost 20 million Spanish pesetas in notes that he was taking to deposit at a Swiss bank. His domestic law prevented the export of large quantities of pesetas without prior authorisation, but this was overridden by his right in Community law to move capital to a non-EU state. Transfer of liquid funds is not properly counted as direct investment.271 Thompson272 suggests that export of silver alloy coins counts as a means of payment, as do gold Krugerrands,273 but half-crowns and other coins withdrawn from legal tender may be better treated as goods.274
262 Trümmer (n 14 above) J[23–24], AG[35–36] Pergola; said to be correctly located within Capital Nomenclature (n 235 above) [IX] though [VIII] seems correct. 263 Trümmer (n 14 above) J[16], J[26–27], J[31]. 264 Stefan (n 140 above). 265 And similar for Capital Nomenclature (n 235 above) [IX]. 266 Deferment of payment could be capital movement: Trümmer (n 14 above) AG[10] Pergola. 267 Capital Nomenclature (n 235 above) [II], for land see above [1.45ff]. 268 Capital Nomenclature (n 235 above) [XII], respectively A or B. 269 Bordessa (n 161 above); subject to any justified national restriction; see below [2.37ff]. 270 Sanz de Lera (n 160 above); Bordessa (n 161 above); Eurobonds (n 134 above) AG[9ff] Jacobs. 271 Sanz de Lera (n 160 above) J[30]. 272 Thompson (n 223 above); Casati (n 223 above).
Movement of Landowners
9
35
Transactions after immigration or emigration
[1.52] Cross-border transactions often follow emigration or immigration, notably after a person moves abroad to buy a home in a foreign country. Those which should be allowed include settlement of debts by immigrants in their previous country of residence, transfers of assets by emigrants or repatriation of savings made by immigrants to their previous country of residence.275
10
Miscellany
[1.53] Insurance payouts and premium payments form Category [X], which spells trouble for any requirement to insure property within a particular national market.276 Miscellaneous ‘other’ capital movements include:277 앫 앫 앫 앫 앫
imposition of death duties; payment of damages of a capital nature; refunds from cancelled contracts or of advance payments; royalties from intellectual property rights; and transfers of monies required for the provision of services.
There is also a final ‘other’ sub-category to sweep up matters left behind by the 13 specific headings.278
MO VEMEN T O F LA N DOWN ER S
Movement of Landowners 1
EEA movement club
[1.54] Europe as a movement club means EEA-30. A Directive279 gives rights to EEA nationals to move and reside elsewhere in the EEA, though workers from eastern accession states do not yet enjoy full rights.280 No attempt is made here to provide a comprehensive discourse on European migration law,281 a subject beyond the limit of anybody’s patience, but rather our focus is on the specific position of buyers and users of land. The two states involved are described as the Thompson (n 223 above) J[25–27]. Thompson (n 223 above) J[30]. A state is entitled to prevent its currency being melted down. 275 Capital Nomenclature (n 235 above) [XI] heads E–F. 276 C-410/96 Criminal Proceedings v Ambry [1998] I ECR 7875 ECJ, J[40] (treated as service provision but the capital breach was equally clear). 277 Capital Nomenclature (n 235 above) [XIII] heads A–E. 278 Capital Nomenclature (n 235 above) [XIII] head F; C-200/98 X & Y v Riksskatteverket [1999] I ECR 8261 ECJ; C-251/98 Baars [2000] I ECR 2787 ECJ; Église de Scientologie (n 175 above) AG[2] Saggio. 279 Residence Directive (n 122 above). 273 274
36
Land as a European Commodity
home state and the host state,282 and it is assumed that the buyer is a national of a state within the EEA-30.283 [1.55] Individual rights to move and reside freely within the territory of other EEA states are conferred on EU citizens284 (that is, nationals of EU-27 states285) and also on EEA nationals286 (that is, nationals of any EEA state), but the practical rights are those conferred by the Movement and Residence Directive.287 Nationality, the core of movement rights, remains within the domestic domain since each state determines its own nationals,288 the British nationality rules being particularly complex.289 Within each of these categories rights of entry for up to three months are distinct from rights of residence in the longer term, from three months to five years, and permanent residence beyond that.290 Controls during this intermediate period are the ones that need to be considered most carefully by those planning to buy abroad since residence is confined to privileged classes291 of the economically active (business and workers) and self-supporters. Lawful292 residence can act as a gateway to permanent residence rights in a host state after five continuous years,293 and this may well lead on to an application for naturalisation using domestic rules.
See below [1.82]. AP van der Mei Free Movement of Persons in the EC (Oxford, Hart, 2003, 1-84113-288-8); N Rogers & R Scammell Free Movement of Persons in the Enlarged EU (London, Sweet & Maxwell, 2005, 0-421-87570-4); J Apap Freedom of Movement of Persons (The Hague, Kluwer, 2002, 90-411-1768-7); F Weiss & F Wooldridge Free Movement of Persons within the EC (The Hague, Kluwer, 2002, 90-411-1708-3). 282 A less cumbersome version of ‘host Member State’ referred to in Residence Directive (n 122 above) §2[3]. 283 Other people resident in Europe are described as Third Country Nationals (TCNs) and for their position see below [1.85], [1.94]. 284 EC §§61–69 ex §§73i–73q; EU Charter FR (n 131 above) §45[1]. 285 EC §17 ex §8; Residence Directive (n 122 above) §2[1]. 286 EEA Agreement as adjusted and amended (nn 50–52 above) Annex V. 287 Residence Directive (n 122 above) §1; Immigration (EEA) Regs 2006, SI 2006/1003; Phull (n 132 above) 77 Leggatt LJ. 288 Treaty on EU §8 ex §G. National rules on residence may be more favourable than the European base-line. 289 C-192/99 R(JR) Kaur v Secretary of State for Home Department [2001] I ECR 1237 ECJ; R Shah ‘Who is a UK National for EU Purposes?’ [2001] NLJ 580–581; R Shah ‘Why some British Nationals are not EU Citizens’ (2002) 16 Immigration Asylum and Nationality Law 82–96. 290 Residence Directive (n 122 above) §§ 6, 7, 16; Immigration (EEA) Regs 2006 (n 287 above) regs 13–15 calls these rights respectively ‘initial’, ‘extended’ and ‘permanent’ residence. 291 See below [1.75ff], [1.88ff]. 292 Lawful residence depends upon national law: C-466/00 Kaba v Secretary of State for Home Department [2003] I ECR 2219 ECJ; C Jacqueson ‘Something New Under the Sun?’ (2002) 27 EL Rev 260–281, 264. 293 Without expulsion from the host state: Residence Directive (n 122 above) R[22], §§27ff. 280 281
Movement of Landowners
37
2 Use value [1.56] Use value is often more important than investment value, allowing a house to be turned into a home.294 Free movement of persons is fundamental to the internal market.295 Without that a buyer is an investor, in the same position as if she had bought in America, free to buy but not free to stay for long.296 A dichotomy between ownership and use value is familiar from human rights jurisprudence, which shows that fundamental rights to property cannot be deployed to secure rights of access to the territory of the state where the property is owned.297 A Yugoslav owning property in Croatia could be denied access to that country after it split from the former Yugoslavia even after an extended stay,298 since there is no Convention right for a foreign citizen who owns property in another country to reside in that country in order to make use of it.
3
Investors
[1.57] Land is a good medium for pure investment, whether its acquisition is intended to secure an income yield in the form of a rent or for capital growth or a combination of both, the similarity being that a pure investor is concerned not with use of the land but rather with exploiting its use value. It would be possible to buy a house or office block and board it up with a view to some future use, as Harry Hyams did with Centre Point in London in the 1960s,299 and, less morally reprehensible, to place a potential development site in a land bank pending completion of a planning process. Once permission is given an investor will generally develop a vacant site by licensing a developer to carry out the construction work and letting or selling the completed building. Finally, and most commonly, there is the buy-to-let, in which a property is acquired in order to generate income through letting and where the investor may choose to leave all management to a professional agent, the investor being concerned with a net rent though keeping a weather eye open to the possibility of a future sale with a capital gain. Acquisition of land as an investment, and finding the money to pay for it, involve capital movements.300 All these transactions are carried out at arm’s length from the land and so the personal mobility of the investor is not a prerequisite to the feasibility of the investment. Investment across European borders doubled between 1985 and 1995, either 294 Commercial property is less problematic because of the business movement freedoms; see below [1.63]. 295 Residence Directive (n 122 above) R[2]. 296 In the USA six months, or three months in Europe. 297 E Conv HR Protocol 1 (n 126 above) §1. 298 HR 42389/98 Ilić v Croatia [2000] September 19th E Comm HR (case inadmissible). 299 London Landmarks () allege that as a result it was the ‘single most profitable building ever constructed in the UK’. 300 See above [1.36].
38
Land as a European Commodity
side of the Maastricht implementation,301 but there is plenty of scope for further advance. There is a strong upward trend in funds flowing into the English market302 and strong advantages in a strategy involving outward investment into a portfolio of European property assets.303
4
Borrowers
[1.58] Home loans outstanding in EU-15 amounted to around €4.25 trillion in 2005, that is, in the measure favoured by economists, around 45 per cent of EU gross domestic product. The market remains heterogeneous with the greatest concentration of borrowing activity in the five largest states, relatively low borrowing in Italy, and untapped markets in the accession states of the east. At present there is significant scope for increasing the rate of cross-border borrowing and in this way unlocking substantial savings for borrowers, an ideal application of internal market principles since borrowers do not need to move to borrow.304
FACTO R S G EN ER ATI N G MO VEMEN T O F B UYER S
Factors Generating Movement of Buyers [1.59] A right to buy land is of limited value without the right to move to occupy the land bought. European law separates market players into categories, the most important being pure investors, businesses, workers and self-supporters. This leaves a residual category of economically inactive people lacking the resources needed for self-support from whom freedom to move is withheld, which is just as well for without some constraint capital freedom has the power to cause widespread social disruption and to destabilise land markets.305 Flesh will be provided for these bones, but not before consideration of three major elements of the market culture: uneven earnings, the uneven density of Europeans and the ever-increasing ease of travel around the continent.
HW Wilkinson ‘European Property Market’ [1990] Conveyancer 409–412. DTZ’s 28th Money into Property report; T McConnell ‘Safe Haven Britain’ (2003) 20 Property Week 30–32. 303 J Plender ‘Cross Border Investment in Land’ [2005] 17 EG 46. 304 Mortgage Credit in 2001–2002 (Brussels, European Mortgage Federation, 2002) [1]; Mortgage Credit Forum Group Report The Integration of EU Mortgage Credit Markets (Brussels, DG Internal Market, 2004) [7–9]; Mercer Oliver Wyman Study Financial Integration of European Mortgage Markets (Brussels, European Mortgage Federation, 2003) [6.1] fn 22; Green Paper on Mortgage Credit COM (2005) 327 [6]; London Economics Report (n 16 above) [4.4]; see below [9.07]. 305 RCA White ‘Free Movement, Equitable Treatment and Citizenship of the Union’ (2005) 54 ICLQ 885–906, 905. 301 302
Factors Generating Movement of Buyers
1
39
Disparities in financial clout
[1.60] A survey by the World Bank306 has concluded that the massive migration, documented and undocumented, which followed the collapse of the Soviet Union was driven primarily by economic motivation, players chasing money in a freer market. It seems logical to assume that borders falling in Europe will provoke the same response. Host countries benefit hugely from the supply of labour and home countries benefit from the remittance of earnings by workers back to their country of origin, in Moldova to the extent to 20 per cent of gross domestic product. It seems therefore that the first factors to consider in the emergence of a pan-European market are economic. In this context the range of gross domestic product within the new Europe gives rise to concern. Eurostat suggests that from an EU-27 base of 96 the gross domestic products of member states per capita range from 43 to 227.307 Just on the average are Spain and Italy and slightly above is France. The vast block of EU-15 states are in the range 110–130, including the United Kingdom on 116. Ireland is out ahead of the larger European states, almost up to the average income of Americans, though the special demographics of Luxembourg give it an unchallengeable lead. Compare then the lower end of the range. Right at the bottom in the range 35–38 are Bulgaria and Romania with current candidates such as Macedonia and Turkey even lower. Most of the accession states that joined in 2004 languish in the 50s or 60s, joined only by Portugal from EU-15. A small group in the 80s includes the Czech Republic, Greece, Cyprus and Slovakia. These figures must suggest the huge potential scale of migration when the temporary caps on full rights for workers to migrate are lifted.
2
Density of settlement
[1.61] Europe is growing so fast that it is difficult for statistics to keep pace. At present the internal market covers a European Economic Area, EEA-30, of around 500 million people308 sprinkled unequally over an area of almost five million sq kms,309 which implies that just a little over 100 people inhabit each square kilometre.310 In terms of the general population, the tundra and forests are sparsely populated311 and equally inhospitable are the bogs of central Ireland, 306 A Mansoor & B Quillin Migration and Remittance: Eastern Europe and the Former Soviet Union (Washington, World Bank, , 2006, 978-0821362334) Overview 3. 307 ‘GDP per Capita in PPS’ Eurostat (2007); Housing Statistics in the EU 2004 (Stockholm, Boverkot, 2005, 91-7147-865-5) Table [1.17]. 308 More precisely 493 million for EU-27 and 5 million for EEA–3. 309 More precisely 4.8 million sq kms; EU-27 = 4.336 million sq kms; EEA–3 = 0.488 million sq kms. 310 Densities have dropped with eastwards expansion: Earley (n 4 above). 311 Finland (17/sq km); Sweden (22); by contrast Denmark is well above average at 124/sq km. Even lower in density are the EEA-3 states Iceland and Norway.
40
Land as a European Commodity
while the whole of the east of the continent is relatively thinly populated. Britain comes out well towards the top of the table of dense populations312 but still only two and a half times the EU average.313 A map of member states314 reveals Britain at the northern end of a spine of high density that runs through Benelux, Germany and Italy ending up with Malta. Over to the west, France and Portugal are just about on the EU average with Spain slightly less dense.315 An average here includes the vast empty plains of Castille and thus conceals the massive coastal concentrations of Andalucia and Catalonia and more generally regionalised data would give a quite different and truer picture of employment hotspots and densely packed coastal areas, the areas which will grow in attraction as people are increasingly free to follow economic imperatives and personal desires. There should, however, be plenty of lebensraum in Central and Eastern Europe. Massive migration, documented and undocumented, has followed the freeing of borders when Soviet power collapsed and the main motivation behind this movement has been economic, market players chasing money. There is, however, a significant benefit to countries depopulated of their workers in the shape of remittances to the family back home, though these only achieve a full benefit when there are proper savings mechanisms available.316 The internal market is best compared to a centrifuge, which will thicken the coastal fringes and empty the east, just as America has migrated to its ocean seaboards. Huge social problems may lie ahead, and it may be just as well that full personal mobility has not yet taken hold.
3
Travel
[1.62] Europe has been shrunk by the availability of cheap flights, which makes the Mediterranean feasible for homes, holiday homes and commuting. John Ruskin conjured up an image of imagined cultural unity across Europe by imagining what a bird might see as it soared far above its normal range over the continent: Let us, for a moment, try to... imagine the Mediterranean lying beneath us like an irregular lake, and all its ancient promontories sleeping in the sun:… Greece, Italy and Spain, laid like pieces of a golden pavement into the sea-blue... Then let us pass farther towards the north, until we see the orient colours change gradually into a vast belt of rainy green, where the pastures of Switzerland, and poplar valleys of France, and dark forests of the Danube and Carpathians stretch from the mouths of the Loire to those of the Volga, seen through clefts in grey swirls of rain-cloud and flaky veils of the mist of 312 Luxembourg (171); Italy (192); Germany (231); UK (241); Belgium (332). For the EEA-3 state Liechtenstein the figure is 216 and in Switzerland it is 188. 313 An inflow from eastern accession states has increased the UK population and densities: Independent October 21st 2005. 314 EU Housing Statistics 2004 (n 307 above) Table [1.2F]. 315 Spain (80/sq km); Greece (83), Austria (97), France (109), Portugal (112). 316 Migration and Remittance (n 306 above) 3.
Factors Generating Movement of Buyers
41
the brooks, spreading low along the pasture lands: and then, farther north still, to see the earth heave into mighty masses of leaded rock and heathy moor, bordering with a broad waste of gloomy purple that belt of field and wood, and splintering into irregular and grisly islands amidst the northern seas, beaten by storm, and chilled by ice-drift.317
With the aid of his atlas, Ruskin put into words a brilliant hypothesis, but one which has become a commonplace, the view from a window seat of an aeroplane flying northwards from Nice to Stockholm and beyond. Before his time the louts we exported to the continent were aristocratic Grand Tourists, but this idling was cut short by the Napoleonic Wars. When travel resumed, in Ruskin’s generation, railways had shrunk the time and labour involved in reaching the south, but Victorians were nevertheless compelled to undertake a real journey to reach the Mediterranean, a fact which necessarily limited the clientele to the moneyed and leisured. Nineteenth-century colonisation was genteel in places like Pau, for the foxhunting, Nice, and Genoa, and the fact is that a gradual osmosis of the upper and upper middle classes did nothing to Europeanise markets in land. Buyers knew full well that they were signing up to the local law and that when in Rome they were to do as the Romans. Mark Twain was already griping about overcrowding in 1878,318 but in truth mass tourism is a post-War phenomenon, coincident in time with the jet. This has created a scrum of potential buyers on the Mediterranean coast, but the market was constrained by controls on the foreign ownership of land and by exchange controls, a fearsome weapon for the oppression of the holidaying classes.319 European land law can only develop in a European market and this is a creature of the last couple of decades of the twentieth century and depends upon a critical mass of potential buyers. A cursory survey of the queue at Gatwick for the easyJet to Nice suggests that things have changed, changed utterly. When holidays are so mundane it is no surprise to find that holiday homes have become a commodity, enabling a family to keep coming back to the sun and a trophy to show off to our friends. A step-change in the market occurred in the mid 1990s.320 Air travel has increased mobility, but it is specifically low cost flights that have changed the perception of how feasible it is to own a holiday home abroad. Some statistics. Around 50 per cent of the British population flies at least once a year,321 though this is mainly confined to the middle and higher socio-economic groups322 who seem able to overcome their scruples about the environmental cost of flying.323 About a fifth of John Ruskin Works (London, Smith Elder, 1872) vol X 185–187. Mark Twain A Tramp Abroad (Oxford, OUP, 1996, 978-0-195-10137-9, a reprint of 1st edn, 1878) ch XXIX passim. 319 See below [2.34]. 320 See below [1.91]. 321 Independent May 28th 2005. 322 Independent November 16th 2006. 323 A single flight from London to Rome creates 1.4 tonnes of carbon dioxide: Independent May 28th 2005. If Ryanair boss Michael O’Leary is to be believed farting cows and the rest of the livestock industry are a greater source of atmospheric carbon: Independent November 7th 2006. 317 318
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Land as a European Commodity
Brits fly to Spain each year, the number one destination, spending an average of 11 nights. Trips to France lag behind in number, average length and total spend and overall there is a considerable deficit in the balance of payments on tourism.324 Around 400K Europeans are airborne at any one time,325 and low cost airlines service 1.5K routes.326 British demand has increased five-fold over 30 years and demand is set to increase again three-fold in the next 25 years. Owners of foreign properties want to visit them quickly and often so a low cost air link is important in the way that London commuters once looked for an express line to Waterloo, though airlines emphasise that they owe no duty to second home-owners.327 Cheap flights have fuelled the land market in Europe, and exported British buyers to the continent of Europe. William Sanson had hard words that ‘people should travel less’.328 Property owners should travel less as well.
B USI N ESS R I G HTS TO B UY LA N D
Business Rights to Buy Land 1
Relevance of market freedoms
[1.63] The internal market within which there is freedom to make capital investments is also an area within which there is the right to move to set up businesses and to provide or receive services, and to move employees.329 As for capital, a European dimension is created only when the conduct of a business crosses a national frontier.330 A Londoner relies on domestic law to set up business in Edinburgh, but a European angle arises when a British citizen moves around the continent providing services and takes his wife with him on his travels, her right to move being an adjunct of his right to provide services anywhere he chooses in Europe.331 European land law seemed likely at first to develop in the interstices of the business freedoms332 and even that limited remit carried a serious bite. Land law, as it stood at that moment when European integration became a reality, is captured and encapsulated in an aside by Advocate-General Jacobs in the Phil Collins case, rejecting a spurious argument about copyright, that 324 Holidays Abroad by UK Residents by Destination 2002 (Office of National Statistics, Table 12.20); Guardian November 27th 2003. 325 Guardian July 7th 2005. 326 Times March 11th 2006 quoting the European Low Fares Airline Association. 327 Observer February 8th 2004. 328 W Sanson Grand Tour Today (London, Hogarth, 1968, 978-0-701-20287-3) 206. 329 EC §2 ex §2; EC §14 ex §7a; Single Europe Act 1986 [1987] OJ L169 1 §89. 330 Angonese (n 153 above); R(JR) Countryside Alliance v Att-Gen [2006] EWCA Civ 817, [2006] 3 ELR 97, [15] Clarke MR; see above [1.20]. 331 C-60/00 Carpenter v Secretary of State for Home Department [2002] I ECR 6279 ECJ. 332 Treaty of Rome §§52–58 (establishment), §§59–66 (services).
Business Rights to Buy Land
43
it might just as well be argued that a Member state could prohibit the nationals of other Member states from buying land for business use.333
Economic freedoms are generally enforced both directly and horizontally,334 giving rise to a domestic right to damages when an EU citizen who wishes to establish is improperly obstructed from buying a flat.335 Thus even before there was a common market in land there was this potential for a European land law intended to achieve a common market in other economic factors of production, but the likely sum of these intercalations seemed to be very minimal. Post-Maastricht it is not too important to be fussy about which economic freedom is in play, since the freedoms overlap.336 Business rights are now secondary in the sense that any land transaction and any control on it should first be considered from the capital angle,337 whether the alternative is establishment338 or services.339 Business freedoms remain in the wings to deal with a case in which a particular control is valid as a restriction on capital movement but is open to question as an impediment to business. There seems to be a developing trend towards considering infringement under multiple headings, the more the merrier.340 Rights to conduct business may also be important during the association period which precedes full membership, since business rights are often granted before capital freedom, though often subject to some prior formality such as pre-entry registration and obtaining a temporary residence permit before travelling.341 Association agreements often also pick up a repealed provision of the Treaty of Rome which provided for ‘economic activity’342 to flow across the European market and since it seems clear, reading between the lines of judicial reticence, that transactions with land do constitute economic activity343t his too may help towards a freer market in land even in advance of full accession. [1.64] Rights to set up in self-employment need to be buttressed by the free C-92/92 etc Phil Collins v Imtrat [1993] I ECR 5145 ECJ, AG[22] Jacobs. Case 2/74 Reyners v Belgium [1974] ECR 631 ECJ; Angonese (n 153 above); Viking Line v International Transport Workers’ Federation [2005] EWHC 1222, [2006] ILP 4; C-268/99 Jany v Staatssecrtaris van Justitie [2001] I ECR 8615 ECJ, J[26] (association agreement). 335 Oberster Gerichtshof 1 Ob 12/00 x (n 213 above); White (n 155 above) ch 6. 336 Reisch (n 63 above) AG[59] Geelhoed; Flynn (n 151 above) 787–791. 337 Konle (n 42 above); Centro Walter Stauffer (n 248 above) J[24]. 338 UK Golden Share (n 151 above) J[51–52]; Baars (n 278 above) AG[26–30] Alber. 339 C-118/96 Safir v Skattemyndighete I Dalarnaslän [1998] I ECR 1897 ECJ, J[22–23], J[30–35]; C-279/00 Commission EC v Italy (Recruitment Agencies) [2002] I ECR 1425 ECJ; Piazza (n 259 above) J[50–53]; Flynn (n 151 above) 789–791; Usher (n 26 above) 111ff. 340 Italian Recruitment Agencies (n 339 above). 341 C-257/99 etc R(JR) Gloszczuk v Secretary of State for Home Department [2001] I ECR 6369 ECJ, AG[54] Léger; C-327/02 Panayotova v Minister voor Vreemdelingenzaken en Integratie [2004] I ECR 11055 ECJ; B Bogusz ‘Right of Establishment for Accession State Nationals’ (2002) 27 EL Rev 472–482. 342 Treaty of Rome §7. 343 Greek Border Regions (n 140 above) Report [7], AG[14] Jacobs; Jany (n 334 above) J[32ff], AG[32ff], AG[122] Léger, but decided on other grounds at J[49]. 333 334
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Land as a European Commodity
movement of persons.344 This applies to established service providers and to workers of their choosing345 and there is also freedom of movement for recipients of services such as tourists346 which may extend their movement rights.347 Movement rights of the self-employed do not require separate consideration because they are the same as for workers,348 an equivalence reconfirmed by the recent consolidation of residence rights for citizens and EEA nationals.349 A person may move from his home state in order to live in and trade from a host state, and permanence accrues after five lawful years.
2
Establishment and service provision
[1.65] The process of setting up a business and operating it from a permanent or settled place of business over an indefinite period of time is called establishment,350 the stability and permanence of the base being crucial.351 Self-employed and professional people352 invoke the right of establishment, as does a worker who subsequently decides to set up on his own. Other establishers are the promoters of undertakings, companies and firms,353 managers of businesses, and businesses when setting up agencies, branches and subsidiaries (‘secondary establishment’).354 Case law is relatively scarce because the concept of establishment is so broad.355 Obstacles to establishment should by now have been removed, including cross-border estate agency and other self-employed professionals dealing with transactions in commercial and residential land.356
344 Reisch (n 63 above) AG[31] Geelhoed; P Craig & G de Búrca EU Law — Text Cases & Materials (Oxford, OUP, 3rd edn, 2003, 978-0-19-924943-5) 768–769; E Guild ‘Free Movement of Business People in Europe’ (1999) 1 Perspectives in European Business Law 3–5. 345 R(JR) Loutchansky v First SS [2005] EWHC 1779, [2005] 3 CMLR @ 43; C-113/89 Rush Portuguesa v Office National d’Immigration [1990] I ECR 1417 ECJ. 346 Van der Mei (n 281 above) 14. 347 C-200/02 Zhu v Secretary of State for Home Department [2004] I ECR 9925 ECJ; Ali v Secretary of State for Home Department [2006] EWCA Civ 484, [2006] ELR 423, [26], Keene LJ. 348 Van der Mei (n 281 above) 14; N Reich ‘Constitutional Relevance of Citizenship and Free Movement in an Enlarged Union’ (2005) 11 ELJ 675–698, 686. 349 Residence Directive (n 122 above) §1. 350 EC §§43–48 ex §§52–58; EU Charter FR (n 131 above) §§16–17; EEA Agreement as adjusted and amended (nn 50–52 above) §§31ff, Annexes VIII–XI. 351 C-55/94 Gebhard v Avocati di Milano [1995] I ECR 4165 ECJ, J[25]; C-221/89 R(JR) Factortame v Secretary of State for Transport [1991] I ECR 3905 ECJ; Reisch (n 63 above); C-215/01 Staatsanwaltschaft Augsburg Beim Amtsgericht Augsburg v Schnitzer [2002] I ECR 14847 ECJ, AG[19] Mischo. 352 Jany (n 334 above) AG[105] Léger. 353 Including co-operatives, public law corporations and non-profit-making organisations. 354 C-212/97 Centros v Erhvervs -og Selskabsityrelsen [1999] I ECR 1459 ECJ; and many later cases. 355 White (n 155 above) 36. 356 EC §44 ex §54; Abolition of Restrictions on Freedom of Establishment, General Programme, (1962) OJ (English Special Edition, Second Series) IX 7, Annex 1 Group 640; Establishment Directive 67/43/EEC, [1967] OJ (English Special Edition) 3, §2.
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[1.66] Around 70 per cent of the economic activity of the EU consists of the provision of services.357 Freedom to do this across the EU is a fundamental of the internal market,358 fully achieved and now coequal with the other freedoms.359 Services360 include industrial activities, commercial activities, the work of craftsmen, and professional activities of kinds normally provided for remuneration, not to mention morally dubious activities such as prostitution361 and gambling. The key is that activity is carried out from a base more temporary than a permanent establishment,362 so renting of premises abroad may perhaps be suggestive of service provision. Schnitzer363 is a leading case precisely because it sits so uncomfortably close to the junction of these two freedoms. A Portuguese firm was employed on a construction project in Bavaria to carry out the plastering work, stretching over a three-year period. German domestic law required a service provider to be listed on a trades register but this and the administrative fine imposed in default were improper as a matter of European service provision. The decision that the company had not established in Germany over this period of time was not easy.364 Services vary widely and there is no abstract test for the necessary duration or frequency, but the repetition will be less and the pattern less regular than with an establishment.365 [1.67] Pre-Accession Association Agreements often allow service provision, as well as establishment, usually subject to some prior administrative control.366 Free movement of services will not be fully attained in the ten eastern states (the eight eastern accession states of 2004 plus Bulgaria and Romania) until the end of the transitional period of up to three years after accession.367 An establishment in one state can also be used as a base from which to stray over a border to provide tourist or other services in a second state on a more temporary basis.368
Services Directive 2006/123/EC [2006] OJ L376 36, R[4]. EC §§49–55 ex §§59–66; EEA Agreement as adjusted and amended (nn 50–52 above) §§36ff, Annexes IX–XI; EU Charter FR (n 131 above) §17[2]. 359 M Adenas & W-H Roth Services and Free Movement in EU Law (Oxford, OUP, 2002, 0-19-829938-9). 360 EC §50 ex §60; Schnitzer (n 351 above) J[3–7]; White (n 155 above) 37–42. 361 Jany (n 334 above) AG[118ff] Léger, J[49]; many sex workers are in disguised employment: at J[51ff]. 362 An EU service provider can subsequently establish, and this right may be extended by the Council to the nationals of third countries. 363 Schnitzer (n 351 above) J[3–7], AG[22] Mischo. 364 Schnitzer (n 351 above) AG[18] Mischo; JL Hansen ‘Full Circle’ (2000) 11 European Business Law Review 83–90. 365 Schnitzer (n 351 above) J[30–31], J[40]. 366 Gloszczuk (n 341 above); C-257/99 R(JR) Barkocki v Secretary of State for Home Department [2001] I ECR 6003 ECJ; C-16/05 R(JR) Tum v Secretary of State for Home Department [2004] 1 CMLR 33 @ 1012 ECJ, AG[27] Geelhoed. 367 Accession+10 (n 69 above) §57[1]. 368 Luisi (n 225 above); MC Van de Woude & P Mead ‘Free Movement of the Tourist in Community Law’ [1988] 25 CML Rev 117–140. 357 358
46
Land as a European Commodity
3
Restrictions on business freedom
[1.68] Restrictions on establishment369 may be imposed in the interests of public policy, public security, public health, or other grounds approved by the EU Council; legitimate purposes included town and country planning, securing a permanent population, economic activity.370 Nationality-based discrimination is banned, whether direct or indirect.371 If a control fails on one ground it becomes unnecessary to consider the other,372 but justification may be needed under both freedoms373 because restrictions on establishment have to be justified on narrower grounds than capital restrictions, which have a broader base.374 So a control has to be justified as a control on capital movements and separately as a control on establishment.375 [1.69] Domestic restrictions on service provision are multifarious, often nefarious, and very frequently in conflict with European principles. German service providers usually have to be listed in a trades register before firms can begin to trade, a clear restriction and one that cannot be tolerated at all unless registration is automatic, free of subscriptions,376 and without delay or complication. Even with these safeguards, it was improper to require a Portuguese firm to register in Germany before carrying out plastering work in Bavaria,377 and there are innumerable other reported cases of unjustified restrictions.378 Of course, controls may be justified, recent examples including taste requirements for computer games,379 respect for the state minimum wage,380 and a duty to deduct tax at source.381 [1.70] A new Directive has been agreed to attack remaining restrictions on service provision.382 It will continue to be necessary for a service provider to comply with regulations of the host state where the service provision is to be carried out. A service provider has a ‘single point of contact’ in a particular EC §46 ex §56. Konle (n 42 above) J[40]. 371 C-320/03 Commission EC v Austria (Ban on Lorries) [2005] I ECR 9871 ECJ, J[38]. 372 UK Golden Share (n 151 above) J[51–52]. 373 Safir (n 339 above) AG[9], AG[16–18] Tesauro. 374 Safir (n 339 above) AG[16] Tesauro. 375 Safir (n 339 above) AG[18] Tesauro; contrast Greek Border Regions (n 140 above) [1989] ECR 1461 ECJ, J[20ff] (pre-Maastricht). 376 C-58/98 Conster [2000] I ECR 7919 ECJ. 377 Schnitzer (n 351 above). 378 Eg C-79/01 Payroll Data Services (Italy) [2002] I ECR 8923 ECJ. 379 C-36/02 Omega [2004] I ECR 9609 ECJ. 380 C-369/96 Criminal Proceedings v Arblade [1999] I ECR 8453 ECJ. 381 C-290/04 FKP Scorpio Konzertproduktionen v Finanzamt Hamburg-Eimsbüttel [2006] STI 2274 ECJ. 382 Services Directive (n 357 above) §§2, 4, but excluding, eg, social housing; financial services are to be subjected to a dynamic consolidation to remove remaining barriers whilst reflecting stakeholder sentiments: Financial Services Policy 2005–2010 (EC Commission White Paper, December 5th 2005, IP/05/1529); Handbook on Implementation of the Services Directive (EC, 2007). 369 370
Business Rights to Buy Land
47
state,383 a single384 regulator from whom he can obtain information about all compliance requirements in that country. [1.71] German chimney sweeps385 are illustrative of the problems, having enjoyed a near monopoly since the fifteenth century under a scheme for allocating sweeps to districts, one sweep being allocated to each of 8K districts created in 1937 by Heinrich Himmler. Since then functions have been changed to include checks on modern heating systems and the system has in theory been open to non-Germans but it is obviously inimical to open competition. Two lists are set out in the new Services Directive of restrictions on establishment by service providers to be eliminated and of such requirements that have to be evaluated. Prohibited requirements relate to386: 앫 앫 앫 앫 앫 앫 앫 앫
nationality of staff; residence of shareholders; establishment in more than one state; primary or secondary establishment; reciprocity requirements; tests of market need; financial guarantees; and registration for a period before commencing provision.
Requirements that will need to be evaluated, and will be subject to a presumption against their acceptance unless a justification can be established,387 relate to: 앫 앫 앫 앫 앫 앫 앫 앫 앫
quotas or territorial restrictions; prescription of the legal vehicle required by service providers; reservation of access to specific providers; bars on multiple establishment within a state; minimum numbers of employees; fixed tariffs; sale price fixed below cost; requirement to allow access to services by other providers; and joint supply.
This list is not exhaustive. Application of this Directive to lawyers is considered elsewhere.388
Services Directive (n 357 above) R[48], §6. There could in fact be more than one in a state. 385 J O’Keefe ‘Brussels Watch’ [2006] 42 LSG 11; Guardian November 4th 2006; C-134/05 Commission EC v Italy (Debt Collection Services) [2007] July 18th ECJ. 386 Services Directive (n 357 above) §14; this Directive is to be implemented by December 28th 2009. 387 Services Directive (n 357 above) §15. 388 See below [7.07ff]. 383 384
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Land as a European Commodity
[1.72] Recipients of services will also receive new rights to information about the service and its provider and about the quality of the service offered.389
4
Acquisition of property for business
[1.73] Freedom to set up a business elsewhere in Europe is one of the key drivers of the internal market, which requires the ability to buy and rent premises from which to conduct that business. Controls on the acquisition of land by EEA nationals hinder free establishment and service provision and may well fail for that reason. Establishment includes the right for a national of one EU state to acquire and use land and buildings situated in the territory of another EU state, a right important enough to be mentioned in the EC Treaty itself,390 with a qualification in relation to agricultural activity.391 It is merely one specific example of the right to all facilities and assistance in pursuit of an established business.392 This is why controls on landownership in the Greek ‘border’ regions393 were perceived as infringements of the freedom of establishment. Associated with the acquisition and use of business property394 is the right to all assistive facilities, notably the exploitation and transfer of land, complementary rental rights,395 and the right to obtain loans and to offer land as security.396 Residence rights397 include the acquisition of a second home to be used while exercising that freedom. Land law rules must not have the indirect effect of making it more difficult for people to set up a business, though this will usually reconfirm that a restriction is improper as a hindrance to capital movement.398 Legislation hindering access or exercise of such rights need to be tested and justified, and it will be very difficult to justify treating nationals of different states unequally.399 Italy formerly limited access to social housing to Italian nationals. Limits applied both to access to allocation of 389 Services Directive (n 357 above) §§19ff; these are restrictions on service provision (as opposed to the restrictions on establishment by service providers in §§9–15 just discussed). 390 EC §44 [2](e) ex §54 [3](e); Jenard Report [1979] OJ C59 1, 34. 391 EC §33[2] ex §39[2]; Greek Border Regions (n 140 above) J[21]. 392 EC §43 ex §52. 393 Greek Border Regions (n 140 above) J[20ff], AG[8], Jacobs; J Kalisperas ‘An Outline of the Greek Property Market’ (1978) 248 EG 853–854. 394 Greek Border Regions (n 140 above) J[13]. In Centro Walter Stauffer (n 248 above) J[19] it is stated that an establishment only arises when land is managed actively and not through acting as a landlord of rented property. 395 Greek Border Regions (n 140 above) AG[8] Jacobs; he uses the term ‘second home’ in a sense slightly different from its normal English sense. 396 Council Programme December 18th 1961 [1962] JO 32, 36; Italian Housing Aid (n 231 above) J[14]. 397 C-62/96 Commission EC v Greece (Ship Registers) [1997] I ECR 6725 ECJ, J[19]; C-106/91 Raurath [1992] I ECR 3351 ECJ, J[16–17]; C-363/89 Roux [1991] I ECR 273 ECJ, J[9–10]; Case 48/75 Royer [1976] ECR 497 ECJ, J[50]. 398 Flynn (n 151 above) 788. 399 Greek Border Regions (n 140 above) J[20–23]; C-243/01 Criminal Proceedings v Gambelli [2003] ECLYB [160] ECJ.
Workers
49
homes and help with mortgage costs. This restricted improperly establishment, secondary establishment and employment rights — between which no distinction should be made400 — and limited facilities which could encourage and make easier the exercise of those rights.401 Self-employed people must have equal access under housing legislation, irrespective of their nationality.402 Given the transience of service provision, outright ownership of land may seem less likely to be invoked by a service provider,403 but it may need to acquire an office or similar infrastructure.404 A service provider will commonly need to rent business premises and residential accommodation for workers and letting is itself a provision of services.405 In the Greek border regions controls existed on renting land and taking assignments of agricultural property which would seriously affect a person wishing to come temporarily from elsewhere in the EU to trade or farm in Greece.406 It must be remembered that the service freedom applies both to the provider and to the recipient of the service, especially important in tourist areas,407 and there must be no nationality-based discrimination.408
WO R KER S
Workers 1
Main categories of economic migrant
[1.75] Official statistics measure individual workers and retirees, but they do not provide a convenient measure of workers emigrating and establishing a home overseas. Even without clear figures it is plain that a diaspora is taking place of young British families leaving in the face of rising house prices, unable to afford a decent life without moving to France or Spain. Spain is the major destination409 (about 50K a year), followed by France, with Italy trailing far behind. One in six graduates leaves. Conversely, there is a major influx of workers from overseas, though many of these will presumably be forced to rent.410 [1.76] Long-distance commuting within Britain is increasing to the extent that
400 401 402 403 404 405 406 407 408
Italian Housing Aid (n 231 above) J[12]. Italian Housing Aid (n 231 above) J[10], J[14]. Italian Housing Aid (n 231 above) J[15–17]. Greek Border Regions (n 140 above) AG[9] Jacobs, J[27]. Schnitzer (n 351 above) J[28]. Reisch (n 63 above) AG[31] Geelhoed. Greek Border Regions (n 140 above) Report [9], J[24], but decided on other grounds at J[28]. Albore (n 138 above) AG[12] Cosmas. EC §12 ex §6; Italian Housing Aid (n 231 above); Greek Border Regions (n 140 above) Report
[24]. eg, Spain 33 to UK and 88 from UK to Spain every day: Independent November 3rd 2006. Independent August 4th 2006, citing Office of National Statistics figures; immigration of 582K was matched by an exodus of 360K Brits in 2004. 409 410
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Land as a European Commodity
800K people travel regularly more than 30 miles,411 and this is now spilling over into Europe. One study predicts a commuter belt stretching from Barcelona, Palma and Marrakech to Dubrovnik.412 Some malcontents already commute to work through the Channel Tunnel from cheap homes in the Pas de Calais,413 but weekly commuting from the continent is the perquisite of self-employed professionals, many of whom rely on budget airlines for transportation between their continental bolt-hole and an office in Britain. [1.77] Workers and commuters both enjoy free movement rights.
2
Workers
[1.78] Implicit in an internal market is the principle that labour must be able to move freely within the market, which means unrestricted residence rights for workers — a concession necessarily extended to ex-workers and related categories. These are not the gentlemen who support themselves but rather those who toil and spin. Rights of movement attach to nationals of any of the EEA-30 states414 and these have emerged unchanged from the recent consolidation.415 EEA nationals may stay in the short term in another EEA state for up to three months without declaring their status and do not require a work permit, except for workers from eastern accession states for whom there are restrictions and pre-entry formalities. [1.79] Job-seekers must be free to move from one state to another in search of work and be offered equal access to employment markets.416 Their entry to the employment market should be facilitated by job-seeker’s allowance417 after local residence of sufficient duration to establish the genuineness of attempts to seek work,418 but a job-seeker can be asked to leave if he fails to find work within six months.419
Guardian September 2nd 2005. D Jones Thomson Future Forum 2016 (London, Thomson, 2006), 10; Independent September 9th 2006 citing survey for the Property Investor Show. 413 Guardian November 22nd 2004; Independent September 9th 2006. 414 EC §40 ex §49; EEA Agreement as adjusted and amended (nn 50–52 above) §28[1]; Immigration (EEA) Regs 2006 (n 287 above) reg 5; see above [1.54]. 415 Residence Directive (n 122 above) §1. 416 EU Charter FR (n 131 above) §15[2]; EC §29[2] ex §48[2]; EEA Agreement as amended and adjusted (nn 50–52 above) §28[3]; Case 39/86 Lair v Univeristat Hannover [1988] ECR 3161 ECJ, J[32–33]; C-184/99 Grzelczyk v Centre Public d’Aide Sociale Ottignies-Louvain-la-Neuve [2001] I ECR 6193 ECJ. 417 Not other benefits: Residence Directive (n 122 above) §14. 418 The UK requires habitual residence: C-138/02 Collins v Secretary of State for Work and Pensions [2004] I ECR 2703 ECJ; Collins v Secretary of State for Work & Pensions [2006] EWCA Civ 376, [2006] ICR 1033; C-224/98 D’Hoop v Office National de l’Emploi [2002] I ECR 6191 ECJ, J[38]; C-258/04 Office National de l’Emploi v Ioannidis [2005] I ECR 8275 ECJ. 419 Vitale v Secretary of State for Home Department [1996] Imm AR 275 CA; C-292/89 R(JR) Antonissen v Immigration Appeal Tribunal [1991] I ECR 745 ECJ. 411 412
Workers
51
[1.80] A worker is a person who has entered the employment market under a contract to perform services for a period of time under the direction of another person in return for remuneration.420 Workers may stay in the host state over the longer term, that is, for a period exceeding three months, subject to registration formalities,421 and may claim social security as a migrant worker422 and protection against expulsion. Former workers may retain residence after their economic activity has ceased, a case law right now consolidated. A former worker retains his status when temporarily unable to work, involuntarily unemployed,423 or embarking on vocational training, though there are detailed qualifications424 and these rights are interpreted strictly.425 Additional categories beyond those already mentioned are part-time workers, student workers and posted workers.426 [1.81] Workers who are EEA nationals establish permanent residence after a five-year stretch served as an employee in a host state.427 Provision is also made for cross-border workers: a worker who has completed three years’ continuous employment in the host state may then take up work in a second host and after commuting for the remainder of the five-year period secure permanent rights in the host state he moved to first. Permanent residence may be accelerated and so acquired in less than five years when workers stop work in certain circumstances, for example after reaching host state pension age, taking early retirement, or suffering permanent incapacity to work.428
3
Workers from accession states
[1.82] Workers from Cyprus and Malta enjoy full access to the EEA-30 employment market.429 Controls apply to workers from the remaining eight states which joined the Union in mid-2004 in the heartlands of central Europe, and from Bulgaria and Romania after their accession at the start of 2007. Western states offer higher wages which are attractive to workers from the east and these states have had to be protected against the vast pool of potentially mobile workers by a deferral of full movement rights,430 the delay varying from host to host and being 420 Van der Mei (n 281 above) 22ff; Collins ECJ (n 418 above); C-456/02 Trojani [2004] I ECR 7573 ECJ (migrant working in a hostel for pocket money; left to domestic court). 421 Residence Directive (n 122 above) §§7–11. 422 EC §42 ex §51; EU Charter FR (n 131 above) §34[2]. 423 C-406/04 De Cuyper v Office National de l’Emploi [2006] I ECR 6947 ECJ, J[47] (unemployment benefit). 424 Residence Directive (n 122 above) §§7–8; Greek Border Regions (n 140 above); Case 186/87 Cowan v Trésor Public [1989] ECR 195 ECJ, J[17]; C-413/01 Ninni-Orasche [2004] I ECR 13187 ECJ; P Dwyer ‘Retired EU Migrants’ (2001) 23 Journal of Social Welfare and Family Law 311–328. 425 C-257/00 Givane v Secretary of State for Home Department [2003] I ECR 345 ECJ. 426 Van der Mei (n 281 above) 14, 34ff. 427 Residence Directive (n 122 above) §§16–21. Entitlement should be certified. 428 Residence Directive (n 122 above) §17[1], with much detail. 429 Accession +10 (n 69 above) §24, Annex VII (Cyprus), Annex XI (Malta). 430 Accession+10 (n 69 above) §24 and Country Annexes; A Adinolfiu ‘Access to Work of Citizens of the New Member States’ (2005) 42 CML Rev 469–498.
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Land as a European Commodity
either two,431 five432 or seven433 years. Eastern Europeans who have obtained work permits in the normal way and worked in the west lawfully for 12 months at the time of their home state accession are free to stay in the one host, and a similar one-country right applies to workers admitted after accession and subsequently continuing residence for 18 months. Family members can come and work. Britain has adopted an open doors policy, along with Ireland and Sweden, for which the government has been commended to the rest of Europe,434 but the fact is that the prediction of likely numbers has turned out to have been totally wrong.435 Eastern workers436 in the United Kingdom must apply to the State Worker Registration Scheme within one month of starting work437 and obtain a registration certificate authorising them to work for that employer, and they must be self-supporting during their stay.438 Bulgarian and Romanian workers will face restrictions for up to seven years after their home states joined at the start of 2007, with Germany and Austria opting for the full transition period, and Bulgarians and Romanians coming to Britain will experience the same seven year hitch.439 Many places on the Seasonal Agricultural Workers Scheme will be reserved for workers from Bulgaria and Romania.
4
Family members of workers
[1.83] Family members must be considered separately, since all too often a right of residence for a particular person is accompanied by a refusal to admit members of his440 family. Free movement can mean the freedom to leave behind your partner and family.
Portugal, Spain, Italy, Greece, Finland (ie, to mid-2006). France, Belgium, Netherlands, Luxembourg (ie, to mid-2009). 433 Germany, Austria and Denmark (ie, to mid-2011). 434 Guardian February 6th 2006. 435 A study by University College London suggested a maximum of 13K eastern workers, when 600K have come in total: Independent November 22nd 2006; the figure for net migration is much lower because it takes no account of those who have worked short-term and left: Guardian August 23rd 2006, August 25th 2006; Daily Mail passim. 436 Registration is not required of the self-employed, full-time students, retired workers, those self-sufficient, and those residing lawfully at the time of accession. 437 Accession (Immigration and Worker Registration) Regs 2004 SI 2004/1219 as amended by SI 2005/2400 and recently renewed beyond 2006 by SI 2007/475; S Currie ‘Post Accession Experience of A–8 Migrant Workers in the UK’ (2006) 31 EL Rev 207–229, 212. 438 Social Security (Persons from Abroad) Regs 2006, SI 2006/1026; R(JR) H v Secretary of State for Work & Pensions [2004] EWHC 1097, [2004] 3 CMLR 11 @ 236. 439 EU (Accessions) Act 2006 c 2 s 2; Accession (Immigration and Worker Authorisations) Regs 2006, SI 2006/3317. 440 ‘He’ and ‘his’ and cognate terms are, of course, used in a gender-neutral sense. 431 432
Workers
53
Family members of citizens enjoy rights similar to those enjoyed by citizens, irrespective of their own nationality.441 Full rights are conferred upon the following members of the family of an EEA national citizen442: 앫 앫 앫 앫
a spouse443 (provided the marriage is not one of convenience444), a registered partner treated by the host state as equivalent to a spouse,445 direct descendants under the age of 21 or dependants over that age,446 and relatives in the ascending line (parents and grandparents) who are dependants.447
The extended family is a wider group of people who should be considered domestically to decide whether residence can be granted on the basis that the host state should seek to facilitate entry and residence by people connected to an EEA national in the following groups, even if not themselves nationals,448 that is: 앫 dependants or household members, 앫 family members cared for as a result of serious health problems, and 앫 a partner with a durable and duly attested relationship. Heterosexual cohabitees and unregistered same-sex couples who have chosen not to register their partnership449 thus rely on a host state to recognise their relationship as durable, an unacceptable imposition on those with non-nuclear living arrangements.450 Each case needs to be considered individually, taking account of financial and physical dependence on the national, and any denial of entry or residence must be justified by the putative host state. [1.84] Short-term entry is no problem for family members accompanying or joining an EEA national for up to three months.451 A family that wishes to be together for longer than three months can do so provided that the person they are joining falls into one of the categories of citizens enjoying longer-term residence rights, such as workers and former workers; family members then enjoy 441 Residence Directive (n 122 above) §3[1]; S Peers ‘Family Members Residence Rights’ (2001) 26 EL Rev 76–83; Immigration (EEA) Regs 2006 (n 287 above) regs 7–10. 442 Residence Directive (n 122 above) §2[2]. 443 Kaba v SS Home Department (n 292 above); Carpenter v Secretary of State for Home Department (n 331 above) J[42]. 444 Residence Directive (n 122 above) §35; however, a genuine marriage may be exploited to secure residence advantages: C-109/01 R(JR) Akrich v Secretary of State for Home Department [2003] I ECR 9607 ECJ. 445 Residence Directive (n 122 above) §2[2](b); for other partners, see n 456 below. 446 PB v Secretary of State for Home Department [2005] Imm AR 586 Immigration Appeal Tribunal. A parent caring for a child may obtain derivative rights through the child: C-413/99 Baumbast v Secretary of State for Home Department [2002] I ECR 7091 ECJ; Zhu (n 347 above). 447 Also relatives in the last two categories of the spouse or partner. 448 Residence Directive (n 122 above) R[6], §3[2]. 449 Case 59/85 Netherlands v Reed [1986] ECR 1283 ECJ; L Papdopoulou ‘In(di)visible Citizen(ship): Same Sex Partners in EU Immigration Law’ [2002] Yearbook of European Law 229–262. 450 L Woods ‘Disadvantaging the Disadvantaged?’ (1999) 11 Child & Family Law Quarterly 17–31; R Gaffney-Rhys ‘EU Freedom of Movement’ [2006] International Family Law 65–71. 451 Residence Directive (n 122 above) §§4–6.
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Land as a European Commodity
corresponding subsidiary rights when accompanying or joining the active citizen. Family members need a residence card (an EEA family permit in Britain).452 Permanent unconditional residence should be accorded to family members of Union citizens after residence for a continuous period of five years without expulsion, irrespective of their own nationality, and even sooner if living with a worker at the time of his retirement or death in service. Family members enjoy free-standing rights after their family relationship has ended, for example by death, separation,453 or divorce even if they have not yet had time to acquire permanent residence rights, though there are many detailed rules, much tighter conditions for family members who are not themselves EEA nationals,454 and a requirement of self-sufficiency.455 Children of a departed worker may remain behind to complete their education,456 accompanied by the parent with actual custody.
5
Non-EEA workers and their family members
[1.85] A third-country national has residence rights in most EEA states, though not the United Kingdom, Ireland or Denmark. A person who is not a national of any of the EEA states must initially comply with domestic immigration rules of a host in order to begin work within the EEA and may then remain in the host state by renewing his work and residence permits. Long-term resident status457 accrues after residence as a worker458 stretching over five years without withdrawal of his residence permit and with minimal absences.459 Residence, evidenced by a long-term residence permit,460 remains conditional on the demonstration of adequate resources and also sickness insurance.461 Non-nationals were formerly tied to their host state, but those with long-term resident status may now move to work elsewhere in the EU,462 staying in the second host state for more than three months with a view to employment, other economic activity, study or vocational training. Quotas apply to general workers but numbers of posted workers and
452 Residence Directive (n 122 above) §§7–11; Immigration (EEA) Regs 2006 (n 287 above) regs 11–12 (EEA family permit); Case 12/86 Demirel’s case [1987] I ECR 3719 ECJ (Turkey). 453 Case 267/83 Diatta v Land Berlin [1985] ECR 567 ECJ, J[10]. 454 Residence Directive (n 122 above) §§12–13; Givane (n 425 above). 455 Residence Directive (n 122 above) §§7[1](a)–(d), §8[4]. 456 Residence Directive (n 122 above) §12[3]. 457 Third Country National Long-term Residence Directive 2003/109/EC [2004] OJ L16 44, §§1–3; S Boelaert-Suominen ‘TCNs who are Long-term Residents’ (2005) 42 CML Rev 1011–1052; S Peers ‘Implementing Equality?’ (2004) 29 EL Rev 437–460. No attempt is made to describe the special position of Turkish workers. 458 Excluding seasonal workers TCN Residence Directive (n 457 above) §3[1]; students have other rights. 459 TCN Residence Directive (n 457 above) §4 (up to six months and in total ten months). 460 TCN Residence Directive (n 457 above) §8. 461 TCN Residence Directive (n 457 above) R[7], §5. 462 TCN Residence Directive (n 457 above) §§14–23.
Workers
55
cross-border service providers are unlimited.463 The non-national can then stay on to secure long-term residence rights in the second state or may move back to his original host. [1.86] Family reunification is permitted for the family of a non-citizen,464 again excepting the United Kingdom, Ireland and Denmark. The ‘sponsor’ must have been living lawfully in a host EU state for two years and can then apply for his family members to be allowed to join him,465 on the basis that the entire family will be self-supporting and covered by adequate sickness insurance.466 Reunion rights apply to the sponsor’s spouse, their minor children, and minor children in their joint custody, their adult children who are unmarried and who require care and to dependent parents.467 A host state should also consider granting reunion rights to an unmarried partner who enjoys a stable and long-term relationship with the sponsor.
6
Property law rights of workers
[1.87] A worker needs a place to live. Land law rights are an essential component of the right to work and so national property rules are overridden to ensure that workers are not discouraged from moving.468 The rental market for a French worker in Paris should be no easier and no harder than for an English person who has moved to the French capital in order to work. It is improper to check on the suitability of a worker’s living accommodation before deciding to renew his work permit.469 Controls on foreign ownership were struck down in the Greek Border Regions,470 showing the potency of the European right to work as a means to secure housing, rental rights and landownership.471 Migrant workers have unrestricted access to housing472 and equal treatment with nationals.473 Controls of any kind require justification and their justification will be an uphill battle,474
463 TCN Residence Directive (n 457 above) §16; such people cannot switch to a non-economic basis. 464 Directive 2003/86/EC [2003] OJ L251 12; S Peers ‘Family Reunion’ in N Walker Europe’s Area of Freedom Security and Justice (Oxford, OUP, 2004, 978-0-19-927465-9) 148; G Davies ‘Third Country Family Members of Community Migrants’ [2004] ECLYB lxxvi–lxxix. 465 Family Reunification Directive (n 464 above) §8, subject to any expulsion decision. 466 Family Reunification Directive (n 464 above) §7. 467 Family Reunification Directive (n 464 above) §4; C-540/03 European Parliament v Council EU (Family Reunification) [2006] I ECR 5769 ECJ (annulment claim failed, no breach of E Conv HR §8). 468 Barnard (n 168 above) 461ff. 469 Case 249/86 Commission EC v Germany (Workers’ Living Conditions) [1989] ECR 1263 ECJ. 470 Greek Border Regions (n 140 above). 471 Greek Border Regions (n 140 above) at J[13–19]. 472 Greek Border Regions (n 140 above) Report [20–23], AG[10–11] Jacobs, J[15–18]. 473 Italian Housing Aid (n 231 above); Castelli (n 231 above). 474 eg, nationality requirements for ships’ captains: C-47/02 Anker v Germany [2003] I ECR 10447 ECJ (Germany).
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Land as a European Commodity
so that, for example, it is improper to insist upon local registration of workers’ cars.475
SELF -SUPPO RTER S
Self-supporters 1
Categories of self-supporter
[1.88] Emigration is nothing new, only its pattern. There are 5.5 million British expatriates around the globe, around one in 10 of the population born here, but not so much greater than the figure of 4 million recorded in 1881.476 The largest populations then were in Anglophone countries and these remain popular destinations, but widespread emigration to the continent of Europe is relatively new. Emigration to Europe is running at 70K annually, with 5 per cent of British families harbouring the wish to sell up and move.477 Spain has the largest expatriate community, three quarters of a million full-time and one million including second home-owners.478 Most emigration is motivated by the attractiveness of the destination rather than negative feelings towards the home country, ‘pull’ rather than ‘push’, and research also suggests that emigration correlates with increases in house prices. Around a quarter of people who leave ultimately return. [1.89] Many people emigrate when they retire, moving their main residence abroad and living off their pension.479 Numbers of overseas retirees can be estimated from the number of British nationals receiving their pension abroad, an ominous 666K worldwide, but this figure includes the popular American and Commonwealth retirement destinations. Retirement within Europe is smaller in volume than second home- ownership. Dreams of down-sizing and joining a laid-back lifestyle in the sun need to be coupled with an acute assessment of the tax position and consideration of the practical problems of healthcare and family contact. If at all possible retirees should retain an escape route back to Britain which is not, as Betjeman suggested, simply a matter of putting aside the fare to England.480 There are said to be administrative problems with the payment of 475 C-232/01 Criminal Proceedings v Van Lent [2004] 3 CMLR 23 @ 465 ECJ; C-151/04 Criminal Proceedings v Nadin [2005] I ECR 11203 ECJ. 476 D Sriskandarajah & C Drew ‘Brits Abroad’ (London, Institute of Public Policy Research, 2006); Independent December 12th 2006. 477 Times November 22nd 2006. 478 Unofficial guesses treble these figures to account for people not registered; four-tenths are in Andalucia, 50K move each year and 600K are intending to buy; official British communities in France are 200K, Italy 25K and Germany 115K. 479 A Place in the Sun? Trends in the Ownership of UK Foreign Property (London, Grant Thornton with Lombard Street Research, 2006) 2ff. 480 John Betjeman ‘Costa Blanca’ Collected Poems (London, John Murray, 1975) 381.
Self-supporters
57
pensions overseas, though retirees within the EEA should be entitled to inflationary increases in pension entitlements. [1.90] There is also a small group of wealthy individuals who can live overseas without a regular income and a larger group of economic emigrants.481 [1.91] A person who is planning to buy a holiday home and visit it periodically can rely on entry and exit rights as an EEA national which include the right to reside in another European state for up to three months at a time.482 This right is conferred personally and directly on EU citizens and EEA nationals and is free from the need for a visa and from any other similar administrative formalities, apart from possession of a home state ID card or passport.483 National borders within the EU are no longer controlled484 except when entering Denmark and in the common travel area of Britain and Ireland.485 Those paid to act as our counters suggest that 230K Brits owned bolt-holes overseas in 2005,486 though revised methodology puts the figure higher487 and private sector research suggests a figure closer to 300K, with a big upswing from 1998 onwards and a firmly upward course predicted for the future.488 Beware: most Britons buying abroad are 50-plus, affluent and male — the same profile as for golfers.489 The official average paid for a home in Europe is apparently £109K,490 though it is not recorded whether this takes account of ‘Spanish practices’.491 Our compatriots will buy anywhere that is cheap and has fast rising prices,492 but Spain is the major victim493 with ten per cent of its total population made up of immigrants,494 and where four out of ten new homes are bought by Britons. Global warming may be setting a new trend for the well-watered countries of northern Europe including Scandinavia, Danish weekend cabins, Irish cottages and the Netherlands.495 Most people who have owned a house in Britain See above [1.75]. Residence Directive (n 122 above) §6. This does depend upon how long a person expects his holiday to last. 483 Residence Directive (n 122 above) R[11], §5[1]; expiry of the ID or passport is not a ground for expulsion: §15[2]. 484 Schengen Acquis [2000] OJ L239 1; Schengen Borders Proposal 2004/127 (COD). 485 The UK acceded to parts by Council Decision 2004/926/EC [2004] OJ L395 70; B Ryan ‘Common Travel Area of Britain and Ireland’ (2001) 64 MLR 228–234. 486 Times May 16th 2005 citing official figures which rely on registration with tax authorities, but as many as two-thirds do not register. 487 D Aspden ‘Methodological Improvements to UK Foreign Property Investment Statistics’ (2005) 619 Economic Trends’ 54–60. 488 A Place in the Sun (n 479 above) 2ff. 489 Independent August 25th 2006. 490 Guardian June 16th 2005. 491 In some Romance countries sale prices are misreported to save tax, a practice partially condoned since tax rates are set to reflect likely under-reporting. 492 Independent June 16th 2005; J Hancock ‘Sunshine, Moonlight and Good Times’ (2002) 06 Money Management 60–62. 493 English households head for Spain (27%) and France (20%) with 18% of second homes elsewhere in Europe and 35% outside Europe: Aspden (n 487 above) 55. 494 Ball Housing Review 2005 (n 8 above) 10. 495 Ball Housing Review 2005 (n 8 above) 10. 481 482
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Land as a European Commodity
for some time could now afford to buy a property abroad. The second homes market may prove to be volatile since demand is discretionary with no demand other than from holiday buyers and there could be considerable default on loans,496 and Spain, in particular, may be ripe for correction. Roughly equal numbers buy property as holiday homes and as investment, but holiday homes work better.497 Given that overseas property has a value equivalent to 2 per cent of net housing wealth, the reported income is a paltry £70 million annually from Spain.498 Amateurs often fail to appreciate costs and maintenance.499 It goes without saying that careful consideration needs to be given to taxation issues, including possible problems created by corporate ownership vehicles, and careful familiarisation is required with double taxation regimes.500
2
EEA nationals
[1.92] French law in its majesty imposed the same curb on the rich and the poor sleeping under bridges,501 and the same spirit of equality is alive today since Europeans are free to move anywhere within the EEA and to stay, provided only that they have the means for their own support. It was in 1992 that the category of self-supporters was first recognised and since then Europe has been uncommonly unified in its geometry, self-supporters being hosted across the EEA-30,502 even in the awkward squad of Britain, Ireland and Denmark, and even if the home state is in the ten eastward accession states including Bulgaria and Romania,503 and even for the Swiss.504 Doors swing wide open to let in those who are well-off. They can enter as a traveller using their ID or passport, but a person planning to arrive for an extended stay in a host state should follow host state rules about reporting their presence within its territory within a reasonable period of time.505 More importantly, they can remain and live in a host state in the longer term, that is, presence lasting more than three months but less than five years. After that the residence of an EEA citizen will become permanent. In the interim period, conditions of self-sufficiency apply to prevent unemployment moving around the market.506 Sufficient resources must be available to ensure 496 497 498 499 500 501 502 503 504 505
Ball Housing Review 2005 (n 8 above) 4. A Place in the Sun? (n 479 above); Paul Davies at Mintel, Independent November 22nd 2006. Aspden (n 487 above) 54. A Place in the Sun? (n 479 above). A Ashworth Times November 24th 2006. Anatole France Le Lys Rouge (1894) ch 7. Residence Directive (n 122 above) §27. Including under pre-accession agreements: Jany (n 334 above) AG[69ff] Léger. See below [2.51ff]. Residence Directive (n 122 above) §§5, 26; Ali (n 347 above) [26] Keene LJ (restatement of old
law). 506 Proposal for a Directive on the Right of Residence for Nationals COM (79) 215 final; Van der Mei (n 281 above) 45.
Self-supporters
59
that the resident will not become a burden on the social assistance system of the host state during their period of residence, and it is also necessary to carry comprehensive sickness insurance cover.507 Proof of self-sufficiency, which applies both to the citizen and to family members, is by declaration made when registering with the host state authorities.508 The level of financial safeguards required509 is essentially set at the pension level, considering both the mover and family members moving with him, though less for students. In the United Kingdom the resources must be enough to avoid claims for income support, housing benefit and council tax benefit and sufficiency is assessed against the maximum resources needed to become eligible for social assistance under the British benefits system.510 A child may be able to satisfy the self-sufficiency test through her parents.511 Social assistance will not be available to be claimed in the host state, wherever it is, and residence could be terminated if a supposedly self-supporting person becomes an unreasonable burden on his host state.512 Withdrawal of residence would not be an automatic consequence of subsequent recourse to the social assistance system, but rather each case would need to be assessed on its facts to consider a particular person as a burden. A child born in Ireland without adequate sickness insurance has no right to enter Britain,513 but it is at present unclear whether making National Insurance contributions is sufficient or whether the health insurance must be private,514 but at any rate failure to maintain adequate sickness insurance is not by itself sufficient to ground a deportation.515 The need for adequacy of resources is removed when permanent residence accrues, generally after five years.516 Social security benefits should be made available as they would be to a host state national.517 Entitlement to permanent residence should be certified by the host state.518 Even permanence is only relative and can be lost after acquisition through absence from the host state for more than two consecutive years,519 a problem avoided by naturalisation in the host state using their domestic rules.
Residence Directive (n 122 above) §7[1](b); Ali (n 347 above) [20] Keene LJ. Jacqueson (n 292 above) 276. 509 Van der Mei (n 281 above) 47, ch 3, 117–125. 510 Immigration (EEA) Regs 2006 (n 287 above) reg 4. 511 Zhu (n 347 above) (a girl born to affluent Chinese parents in Northern Ireland). 512 Residence Directive (n 122 above) §14[1]. 513 W v Secretary of State for Home Department [2006] EWCA Civ 1404, [2007] 1 CMLR 17 @ 558; Ali (n 347 above). 514 Contrast Ali (n 347 above) [9] Keene LJ (surely correct?) and [26] Sedley LJ. 515 Residence Directive (n 122 above) §8[1]; Baumbast (n 446 above) J[93]; T Tayleur ‘Citizens of Europe’ [2003] ECLYB lx–lxiv; O Glynker ‘Partial Migration in the EU’ (2004) 15 King’s College Law Journal 367–397. 516 Residence Directive (n 122 above) R[17], §§16–21. 517 Residence Directive (n 122 above) R[18]. 518 Residence Directive (n 122 above) §19. 519 Residence Directive (n 122 above) §16[4]. 507 508
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Land as a European Commodity
3
EEA families
[1.93] Family members of self-supporters have rights of residence, the extent of the European family being the same as that already considered in the context of workers, heterosexual cohabitees again being in an inferior position and dependent upon the discretion of the host state.520 A family member who is himself an EEA national and self-supporting with medical insurance has a free-standing right, but the right of a non-national is dependent upon the head of the family demonstrating sufficient means and insurance to cover all the family living with him.521 Family members could take up employment or self-employment.522 Permanent residence should be accorded to family members of Union citizens after residence for a continuous period of five years without expulsion, and this is free of conditions and carries the right to social benefits.523 Rights may survive death, termination of the family relationship by divorce, etc, or departure if self-support and medical insurance can be demonstrated.
4
Third-country nationals
[1.94] Rather more than 3% of the European population live in a country of which they are not nationals, and if they are not citizens of any EEA state, around 9 million of them, they are said to be third-country nationals. As such they have social security rights and limited rights of residence and movement within Europe,524 except that the United Kingdom, Ireland and Denmark have opted out. This is by no means the only complexity. Initial entry and subsequent residence must be lawful, and this is controlled by the host state which may withdraw a residence permit before long-term resident status is attained. Long-term resident status is granted in the host state after residence stretching over five years with minimal absences,525 provided the resident can demonstrate adequate, stable and regular resources and sickness insurance.526 Family reunification is permitted to third-country nationals,527 except in the United Kingdom, Ireland and Denmark. The ‘sponsor’ is a third-country national with two years’ lawful residence under his belt who may then apply for defined family members whom he can support to be allowed to join him. The two-year gap truly makes Europe a philanderer’s paradise.
See above [1.83ff]. Residence Directive (n 122 above) §7[1](d). 522 Residence Directive (n 122 above) §23. 523 Residence Directive (n 122 above) §§16, 18, 23. 524 TCN Residence Directive (n 457 above) R[25–26] as from January 2006. 525 TCN Residence Directive (n 457 above) §§1–13; §9 provides for the loss of status in host A after long-term residence in host B. 526 TCN Residence Directive (n 457 above) §§5–9. 527 Family Reunification Directive (n 464 above), see above [1.86]. 520 521
Market Elements
5
61
Students
[1.95] An EU citizen may choose to study or receive vocational training in another EU state at a state-financed or state-accredited establishment528 and European universities must be open to EU students.529 Registration will be required with the host state authorities530 and this requires evidence of comprehensive sickness insurance cover and a declaration of self-sufficiency. A student with resources exceeding the maximum threshold for social assistance in the host state must be admitted, but below that level account has to be taken of the personal circumstances of each student.531 Expulsion is not an automatic consequence of falling below the level of self-sufficiency and consideration needs to be given to individual facts.532
MA R KET ELEMEN TS
Market Elements This chapter has demonstrated that we have the basis for a European market in land with a substantial volume of cross-border transactions, a legislative structure, free movement of funds for purchases and relative freedom for market players to move across the market. Subsequent chapters will show that it is unlikely that a substantive European land law will emerge,533 but that a harmonised transactional law is being constructed.534
528 EU Charter FR (n 131 above) §14; Residence Directive (n 122 above) §7[1](c); Immigration (EEA) Regs 2006 (n 287 above) reg 4 (enrolled at an institution on the Department of Education and Skills Register of Education and Training Providers). 529 C-147/03 Commission EC v Austria (Access to Higher Education) [2005] I ECR 5969 ECJ. 530 Residence Directive (n 122 above) §8[1]. 531 Residence Directive (n 122 above) §8[4]; otherwise the minimum social security pension paid by the host state. 532 Grzelczyk (n 416 above). 533 See below [ch 3]. 534 See below [ch 5], [ch 7], [ch 8], [ch 9].
CO N TR O L S O N EUR O PEA N B UYER S
2 Controls on European Buyers Restrictions and Controls. Military Regions. Second Homes. Agricultural Land and Forests. Direct and Indirect Controls. Justification of Controls. Authorisation and Declaration Schemes. Swiss Controls.
R ESTR I CTI O N S A N D CO N TR O LS
Restrictions and Controls 1
Second homes
[2.01] Broadsheet readers may aspire to the sophisticated lifestyle described by Mairéad Molloy: My partner Chris and I live between Knightsbridge, Cannes and Toulouse, but I also have two homes in Ireland.1
Even the bravest spirit may be a little daunted by the thought of five homes or, as the headline writer put it, ‘four second homes’. After all, Mairéad tells us that such a life involves split wardrobes, multiple repair bills, complex arrangements, much travel and too little time to enjoy the golden glow from the 34-hectare patch of sunflowers in the backyard. Nevertheless, a more modest version of the European lifestyle remains a widespread dream. About 3 per cent of British households already have a holiday home abroad and many city traders plan to invest their bonus in foreign property without bothering to view, while another 28 per cent of the population hold on to the hope that a lottery win will unlock their fantasy of a second home in the sun.2 An unscientific survey suggests that many academics are included among the group of dreamers. The question that this chapter considers is the converse one, that is, the extent to which states can guard themselves against an influx of second home-owners. [2.02] European countries were once closed shops, limiting land ownership to Guardian Weekend June 10th 2006 79. Guardian January 11th 2007, citing a poll for Pure International by Populus ; one may wish to avoid their preferred destinations: France (28%), Italy (21%) and Spain (19%); a luxury property overseas is seen as an important symbol of achievement by 60%, more than an attractive partner (51%) or luxury yacht (18%); Times November 22nd 2006. 1 2
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Controls on European Buyers
nationals or long-term residents, and preventing ‘aliens’ from acquiring land. International law allowed each state to determine what restrictions should apply, and this right was widely exercised, as Weisman3 found when he surveyed Western Europe. It went without saying that markets at the time of his work in 1986 were restricted in the socialist east. Some states pursued policy objectives such as military requirements or linking the spread of second homes, such purpose-based rules being called ‘controls’ in this chapter. These stand some chance of surviving accession to the EU, though subject to strict justification. Outright restrictions (‘restrictions’) are limits on land ownership imposed without any policy objective but merely in order to exclude foreigners from the land market as an assertion of national sovereignty, either for historical reasons or to reflect national sentiment of ‘Romania for Romanians’ or ‘a terra corsa à i Corsi’. Their origin was often feudal and hence directed towards defence requirements, but most states moved on later to licensing systems for land and administrative controls on the movement of funds. Lack of a policy reason for a restriction will make it invalid once the state joins the European capital club, subject to any transitional period allowed on accession.4 Entry into the EU and the subsequent expiration of transitional periods precipitated crises in many parts of the continent when closed societies and compartmentalised markets were suddenly jumped into a modern world where wealthy buyers could come from other parts of Europe. Weisman’s5 survey of the Berlin Wall era found that purpose-based controls were used in most states of Western Europe in pursuit of a variety of policies, such as: 앫 preservation of scarce land (Norway, Sweden and Ireland),6 앫 economic control and cultural protection (France),7 and 앫 stabilisation of market prices or nature conservation (Norway). Controls were targeted at particular kinds of land, demarcated according to the land’s quality, use or location. Limits to second home-ownership remain common in modern Europe.8 [2.03] The Third Directive attacked compartmentalisation of the general market in capital whilst reserving the position of second homes; but the more rigorous realignment at Maastricht applied to second homes as to all other forms 3 J Weisman ‘Restrictions on Acquisition by Aliens’ (1980) 28 American Journal of Comparative Law 39–66, 41. 4 See below [2.19ff], [2.28ff]. 5 Weisman (n 3 above); L Keywan ‘Do We Live in Alien Nations?’ (1972) 3 California Western International Law Journal 75–111, 76; D Zagaris ‘Investment by Non-Resident Aliens in US Real Estate’ (1977) 31 University of Miami Law Review 565–614, 604–605; JK Bentil ‘Tenancies of Immovable Property and the EEC’ (1980) 124 SJ 523–525; D Campbell Legal Aspects of Alien Acquisition of Real Property (London, Kluwer, 1980). 6 Irish Land Act 1965 s 45(1)(g)(ix). 7 French Government Declaration May 23rd 1966; Weisman (n 3 above) at 43. 8 See below [2.15ff].
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of capital movement.9 So it was at that moment, the start of 1994, that national laws had to be reformulated and controls had to be tested for utility. European law will assess the legitimacy of the policy objective and then, the test most likely to be failed, test the control adopted for proportionality in relation to its objective; measures adopted must not go beyond what is needed to secure the policy objective so a control will be invalid if a lesser control could achieve the objective. Few controls have in fact survived scrutiny by the European Court of Justice. Succeeding sections consider the policy objectives and the justification process.
MI LI TA RY R EG I O N S
Military Regions 1
Feudal restrictions
[2.04] Until very recently most states imposed some controls on the acquisition and ownership of land by foreigners and in the unhappy past states had reason to be fearful. A continent at war with itself needed land law rules for security. Artois — the region, as all Stella drinkers know, around Arras in northern France — has been ravaged by armies led by Marlborough and the Duke of York and many others and the Great War trenches stuck there for four horrible summers; so regular were the incursions that the customary law of Artois provided that houses were treated as movable property, so frequently were homes destroyed by marauding troops.10 Insecure medieval kings naturally put security ahead of the rights of property owners, assuming that foreigners were potential traitors, and just as much on guard to protect their border regions from erosion by economic assault from without. Hence the concept of fealty as a component of feudal tenure, the idea that a person holding land of the Crown owed in return a personal obligation of loyalty.11 Feudal controls survived much later in many European countries than they did in England, a matter which the lawyers drafting Lord Nelson’s will forgot. His reward from the Bourbons for propping up their corrupt regime in Naples was the gift of the Dukedom of Brönte on the lower slopes of Etna in Sicily. He created a testamentary trust for sale of this estate, which he never had an opportunity to visit, but this direction to sell was held to be illegitimate and so not binding on his trustees.12 Land was held in fee and could not be sold on the open market, though by the time the case came to court the feudal tenure had been abolished and converted to absolute ownership, too late to help the beneficiaries of his will. See above [1.29]. JAC Smith ‘Classification by the Site in the Conflict of Laws’ (1963) 26 MLR 16–33, 22. 11 AWB Simpson History of Land Law (Oxford, Clarendon, 2nd edn, 1986, 0-19-825536-5), 15–16. 12 Nelson( Earl) v Lord Bridport (1846) 8 Beaven 547, 50 ER 215; see below [11.28]. 9
10
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Controls on European Buyers
In England the feudal yoke was cracked by Cromwell and formally broken in 1870,13 legislation which survives to this day as re-enacted in 1914.14 Under it real property in the United Kingdom may be taken, acquired, held and disposed of by an alien in the same manner as by a British subject and title may also be obtained by succession on death.15 Controls on aliens are now needed only in war time16 and, let us hope, never again.
2
Border regions
[2.05] Very many countries had restrictions on foreign ownership in border regions or other areas of military significance. France and Spain are no longer likely combatants, but the Pyrenees were once a vital demarcation line. Just to the north at Pau was the home of Cecil William Mercer, a gentleman barrister who made his living writing under the pen name Dornford Yates. Woven into the plot of a Berry book17 is a sub-theme involving the ownership of a barn, registered in the name of an English villain, in which the victim Tass is found buried in quicklime. Englishmen were not, at the time of the story, allowed to buy within 20 miles of the national boundary, so the registration was revoked and the villain’s ill-gotten gains could be confiscated. Greece applied a special acquisition regime to all land in the Greek ‘border’ regions, including islands, islets, coasts and designated parts of the interior, a category which came to occupy about 55 per cent of Greek territory. An attempt by a foreigner to acquire land in the border regions was an absolute nullity to which criminal sanctions also applied.18 ‘Emergency’ laws imposed in 193819 applied to Greeks but the regime was tougher for foreigners, who could acquire land only if the border land designation was revoked, a ludicrous rule often circumvented by using a Greek company as a property-owning vehicle.20 Accession to the EU has led to the controls being struck down as incompatible with the right of any European citizen to establish a business in another country.21 Establishment of a business entails all facilities and assistance needed to pursue that business,22 including the right to acquire and use business property in the territory of a member state, the right to acquire a second home in order to exercise Forfeiture Act 1870, 33 & 34 Vict c 23, s 1. British Nationality and Status of Aliens Act 1914, c 17, s 17. 15 The old common law continues for estates passing prior to May 12th 1870. One would prefer after 1925 to say ‘land’; legislation referring to ‘real property’ suggests that the liberalisation would not extend to leaseholds. 16 Public international law lies beyond the scope of this chapter. 17 Dornford Yates The House That Berry Built (London, Ward Lock, 1945) ch XVI. 18 Presidential Decree June 22nd to 24th 1927, but excluding leases up to three years and mortgages. 19 Greek Emergency Law 1366/1938, amended by Laws 1629/1939 and 21123/1939. 20 J Kalisperas ‘An Outline of the Greek Property Market’ (1978) 248 EG 853. 21 Case 305/87 Commission EC v Greece (Border Regions) [1989] ECR 1461 ECJ; Report [11–I4]; also AG[1–3] Jacobs; J[20–23]; C Bright & S Bright ‘Europe, The Nation State and Land’ ch 14 in S Bright & J Dewar Modern Studies in Property Law (Oxford, OUP, 1998, 0-19-876455-3), 365–366. 22 EC §43 ex §52. 13 14
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that freedom, the right to use and deal freely with the property after its acquisition, and complementary rental rights.23 Any hindrance to access to or exercise of such rights requires justification and the controls in the Greek borders failed all of these tests. [2.06] Italy attached military importance to almost all of the smaller Italian islands,24 including Ischia in the Bay of Naples. Albore25 acted as notary for two German nationals who wanted to buy a home on the island but who were refused registration of their title since the purchase lacked prefectoral authorisation. It seems odd to act against these two men when the island was already practically a German colony,26 and as non-nationals the two were discriminated against by a restriction on capital movements which did not apply to Italians.27 Military justification was in principle available, not merely by alluding to the defence but only by demonstrating real and serious risks to the military interests of the country,28 that is, applying full proportionality. Application of the test is for the local courts.29 They must find a logical connection that must exist between the attainment of the stated objective and the rules enacted, and it would undoubtedly be difficult to justify today controls unchanged since before the Second World War30 and impossible to justify leaving the military authorities an unfettered discretion.31 [2.07] Finnish border regions are designated by legislation currently dated 199232 but originating in the country’s earlier struggle to cope with Russia as a neighbour. Purchase of property in borderland areas is restricted when the buyer has not been domiciled in Finland for the last five years or is a non-Finnish company; permission is required from the local authority, though inheritance and transfers on matrimonial breakdown are exempt from control.33 Similar controls continue in Poland, Turkey and many other countries.
Greek Border Regions (n 21 above) AG[8] Jacobs. Italian Law 898/1976 §18 as amended by Law 104/1990 §9; the case is unusual in that discriminatory treatment was introduced after Italy became an EC member. 25 C-423/98 Re Albore [2000] I ECR 5965 ECJ. 26 P Blanchard Blue Guide to Southern Italy (London, A & C Black, 8th edn, 1996), 232. 27 See below [4.38]. 28 Albore (n 25 above) J[21–24]. 29 Albore (n 25 above) J[19]. 30 Albore (n 25 above) AG[67–70] Cosmas. 31 Albore (n 25 above) AG[77ff] Cosmas. 32 Finnish Law on Land Purchase by Non-residents 1992 [1993] ECLYB [4069]. 33 Finnish Law (n 32 above) §§4–10. 23 24
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Controls on European Buyers SECO N D HO MES
Second Homes 1
European controls
[2.08] Many states maintain controls against the spread of second homes, often confined to particular pressure points such as coastal areas or national parks, and European law has had to adapt to the continuance of these controls. English law almost always refers to ‘second homes’ meaning a home other than the principal residence used for holidays or weekends, possibly rented out to holiday makers for some weeks and otherwise left empty. Problems of categorisation often occur in taxation contexts, for example the reduction in council tax on second homes,34 definition of ‘principal residence’ for the ill-fated poll tax and the private residence exemption from capital gains tax.35 The French term is ‘maison secondaire’ which is almost always translated into English as ‘secondary residence’ a sense not quite consonant with normal English usage. The Third Capital Directive (1988) continued to exclude second homes from the general freedom in the market in capital, in order to preserve stability in particular areas and in border regions.36 However, the Treaty provisions on capital movements agreed at Maastricht37 trampled into this area as well and applied in full to second homes as from the start of 1994. Any remaining national controls had either to be relaxed or to meet the justification requirements of European law. Legitimate reasons for controlling the market in second homes might include the preservation of specific regional characteristics, the need to make sparing use of land where residential development sites are limited and the need to control price rises caused by a rash of second homes, as well as the desire to maintain a permanent population with settled economic activity.38 Few controls have survived scrutiny by the European Court of Justice. The trauma following accession can be great even if a lengthy period is allowed for adjustment.
2
Britain and Ireland
[2.09] The second homes market in Britain provides a good snapshot of what is happening elsewhere, and it is useful to consider purely internal transactions as a prelude to the discussion of second home-ownership with a cross-border dimension. Using council tax registrations, the government estimated that there are 34 Local Government Finance Act 1992, c 14, s 11(2) and s11A added by Local Government Act 2003, c 26, s 75(1) as from April 1st 2006. 35 Taxation of Chargeable Gains Act 1992, c 12, s 222. 36 Third Capital Directive, Directive 88/361/EEC for the implementation of EC §67, [1988] OJ L178 5, R[6–7], §6[4]. 37 See above [1.29]. 38 C-302/97 Konle v Austria [1999] I ECR 3099 ECJ, AG[16] Pergola, J[40].
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236K across the UK in 2005,39 though this is almost certainly an under-estimate,40 and that they are set to double within 20 years. Restrictions on second homes have been proposed to protect vulnerable areas against an influx of outsiders, but schemes run up against the EU concern to protect a few possible European buyers, which often precludes the possibility of locking-out the vast mass of buyers who are actually British. [2.10] The greatest preponderance of second homes is in central London,41 with more than 27% of living units in the City of London having a secondary use, that is, as a London bolt-hole for a worker living in the country. Kensington is considering introducing a local preference, which, as one paper put it, will protect children from well-heeled families from having to move to Chelsea.42 The scheme is out for public consultation. [2.11] More in need of protection are the English beauty areas. Second homes are increasing across most cheaper rural areas,43 but especially in the South West of England,44 especially Scilly (where almost a quarter of all properties are second homes) and South Hams in Devon (one in eight). Residence clauses have been imposed on the resale of former local authority housing bought under the right-to-buy scheme, reducing resale values by up to £100K,45 but the supply of affordable housing is inadequate everywhere. Villages in the National Parks have become depopulated like Goldsmith’s Auburn,46 so the twin issues are the economic dead hand of absentee owners and the displacement of locals from the housing market in tourist areas. There are problems in the New Forest heritage zone47 and Exmoor,48 which boasts the least affordable housing for local residents in the whole of England, and also the Lake District where parts have 60% second homes and buy-to-lets,49 admittedly in a larger market. In all these areas planning policy is the method of control,50 which can only have a marginal impact because it bites only on new building, which is already virtually impossible within the National Parks. If a new home is built there will be a condition attached limiting occupation to a local craft worker or local resident with housing need. Planning controls are also being used in Snowdonia, and in the Yorkshire Dales where the Park Authority’s plans went to a planning inspector 39 Hansard Written Answer by Yvette Cooper MP, June 29th 2006 (this equates to 1.1% of stock); Survey of English Housing (London, Department of Communities and Local Government, 2006) Table S353 (425K, 76% owned). 40 Independent on Sunday April 11th 2004. 41 Sunday Times March 7th 2004. 42 Times November 14th 2005. 43 Sunday Times March 7th 2004. 44 Independent on Sunday April 11th 2004. 45 Independent November 19th 2005. 46 Oliver Goldsmith The Deserted Village (1770). 47 Bournemouth Echo February 4th 2003. 48 Sunday Times April 13th 2003 49 Times May 23rd 2005. 50 Guardian January 20th 2005.
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who endorsed the case for planning controls. The Dales has only 10K homes in total, with second home-ownership of 65 per cent in the dream village of Bolton Abbey.51 Definitional problems abound, such as whether locals should be able to retire back to their native area, the position of people living close to the Park boundary and home-working.52 [2.12] Protection is also needed in the Celtic fringes. Concern about English second home-owners has been central to the political debate in western parts of Wales since the 1960s, where an extremist group dubbed the ‘Sons of Glyndwr’ conducted a firebombing campaign that attacked around 170 properties during the 1980s.53 There is a general belief in the power of planning to shape housing opportunities and regulate housing pressures and the nationalist party (Plaid Cymru) has consistently argued that planning permission should be needed before a home is converted to use as a second home. Wales has around 20K second homes, judging from census and council tax returns, representing only about 1.5 per cent of stock. These are concentrated disproportionately on the west coast from the Gower, Pembroke and Cardigan Bay in the south to the Lleyn Peninsular and Anglesey in the north, all attractive, high price areas. Pembrokeshire Coast National Park proposed a ban on new holiday and retirement homes or indeed any development apart from by local owners or where there is essential need,54 and controls have been introduced in Snowdonia to limit homes to residents of ten years’ standing. A report prepared for the Welsh Assembly reached the surprising and politically unwelcome conclusion that strong constraint of the Welsh second homes market could not be supported economically.55 Many other pressures have made houses unaffordable, notably commuting, movement out of town, or retirement, but the real problem is wealthy owners in pretty areas of acute economic disadvantage, pushing out young people for social and employment reasons. Adjustment of the market cannot provide a solution, so the key is increasing elasticity in supply (ie, building more houses) using existing powers to secure affordable housing in concert with an attack on issues of economic deprivation.56 Coastal parts of Scotland and Ireland are also experiencing pressure. Aberdeenshire is a particular hot spot in Scotland — one is thinking in housing terms here — with pressured area status and a crisis in housing so acute that the 51 Guardian December 13th 2004; Independent December 11th 2004; Guardian January 20th 2005; Independent January 20th 2005. 52 C Brannigan Times October 27th 2006. 53 B Rogers The Man who Went into the West (London, Aurum, 2006, 978-1-845-13146-3) 282–283. According to G Wagner Elegy for Corsica (London, Cassell, 1966) 27 when property cases ‘don’t look like being settled until the next century or so resort is often had to fire’. The Corsican National Liberation Front targets foreigners from mainland France at a rate of 10 holiday homes a month, homes said to have been ‘plastiqué’: Guardian August 28th 2006; firebombing is associated with a ‘revolutionary tax’. 54 Times January 31st 2002. 55 N Gallent, M Tewdwr-Jones & A Mace ‘Controlling Second Homes Through Planning’ (Cardiff, Welsh Assembly, 2002) [5]. 56 Gallent (n 55 above) [4].
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right to buy properties rented from public sector landlords has been suspended. Considerable publicity was given to the sale of a former council house in Plockton, looking out from the mainland over to Skye, at a price above £300K, this tiny village consisting of one-third holiday homes, while 22 families languish on the council waiting list.57 Restrictions of new homes to locals can create problems because the potential market is so small, a particularly ludicrous requirement being to market a house in the highest council tax band to those on low incomes.58 Much of what has been said above about English National Parks applies to special areas such as the Cairngorms.59 Over in Ireland, a 60-mile stretch of Connemara coastline is subject to a ban imposed by Galway County Council on house-building by people who cannot speak Irish,60 the local issue being loss of Irish identity as much as the invasion of second home-owners. Galway is typical of many schemes in concentrating on new building. The Irish-speaking test seems to meet EU tests but it is a particularly vicious deterrent to Dubliners as well as to those from over the seas in England; around forty per cent of Irish residents self-certify themselves as Irish-speaking when the actual fluency rate is about three per cent.61 [2.13] In conclusion, Europeans are not the problem in Britain and Ireland but British and Irish buyers of second, spare, homes in areas where there is already a shortage of housing. The English land market has exploded to such an extent that it is not uncommon for people to own two homes. Since 1999 the ‘new’ Labour government has made the decidedly non-Labour pledge to take no action against second homes62 and surcharges on council tax have been ruled out.63 European rules are designed to protect cross-border buyers, a tiny percentage of the total, but if it were desired to legislate against internal second homing the internal market rules present almost insuperable problems to the successful imposition of controls.
3
The European market
[2.14] The strong and expanding market for Britons to own second homes elsewhere in Europe is described elsewhere.64 West Highland Free Press March 18th 2005. Independent June 9th 2004. 59 Times November 22nd 2005; F Becker ‘Planning, EC law and Access to the Property Market’ [2005] SLT 219–221 (good analysis of the impact of EU rules). 60 Independent December 19th 2002; contrast Bright & Bright (n 21 above) 366. 61 Guardian January 5th 2007. 62 A proposal of the Rural White Paper 2000 Our Countryside: The Future (London, Cm 4909, 2000); A Wallace et al ‘The Impact of Empty, Second and Holiday Homes on the Sustainability of Rural Community’ (York, Centre for Housing Policy, York University, 2005). 63 Housing and Planning Minister Yvette Cooper MP Financial Times July 3rd 2006; Commission for Rural Communities Report on Affordable Rural Housing (London, Department of the Environment, Farming and Rural Affairs, 2006). 64 See below [3.35ff]. 57 58
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4
Austrian alps
[2.15] Preservation of the Alpine environment is a major concern in Austria and Switzerland, the commercial pressures all too apparent. Strong controls apply almost everywhere, but do they meet European rules? First let us consider the position post-Austrian accession to the EU. Konle65 was a German national who bought a plot of land in the Tyrol at a judicial auction in 1994. As a non-Austrian, Tyrolean property legislation required him to obtain authorisation to hold on to it, and this would only be granted if he proved that he was not intending to use it as a second home. The Lienz District Court, from which Konle had bought the land, rejected his application for the requisite permission. His right to invest his capital had been restricted and in addition Konle intended to make Austria his home and to run a business from a building erected on the plot he had bought, so bringing himself within the establishment rule, though it was not ultimately necessary to consider this additional point.66 The European Court of Justice awarded damages for the withholding of authorisation.67 The ruling against Austria in Konle opened the way for a rash of schemes designed to restrict the purchase of second homes in tourist areas, an apparent paradox which is in fact easily explained: although the particular controls were discriminatory and disproportionate, the case recognised the possibility that controls on second homes could be justified.68 Legitimate legislative aims included the need to make sparing use of land in regions with limited room for habitation and the need to control price rises caused by a rash of second homes.69 This is backed up by a declaration by member states that: Community acquis shall not prevent individual member states from adopting… measures on the subject of secondary residences… provided such measures are necessary for the purposes of land management and environmental protection [and] provided that… their application does not involve direct or indirect discrimination among nationals of the Member States.70
Catches are that any restriction must be necessary, and the full extent of it must be necessary so that no lesser restriction (such as a system of declarations) would suffice, and it must be non-discriminatory.71 It is not easy to negotiate European law to come up with a scheme that survives scrutiny. [2.16] Konle considered two interrelated systems under successive version of the Tyrol GVG,72 the first enacted in 1993 and a revision in 1996.73 The 1993 65 66 67 68 69 70 71 72 73
Konle (n 38 above); A Lengauer ‘Konle case’ (2000) 37 CML Rev 181–190. See above [1.73]. Konle (n 38 above) J[3–4]. Konle (n 38 above) J[40]; C-213/04 Burtscher v Stauderer [2005] I ECR 10309 ECJ, J[44–46]. Konle (n 38 above) AG[16] Pergola. Quoted in Konle (n 38 above) AG[16] Pergola. Konle (n 38 above) J[40–49]. Grundverkehrsgesetz = Land Transfer Law. Konle (n 38 above) AG[3–5] Pergola, J[3–13].
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scheme failed for breach of the domestic right to property74 and because it discriminated between Austrians and foreigners.75 The 1996 version76 was intended to take the sting out of this ruling by removing the easier declaration scheme for Austrians, but it failed on two new grounds. A new accelerated procedure for Austrians reintroduced discrimination in another form and, more importantly, by adopting the tougher of the two 1993 regimes — prior authorisation rather than prior declaration — the 1996 version fell foul of the requirement to act proportionately, which called for the least intervention possible. What was good enough for Austrians in 1993 could and should have been applied to foreign nationals in 1996. Third time lucky. A new system has been introduced which, according to the Austrian courts,77 meets the requirements of European law, so much so that it was not even necessary to obtain a preliminary ruling. [2.17] Reisch78 concerned the use of building plots for second homes in Salzburg under the Salzburg GVG 1997.79 This required a buyer to make a declaration that the property would only be used as a principal private residence or for commercial purposes, that is, not as a secondary residence. Regional control of secondary residences in sensitive locations was legitimate, Salzburg had avoided nationality-based discrimination,80 and prior declaration was certain.81 All this passed muster, but what failed under European law was a procedure requiring prior authorisation of dubious transactions by the Land Transfer Commission; this operated on a presumption basis and left a wide discretion to the authorities, given that future use could never be proved.82 In the most recent case, Burtscher v Stauderer,83 a landlord sought to evict his tenant, Stauderer, who had failed to make the required declaration and so, it was said, had made his lease null and void. The case shows that the prohibition on use of property as a holiday home held on a lease is the same as for a house that is bought outright.84 However, the penalty for failure to make a declaration within the two-year period — automatic invalidity — was held to be unnecessary and so disproportionate.85 Problems also arise from the Austrian controls on agricultural land.86 It was not targeted at particular pressure points: Konle (n 38 above) AG[17] Pergola, J[9]. Konle (n 38 above) J[12]; see below [4.38]. 76 Konle (n 38 above) J[35ff], J[48]. 77 Oberster Gerichtshof 1 Ob 216/02 z [2003] ECLYB [322]; other domestic decisions are: Oberster Gerichtshof 1 Ob 12/00 x [2001] ECLYB [491]; Oberster Gerichtshof 5 Ob 58/04 [2005] ECLYB [273]. 78 C-515/99 Reisch v Burger Meister Der Landeshauptstadt Salzburg [2002] I ECR 2157 ECJ; C-300/01 Salzmann [2003] I ECR 4899 ECJ, J[53ff]. 79 Reisch (n 78 above) AG[2–8] Geelheed, J[5–9]. 80 Reisch (n 78 above) J[33–34]; Konle (n 38 above) J[40]. 81 Reisch (n 78 above) J[55]. 82 Reisch (n 78 above) J[37–41], AG[116ff] Geelheed; Konle (n 38 above) J[37–48]. 83 Burtscher v Stauderer (n 68 above). 84 Burtscher v Stauderer (n 68 above) J[14]. 85 Burtscher v Stauderer (n 68 above) J[51–61]. 86 C-452/01 Re Ospelt [2003] 1 ECR 9743 ECJ; see below [4.27]. 74 75
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Controls on European Buyers
[2.18] What of purchases before Austrian accession? Konle held that Austrian controls on incomers buying land were not saved by the terms of its accession agreement.87 A second case was Beck.88 A notarised contract made in 1983 for the sale to BL of a flat in Kitzbühel was held to be invalid under the Austrian law on second residences because, ten years afterwards, it was discovered that shares in the acquiring company had been bought by a German allegedly intending to evade Tyrolean second homes controls. A declaration of invalidity of the transaction was made by the Tyrolean courts in 1994. Austrian legislation requiring a declaration which fell foul of European law was saved for a transitional period by the terms of its accession to the EU.
5
Permanent derogations
[2.19] When the market in land was liberalised after Maastricht, Denmark, in a sure sign of things to come, insisted on the right to maintain existing controls on second homes,89 the fear being predatory German neighbours, a fear later repeated in Poland, the Czech Republic and Austria.90 [2.20] Second home-ownership is a concern across the areas of natural beauty. To take just one example, Finland adopted restrictions in 199291 targeted at non-residents, defined in terms of domicile for less than five years in Finland, and at non-Finnish companies.92 In recreation areas, permission must be obtained for purchases from the local authority,93 and the Environment Ministry can tighten the rules against foreign purchases if these increase to create particular problems. Purchases are caught but not inheritance nor transfers on matrimonial breakdown. The Åland Islands form an autonomous administrative district consisting of 6,554 islands in the Gulf of Bothnia with a population of around 23K. Concessions made on Finnish accession94 preserve the effect of existing provisions95 restricting landownership by individuals without hembygdsraettlkotiseutuoikeus (regional citizenship) in Åland; acquisition and holding of land requires permission from the competent authorities, though these restrictions must be See above [1.06]. C-355/97 Beck’s Application [1999] I ECR 4977 ECJ; Salzmann (n 78 above) J[53ff]. 89 Acquisition of Property in Denmark Treaty of EU Protocol 1 [1992] OJ C191 68. The Protocol does not save a control which applies to principal homes as well as second homes: C-370/05 Criminal Proceedings v Festersen [2007] January 25th ECJ, J[46ff]; see also T v Justitsministereit 195/2005, [2007] UfR 99H, [2007] 03 ECL [54]. 90 Guardian August 23rd 2006. 91 Finnish Law on Land Purchase by Non-residents (n 32 above). 92 Finnish Law (n 32 above) §5; for purchase in border regions see §4 and above at [4.07]. 93 Finnish Law (n 32 above) §§7–10. 94 Accession Act of Norway, Austria, Finland and Sweden, Protocol 2 (Åland islands) [1994] OJ C241 352, §1; EEA Agreement [1992] OJ L12 3 as adjusted [1994] OJ L1 572 and amended [2004] OJ L130 3, §126 . 95 Those in force on January 1st 1994. 87 88
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enforced on a non-discriminatory basis.96 Companies also require permission to buy land, and establishment and service provision in general are also controlled. [2.21] Malta joined in 2004 having negotiated a protocol97 to its accession agreement which preserves existing rules on the acquisition of secondary residences. Few dwellings are available and land available for new construction is scarcely enough to satisfy the needs of present residents and hence the case for controls which are not transitional but which may be continued indefinitely. Malta may maintain in force its rules98 on the acquisition and holding of land as secondary residences by nationals of EU states who have not been resident legally on the island for at least five years. Authorisation procedures must be published and based on objective, stable and transparent criteria, which must be applied in a non-discriminatory manner as between nationals of different EU states. Restrictions apply only to property of relatively low value with thresholds of 30K Maltese lira for apartments and 50K Maltese lira for property other than apartments and property of historical importance,99 limits which may be adjusted for property price inflation in Malta. Above those thresholds there is an open market in property for all European nationals.
6 Transition after (eastern) accession [2.22] Controls on second homes are allowed to continue in a number of accession states for a transitional period of five years, subject to review. [2.23] Cyprus is a Mediterranean island like Malta, though with slightly more property and scope for development, the rules currently only operating in the Greek-influenced southern portion.100 Existing legislation in force at the end of 2001101 can be maintained regarding the acquisition of residences for secondary use for five years from the date of accession in 2004.102 [2.24] In the central European heartlands, controls will fade out after five years, measured from mid-2004, but in the meantime the acquisition of secondary residences by non-resident EU/EEA nationals may be controlled using the existing 96 97
ie, they must apply equally to all natural and legal persons of all EU states. Accession Act of Malta, Cyprus and eight Eastern European States Protocol 6 [2003] OJ L236
947. Immovable Property (Acquisition by Non-residents) Act 1974 as amended, c 246. The limits as at August 2007 are about €70K and €117K; the exchange rate is 0.61 Lira to the £ sterling. 100 On the north, see below [4.31]. 101 Land Acquisition by Aliens Law c 109; Laws 52/1969, 55/1972 and 50/1990; Decision 50.228 of the Council of Ministers August 25th 1999; Circular of the Ministry of the Interior to District Officers September 30th 1999. 102 Accession Act of Malta, Cyprus and eight Eastern European States [2003] OJ L236 33, Annex VII [3], [2003] OJ L236 819; C Hillion ‘Long Live the EU’ (2004) 29 EL Rev 583–612. 98 99
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Controls on European Buyers
rules in the Czech Republic,103 Hungary104 and Poland.105 EU and EEA nationals who have been legally resident in the country where they wish to purchase for four years continuously will be free to buy in the same way as nationals. Authorisation procedures in Poland and Hungary must be based on objective, stable, transparent and public criteria applied in a non-discriminatory manner so as not to differentiate between nationals of the member states. A number of accession states allowed a free market immediately: no request for any adjustment period for the second homes market was made by the Baltic states of Estonia, Latvia and Lithuania, nor by Slovakia, so in these states capital freedom operated from the date of accession. [2.25] Slovenia106 may control the market in all land (including therefore second homes) using a safeguard for the general land market for a maximum of seven years after its accession. [2.26] Bulgaria and Romania have also negotiated substantial transition periods for the adaptation of land law but here of course the periods run from the start of 2007107; existing controls continue even against EEA nationals on the acquisition of second homes for five years until the end of 2011. Controls also apply to the acquisition of land by EEA companies neither registered nor established nor having a branch or representative in the host state.108
AG R I CULTUR A L L A N D A N D F O R ESTS
Agricultural Land and Forests 1
Agricultural consolidation
[2.27] European states may regulate farm land by increasing the size of holdings, preventing speculation, and ensuring that land belongs to those who work it. Compulsory purchase rules were upheld in Ireland when they exempted agricultural land provided that the farmer was resident on or very close to the land,
103 Accession+10 (n 102 above) Annex V [3], [2003] OJ L236 805 (review after three years); Foreign Exchange Act 219/1995 Sb, as amended. The rules also apply to a foreign company formed in another EU state without an establishment in the Czech Republic. 104 Accession+10 (n 102 above) Annex XX [3.2], [2003] OJ L236 846 (review after three years); Land (Acquisition by Foreign Nationals) Government Decree 1996 [1996] ECLYB [2042]; D Majoros Bringing Hungarian Land Ownership Legislation into Conformity with EC Law (USA, Monterey Institute of International Studies, Masters thesis, 2000). 105 Accession+10 (n 102 above) Annex XII [4.1], [2003] OJ L236 878 (no power to review); Acquisition of Land by Foreigners Law, March 24th 1920, as amended, Dz U 1996, 54, poz 245. 106 Accession+10 (n 102 above) Annex XIII [4], [2003] OJ L236 909. 107 See above [1.09]. 108 Accession Act of Bulgaria and Romania [2005] OJ L157 142, Annex VI [3.1] (Bulgaria), Annex VII [3.1] (Romania: residents may only be subject to procedures applying to nationals). Transitions are subject to review in the third year.
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rules designed to shut out outside investors.109 Denmark controls speculation by foreign buyers in parcels of less than 30 hectares.110 It is one thing to pursue a legitimate objective of protecting agricultural production, and quite another to draft controls that survive European scrutiny. Austria suffered again in Ospelt.111 A native of Liechtenstein, Ospelt, moved to live in Vorarlberg in the westernmost canton of Austria where he lived in some style in a castle surrounded by an agricultural estate. This he wanted to leave to a foundation for the benefit of his daughter. Permission was refused under the Austrian control scheme since parts were let to farmers for agricultural production and she was not herself a farmer. European law overrode this decision. It was legitimate to control the use of farmland, but unnecessary to impose controls on foreign ownership of land if it was let to and farmed by Austrians112 and quite sufficient to have obtained the donee’s assurance that she would allow the estate to continue to be used for agriculture.113 Attempts to revamp the controls have again run into problems because they differentiated nationals and nonnationals.114
2
Accession arrangements
[2.28] Recent accession states have negotiated transitional protection against outsider acquisitions of farmland and forestry. No controls were requested by Malta or Cyprus, but the accession states of Central and Eastern Europe need stability after their recent emergence from the post-socialist privatisation of agricultural land. General controls can be maintained for seven years running from mid-2004 subject to a review after three years,115 and similar transitional controls will also be allowed from the start of 2007 in Bulgaria and Romania. Poland secured a ban on foreigners buying farm land for 12 years from mid-2004 and this longer period has called for a more detailed exposition of the self-employed farmer exemption. [2.29] There are a number of seven-year states. 109 Case 182/83 Robert Fearon v Irish Land Commission [1984] ECR 3677 ECJ; on the discrimination problem see below [4.38]. 110 King v Ministeriet for Fødevarer Landburg og Fiskeri [2001] UfR 1249 [2001] ECLYB 493; King v Fødevare-Og Landbrugsministerei R–3660–97 [2000] Uf R 1276, [2000] ECLYB [466], Denmark. An important illustration, reported too late for full discussion, is Festersen (n 89 above); it is legitimate to seek to secure that farming is carried out by owner occupiers, but Danish controls were not proportionate in requiring a foreign buyer of agricultural land to maintain residence for eight years and were also improper in covering farmhouses used only for residential purposes: see at J[28], J[44]. 111 Ospelt (n 86 above). This is an EU-EEA case heard in the ECJ; see above [1.07] n 53. 112 Ospelt (n 86 above) J[50]. 113 Ospelt (n 86 above) J[55]. 114 In Ospelt (n 86 above) the requirement for agricultural use was also unconstitutional in Austria because it discriminated against non-Austrians: Verfassungsgerichtshof G 79/04 [2005] Ecolex 660, [2006] 01 ECL [48]; attempts to correct this are the Austrian Agriculture (Amendment) Law 2005, 2004/102, 2003/35. 115 Land Purchase in Accession States Proposal (Commission, IP/01/645).
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Controls on European Buyers
Slovenia116 may safeguard the market in land (including agricultural land and forestry) for a maximum of seven years after its accession. In other accession states the transitional protection is limited to agricultural and forest land, the seven-year transition being subject to review after three years when restrictions may be curtailed or extended for up to three years if there is a threat of serious disturbances in the agricultural land market.117 Controls — such as those in the Czech Republic,118 Slovakia119 and Hungary120 — may be continued on the ownership of land and other agricultural property, and the acquisition of agricultural land and forests after privatisation. Nationals of EU states and foreign companies121 would otherwise have the right to free capital investment, but controls can be maintained on EU nationals, no worse than at the time of accession and no worse than for nationals of any third country. Self-employed farmers are able to exercise the European right to establish in and to reside in a host state, following only the procedures applied to host state nationals, but in the Baltic statelets and most of the central Europe heartlands establishment is limited to residents and farmers of three years’ standing.122 [2.30] Similar transition periods are allowed to Bulgaria and Romania from the accessions at the start of 2007, during which time existing controls can be maintained against EU and EEA citizens on acquisition of agricultural lands, forests and forestry,123 the seven-year adaptation period expiring at the end of 2013.124 Existing legislative controls in both countries can be maintained against nationals and companies, though EU and EEA buyers are entitled to treatment at least as good as that of the nationals of any third country.125 Self-employed farmers from the EU (but notice the omission here of reference to the EEA) may establish themselves and reside in the host state in the same way as home state nationals. [2.31] Poland126 follows the general pattern, but with a longer transition period of 12 years from July 2004127 and with more explication of the three-year Accession+10 (n 102 above) §37 and Annex XIII [5] [2003] OJ L236 906. Accession+10 (n 102 above) [2003] OJ L236 803ff (capital provisions by country, with (annex)): Czech Republic (V), Estonia (VI), Latvia (VIII), Lithuania (IX), Hungary (X) and Slovakia (XIV). 118 Foreign Exchange Act 219/1995 Sb as amended, Act 229/1991 Sb; Act 95/1999 Sb. 119 Foreign Exchange Act 202/1995 Coli; Act 229/1991 Coli on Ownership of Land and Agricultural Property, as amended. 120 Land (Acquisition by Foreign Nationals) Government Decree 1996 [1996] ECLYB [2042]; Majoros (n 104 above). As recently as 2000 foreigners were barred from ownership of Hungarian agricultural land and lagged far behind EU rules. 121 Formed in other EU states without any establishment in the host state. 122 Estonia, Latvia and Lithuania; also Hungary and Slovakia; there is no residence requirement in the Czech Republic. 123 Bulgaria Forests (Amendment) Act 2005 [2005] 11 ECL [51]; A Ekroos ‘Forests and EU’ (2005) 14 East European Law Review 44–57. 124 See below [4.26]. 125 Accession Act of Bulgaria and Romania (n 108 above) Annex VI [3.2] (Bulgaria), Annex VII [3.2] (Romania); transition is subject to review in the third year. 126 Accession+10 (n 102 above) Annex XII [4.2] [2003] OJ L236 878. 127 A review after three years may curtail the transitional period. 116 117
Direct and Indirect Controls
79
establishment rule. Existing Polish rules remain in force128 to restrict the acquisition of agricultural land and forests. Authorisation procedures must be laid down by law and based on transparent, objective and public criteria, and these must be applied in a non-discriminatory manner between EU nationals residing in Poland. Self-employed persons129 from EU or EEA states130 may establish without authorisation after being legally resident and leasing land in Poland as an individual or company for three continuous years, subject only to procedures affecting Poles. Explication is provided of the three-year lease test. In some provinces a lease prior to a purchase is included though not before the certified date of the original lease and transfer is allowed between individuals and corporate vehicles. Lease agreements by natural persons can be provided with a certified date retroactively and the entire lease period of the certified contracts will be counted. Self-employed farmers may transform their current lease contracts into contracts as natural persons or into written contracts with a certified date under a procedure that should be transparent and operated so as not to form a new obstacle.
DI R ECT A N D I N DI R ECT CO N TR O LS
Direct and Indirect Controls 1
Transactions affected
[2.32] Express controls in pre-EC days invariably prescribed invalidity as the sanction for failure to observe domestic controls.131 All states controlled a straightforward purchase. Practice varied between states about what other transactions were affected, most states allowing short-term rental leases and successions, at least to a near relative132 and most also a mortgage133 which cedes to the lender the power to foreclose or to sell in default; if the creation of a mortgage escaped control then logically it was also necessary to exempt the sale made to enforce the mortgage on a default.
130 Law of March 24th 1920 on the Acquisition of Land by Foreigners as amended, Dz U 1996 54, poz 245; these restrictions must not be stiffened further. 129 Not farmers, as in all the other annexes, but this is implicit in the reference which follows to agricultural land. 130 The inclusion of EEA states is wider than the other accession annexes. 131 Sweden, Norway, Switzerland, Austria; Weisman (n 3 above) 65ff. 132 Respectively Sweden and Denmark, and Ireland and Switzerland. 133 C-484/93 Svensson [1995] I ECR 3955 ECJ, AG[8–10] Elmer; C-439/97 Sandoz v Finanzlanderdirecktion für Wien [1999] I ECR 7041 ECJ, AG[41–42] Léger; E-1/00 Icelandic State Debt Management Agency v Islandsbanki [2000] July 14th EFTA Ct.
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2
Registration requirement
[2.33] Registration requirements often conceal obstacles to pan-European purchases. The best illustration, Trümmer’s Application,134 as already discussed, rejected a requirement to register a mortgage of land in Austria in Austrian schillings since this prejudiced the security of a loan offered by two Germans, Trümmer and Meyer, denominated in German marks, in a manner that was unjustified.135 RP v Registrar of Torrevieja136 illustrates once more how land registration requirements can act as an indirect disincentive to foreign nationals. When a Spanish married couple bought land, it was necessary to lodge with the local Land Registry details of the matrimonial regime applying between them so that the registry could determine the specific share being acquired by each of the spouses. Spanish law formerly required the same evidence when a foreign couple bought land in Spain, but amendments to the regulations137 were made at the time of Spanish accession to secure a free capital market and these permit the register to state that a matrimonial regime applies to the land without specifying what that regime might be.
3
Exchange controls
[2.34] Exchange controls were limits on the movement of funds across borders, and in our particular context they limited the amount of money that could be removed from the United Kingdom to fund an acquisition of a house overseas. British exchange controls were introduced as a temporary measure to protect the economy after the Second World War,138 and limited British tourists to a maximum of £50 in sterling spending money, an allowance which made the purchase of land abroad impossible. In Webb v Webb139 a father had to buy a flat in Antibes in the name of his son to satisfy exchange control rules, a fact important in determining whether or not a gift by way of advancement had occurred.140 Exchange controls posed severe problems for the aristocratic rump left on the Mediterranean after the war ended.141 Apparently John Lennon and George Harrison were suspected of technical breaches when shifting cash in and out of England to their tax exile in France in 1973, though the matters were too minor to make prosecution appropriate.142 Controls called into question by 134 C-222/97 Trümmer’s Application [1999] ECR 1661 ECJ; A Landsmeer ‘Capital Movement’ [2000] Legal Issues of Economic Integration 195–200. 135 EC §56 ex §73b. 136 RP v Registrar of Torrevieja [2003] RJ 2199, [2004] ECLYB [1709] DGR Spain. 137 Reglamento Hipotecario §92 as amended in 1982. 138 Exchange Control Act 1947. 139 C-294/92 Webb v Webb [1994] I ECR 1717 ECJ; 140 See below [11.47ff]. 141 D Phelps A House in Sicily (London, Virago, 1999, 1-86049-680-6) 13–14. 142 Guardian November 9th 2006.
Justification of Controls
81
European rules are much broader than foreign exchange restrictions in this technical sense.143
4
Controls on investments
[2.35] Capital movement is impeded when direct controls are imposed on the acquisition of capital investments, for example rules preventing Belgians buying Eurobonds144 to ensure that withholding tax (taxation at source) was applied.145 Just as much of an impediment is an authorisation procedure such as that used by the Prime Minister of France to block investment by the Scientology church,146 and attempts to retain control when utilities are privatised through the retention of a Golden Share.147
5
Indirect controls
[2.36] Any measure liable to dissuade or to reduce the attractiveness of an investment is a control on the free movement of capital,148 even if the effect is minor or trivial.149 Examples are differential deduction rules for national insurance contributions150 or differential taxation,151 or the requirement for French co-owners to employ a managing agent with an address in France.152
J USTI F I CATI O N O F CO N TR O LS
Justification of Controls 1
Controls
[2.37] All rules limiting the movement of capital have to be tested for
C-157/85 Brugna [1986] ECR 2013 ECJ, J[22]. C-478/98 Commission EC v Belgium (Eurobonds) [2000] I ECR 7587 ECJ, AG[41ff] Jacobs, J[40–47], J[60]. 145 The aim of preventing tax evasion was legitimate but an outright ban was not proportionate. 146 C-54/99 Association Église de Scientologie de Paris v French Prime Minister [2000] I ECR 1335 ECJ, J[5–15], AG[11] Saggio; C-163/94 Sanz de Lera v Spain [1995] I ECR 4821 ECJ, J[24–25]; Case 203/80 Casati [1981] ECR 2595 ECJ, J[9–10]. 147 C-463/00 Commission EC v Spain (Golden Share) [2003] I ECR 4581 ECJ, J[44–47]. 148 Brugna (n 143 above) J[22]; Svensson (n 133 above) AG[8–10] Elmer; Sandoz (n 133 above) AG[41–42] & AG[48–49] Léger; Eurobonds (n 144 above) J[18–19]; Sanz de Lera (n 146 above) AG[18] Tesauro. 149 Sandoz (n 133 above) AG[45] Léger. 150 C-204/90 Bachmann v Belgium [1992] I ECR 249 ECJ; Sandoz (n 133 above) AG[57] Léger. 151 Sandoz (n 133 above) AG[99] Léger. 152 The Commission is asking for amendment of this law: IP/06/441. 143 144
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Controls on European Buyers
justification,153 both on technical grounds such as discrimination and on the basis of a purpose-based test applying proportionality.
2
Discrimination
[2.38] Discrimination on the grounds of nationality154 is prohibited when applying the European capital freedom,155 though it is allowed outside the scope of the internal market.156 Below is a brief and random selection of illustrations: 앫 restriction of cheap loans for the self employed to nationals,157 앫 differential compensation for English tourists and French victims injured in Paris,158 앫 unequal access to tendering for Italian state contracts,159 and 앫 registration of a company refused because of the existence of a subsidiary registered in another EU state.160 No discrimination occurs where nationals and non-nationals are treated alike.161 Land law rules fail for EU-specific discrimination when a state imposes controls on the purchase of land by nationals of other states. Any control must as a minimum be general in application and must not allow host state nationals more favourable treatment. Similarly clear as a discrimination was a differentiation by Islandsbanki of the fees charged for a state guarantee of a loan, more being charged for foreign loans than for Icelandic ones.162 Controls in border regions or areas of military importance did just that and so they were invalid in Greece163 and on the islands in the Bay of Naples.164 This last case makes clear that a condition involving nationality-based discrimination can be justified in the 153 JA Usher The Law of Money and FS in the EC (Oxford, OUP, 2nd edn, 2000, 978-0-829877-9), 27–38; JH Dalhuisen ‘Financial Liberalisation and Reregulation’ (2001) 11 European Business Law Review 373–380; A Landsmeer ‘Movement of Capital and Other Freedoms’ (2001) 28 Legal Issues of European Integration 57–69; S Mohamed ‘Recent Case-law in the Field of Free Movement of Capital’ (2001) 12 European Business Law Review 263–271; L Flynn ‘Coming of Age’ (2002) 39 CML Rev 773–865, 778ff; P Oliver & W-H Roth ‘The Internal Market and the Four Freedoms’ (2004) 41 CML Rev 407–441, 434ff. 154 EC §12 ex §6; G Davies Nationality Discrimination in the European Internal Market (The Hague, Kluwer, 2003, 9041119981); Oliver & Roth (n 153 above) 411ff. Discrimination by sex, race, religion, etc is covered by EC §13 ex §6a. 155 EC §58[3] ex §73d[3]; C-55/94 Gebhard v Avocati di Milano [1995] I ECR 4165 ECJ; Flynn (n 153 above) 783. 156 C-386/02 Baldinger v Pensionsversicherungsanstalt der Arbeiter [2004] I ECR 8411 ECJ. 157 Case 63/86 Commission EC v Italy (Housing Aid) [1988] ECR 29 ECJ [16–17]. 158 Case 186/87 Cowan v Trésor Public [1989] ECR 195 ECJ. 159 Case 3/88 Commission EC v Italy (Public Contracts) [1989] ECR 4035 ECJ. 160 C-212/97 Centros v Erhvervs -og Selskabsityrelsen [1999] I ECR 1459 ECJ; C-200/98 X & Y v Riksskatteverket [1999] I ECR 8261 ECJ. 161 R(JR) Professional Contractors Group v Inland Revenue Commissioners [2001] Times April 5th Burton J (taxation of nationals and non-nationals at source). 162 Islandsbanki (n 133 above); Flynn (n 153 above) 780–783. 163 Greek Border Regions (n 21 above) Report [11–I4], AG[1–3] Jacobs, J[20–23]; see above [2.05ff]. 164 Albore (n 25 above).
Justification of Controls
83
public interest, but it would need to be an extreme case and a discriminatory control will be much more difficult to justify than one which is neutral as between EU nationals.165 [2.39] ‘Foreignness’ could be defined in various ways, without mention of nationality, and in particular taking account of residence. Controls couched in this way are not inherently improper but they require justification166 and will often fail for want of a policy justification; for example, there was no reason to prevent a Polish woman from acting as a window prostitute in Amsterdam,167 and no reason why Austrian tour guides should need a permanent residence in Austria,168 and problems associated with security for costs by non-resident litigants.169 Nevertheless, residence may be a legitimate basis of distinction.170 In Robert Fearon171 Irish rural land was subject to compulsory acquisition by public bodies unless the farmer was resident on or near the land — a control based on residence rather than nationality and using the sound underlying policy of ensuring that people owning farming land were closely linked to the land. [2.40] Discriminatory taxation is a difficult subject attracting a mass of case law. Free movement of capital may be subjected to two forms of restriction.172 States can impose taxes and in doing so may continue to distinguish between taxpayers according to their place of residence or the place where capital is invested, though not their nationality and though exemption of tax provisions is limited to those existing at the end of 1993.173 National laws may also impose controls on the evasion of taxation, to secure prudent supervision of financial institutions or to provide administrative checks on movements of capital, as well as measures required by public policy or public security.174 Tax rules must be
165 Albore (n 25 above) J[17]; Eurobonds case (n 144 above) AG[49] Jacobs; C-250/95 Futura Participations v Administration des Contributions [1997] I ECR 2471 ECJ; Église de Scientologie (n 146 above) AG [22] Saggio; Flynn (n 153 above) 800 (point open). 166 Residence in two states creates a cross border element: EC §56 ex §73b; Eurobonds (n 144 above) J[18]; Reisch (n 78 above) AG[44] Geelheed; see above [1.22]. 167 C-268/99 Jany v Staatssecrtaris van Justitie [2003] I ECR 8615 ECJ, AG[116] Léger. 168 Verwaltungsgerichtshof 2002/04/0066 [2003] ECLYB [288]. 169 Ngyuyen v Searchnet Associates [1999] 3 CMLR 413 Scottish CS, [19] Sheriff Principal Nicholson; Fitzgerald v Williams [1996] QB 657 CA, 671ff Bingham MR; C-412/97 ED v Italo Fenocchio [1999] I ECR 3845 ECJ, J[17]; E-10/04 Piazza v Schurte [2005] July 1st EFTA Ct, J[36], J[49]. 170 Flynn (n 153 above) 793ff. 171 Robert Fearon (n 109 above) AG[6–10] Darmon; King v Fødevare-Og Landbrugsministerei (n 110 above); King v Ministeriet for Fødevaner (n 110 above). 172 EC §58 ex §73d; C Proctor ‘Taxation, Investments and Free Movement of Capital’ (2001) 16 Butterworths Journal of International Business and Finance Law 363–371. 173 EC §58[1](a) ex §73d[1](a); Declaration on §73d [1992] OJ C192 99; 11992M/AF1/DCL/07. 174 EC §58[1](b) ex §73d[1](b); Eurobonds (n 144 above) J[38] (justification claim failed), AG[42] Jacobs; C-358/93 etc Ministerio Fiscal v Bordessa [1995] I ECR 361 ECJ; Sanz de Lera (n 146 above).
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Controls on European Buyers
consistent with the economic freedoms which underpin the Economic Community,175 and must not discriminate on grounds of nationality.176 [2.41] Residence-based controls are allowed in taxation but are subject to technical rules. Taxation is left to EU states and the exercise of fiscal sovereignty by two countries in parallel situations may create friction but there is no duty to avoid double taxation.177 States must ensure that their rules are not discriminatory in operation between different EU nationals. The situation of a taxpayer who is resident is different from one who is not resident178 and it follows that tax rules may differentiate according to residence, as in Barbier’s Heirs,179 but here justification was required and on the particular facts —inheritance tax payable by a non-resident when it would not be payable by a Dutch resident — failed to find adequate justification.180 The dose was repeated in Heirs of van der Heijden181 in connection with the Dutch presumption that a national who dies within ten years of moving to reside elsewhere is still treated as resident at the time of death for the purpose of administering inheritance taxation.182 When stamp duty is imposed on conveyancing documents a discrimination may arise if the rules favour nationals over non-nationals. Sandoz v Finanzlanderdirecktion für Wien183 concerned a company called Sandoz in Vienna which borrowed ATS 200 million from a related Sandoz company in Brussels. Austrian stamp duty was imposed at the rate of 0.8 per cent of the value of the loan. A loan between two Austrian companies which was recorded in a written instrument would also attract stamp duty, but an Austrian company had the 175 Sandoz (n 146 above) AG[68] Léger. This has cast doubt on the differential scheme for stamp duty exemptions in disadvantaged areas: R Forsdyke & C Golfinopoulos ‘Stamp Duty Exemption’ [2002] 93 Property Law Journal 2–4. 176 C-268/03 De Baeck v Belgium [2004] I ECR 5961 ECJ; C-315/02 Lenz v Tirol [2004] I ECR 7063 ECJ, J[49]; see above [2.08]. 177 C-513/04 Kerckhaert-Morres v Belgium [2006] STI 2508 ECJ. 178 C-234/01 Gerritse v Finanzamt Neuköln-Nord [2004] I ECR 5933 ECJ, J[42]; C-376/03 D v Inspecteur van de Belastingdienst [2005] I ECR 5821 ECJ. 179 C-364/01 Barbier’s Heirs v Inspecteur van de Belastingdienst [2003] I ECR 15013 ECJ; C-512/03 Blanckaert v Inspecteur van de Belastingdienst [2005] I ECR 7685 ECJ; Bachmann (n 150 above). 180 Also unjustified: C-319/02 Manninen [2004] I ECR 7477 ECJ; C-334/02 Commission EC v France (Income Tax on Investments) [2004] I ECR 2229 ECJ. 181 C-513/03 Heirs of van der Heijden v Inspecteur van de Belastingdienst [2006] STI 535 ECJ, J[43–50]; C-152/03 Ritter-Coulais v Finanzamt Germersheim [2006] I ECR 17111 ECJ, J[18] (rental income losses; less favourable treatment of non-residents); C-265/04 Bouanich v Skatteverket [2006] I ECR 923 ECJ, J[43]; C-446/03 Marks and Spencers v Halsey [2005] I ECR 6443 ECJ; Autologic [2005] UKHL 54, [2006] 1 AC 118 (Marks and Spencer setting off losses on EU subsidiaries); C-446/04 FII Group Litigation v Commissioners of Inland Revenue [2006] STI 2750 ECJ (BAT litigation about taxation of dividends paid by foreign subsidiaries to UK parents when UK-to-UK payments exempt). 182 Case law is developing too fast to be adequately handled at the proofing stage of this book; vital authorities are: C-386/04 Centro di Musicologia Walter Stauffer v Finanzamt München für Karperscahften [2006] I ECR 8203 ECJ; C-445/04 FII Group Litigation v Commissioners of Inland Revenue [2006] I ECR 11753 ECJ; C-157/05 Holbock v Finanzamt Salzburg-Land [2007] May 24th ECJ; C-451/05 Européenne et Luxembourgoise d’Investissements v Directeur General des Impots (ELISA) [2007] April 26th, AG Mazak (land tax from which French residents exempt). 183 Sandoz (n 133 above); C-1/93 Halliburton Services [1994] I ECR 1137 ECJ; Eurobonds (n 144 above) AG[23] Jacobs.
Justification of Controls
85
option of leaving the loan arrangement unfinalised, without a written document, and in this way was able to escape liability to stamp duty. A loan by a non-resident company was charged to duty even if it was not committed to writing. Although these rules were intended to facilitate proof of the existence of the loan, they operated in fact as an obstacle to the free movement of capital. Stamp duty rules had to apply to all, irrespective of nationality and residence.184
3
Lawfulness and certainty
[2.42] Technical requirements apply to any control on the use of property. These were developed by ECJ case law and have formed part of the Community acquis, the jurisprudence, so they can be found reproduced in transitional arrangements made on accession: authorisation procedures for foreigners buying second homes must be based on criteria that are objective, stable, transparent and public, while universality is another requirement. Lawfulness is essential. Rules controlling the sale of property must, as a matter of internal constitutionality,185 be properly incorporated into domestic law. Laws in disuse remain in breach of EU law until repealed.186 Certainty is a second requirement. Weisman187 found that pre-Community controls generally gave states an element of discretion, but European testing looks for national law to be stated precisely and to make clear what is and is not allowed. French legislation allowing the Prime Minister to block a direct foreign investment fell because the categories were not stated with specificity and left too much open to doubt.188 French legislative drafting took a second mauling in connection with the golden share in ELF Aquitaine,189 since the French Republic could oppose any transfer of assets or any use of assets as security, without any published criteria. A priori certainty is more likely to be accepted than a retrospective invalidation of a completed transaction.
4
Purpose-based justification
[2.43] Once technical rules are satisfied, justification of restrictions is based on
Sandoz (n 133 above) J[26], J[31–38]. An issue unnecessary to decide in Konle despite the rule relied on having been struck down by the Austrian constitutional court; Konle (n 38 above) J[30]; Flynn (n 153 above) 792; see above [2.16]. 186 Trümmer’s Application (n 134 above) J[33]; C-367/98 Commission EC v Portugal (Golden Share) [2002] I ECR 4731 ECJ, J[4]. 187 Weisman (n 3 above) 57 (eg, Sweden, Switzerland, Denmark). 188 Église de Scientologie (n 146 above) J[19–23], AG[20] Saggio; Sanz de Lera (n 146 above) J[25]; Flynn (n 153 above) 802. 189 C-483/99 Commission EC v France (Golden Share) [2004] I ECR 4781 ECJ. Lack of clarity was conceded in C-174/04 Commission EC v Italy (Golden Share) [2005] I ECR 4933 ECJ, J[40]. 184 185
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Controls on European Buyers
the need to show that the restriction pursues an objective of public importance,190 with three subsidiary requirements191 that 앫 there is an overriding reason of general interest, 앫 a restriction is adopted suited to the attainment of that objective,192 and 앫 the means adopted must be tested against other possible approaches so that the least intrusive is adopted. The last stated test for proportionality is the toughest and few states have succeeded in upholding their controls. [2.44] A control on capital movement is allowed in order to defend a national interest,193 provided it is genuine, actual, and sufficiently serious to threaten a fundamental interest of society.194 Financial or economic interests do not count.195 Some reasons are noted in the EC Treaty as widened at Maastricht, but others are additions to the Treaty196 which must pursue an overriding requirement of general interest, applicable to all persons and undertakings engaged in an activity in the territory of the host state.197 Specific examples are taxation, and the prudential supervision of financial institutions to prevent money laundering, drug trafficking and terrorism.198 Some cross-fertilisation is possible from the fields of movement of workers and goods, but public policy is narrower in relation to capital.199 The rules for establishment are more restrictive.200 [2.45] Once a legitimate public purpose has been identified, perhaps controlling second home-ownership, it is also necessary to demonstrate a logical link between the control adopted and the purpose to be achieved such that the controls are suitable to attainment of their objective. Then comes the toughest rule, proportionality,201 which requires that a scheme of controls applied must be strictly necessary to attainment of the objective sought, that the objective could not be achieved in some less intrusive way.202 A state wishing to control land Reisch (n 78 above) J[33], AG[125–127] Geelheed; Flynn (n 153 above) 798ff. C-463/00 Commission EC v UK (Golden Share) [2003] I ECR 4641 ECJ, J[49]; Greek Border Regions (n 21 above) J[11]. 192 Konle (n 38 above) J[43–44]. 193 Église de Scientologie (n 146 above) AG[14] Saggio. 194 C-503/99 Commission EC v Belgium (Golden Share) [2002] I ECR 4809 ECJ, J[38]. 195 Case 136/75 Rutili v French Minister of Interior [1975] ECR 1219 ECJ, J[30]; C-120/95 Decker v Caisse de Maladie des Employ [1998] I ECR 1831 ECJ; C-35/98 Staatssecretaris van Financien v Verkooijen [2000] I ECR 4071 ECJ; Portuguese Golden Share (n 186 above). 196 Case 120/78 Cassis de Dijon [1976] ECR 181 ECJ; Case 60/84 etc Cinéthèque [1985] ECR 2065 ECJ. 197 Belgian Golden Share (n 194 above). 198 EC §58[1](b) ex §73a[1](b); Bordessa (n 174 above) J[2]; Sanz de Lera (n 146 above) J[22]; Flynn (n 153 above) 793ff. 199 Église de Scientologie (n 146 above) AG[18] Saggio; Albore (n 25 above) J[18]. 200 See above [3.15]. 201 T Tridimas General Principles of EU Law (Oxford, OUP, 2000, 978-0-19-829932-5) chs 3–4. 202 French Golden Share (n 189 above); Trümmer’s Application (n 134 above) AG[16–17] Pergola; Rutili (n 195 above) J[26–27]; Église de Scientologie (n 146 above) J[18]; Sanz de Lera (n 146 above) J[23]. 190 191
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purchase has three levels of control available, in descending order of intrusiveness: prior authorisation, advance declaration or retrospective declaration. Authorisation procedures failed to pass muster in a series of cases precisely because a declaration procedure was a feasible alternative.
5
Fundamental freedom
[2.46] The right of property would now be recognised via the Nice Charter203: Everyone has the right to own, use, dispose of and bequeath his or her lawfully acquired possessions.
It is curious that national restrictions on landownership have rarely infringed the European Convention on Human Rights. A complaint204 that a national of Liechtenstein could not acquire land in Austria was ruled inadmissible at the earliest stage. National rules that land acquired without a licence should be sold were examined in Håkansson v Sweden.205 Agricultural land sold by a police officer to a farmer at auction and bought for 240K Skr had to be resold at a loss, the resale yielding only 172K Skr, because the permission needed for its retention was not forthcoming given that the land was earmarked for the consolidation of holdings, but a complaint based on expropriation contrary to the right to property206 was rejected. The purchaser was aware of the law and had brought matters on himself. Happily, the buyer recouped some of his losses through an award for damages of 60K Skr for the state’s failure to provide a proper civil review, and indeed the procedural and peripheral right to a fair trial is the only one in play. In Austria a licence was required from the Real Property Transaction Authority207 and the procedure could fail procedural tests, as for example a case concerning an American’s holiday home at Hopfgarten in the Tyrol,208 whose appeal was held in camera before junior officials and whose further appeal to the Constitutional Court was rejected without a hearing. This infringed his right to a fair trial but no issue arose on his right to property. AUTHO R I SATI O N A N D DECLA R ATI O N SCHEMES
Authorisation and Declaration Schemes 1
Prior authorisation
[2.47] Prior authorisation schemes were first rejected in relation to 203 204 205 206 207 208
EU Charter of Fundamental Rights, [2000] OJ C364 1, §17[1]. HR 19441/92 Ohg v Austria (1994) 18 EHRR CD107 E Comm HR. HR 11855/85 Håkansson v Sweden (1991) 13 EHRR 1 E Ct HR. E Conv HR Protocol 1 §1. Tyrol GVG (n 72 above) 1970 §3. HR 8790/79 Sramek v Austria (1985) 7 EHRR 351 E Ct HR.
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cross-border exports of currency in Bordessa,209 because, if it is possible to have a system of declaration which meets the policy objectives, it is unnecessary and disproportionate to insist on prior approval. The most extreme control so far litigated was the requirement in France that the Prime Minister should give prior authorisation for direct foreign investment, a control enforced against the Scientology church,210 but invalid despite the rule that a permission sought and not decided for one month was deemed to be granted.211 Prior authorisation could be justified if the threat was genuine and serious, for example where they could not be traced in retrospect so action had to be taken in advance.212 In summary: prior authorisation bad, prior declaration good.213 A number of Golden Share cases demonstrate the dubiety of schemes of administrative approval outside the land context, for example the activities of a Spanish utility company,214 the activities of the company running British airports,215 the oil infrastructure run by Elf Aquitaine216 and Belgium217 when it privatised companies, since the intention behind the retention by the Belgian government of Golden Shares was to secure advance notice of any changes affecting the distribution infrastructure for domestic gas. It was prudent to safeguard energy supplies but Government powers were mainly opposition rights with intervention restricted to cases where energy policy was compromised. [2.48] It follows from what has just been said that a requirement for prior authorisation of land acquisition is generally disproportionate. The Tyrol GVG required a non-Austrian to obtain administrative authorisation for the purchase of land in the Tyrol. Authorisation requirements are not justified if there are other less restrictive methods of achieving the aims of the legislation, and a post-completion declaration of the intended use of the land would be just as good.218 Konle was a German national who was refused authorisation to hold land in Austria, even though he was intending to make it his home and to establish a business there, but the rules restricting his purchase were struck down.219 The objectives to maintain a permanent population and to stabilise a non-tourist economy were legitimate but measures had to be no more restrictive than
209 Bordessa (n 174 above) J[27]; Eurobonds (n 144 above) AG[9ff] Jacobs; Case 286/82 etc Luisi v Italian Ministero del Tesoro [1984] ECR 377 ECJ; Sandoz (n 146 above) AG[39–40] & AG[54–55] Léger. 210 Église de Scientologie (n 146 above) J[5–11], AG[11] Saggio; Sanz de Lera (n 146 above) J[24–25]; Casati (n 146 above) J[9–10]. 211 Église de Scientologie (n 146 above) J[15]. 212 Église de Scientology (n 146 above) J[19–20], AG[16] Saggio; Bordessa (n 174 above); Konle (n 38 above) J[45–46]. 213 Sanz de Lera (n 146 above) J[10], J[26–29]. 214 Spanish Golden Share (n 147 above) J[69–78]. 215 UK Golden Share (n 191 above) J[44–47]. 216 French Golden Share (n 189 above); Portuguese Golden Share (n 186 above). 217 Belgian Golden Share (n 194 above). 218 GVG (n 72 above); Konle (n 38 above) J[44–48]; Reisch (n 78 above) J[35]. 219 Konle (n 38 above) J[3–4].
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necessary. On this the Austrian authorities failed to convince.220 They had access to considerable information and too much discretion about how to use it,221 and non-Austrians were disadvantaged by closer checks than Austrians and by being denied access to the accelerated procedure available to internal purchasers. Salzmann confirms this: a requirement for an owner to prove his future use inevitable creates a discretion and the possibility of discriminatory applications.222 Prior authorisation usually fails the test of strict necessity, as does the suspensive effect of Austrian legislation.223 After Konle a new system has been introduced which, according to the Austrian courts,224 meets the requirements of European law, so much so that it was not even necessary to refer cases to the ECJ for a ruling. Third time lucky.
2
Prior declaration
[2.49] Trouble subsequently flared up in Salzburg, but Reisch v Burger Meister Der Landeshauptstadt Salzburg225 confirms that a system of prior declaration can be made to work within European controls. Use of building plots for second homes in Salzburg226 was controlled by a system of compulsory declarations which had to be made upon any transfer of a building plot and any application for the grant of a right to build, the party acquiring the title being required to state that the property would only be used as a principal private residence or for commercial purposes. Prior notification was required within a stipulated time period, with a criminal sanction in default. Dubious cases could be referred to the Land Transfer Commission, which would impose conditions to ensure that the land was used for the declared purpose. A series of appeals227 arose from prior notifications, authorisations, and fines imposed for failing to make timely declarations, all raising the question whether these procedures were compatible with EU law. Control of secondary residences in certain geographic areas was a legitimate public interest, controls were applied in Salzburg to Austrians and non-nationals alike, and the procedure was declaratory.228 This was not necessarily worse than insisting on a notarial act and registration.229 Notification of dubious cases by the land agent allowed legal certainty for other transactions. However, dubious cases were referred to the Land Transfer Commission and required prior Konle (n 38 above) J[42]. Konle (n 38 above) J[40–41]. 222 Salzmann (n 78 above) J[46–47]. 223 Salzmann (n 78 above) J[51]. 224 Oberster Gerichtshof 1 Ob 216/02 z (n 77 above). 225 Reisch (n 78 above). 226 Reisch (n 78 above) J[5–9], AG[2–8] Geelheed. 227 Reisch did not apply for permission; Lassacher and the others applied but were refused permission: Reisch (n 78 above) AG[12–13] Geelheed. 228 Reisch (n 78 above) AG[32–34] Geelheed, following Konle (n 38 above). 229 Reisch (n 78 above) AG[128] Geelheed. 220 221
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Controls on European Buyers
authorisation230 with an adverse presumption, criminal sanctions and the possibility of annulment and this aspect of the overall procedure was unnecessary and incompatible with EC law.231 In short: prior authorisation bad, prior declaration good. In Ospelt232 a procedure for refusing permission for the sale of Austrian agricultural land failed because it was wholly unnecessary to do other than rely on an assurance in relation to land let to and farmed by other parties.233
3
Subsequent declaration
[2.50] The modern tendency is to rely on a subsequent declaration procedure. In Burtscher v Stauderer234 the question was the proportionality of the penalties for failing to make a declaration. A dwelling in Sonntag was let to Stauderer for use as a holiday home after renovation, the intention being that he should buy it if this was lawful. In fact, the prohibition on use as a holiday home was the same on a lease as on a sale.235 A declaration as to use was required and since no declaration had been made within the two-year time limit, the landlord argued that the lease was null and void and so the tenant should be required to vacate. Earlier cases suggested that the declaration procedure was compliant,236 the objective of regulating the second homes market being legitimate and the declaration procedure being a proportionate response237 which was implemented without nationality-based discrimination.238 A penalty of automatic invalidity for a declaration made late is not proportionate,239 and disproportion is a theme taken up in several recent tax cases.240 SWI SS CO N TR O LS
Swiss Controls 1
Lex Koller
[2.51] A strong sentiment in favour of a Swiss Switzerland found its expression historically in restrictions on alien ownership irrespective of any economic 230 Reisch (n 78 above) AG[119] Geelheed, contrasted the prior authorisation scheme in Konle (n 38 above). 231 Reisch (n 78 above) AG[130] Geelheed, J[37–40]; Konle (n 38 above) J[44–48] 232 Ospelt (n 86 above). 233 Ospelt (n 86 above) J[50], J[55]. 234 Burtscher v Stauderer (n 68 above). 235 Burtscher v Stauderer (n 68 above) J[11–14]. 236 Burtscher v Stauderer (n 68 above) J[23]. 237 Burtscher v Stauderer (n 68 above) J[44–46]; Konle (n 38 above) J[40]; Reisch (n 78 above) J[33–34]; Salzmann (n 78 above) J[42–44]. 238 Burtscher v Stauderer (n 68 above) J[48]. 239 Burtscher v Stauderer (n 68 above) J[51]. 240 See n 182 above.
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justification for a purchase.241 Like many repressive rules this provoked artificial avoidance, in this case using corporate land-owning vehicles.242 Nevertheless, Swiss banking laws attracted too much cheap money during the 1970s and 1980s and this spilled over into the land market, creating a false escalation of prices fuelled by too many wealthy foreign investors. The initial legislative response was the Lex Friedrich, named after the Minister who proposed it,243 which smothered the foreign market in land. Swiss voters refused to forgo these controls in order to attain membership of the EEA but the price of that obstinate attempt to buck the internal market was that obstacles to foreign investment precipitated a period of economic stagnation. Reform has proceeded grudgingly, the minimum necessary to secure limited participation in the internal market.244 What emerged in 1997 was a modified and looser restriction on the acquisition of land by non-resident foreigners, called the Lex Koller after the new incumbent.245 Nationals of an EEA-30 state are allowed freer access to the land market once they are resident in Switzerland, but strict controls remain against non-resident Europeans, non-resident Swiss and foreign second homes, and non-Europeans face an impenetrable barrier. The Koller regime has been further liberalised by the subsequent adoption of the full EEA freedom of movement, described below,246 which benefits establishers, workers and the self-sufficient. [2.52] Repeal of the Lex Koller was proposed by the Swiss Federal Council in 2005 and is now grinding slowly though the legislative machinery, with restrictions on the acquisition of land by persons abroad to be repealed subject to continuing protection for tourist areas.247 This should benefit non-resident Swiss, Europeans who will no longer have to establish residence, and non-Europeans.
2
Main residence
[2.53] Acquisition of residential land is controlled by the Lex Koller when the person making the acquisition is a foreign resident, whether his nationality is Swiss or of an EEA state. Residence is assessed according to the category of Acquisition of Land by Foreign Residents 1961 §7; Weisman (n 3 above) 50. M v Statthalteramt Des Bezirkes Zurich [1997] BGE IV 167, [1998] ECLYB [2345] Swiss Kassationshof. 243 Federal Law 1988, FL SR 211.412.41; Ordinance 1984 OFL SR 211.412.411; R Mercon & R Fletcher ‘Acquisition of Real Estate by Foreigners in Switzerland’ (1989) 11 Comparative Law Yearbook of International Business 39–54. 244 L Goetschel ‘Change Through Distance’ (2003) 8 European Affairs Review 313–330. 245 Lex Koller, Federal Law on Acquisition of Real Estate by Foreigners, in force October 1st 1997; H Gautier & M Nussbaumer ‘Easing of Swiss Rule on Acquisition of Real Estate by Foreigners’ [1998] ILP 74–78; Acquisition of Real Estate by Persons Abroad (Berne, Federal Office of Justice, , 2005). Guidance in English has recently been removed from the website. 246 See below [2.54]. 247 See below [2.56]. There appears to be a backlash summed up in the headline of the Swiss newspaper Blick ‘How Many Germans Can Switzerland Stand?’ cited in the Independent March 10th 2007. 241 242
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Controls on European Buyers
permit held. Non-nationals (even from outside Europe) were able under the Lex Friedrich to buy a home in Switzerland if they held a C permit allowing permanent settlement but the Lex Koller has greatly widened the freedom by allowing house purchase by EEA-30 nationals holding a yearly residence permit or a B permit allowing residence for half of each year.248 Restrictions remain on plot size and floor areas, but each limit is more liberal under Koller than Friedrich.249
3
Free movement of persons
[2.54] Switzerland’s adoption of EEA rights of free movement of persons is best described as tentative. Rejection of EEA membership has been followed by a decision to proceed sector by sector with bilateral agreements between Switzerland and the EU, the most notable example being free movement of persons which entered into force in 2002 after a referendum.250 Swiss are free to move to the EEA-30 when within the European free movement categories — workers and self-supporters.251 Full freedom of movement in the reverse direction will be phased in. In the interim period, there is freedom to enter for up to four months but quotas apply to longer stays, of between four and twelve months and over twelve months (A and B permits now with simplified procedures), and permanent settlement under a C permit will be available after an EEA national has been resident for ten years. The whole scheme is a trial which may be aborted after seven years. Easing of the rules for permits makes it easier for an EEA national to qualify to buy a main residence without permission and, having done so, he will not be obliged to sell up when leaving Switzerland. Business rights with Switzerland arise under the bilateral agreement. Those intending to engage in economic activity may enter Switzerland and establish and or set up in service provision, subject to quotas during a six-year transition.252 Permanent residence can be retained after the end of economic activity.253 Land can be acquired if linked to the economic activity. No authorisation is required under the amended Lex Koller for the acquisition of a permanent establishment, whether bought outright or rented, and the need for personal management of land-holding companies is removed. Investment in commercial companies is free, unless the main business is buying or trading in dwellings. Establishers are 248 Continued use of the property is dependent on renewal of residence rights, but if the permit is withdrawn it is not necessary to sell the dwelling already acquired. 249 Up to 3K sq m plot size without consent (previously 1K sq m land and 200 sq m floor area); a special permit is needed to buy larger plots. 250 EU-Switzerland Bilateral Agreement on Free Movement [2002] OJ L114 7 as from June 1st 2002; this has been adapted by a Supplementary Protocol for eastwards expansion of the EU. UK rules treat Switzerland as part of the EEA: Immigration (EEA) Regs 2006 SI 2006/1003 reg 2; special rules are retained for workers posted from Switzerland who do not need a work permit for stays of up to 90 days. 251 See above [1.75ff], [1.88ff]. 252 Bilateral Agreement (n 250 above) §§1, 4, 7 (family members), 10 (quotas), Annex I §1. 253 Bilateral Agreement (n 250 above) §7; Annex I §4. .
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free to buy a principal residence and have the same rights as Swiss nationals to acquire a secondary residence or holiday home.254 Workers will be able to use the bilateral agreement to enter Switzerland and live there while working and remain resident at the end of economic activity.255 Switzerland is allowed to apply quotas for five years to work that is more than very temporary.256 Job-seekers are allowed six months to find employment.257 Workers, etc can buy land, particularly a primary house, but also land for a secondary residence or holiday accommodation on the same terms as a national, and frontier workers may also buy a Swiss bolt-hole,258 though not a holiday home. [2.55] Self-supporters, as usual, are treated liberally by free movement rules. A person ‘not pursuing an economic activity’ needs sufficient means not to need to apply for social security during their stay — the measure of sufficiency being the minimum state pension level — and must carry all-risks sickness insurance cover.259
4
Holiday homes
[2.56] Controls limit the acquisition of holiday homes by non-resident buyers.260 Quotas are allocated by Canton covering, for example, mountain areas and the rules vary from region to region.261 Acquisitions are limited by land area (1K sq m), floor area (100 sq m), and family (one each). Exemption from these rules has to be proved to the land registry or otherwise the case goes to the Cantonal authority. When and if the proposed repeal of the Lex Koller is completed, controls will be preserved in tourist areas to prevent a building boom, zoning being a Cantonal responsibility, the process to be completed by 2008. It is reported that a moratorium has been imposed for the whole of the year 2007 in seven communes containing the best ski resorts because of the backlog of cases, and the future is unclear.262
Bilateral Agreement (n 250 above) Annex I §25. Bilateral Agreement (n 250 above) §§1, 4, 7, Annex I; Council Decision 12582/04 (workers from eastern accession states). A special permit is available to a frontier worker. 256 Bilateral Agreement (n 250 above) §10 (15K permanent and 115K part year). 257 Bilateral Agreement (n 250 above) §2[1]. He can also stay if economic activity ceases and he is self-sufficient: §4, but unemployment benefits can be counted for one year: Annex I §24[3]. 258 Bilateral Agreement (n 250 above) Annex I §25. 259 Bilateral Agreement (n 250 above) §§1[c], 6, Annex I §24. 260 Bilateral Agreement (n 250 above) as adjusted for eastwards accessions; Council Decision 12582/04; EC Protocols on Secondary Residences in Denmark and the Åland Islands apply. 261 Independent Property July 26th 2006. 262 Observer January 7th 2007; Independent January 20th 2007. 254 255
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Controls on European Buyers
5
Enforcement of Koller controls
[2.57] Lex Koller bites when a buyer from abroad buys land, entry on the land register being refused until the purchase is shown to be within a permitted category. This sanction is applied to any transaction giving control of land, including outright acquisition of title, disguised purchase through a long-term rental, acquisition of shares in a landowning company, transfer abroad of the headquarters of a property-owning company, participation in a partnership, or investment in a real estate investment fund as well as contracts, options and pre-emptions. Successions and gifts by will to the legal heirs are exempt,263 and other minor exemptions are for transactions confirming existing titles and minor readjustments within condominiums. Secured lenders are free to sell after a default, pension schemes and charitable foundations may buy, and controls are released if property is otherwise unsaleable. Beyond those cases there is a procedure for Cantonal adjudication of doubtful transactions.
263
Non-family members who benefit under a will must sell within two years.
TOWA R DS A EUR O PEA N LA N D LAW?
3 Towards a European Land Law? National and European Laws. Immovables. The Site. Selection of Land Law. Property of the European Institutions. Respect for Territoriality. Subsidiarity. Fundamental Rights in the EU. Specific Fundamentals. Convergence. A Substantive Miscellany. Value Added Tax. Single Farm Payment. Special Agricultural Regimes. Dairy. Towards What?
N ATI O N A L A N D EUR O PEA N LAWS
National and European Laws [3.01] No one could doubt the popularity of magazines devoted to the British experience of buying second homes all over Europe. Diana Wallis MEP1 read in one of them: a reader’s letter… asking why was it so complicated to buy abroad with different laws. Why, she asked can’t we all use the same law? I have no doubt that she had in mind everyone using English law! Yet of course she had a point.
It requires a leap of the imagination to be able to envisage a world in which Europe might adopt English land law so that the beautiful simplicity of propriété was replaced by the calculus of estates. Nothing short of an English Napoleon could achieve that. Even English lawyers would be hard-pressed to put a case for our archaic and over-complex system, though no doubt no one would choose any continental conveyancing system ahead of the English, nor a foreign register over a British one, and no English lawyer would want to dismiss the trust. In Utopia a foreign property code would be linked to an English conveyancing process and a workable trust vehicle, but not in the real Europe. Instead, this chapter explores the possible emergence of a European land law using four main themes. At present Europe is a continent with a multiplicity of land laws, at least one for each of the members of EEA-30 and even more because of the multiplicity of property systems within several of the European states. Territoriality is a basic human imperative2 and territorial control of the land 1 D Wallis MEP (speech at the Centre for European Private Law, Munster, July 6th 2006, ). 2 R Ardley The Territorial Imperative (London, Collins, 1967); RD Sack Human Territoriality: Its Theory and History (Cambridge, CUP, 1986, 0-521-26614-9).
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Towards a European Land Law?
within a state’s borders is as much a reflex instinct of any government as is taxation of things within the state’s reach.3 Brussels has not so far attempted to wrest control of property systems from the government of member states. A workable internal market is most easily achieved by a clear conflicts regime which makes clear which national law is to apply to a particular parcel of land or right in land. The European conflicts regime in fact largely sidesteps land, the conflicts club rules confining themselves to the imposition of site-based forums for land, as the next chapter describes.4 The regime directs a dispute about land to the local courts which are then free to apply their own rules of private international law to ascertain which law applies to the land, but a universal and obvious principle applies, site-based law. The correct sectoral description is immovable property, which means the same as land.5 Sectoral allocation is generally easy, land being as easy to identify as an elephant. Land allocates itself to a particular state, though rights in land are potentially more mobile and therefore need to be grounded in a particular state, as will be described. National courts are then left to apply their own rules to any conflict. More detailed schemes are worked out for personal obligations affecting land, such as contracts and trusts.6 The basic theme of the later parts of this chapter is the prospect for a harmonisation of national land laws. It is commonly believed that EU competence is limited by article 295 of the EC Treaty but it will be demonstrated that there is in fact no shield7 where there is some other reason for Community competence such as to secure an internal market or to enforce European competition rules.8 Other potential bars are the principle of subsidiarity (that decisions should be taken at the lowest feasible tier of government), the lack of competence for pure harmonisation, the need to respect the fundamental rights of property-owners,9 and the limited practical effects of convergence; so despite the potentialities the present scale of the substantive land law of the European Union is very small.10 European law, having filled the creeks and estuaries,11 has so far stopped short of swamping the land itself but our defences are breached and the eventual Europeanisation of property law seems as inevitable as global warming. 3 RT Ford ‘Law’s Territory (A History of Jurisdiction)’ (1999) 97 Michigan Law Review 843–930, 843. The basic territoriality of tax legislation was confirmed in Agassi v Robinson [2006] UKHL 23, [2006] 1 WLR 1380, though the majority led by Lord Scott at [56] felt that the presumption was disapplied on the facts, Lord Walker dissenting at [20–21]. 4 Regulation on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (EC) 44/2001, [2001] OJ L12 1; see below [4.12ff]. 5 Continentals often use the term real property as an English translation but this (technically confined to freehold land) is not a precise equivalent. 6 See below [ch 8], [11.34ff]. 7 EC §295 ex §222; this is generally referred to in this chapter as the property shield or property exclusion: see below [3.18ff]. 8 C Bright & S Bright ‘Europe, the Nation State and Land’ ch 14 in S Bright & J Dewar Modern Studies in Property Law (Oxford, OUP, 1998, 0-19-876455-3) 362. 9 Convention for the Protection of Human Rights and Fundamental Freedoms (Rome, 1950, CETS 5), incorporated by case law; EU Charter of Fundamental Rights [2000] OJ C364 1. 10 See below [3.48ff], [ch 11]. 11 HP Bulmer v J Bollinger (No 2) [1974] Ch 401, 418 Lord Denning MR.
Immovables
97 I MMO VA B L ES
Immovables 1
Why distinguish?
[3.02] Private international law begins by characterising an issue12 in order to determine which sectoral rule should be applied, that first step at least being relatively straightforward in the context of this book; the sector is immovable property, or, for English readers, land.13 Several important conflicts are determined once particular property has been characterised as either immovable or movable,14 including forum and land law. This classification also determines the proprietary effect of a transaction, its validity against a third-party purchaser, and its priority.15 Immovable property of a deceased landowner must be segregated from his movable things since the law to be applied to an international succession differentiates these two types, with the land governed by the law of the site.16 The European rule book17 and its domestic implementation18 are largely silent when it comes to land and this rule is left to the private international law of each state; fortunately these rules generally coincide.
2
Immovable things and rights
[3.03] Civilian systems refer to immovable property rather than land, their term embracing outright ownership (freeholds), leases (leasehold land), rights in land, and things affixed to land. Although there is a common understanding across Europe about the basic outline of the concept there are many minute differences of detail. Land is clear-cut but differences can occur with things annexed to land, intangibles and mortgages. Soil and buildings are true land, truly immovable. It is thought by the law to 12 Macmillan v Bishopsgate Investment Trust (No 3) [1996] 1 WLR 387 CA, 391–392 Staughton LJ, 407 Auld LJ; Raiffeisen Zentralbank Osterreich v Five Star General Trading [2001] EWCA Civ 68, [2001] QB 825, 840 Mance LJ. 13 Dicey & Morris The Conflict of Laws (London, Sweet & Maxwell, 14th edn by L Collins, 978-0-421-88360-4) II [22]; J Westlake A Treatise on Private International Law (London, Sweet & Maxwell, 7th edn by N Bentwich, 1925) 216ff (good on older cases); JD Falconbridge Essays on the Conflict of Laws (Toronto, Canada Law Books, 2nd edn, 1954) 118ff, 506ff; JM Carruthers Transfer of Property in the Conflict of Laws (Oxford, OUP, 2005, 978-0-19-927147-4) [1.01ff]. 14 This is the general spelling without a middle ‘e’, though judicial support can be found for ‘immoveable’ eg Macdonald v Macdonald (1932) SC HL 79, 84 Lord Tomlin. 15 JA Clarence Smith ‘Classification by the Site in the Conflict of Laws’ (1963) 26 MLR 16–33. 16 Dicey & Morris (n 13 above) [32–33] (at least where the death occurs in a common law state); see below [11.26]. 17 Rome Convention [1980] OJ L266 1 (original), [2005] OJ C334 1 (consolidated); Giuliano Lagarde Report [1980] OJ C282 1; Rome I Green Paper COM (2002) 654 final; Rome I Proposal 2005/0261 (COD). 18 Contracts (Applicable Law) Act 1990, c 36.
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be so, although buildings eventually fall down and in the interim can be knocked down, and the soil of the earth could be dug out to create a vast void. Soil and buildings at least feel permanent and the law, concerned only with practicalities, adopts the self-evident classification for the soil of the earth, houses and other buildings erected on it. The only truly immutable thing to medieval lawyers was the empty space above the face of the earth, but then we discovered that even this moved as the world spins on its axis,19 but it is still placed irrevocably at one particular point on the earth’s surface in relation to its neighbours, subject only to cataclysmic unnatural events such as earthquakes.20 Izmit in Turkey lies on the junction of two plates of the earth’s crust and there a massive earthquake moved one side of a petrol filling station while leaving the other side untouched, so that two rows of pumps which once stood opposite each other are now out of alignment by almost five metres. A wholly natural event like an alteration in the redirection of a watercourse may alter our topography: a well-known example occurred when the River Coesnon dividing Brittany from Normandy altered course and by a whim handed Mont St Michel to Normandy. In our settled landscape these events are sufficiently peripheral to enable property law to function perfectly well without considering them. In theory, perhaps, the law of a site could declare that land was movable, but Story considered that physical land and houses were inherently and necessarily immovable,21 and dicta in Macdonald also, on balance, cast doubt on the international recognition of such a domestic fiction.22 International law treats physical land as immovable. Categorisation is left to the law of the site, because that is the forum used to resolve the issue and the selection of land law is one of the tasks facing the courts of the forum: English courts use common law principles to identify land,23 and the corresponding domestic focus to this question would exist in the courts of virtually every other state. It remains to be seen whether the European Court of Justice will be prepared, in a suitable case, to create its own autonomous definition and, if so, how that definition might look. The search, at any rate, is for immovable property rather than the more restricted category of immovable things. [3.04] Rules for fixtures vary. An old custom in Artois (the area around Arras) provides a favourite example, for the regularity with which the area was invaded by enemy armies was so great that houses there were treated as movable because Clarence Smith (n 15 above) 27. National Carriers v Panalpina (Northern) [1981] AC 675 HL, 691 Lord Hailsham LC, 714D Lord Roskill; Cricklewood Property & Investment Trust v Leighton’s Investment Trust [1945] AC 221 HL, 229 Viscount Simon LC. 21 J Story Commentaries on the Conflict of Laws (Boston, Little Brown, 8th edn, 1883) [447]. 22 Macdonald (n 14 above) 84 Lord Tomlin, 89 Lord Thankerton. 23 G White ‘Civil Jurisdiction and Judgments Act 1982’ Part I [1983] Conveyancer 180–193, Part II [1983] Conveyancer 306–314, 306; Carruthers Transfer of Property (n 13 above) [1.15ff]; A Briggs Conflict of Laws (Oxford, Clarendon, 2002, 0-19-876333-6) ch 8. 19 20
Immovables
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of the likelihood that they would soon be knocked down.24 Let us hope that this is no longer the cockpit of Europe. Wales is generally more settled and so a shack resting on its own weight on the soil and gradually sinking into the Gower Peninsula but otherwise unattached was held to be a fixture in the leading common law case.25 Legal systems may vary at the margins over the precise definition of annexation.26 Rights are often treated as immovables. Clarence Smith’s exhaustive investigation led him to a definition of immovable rights comprehending any right of ownership, occupation or drawing profits from any site, the site being taken as one with all things regarded by the law of that site as annexed to it for the purpose in hand, and probably means also any right which is the creature of positive law and is so classified by its creator.27
Clearly this includes things like easements which must be enjoyed with land,28 but all rights outside this definition are movable (not-land). The sifting process is the prerogative of the law of the site irrespective of the forum.29 As Story said, each nation may impress on property a character and no other state may impugn it.30 Differences are likely at the margins, for example with the odd and inexcusable English principle that peerages are treated as hereditaments to be bought and sold, the treatment of abstract and abstruse entities such as manors, and particularly the treatment of intangibles like rent charges. It is open to a state to adopt one characterisation for international purposes and then, when a particular item is treated as immovable and so assigned to the land grouping, then to recategorise it as not-land for domestic purposes. Double classification of things in the grey area between the two extremes produces odd results, one of which particularly tickled the fancy of Clarence Smith: a share of a rent charge was allocated internationally to England by the immovable rule of the site but then reclassified internally by English law as personalty, the reclassification just happening to make it taxable — how to explain this to the non-expectant taxpayer as he left court!31 Common lawyers often made the innate and quite incorrect assumption that civilian law generally agreed with the common law about the movable/immovable divide. Is a claim for restitution of land a real claim affecting the land or a matter of personal obligation? A definitive answer can be provided for one sort of claim, the claim to recover property seized from Jews in pre-War Germany. After the Clarence Smith (n 15 above) 22. Elitestone v Morris [1997] 1 WLR 687 HL; Case of Admiral Palliser discussed in Mostyn v Fabrigas (1774) 1 Cowper 161, 180 Lord Mansfield MR, 98 ER 1021 (fishing huts immovables); S Lee ‘Title to Foreign Real Property in Transnational Money Claims’ (1995) 32 Columbia Journal of Transnational Law 607–672, 654 n 281 (US cases where shacks or barns treated as movables). 26 In England see P Sparkes A New Land Law (Oxford, Hart, 2nd edn, 2003, 1-84113-380-9) [2.01ff]. 27 Clarence Smith (n 15 above) 33. 28 Clarence Smith (n 15 above) 26. 29 Re Berchtold [1923] 1 Ch 192 Ch D. 30 Duncan v Lawson (1889) 41 Ch D 394 Kay J. 31 Chatfield v Berchtoldt (1871) LR 7 Ch App 192 CA in Chancery; Clarence Smith (n 15 above) 22. 24 25
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Unification of Germany surviving relatives were able to claim back the land. If the claim qualified as an immovable, German law applied and the children of the current claimant had a vested share in the land. But it was held that this claim was a matter of obligation which could be pursued by the daughter-in-law of the original owner without her handing any of the proceeds over to her children. A claim for restitution was not a matter of property, even though it was a claim that substituted for the previous ownership right, since the claim was made against the State, and could be converted to a right to compensation if purchasers had bought the land or built on it in good faith. The law of the place (German law) determined whether this claim was land or personal property.32
3
Leases and other special cases
[3.05] Leaseholds33 require special treatment because of the bizarre rule of the English common law that these are to be treated as personal property.34 When an international element is introduced because, for example, the land is located in Canada,35 leases have to be treated as land36 with English and Scots37 law speaking as one. Selection of law follows according to its geographical location within the territory of a particular state. Conflicts rules vary about how to treat a mortgage. Being intangible mortgages are not immovable in the literal sense but they are closely linked to the asset forming the security, the land mortgaged, which is immovable, and with remedies which include the right to sell the land. Partly a mortgage is also a personal obligation for payment of a debt. Characterisation involves finding a balance between these two aspects and where the scales come to rest varies from state to state and between types of security. English law sees its form of legal mortgage as immovable,38 and the same is true of Scots heritable bonds,39 and internal allocation rules treat a secured debt as located at the site of the immovable property forming the security.40 Lesser securities such as equitable Bundesgerichtshof IV ZR 171/99, [2000] N Jus 546, [2000] ECLYB [2239]. Freke v (Lord) Carbery (1873) LR 16 Eq 461 Lord Selborne; Duncan v Lawson (n 30 above); Re Caithness (1891) 7 TLR 354 Chitty J; Pepin v Bruyère [1902] 1 Ch 24 CA; Macdonald (n 14 above) obiter. 34 Re Hoyles [1910] 2 Ch 333, [1911] 1 Ch 179 CA. 35 Macdonald (n 14 above) (extensive land-holdings in British Columbia, Manitoba, Saskatchewan, and a mortgage of Canadian land); Coppin v Coppin (1725) 2 Peere Williams 291, 24 ER 735; Clarence Smith (n 15 above) 26ff. 36 The value of the Canadian lease was excluded from the daughter’s legitim, her entitlement in Scots law to succeed to a share of her father’s movable estate. 37 Downie v Downie’s Trustee (1866) 4 Macpherson (Session Cases) 1067. 38 Re Hoyles (n 34 above); Adams v National Bank of Greece [1961] AC 255 HL. 39 Jerningham v Herbert (1828) 4 Russ 388, 38 ER 851. The decision in Macdonald (n 14 above) depends on an admission that the particular mortgage was movable before the case reached the Lords: Clarence Smith (n 15 above) 26 40 Civil Jurisdiction and Judgments Act 1982, c 27, sch 4 para 3(h)(i); Dicey & Morris (n 13 above) [11-268], [23-063] (this is not in the European Regulation). 32 33
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mortgages and charges on English land may be movable,41 and that is how all mortgages are seen in Australia,42 France and Germany.43 [3.06] Categorisation of equitable interests presents massive problems because equitable actions are in personam and not directed straight at the land which forms the trust asset. Further, if a trust is established it gives a proprietary right enforceable against almost all the world, but it is less than a fully in rem right because of the possibility of its being destroyed by a purchaser without notice. Trusts were treated as immovable property in traditional public international law but are treated as matters of personal obligation by the European conflicts club. Complex issues are involved here and in order to avoid interruption of the narrative flow, discussion of these issues is postponed to a more convenient place where trusts can be considered as a whole.44
THE SI TE
The Site 1
Land
[3.07] Land has geographical limits and is fixed on the earth’s surface, so that it has a set relationship to the spatial and territorial limits of one particular system of law,45 and this made it easy to allocate the site of particular land to a particular state.46 This derives from the judgment of Justice Story in Swift v Tyson47 where, in the context of the tug between federal and state jurisdiction,48 he identified the category of 41 Price v Dewhurst (1839) 8 Simon 617, 59 ER 244 Shadwell VC (mortgage of land in St Croix); Clarence Smith (n 15 above) 31. 42 Macdonald (n 14 above) 88 Lord Thankerton; Att-Gen v (Lord) Sudeley [1897] AC 11 HL, 15 Lord Halsbury LC (New Zealand). 43 Clarence Smith (n 15 above) 18. 44 See below [11.34ff]. 45 FC von Savigny Treatise on the Conflicts of Law (New Jersey, Rothman Reprints, 2nd edn, 1972) 47–48; Cookney v Anderson (1863) 1 De Gex Jones & Smith 365, 379 Lord Westbury LC, 46 ER 146. 46 The site rule also applies, with odd results, to movables such as aircraft: Kuwait Airways v Iraqi Airways [2002] 3 All ER 209 HL; Mazur Media v Mazur Media [2004] EWHC 1566, [2004] 1 WLR 2966 Lawrence Collins J; Peer International Corp v Termidor Music Publishers (No 1) [2003] EWCA Civ 1156, [2004] Ch 212; see also below [3.13] nn 95–96. 47 Swift v Tyson (1842) 41 US 1 Supreme Court, 19, Justice Story; PM Hay ‘The Situs Rule in European and American Conflicts Law’ in PM Hay & MH Höflich Essays in Honor of JE Cribbet (Illinois, University of Illinois Press, 1988, 0-252-01593-2) 109; D Caruso ‘Private Law and Public Stakes in European Integration: the Case of Property’ (2004) 10 ELJ 751–765, 756; Carruthers Transfer of Property (n 13 above) [2.07]. Falconbridge Essays (n 13 above) 596 thinks English adoption of the site rule extreme (he has a good discussion of renvoi and situs at 217); Westlake A Treatise on Private International Law (n 13 above) 9 attributes this to its matching the national temper. 48 The decision in favour of state exclusivity over land was overturned in Erie RR v Tompkins (1938) 304 US 64 Supreme Court.
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things having permanent locality such as rights and titles to real estate and other matters immovable and intra-territorial in their nature and character.
From that it is a short and obvious step to select49 a court system to decide a dispute and from that to select a property law to apply.50 If the parties in dispute are also all connected to that same state there is no conflict and the case falls fairly and squarely within the competency of a single legal system: two French citizens arguing about a letting of a flat in Paris must take their dispute to a French court and satisfy themselves with the modern version of the Napoleonic Code. Courts in London or Moscow should never become involved but if they are dragged in to a dispute peripherally they will have to accept whatever the French court decides about the land. [3.08] Land cannot be abducted and shepherded across a state line, but owners are more difficult to pin down and it is perfectly possible for a claimant to land to move himself. Rights are also potentially mobile.51 Fluidity of movement increases in an internal market and with it the volume of cross-border commerce and the number of disputes.52 A conflict arises when a claimant in one state takes action about land in another. Suppose, for example, that a French woman lets a house in Edinburgh to an Italian, or, a different issue, the transaction involved is a Franco-Italian sale. Any dispute connected to two states inevitably involves a conflict since all property law systems diverge and problems multiply as more states pile in. ‘Conflict’ might suggest a Hobbesian and brutish state of nature between legal systems slugging it out like rival soccer gangs, when in fact they have learnt to coexist and so it may be better to submit to civilian usage and talk about ‘private international law’ as a better encapsulation of the decorum and mutual accommodation generally achieved today.53 The truth is sophistication, not thuggery. Geoffrey Cheshire was already master of the 1925 property legislation when, turning to private international law ten years later, he found a perfect antithesis to ‘real property’, fluid not static, elusive rather than obvious, repelling any tendency to dogmatise by reason of the numerous possible permutations.54 Readers have fair warning that Cheshire was challenged by what lies ahead. 49 This book departs from normal practice in using ‘choice’ for a forum or law nominated by the parties, a consensual forum or law, and ‘selection’ for a forum or law nominated by European conflicts rules because of the existence of a connecting factor; on choice see below [10.34ff]. 50 Carruthers Transfer of Property (n 13 above) [8] argues for a more flexible rule in relation to the transfer of land, and favours meeting the legitimate interests of buyers and sellers (see [8.14ff]) with a more sensitive rule that would retain a rebuttable presumption in favour of site (see [9.47]) whilst allowing a closer connection to be established by connection to the parties, their relationship, their course of dealing or contractual rights; Draft Convention §§6, 7A. Transfer is discussed below at [10.04] but it would never be possible to displace the basic proprietary framework of the site, such matters as whether land is alienable and what rights in it can be created. 51 Caruso (n 47 above) 756–757. 52 Rome I Green Paper (n 17 above) [1.1]; Giuliano Lagarde Report (n 17 above) Introduction [1]. 53 Cookney v Anderson (n 45 above) 379–380 Lord Westbury LC. 54 G Cheshire Private International Law (London, Butterworths, 1st edn, 1935) preface; currently Cheshire & North Public International Law (London, Butterworths, 13th edn by P North & JJ Fawcett, 1999).
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[3.09] Conflicts may arise in connection with two distinct but interrelated issues arising under private international law: 앫 forum — which court has jurisdictional competence to hear the dispute; and 앫 law — which system of law should be applied. It is desirable for forum and law to march in step; so that, for example, French courts apply French rules to French land. This is based on the site of the land or, in old money, the forum and the law ‘rei sitae’. Legal jurisdiction flows naturally from the immovability of land. It would not be sensible to determine a dispute about a Spanish island inhabited and grazed by Moroccan sheep55 in the Royal Courts of Justice, nor would a Southampton landlord wish to travel to the Cour de Grande Instance in Paris to litigate his claim to repossession against his tenant. European rules lay down a rule for forum and allows law to follow, though a subsequent chapter considers many cases where forum and law diverge.56 Indeed the European conflicts rules are so poor that the United Kingdom should withdraw from them.
2
Site and non-site bases and site coincidences
[3.10] A forum or law is described in this book as site-based if it is necessarily chosen because of the location of the land in issue. Others for contracts and trusts are non-site. In many cases a law or forum may be chosen or selected which happens to correspond to the site of the land but where the selection is made from the existence of some non-site connection. For example, a contract to sell a house in Galway to an English purchaser long settled in Dublin can be enforced against the purchaser if she proves recalcitrant in Ireland; to do so because the house is in Galway is site-based, but to do so because of her domicile in Dublin is a coincidence because she might just as easily be domiciled in Belfast or Liverpool or Paris or Istanbul. This book makes non-site assumptions where facts are purely contingent.
3
Cross-border and trans-national holdings
[3.11] A lease may include land in two or more European states and in such a case Scherrens v Maenhout57 is authority for distinguishing two situations. More common is a lease demising two distinct parcels of land by a single document, each discrete and lying wholly within a particular European state, Scherrens itself involving five hectares of Belgium and a non-contiguous parcel of twelve hectares 55 Parsley Island (Isla del Perejil) is a Spanish enclave on the Moroccan coast seized by Moroccan soldiers in two dinghies in 2002; G Tremlett Guardian July 13th 2002. 56 See below [10.17]. 57 Case 158/87 Scherrens v Maenhout [1988] ECR 3791 ECJ; TC Hartley ‘§16: Land in Two Contracting States’ (1989) 14 EL Rev 57–58.
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of the Netherlands. This lease was severed into its constituent parts, allowing Belgium and the Netherlands to assume jurisdiction over their respective parts.58 Less commonly, the special characteristics of a lease might dictate a need for one court to decide where the property demised is a single farm or business unit with almost all the land in one state but overlapping the state border, and perhaps whenever a single geographical holding on a state border forms a single economic unit.59 One problem not yet faced is what happens if state A provides that a particular piece of land physically sited within the territory of state B is deemed by its private international law to fall within the territory of state A. One can imagine problems, absurdity even, arising from enclaves and exclaves or from disputed territory such as Gibraltar and northern Cyprus.60 English law probably precludes notional relocation of land which is physical in character, but rules could easily differ about how to ground intangibles such as a rent charge.61 It seems that a contract will also be severable on a site basis.62
SELECTI O N O F LA N D LAW
Selection of Land Law 1
The Rome I club and its limits
[3.12] Contract laws vary across Europe. Relatively few cases have an international element,63 but those with elements linked to several countries need clear rules for selecting one legal system, uniform rules lubricating the workings of the common market.64 The Rome Convention65 — or ‘Rome I’66 — aims to establish certain and uniform rules concerning the choice and selection of law applicable to contractual obligations.67 It offers freedom of choice apart from the case of consumer contracts, but where no choice is made a law is selected for the parties by identifying a close connection to the contract,68 perhaps helping to reduce the
Scherrens (n 57 above) J[13–15]. Left open in Scherrens (n 57 above) J[13–15], though AG[3] Mancini was against. 60 See below [4.31ff]. 61 Dicey & Morris (n 13 above) II [22.011–22.012]. 62 Rome Convention (n 17 above) §4[1]; Giuliano Lagarde Report (n 17 above) §4, [8]; Dicey & Morris (n 13 above) II [33–230]; R Plender & M Wilderspin The European Contracts Convention (London, Sweet & Maxwell, 2nd edn, 2001, 0-421-73860-X) [6.22]; see below [10.09]. 63 Rome I Green Paper (n 17 above) [1.6]; Giuliano Lagarde Report (n 17 above) Introduction [1]. 64 It is nevertheless currently a poor tool of legal integration: O Lando ‘Optional or Mandatory Europeanisation of Contract Law’ (2000) 8 ERPL 59–69, 62. 65 Rome Convention (n 17 above); Giuliano Lagarde Report (n 17 above). 66 Dicey & Morris (n 13 above) II [32]; Plender & Wilderspin (n 62 above); J Hill ‘Rome Convention: the Approach of the UK Courts’ (2004) 53 ICLQ 325–350. 67 Giuliano Lagarde Report (n 17 above) Introduction [1] and §1, [1]. 68 Rome I Green Paper (n 17 above) [1.5]. 58 59
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attractions of forum shopping.69 As usual, the European rules are crude as compared to the preceding common law. After an extended pause the United Kingdom incorporated Rome I into domestic law by the Contracts (Applicable Law) Act 1990.70 The process of unification of conflicts rules can be traced in the Giuliano Lagarde Report.71 Proposals have been made to bring the selection of contract law more formally within the EU conflicts club by a Regulation72 but Denmark, the United Kingdom and Ireland will not participate.73 The Rome Convention selects the law to be applied to contractual obligations in civil and commercial matters,74 but this Convention never impinges on pure property law, exclusions being corporeal and incorporeal property, security interests, and formality provisions, indeed all aspects of property which had been the subject of an explicit exclusion in a preliminary text which was, however, removed from the final version for obviousness and superfluity.75 French land sold by a German contract has an underlying structure of property law which is French, but any personal aspects of the contract may be covered by German law. So the conflicts club has a void for land. All states insist upon applying their own law to their own land, including issues of saleability, formalities, the proprietary effect and priority of a transfer and relationships with neighbours and how it may be offered as a security.76 Site-based law is imposed not under explicit European legislation but as part of a continent-wide ius commune. Closer to the line and requiring express exclusions from the Rome scope are: 앫 common law77 trusts, their constitution and the relations between the settlor, trustees and beneficiaries,78 questions of the status and capacity of individuals,79 and 앫 wills, succession, matrimonial and family property, and all related contracts.80 앫
69 Rome I Green Paper (n 17 above) [1.3], [3.1.2]; C-381/98 Ingmar GB v Eaton Leonard Technologies [2000] I ECR 9305 ECJ. 70 Contracts (Applicable Law) Act 1990, c 36, s 2(1); but only in force as from 1994; for this, the several amendments, the geographical reach, UK derogations and ECJ interpretation, see below [4.09ff], [10] passim. 71 Giuliano Lagarde Report (n 17 above) Introduction [2] and §4, [1]. 72 Rome I Green Paper (n 17 above) [3]; AML Rodríguez ‘The Rome Convention and its Revision’ (2004) 12 ERPL 167–191. 73 Denmark will be out whereas the UK and Ireland are yet to decide: Rome I Proposal (n 17 above) R[18–19]. 74 Rome Convention (n 17 above) §1[1]. 75 Giuliano Lagarde Report (n 17 above) Introduction [3] and §1, [2–3]. 76 The property exception covers the grant of limited rights but not a contract for a grant: Dicey & Morris (n 13 above) II [33–226]. 77 Civilian-type trusts are contractual in origin and within Rome, but judges should nevertheless be free to exclude them where they display the same characteristics as common law trusts: Giuliano Lagarde Report (n 17 above) §1, [8]. 78 Hague Convention XXX §2, Recognition of Trusts Act 1987, c 14, s 1(1); see below [11.59]. 79 Rome Convention (n 17 above) §1[2]; but including of course capacity to contract: §11. 80 Giuliano Lagarde Report (n 17 above) §1, [3]. However, gifts arising from contract are covered.
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Any conversion of the Rome Convention into EU legislation will carry forward similar exclusions.81
2
Domestic public international law
[3.13] Selection of a forum according to the site of land in dispute will also select the law to be applied. True enough, technically speaking, the matter is left to be decided by local law,82 but the reality is that courts will always apply their own local law to their own land, the law of the site (lex situs). This rule is universal in the literal sense.83 A legal system would have to be abnormally unjingoistic to do anything else and one can scarcely imagine the French courts abandoning the simplicity of propriété in favour of the conceptual beauty of the common law doctrine of estates. Spanish law is proper to determine a dispute about ownership in Spain84 and Italian law proper for a letting of a holiday villa in Italy even as between a landlord and a tenant who were both Germans.85 This is true so long as the issue is an ownership dispute but the court of the site may be required to apply a foreign law chosen by the parties when the issue affects a transaction with land.86 At common law and in equity: the incidents to real estate, the right of alienating or limiting it and the course of succession to it depend entirely on the law of the country where the estate is situated.87
An owner of property cannot modify his estate or increase the dispositive powers associated with it,88 but rather his ownership depends upon the general law of the land so that, for example, if the state converts from feudalism to a modern commercial basis individual ownerships follow. Tax follows the same pattern with obligations in rem over property left to the state in which the property was situated, whereas personal obligations based on a duty to transfer title were for the state of residence to take into account.89 Other matters left to the law of the site are formalities,90 the method of selling land in Sardinia,91 questions of capacity to deal with immovables, capacity to make an English mortgage of land in Johannesburg which is governed by the law of the Transvaal,92 and Rome I Proposal (n 17 above) §1[2]. Jenard Report [1979] OJ C59 1, 34. 83 Cookney v Anderson (n 45 above) 380 Lord Westbury LC. 84 Re Hayward [1997] Ch 45, 56G–57B, 59B Rattee J. 85 C-241/83 Rösler v Rottwinkel [1985] ECR 99 ECJ; but on holiday lettings see below [4.40ff]. 86 Rösler (n 85 above) 118 AG Slynn. 87 Nelson v Bridport (1846) 8 Beaven 547, headnote at 547, 50 ER 215. 88 Nelson (n 87 above) 571. 89 C-364/01 Barbier’s Heirs v Inspecteur Van de Belastingdienst Particulieren [2003] I ECR 15013 ECJ (Dutch inheritance tax). 90 Adams v Clutterbuck (1883) 10 QBD 403 QBD (seal not required on English lease of Scottish sporting rights). 91 Re Piercy [1895] 1 Ch 83, 88 North J; F Pollock (1895) 11 LQR 105–107. 92 Bank of Africa v Cohen [1909] 2 Ch 129 CA, 146 Kennedy LJ; Anon (1909) 25 LQR 342; also Duncan v Lawson (n 30 above); Re Cartney (1840) Montagu & Chitty 239. 81 82
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wills.93 Problems are perhaps greatest with business tenancies.94 Formalities for transfer95 and gift96 of personalty also follow the location of the thing at the time the transaction or disposition is made.
3
No choice of land law
[3.14] Parties are not allowed to choose the law that is to apply to their land.97 The parties to the lease of property in Spain stated an express choice of German law to apply to their agreement but freedom of contract was subject to overriding principles of public order which chose Spanish law and a Spanish forum: rules which had to be applied to a lease of property in Spain fell directly under such provisions.98 It would be interesting to open up the European market to a bare-knuckle fight between English property law and civilian principles by allowing an open choice of land law. An optimal market is achieved by peopling it by individuals with a free choice and leaving it to them to pursue their own interests. Would we see a European flag of convenience to match that which sees 40 per cent of all companies traded on the New York stock market opting to incorporate in Delaware?99 Reality precludes any land law of convenience. Transactional aspects of land transactions may be open to choice, but land law is quasi-public fixing a scheme for real enforceability against third-party purchasers and also fixing relationships with neighbours; it would not be feasible to subject No 13 Nelson Mandela Way to German law when No 15 has voted French. Land law is not a bespoke service. In fact, a state will apply to its own land many mandatory provisions and these will have an overriding character against any other law chosen or selected for the contract.100 Other difficulties standing in the way of a free choice are lack of information, language problems, limits to the expertise of lawyers and transaction costs.101 Legal diversity adds to transaction costs, especially for small business,102
See below [11.17]. C Romney ‘Peace with Mainland’ [1999] 43 EG 145–147 (comparative table of terms of commercial leases in main continental jurisdictions). 95 Gammell v Sewell (1860) 5 Hemmings & Miller 728, 157 ER 1371; A v N [1998] BGE III 103, [1999] ECLYB [2314] I Zivilabteilung; CW Fassberg ‘On Time and Place in Choice of Law for Property’ (2002) 51 ICLQ 385–400. 96 Le Meilleur v Trehout [2001] II JCP 10620, [2002] ECLYB [1188]; Air Foyle v Center Capital [2002] EWHC 2535, [2003] 2 Lloyd’s Rep 753 Gross J; D Osborne ‘Lex Situs and Aircraft’ (2004) 3 LMCLQ 303–312. 97 On ‘choice’ and ‘selection’ see (n 49 above). 98 B v XX [2002] J Aran 3107, [2002] ECLYB [1227] Tribunal Supremo; Spanish Law on Judicial Power §22[1] following the European forum rules. 99 G Wagner ‘The Economics of Harmonisation: the Case of Contract Law’ (2002) 39 CML Rev 995–1023, 1001–1003, 1005. 100 See below [10.07]. 101 Wagner (n 99 above) 1006–1013. 102 Wagner (n 99 above) 1014. 93 94
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but so would harmonisation and it makes business sense to rely on conflict resolution.103
4
Recognition of judgments
[3.15] Foreign land law may be imported to another European country because of the requirement to recognise judgments given on the basis of mutual trust.104
5
Site-based selection of contract law
[3.16] Contract law is selected under the Rome Convention, in the absence of a choice, by seeking out the country with which a contract is most closely connected, after it has been severed if a single contract is used to sell land in several EU states. Land is subject to a special rule for applicable law so notably absent for forum which governs, more precisely, any contract whose subject matter is a right in immovable property or a right to use immovable property, including a contract to grant a lease or a right of way or a mortgage, and presumably also a contract to sell an existing estate or ownership right in land. It creates a presumption that the contract is most closely connected with ‘the country where the immovable property is situated’.105 The site rule also applies to a consumer contract where the service is to be provided completely in a country different from that of the consumer’s habitual residence.106 If the Rome I Proposal comes to fruition, the site rule will be solidified as a starting point for land contracts and the fit between the forum rules for short leases will be improved.107
PR O PERTY O F THE EUR O PEA N I N STI TUTI O N S
Property of the European Institutions [3.17] The European Commission has capacity to acquire or dispose of movable and immovable property and to be a party to legal proceedings.108 This 103 Wagner (n 99 above) 1013–1018; M Solimine ‘Economic and Empirical Analysis of Choice of Law’ (1989) 24 Georgia Law Rev 49–94; U Mattei Comparative Law and Economics (Michigan, University of Michigan Press, 1997, 0-472-06649-8); JL Dunoff & JP Tractman ‘Economic Analysis of International Law’ (1999) 24 Yale Law Journal of International Law 1–60. 104 See below [4.32ff], [9.75ff]. 105 Rome Convention (n 17 above) §4[3]; Rome I Green Paper (n 17 above) [3.2.6.1]; see below [10.33]. 106 Rome Convention (n 17 above) §5[4–5]; Giuliano Lagarde Report (n 17 above) §5, [5]; Dicey & Morris (n 13 above) II [33–004]; Rome I Proposal (n 17 above) §§5[1], 6[2]; see below [10.33]. 107 Existing limitations on the scope of the selection of law rules will be repeated and amplified: Rome I Proposal (n 17 above) R[14], §§1[2]; 18. 108 EC §282 ex §211.
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takes place under domestic law and does not involve the creation of a distinct substantive law along the line of the employment regime for EC officials.
R ESPECT F O R TER R I TO R I A LI TY
Respect for Territoriality 1
Property exclusion
[3.18] According to article 295, the consolidated Treaty of Rome: shall in no way prejudice the rules in Member States governing the system of property-ownership.109
The same self-denying ordinance found its way into the draft Constitution110 and also into the Agreement for the EEA.111 The precise meaning of these provisions has not been settled,112 they are by no means straightforward,113 and their complexities are little explored114 outside the field of industrial (or, in common law parlance, intellectual) property rights.115 The practical effect of article 295 is limited since arguments based on it have been rejected in every reported case.116 Property is a strange thing to be singled out by the Treaty,117 given how property is an inseparable part of the process of economic integration, and necessarily fair game for community legislators.118 Article 295 has an important effect in keeping the EU out of pure domestic property law, but it has not been a serious impediment to the development of an autonomous European land law. [3.19] It, article 295, can be read at face value, to some extent at least, when it states that entry into the Treaty ‘shall in no way prejudice’ national property rules. Basics of national systems should remain free from European interference or at the very least any European intrusion will require strong justification where these are called into question.119 Formal expression is given by the article to the EC §295 ex §222. Draft European Constitution [2004] OJ C310 1, §III–331. 111 EEA Agreement [1992] OJ L12 13 as adjusted [1994] OJ L1 572 and amended [2004] OJ L130 3, §125; S Norberg, K Hökborg, M Johansson, D Eliasson & L Dedichen A Commentary on the EEA Agreement (Stockholm Fritzes, Kluwer, 1993, 9-138-92200-2) 302–303; T Blanchet, R Piippona & M Westman-Cléments The Agreement on the EEA (Oxford, OUP, 1994, 0-19-825884-4) 105ff. 112 C-30/90 Commission EC v UK (Patent Licensing) [1992] I ECR 829 ECJ, 840. 113 P Oliver Free Movement of Goods in the EU (London, Sweet & Maxwell, 4th edn by P Oliver & M Jarvis, 2002, 978-0-421-74020-4) [9.30]. 114 But see: F Campbell-White ‘Property Rights a Forgotten Issue under the Union’ in NA Neuwahl & A Rosas The EU and Human Rights (The Hague, Martinus Nijhoff, 1995, 9-041-10124-1), 249–263; Caruso (n 47 above); B Bogusz ‘Modernising English Property Law: The Influence of Internal Market Principles’ (2006) European Business Law Review 1395–1419, 1407–1411 115 Case 24/67 Parke Davis v Probel [1968] ECR 55 ECJ, 59; see below [3.27]. 116 See below [3.22ff]. 117 Caruso (n 47 above) 752. 118 Caruso (n 47 above) 753. 119 A Campbell Common Market Law (London, Longmans, 1969) vol 2 [2266]. 109 110
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territoriality of property rights, for example in the independence of national systems of patent law,120 perhaps creating a presumption that property rights recognised nationally will be upheld in European contexts.121 As Advocate General Römer said of article 295 in Consten: its object is solely to guarantee in a general manner the freedom of the Member States to organize their own systems of property.122
No European element enters into pure property law such as conveyancing systems, succession on death, and family law.123 Property lawyers have a licence to be dry.124 There is a provisional protection for national legislation, and the starting gate has been moved,125 but no outright shield. Membership of the Economic Community does not affect the structure of the property legislation of member states, any more than it affects parent-child law or inheritance provision or the grounds for nullity of a marriage. Full integration of private law is not the aim but merely to secure the decisive influence in economic activity.126
2
Neutrality between forms of industrial ownership
[3.20] Teleological interpretation derived from the history of the article must first be cleared from the field as a distraction. A corresponding provision was included in the Treaty establishing the European Coal and Steel Community but that does not determine the scope of its modern derivative. Property lawyers all celebrate May 9th, Europe Day, as the day on which, when Robert Schumann made his proposal for the establishment of an authority to establish a common market in coal and steel, he made the exception that: L’institution de la Haut Authorité ne préjuge en rien du régime de propriété des entreprises.127
In some states coal and steel production was organised through private undertakings but other states nationalised the producers of coal and steel so these Parke Davis (n 115 above) 77 AG Römer. Parke Davis (n 115 above) 64 ECJ. 122 Case 56/64 etc Consten v Commission EC [1966] ECR 299 ECJ, 366 AG Römer; C-350/92 Spain v Commission EC (Medicinal Products) [1995] I ECR 1985 ECJ, AG[14] Jacobs. 123 H Smit & P Herzog The Law of the EC: a Commentary (New York, Matthew Bender, 1997) vol 5 [6–216.58]. 124 The reference is to Mrs Thatcher’s division of her cabinet into ‘wet’ (pro-European) and ‘dry’ (Eurosceptic). 125 UK Patent Licensing (n 112 above) Report [31]; it cites: Case 144/81 Keurkoop v Nancy Kean Gifts [1972] ECR 2853 ECJ; Case 35/87 Thetford v Fiamma [1988] ECR 3585 ECJ; Case 341/87 EMI Electrola v Patricia Im- und Export [1989] ECR 79 ECJ, J[1]. 126 C-367/98 Commission EC v Portugal (Golden Share) [2002] I ECR 4731 ECJ, AG[63], AG[65] Colomer. 127 Schumann Declaration May 9th 1950 (); ‘The institution of the High Authority will in no way prejudge the methods of ownership of enterprises’; European Coal and Steel Community Treaty §83 followed in very similar terms. 120 121
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products were marketed by state-owned corporations. Different forms of ownership of the enterprises engaged in coal and steel production were to be respected, a point even more explicit in the earlier drafts which had referred to the ‘propriété de moyens de production’ — that is, ownership of means of production.128 Neutrality was to be maintained between steel producers with private shareholders and state-controlled vehicles and that ‘agnosticism’129 as between privatised and collectivised organisation of markets has, at least in theory, been carried through into the internal market in general.130 A programme of nationalisation can be implemented within the EC131 and Italy has collectivised its electricity supply,132 and more generally states are free to decide for themselves about public ownership133 and whether to nationalise or denationalise.134 Neutrality is also maintained between the private and public sectors when competition issues such as state aid135 are under discussion, though this is of limited value since the article 295 shield is not valid against competition issues136 or state aid rules.137 In practice the public option is severely constrained.138 [3.21] Between the extremes of private and public lie heterogeneous mixtures of the two,139 examples being considered in the various Golden Share cases. Several states privatised nationalised utilities on terms reserving to the relevant state authority some degree of control over the business conduct of the utility by means of the designation of a share (the Golden Share) with enhanced voting rights and an effective veto over company policy. An EU that was truly neutral as between private and public ownership would surely accept the half-way house of private investors subject to a degree of state planning of infrastructure? Given the 128 S Neri & H Sperl Traité Instituant la CEE, Travaux Préparatoires (Luxembourg, ECJ, 1960) 410; Portuguese Golden Share (n 126 above) AG[50–51] Colomer. 129 P Craig & G de Búrca EU Law Text Cases & Materials (Oxford, OUP, 3rd edn, 2003, 0-19-876273-9) 1123; Bright & Bright (n 8 above) 358ff. 130 EC §86 ex §90. 131 Written Q 346/80 [1980] OJ C213 16 (Roy Jenkins). 132 Case 6/64 Costa v Ente Nazionale per l’Energia Elettrica [1964] ECR 585 ECJ. 133 Case 32/65 Italy v Council EC (Competition Agreements) [1966] ECR 389 ECJ, 422 AG Römer; Parke Davis (n 115 above) 63; Case 44/79 Hauer v Rheinland-Phalz [1979] ECR 3727 ECJ, AG[7] Capotorti; Case 188/80 etc France v Commission EC (State Aids) [1982] ECR 2545 ECJ, 2556 AG Reischl; C-202/88 France v Commission EC (Telecommunications Terminals) [1991] I ECR 1223 ECJ, 1239 AG Tesauro; Spanish Medicinal Products (n 122 above) AG[29] Jacobs, J[29ff]. 134 DC Goyder EC Competition Law (Oxford, OUP, 4th edn, 2003, 0-19-925788-4) 249 fn 9; J Mégret Le Droit de la CEE (Brussels, Université de Bruxelles, 1987) vol 15 42; H von der Gröben, H von Böchl & J Thiesing Kommentar zum EWG-Vertrag (Baden Baden, Nomos Verlagsgesellschaft, 1974) vol 2 557–558. 135 Aid by Charleroi Airport to Ryanair Commission Decision 2004/393/EC [2004] OJ L137 1, [18], [45], [68]; also numerous other decisions on state aid. 136 Charleroi Airport (n 135 above) [158]; Commission Decision 2005/842/EC (Public Service Compensation) [2005] OJ L312 67, [119], [138], [146]. 137 Case T–116/01 P&O European Ferries (Vizcaya) v Commission EC [2003] II ECR 2957 CFI, J[148–153]; the point is not mentioned on appeal: C-442/03P P&O European Ferries (Vizcaya) v Commission EC [2006] All ER (D) 06 (June) ECJ (tickets for Bilbao–Portsmouth ferry). 138 Caruso (n 47 above) 755–756. 139 Portuguese Golden Share (n 126 above) AG[52–55] Colomer.
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long and fascinating analysis of ontological and historical factors by Advocate-General Colomer,140 the judgments must be said to be disappointingly brief. The European Court of Justice stated in the Belgian case141 that retention of public influence on the privatisation of undertakings could not be justified simply by pleading that it was part of the national system of ownership of shares, since article 295 did not exempt rules of property from the fundamental rules of the EC Treaty. This mantra was repeated in the subsequent cases,142 so that by the time that Spain got to court it was clear that article 295 had no practical effect in such cases, not even to raise a presumption in favour of national property law.143
3
Internal market
[3.22] Ownership is necessarily fettered to the extent needed to achieve the overall objectives of the Community.144 Intervention in property rights is legitimate whenever a matter falls within an area of European competence, most commonly because of internal market rules, and is in fact a commonplace. National property systems yield ground to all of the general economic freedoms,145 most notably the freedom to move capital. Absolute respect for property rights: would result finally in the paralysis of the powers of the Community.146
Indolence on the part of the Community ends when faced with discriminatory provisions.147 Even if no unequal treatment may dissuade from exercise or render right illusory.148 Reliance on article 295 in such contexts is ‘spurious’.149 [3.23] This is shown in several rulings of the European Court of Justice governing immovable property (land). Access to the ownership of immovable property is implicit in the freedoms guaranteed by the Treaty.150 Property is left to member states151 but can be overridden in the Community interest to secure 140 Portuguese Golden Share (n 126 above) AG[41ff] Colomer; he concluded at AG[54] that §295 does not refer to civil property. 141 C-503/99 Commission EC v Belgium (Golden Share) [2002] I ECR 4809 ECJ, J[44]; C-302/97 Konle v Austria [1999] I ECR 3099 ECJ, J[38]. 142 C-483/99 Commission EC v France (Golden Share) [2002] I ECR 4781 ECJ, J[44]; Portuguese Golden Share (n 126 above) J[48]. 143 C-463/00 Commission EC v Spain (Golden Share) [2003] I ECR 4641 ECJ, J[67]; contrast AG[54–58] Colomer. 144 Case 4/73 Nold (No 1) [1974] ECR 491 ECJ, J[14]. 145 Parke Davis (n 115 above) 63. 146 Consten (n 122 above) 366 AG Römer; Spanish Medicinal Products (n 122 above) J[14]. 147 C-30/90 Commission EC v UK (State Aids) [1992] I ECR 829 ECJ, J[17]; C-92/92 etc Phil Collins v Imtrat [1993] I ECR 5145 ECJ, J[27–28] (protection for Germans against pirated copying of concerts greater than for other EU nationals); Portuguese Golden Share (n 126 above) AG[67–71] Colomer; Belgian Golden Share (n 141 above) AG[73ff], AG[82] Colomer. 148 C-163/94 Sanz de Lera v Spain [1995] I ECR 4821 ECJ, J[25]; Konle (n 141 above) J[44]. 149 Portuguese Golden Share (n 126 above) AG[78] Colomer. 150 Konle (n 141 above) AG[14] Pergola. 151 Konle (n 141 above) J[38].
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an internal market in land by, for example, ensuring that there is freedom to establish a business elsewhere in the EEA-30 and to move capital to pay for land elsewhere.152 Article 295 may raise the threshold before Community interference can be justified but once over that EC article 295 does not protect national property laws from being examined for compatibility with the fundamental rules of the Treaty. In Robert Fearon v Irish Land Commission153 a system of compulsory acquisition of Irish farmland proved to be non-discriminatory but the fact that scrutiny of the legislation took place at all shows that EU law was potentially in play. The non-discrimination principle was a central part of the right of establishment. [3.24] Several sound bases exist for Community involvement in land law. One such is competition since article 295 does not protect against competition rules; thus in Masterfoods154 an agreement forcing a retailer to display HB’s ice cream in HB’s cabinets had to be tested for compliance with the competition rules and it was not germane to attempt to plead the property exclusion as a shield.155 Any licence to nationalise is necessarily circumscribed by the need to ensure that public dominance does not displace free competition.156 Another legal base for land law is consumer protection.157 It is interesting that when controls on the marketing of timeshares were introduced in the Timeshare Directive158 it was thought necessary to justify intervention because timeshare contracts could be thought to be property interests; the Directive states that timeshare contracts are in fact unlike tenancy agreements and are in many ways more like the contractual transactions used for hotels, residential hotels and similar tourist premises, a reasoning which suggests a nervousness about trampling on vested property. Some aspects of consumer protection legislation go well beyond regulating marketing into substantive law, a notable example in our field being the unfair contract terms regime.159 Environmental protection is another important European issue, though on a grand regional scale rather than the micro-level germane to individual plots of land; thus in Annibaldi v Sindaco del Gamme d Guidonia refusal to allow a three-hectare orchard in a protected archaeological area within a regional park160 could be justified on environmental grounds and could not be attacked using the property exclusion. [3.25] European law has no impact on the internal affairs of a member state, including the rules laid down by member states for property-ownership by its Konle (n 141 above) J[36–38]; C-355/97 Beck’s Application [1999] I ECR 4977 ECJ. Case 182/83 Robert Fearon v Irish Land Commission [1984] ECR 3677 ECJ, J[10–11]; Bright & Bright (n 8 above) 361; see above [1.26]. 154 C-344/98 Masterfoods v HB Ice Cream [2000] I ECR 11369 ECJ, AG[103ff] Cosmas; but decided on other grounds at J[61]. 155 EC §§81–82 ex §§85–86 156 Craig & de Búrca (n 129 above) 1123. 157 See below [ch 5]. 158 Timeshare Directive 94/47/EC, [1994] OJ L280 83, R[5–6]; Caruso (n 47 above) 757. 159 Unfair Terms in Consumer Contracts Regs 1999, SI 1999/2083; see below [8.24ff]. 160 C-309/96 Annibaldi v Sindaco del Gamme di Guidonia [1997] I ECR 7493 ECJ, J[23]. 152 153
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own nationals,161 but only has an impact on cross-border issues.162 Europeanisation of property law is in one sense peripheral and tangential, yet nonetheless important for that where it does occur. In practice this limitation is of little moment since domestic systems rarely extend a right to EU citizens or EEA nationals without ensuring that their own nationals enjoy the same right, and it is often politically impossible not to make the same extension, and if not it is necessary to make sure that other possible cross-border elements such as divergent residence are covered.163 Once it is established that Community law might in principle make an inroad into national sovereignty over property systems, an issue of justification arises164 and it is only when legislation is tested to establish that it follows a legitimate purpose and is proportionate to that end, by being as unobtrusive as possible, that the potential incursion becomes an actuality. National law remains in play to the extent that there is no harmonisation.165 [3.26] The language of article 295 is inapt166 to guarantee property in the same way as the European Convention and national constitutions.167
4
Industrial property
[3.27] Europeans refer to industrial property168 as the means of protecting the fruits of intellectual labour through patents, copyrights, trademarks and design rights and enabling the operation of a sophisticated market in goods.169 Rights conferred at national level170 are proprietary in character and therefore attract the article 295 shield against European interference, but the shield is wafer thin. Recognition of a French copyright necessarily distorts the market when the goods affected are circulated in the British and German markets. Community-based rules must be powerful enough to override nationally recognised intellectual property in order to ensure that, ultimately, it is possible to have a market in goods between European states.171 Early commentators on the Treaty
Phull v Secretary of State for Home Department [1996] Imm AR 72 CA, 75–77 Leggatt LJ. EC §65 ex §73m. 163 See above [1.20]. 164 French Telecoms (n 133 above) 1247 AG Tesauro; Case 59/75 Pubblico Ministero v Manghera [1976] ECR 91 ECJ. 165 Spanish Medicinal Products (n 122 above) J[17]. 166 Despite C-19/89 Cnl-Sucal v HAG II [1990] I ECR 3711 ECJ, AG[14] Jacobs; this has been cited in several cases from 2007, but still seems inapposite. 167 See below [3.33ff]. 168 The common law equivalent is intellectual property. 169 FA Mann ‘Industrial Property and the EEC Treaty’ (1975) 24 ICLQ 31–43, 34. 170 EMI Electrola v Patricia (n 125 above) J[11]; Phil Collins (n 147 above) J[18]. 171 Consten (n 122 above) 366 AG Römer; Italian Competition Agreements (n 133 above) 422 AG Römer; Parke Davis (n 115 above) 72; Phil Collins (n 147 above) J[22]; Spanish Medicinal Products (n 122 above) AG[18] Jacobs; Craig & de Búrca (n 129 above) 1123. 161 162
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contended for the inviolability of property rights but it has proved to be untenable and national laws in the field of industrial property can be harmonised uncramped by article 295.172 Europe can extend the duration of patent protection for pharmaceutical drugs where the initial authorisation for marketing has been delayed by granting European supplementary protection certificates and in doing so this affects materially the substance of the right granted.173 Unfettered freedom to organise property rights locally would end up in the paralysis of the power of the Community. Lessons from the field of industrial property are not easily transposed to land law because of the special Treaty provisions which inhabit the lesser field and which ensure that article 295 is never considered in an unadulterated form. A free market is one without quotas (‘quantitative restrictions’) as between states but controls on exports and imports are allowed in the interests of ‘the protection of industrial and commercial property’.174 Europe intervenes here to ensure that nationally recognised industrial property rights are aligned, and this aligns with the article 295 prohibition on overriding national property rights.175 The two Treaty provisions swing together in the same direction. The existence/exercise dichotomy considered below is anchored firmly in these special considerations.176 [3.28] In other cases specific Treaty provisions tug against the exclusivity of national property rights, the exemplar being the articles attacking anti-competitive practices such as cartels177 or the abuse of dominant position.178 Free movement of goods is secured despite industrial property rights that might otherwise be used to control the market.179 Competition principles override property rights. European measures might have a variety of effects with an increasing impact on national property rights, which might involve: 앫 restraints on the exercise of rights, 앫 affecting the existence of such rights,
172 KPE Lasok Law and Institutions of the EU (London, Butterworths, 7th edn, 2001, 0-40-690186-4) 721; G Tritton Intellectual Property in Europe (London, Sweet & Maxwell, 2nd edn, 2002, 987-0-421-90850-5) [1.037]. 173 UK Patent Licensing (n 112 above) J[18], AG[8–9] Van Gerven; Spanish Medicinal Products (n 122 above) AG[26–28] Jacobs. 174 EC §30 ex §36; HAG II (n 166 above) AG[14] Jacobs; Campbell-White (n 114 above); Goyder (n 134 above) 250–251; P Koutrakos ‘Common Vocabulary of Free Movement of Goods’ (2003) 28 EL Rev 53–69, 53. 175 Oliver & Jarvis (n 113 above) [9.30]. 176 HAG II (n 166 above) AG[14] Jacobs. 177 EC §81 ex §85. 178 EC §82 ex §86; Case 78/70 Deutsche Grammophon v Metro [1971] ECR 487 ECJ, J[1] (rental agreements causing a distortion of trade). 179 EC §30 ex §36; Spanish Medicinal Products (n 122 above) AG[22] Jacobs; Case 35/76 Simmenthal v Italian Minister of Finance [1976] ECR 1871 ECJ, [14]; Case 5/77 Tedeschi v Denhasit [1977] ECR 1555 ECJ J[34]; Case 153/78 Commission EC v Germany (Imported Meat) [1979] ECR 2555 ECJ, J[5]; C-9/93 IHT v Ideal Standard [1994] I ECR 2789 ECJ, J[58].
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앫 affecting the core or substance of such rights, and 앫 negating the right. Despite the apparent protection of article 295 case law allows all four of these effects, but the European interference becomes progressively more difficult to justify as one descends towards the foot of this list. Free competition and the operation of the free market are principles which may require limits to be imposed on the exercise of industrial property rights.180 Consten181 provides an example, tempting and dangerous in equal measure because the facts fit so neatly into a clean distinction between the existence and exercise of rights. Consten’s sole dealership for Grundig products in France was supported by a grant of exclusive rights to use the ‘GINT’ trademark which guaranteed the authenticity of Grundig products, this grant being an attempt to preclude parallel imports from other EEC countries below list price. An injunction prevented the use of the trademark for this anti-competitive purpose,182 a European remedy which called into question the way the French industrial property right was being used.183 National law inevitably restricts the exercise of rights184 so this is no great novelty. EU legislation is more likely to be justified if it confines itself to limiting the exercise of rights of property.185 This has not proved a stable line. Every property right is a bundle of rights, and any control imposed on it will impinge on its existence to some degree, a line of reasoning propounded by Beier186 which has been influential on judicial thinking.187 It is better to identify a specific subject matter consisting of a number of core rights under national law which define the essence of the property right.188 This ‘core’ may be rendered into French as the objet specifique and into German as der spezifische Gegenstand.189 This essential core necessarily varies between each of the various industrial property rights — design rights,190 trademarks,191 180 Italian Competition Agreements (n 133 above) 422 AG Römer; Parke Davis (n 115 above) 63 ECJ, 77 AG Römer; Deutsche Grammophon (n 178 above) J[11–13]; Case 15/74 Centrafarm v Sterling Drug [1974] ECR 1147 ECJ, J[7]; Nold (n 144 above); Case 119/75 Terrapin (Overseas) v Terranova Industrie [1976] ECR 1039 ECJ, J[6]; UK Patent Licensing (n 112 above) 844; Spanish Medicinal Products (n 122 above) AG[10–11] Jacobs. 181 Consten (n 122 above); Goyder (n 134 above) 42–44. 182 Grundig-Consten iv/a–004–03344 [1964] OJ 2545. 183 Consten (n 122 above) 396; Parke Davis (n 115 above) 63. 184 Nold (n 144 above) 515 AG Trabucchi. 185 Case 5/88 Wachauf v Germany [1989] ECR 2609 ECJ. 186 FK Beier ‘Industrial Property and the Internal Market’ [1990] 2 International Review of Intellectual Property & Competition Law 131, 145; Craig & de Búrca (n 129 above) 1088–1089 (existence test ‘unreal and questionable’); Goyder (n 134 above) 249ff. 187 C-267/95 Merck v Primedean [1996] I ECR 6285 ECJ, AG[93ff] Fennelly; C-241/91P RTE v Commission EC [1995] I ECR 743 ECJ, AG[31] Gulmann. 188 Case 238/87 Volvo v Erik Veng [1988] ECR 6211 ECJ; RTE (n 187 above) AG[28–31] Gulmann; Merck (n 187 above) AG[93] Fennelly; HAG II (n 166 above) J[14]; IHT v Ideal Standard (n 179 above) J[58]; C-414/99 Zino Davidoff v A&G Imports [2001] I ECR 8691 ECJ. 189 CW Bellamy & GD Child EC Law of Competition (London, Sweet & Maxwell, 5th edn by PM Roth, 2001, 978-0-421-56440-4) vol 1 [8.007]. 190 Keurkoop (n 125 above). 191 Consten (n 122 above); Terrapin (n 180 above).
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copyrights192 and patents.193 The substance is exhausted by exposure of the thing to the market, after which the thing must be free to circulate but the industrial property right cannot be exhausted in advance of first circulation.194 This special meaning of ‘specific subject matter’ in relation to the first circulation of goods protected by industrial property rights cannot be transposed directly into other contexts such as rights in land. [3.29] Even this line has not held. Community action may add to or deduct from the substance of a property right, with no protected zone for rights recognised nationally,195 though European legislation becomes more difficult to justify the further it invades the sanctity of property rights.196 European provisions may unquestionably extend the national duration of a right, though this is unexceptionable since prolongation of a right can scarcely be seen as a ‘prejudice’197 to it.198 Conditions that are clearly prejudicial are also allowed, even to the point of negating the very existence of the grant.199 British American Tobacco200 challenged domestic implementation of the tobacco marketing regime by which the health warnings on packs of cigarettes were made even more prominent to the point where too little space was left on the pack to fit in some existing brand names. This highly desirable health-based warning was allowed to override completely the trade mark201 and other trade marks faced a total prohibition, notably ‘Mild Seven’ which misleadingly suggested a low nicotine content. Direct negation of the right recognised nationally was accepted.202 The article 295 bar on interferences with property is clearly not absolute: All of these formulae have been used, in various fashions, to give the impression of firm competence boundaries and to reinforce the legitimacy of the 192 RTE (n 187 above); Phil Collins (n 147 above); B Pasa & GA Benacchio The Harmonisation of Civil and Commercial Law in Europe (Budapest, Central European University Press 2005, 963-7326-35-9) 449ff. 193 Parke Davis (n 115 above) 71; Centrafarm v Sterling Drug (n 180 above) J[9]; UK Patent Licensing (n 112 above) J[21]. 194 Phil Collins (n 147 above) AG[18–20] Jacobs; Parke Davis (n 115 above) 61; Thetford v Fiamma (n 125 above); C-479/04 Laserdisken v Kulturministeriet [2006] I ECR 187 ECJ, J[21]; Bright & Bright (n 8 above) 254–255. Sadly there is nothing to prevent Danish copies of Cliff Richard records circulating in Germany: EMI Electrola v Patricia (n 125 above). 195 Italian Competition Agreements (n 133 above) 408–409; Robert Fearon (n 153 above); Konle (n 141 above) J[37–38]. 196 Wachauf (n 185 above). 197 EC §295 ex §222. 198 Nold (n 144 above) AG[31] Capotorti, J[14]; Spanish Medicinal Products (n 122 above) AG[15] Jacobs; Centrafarm (n 180 above) J[11]. It is the same where a European measure is intended to protect the subject matter of nationally recognised industrial property: C-23/99 Commission EC v France (Goods in Transit) [2001] I ECR 7653 ECJ, AG[65] Mischko. 199 Phil Collins (n 147 above) J[18]; UK Patent Licensing (n 112 above) J[18], AG[8–9] Van Gerven. 200 C-491/01 R(JR) British American Tobacco (Investments) v Secretary of State for Health [2002] I ECR 11453 ECJ. 201 British American Tobacco (n 200 above) question 1(d), J[142ff], AG[253–278] Geelhoed. 202 This must be said to affect the substance of the mark despite British American Tobacco (n 200 above) J[153], AG[267–271] Geelhoed.
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Europeanising project. All are controversial, subject to continuous evasion and prone to obsolescence.203
SUB SI DI A R I TY
Subsidiarity 1
Subsidiarity
[3.30] Subsidiarity204 is a vital component of any federal structure and in its pure form can only exist within a formal constitutional structure.205 Some aspects of decision-making must be allocated to the federal legislature and some to the exclusive competence of the component parts, but in between lies an area of concurrent competencies where either federal or local legislature might enact law.206 Federal power is enhanced by the principle that what touches all should be approved by all.207 Subsidiarity provides a counterweight since it enshrines the principle that decisions should be made as close as possible to the citizen affected. This checks the Federal Government in Germany208 and within the United Kingdom ensures that policy on Scottish road-building will be decided in Edinburgh even if the odd Berwick-toEdinburgh commuter is disenfranchised.209 One source of subsidiarity is the doctrine of the Roman Catholic Church pre-shadowed in an encyclical Rerum Novarum by Pope Leo XIII210 and articulated more explicitly forty years on by Pope Pius XI in Quadragesima Anno,211 a social doctrine designed to limit the competence of sovereign states to legislate on social matters of concern to Catholicism. Earlier traces of the doctrine are to be found in the teachings of Aristotle and St Thomas Aquinas and the liberalism of John Stuart Mill.212 A commonality of origin conceals wide-ranging differences,213 not least because the European principle allocates cases between two layers of democratic bodies rather than being designed to secure democratic decision-making as against autocracy.
Caruso (n 47 above) 764. A Estella The EU Principle of Subsidiarity and its Critique (Oxford, OUP, 2002, 0-19-924242-9); JW Montgomery ‘Subsidiarity as a Jurisprudential and Canonical Theory’ (2002) 148 Law & Justice 46–53. 205 G Davies ‘Subsidiarity: The Wrong Idea, In the Wrong Place, At the Wrong Time’ (2006) 43 CML Rev 63–84. 206 Estella (n 204 above) 82; but areas of competence within Europe are often fuzzy: at 90. 207 NW Barber ‘The Limited Modesty of Subsidiarity’ (2005) 11 ELJ 308–325, 316. 208 Estella (n 204 above) 81. 209 Barber (n 207 above) 319. 210 Rerum Novarum May 15th 1891. 211 Quadragesima Anno May 15th 1931; Montgomery (n 204 above). 212 Estella (n 204 above) 76. 213 Barber (n 207 above) 309ff. 203 204
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EU competence extends to all aspects of the common market,214 including the free movement of capital to pay for land. National and community spheres overlap.215 Where the EU has chosen to act, its legislation overrides national law,216 flooding into every nook and cranny of our property law, as it does into other parts of the legal coastline.217 But national property laws can counter-attack because land law falls into that category where European and national laws overlap and where subsidiarity forms a counterweight to Brussels power218 with as much as possible left to the governments of member states. Regimes of landownership are an important aspect of national identity. There is a corresponding principle in human rights law.219 [3.31] A continent-wide private law would involve dilution of the concept of sovereignty,220 but sovereignty is greatly buttressed by the principle of subsidiarity, gradually spelt out by the European institutions221 but brought on to the centre of the stage and reinforced at Maastricht.222 It is presumed that one can better satisfy the preferences of the inhabitants the closer a decision is taken to them, though a cost/benefit analysis might rebut this presumption.223 Article 1 of the Treaty on European Union contains a declaration of a vision of Europe224 but it has not proved to be legally enforceable and its practical effects are slight.225 It is interpreted to mean that the EU must not tamper with national property laws.226 Aspects of the national culture such as family law and succession rules are outside the European ambit. According to taste this is a pathological sign of a contribution to fragmentation or reinforces the beneficial plurijuralism.227 [3.32] Extended judicial discussion has led to few direct pronouncements228 214 EC §5 ex §3b. Treaty objectives can be stretched where needed to secure a common market: EC §308 ex §235; P Legrand ‘Localness in EU Law’ (2002) 10 ERPL 61–76. 215 J Snell ‘Who’s got the Power? Free Movement and Allocation of Competencies in EC Law’ (2003) 22 Yearbook of European Law 323–351. Subsidiary has no role when the EC has exclusive competence: T-362/04 Minin v Commission EC [2007] January 31st ECJ, J[86]. 216 A principle too basic to require authority. 217 HP Bulmer v J Bollinger (No 2) [1974] Ch 401 CA, 418 Lord Denning MR. 218 EC §5 ex §3b; Treaty on EU §2 ex §B. 219 PG Carozza ‘Subsidiarity as a Structural Principle of International HR Law’ (2003) 97 American Journal of International Law 38–79. 220 H Rosler ‘Eliminating Borders of National Private Law — Potential Analysis of EU Private Law, the CIGS and the Principles’ (2003) 4 European Legal Forum 205–211. 221 Estella (n 204 above) 85–86 (origins mid-1970s). 222 Treaty on EU §1 ex §A; Draft European Constitution (n 110 above) §9; EC Protocol 30 [1992] OJ C342 105; Estella (n 204 above) 100ff. 223 H Collins ‘Good Faith in European Contract Law’ (1994) 14 OJLS 229–254. 224 Barber (n 207 above) 312. 225 Barber (n 207 above) 308. 226 J Rogers Prosser ‘Property Abroad’ [1989] 39 LSG 12–14. 227 S Weatherill ‘On the Depth and Breadth of European Integration’ (1997) 17 OJLS 537–550; P Legrand ‘Against a European Code’ (1997) 60 MLR 44–63, 44. 228 Estella (n 204 above) 140; citing: C-84/94 UK v Council EU (Working Time Directive) [1996] I ECR 5755 ECJ; C-376/98 Germany v European Parliament (Tobacco Advertising) [2000] I ECR 8419 ECJ; British American Tobacco (n 200 above).
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and it seems that the European Court of Justice will accept the judgment of the Community institutions of the need for Community action,229 seeing subsidiarity as a negative feature contrary to the Court’s political agenda of fostering integration and fearful of its disintegrative potential.230 There is an important distinction between material and procedural subsidiarity, the latter more fully recognised, the former much the more potent,231 and courts of the Community have been reluctant to implement material subsidiarity.232
F UN DAMEN TA L R I G HTS I N THE EU
Fundamental Rights in the EU 1
Guarantees of fundamental rights
[3.33] According to the Treaty on European Union233: The Union is founded on principles of liberty, democracy, respect for human rights and fundamental freedoms and the rule of law.
So is the EEA.234 Respect for human rights is a condition of Union membership235 and human rights conditionality is an aspect of candidacy and external relations.236 A Charter of Fundamental Rights for the EU was declared at Nice in 2000,237 and now applies across the enlarged Union.238 An attempt to incorporate this into the constitutional structure of the Union fell with the rejection of the draft Constitution by the French and Dutch voters.239 What a waste this was for the contestants on the Spanish version of the reality TV show Big Brother who spent five days memorising the contents of the EU constitution in order to explain it to a Pole who did not speak Spanish.240 And what a peculiar position this leaves! C-233/94 Germany v Council EU (Deposit Guarantee Directive) [1997] 1 ECR 2405 ECJ. Estella (n 204 above) 148ff, 168–172; Barber (n 207 above) 324–325. 231 Estella (n 204 above) 106–114. 232 Estella (n 204 above) 174. 233 Treaty on EU §6 ex §F; C-154/04 etc R(JR) Alliance for Natural Health v Secretary of State for Health (Food Supplements) [2005] I ECR 6451 ECJ, J[122]. 234 E-2/03 Akaeruvaldid v Ásgeivsson [2003] December 12th EFTA Ct; E-8/97 JV 1000 Sverige v Norway [1998] June 12th EFTA Ct, J[26]; E-2/02 Technologien Bauschaftsberatung v EFTA [2003] June 19th EFTA CT, J[37]. 235 Treaty on EU §6 ex §F. 236 L Bartels HRs Conditionality in the EU’s International Agreements (Oxford, OUP, 2005, 0-19-927719-2). 237 EU Charter FR (n 9 above); S Peers & A Ward EU Charter of Fundamental Rights (Oxford, Hart, 2004, 1-84113-449-X). There are scarcely enough trees in the world to provide the paper needed to list all the articles written on the subject. 238 R Harmsen ‘The European Convention on Human Rights after Enlargement’ (2001) 5 International Journal of Human Rights 18–43. 239 Draft Constitution (n 110 above). 240 Observer November 28th 2004. 229 230
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Constitutional entrenchment was needed, and now that the Constitution has foundered some other way must be found quickly to secure a formal legal status.241 The current lack of justiciability242 means that Charter rights cannot be pleaded directly in domestic courts in civil disputes243 and nor is it of any more use in the European Court of Justice than a copy of the Beano.244 Human rights enshrined in the Charter were already part of community law via case law, and the Charter is a convenient way of discovering just what are the fundamental principles recognised. At first Community rights were drawn from the constitutional traditions of member states and indeed they were incorporated to ensure that Community law was constitutional in Germany.245 Variable national standards are not realistic so a common European level was decided upon in Hauer,246 though some flexibility may occur to accommodate a particular national guarantee at a higher level.247 Charter rights also recognise the importance of state constitutions.248 The major source for EU human rights is the European Convention249 but direct accession is unlawful250 so the Convention case law has to be sifted before being applied by the European Court of Justice.251 The European Convention on Human Rights provides an important inspiration for the list of rights secured by the Nice Charter252 and thus the Charter picks up the source for the Community right of property stated in the seminal case of Hauer.253 Also adopted are Convention principles on procedural matters such as locus standi254 and remediation. [3.34] No new powers or tasks are created255 so the basic function of human 241 Communication on the Legal Nature of the EU Charter of FR in the EU COM (2000) 644 final; Future Status of the EU Charter (HL Paper 48, Session 2002–2003); A Arnull ‘From Charter to Constitution and Beyond’ [2003] PL 774–793; AL Young ‘The Charter, The Constitution and HR’ (2005) 11 European Public Law 219–240. 242 FG Jacobs ‘HRs in the EU: the Role of the ECJ’ (2001) 26 EL Rev 331–341; A Knook ‘The Court, the Charter and the Vertical Division of Powers in the EU’ (2005) 42 CML Rev 367–398. 243 R(JR) Mohtasham v Visitor of Kings College London [2003] EWHC 2372, [2004] ELR 29 Richards J. 244 Jacobs (n 242 above) 340. 245 Case 29/69 Strauder v Ülm [1969] ECR 419 ECJ; Case 11/70 Internationale Handelsgesellschaft [1970] ECR 1125 ECJ; Nold (n 144 above) J[14]. 246 Hauer v Rheinland-Pfalz (n 133 above) J[14]; Internationale Handelsgesellschaft (n 245 above) J[3–4]. 247 Case 234/95 Bosphorus v Irish Ministry of Transport [1996] I ECR 3953 ECJ, J[68]; International Handelsgesellschaft (n 245 above) J[3–4]; Wachauf (n 185 above) J[17]. 248 EU Charter FR (n 9 above) §53. 249 E Conv HR (n 9 above); see above [1.19]; Laserdisken (n 194 above) J[61]; C-112/00 Schmidberger [2003] I ECR 5659 ECJ, J[71]. 250 Opinion 2/94 Accession to the European Convention [1996] I ECR 1759 ECJ; L Neville Brown & J McBride ‘Observations on the Proposed Accession of the EC to the ECHR’ (1981) 29 American Journal of Comparative Law 691–705. 251 British American Tobacco (n 200 above) AG[259] Geelhoed. 252 EU Charter FR (n 9 above) §52[3]. 253 Hauer v Rheinland-Pfalz (n 133 above) J[13–15]; Internationale Handelsgesellschaft (n 245 above); Nold (n 144 above) J[13]. 254 C-321/95 Greenpeace v Spain (1998) 19 HRLJ 376 ECJ. 255 EU Charter FR (n 9 above) §51[1].
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rights is to constrain the power of the Community to act. Thus a person who owns property which the Community threatens to take away or of which the Community wishes to control the use, human rights are in play, and so they are if another person uses Community legislation to affect the property, or domestic legislation which is implementing Community legislation or where a domestic decision-maker makes a decision governed by Community law.256 Hence the basic function is as a brake on institutional competence.257 Human rights are most powerful when used horizontally between one private litigant and another, though of course most cases are vertical (EU citizens exploiting the rights against the EU).258 Justification on policy grounds of actions that would otherwise infringe human rights helps to restore Community powers. At first the European Court of Justice was reluctant to apply human rights jurisprudence to control EC actions259 but it is now applied officiously whilst very rarely finding that any breach has occurred. One of the most blatant examples is the Family Reunification Directive260 which provided that a sponsor from outside the EU could be joined by his family only after two years, a philanderer’s charter and seemingly inconsistent with respect for the family, but held by the European Court of Justice to be valid because the legislature had considered and set the balance.261 Hence there is a serious risk that human rights will go unprotected because the justification balance is slanted towards the EU and is not impartial as in Strasbourg, to which competence needs to be transferred as a matter of urgency.262 [3.35] When the Treaty speaks of fundamental freedoms, it is talking about the economic freedoms guaranteeing the right to free movement of capital and persons, goods and services. In the perverse logic of the internal market, no irony is perceived in attaching the label ‘fundamental’ to an economic right such as the freedom to move capital even though it is clearly on a lower plane than, say, the right to life or the right not to be tortured. Charter rights are described as fundamental rights and are applied in EU contexts without distinction between individual citizens and corporate citizens of the Union.263 Almost all the cases involve commercial rights and particularly the Convention right to property.264 256 Case 41/74 Van Duyn v UK [1974] ECR 1337 ECJ; Wachauf (n 185 above); Case 260/89 ERT case [1991] I ECR 2925 ECJ, J[42], J[50]; C-159/90 SPUC Ireland v Grogan [1991] I ECR 4685 ECJ, AG[31] Van Gerven; Case 60/84 etc Cinéthèque case [1985] ECR 2605 ECJ; Case 12/86 Demirel’s case [1987] I ECR 3719 ECJ; domestically: C-20/00 Booker Aquaculture v Secretary of State for Scotland [2003] I ECR 7411 ECJ (fish); R(JR) Eastside Cheese Co v Secretary of State for Health [1999] 3 CMLR 123 CA (cheese, no violation). 257 Bright & Bright (n 8 above) 363. 258 C Hilson ‘What’s in a Right?’ (2004) 29 EL Rev 636–651, 645; O Cherednychenko ‘EU FRs, EC Fundamental Freedoms and Private Law’ (2006) 14 ERPL 23–61. 259 J Coppell and A O’Neill ‘The ECJ — Taking Rights Seriously’ (1992) 29 CML Rev 669–692. 260 C-540/03 European Parliament v Council EU (Family Reunification) [2006] I ECR 5769 ECJ. 261 Family Reunification (n 260 above) J[52]. 262 See above (n 250 above). 263 T-306/01 Yusuf v Council EU [2005] II ECR 3533 CFI, J[289]. 264 E Conv HR Protocol 1 (Paris, 1952, CETS 9) §1.
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This can cause rights that are essentially similar, and subject to cross-fertilisation in interpretation,265 to diverge significantly when applied in the two courts in Luxembourg and Strasbourg.266 Fundamental (human) rights often conflict with fundamental (internal market) freedoms, neither set of constructs being absolute but both qualified and capable of restriction. Thus an individual’s right of property may work along with the freedom to move capital, or it may be that one person’s freedom to move capital works against rights of property already owned by another.267 Thus in Schmidberger268 environmental protests blocked the Bremer motorway thus injuring the business of a timber transport company; this derogation from free movement of goods was held to be justified in the interests of securing the freedom of expression of the protesters.269 The reverse accommodation, the fundamental right of contracting to allow the market freedom to flourish was applied in the case of agricultural blockades by French farmers.270 The following section now identifies some areas where fundamental rights are an integral part of Community law,271 without making any attempt to be comprehensive.272
SPECI F I C F UN DA MEN TA LS
Specific Fundamentals 1
Property
[3.36] Property-ownership is a fundamental human right. It includes the right to own and dispose of property and also protection against deprivation of possession. As expressed in the Charter of Fundamental Rights: Everyone has the right to own, use, dispose of and bequeath his or her lawfully acquired possessions. No one may be deprived of his or her possessions, except in the public interest and in the cases and under the conditions provided for by law, subject to fair compensation being paid in good time for their loss. The use of property may be regulated by law in so far as is necessary for the general interest.273
EU Charter FR (n 9 above) §52 [3]. Compare Case 46/87 etc Höchst v Commission [1989] ECR 2859 ECJ; HR 13710/88 Niemitz v Germany (1993) 16 EHRR 97 E Ct HR; K Lenaerts ‘FRs in the EU’ (2000) 25 EL Rev 575–600, 581. 267 J Morijn ‘Balancing Fundamental Rights and the Common Market Freedoms in EU Law’ (2006) 12 ELJ 15–40. 268 Schmidberger (n 249 above); A Biondi ‘Free Trade, A Mountain Road, The Right to Protest’ [2004] EHRL Rev 51–61. 269 Schmidberger (n 249 above) J[74]. 270 C-265/95 Commission EC v France (Agricultural Blockades) [1997] I ECR 6959 ECJ; L Jaeckel ‘The Duty to Protect FRs in the EC’ (2003) 28 EL Rev 508–527. 271 International Handelsgesellschaft (n 245 above) J[4]. 272 P Alston The EU and Human Rights (Oxford, OUP, 1999, 978-0-19-829806-9). 273 EU Charter HR (n 9 above) §17[1]; §17[2] protects intellectual property. 265 266
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This formulation looks very similar to the three prongs274 of article 1 of Protocol 1 to the European Convention on Human Rights,275 and is applicable in the EU only indirectly through adoption by the ECJ. These cover, in order of practical application, guarantees against: 앫 deprivation of assets without justification and without full compensation,276 앫 controls on the use of property without justification, and 앫 interference with the quiet enjoyment of property. It is also useful to link property rights to discrimination in the technical Strasbourg sense of the word when wishing to attack rules of property law which appear to work arbitrarily.277 [3.37] In Strasbourg jurisprudence these guarantees apply to ‘possession’, which includes land, leases,278 rights in land and much else besides, and a similar autonomous definition applies in the EU.279 Property includes rights such as milk quotas280 but not mere rights to a profitable share of a market in a particular product.281 Hauer282 is concerned with a regulation restricting the planting of vines on some land at Bad Dürkheim owned by Liselotte Hauer. The German authorities ruled that the land was subject to a Community regulation which prevented new grants of permission to convert land to vines.283 Although the human right was engaged, it was found, as in most cases, that the community action was justified. The EC had too much wine. A fundamental right to property is the ground norm most often in issue in EU cases.284 Fundamental rights were recognised as a counterweight to Community competition law285 and to Community competition law when applied in the English courts.286
274 HR 10522/83 Mellacher v Austria (1990) 12 EHRR 391, E Ct HR, 408. Cases repeat this so often that it has become a Strasbourg cliché; Sparkes (n 26 above) [5.13ff]; but human rights jurisprudence is moving fast. 275 See above (nn 249–250). 276 Robert Fearon (n 153 above). 277 In the more usual sense of, eg, sexual discrimination see C-249/96 Grant v South West Trains [1998] I ECR 621 ECJ. 278 Bosphorus (n 247 above). 279 C-347/03 Friuli-Venezia Giulia (ERSA) v Ministero delle Politiche Agricole e Forestale [2005] I ECR 3785 ECJ, AG[96] Jacobs. 280 Wachauf (n 185 above) J[18]; see below [3.84]. 281 Case 280/93 Germany v Council EU (Bananas) [1994] I ECR 4973 ECJ, J[73]. 282 Hauer v Rheinland-Pfalz (n 133 above). 283 Regulation (EEC) 1162/76. 284 Internationale Handelsgesellschaft (n 245 above); Nold (n 144 above); C-42/95 Siemens v Nold [1996] I ECR 6017 ECJ; Hauer v Rheinland-Pfalz (n 133 above); Wachauf (n 185 above) J[17]; Höchst (n 266 above) J[13]. 285 Case 1/58 Stork v ECSC [1959] ECR 17 ECJ; Case 36/59 etc Geitlung Case [1960] ECR 423 ECJ; Case 40/64 Sgarlata v Commission [1965] ECR 215 ECJ; Case 149/77 Defrene v Sabena [1978] ECR 1365 ECJ; Strauder v Ülm (n 245 above) (butter coupons). 286 Allgemeine case [1980] QB 390 CA, [12] Donaldson J (gold bars); Kaur v Lord Advocate [1980] 3 CMLR 79 CS OH (deportation of immigrants).
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[3.38] A Community right of property was stated in the seminal case of Hauer v Rheinland-Pfalz287 and after a long, slow burn cases have now increased beyond counting. It is a staple of pleading to include an allegation that property rights have been infringed. Very many cases engage human rights arguments because very many Community actions will in some sense impact upon the rights of owners of property, but it is not so easy to find cases where the deployment of human rights arguments has meant overall success. In most cases when human rights principles are engaged the Community action will be justified because it will only meet Community principles of justification if it pursues a legitimate purpose and is proportionate to the achievement of that aim, and the justification principle for human rights288 is similar in its conceptual structure. Restrictions must be intended to achieve a proper objective and if so it is difficult to establish an infringement, though there is some scope for play in the principle against an intolerable interference.289 All this shows why most arguments about human rights applied to property are such time wasters.
2
Search
[3.39] Roquette Frères290 shows, as one of many examples, how a national court deciding to allow a search under EU investigative powers must ensure that the decision to order the search was proportionate, so that the investigators respect the human rights of the owners of the business. Another illustration is Höchst v Commission291 where an investigation into an alleged cartel in PVC involved the search292 of a factory at Frankfurt am Main and to justify this there had to be a legal basis in community law and respect for the right of defence. Inviolability of the home was not in issue since the search affected business premises. EU institutions will enjoy a residual margin of appreciation,293 that is, judicial respect for the decision of the decision-maker. Thus in Höchst the particular search was justifiable to secure the important Community objective of an open market in PVC. 287 Hauer v Rheinland-Pfalz (n 133 above) J[13–15]; Internationale Handelsgesellscahft (n 245 above); Nold (n 144 above) J[13]. 288 C-306/93 Wizersekt [1994] I ECR 5555 ECJ, J[22]; C-37/02 etc Di Lenardo [2004] I ECR 6911 ECJ, J[82]; ERSA (n 276 above) J[119]; C-210/03 R(JR) Swedish Match v Secretary of State for Health [2004] I ECR 11893 ECJ, J[72]; Food Supplements (n 233 above) J[126]. 289 Wachauf (n 185 above) J[18]; T Tridimas General Principles of EU Law (Oxford, OUP, 2000, 978-0-19-829932-5) 215; Hauer v Rheinland-Pfalz (n 133 above) J[32]; Case 265/87 Schräder [1989] ECR 2237 ECJ, J[15]; Di Lenardo (n 288 above) J[82]; C-295/03 Alessandrini v Commission EC [2005] I ECR 5673 ECJ, J[86]; C-453/03 Abna v Secretary of State for Health [2005] I ECR 10423 ECJ, J[87]; and many other cases. 290 C-94/00 Roquette Frères v Directeur Général de la Concurrence de la Consummation et de la Répression des Frauds [2002] I ECR 888 ECJ; M Lienemeyer & D Waelbroek ‘Case Comment’ (2003) 40 CML Rev 1481–1497. 291 Höchst (n 266 above). 292 Case 5–11 etc San Michele v European Coal and Steel Community [1962] ECR 449 ECJ. 293 Demirel’s case (n 256 above).
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Domestic and family rights
[3.40] European formulations of human rights doctrine include domestic rights like respect for the home,294 and human rights is an important factor in the development of the new European family law; also respect for private and family life and to marry and found a family.295
4
Trial rights
[3.41] Procedural rights apply in EU law296 to ensure the right to a fair trial,297 and specifically during European Commission investigations298 and include the right of access to a court whenever rights are being determined.299 States are also legitimately exonerated from responsibility for the interminable delays when references are made to the European Court of Justice.300 Administrative rights may be developing.301
CO N VER G EN CE
Convergence [3.42] A smart ship and its sinister mate — a great alien Shape of Ice, seemed for a time far and dissociate, Till the Spinner of the Years Said ‘Now!’ And each one hears, And consummation comes, and jars two hemispheres. This ‘Convergence of the Twain’302 was what sank the Titanic. The question must be asked whether, if the ‘two hemispheres’ of common law and civil law succumb to an ‘intimate welding’ in the European Union, a convergence of law will be brought about and if so will it be quite so catastrophic? And will it cause the EU Charter FR (n 9 above) §§7, 9; Case 31/59 Acciaeria di Breschia [1960] ECR 71 ECJ. E Conv HR §8; EU Charter FR (n 9 above) §§7, 9; Family Reunification (n 260 above); C-122/99P D v Council EU [2001] I ECR 4319 ECJ; C-117/01 KB v NHS Pensions Agency [2004] I ECR 541 ECJ; C-465/00 Osterreichischer Rundfunk [2003] I ECR 4989 ECJ; and many other cases, see below [11.01]. 296 E Conv HR §6[1]; EU Charter of FR (n 9 above) §§20–23, 47. 297 Yusuf (n 260 above) J[325]; C-32/95 Commission EC v Lisrestal [1996] I ECR 5373 ECJ, J[21] C-462/98 Mediocurso v Commission EC [2000] I ECR 783 ECJ, J[36]; C-135/92 Fiskano v Commission EC [1994] I ECR 2885 ECJ, J[39–40]. 298 T-112/98 Mannermannrohren-Werke v Commission EC [2001] II ECR 729 CFI; on appeal C-190/01 [2001] July 28th ECJ. 299 Yusuf (n 263 above) J[332–343]. 300 C-185/95 Baustahlgewebe v Commission EC [1998] I ECR 8417 ECJ. 301 K Kanska ‘Towards Administrative Human Rights in the EU’ (2004) 10 ELJ 296–326. 302 Thomas Hardy ‘The Convergence of the Twain’ (London, Macmillan, 1912) XI. 294 295
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common law to sink to the ocean depths for those ‘moon-eyed fishes’, the comparative lawyers, to query ‘What does this vaingloriousness down here?’303
1
Juxtaposition
[3.43] First, it may be doubted whether it is correct to see a single common law as one side of the common/civilian divide.304 Judge Forwood of the Court of First Instance has been quoted as identifying enormous potential for incompatibilities within the common law systems. For him, the laws of England (including Wales), Northern Ireland and the Republic of Ireland differ widely enough to create problems of assimilation without taking into account the civilian systems and civilian mixes such as Scotland. And his experience involves wide divergences within the codified systems of continental Europe. Indeed, in property law there can be seen to be fundamental differences between the English and Irish systems — based on English legislation not received in Ireland. Rather ‘there are 15 systems of law and it’s a juridical zoo’305 a biodiversity since increased to 27. Despite basic similarities in the organisation of property-ownership in any capitalist society, wide disparities in detail exist between the laws of member states of the European Union. Even the most basic concepts are discrete. England, Wales and Ireland are the only common law jurisdictions. The remaining states have civilian systems derived ultimately from Roman law. Scotland has a unique fusion of civilian and feudal law, much of continental Europe takes its law from Napoleon’s Code Civil, and Germanic states follow more or less closely Das Bürgerliches Gesetzbuch.306 Great disparities also arise in conceptually less fundamental areas such as security of tenure, land use, family law and succession rights. Particularly wide variations exist in the extent to which freedom of testation is allowed or restricted. There is no question that we have primarily a clash of epistemologies,307 though legal technique is convergent to some extent. Civilians see a decisive shift to axiomatisation under the Justinian code by comparison with which the common law is thought to be trapped in an inductive stage.308 Civilians tend to march on from the assumption that their means of analysis are more sophisticated to the proposition that the civilian system itself is more sophisticated, and that therefore if a European system is to be created the common law system itself must be jettisoned. There is no doubt that, in the development of European law, English law has been marginalised.309 A European civil code would ‘Convergence’ (n 302 above) VI. G Samuel Foundations of Legal Reasoning (Antwerp, Maklu, 1995) 28. 305 J Fleming ‘Striving to Find a Common Language’ [2002] 19 LSG 23–24. 306 Germany, Austria, and Greece; also Switzerland and Turkey. 307 R Blanché, L’Epistémologies (Paris, Presses Universitaires, 3rd edn, 1985) 65. 308 G Samuel ‘The Impact of European Integration on Private Law’ (1998) 18 LS 167–176. 309 C Joerges ‘On False Dichotomies, True Conflicts, the Need for a Constitutional Perspective’ (1998) 18 LS 146–166, 152. 303 304
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excommunicate the common law community.310 This must not be thought of in terms of superiority. If the common law has had little influence on the continent it is because we were late joiners, because of our recalcitrance as Europeans, because of our retention of links across the Atlantic and with Commonwealth nations, and not because our law is inferior. In essence, common law concepts are discarded and English vocabulary is mangled because common lawyers do not contribute to the law reform process, so Europe sees French and German concepts slugging it out with Scandinavian systems also pushed to the margins despite the need for a Nordic infusion of soberness and simplicity.311 [3.44] Aspects of civilian property law are undoubtedly superior — its simplicity, the easy entry route through the concept of absolute ownership, the limited range of interests that can be created, and the absence of the legal/equitable divide for incumbrances can all be sold as advantages. But there are major downsides too. The numerus clausus keeps the range of property interests the same as when codes are first promulgated,312 whereas the open-endedness of the common law category of property enables the common law to react better to social changes. The division between law and equity is incomprehensible to a civilian and so civilian systems are condemned to the commercial disadvantage of operating without the trust, the ability to divide legal ownership from beneficial ownership — which is the key to the successful management of funds. No one who understands the two systems of succession could possibly prefer the civilian system to the neatness of the personal representative.313 In the brutal world of conflicts of property law it is the common law that is fittest to survive. So if to codify314 is to jettison the common property law it can never succeed and should never be attempted. [3.45] What is required is a synthesis, the best of each system, with the trust a key element that needs to be taken to the civilian heart, while the simplicity and order at the kernel of the continental system needs to inform the common law system. Legislation can never therefore succeed if it seeks to select between the existing systems and all that can be attempted is a super code, a functional superstructure above and beyond the two main existing systems. At that level it is believed that the main functional building blocks are universal — ownership, lease, mortgage, servitude (= the common law easement and covenant), though one needs to add the common law trust to get a fully functioning modern property law system.
P Legrand ‘Against a European Code’ (1997) 60 MLR 44–63, 51. O Lando ‘Optional or Mandatory Europeanisation of Contract Law’ (2000) 8 ERPL 59–69, 60. 312 JH Dalhuisen ‘European Private Law: Closed to Open System of Proprietary Rights’ [2001] 5 Edinburgh Law Review 273–296. 313 EC Ryder ‘The Law of Property and the Common Market’ (1963) 16 CLP 90–104; AG Chloros ‘Principle, Reason and Policy in the Development of European Law’ (1968) 17 ICLQ 849–877. 314 A Gambaro ‘Perspective on the Codification of the Law of Property’ (1997) 5 ERPL 497–504. 310 311
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[3.46] In some fields of law, such as tort and contract, there may be, as Markesinis argues, a gradual convergence in private law,315 achieved by juxtaposition within a single market, a reflection of that functionalism which suggests that all systems reach similar solutions to the same problem.316 Juxtaposition and inter-trading may eventually create some degree of integration. As I wrote in 1999: A multinational company seeking to establish a chain of supermarkets across Europe will not be satisfied with needing to master multiple systems of property law.317 They will expect a unified system of conveyancing, just as our ancestors expected a common law, so that the focus will shift to functional analysis of basic building blocks — ownership, transfer, lease, mortgage security, and rights over neighbouring land.’318
2
Legislative union
[3.47] Political union by itself will not create a common property system. Europe is not unusual in achieving political union by promising to respect existing property laws. The idealisation of known systems of property law at the moment of union rarely correlates with the truth of the existing system. Any potentially convergent effect of federation is negated by making legislative power local to a single system of property law. True convergence presupposes legislative power and legislative competence.319 These truths can be demonstrated by the fact that Louisiana retains a civilian system in the common law sea of the United States, many years after its accession to the Union in 1812, an equilibrium likely to remain undisturbed simply because of the absence of any mechanism to alter things. A European exemplar is even more apposite. Under Queen Anne, in 1707, the Crowns of England and Scotland were united but only on terms which preserved the distinctive identity of Scots law, after which there was to be ‘no alteration in the law in respect of the private right of citizens except for the evident utility of the subjects of Scotland’.320 At a stroke this neutered the potency of the union of the legislative power in the Westminster Parliament (since in any event partially reversed321). Even the recognition of a single Supreme Court — the House of Lords — has done nothing to fuse English and Scots land law because of the federal structure in which Scotland is a unit of property law within a larger political entity of the United Kingdom, mirroring the position of Louisiana in the United States. Scots B Markesinis The Gradual Convergence (Oxford, Clarendon, 1994, 0-198-25828-3) 30. K Zwiegert & H Kotz An Introduction to Comparative Law (Oxford, OUP, 3rd edn, 1998, 978-0-198-26859-8) 34ff. 317 S Bright & G Gilbert Landlord and Tenant Law: The Nature of Tenancies (Oxford, Clarendon, 1995, 0-198-76349-2) 67. 318 P Sparkes A New Land Law (Oxford, Hart, 1st edn, 1999, 1-84113-013-3) 35. 319 FH Lawson ‘Private Law Aspects of Western Union’ [1949] 2 CLP 226–244, 233. 320 Treaty of Union 1707 §XVIII. 321 Scotland Act 1998 c 46. 315 316
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property remains incomprehensible to an English lawyer, and vice versa, though it is true that differences of terminology are not necessarily incompatible with similarity in substance.322 Analysis suggests that the two systems remain as far apart as ever. In Scotland a life interest is a mere incumbrance, a lease is a personal servitude, joint tenancy with survival exists only between trustees, and indeed the basic division between legal and equitable rights is unrecognised. Curiously there is little similarity in modern legislative schemes, such as the one for limitation, though the registration scheme shows a family resemblance. The differences are so deeply entrenched as to be almost proof against legislative change and certainly proof against case-based assimilation or convergence of practice.323 Ryder concluded that approximation of laws across Europe is unlikely in the property field, a judgment made in 1963324 and holding good forty years later. The EU remains a union of states with discrete systems of property law.325 Convergence of substantive systems of property law is unlikely to arise from membership of that union on its own.
A SUB STA N TI VE MI SCELLA N Y
A Substantive Miscellany 1
European land law
[3.48] We cannot speak of European land law in the same sense as of a European contract law, a labour law or a competition law, but the land law which the European Union does possess is very concrete, if small in content. Randomness is the consequence of the intrusion into land being coincidental, an outcrop of a substantive subject affecting another, a form of growth that can never fuse to form a coherent pattern. Reverend Sabine Baring-Gould compared his glimpses of the Cevennes to a farmer opening his hand to display a sample of his grain as a symbol to represent the complete stack,326 so here we offer a Miscellany as a homage to the greatest writer on English land law, now sadly an authority, Sir Robert Megarry.327
Ryder (n 313 above); Lando (n 311 above) 68. Ryder (n 313 above) 104. 324 Ryder (n 313 above) 104. 325 BA Hurndall Property in Europe (London, Butterworths, 1998, 0-406-01309-8). 326 S Baring-Gould A Book of the Cevennes (London, John Lane, 1907) 61. 327 RE Megarry A Second Miscellany at Law (Oxford, Hart, 2nd edn by BA Garner, 2005, 978-1-841-13554-0). 322 323
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Environment
[3.49] Environmental concerns328 need to be addressed on a global and continental scale and so environment is a major area of EC competence both in the EU329 and the EEA.330 It is mainly concerned on a macro-scale so that there is little direct impact on individual landowners. For example, an environmental impact assessment is required to form part of the planning process for major developments and infrastructure projects. Occasionally they may, like any rules, affect individual properties, for example the Single European Sky may affect properties close to airfields.331 Community competence is directed towards four main policy goals: 앫 앫 앫 앫
to devise tools for Environment Impact Assessment, to improve information flow between policy-makers and citizens, to develop and implement a European urban environment strategy, and to improve the management of coastal zones.
Policy concerns include pollution, air, chemicals, accidents, industry, soil, waste and water, and also nature and biodiversity, and sustainable development.
3
Energy performance of buildings
[3.50] Reduction of greenhouse gases is vital to our survival and the residential sector involves 40 per cent of energy consumption. Accordingly, the EU has legislated on the energy performance of buildings,332 to improve this matter so vital to our future.333 A methodology is provided for calculations to take account of thermal characteristics, heating and hot water, ventilation, lighting, position and orientation, solar systems, categories, houses, etc, with set energy performance levels required.334 The benchmarks apply to new buildings, and to a major renovation or improvement of existing buildings.335 Energy certification is required where a building is constructed, sold or rented out, and it has to be renewed every ten years and the current version displayed visibly if the building is large.336 Certification is implemented into English law as part of the Home Information Pack: all home owners in England and Wales will need to prepare a Home
328 C Kiss & D Shelton Manual of EU Environmental Law (Cambridge, CUP, 2nd edn, 1977, 0-521-59122-8). 329 EC §6 ex §3c; also §§174–176 ex §§130r–130t. 330 EEA Agreement as amended and adjusted (n 111 above) §73 Annex XX. 331 C-466/98 etc Commission EC v UK (Open Skies) [2002] I ECR 9427 ECJ. 332 Energy Performance of Buildings Directive 2002/91/EC [2002] OJ L1 65; B Anderson ‘Energy Performance of Buildings Directive’ (2006) 159 Environment Information Bulletin 12–14. 333 Energy Performance Directive (n 332 above) §1; buildings are defined in §2. 334 Energy Performance Directive (n 332 above) §§3, 4, Annex I. 335 Energy Performance Directive (n 332 above) §§5–6. 336 Energy Performance Directive (n 332 above) §7; §8 requires regular inspection of boilers.
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Information Pack before putting their home up for sale337 and an Energy Performance Certificate will be a mandatory component from that date.338 Certificates will rate the energy efficiency of a home on a scale from A to G. Homes account for 27 per cent of the UK’s carbon emissions and this is intended to help homeowners to reduce the environmental impact of their homes, possibly saving an average of £300 a year.
4
Anti-competitive agreements and abuse of market dominance
[3.51] A market should guarantee excellence of quality at the lowest possible prices, and this requires a market populated by independent suppliers each subject to competitive pressure exerted by the others. Competition law is designed to secure such a market, or at least a workable imitation,339 in the EEA-30. It goes without saying that the competitive ideal does not extend to agricultural produce.340 There are three main constraints relevant to land law,341 and indeed any existing contractual rights and property342 covering respectively agreements restricting competition, abuse of a dominant position, and state aids. The Treaty343 prohibits agreements having as their object the prevention, restriction or distortion of competition within the common market; the same applies to concerted practices with the same effect. Activities called into question are fixing of prices, directly or indirectly, controls on production, controls on market investment, sharing of markets, imposition of differential trading conditions or the imposition of supplementary obligations.344 However, the bar is not absolute. Some agreements that would ordinarily fall foul of the prohibition may be allowed by the Commission because the effect is to improve production or distribution or to support technical advances to enhance economic progress and because consumers secure a fair share of the benefits; such an agreement must be no more than is needed to achieve the desirable objective and must not eliminate competition from substantial parts of the market.345 These two principles collided in Crehan, as described below.346 337 Home Information Pack (No 2) Regulations 2007, SI 2007/1667; the scheme was implemented in July 2007 for four-bedroom houses and from September 2007 for three-bedroom houses, with the remaining 40% of the market to follow; Bogusz (n 114 above) 1404. 338 Energy Inspectors will have to be members of an approved certification scheme. 339 Goyder (n 134 above) 4. 340 Trade in Agricultural Products Regulation (EC) 1184/2006 [2006] OJ L214 7. 341 Bright & Bright (n 8 above) 367ff. 342 Goyder (n 134 above) 8. 343 EC §81 ex §85; EEA Agreement as amended and adjusted (n 111 above) §53ff; Goyder (n 134 above) chs 6–7. 344 Goyder (n 134 above) ch 7. 345 EC §81[3] ex §85[3]; Goyder (n 134 above) ch 8; Guidelines [2004] OJ C101 8; a market share is not substantial if below 5%, and is substantial if it is over 15%, and between it will depend upon circumstances. Before market opening Whitbread, Bass and Scottish & Newcastle collectively held 30% of the UK market in beer. 346 See below [3.53].
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[3.52] European competition law may interact with land law in the same way that English competition law has always done. It is not uncommon for commercial leases to contain clauses restricting market activities. The leading English case concerns ‘solus’ agreements — in this case, a clause in a mortgage of a petrol filling station that all the petrol sold on the forecourt would be of a particular brand.347 It is not the mortgage itself which may infringe competition rules but the ‘tie’ with it. Most European cases concern tied house clauses, that is, leases of a public house tied to a particular brewery348 and the EU is to be commended for reducing fizz and intruding a choice of real ales, a policy worth the contribution to the EU on its own. Superficially the penalty is voidness349 but very often an agreement may be severable so that, for example, an anti-competitive covenant is struck out of a lease but the lease of the property otherwise continues in force.350 It could also affect, for example, a coffee shop franchise where terms of the agreement are to continue after termination of the franchise.351 A lease containing the terms that beer has to be bought from the landlord obviously affects the market in beer and may be large enough to distort trade between different EEA states. The terms of leases and mortgages are overridden if they infringe principles designed to secure free competition in English law. However, a tie which is void can be resurrected by a transfer to smaller brewer.352 Domestic law has been tightened to secure redeemability of loans and to ensure that pubs are free when sold out of the brewer’s tied estate.353 [3.53] Enforcement is by the European Commission and national competition authorities, but individuals may protect their rights through the national courts.354 Damages are in principle available for anti-competitive contracts. Both parties are involved but it will usually be possible under national law for the weaker party who is the victim of the anti-competitive activity to complain against the stronger party who is the instigator.355 However, the problem is complicated because of the two conflicting principles in EC article 81, one of which bars anti-competitive agreements whilst the other allows Commission clearance of some agreements intended to pursue legitimate objects despite their anti-competitive tendency. Crehan is a case in which the two principles collided.
Goyder (n 134 above) 189; Sparkes (n 26 above) [29.14]. Goyder (n 134 above) 136. 349 EC §81[2] ex §85[2]. 350 Inntrepreneur v Boyes (1994) 68 P & CR 77 CA; Inntrepreneur v Mason (1994) 68 P & CR 53 QBD. 351 Monomeles Protodikeio 8181/2002, [2002] 8 DEE 493, [2002] ECLYB [419]. 352 Passmore v Morland [1999] 1 CMLR 1129 CA. 353 Supply of Beer (Loan Ties) Order 1989, SI 1989/2258. 354 EC §§84–85 ex §§88–89. 355 C-453/99 Courage v Crehan [2001] I ECR 6297 ECJ; H Schepel ‘The Enforcement of EC Law in Contractual Relations’ [2004] 12 ERPL 661–673; Inntrepreneur Pub Co (CPC) v Sweeney [2002] EWHC 1060; T-25/99 Roberts v Commission EC [2001] II ECR 1581 CFI; T-231/99 Joynson v Commission EC [2002] II ECR 2085 CFI; Goyder (n 134 above) 468ff. 347 348
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Crehan356 took over the Cock Inn at Staines in 1991 as a tenant tied to Courage and by the time a surrender was negotiated in 1993 he had lost a significant amount of money. Most of the beer sold had to be taken from the brewer at list price, when the same beer was sold more cheaply to free houses. His landlord became Inntrepreneur, a company formed by the amalgamation of Courage and Grand Metropolitan and initially holding a tied estate of over 7K pubs tied to Courage for 20 years. This dominance in the market infringed European trading laws but a deal was struck with the European Commission357 to reduce their estate to around 4K and to release the ties by 1998. Crehan’s action concerned a period before this reduction occurred. [3.54] In order to succeed in a claim for damages he needed to establish two cumulative conditions that358: 앫 Delimitis 1: it was difficult for competitors to enter the market; and 앫 Delimitis 2: the agreement in question made a significant contribution to the sealing-off effect. The first failed though the second seemed to be satisfied.359 Park J held on the evidence before him that it was not difficult to get access to the on-the-premises beer market in 1991 even though the Commission reached the other conclusion in cases concerning Bass and Whitbread,360 which were held to be sufficiently different to raise a new issue.361 It is perhaps less likely that abuse of dominant position will intrude into land law. A particular trader may assume a dominant position in the common market or a substantial part of it, and will be prohibited from any abuse of such a position distorting fair competition,362 for example unfair purchase prices or trading conditions, or limits on production, markets, or the use of technical developments to the prejudice of customers, inequitable transactions, or the imposition of supplementary obligations unconnected to the contract. It may apply to, say, a significant economic activity, for example, an airport and access must then be non-discriminatory.363 Here there is no question of voidness.364
356 Inntrepreneur Pub Co v Crehan [2006] UKHL 36, [2006] 3 WLR 148; this reverses [2004] EWCA Civ 637, [2004] 3 EGLR 128, but restores [2003] EWHC 1510 (Ch) Park J. 357 EC §81[3] ex §85[3]; Crehan (n 356 above) [30] Lord Hoffmann. 358 C-234/89 Delimitis v Henninger Brau [1991] I ECR 935 ECJ, J[27]; Crehan at [26] Lord Hoffmann. 359 Crehan (n 356 above) [73] Lord Hoffmann expressed no opinion. 360 Crehan (n 356 above) [34] Lord Hoffmann; O Odurdu & J Edelman ‘Compensatory Damages for Breach of §81’ (2002) 27 EL Rev 327–339. 361 Crehan (n 356 above) [71] Lord Hoffmann. 362 EC §82 ex §86; EEA Agreement as amended and adjusted (n 111 above) §54; Goyder (n 134 above) 324–327; R O’Donoghue & JA Padilla Law and Economics of EC §82 (Oxford, Hart, 2006, ISBN 184113502 X). 363 Euro Port v Denmark Commission Decision 94/119/EC [1994] OJ L55 52 [12ff]. 364 Goyder (n 134 above) 324–325.
A Substantive Miscellany
5
135
State aid
[3.55] State aid for particular players in a market disrupts competitive pressures and is inconsistent with free competition and so is prohibited.365 This may well affect land. For example, if the state sells a factory site to a company in an attempt to induce it to move its business the effect is the same as paying aid direct to the company. Such a company can produce goods more cheaply than one which receives no aid. The bar extends to direct aid, state gains, interest relief, tax relief, state guarantees and the provision of goods or services on preferential terms. Some aid is innocuous, for example: when it is for social aid; the relief of natural disasters; aid to underdeveloped regions; projects of common European interest; serious economic disturbance and aid to facilitate development and the promotion of culture, heritage or conservation. There is also a de minimis block exemption.366 Adjudication on exemptions is a matter for the European Commission, which can ignore the wishes of the Council.367 [3.56] One major concern is sale of land368 out of the public sector at an undervalue. A Communication from the Commission369 sets out general guidance to states to avoid problems of state aid when public authorities sell land and buildings. If followed it automatically precludes a complaint about state aid. Procedures vary according to whether an offer is unconditional or conditional. Sales must follow a well-publicised, open and unconditional bidding procedure, comparable to an auction, designed to secure the market value. The previous book value is irrelevant. Repeated advertisement is required over at least two months, addressing a broad range of potential buyers. High value properties or those especially attractive to European investors should be announced internationally and Europe-wide. The price must take account of the burden of care and maintenance of the land and buildings, other than obligations of ownership and property taxes. Buyers should be free to use a property bought from the public for any purpose, subject to planning controls and to others restrictions imposed for the prevention of public nuisance or for reasons of environmental protection, and the authorities may impose conditions to preclude purely speculative bids. Conditions of sale imposing special obligations on future owners must apply to all potential buyers. These special obligations must be evaluated separately. If an unconditional bidding procedure is not adopted, an independent evaluation is required by one or more independent valuers prior to negotiations so that a market value (as defined 370) can be established using generally accepted EC §87 ex §92; EC §88 ex §93; EEA Agreement as amended and adjusted (n 111 above) §61ff. De Minimis Aid under EC §§87–88 Regulation (EC) 1998/2006, [2006] OJ L379 5. 367 C-110/02 Commission EC v Council EU (Aid to Pig Farmers) [2004] I ECR 6333 ECJ. 368 P&O European Ferries CFI (n 137 above); T-274/01 Valmont Nederland v Commission EC [2005] II ECR 3145 CFI; T-148/99 Diputación Floral de Álavar v Commission EC [2002] II ECR 1275 ECJ. 369 Commission Communication on State Aid Elements in Sales of Land and Buildings by Public Authorities [1997] OJ C209 3; this also applies to EEA-3. 370 Insurance Companies Directive 91/674/EEC [1991] OJ L374 7, §49[2]. 365 366
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valuation standards. Any departure from market price must fall within a 5 per cent cushion or otherwise it is as if state aid has been granted.371 Market value should not be set below the acquisition cost during the first three years of ownership unless a general decline in market prices is certified independently. Member states must notify the Commission of any non-compliant sale, where the divergence from these standards is more than minimal, that is, any sale concluded after neither an open and unconditional bidding procedure nor an independent valuation.372 These procedures affect only outright sales and not acquisitions (which are within the public procurement rules immediately below) nor the letting or leasing of land and buildings by public authorities for which equivalent ideas have to be applied without specific guidance. States are allowed to provide aid to promote the quality of and access to private housing.
6
Public procurement
[3.57] Public procurement rules have recently been consolidated.373 They apply to all large public contracts including the acquisition of land and matters such as tendering for public sector construction projects, and also, for example, property maintenance of office blocks owned by a town council but leased out to a company.374 Brussels and Whitehall engaged in a confrontation about the status of registered social landlords — housing associations which provide residential accommodation — and whether they were public bodies for procurement purposes375 but eventually the EU prevailed and public procurement proceures do now apply in the social housing sector.376 Contracting authorities must treat economic operators equally and in a non-discriminatory andtransparent way.377 Rules kick in when public contracts exceed certain thresholds378 including contracts subsidised by more than 50 per cent.379 There is a detailed pre-tender procedure,380 involving rules for advertising,381 and a [1996] 48 EG 36. [1996] OJ C68 9. 373 Public Procurement Directive 2004/18/EC [2004] OJ L134 114, as from February 2006; Utilities Procurement Directive 2004/17/EC, [2004] OJ L134 1; S Silberg ‘New European Directive’ (2004) 5 European Legal Forum 304–308. 374 C-18/01 Arkkitehtuuritoimisto [2003] I ECR 5321 ECJ. 375 N Madge & J Luba ‘Recent Developments in Housing Law’ [2004] 10 Legal Action 25–27; A Woolich & A Marriott ‘Registered Social Landlords and EC Procurement’ (2003) 6 Journal of Housing Law 45–49; A Woolwich and A Marriott ‘Registered Social Landlords and EC Procurement Rules’ (2003) 10 Housing Law Monthly Supplement iv–viii; R Rees ‘Social Landlords caught in the Public Procurement Net’ (2004) 15 Construction Law 26–28. 376 John Prescott MP (Office of Deputy Prime Minister, September 13th 2004). 377 Public Procurement Directive (n 373 above) §2 as defined in §1[2]. 378 Public Procurement Directive (n 373 above) §7. 379 These vary according to the type of contract. 380 Public Procurement Directive (n 373 above) §§23–34. 381 Public Procurement Directive (n 373 above) §35ff. 371 372
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detailed tendering process382 for which there must be an appeal.383 Special rules apply to public works concessions384 and even more complex rules apply to construction and site preparation, property management and legal services.385 The basic objective is to secure the most economically advantageous offer for contracting authorities.386
7 Late payment [3.58] The Late Payment Directive387 applies to all payments made as remuneration for commercial transactions388 including business-to-business and business-to-government transactions for the delivery of goods or provision of services389 but not contracts on the business-to-consumer pattern.390 Interest accrues from the date fixed for payment or otherwise 30 days from an invoice or receipt of the goods or services.391 Interest is calculated as a rate seven percentage points above the main refinancing rate of the European Central Bank, in default of other contractual agreement. Outside the Eurozone an equivalent rate is set by the national central bank.
VA LUE A DDED TA X
Value Added Tax 1
Taxation
[3.59] Taxation lies beyond the scope of this book. It is a matter largely left to national law but is subject to EC intervention to prevent discriminatory rules between member states. Tax rules may not differentiate according to nationality, though they may differentiate between residents and non-residents.392 Property of the Communities is exempt from national taxation.393
Public Procurement Directive (n 373 above) §38. C-81/98 Alcatel Austria [2006] I ECR 7671 ECJ; A Brown ‘Alcatel’ (2006) 6 Public Procurement Law Review 332–337. 384 Public Procurement Directive (n 373 above) §56ff. 385 Public Procurement Directive (n 373 above) Annexes I, IIA, IIB 386 C Bovis ‘New Public Procurement Regime’ (2006) 12 European Public Law 73–109, 88. 387 Late Payments Directive 2000/35/EC [2000] OJ L200 35; R Shulte-Barucks & S Ongena ‘The Late Payment Directive — a Step Towards an Emerging European Private Law’ (2003) 11 ERPL 519–544. 388 Late Payments Directive (n 387 above) §1. 389 Late Payments Directive (n 387 above) §2. 390 Schulte-Brauchs & Onego (n 387 above) 528. 391 Late Payments Directive (n 387 above) §3; by §3[2] national law may make it 60 days for some cases. 392 See above [2.41]. 393 Protocol on Privileges and Immunities of the ECs [1967] OJ 152 13, §3. 382 383
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Towards a European Land Law?
Value added tax
[3.60] Nor is it intended to say anything substantial about the vital question of VAT,394 a subject on which Jordan provides a thorough grounding.395 A charge to VAT arises when a trader registered for the tax makes a taxable supply. Thus a shopkeeper selling a bar of chocolate makes a taxable supply and adds 17.5 per cent to the price when selling it to a customer. The standard rate will vary slightly elsewhere in Europe. A site-based rule is applied to determine the place of a supply396 which selects the national tax scheme to apply. Timing is also important.397 Many commercial transactions with land need careful consideration. The object of the brief exposition that follows is not a sound basis on which to take practical decisions but is merely intended to introduce concepts which may be transferable to other contexts of European land law.
3
Domestic transactions
[3.61] VAT applies to a supply made by a trader, so there is no question of taxing a sale by one private individual to another. Issues may arise when private premises are switched to business use or for property with mixed use.398
4
Standard-rated
[3.62] Standard rate transactions are relatively straightforward. The price to the ultimate consumer is increased by the tax at 17.5 per cent, but the trader who sells land will be able to recover the VAT paid by him, for example the purchase cost, so from the point of view of a trader in land it is largely neutral. Transactions by which income is derived from land are often standard-rated, examples being charges for fishing rights, sleeping accommodation (hotels), holiday accommodation, pitch fees in caravan parks, mooring charges, parking charges and entrance fees to sports grounds. These are by way of exception399 to the normal exemption for land,400 the double negative ensuring that the standard charge applies. Options are also chargeable. Another crucial case for standard 394 The main authorities are Sixth VAT Directive 77/388/EC [1977] OJ L145 1, as amended; Value Added Tax Act 1994, c 23 (‘VATA 1994’), sch 89 group 1. 395 D Jordan Understanding VAT on Property (London, Law Society, 2nd edn, 2006, 978-1-85328-994-1); appendix A has a good summary. 396 Jordan (n 395 above) [1.4.13]; VAT (Place of Supply of Services) Order 1992, SI 1992/3121, para 5. Beneficial ownership is taken if this is separated from the legal. 397 Jordan (n 395 above) [1.5]. On the timing of internet contracts see Robertson’s Electrical v Customs & Excise Commissioners [2007] STC 612. 398 C-434/03 Charles v Staatssecretarias von Financien [2005] I ECR 7037 ECJ (allocation of capital goods between business and non-business parts). 399 VATA 1994 (n 394 above) sch 9 group 1. 400 VATA 1994 (n 394 above) sch 10.
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rating is the sale of new commercial property, new here meaning within three years from the time of the certificate of practical completion (bare land following).401 Because land is treated differently there is an important land/not-land divide, and ‘fixtures’-type points can arise. Thus a letting of a prefabricated building which can be dismantled and reassembled may be treated as immovable despite the possibility of moving it, in one case temporary housing for asylum seekers for five years.402 In this and other contexts there is an important distinction between major and minor interests, major interests comprehending the freehold and any lease over 21 years, shorter leases being minor interests.403 A grant of lease in a commercial building is exempt from VAT irrespective of the age of the building and the length of the lease, subject to an election to waive exemption.404 A letting is an assignment to a tenant in return for rent and the grant of the right to exclude all others for that period.405 Conversion of business premises to private use is not equivalent to a letting.406 There is also a considerable case-law about licences,407 the lease/licence distinction being autonomous408 and by no means as that established in England by Street v Mountford.409
5
Exempt transactions
[3.63] In essence there is an exemption410 for all grants of interests in, rights over411 or licences to occupy land, including transactions such as assignments, surrenders, and reverse surrenders, though in some cases a standard or zero rate is applied.412 The topsy-turvy world of VAT is at once revealed because an exemption, which sounds a fine thing, can actually be disadvantageous. Although VAT does not have to be added to the price of the land sold, a good thing, the tax paid by the developer to acquire and improve the land (the input tax) is not VATA 1994 (n 394 above) sch 9 group 1 Item 1(a), Note 4. C-315/00 Maierhofer [2003] I ECR 563 ECJ. 403 VATA 1994 (n 394 above) s 96; in Scotland it was the dominium utile and now the non-feudal equivalent. 404 VATA 1994 (n 394 above) sch 10; C-409/98 Mirror Group v Commissioners of Customs and Excise [2001] I ECR 7175 ECJ; Maierhofer (n 402 above); C-275/01 Sinclair Collins [2003] I ECR 5965 ECJ; C-108/99 Commission EC v Cantor Fitzgerald International [2001] I ECR 7257 ECJ. 405 Mirror Group (n 404 above) J[31]; Cantor Fitzgerald (n 404 above) J[21]; C-358/97 Commission EC v Ireland (VAT on Road Tolls) [2000] I ECR 6301 ECJ J[52–57]; C-326/99 Stichting ‘Goed Wonen’ v SS for Finance [2001] I ECR 6831 ECJ, J[55]. 406 C-269/00 Seeling v Fin Starnberg [2004] 2 CMLR 32 @ 757 ECJ. 407 VATA 1994 (n 394 above) sch 9 group 1, item 1; VAT Notice 742 Land and Property [2.5–2.7]; C-284/03 Belgium v Temco Europe [2004] I ECR 11237 ECJ; ‘Goed Wonen’ (n 405 above) J[55]; C-346/95 Blasi v Finanzamt München [1998] I ECR 481 ECJ, J[26]. 408 Temco Europe (n 407 above) J[12]; ‘Goed Wonen’ (n 405 above) J[47]. 409 Street v Mountford [1985] AC 809 HL; Sparkes (n 26 above) [25.73]. 410 Sixth VAT Directive (n 394 above) §13B; VATA 1994 (n 394 above) sch 89 group 1; Jordan (n 395 above) [1.1.2]. 411 ‘Goed Wonen’ (n 405 above) (usufruct). 412 See above [3.62], below [3.66]. 401 402
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recoverable, a consideration which normally predominates with developers. The basic rules applying an ‘exemption’ to commercial property were laid down in 1989.413 Residential property is also almost always exempt from charge.414
6
Option to tax
[3.64] A commercial developer or landlord may opt to apply taxation at the standard rate to a development, ensuring that any sale or lease of the property is then a taxable supply and standard rate VAT has to be paid, so that future rent and service charges will cost 17.5 per cent more. In this way input tax can be recovered that would otherwise be irrecoverable, for example, the acquisition and construction costs of the building. This possibility was introduced in 1989415 for commercial property though it does not apply in the domestic and residential sectors.416 A procedure is laid down.417 The claim needs to be planned well in advance and it may be essential to register in advance of construction work to preserve recovery rights for input tax.418 Any retroactivity is limited to six months at most and is controlled nationally419; the developer may need to give advance notice and to get permission from the Revenue authorities. The option to tax is open to abuse and there is a considerable amount of anti-avoidance legislation.420
7
Reduced rate
[3.65] A reduced rate of 5 per cent applies to dwellings, including construction work, conversion and renovation, and more generally to many energy-saving works.421
8
Zero-rating
[3.66] Zero-rating is the most favourable tax position because no tax has to be charged to the ultimate consumer but the trader is allowed to deduct his input tax. So the acquisition and conversion costs he incurs will be reduced by the Sixth VAT Directive (n 394 above) as amended in 1989. VATA 1994 (n 394 above) sch 9 group 1 item 1 [3]; for a zero-rated exception see below [3.66]. 415 Sixth Directive VAT (n 394 above) §13C; VATA 1994 (n 394 above) sch 10 para 2; VAT Notice 742A Option to Tax Land and Buildings. It was introduced in August 1989 but could in some circumstances apply as from April 1989. 416 eg, dwellings, residential caravans, moorings, housing association, and DIY builders. 417 Jordan (n 395 above) [2.7.9]. 418 Jordan (n 395 above) [1.4]. 419 C-269/03 Luxembourg v Kirckberg [2004] I ECR 8067 ECJ; C-136/97 Norbury v Customs & Excise Commissioners [1999] I ECR 2491 ECJ. 420 Jordan (n 395 above) [2.7]. 421 VATA 1994 (n 394 above) sch 7A Group 2. 413 414
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amount of the VAT. It is applied to residential property,422 that is, new or newly converted dwellings where the property has not been used as a dwelling for at least 10 years. Zero-rating is applied to the first grant of major interest, but a shorter lease, up to 21 years, is exempt with no recovery of input tax allowed. It is also in some other cases chosen for social reasons such as work on listed and protected properties and non-business charitable properties.423
SI N G LE FA R M PAYMEN T
Single Farm Payment 1
Farmers, holdings and farms
[3.67] Ownership of farmland is left to national law, and in particular issues such as title, mortgaging and succession, as are the regulation of agricultural tenancies424 and questions such as the termination of a lease.425 This is the focus of agricultural law in most countries.426 However, no farmer can ignore the monster that is the Common Agricultural Policy; by far the most important and immediate issue is the Single Farm Payment.427 [3.68] A farmer is a person who exercises an agricultural activity on a holding situated within the territory of the Community, whether an individual, a company or a group of persons, whatever their legal status under national law.428 A farmer’s ‘holding’ is the collection of all production units managed by a farmer within a single EU state and within Community territory,429 a concept which can include parts used for non-agricultural purposes.430
422 VATA 1994 (n 394 above) sch 9 group 1 item 1. [3]; VATA 1994 sch 8 group 5 note 2; Jordan (n 395 above) [3.2.1]. 423 VATA 1994 (n 394 above) sch 8 groups 5–6; these cover new properties, renting, conversions, residential property, charitable property and property held for social purposes; Jordan (n 395 above) [5]–[6]. Provision of social housing is a business: Riverside Housing Association v Revenue & Customs Commissioners [2006] EWHC 2838, [2006] STC 2072 Lawrence Collins J. 424 N Ravenscroft, R Gibbard, S Markwell & J Reeves ‘Private Sector Tenancy Arrangements: The European Experience’ in P Jackson & DC Wilde Contemporary Property Law (Aldershot, Dartmouth, 1999, 1-84014-747-4). 425 C-2/92 R(JR) Bostock v Ministry of Agriculture Food & Regional Affairs [1994] I ECR 955 ECJ. 426 JA McMahon ‘Common Agricultural Policy’ (2002) 53 NILQ 9–27. 427 Direct Support Schemes under the Common Agricultural Policy Regulation (‘Single Payment Regulation’) (EC) 1782/2003 [2003] OJ L270 1. A second wave and some detailed amendments are introduced by (EC) 319/2006 [2006] OJ L58 32. 428 Single Payment Regulation (n 427 above) §2[a]; G Whittaker ‘Life on the Farm’ [2005] 05 LSG 32–33 (unchanged from earlier schemes); C-403/98 Aziende Agricola Monte Arcosu v Sardegna [2001] I ECR 103 ECJ (companies could not register in Sardinia; Regulation had no direct effect); many aspects of the CAP do have direct effect: see, eg, C-253/00 Muñoz v Frumar [2002] I ECR 2289 ECJ. 429 Single Payment Regulation (n 427 above) §2[a–b]; G Whittaker (n 428 above) 32–33 (also unchanged). 430 Case 152/79 Lee v Minister of Agriculture [1980] ECR 1495 ECJ.
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[3.69] Agricultural activity, the key concept, involves the production, rearing or growing of agricultural products,431 including harvesting, milking, breeding animals or keeping animals for farming. Agricultural land is mainly used for livestock, arable, vegetables and soft fruit, but even grazing horses might now be seen as agricultural.432 Another activity, increasingly emphasised, is maintaining land in good agricultural and environmental condition.433 Bodiguel and Cardwell have demonstrated,434 using the specific examples of the United Kingdom and France, how domestic definitions of ‘agriculture’ — aimed at defining the scope of security of tenure for agricultural tenants — continue to be linked to productive farming even while the EU is shifting its definition to reflect the decoupling of aid and production; whilst it is true that there is no imperative for domestic legislation to redelineate the agricultural field, one can only imagine that the process of change will prove to be inexorable. [3.70] Aid will mainly take the form of a single payment established at farm level, the amount being linked to areas of land within a holding put to particular uses, so specific parcels need to be identified and linked to relevant uses. Parcels should be identified on maps, land registry documents, or a specialised cadastre, with a computerised index and able to discriminate each parcel or production block, to a scale of 1:10K or better and with a unique reference. Holdings should then be cross-referenced to a record of payment entitlements, aid applications, and the identity of each farmer seeking aid.435 The Rural Payments Agency maintains a Rural Land Register in England and Wales derived from 1:5K scale Ordnance Survey sheets, on old-fashioned A3 sheets even though the administration in each state is supposed to be computerised436; the crucial identifiers are plot IDs and the agricultural holding number, and these are the key to unlock access to the system. The register should also record the holder, the value and type of aid awarded, and details of the source of the claim, whether deriving from personal claims or from the national reserve, purchase, lease, or inheritance. A detailed administrative structure is laid down.437 A farmer applying the single farm payment submits a single application each year before the national closing date, using pre-printed forms,438 which merely have to be checked and amended as necessary. Detailed rules are laid down for making 431 EC Annex 1 ‘Agricultural Products’; Single Payment Regulation (n 427 above) §2[f]; fishing is excluded. 432 . 433 Single Payment Regulation (n 427 above) §§2[c], 5. 434 L Bodiguel & M Cardwell ‘Evolving Definitions of “Agriculture” for an Evolving Agriculture?’ [2005] Conveyancer 419–446. 435 Single Payment Regulation (n 427 above) §§17–27; Implementation of Cross-Compliance etc Regulation (EC) 796/2004 [2004] OJ L141 18, §6[1]. 436 Single Payment Regulation (n 427 above) §17; Direct Support Schemes Regulation (EC) 1259/1999 [1999] OJ L160 113, §2a. 437 Single Payment Regulation (n 427 above); Single Payment Implementation Regulation (EC) 795/2004 [2004] OJ L141 1, §12ff; CAP Single Payment and Support Schemes (Integrated Administration and Control System) Regs 2005, SI 2005/218, as amended. 438 Implementation of Cross Compliance etc Regulation (n 435 above) §18[1].
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payments.439 The United Kingdom paid out £1.5 billion to a claimant population of 117K in 2005, but the volume of claims created administrative problems in the Rural Payments Agency, which the government has pledged to iron out.
2
Single Farm Payment
[3.71] Aid under the Common Agricultural Policy is now mainly based on the Single Farm Payment, a scheme for income support for individual farmers based on productive area and ‘decoupled’ from production.440 Decoupling occurred between 2005 and 2006441 for most agricultural products, and 90 per cent of all payments are production-neutral.442 Farmers will be free to respond to demand in the market place when choosing what to produce, with increased ‘market orientation’ and a genuine choice of farming strategy.443 The Single Farm Payment scheme will cover all arable crops as well as grain, legumes, seeds, beef and sheep, and the milk sector from 2007. Britain is fully decoupled with one tiny exception,444 which is why the focus of the discussion here is on the Single Farm Payment. A second wave of reform will bring in Mediterranean crops such as tobacco, cotton and olive oil as well as hops.445 A few specific crops continue to attract production-linked aid, notably the cereal sector in France446 and livestock across the continent,447 though these should be phased out by 2012. [3.72] Income is not calculated per farm but broken down into ‘payment entitlements’, which is easier when part of a farm is sold.448 Payment entitlements are derived in most of Western Europe449 from an historic yield method determining the income yield from the particular farm during a reference period in the years 2000–2002. Other states use a flat rate per hectare for all land within a state, or at least within a region, and the method may either be a static mix of the two,450 or a dynamic mix moving gradually to a flat rate basis.451 Single Payment Regulation (n 427 above) §36. Single Payment Regulation (n 427 above) §33ff. 441 Single Payment Regulation (n 427 above) §71; Finland, France, Greece, the Netherlands and Spain; Malta and Slovenia applied the Single Farm Payment in 2007. 442 M Cardwell ‘Current Developments in Agriculture’ (2006) 55 ICLQ 467–475, 470. 443 Single Payment Regulation (n 427 above) R[28]; Cardwell (n 442 above) 468. 444 See below [3.82] n 504. 445 Common Organisation of Market in Cotton etc Proposal, COM (2003) 698 final; Overview of Implementation of Direct Payment under the CAP in Member States (DG for Agriculture and Rural Development, February 2007); this can be found at . 446 Overview of Implementation of CAP Reform (n 445 above) set at 25% of aid; Cardwell (n 442 above) 470 also adds Spain. 447 See below [3.82]. 448 See below [3.82]. 449 Austria, Belgium, France, Greece, Ireland, Italy, the Netherlands, Portugal and Spain; also Scotland and Wales. 450 Luxembourg, Sweden and Northern Ireland, 451 Finland, Germany and England; England is regionalised into a normal area, moorlands (hill farming) and other special areas. 439 440
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[3.73] One problem with aid that is based on area is that it gives more to those who already have most. The general perception is that the CAP provides a mechanism for redistributing wealth from British and German families (at a rate of £660 per family) to small-scale French farmers. French farmers receive €89 billion in contrast to the €46 billion paid to British farmers, while other large beneficiaries in EU-15 include Ireland, Portugal, Greece and Spain. However, a system designed to protect small farmers has ended benefiting the rich most, because area support schemes mean that the greater the landowner the greater the grant, reportedly £1.1 million a year for the Sutton Estates, and it is no surprise to find that the Duke of Westminster, the Queen and the Prince of Wales are major landowners, but even Prince Albert of Monaco apparently receives £200K from the British fund.452 A simple money cap is imposed on the total amount of support which works down into ceilings at Community, national and regional levels, excess claims being scaled down proportionately to fit the money cap.453 [3.74] EU states could decide to apply the single payment scheme at regional level, the national ceiling being divided, and this will also regionalise set-aside entitlements.454 This option has been taken up more than expected.455 The effect is to reduce European homogeneity and effect a renationalisation of agricultural policy.456 The result can be messy and is particularly so in the United Kingdom where there are no fewer than six local systems across the four jurisdictions457; Scotland and Wales have adopted the historical model,458 England has a dynamic hybrid moving to a flat rate model at the end of a transition period,459 but with separate schemes for the bulk of England, for moorland and other special development areas, and Northern Ireland has adopted a static hybrid. The special regime for hill farming is the major innovation attributable to British entry into Europe.460 Other ‘less-favoured areas’ are allowed up to 10 per cent of the land area, and in England are South Yorkshire, Merseyside and Cornwall and in Wales the West and the Valleys.461 Special schemes apply to some marginal regions such 452 These figures are according to newspaper reports: Guardian March 23rd 2005; Independent November 7th 2005. 453 Single Payment Regulation (n 427 above) §11. 454 Single Payment Regulation (n 427 above) §§58, 63; Single Payment Implementation Regulation (n 437 above) §26. 455 Cardwell (n 442 above) 470. Regionalised states overseas are Belgium, Finland Germany (13 regions) and Sweden. 456 ‘Renationalisation of the CAP?’ (2005) 112 Farm Law 7; B Jack ‘Implementing EU Agricultural Law in Northern Ireland and Republic of Ireland (2003) 54 NILQ 377–441, 403; Cardwell (n 442 above) 470–471 (a compromise). 457 Common Agricultural Policy Single Payment and Support Schemes Regs 2005, SI 2005/219, reg 3. 458 This is also true of most of Western Europe. 459 Also in Germany and Finland. 460 Single Payment Regulation (n 427 above) §58; Common Agricultural Policy Single Payment and Support Schemes (Amendment) Regs 2006, SI 2006/239 reg 3; JA Usher EC Agricultural Law (Oxford, OUP, 2nd edn, 2002, 978-0-19-826882-6) 162; formerly Mountain and Hill Farming Directive 75/268/EEC [1975] OJ L128 1; Hill Farm Allowance Regulations 2005, SI 2005/154. 461 Whittaker (n 428 above).
Single Farm Payment
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as Finland and Sweden north of the 62nd parallel,462 and there are also ‘outermost regions’ in places such as the Aegean islands.463 [3.75] Ten new member states entering in May 2004 increased the number of EU farmers to 11 million and the cultivated area by around 30 per cent, figures since further increased by the accession of Bulgaria and Romania.464 Pre-accession payments under the Single Area Payment Scheme (SAPS) in the east are gradually switching over to the Single Farm Payment on a flat rate basis, so that they increase gradually to a full envelope in 2013.465
3
Calculation of the Single Farm Payment
[3.76] Holdings must exceed 0.3 hectares unless a lower size is set nationally.466 For at least 75 per cent of the reference parcels in an aid application, at least 90 per cent of the respective area must be eligible under the Single Farm Payment Scheme.467 Payment entitlements are matched to the area of the farmer’s holding, called an eligible hectare,468 the matching being the process by which a cash entitlement is created. Eligibility of hectarage derives from the use of land for agricultural activity, excluding vineyards, land producing fruit and vegetables, and land planted with potatoes for eating and permanent crops.469 Farmers may use the parcels declared for any agricultural activity covered by the Single Farm Payment Scheme. Modulation is reducing overall payments by five per cent, thus redirecting funds to rural development.470 If the farmed area has remained the same, the Single Farm Payment is derived from the aid paid under the previous scheme. An average is taken over the three reference years of the total amount of payments which a farmer was granted under the earlier support schemes.471 Adjustments are made for farmers starting Single Payment Regulation (n 427 above) §98. Single Payment Regulation (n 427 above) §70. 464 Accession of Bulgaria and Romania Protocol Annex III [2], [2005] OJ L157 58; at present only trade: Regulation (EC) 1683/2006 [2006] OJ L314 18. 465 Council Decision 2004/368/EC [2004] OJ L130 1; Single Area Payment Scheme Envelopes Regulation (EC) 864/2004 [2004] OJ L161 48, Annexes VIII–VIIIA, as amended by Regulation (EC) 118/2005 [2005] OJ L24 15, especially Annex VI; Single Payment Regulation (n 427 above) §71aff inserted by Regulation (EC) 583/2004 §1[5ff]; C Daugbjerg & A Swinbank ‘CAP and EU Enlargement’ (2004) 42 JCMS 99–119; K Inglis ‘Implications of Enlargement for EC Agri-food Law’ (2004) 10 ELJ 595–612; K Kosior ‘New Stakeholders in CAP’ (2005) 11 ELJ 566–585. Malta and Slovenia have already switched. 466 Implementation of Cross-Compliance Regulation (n 435 above) §14; a lower size may be set nationally but the European minimum applies under Single Payment and Support Schemes Regs 2005 (n 457 above) reg 5 and Single Payment Scheme (Amendment) Regs 2006 (n 460 above) reg 5. 467 Implementation of Cross-Compliance Regulation (n 435 above) §6[2]. 468 Single Payment Regulation (n 427 above) §36. 469 Single Payment Regulation (n 427 above) §108 is replaced by Regulation (EC) 583/2004 §1[17]. 470 Single Payment Scheme (Amendment) Regs 2006 (n 460 above) reg 11. 471 Single Payment Regulation (n 427 above) §§37–39, Annexes VI–VII. 462 463
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up and also for exceptional circumstances causing hardship472 such as long-term professional incapacity, natural disasters, or destruction of livestock. Payments are scaled down to fit national ceilings.473 Continuance of a farmer’s income is dependent upon maintaining the same area of land available for agricultural activity if grant is to continue, since income generally reflects the farmer’s three-year average number of hectares.474 The payment entitlement (based on the historical area of the farm) must be matched with an eligible hectare (on the farm as it stands today); a hectare is eligible if available to the farmer for at least 10 months each year, an agricultural area of the holding taken up by arable land and permanent pasture excluding areas under permanent crops, forests or used for non-agricultural activities.475 There are specialised rules, both European and national.
4
Transfer of Single Farm Payments
[3.77] Eligibility for a Single Farm Payment may derive not from the receipt of grants in earlier years by the farmer himself, but from the qualification of a predecessor who has received the holding or part of it by way of inheritance from a qualified farmer, a transfer in anticipation of inheritance, when a change of legal status such as incorporation occurs or any merger or scission of holdings. Income rights can be acquired along with agricultural land, though care is needed to ensure that the purchaser is not prejudiced by his vendor’s sins476 and indeed a farmer generally wishes to buy payment entitlement and land together.477 Payment entitlements may only be transferred once definitively established478 and then only to another farmer479 established within the same state and region.480 Land can also be leased with payment entitlements.481 A transfer in gross (without land) is possible if the farmer has used at least 80 per cent of his payment entitlements during at least one calendar year but otherwise Single Payment Regulation (n 427 above) §§37ff. It may be necessary to take some other base. Single Payment Regulation (n 427 above) §41, Annex VIII. 474 Single Payment Regulation (n 427 above) §43. Matching is done by the farmer. 475 Single Payment Regulation (n 427 above) §44; the precise 10 month period is determined nationally; Single Payment Scheme (Amendment) Regs 2006 (n 460 above) regs 6, 9; the default date adopted in the UK is February 1st. 476 Single Payment Regulation (n 427 above) §33; Single Payment Scheme Handbook and Guidance 2007 (Rural Payments Agency, 2007); this can be found at under Tabs ‘Single Payment Scheme, ‘Forms and Guidance’ and ‘2007 Forms and Guidance’; Whittaker (n 428 above). Notification must be given 6 weeks before a transfer, thus advancing the deadline by 6 weeks: Single Payment Scheme Regs 2005 (n 457 above) reg 10; Single Payment Scheme (Amendment) Regs 2006 (n 460 above) reg 10. 477 Single Payment Regulation (n 427 above) §44; Single Payment Implementation Regulation (n 437 above) §74. 478 Otherwise there should be an agreement to transfer immediately after this condition is satisfied. 479 There are problems if the seller has ceased farming before making a transfer. 480 There may be problems with an heir elsewhere in Europe. 481 Single Payment Regulation (n 427 above) §46; in the east see §71k inserted by (EC) 583/2004 §1[5]. 472 473
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there may be a siphon to the national reserve. State schemes may siphon-off part of the payment entitlements on a sale, with or without land, for the national reserve, and the same applies to a letting for six years or more and any dealing with part.482
SPECI A L AG R I CULTUR A L R EG I MES
Special Agricultural Regimes 1
Set-aside
[3.78] Arable crops represent 40 per cent of the area of agricultural land and 21 per cent of agricultural income. They comprise cereals such as wheat, sweetcorn, oilseeds, protein crops, and so on and arable land also includes set-aside and formerly arable land subsequently maintained in good agricultural and environmental condition as well as land under greenhouses or under fixed or mobile cover.483 Farmers are bound to take a percentage of this land out of cultivation, as under earlier aid schemes,484 the basic rate for compulsory set-aside continuing at 10 per cent with even more allowed on a voluntary basis.485 Cash payments are generated when a set-aside entitlement, carried forward from the previous regime, is accompanied by a hectare eligible for set-aside.486 It must be taken out of production and the land has two main uses: (1) biomass for fuel production, or (2) land subject to environmental measures, meaning unploughed strips in fields of crops.487
482 Single Payment Regulation (n 427 above) §46. This may be used for assisting new farmers. Allocation from the national reserve cannot be traded for five years. No siphon is applied in the UK at present. The possibility of transfer in gross has led to ‘entitlement trading’ in which entitlements are sold to lifestyle farmers since even a paddock can qualify for support; the market is both ‘ferocious’ and ‘ludicrous’: Sunday Times July 29th 2007. 483 Single Payment Regulation (n 427 above) §§5, 66, Annex IX; Single Payment Implementation Regulation (n 437 above) §2[1]. 484 Exceptions include organic production, materials not intended for human or animal consumption, small producers, permanent pasture, permanent cropping land, forest, and non-agricultural land: Single Payment Regulation (n 427 above) §§54–55; C-372/98 R(JR) JH Cooke & Sons v Ministry of Agriculture Fisheries & Food [2000] I ECR 8683 ECJ. 485 Single Payment Regulation (n 427 above) §107; Single Payment Implementation Regulation (n 437 above) §32ff; CAP Single Payment Scheme (Set-aside)(England) Regs 2004, SI 2004/3385 as amended by SI 2007/633; Set-aside Handbook & Guidance for England 2007 which can be found at under Tabs ‘Single Payment Scheme, ‘Forms and Guidance’ and ‘2007 Forms and Guidance’. In the east, Single Payment Regulation §71j inserted by Regulation (EC) 583/2004 §1[5]. 486 Land ineligible for payments was used in 2003 as permanent pasture, for permanent crops, trees, or for non-agricultural purposes. 487 Single Payment Regulation (n 427 above) §§54–56, 88–91; Single Payment Scheme (Amendment) Regs 2006 (n 460 above) regs 12–13; as to transfers see Single Payment Regulation (n 427 above) §54[7]; Regulation (EC) 1973/2004 [2004] OJ L345 1.
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2
Towards a European Land Law?
Organic produce
[3.79] A whole list of organic products488 and foodstuffs are identified for CAP purposes, produced according to organic principles — using permitted pest controls, fertilisers and soil conditioners, and without food irradiation or the use of genetically modified organisms — and these qualify to be marketed as organic and for the proposed Community organic logo. Extra income is paid to organic farmers according to area and support is also paid to farmers signing up for quality schemes on the protection of geographical indications and designations of origin.489
3
Cross compliance
[3.80] Protection of the environment has developed as a concern since 1992 into a positive obligation to qualify for the Single Farm Payment. Direct aid payments are linked to basic standards for the environment, food safety, animal health and welfare and good agricultural and environmental conditions.490 There are three main aspects. Environmentally friendly management is required, under a strict timetable, such as conservation of wild birds, wild flora and fauna, and natural habitats, and protection of groundwater against pollution, especially from nitrates, and the soil against sewage sludge. Less fertiliser should be used on grass; margins maintained in fields for ground nesting; and stubble left until late winter, with hedges cut less frequently. Most British farmers will qualify for basic aid under the Environmental Stewardship Scheme but this is increased greatly in sensitive areas such as a Site of Special Scientific Interest. Good agricultural condition must be maintained for land taken out of production, using European, national and regional criteria, covering matters such as the prevention of soil erosion, organic content of soil, maintenance of soil structure, and minimal stocking to protect permanent pasture. Animal health and welfare requirements must be observed, notably in relation to the notification of contagious diseases.
488 Regulation (EEC) 2092/91 Annexes I, II; Regulation (EC) 1804/1999; N Lampkin & M Stolzer ‘European Action Plan for Organic Food and Farming’ (2006) 3 Law, Science & Policy 59–73. 489 C-135/03 Commission EC v Spain (Use of ‘Bio’) [2005] I ECR 6909 ECJ; C-107/04 Comite Andaluz [2005] I ECR 7137 ECJ. 490 Single Payment Regulation (n 427 above) §§3ff, Annex III as amended; Implementation of Cross Compliance etc Regulation (n 435 above) §§41ff; CAP Single Payment Scheme (Cross Compliance) (England) Regs 2004, SI 2004/3196, amended by SI 2005/918; Cross Compliance Handbook for England 2006 (Rural Payments Agency, 2007); this can be found at under Tabs ‘Single Payment Scheme, ‘Forms and Guidance’ and ‘2006 Forms and Guidance’; A Woods ‘Cross Compliance’ (2005) 05 Rights of Way Law Review 57–70. This system is unpopular with farmers and there is a raft of measures to improve it, including power to ignore trivial breaches.
Special Agricultural Regimes
4
149
Rural development
[3.81] Countryside accounts for 80 per cent of the area of Europe and the policy of rural development which provides €4.3 billion annually for restructuring to make agriculture more competitive whilst conserving the rural heritage, has developed into a second pillar of the CAP.491 A major theme is diversification of agricultural holdings beyond agriculture and the promotion of tourist use; other aspects are early retirement and setting-up of young farmers, modernisation of production methods, structural reorganisation of farms, and the protection of the heritage.492 Farmers in pre-accession states receive grants to help bring them up to European standards. Modulation aims to reduce direct payments (including the Single Farm Payment) to sustain agriculture by between 3 and 5 per cent annually, over the years 2005 to 2012, the sums saved being ploughed back into rural development measures.493
5 Coupled sectors [3.82] In Britain and Ireland the position is straightforward. Decoupling from production was undertaken in 2005 with one very trivial exception.494 Elsewhere the position is much more complex, but a convenient summary is available on the internet of the progress of decoupling under the CAP reform.495 This leaves some areas where aid496 is still linked with production, though these will gradually disappear. Extra aids are provided for durum wheat, protein-rich crops such as peas and beans, rice, potato starch,497 and also nuts.498 A second wave of reform is decoupling most of the market in tobacco, cotton, olive oil and hops, and also the sugar sector.499 Attention is now turning to the wine sector500 and to a new Common Organisation of Market (CMO) for fruit and vegetables which contributes 17 per There are innumerable regulations on the subject. A Ekroos ‘Forests and the Environment — Legislation and Policy of the EU’ (2005) 14 European Environmental Law Review 44–57. 493 Single Payment Regulation (n 427 above) §§10, 12; Annex II as amended (national limits); Implementation of Cross Compliance etc Regulation (n 435 above) §77 (applied to gross payments). 494 Scotland applies a 10 per cent ceiling under §69 in the bovine sector; this makes available about €30 million of aid: Regulation (EC) 118/2005 Annex II. 495 Overview of Implementation of CAP Reform (n 445 above). 496 In almost cases there is a fixed aid or premium and an additional allowance to mop up additional allocations; in this book the latter is not mentioned separately. 497 Single Payment Regulation (n 427 above) §§72–93; some amendments for eastern states are made by Regulation (EC) 583/2004 §§1[6ff], 1[16]. 498 Single Payment Regulation (n 427 above) §§83–87. 499 Sugar restructuring took place in July 2006 and the sector is entering the Single Payment Scheme in 2007: Regulation (EC) 319/2006 [2006] OJ L158 32; Overview of Implementation of CAP Reform (n 445 above). 500 Towards a Sustainable European Wine Sector SEC (2006) 770. The ‘wine lake’ amounts to more than an entire year’s production: Independent July 5th 2007. 491 492
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cent to total agricultural production,501 and there is a more general initiative for a simplification of all the CMOs.502 France stands alone in being partially (that is, to the extent of 25 per cent) coupled in the cereal sector, though several states still pay for seeds — other than Cannabis — by volume. There are also considerable parts of Europe where some aspects of the meat sector remain coupled. Dairy sector payments were decoupled everywhere in the years from 2005 to 2007, but there are production controls (quotas) and extra payments.503 In many European states like Britain the Single Farm Payment Scheme will include beef and sheep, decoupling aid and production, though with small national supplements in some states,504 but many continental states have opted for a more gradual transition to the Single Farm Payment and retain some of the old aids for meat transitionally505 or make additional payments by headage or area stocked with livestock.506 Farmers in partial implementation states will receive a percentage of the single payment and a percentage based on meat production507 in relation to sheep and goat meat (ovines)508 and beef and veal (bovines).509 Those schemes have detailed transfer rules.510
DA I RY
Dairy 1
Dairy activity
[3.83] Dairy is a special case, the most important agricultural activity in most of Europe. It accounts for three-quarters of agricultural activity in Germany, France and the United Kingdom, though dairy is very limited down south.511 The regime is divided between a wholesale market in which 40 dairies buy 65 per cent of all milk and a smaller market for direct sales.512 Production was jeopardising Common Organisation of Market in Fruit and Vegetable Proposal COM (2007) 17 final. Common Organisation of Agricultural Markets Proposal COM (2006) 822 final. 503 See below [3.83]. 504 Single Payment Regulation (n 427 above) §69 (Greece 10% beef, and 5% sheep and goats; Italy 7% beef and 5% sheep and goats; Scotland 10% bovine sector). 505 Single Payment Regulation (n 427 above) §47. 506 Single Payment Regulation (n 427 above) §§71, 133–136; ceilings are provided in partial implementation states by Annexes I–V amended by Regulation (EC) 118/2005. 507 Single Payment Regulation (n 427 above) §66. 508 Single Payment Regulation (n 427 above) §§111ff. 509 Single Payment Regulation (n 427 above) §§121ff. 510 Single Payment Regulation (n 427 above) §§117ff, 127–128. 511 Commission Report on Milk Quotas SEC (2002) 789, [2.1]. Traditional production is threatened in areas of the accession states such as in Transylvania where some milk remains unsterilised: Observer June 24th 2007. 512 Milk Quotas Report (n 511 above) [3.3]; Common Organisation of the Market in Milk Proposal February 15th 2007. 501 502
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the future of the CAP and so quotas were introduced in 1984513 in order to limit the amount of milk produced.514 Recently the price has fallen and production is being edged up slightly.515 Much of the money paid in the milk sector is integrated into the Single Farm Payment scheme as from 2007 (or 2005 in the United Kingdom), but there will be a Dairy Premium to supplement the basic level of support.516 Farmers have quotas which they are allowed to produce and there is a scheme of financial penalties for over-production called a ‘levy’.517 We must immediately tackle this matter of terminology. The European Commission studiously avoids the use of the word quota in favour of ‘reference quantities’. In the bogs of Connemara they talk of little else. One is strongly reminded of Henry Reed’s fond reminiscence of army training in Judging Distances in which grazing sheep are reported to army command as a ‘dozen of what appear to be animals’.518 Readers will be able to supply the punchline for themselves. This book joins the farming community in calling a quota a quota. The scheme is continued from 2004 for eleven years, its effect being to impose a financial penalty on a farmer responsible for excess production.
2
Proprietary character of milk quotas
[3.84] Wachauf,519 the leading case, follows the European line that a quota is not strictly an asset, but has a quasi-proprietary character.520 The question was whether a tenant who had built up a quota entitlement should be compensated for the fruits of his labour when he surrendered the tenancy. Compensation had been refused in the German courts, but the European Court of Justice thought that there was enough leeway allowed to the national authorities to ensure that the domestic right to property was respected. This quasi-proprietary status has also been adopted in the Irish Supreme Milk Quotas Report (n 511 above) [2.3.4]. Milk Quotas Report (n 511 above) [3.4.1]. 515 Milk Quotas Report (n 511 above) [4.2.]. Quotas have increased by 0.5% over five years. 516 Single Payment Regulation (n 427 above) §§95–97; Single Payment Scheme Regs 2005 (n 457 above) reg 7; Single Payment Scheme (Amendment) Regs 2006 (n 460 above) reg 7; Usher (n 460 above) 91–92. The premium increased threefold from 2005 to 2007 during the transition. In the east: Single Payment Regulation §71i inserted by Regulation (EC) 583/2004. Payment dates are amended by Regulation (EC) 1540/2004. 517 Milk Levy Regulation (EC) 1788/2003 [2004] OJ L375 1, as amended by (EC) 1406/2006 [2006] OJ L265 8; Single Payment Implementation Regulation (EC) 595/2004, §6ff. In England: Dairy Produce Quotas Regulations 2005 SI 2005/465, as amended by SIs 2006/120 and 2007/106; there are similar schemes in Wales, Northern Ireland and Scotland; Dairy Produce Quotas (General Provisions) Regs 2002 SI 2002/458, as amended by SI 2005/466; C-230/01 Intervention Board v Penycoed Farming Partnership [2004] I ECR 937 ECJ; Agea v Malzani [2002] Foro it No 5 I col 1335, It Cass [2002] ECLYB [386]; Usher (n 460 above) 92. 518 H Reed ‘Lessons of War II, Judging Distances’ in A Map of Verona (London, Jonathan Cape, 1946) 24. 519 Wachauf (n 185 above). 520 M Cardwell ‘Milk and Livestock Quotas as Property’ (2000) 4 Edinburgh Law Review 168–190, 184, 189. 513 514
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Towards a European Land Law?
Court.521 The issue in Community litigation is often the liability to producers from whom quota has been improperly withheld. A large number of cases concern so-called ‘Slom’ quotas, the name deriving from an acronym in Dutch. When quotas were first introduced, many producers had already accepted payments under another scheme to withdraw from production for a fixed period of time, and these people had no production and so no quota was allocated to them in the initial allocations. This was so unfair and illegal that Slom quotas were provided to such producers,522 if able afterwards to resume production, and this scheme then had to be extended to successions523 and comparable transactions.524 Milk quotas are also of economic value in litigation about their loss through professional negligence.525 National law in member states often does award proprietary status, the position in Germany526 and also in Britain, where this has important effects. Swift v Dairywise Farms527 establishes that a quota can be held in trust, and the unforeseen effect is to make it possible to use the quota as security for a loan, and to create a security of sufficient solidity to be kept out of the hands of a liquidator on the insolvency of the farming company. Thus the combination of a quota and equity is to create an asset with a commercial value which is thus mortgageable.
3
Transfer
[3.85] The Commission wanted to avoid a financial market in quotas528 but that is effectively what there is. Entitlements once definitively established but only between farmers, quotas can be transferred between producers under national law.529 On a sale of dairy land, the quota will usually go with it,530 using detailed rules set by national law. A compulsory purchase or sale for non-agricultural purposes will not transfer the quota. The same applies to gifts and to inheritance and other transmissions, which are subject to the usage rule. If all agree a producer can take the quota to a new farm, either permanently or by lease, C-340/2000 Maher v Ministry of Agriculture F&RD [2000] 2 CLMR 48 Irish Supreme Ct. Case 120/86 Mulder [1988] ECR 2321 ECJ; C-104/89 Mulder v Council EC [1992] I ECR 3061 ECJ. There are also many human rights cases. 523 C-314/89 Ruah [1991] I ECR 1647 ECJ; T–199/94 Gosch v Commission EC [2002] II ECR 391 CFI; T-187/94 Rudolph v Council EU [2002] II ECR 391 CFI. 524 Equivalence exists when the intention is to favour a potential beneficiary without the intention being to release market value: C-384/00 Bredemeier v Landwirtschaftskammer Hannover [2002] I ECR 4517 ECJ, J[10]; C-44/89 Van Deetzen II [1991] I ECR 5119 ECJ; C-159/89 Spagl [1990] I ECR 4539 ECJ. 525 Parry v Edward Geldard (No 2) [2001] PNLR 44 Jacob J. 526 Bundesvervaltungsgericht 3C 35/03 [2005] 06 ECL 43. 527 Swift v Dairywise Farms (No 2) [2001] EWCA Civ 145, [2003] 1 WLR 1606n; on appeal from [2000] 1 WLR 1177 Jacob J; Harries v Barclays Bank [1977] 2 EGLR 15 CA, 18 Morritt LJ. 528 C-401/99 Thomsen v Amt für landlichte Ramme Husum [2002] I ECR 5775 ECJ, J[39]; Cardwell ‘Milk Quotas as Property’ (n 520 above). 529 Dairy Produce Quotas Regs 2005 (n 517 above) reg 9ff. 530 Guide to Milk Quotas 2005 (Rural Payments Agency, 2007) [8]. 521 522
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though national law generally restricts leases to producers.531 Problems arise on the surrender of a lease to a landlord; if the tenant continues to produce on the rest of the holding the quota stays, but otherwise it can transfer to the landlord who in this exceptional case can hold it temporarily.532 An apportionment is made on a sale of part, either as agreed or as determined using a disputes procedure.533 There is a procedure called a ‘siphon’534 in which part of the quota transferred is put into the national reserve, a reserve which also includes quotas released by inactive producers.535
TOWA R DS WHAT?
Towards What? This chapter has identified a significant number of areas where EU rules directed to other ends have a significant and substantive effect on property law. Collectively their bulk is significant. Nevertheless, they have not coalesced into any coherent form and, it has been suggested, are unlikely to do so, and neither are national property systems likely to converge. The driving force behind the emergence of a European Land Law will be a cross-border transactional law as discussed in the subsequent chapters.536
Bundesvervaltungsgericht 3C 35/03 (n 526 above). Dairy Produce Quotas Regs 2005 (n 517 above) regs 14–17; Thomsen (n 528 above) J[32], J[39]. 533 Dairy Produce Quotas Regs 2005 (n 517 above) regs 10–11. 534 C-313/99 Mulligan v Minister for Agriculture & Food [2002] I ECR 5719 ECJ, J[26]; C-98/91 Herbrink [1994] I ECR 223 ECJ, J[11]; C-189/92 Le Nan [1994] I ECR 261 ECJ, J[12]; C-463/93 St Martinus Elten [1997] I ECR 255 ECJ, J[24]; C-15/95 EARL de Kerlast [1997] 1 ECR 1961 ECJ, J[17–18]. 535 Inactive for a 12-month period and failing to resume production in the subsequent 12 months, or marketing less than 70% of their quota as to unused parts. 536 See below [ch 5]–[ch 10]. 531 532
ACTI O N S A F F ECTI N G LA N D
4 Actions Affecting Land Europeanisation of Actions. European Conflicts Club. Provisional Measures. Exclusive Forum over Land. Trespass used to Assert Title. Public Registers. Tenancies, Holiday Lets and Timeshares. Personal Actions.
EUR O PEA N I SATI O N O F ACTI O N S
Europeanisation of Actions [4.01] Land is immovable and irrevocably sited in one of the European states so it might seem that disputes about land are parochial matters, confined to the courts of the state where the land is sited. So, in general, they are, but cross-border issues arise with increasing frequency as Europeans move across national boundaries to buy or rent land, making use of their free movement rights. An internal market entails Germans selling goods to Swedes in Paris, and so on, and to ensure its smooth operation co-operation is required in civil matters and mutual recognition of judgments.1 Civil law is not codified across Europe, so the market depends upon multiple national codes which need clear rules to work together without conflicts.2 Predictability in the conduct of private affairs and in litigation is achieved by clear and simple rules, but the problem is the injustice that simplicity brings with it.3 [4.02] European law intervenes in four main ways. Rules are provided to determine which law to apply to a dispute, though as the previous chapter demonstrated4 states are left to their own devices in the land sector5 and all states in fact apply a site-based principle. Complementary to rules for selection6 of law 1 EC §65 ex §73m. This is unsuitable as a means of securing true uniformity: O Remien ‘European Private International Law, the EC and its Emerging Area of Freedom, Security and Justice’ (2001) 38 CML Rev 53–86, 75–77. 2 Jenard Report [1979] OJ C59 1, 11. 3 Dicey & Morris The Conflict of Laws (London, Sweet & Maxwell, 14th edn by L Collins 978-0-421-88360-4) I [1-008ff ]; C-125/92 Mulox IBC v Hendrick Geels [1993] I ECR 4075 ECJ, J[11]. 4 See above [3.12]. 5 The main convention in the area applies to contractual obligations but excludes pure land law issues; see below [4.09]. 6 This book departs from general practice to use the word ‘selection’ to describe a case where a law or forum is chosen by the legal system and confines ‘choice’ to a case where the parties make the
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are rules to select a forum in which a dispute is to be fought out, the courts of which country are entitled to try a case. That is the subject of this chapter, which opens with an examination of the conflicts club, broadly EU-27 though with variations from sector to sector and a parallel scheme applying to EEA states.7 Selection in relation to pure land issues is site-based, but within the general ambit of land law many actions will be seen as personal in character where the forum is not necessarily site-based. These aspects are considered in turn. Procedural law is increasingly regulated in its cross-border aspects, and in particular the service of proceedings.8 These moves towards a common European procedure must be noticed, even in an academic assessment such as this, because the service of proceedings may be important in determining the priority between two sets of proceedings started on opposite sides of the continent.9 [4.03] Finally, aspects of procedure such as delay and judicial fairness and fairness in administrative decision-making raise issues of human rights10 which lie beyond the scope of this book. Everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal previously established by law. Everyone shall have the possibility of being advised, defended and represented.11
Legal aid shall be made available to those who lack sufficient resources in so far as such aid is necessary to ensure effective access to justice.
EUR O PEA N CO N F LI CTS CLUB
European Conflicts Club 1
Forum rules for land in the EU (Brussels I)
[4.04] Property-owners must know to which jurisdiction their land is amenable.12 In order to achieve this a members’ club has been set up with its own rules of private international law for the member states of the EU, the primary focus of which is to select a forum to determine a land dispute. As already described, this in practice also selects the land law since states apply their own site-based rules to select their own land law.13 The main rule book for selection; the distinction is fundamental in our context because in pure land issues selection operates and a choice is not possible. 7 See below [4.04ff]. 8 Service Regulation (EC) 1348/2000 [2000] OJ L160 37. 9 See below [10.57]. 10 European Convention of HR (Rome, 1950, CETS 5) §8; JJ Fawcett ‘The Impact of ECHR §6[1] on Private International Law’ (2007) 56 ICLQ 1–48; see above [3.33ff]. 11 EU Charter of FRs [2000] OJ C364 1, §47. 12 Mostyn v Fortingas (1774) 1 Cowp 161, 165 Lord Mansfield CJ, 98 ER 1021. 13 See above [3.12] and below [4.02].
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the forum club is the Council Regulation on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters or, more briefly, the Regulation Civil Jurisdiction.14 Civil and commercial matters are defined autonomously, that is independently of national systems.15 This determines forum directly16 between EU-27 states including the accession states17 with Denmark the lone party-pooper until July 2007.18 Even the United Kingdom has signed up.19 British reluctance was understandable because as this chapter unfolds it will appear that the effect has been to dismantle the common law rules for the conflicts of laws, subtle and supple as well-worn leather, only for them to be replaced with a crude and blunt instrument which puts certainty and clarity ahead of sensible practical results. In our particular context, land, the Regulation does not sufficiently abide by the site rule and all too often it creates a disastrous situation in which the selection of forum diverges from the selection of law, so that a court foreign to the land ends up applying law foreign to itself. Our domestic service rules are aligned to ensure that service abroad can only occur without permission when our courts are the proper forum under European club rules,20 and so that permission has to be obtained before service overseas in any case where forum might be an issue and needs to be fought out first.21 Current rules represent a gentle evolution22 from earlier Conventions.23 Their object is to allocate any case in which the parties and property are spread out internationally across one or more EU states24 ideally to the courts best 14 Regulation on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (EC) 44/2001 [2001] OJ L12 1, as from March 1st 2002 and due for review in 2007. Other nicknames are the ‘Judgments Regulation’ and the ‘Brussels I Regulation’. 15 C-343/04 Land Oberosterreich v EZ [2006] I ECR 4557 ECJ, J[22]. 16 Regulation on Civil Jurisdiction (n 14 above) §76; domestic implementations are listed in Annexes I–IV, as amended by Regulations (EC) 1496/2002 [2002] OJ L225 13, and (EC) 1937/2004 [2004] OJ L334 3. 17 H Heiss & A Supron-Heidel ‘EU Enlargement — Aspects of (International) Procedural Law’ (2002) 4 European Journal of Law Reform 147–164. 18 See below [4.06] n 37. 19 Regulation on Civil Jurisdiction (n 14 above) R[10]; Civil Jurisdiction and Judgments Act 1982 (‘CJJA’), c 27, sch 1 as amended by Civil Jurisdiction and Judgments Order 2001 SI 2001/3929. The British Government is considering relinquishing its veto in the field of judicial co-operation: Times September 21st 2006. 20 Civil Procedure Rules, SI 1998/3132 as amended on 42 occasions, 6.19. 21 Civil Procedure Rules (n 20 above) 6.20. 22 AJ Riley ‘Reforming the Brussels Convention’ [1998] ECLYB xxxiv–xxxvi; J Basedown ‘The Communitarisation of the Conflict of Laws’ (2000) 37 CML Rev 687–708; J Harris ‘The Brussels Regulation’ (2001) 20 CJQ 215–224 (‘little change’); W Kennett ‘The Brussels I Regulation’ (2001) 50 ICLQ 725–737; P North ‘Private International Law Change or Decay’ (2001) 50 ICLQ 477–508; BJ Rodger ‘The Communitarisation of International Private Law’ (2001) Juridical Review 69–80; P North ‘Rethinking Jurisdiction’ [2002] 55 CLP 395–426; C MacLachlan ‘International Litigation and the Reworking of Conflicts of Laws’ (2004) 120 LQR 580–616; A Stadler ‘From the Brussels Convention to Regulation 44/2001’ [2005] 42 CMLR 1637–1661; H Muir Watt ‘European Integration, Legal Diversity and Conflicts of Laws’ (2005) 9 Edinburgh Law Review 6–31; TM Yeo ‘Civil Jurisdiction and Brussels’ (2001) 117 LQR 560–585 23 See below [4.06]. 24 G White ‘Civil Jurisdiction and Judgments Act 1982’ Part I [1983] Conveyancer 180–193, Part II [1983] Conveyancer 306–314, 182.
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placed to determine it.25 Land disputes are generally directed exclusively to a single state — the country where the land is sited — thus eliminating multiplicity of litigation. [4.05] A crucial element is the conformity of jurisprudence secured by the machinery for referring dubious points to the European Court of Justice.26 Any matter of uncertainty27 in the existing jurisprudence should be referred by the national court of last resort for a preliminary ruling on the interpretation of the conflict rules. Rulings are binding on the UK courts28 and those of other EU countries,29 statute law can be kept up to speed by subordinate legislation,30 and there is continuity in the jurisprudence between the Brussels Convention and the Brussels Regulation.31
2
Forum: other European cases
[4.06] Cases may still need to be treated under the earlier Conventions which the Regulation replaces and to which it displays a ‘great similarity’.32 Two cases fall within the Brussels Convention33 first adopted in 1968, but later amended on several occasions as new EU members acceded most notably at San Sebastian34 when Spain acceded. Brussels was implemented into UK law by the Civil Jurisdiction and Judgments Act 1982.35 Denmark did not sign up to the new Regulation, so the amended Brussels Convention continues to apply in a dispute between a Dane and a Brit until July 2007,36 though protracted negotiations have now
25 Case 38/81 Effer v Kantner [1982] ECR 825 ECJ, J[6]; C-68/93 Shevill v Presse Alliance [1995] I ECR 415 ECJ. 26 The Regulation is a piece of Community legislation but previously references took place under a Protocol on Interpretation. Uncertain points of forum must be referred, whereas referrals in relation to law are more discretionary. 27 Jarrett v Barclays Bank [1999] QB 1 CA, 17F–G Morritt LJ; see also: R(JR) Else (1982) v International Stock Exchange of UK and Republic of Ireland [1993] QB 534 CA, 545D–F Bingham MR; Pearce v Ove Arup [2000] Ch 403 CA, 445C-F Roch LJ; Canada Trust Co v Stolzenberg (No 2) [2002] 1 AC 1 HL, 15H Lord Hoffmann. 28 CJJA 1982 (n 19 above) ss 2–3. 29 C-38/98 Usines Renault v Maxicar [2000] I ECR 2973 ECJ (forged Renault parts). 30 CJJA 1982 (n 19 above) s 14. 31 Regulation on Civil Jurisdiction (n 14 above) R[19]; the earlier position is discussed immediately below. 32 Regulation on Civil Jurisdiction Explanatory Memorandum COM (1999) 348 final [4.5]; Borras Report [1998] OJ C221 27. 33 Brussels Convention [1978] OJ L304 36; this is often referred to as ‘Brussels I’ to distinguish it from the Brussels II rules on matrimonial conflicts: see below [11.02]. Subsequent versions are [1978] OJ L304 1, [1982] OJ L388 1, [1997] OJ C15 1, and [1998] OJ C27 1 (final version). 34 San Sebastian Convention [1989] OJ L285 1; this amended §16 relating to land; Cruz, Real & Jenard Report [1990] OJ C189 35; CJJA 1982 (Amendment) Order 1990, SI 1990/2591; see below [4.41]. 35 CJJA 1982 (n 19 above) sch 1 (as amended); White ‘CJJA 1982 I & II’ (n 24 above). 36 Regulation on Civil Jurisdiction (n 14 above) R[9], R[22–23], §§1[3], 68.
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brought home the bacon.37 Brussels may also continue to apply to some EU disputes raising Proustian facts about time passed: the new Regulation is restricted in its application to legal process, subsequent instruments and documents, and subsequent registrations, so Brussels may apply to facts before the Regulation entered into force in a particular state.38 [4.07] A third variant, the Lugano Convention, is accepted by EEA states — or more properly EFTA state since Switzerland is on board — so it applies to an EU-EFTA conflict or an EFTA-non-EU conflict.39 Just to complicate matters, Belgium and Germany40 never acceded to Lugano and continue to rely on reciprocity in bilateral conventions with EEA states. Lugano rules were loosely modelled on the Brussels Convention but they were never updated to match the changes made when the EU created its Regulation. Again, summer 2007 is seeing a long overdue change.41 Current member states are Switzerland, Norway and Iceland — so Lugano applies in disputes between a Swiss and a Brit42 — but Lugano may also be in play when a case involves an accession state and the facts arise before the state joined the EU, for example before the eastwards expansion in 2004.43 Where one of the states involved is outside the EU, there is no power of referral to the European Court of Justice; so interpretation of Lugano is left to the national courts to guess as best they can, making use of the EU jurisprudence.44
3
Forum: land within the United Kingdom
[4.08] Cases need to be allocated between parts of the United Kingdom since 37 Council EU Decision (EC-Denmark) 2005/790/EC [2005] OJ L299 61; COM (2005) 145-2, 2005/0055/CNS. This agreement entered into force on July 1st 2007, [2007] OJ L94 70. Brussels applied until that date: Frederiksvaerk Kommune v Sorensen B-4022-05, [2006] UfR 27940, [2006] 12 ECL [113] (Dane-Swede). One fly in the ointment is that any future amendments to the Regulation on Civil Jurisdiction (n 14 above) by the rest of the EU will have to be agreed by Denmark on a piecemeal basis. 38 Regulation on Civil Jurisdiction (n 14 above) §66[1]; ex Brussels Convention (n 33 above) §54[1]; Land Oberosterreich v EZ (n 15 above) J[21] (pre-accession case involving Austria). 39 Lugano Convention [1988] OJ L319 9; Jenard–Möller Report [1990] OJ C189 57; Speed Investments v Formula One Holdings (No 2) [2004] EWCA Civ 152, [2005] 1 WLR 1936. It will not apply in an EU-EU conflict: Lugano Convention §54B; nor is Liechtenstein a party. 40 As to Germany see [2002] BGBL (D) I 564, [2002] ECLYB [552]. 41 The text of a revised Lugano Convention (‘New Lugano’) has been agreed and will be signed at Lugano over the summer of 2007 to come into force in 2009. The substantive provisions follow the wording and the numbering of the Regulation on Civil Jurisdiction (n 14 above); see Lugano Convention Agreed Final Text March 28th 2007 (Brussels); Opinion 1/03 Competence of the EC to Conclude a New Lugano Convention [2006] I ECR 1145 ECJ; Council Decision July 6th 2007 COM (2007) 387; the text of the New Lugano appears as an Annex. 42 Lugano (n 39 above) was implemented in the UK by CJJA 1991, c 12, inserting CJJA 1982 (n 19 above) sch 3C. 43 Or earlier facts affecting Austria, Finland or Sweden. 44 Lugano Convention (n 39 above) Protocol 2 §1; CJJA 1982 (n 19 above) s 3B inserted in 1991 (n 42 above); Stolzenberg (2) (n 27 above) 15F–G Lord Hoffmann; Agnew v Länsforsäkringsbolangens [2001] 1 AC 223 HL, 234 Lord Woolf MR, 251 Lord Cooke; J Newton Uniform Interpretation of the Brussels and Lugano Conventions (Oxford, Hart, 2002, 1-84113-323-X).
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the Regulation on Civil Jurisdiction fails once it has allocated a case to a member state of the EU,45 assuming we are all Brits together. This is to pay no heed to the mixed emotions a Glaswegian encounters when watching England fall to a penalty shoot-out at the quarter final stage of a World Cup or, more hypothetically, a Londoner experiences watching Scotland falling just short of qualification for the final stages. Football may be right in recognising four home countries, but the law sees three distinct land laws, England and Wales (as one entity), Scotland, and Northern Ireland.46 A conflict arises when a Scotsman sells to an Ulsterwoman a house in Cornwall. Allocation occurs under a domestic statute which implements a distinctive form of the European scheme, at first following the Brussels Convention and then updated to reflect changes made by the EU Regulation.47 At least for true land disputes the rule is simple enough, cases being allocated exclusively to that part of the United Kingdom in which the land is sited, so Scottish courts cannot rule on the ownership of land in Sussex and the High Court in London cannot adjudicate on title to a house in Belfast.48 Internal cases lie outside the competence of the European Court of Justice, leaving domestic courts to guess, badly,49 about how to apply European jurisprudence. European rules miss the Isle of Man, the Channel Islands, Gibraltar and the Cyprus Base Areas,50 which are even outside the Lugano club which does not, for example, operate in Jersey.51 Particular sensitivities surround Gibraltar because the Spanish courts do not accept British territorial claims and judgments given there are not enforced on Spanish soil,52 and an attempt at unilateral extension by our Government in 1998 was opposed by Spain which argues for a multilateral basis for territorial extensions.
4
Contract law (Rome I)
[4.09] Contract laws vary across Europe. Relatively few cases have an international element,53 but those with elements linked to several countries need clear rules for selecting one legal system, uniform rules lubricating the workings of the
45 More recent conflicts regimes (eg, Brussels II for family disputes: see below [11.02]) do cover internal allocation, and all to the good. 46 EU conflicts principles are in play as between Northern Ireland and the Republic of Ireland. Similar issues in other states are determined by internal rules for private sub-international law. 47 CJJA 1982, c 27, sch 4 as amended by CJJA 1982 (Amendment) Order 2000, SI 2000/1824; CJJA 1982 s 20 and sch 8 apply in Scotland. 48 CJJA 1982 sch 4 (n 47 above) para 11(a). 49 C-346/93 Kleinwort Benson v Glasgow CC [1995] I ECR 615 ECJ; [1999] 1 AC 153 HL. 50 CJJA 1982 (n 19 above) s 52; Regulation on Civil Jurisdiction (n 14 above) §68. 51 Formula One Holdings (No 2) (n 41 above). 52 U v XX [2001] J Aran 3968, [2002] ECLYB [398] Spanish Tribunal Supremo; ‘Brussels I in Gibraltar’ [2001] RCL 179, [2001] ECLYB 552; Bols Distilleries v Superior Yacht Services [2005] UKPC 45, [2007] 1 WLR 12. 53 Rome I Green Paper, COM (2002) 654 final, [1.6]; Giuliano Lagarde Report [1980] OJ C282 1, Introduction [1].
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common market.54 The Rome Convention55 (commonly known as ‘Rome I’) aims to establish certain and uniform rules for the choice and selection of law applicable to contractual obligations.56 However, as the previous chapter has demonstrated,57 the Rome Convention is silent on the selection of pure land law so it falls within the scope of this book only when a contract relating to land is under consideration. Rome I offers freedom of choice apart from the case of consumer contracts, but where no choice is made a law is selected58 for the parties by identifying a close connection to the contract,59 perhaps helping to reduce the attractions of forum shopping.60 It has attracted a considerable basic literature.61 It should complement the regime for Civil Jurisdiction with rules which settle the law which is to be applied.62 The United Kingdom signed up soon enough, but there was an extended pause before it was brought into force and incorporated into domestic law by the Contracts (Applicable Law) Act 1990,63 an Act which also resolves internal conflicts between the constituent parts of the United Kingdom64 and the geographical reach can be extended by Order in Council to the Isle of Man, the Channel Islands, Gibraltar, and the Sovereign Base Areas of Cyprus.65 Domestic law can be kept up to speed with European developments by statutory instruments.66 As compared to the ludicrous European forum rules the selection of law rule-book sits relatively comfortably with the common law, but the change is nevertheless considerable.67 English law generally chose the system with the closest and most real connection, what reasonable parties would have adopted had they thought of it,68 but pre-Rome rules were not uniform across Europe,69 and the process of unification of conflicts rules can be traced in 54 It is nevertheless currently a poor tool of legal integration: O Lando ‘Optional or Mandatory Europeanisation of Contract Law’ (2000) 8 ERPL 59–69, 62. 55 Rome Convention on the Law Applicable to Contractual Obligations [1980] OJ L266 1 (original), [2005] OJ C334 1 (consolidated); Giuliano Lagarde Report (n 53 above). 56 Giuliano Lagarde Report (n 53 above) Introduction [1], and §1, [1]; Dicey & Morris (n 3 above) II [32–009]. 57 See above [3.12]. 58 See above [4.02] n 6. 59 Rome I Green Paper (n 53 above) [1.5]. 60 Rome I Green Paper (n 53 above) [1.3], [3.1.2]; C-381/98 Ingmar GB v Eaton Leonard Technologies [2000] I ECR 9305 ECJ. 61 Dicey & Morris (n 3 above) II [32]; R Plender & M Wilderspin European Contracts Convention (London, Sweet & Maxwell, 2nd edn, 2001, 042173860X); J Hill ‘Rome Convention: the Approach of the UK courts’ (2004) 53 ICLQ 325–350. 62 Rome II Proposal (Law for Tort) COM/2003/0427 final, [1.1.4]. 63 Contracts (Applicable Law) Act 1990, c 36, s 2(1); but only as from April 1st 1994 by s 4, SI 1991/707; on the delay see Rome II Proposal (n 62 above) [1.1]. Rome Convention (n 55 above) §§7, 10[1](e) are not implemented in the UK: s 12(2)–(3). 64 Rome Convention §19; Contracts (Applicable Law) Act 1990 (n 63 above) s 2(3); Rome I Proposal 2005/0261 (COD) §21. 65 Contracts (Applicable Law) Act 1990 (n 63 above) s 8(2); Rome Convention (n 55 above) §2. 66 The 1990 Act has been amended by SIs 1994/1900, 2000/1825. 67 Caledonia Subsea v Micoperi [2002] SLT 1022 Ct of Session IH, [18] Lord Cullen LP. 68 Mount Albert BC v Australian Temperance and General Mutual life Assurance Society [1938] AC 224 PC, 240 Lord Wright; The Assunzione [1974] P 150 CA, 175, 179 Singleton LJ. 69 Giuliano Lagarde Report (n 53 above) §4, [1].
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the Giuliano Lagarde Report.70 Consistency is greatly improved by a protocol, recently in force, allowing access to the judicial structure of the EU to secure uniform interpretation,71 though referral is more discretionary than in the case of the forum rules. [4.10] Rome I remains subject to a rolling five-year renewal,72 but proposals are being considered to bring rules for the selection of law more formally within the EU conflicts club by a Regulation to match the rules on selection of forum,73 with some improvements and updating, but United Kingdom participation is uncertain.74
PR O VI SI O N A L MEA SUR ES
Provisional Measures [4.11] A court in a European club state may grant provisional measures to preserve assets and make their value available to satisfy a judgment in litigation that is to follow — in English jargon, a freezing order is made to preserve assets pending litigation elsewhere.75 When a claimant wants an injunction to freeze dealings with land pending the outcome of litigation he should obviously head to the court of the site, since no one else has the ability to enforce a prohibition on dealings. Normal forum rules do not impinge on such powers in the least. Nevertheless, when an interim remedy is sought in the United Kingdom, service always requires the prior permission of the court.76 A legitimate reason to seek an interim order would be to regulate the legal relationship between co-heirs of land held in undivided shares,77 but it would be illegitimate to conduct a fishing expedition across Europe in an attempt to garner evidence by witness hearings overseas.78
Giuliano Lagarde Report (n 53 above) Introduction [2] and §4, [1]. (Brussels) Protocol on the Interpretation of the Rome Convention by the ECJ [1998] OJ C27 52, as from August 1st 2004; Contracts (Applicable Law) Act 1990 (n 63 above) s 3(1)–(2), implemented by SI 2004/3448; Raiffeisen Zentralbank Osterreich v Five Star General Trading [2001] EWCA Civ 68, [2001] QB 825, 833 Mance LJ; Dicey & Morris (n 3 above) II [32-011ff]. 72 Rome Convention (n 55 above) §30; Giuliano Lagarde Report (n 53 above) [2.2]. 73 Rome I Green Paper (n 53 above)[3]; AML Rodríguez ‘The Rome Convention and its Revision’ (2004) 12 ERPL 167–191. 74 Denmark, the UK and Ireland have opted out of the discussion of this development. 75 Regulation on Civil Jurisdiction (n 14 above) §31; ex Brussels Convention (n 33 above) §24; Lugano Convention (n 39 above) §24; CJJA 1982 (n 19 above) ss 24–25 (interim relief), ss 27–28 (Scots protective measures); CJJA 1982 sch 4 (n 47 above) para 16; C-391/95 Van Uden v Deco Line [1998] I ECR 7091 ECJ; C-99/96 HH Mietz v Intership Yachting Sneek [1999] I ECR 2277 ECJ. 76 Civil Procedure Rules (n 20 above) 6.20.4; Dicey & Morris (n 3 above) I [8]. 77 Central Bank of Iraq v OS [2000] Pas Lux 2, [2003] ECLYB [1920] Luxembourg CA. 78 C-104/03 St Paul Dairy Industries v Unibel Exser [2005] I ECR 3481 ECJ. 70 71
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163 EXCLUSI VE F O RUM O VER LA N D
Exclusive Forum over Land 1
Land conflicts
[4.12] More and more Europeans are buying and renting land outside their home state, breeding disputes which are sharpened even further by clashes of culture. Disputes about ownership or the enforcement of a lease must be brought in the courts where land is sited and using the local law. The site-based forum is exclusive. However, exclusivity is restricted to in rem actions and many other actions affecting land are not site-based, notably an action to enforce a contract to sell a house. If the house is in France it would be desirable for any contractual dispute to be referred to the French courts to use French property law, but the most that can be said is that this desirable rule is not a compulsory part of the European rule book, and nor will that be the only quirk to appear.79 [4.13] The site rule is treated in this book as fully observed if both forum and law are the same as the location of the land, and necessarily so. A conflicts rule will be non-site if a dispute is fought out in a forum foreign to the land, or if the law applicable to the personal action is foreign to the site of the land, or if the contingent facts may be arranged so it is possible for non-site facts to occur; non-site assumptions are made. It will almost always be a disaster if the forum is divorced from the applicable law because courts end up applying foreign law which they do not understand. This chapter will explore some cases in which forum or law is properly separated from the site, many egregious cases in which the separation occurs wrongly, and a few deformed and unnatural monsters in which forum, law and land are all three dispersed. European rules tend to encourage this diaspora.
2
European club rules
[4.14] Conflicts rules for land are simple. The category is immovable property (land) rather than the common law category of real property, and the connecting factor is the location of that land: the courts of the site determine cases according to their local law. A positive jurisdictional rule allocates power to hear cases to the courts of the country in which the land is situated while its negative counterpart bars foreign courts from impinging on national territory and sovereignty by entertaining an action affecting the land.80 As such it is an exclusive jurisdiction and one in which the local courts will apply local law. If the site of the land is See below [10.17ff]. Dicey & Morris (n 3 above) II [23]; C-267/95 Merck v Pridedean [1996] I ECR 6285 ECJ, AG[89] Fennelly; Cheshire & North Public International Law (London, Butterworths, 13th edn by P North & JJ Fawcett, 1999, 978-0-406-90596-3) 229–234; JM Carruthers Transfer of Property in the Conflict of Laws (Oxford, OUP, 2005, 978-0-19-927147-4) [2.15]. 79 80
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within the EU-27 (always excepting Denmark), the Regulation on Civil Jurisdiction provides for the local courts to have exclusive jurisdiction regardless of the parties’ domicile. Exclusive jurisdiction is conferred on: the courts of the Member State in which the property is situated
and it applies: in proceedings which have as their object rights in rem in immovable property or tenancies of immovable property.81
Exclusivity applies to real actions, but not to personal actions, an uncomfortable distinction considered later.82 [4.15] All European Conventions apply an exclusive site rule to land, but the details vary in relation to short tenancies83 so it may be necessary to determine exactly which regime is to apply, using the following guidelines: EU state: Regulation on Civil Jurisdiction §22 EU state (older facts) or Denmark (before July 2007): Brussels Convention §16 Parts of the UK:
Modified form of EU Regulation §22 with a special rule for secured debt 84
Parts of other EU states: EEA/EFTA state:
Local law following EU rules Lugano Convention §16 (until New Lugano in 2009).
The basic rule for land is the same throughout all variants, that the local courts for the territory in which the land is situated form an exclusive forum. If a German lets a flat in Paris to a Swede for several years the rules allocate the case to the French courts. This is the French rule85 and also that of all other domestic systems and historical precepts, applied within the European conflicts club in an extreme version which negates all other factors.86 At least it is simple, certain and uniform and ensures comity between states.87
81 Regulation on Civil Jurisdiction (n 14 above) §22[1](a); ex Brussels Convention (n 33 above) §16[1](a); Lugano Convention (n 39 above) §16; CJJA 1982 sch 4 (n 47 above) para 11(a); Jenard-Möller Report (n 39 above). This provision derives from a Treaty to Settle Questions relating to the Saar (Luxembourg, October 27th 1956, UNTS 1053 3) Annex 12 §49; Regulation on Civil Jurisdiction (n 14 above) §34. 82 See below [4.22ff]. 83 See below [4.37ff]. 84 CJJA 1982 sch 4 (n 47 above) paras 11(a), 3(h)(i) (secured debt). Service is allowed without permission provided no other proceedings are pending: Civil Procedure Rules (n 20 above) 19.1.1, 19.1.1A. 85 French CC §§2, 7ff. 86 Schlosser Report [1979] OJ C59 71, [166]. 87 Schlosser Report (n 86 above) [22]; Kuwait Oil Tanker Co v Qabazard [2003] UKHL 31, [2004] 1 AC 300, [6] Lord Bingham.
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[4.16] A precise delineation of the scope of the exclusive area requires an assessment of the underlying reason for recognising exclusivity, which was summarised by Morritt LJ thus88: the courts of the situs should have exclusive jurisdiction in those cases in which the complexities of local law or the needs in the interests of the proper administration of justice for local knowledge or assessments so require.
Tenancies are especially difficult given the complexity of national tenancies legislation which local courts are best placed to apply,89 though this needs to be balanced against the unfairness of forcing a tenant in a comparatively weak social position to travel abroad.90 Nevertheless the match between regulation and reasoning is not a marriage of true love, one imperfection being that a contract for the sale of land has a non-exclusive forum despite the value of local know-how91 and the more general rule for all personal actions and breach of trust actions.92 Thus in Lieber v Göbel93 a transfer of an apartment in Cannes between two German nationals was annulled94 and it became necessary to assess the value of the use made before the annulment for the purposes of awarding restitution, but this compensation fell to be quantified by the German courts even though the basic reference point was the market rent; surely the local court was better placed to determine this but the European Court of Justice said that the German court could rely on valuation evidence from a local expert.95 Were the desirability of local knowledge to be truly decisive, the exclusive jurisdiction would need to be widened.96
3
Priority of an exclusive forum
[4.17] Exclusivity of the land forum is maintained by a negative rule which precludes a court other than that containing the site of the land from considering a case. This is true within the European conflicts club, and the common law,97 though this may be a change from some earlier domestic sets of private 88 Jarrett (n 27 above) 13A Morritt LJ; Jenard Report (n 2 above) 35; C-73/04 Klein v Rhodos Management [2005] I ECR 8667 ECJ, J[16]; Case 220/84 Autoteile Service v Malhé [1985] ECR 2267 ECJ, 2271 AG Lenz; C-8/98 Dansommer v Götz [2000] I ECR 393 ECJ, J[28]; J Westlake A Treatise on Private International Law (London, Sweet & Maxwell, 7th edn by N Bentwich, 1925) 215 (only the authorities on the spot can employ force to give possession or take it away). 89 C-241/83 Rösler v Rottwinkel [1985] ECR 99 ECJ, J[10]. 90 Rösler v Röttwinkel (n 89 above) J[12]; Jarrett (n 27 above) 12–13 Morritt LJ; see below [4.33]. 91 See below [10.22], [10.53]. 92 See below [4.48], [4.54]. 93 C-292/93 Lieber v Göbel [1994] I ECR 2535 ECJ. 94 Actions to establish that a transfer is void or voidable are non-exclusive: see below [10.50ff]. 95 Argument of counsel in Batthyany v Walford (1887) 36 Ch D 269 CA, 277 Cotton LJ. 96 Lee thought that the Brussels Convention (n 33 above) §16 was drawn too tightly in favour of the site: S Lee ‘Title to Foreign Real Property in Transnational Money Claims’ (1995) 32 Columbia Journal of Transnational Law 607–672, 635–636. 97 See below [4.28].
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international law.98 The consequence is to override the normal European jurisdiction over personal actions based on domicile,99 even if a domiciled defendant submits to the jurisdiction by entering a defence, and courts elsewhere must decline jurisdiction of their own motion where the principal issue is something within the exclusive purview of another European club state.100 [4.18] It appears that it is possible to torpedo litigation relating to land. Where an action is personal, the first of two courts seised of the action must be left to decide jurisdictional issues before any steps can be taken in the second action.101 A torpedo is an action commenced in a state such as Italy or Belgium, selected on account of the dilatory civil procedure, which blocks the possibility of the drama being played out on the proper stage in the state holding the site of the land until the torpedo state has ruled itself to be the wrong stage. The torpedo will commonly be for a declaration that no breach giving rise to damages has occurred. It appeared that this underhand tactic could also be used where the action related to land from a decision in relation to the exclusive forum held by the country in which a company is registered over the company’s affairs,102 the particular case concerning a battle for the control of Formula One racing.103 The English Court of Appeal ruled that a second court is not obliged to stay its proceedings if the first court is infringing the second’s exclusive domain, according to Carnwath LJ104 and powerful academic opinions.105 The European Court of Justice has made it clear in Gasser106 that the second exclusive forum must wait to assert control until the first improper forum has relinquished the case. How much better it would be if the frustrated litigant in the correct exclusive forum could obtain an anti-suit injunction as the English courts would have allowed in pre-European days. The ridiculous European rule can only be accepted if there is a means of diverting a torpedo; there ought to be a stiff penalty in costs for litigating in the wrong court and an expedited procedure in White ‘CJJA 1982 I’ (n 24 above) 190. See below [10.53ff]. 100 Regulation on Civil Jurisdiction (n 14 above) §25; ex Brussels Convention (n 33 above) §18; Lugano Convention (n 39 above) §23; CJJA 1982 sch 4 (n 47 above) para 14. Previous English law depended upon a challenge to jurisdiction by the parties. 101 See below [10.57ff]. 102 Exclusive to the state of the company’s registration: Regulation on Civil Jurisdiction (n 14 above) §25; ex Brussels Convention (n 33 above) §18; Lugano Convention (n 39 above) §16[2]; CJJA 1982 sch 4 (n 47 above) para 11(b); this includes questions of capacity to own land: Bayerisches Oberlandesgericht 2Z BR 7/02, [2003] ECLYB [1930]. 103 Formula One Holdings (No 2) (n 41 above). 104 Formula One Holdings (No 2) (n 41 above) [38] Carnwath LJ. 105 P Kaye Civil Jurisdiction and Judgments in Europe (Abingdon, Professional, 1987 879-2-06874-7) 1222; Dicey & Morris (13th edn, 2000) I [12-043] fn 77; A Briggs and P Rees Civil Jurisdiction and Judgments (London, Lloyd’s, 4th edn, 2000, 978-1-843-11425-3), [3.08]; but compare now Dicey & Morris (14th edn, 2006) (n 3 above) I [12.049]. 106 C-116/02 Erich Gasser v MISAT [2003] I ECR 14693 ECJ, J[29–54]; J Mance ‘Exclusive Jurisdiction Agreements and European Ideals’ (2004) 120 LQR 357–365. The point had been left open by C-351/89 Overseas Union Insurance v New Hampshire Insurance [1991] I ECR 3317 ECJ, J[20]. 98 99
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167
every European court to resolve forum issues within, say, a two-week period. Without those safeguards, the United Kingdom should withdraw from the civil jurisdiction club. In Primacom107 actions against lenders with no interest loans were taken in Germany because such loans were contrary to German public policy. A competition arose between this action and English actions to declare the loan agreement binding. An exclusive English forum arose under a jurisdiction agreement108 which also chose English law, so there was a contest between a German court first seised and an English court which was later in the field but exclusive. Where the same cause of action was in issue, as here, the matter had to be left to the first court — a court in Mainz which in fact ceded jurisdiction, but only when that was done could the action proceed.109 [4.19] A case might conceivably fall within the exclusive jurisdiction of several courts, in which case the spoils go to the court first seised and all others must decline jurisdiction.110
4
Actions within the exclusive jurisdiction
[4.20] Exclusive jurisdiction is conferred on the courts of an EU state in which land is situated by the Regulation on Civil Jurisdiction where the particular dispute centres on the ownership of land or, to be more precise, in proceedings which have as their object rights in rem in immovable property or tenancies of immovable property.111
The key concepts here are immovable property, rights in rem, actions having as their object rights in rem, and tenancies of immovable property. All of them were concerns before Europe ever had a conflicts system,112 so securing uniformity across Europe required the development of key concepts with autonomous interpretations113 independent of national systems. A concept like ‘tenancy’ has no universal, Europe-wide, value to fit every national system nor even every civilian system, and the only possibility is autonomous definitions. Holiday lettings will call for special treatment, as will trusts.114 107 JP Morgan Europe v Primacom [2005] EWHC 508 (Comm), [2006] ILP 11 Cooke J; S Schulte-Hillen & MJ Friedl ‘PrimaCom gives Lenders Certainty on Jurisdiction’ (2006) 25 International Financial Law Review 17. 108 Regulation on Civil Jurisdiction (n 14 above) §27[1]; see below [10.35]. 109 Primacom (n 107 above) [36]; on the same cause of action point see [38–49]. 110 Regulation on Civil Jurisdiction (n 14 above) §19; ex Brussels Convention (n 33 above) §23. 111 Regulation on Civil Jurisdiction (n 14 above) §22[1](a); ex Brussels Convention (n 33 above) §16[1](a); Lugano Convention (n 39 above) §16; CJJA 1982 sch 4 (n 47 above) para 11(a). 112 Dicey & Morris (n 3 above) II [23]; Cheshire & North (n 80 above) 229–234. 113 Case 288/82 Duijnstee v Goderbauer [1983] ECR 3663 ECJ (similar issue under Brussels Convention (n 33 above) §16[4] on patents); also C-4/03 Antriebstechnik v Lamellen [2006] FSR 145 ECJ; Dicey & Morris (n 3 above) I [11R-393ff]. 114 See below [4.40ff], [11.34ff].
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Actions Affecting Land
[4.21] Local power over land is imposed in derogation from the home courts of the defendant (the courts of his domicile), the normal rule,115 and for this reason the European Court of Justice ruled in Sanders v Van der Putte116 that the article was to be interpreted restrictively and ‘not… any wider than is necessary to achieve its object’.117 The reasoning has turned out to be catastrophic and wrong but the thinking is easy enough to follow. The conflicts clubs rules are based on EU-domiciled defendants being sued in their home state (§2) and being sued in another EU state only by virtue of stated sections of the EU regime (§§5–24) so the exclusive jurisdiction in §22 is part of an exception to the general home state rule. It was vital that the site/non-site line should be set smoothly and consistently but the European Court of Justice has consistently made the exclusive jurisdiction much too narrow.
5
Actions for a thing in rem
[4.22] Exclusive jurisdiction is tested according to the subject matter of the action, that is ‘proceedings which have as their object rights in rem in immovable property’ etc,118 the question being the target of the action and not the proper characterisation of the action as real or personal.119 English law provides the perfect illustration in the trespass action; this is used to resolve disputes about title to land and to solve claims for damages for injury caused to the land, so the single juristic construct of trespass (a personal action) can fall into the exclusive domain if its object is to obtain an order for recovery of the land or outside it when used to seek damages for injury caused during an unauthorised excursion on to land, the last being personal in both English and European senses.120 The crux is the nature of the subject matter targeted by an action. Rights in rem are ascertained using the test in the Schlosser Report121: A right in personam can only be claimed against a particular person. Thus only the plaintiff is obliged to pay the price and only the lessor of an article is obliged to permit its use. A right in rem on the other hand is available against the whole world. The most
See below [10.53]. Case 73/77 Sanders v Van der Putte [1977] ECR 2383 ECJ, J[11–19]; TC Hartley ‘Jurisdiction over Foreign Immovables’ (1978) 3 EL Rev 164–166. 117 C-280/90 Hacker v Euro-Relais [1992] I ECR 111 ECJ, J[11]; C-294/92 Webb v Webb [1994] I ECR 1717 ECJ, J[17]; Dansommer v Götz (n 88 above); Klein (n 88 above) J[15]; Jarrett (n 27 above) 13A Morritt LJ. 118 Regulation on Civil Jurisdiction (n 14 above) §22[1]; ex Brussels Convention (n 33 above) §§16[1]; Lugano Convention (n 39 above) §16[1]; CJJA 1982 sch 4 (n 47 above) para 11(a); White ‘CJJA 1982 II’ (n 24 above). 119 But contrast the French expression of this test, ‘actions réels immobliers’: Dicey & Morris (n 3 above) II [23–010]. 120 See below [4.51ff]. 121 Schlosser Report (n 86 above) [166]; Lieber v Göbel (n 93 above) J[13]. Contrary to Schlosser at [168] the nature of a right in rem is determined autonomously. 115 116
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important legal consequence flowing from the nature of a right in rem is that its owner is entitled to demand that the thing in which it exists be given up by anyone not enjoying a prior right.
It will be obvious to any common lawyer that equitable rights are left unallocated, but the disastrous consequences of that oversight must wait.122 [4.23] A right in rem is by no means easy as a concept of English law as applied to legal rights, let alone ones that are equitable. It is clear enough for freehold ownership and for legal easements123 — though the right to enforce even these real rights could be lost by estoppel — but what of a mortgage which depends upon retention of the title deeds or a mortgage which needs to be registered as a land charge? What also of the interest of a borrower in mortgaged property (the equity of redemption) which could be overreached by a sale by the lender? Is there a fundamental difference between adverse possession of unregistered land which gives a legal estate and of a registered title which never gave more than a beneficial interest under a trust?124 Some of these rights seem every bit as precarious as a beneficial interest under a trust recognised only in equity. Case law provides some elucidation. In Ferguson v Ferguson,125 the Scottish trustee in sequestration wanted an order that the bankrupt should vest title to his land in Spain in the sequestrator. This brought into issue the right in the thing itself, a jus in re, rather than a right against the debtor in person; since the claim was real the prerogative to make this order lay with the Spanish courts and the Scottish court had to decline.126 Similarly, an action for an injunction to prevent a person occupying property in Spain has to be fought out in Spain, and cannot be conducted in Germany even if one German national sues another German.127 In substance these formulas all assert ownership, but is there any real difference between a claim for a declaration of title and the personal action (at common law) for slander of a title?128 Further, one can see a distinction between an action to assert the existence of a right in land and an action to negate the existence of a right,129 but surely that distinction is trivial since both are within the broad camp of ‘land law’ and should not be fundamental as to jurisdiction. A question of enforcement against a third-party
See below [11.45]. In Frederiksvaerk Kommune v Sorensen (n 37 above) an action by a Danish Council against purchasers of municipal housing for breach of easements was nevertheless treated as non-exclusive. 124 Land Registration Act 1925, c 21, s 75; this is for adverse possession completed before the Land Registration Act 2002, c 9, ss 96–98, sch 5. 125 Ferguson v Ferguson [1990] SLT Sh Ct 73, 75F. 126 This assumes that the matter is one of civil jurisdiction and not, say, an insolvency or matrimonial property: C-115/88 Reichert v Dresdner Bank (No 1) [1990] I ECR 27 ECJ, J[11]; for collective insolvency proceedings see below [9.56ff]. 127 Oberlandesgericht Düsseldorf [2001] RIW 380, [2002] ECLYB [1207]; Ford Soloman [1997] ILP 457 French Cour de Cassation. 128 Casey v Arnott (1876) 2 CPD 24 Denman J; Bree v Narescaux (1881) 7 QBD 434 CA. 129 For the corresponding distinction in contract law see below [10.50ff]. 122 123
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purchaser must be seen as proprietary rather than personal.130 Any question of sufficiency of notice is clearly proprietary and left to the law of the site.131 [4.24] The European Court of Justice has not provided a satisfactory delineation of the exclusive sector, starting by narrowing the exclusive jurisdiction far too much, necessarily therefore differentiating land (only real actions exclusive) from leases (where both real and personal actions are exclusive)132 and in deciding to keep out all actions for breach of trust has constricted the site rule much too tightly.133 This has led to the exclusion of all contractual actions (a complete negation of the site-based rule), doubly unfortunate because of the failure of club rules to make any adequate provision to impose site-based law and a site-based forum for land contracts.134 [4.25] Finally there are a group of personal actions which may in some loose sense be said to concern land but where the basic action is in personal obligation. One example may suffice. In Land Oberosterreich v EZ the government of an Austrian province was concerned, perhaps understandably, by the conduct of the affairs of a nuclear power station 60 km from their border run by a Czech energy supplier. An action for cessation of the nuisance allegedly caused by the power station fell outside the exclusive jurisdiction over land135 since it was not to determine the extent or content of the ownership or possession of land136 and any action to prevent a nuisance137 and perhaps any action for damages,138 were treated as personal actions. The facts were not more appropriately determined locally.139
6
Personal actions associated with real actions
[4.26] Once an action is under way in relation to real rights in land, in the courts appropriate to the situation of the land, it is possible to combine with it personal actions against the same defendant in matters relating to rights in rem in immovable property140; an action for the recovery of land may have tacked on R Griggs Group v Evans [2005] Ch 103 Ch D (movable; decision must be doubted). Exclusive forum applies in whatever form of procedures in which the validity of an intellectual property right is raised, either by action for avoidance or as a defence to infringement proceedings: Antriebstechnik v Lamellen (n 113 above) J[24–25]. 132 See below [4.38]. 133 See below [11.37ff]. 134 See below [10.17ff]. 135 Land Oberosterreich v EZ (n 15 above). 136 Land Oberosterreich v EZ (n 15 above) J[30]; Reichert v Dresdner Bank (n 126 above) J[11]. 137 Land Oberosterreich v EZ (n 15 above) J[31] Jenard Report (n 2 above) 1, 34, 35. 138 Land Oberosterreich v EZ (n 15 above) Schlosser Report (n 86 above) [163]. 139 Land Oberosterreich v EZ (n 15 above) J[38]. 140 Regulation on Civil Jurisdiction (n 14 above) §6[4]; Brussels Convention (n 33 above) §6[4] inserted by San Sebastian Convention (n 34 above) 1989; Jenard-Möller Report (n 39 above) [46–47]; Lugano Convention (n 39 above) §6[4]; CJJA 1982 sch 4 (n 47 above) para 5(d); Dicey & Morris (n 3 above) I [11R-341]. 130 131
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to it other claims which are contractual, though this is merely an addition to the home court forum.
7
Universality: land outside Europe
[4.27] Disputes about the ownership of land outside the boundaries of the EU and EEA will be determined from the site of the land, so a German can only be sued about the ownership of land in Turkey by travelling there, but why, precisely? European conflicts rules for personal actions are generally universal,141 and if this is true of the exclusive land forum, as dicta suggest, it means that land cases can be directed to a state outside the European conflicts club, when the land in issue is sited elsewhere in the world.142 But, against that, the exclusive jurisdiction over land143 is limited specifically to the territory of the EU, so that universality assumes that it is possible to read into the Regulation a derogative provision to match an explicit positive, in the same way as has been done for personal actions. Even if it was ultimately decided that the Regulation did not touch land outside EU borders, this would make little difference, since the private international law of all states reaches the same conclusion, and is in both literal and technical senses universal. Common law rules will certainly direct an action away from Britain to a venue overseas where the land is sited, and public international law rules of every other European state direct the same result.144 From that the foreign law will also be selected.145 Indian courts rule on Indian land using Indian law, and so says England, Scotland, France and everyone else. Even if the general rule is universal, the precise definition of what rights are immovable and of the types of actions affected may vary from state to state and in determining the application to personal actions it may make a difference whether the rule of public international law being applied is European or municipal.
See below [10.56]. Land Oberosterreich v EZ (n 15 above) J[21] (Brussels Convention (n 33 above) applied to land in Czech Republic before Czech accession to the EU); Arkwright Mutual Insurances v Bryanstone Insurance Co [1990] 2 QB 649 Potter J; Pearce v Ove Arup (n 27 above) 423–445 Roch LJ; L Collins ‘Forum Non Conveniens and the Brussels Convention’ (1990) 106 LQR 535–539; A Briggs ‘Spiliada and the Brussels Convention’ [1991] LMCLQ 10–15. 143 Regulation on Civil Jurisdiction (n 14 above) §22[1]; ex Brussels Convention (n 33 above) §16[1]; Lugano Convention (n 39 above) §16[1]; Dicey & Morris (n 3 above) II [23-025ff]. 144 White ‘CJJA 1982 I’ (n 24 above) 190. 145 Rome I which selects contract law is also universal: Rome Convention (n 55 above) §2; Giuliano Lagarde Report (n 53 above) Introduction [3], [9], §2; Caledonia Subsea v Micoperi (n 67 above) [14] Lord Cullen LP. The issue might be revisited when the Convention is converted into EU legislation: Proposal for a Regulation on the Law Applicable to Contractual Obligations ‘Rome I Proposal’ COM (2005) 650 final §2; Rome I Green Paper (n 53 above)[2]. 141 142
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Actions Affecting Land TR ESPA SS USED TO A SSERT TI TLE
Trespass Used to Assert Title 1
Title to land in England
[4.28] Land disputes are not greatly changed by joining the European club, since forum was already allocated to the state in which the land is sited, in both England146 and Scotland,147 and across Europe.148 Common law rules insist that English trespass is used for land here and they also prevent its use for land elsewhere. English land is within the exclusive powers of the English courts, and so as a general rule, and for good reason: actions of ejectment and of the like kind, when the land of which the property, or possession, or status is disputed is English land, should be brought in England.149
Full rein can be given to the power to sue if it is associated with a power to effect service of proceedings overseas,150 since otherwise a Scots or a French tenant might evade all action but this power of overseas service was an innovation when introduced at the time of the judicature reform in 1873.151 Until then an English tenant could put himself beyond the arm of the law by decamping to Boulogne or Avranches.152 When service rules were introduced they were at first too narrow153 but things were soon put right so that the power to effect service overseas matched the jurisdictional powers of English courts over English land,154 and today there is a wide-ranging Anglophone common service area.155
2
Title to foreign land
[4.29] Just as old is the principle that English courts could not be used to pursue land sited elsewhere. English jurisdictional conflicts are as old as the commonality of the common law, since actions had to be brought within the 146 Chatfield v Berchtold (1872) LR 7 Ch App 192; Re Anziani [1930] 1 Ch 407 Maugham J; Re Cutcliffe’s WT [1940] Ch 565 Morton J; Dicey & Morris (n 3 above) II [22]. 147 Hog v Lashley (1791) 3 Paton 247, 270 Ct of Session; Ross v Ross’s Trustee (1809) Faculty College July 4th (1815 edn) 377; Newlands v Chalmers (1832) 11 Shaw & Dunlop 65. 148 Cookney v Anderson (1863) 1 De Gex Jones & Smith 365, 380 Lord Westbury LC, 46 ER 146. 149 Agnew v Usher (1884) 14 QBD 78 QBD, 79 Coleridge CJ. 150 Ex p Rucker (1834) 3 Deacon & Chitty 704; also the Scots cases just mentioned. 151 Supreme Court of Judicature Act 1873, 36 & 37 Vict c 66, ss 23, 67–69, sch para 6. 152 Price v Dewhurst (1839) 8 Simon 617, 618 Shadwell VC, 59 ER 244. Distraint and forfeiture would be useful weapons in such a case. 153 Agnew v Usher (n 149 above) 81 AL Smith J; it may be doubted whether this correctly interpreted the then Rules: Agnew (1885) 51 LT 752 CA. 154 Rules of the Supreme Court Order 11 rule 1(g)–(h), now superseded by Civil Procedure Rules (n 20 above) 6.19ff and Practice Direction 6. 155 Including Scotland, Northern Ireland, the Channel Islands, the Isle of Man, all Commonwealth countries and UK Overseas Territories: Civil Procedure Rules (n 20 above) Practice Direction 6.3.1.
Trespass Used to Assert Title
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correct shire and heard by a jury summoned from the local county set. For many centuries the common law could not at that time touch those exotics who were inhabitants of the County Palatine of Cheshire, because this was treated as a ‘foreign’ country where they did things differently. They had to sue in their own courts. Lee managed to find an impressively early example of a truly international conflict from the time that Edward I was giving the Scots a good hammering, the case being one in which Florentine merchants settled in London were debarred from litigating here for damage caused to their Tuscan land back home because English courts could not take on a foreign case.156 So it is a really old principle that land actions are a perquisite of the local courts and one that has suffused the later development of the common law and of other systems of increasing foreignness such as France, the rest of continental Europe and Scotland. That English law came to rely on a personal action in trespass to carry out the in rem function of securing the possession of land is an undoubted curiosum but trespass was the only way of proving title to land. An explanation can be found in the fact that the real procedures, which might have been expected to carry out this task, had grossly inadequate procedures featuring long delays and trial by battle until the early nineteenth century.157 Formal abolition of these long redundant actions left the field to trespass, a portmanteau embracing two quite distinct actions which need to be disentangled before getting to work on the conflicts issue. One is an action for recovery of land in which the remedy sought is the recovery of the land itself, the species of action formerly known as ejectment, whereas the second is an action by a claimant clearly acknowledged as owner who wants damages for injury caused by a physical incursion on his land. One is the action I would use to eject squatters from my holiday home in Malta and the other would be used against a pilot who has crashed his plane destroying my Maltese bolt-hole. Both these disparate functions were carried by the common law action in trespass, one site-based and nearly real and the other personal in character and at best contingently related to the location of the land.158 It is the action for possession which requires further discussion. [4.30] The Moçambique rule159 prevented trespass to foreign land being litigated in English courts, and its surviving unrepealed remnant160 continues to prevent such an action when the issue involves title or the right to possession of
156
Hugh le Pape v Florence Merchants in London (1280–1281) 8–9 Edward I; Lee (n 96 above) 613 fn
17. 157 RE Megarry & HWR Wade The Law of Real Property (London, Stevens, 6th edn by C Harpum et al, 2000, 978-0-421-47460-4) Appendix. 158 See below [4.51]. 159 British South Africa Co v Companhia de Moçambique [1893] AC 602 HL, affirming Lord Esher MR’s dissent in [1892] 2 QB 358 CA; Dicey & Morris (n 3 above) II [23-034ff]. 160 Private International Law (Miscellaneous Provisions) Act 1995, c 42, ss 9–15, in force May 1st 1996 and prospective only; see also Private International Law: Choice of Law in Tort and Delict (Law Commission 193, 1990); Dicey & Morris (n 3 above) II [23R-021].
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foreign land. Jurisdictional competence is limited accordingly.161 The ‘ejectment’ type of action is site-based. Barred were actions of ejectment, claims to possession of land overseas, and any direct adjudication of priority of claims where, as Parker J put it in Deschamps v Miller162: the whole question is whether or not according to the law of the locus the claim of title set up by one party, whether a legal or equitable claim in the sense of those words as used in English law, would be preferred to the claim of another party.163
A dispute about the effect of a French marriage settlement on the title to a house in Dresden has to be brought in the courts of Saxony,164 and dower claimed over land on the Isle of Man had to be left to the Manx courts.165 It did not follow, as Story wrongly thought, that common law courts could never decide any case involving an issue of title to foreign land166 since issues of title could legitimately arise in actions seeking a personal remedy. [4.31] Normally, no doubt, one would simply head to the foreign court to take action against the interloper, but the peculiar conditions in the northern half of Cyprus have caused this principle to be tested and its vitality reasserted. Turkey invaded the northern ‘half ’167 of Cyprus in 1974, but the regime established there is not recognised internationally by any other state. One effect of the invasion was the displacement of many Greek Cypriots, and the appropriation of their property, often later ‘sold’ to foreigners. The illegality of these acts in international law is clear, but the incursions are not actionable in the north, and the issue, therefore, is whether it is possible to litigate in the home state of a tourist or buyer of a second home. The English courts have used the site rule to support their refusal to intervene. In Hesperides Hotels v Aegean Turkish Holidays168 Greek Cypriot owners of two hotels in Kyrenia had lost the use of their hotels following the Turkish invasion of the north of the island in 1974 and sought to bring to account an English travel agency which booked holiday-makers on package tours into the hotels. The House of Lords were unanimous in the view that it was not permissible for an English court to hear this action for trespass to land169 since the aim was to 161 162
CJJA 1982 (n 19 above) s 30; White ‘CJJA 1982 I’ (n 24 above) 189–190; Lee (n 96 above) 650. Deschamps v Miller [1908] 1 Ch 856, 864 Parker J; this is not the same as the modern European
test. 163 An English court did adjudicate on the validity of a foreign intellectual property right against a third-party purchaser in R Griggs Group v Evans (n 130 above); this case is dubious. 164 Re Hawthorne (1883) 23 Ch D 743 Kay J; Re Hernando (1884) 27 Ch D 284 Pearson J (English woman marrying Spanish man; land in England). 165 Countess Derby’s case (c1502) Keilwey 202, 72 ER 381; cited in Mostyn v Fortingas (n 12 above) 165. 166 See also below [4.52]. 167 Strictly 37% of the land area. 168 Hesperides Hotels v Aegean Turkish Holidays [1979] AC 508 HL; A Briggs Conflict of Laws (Oxford, Clarendon, 2002, 0-19-876333-6) 206. 169 Hesperides (n 168 above) 534 Lord Wilberforce, 540–541 Viscount Dilhorne, 546 Lord Fraser (who explains the non-application to trespass). Lord Wilberforce noted (at 536F–H) the use of the same rule in other jurisdictions.
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recover possession or to secure a declaration of title, though this was no bar to hearing a claim for trespass to the chattel contents of the hotels. Polly Peck International was an English company with close connection to northern Cyprus. After its collapse an action was brought in Polly Peck (No 2)170 to recover various properties in the north including the Constantia Hotel in Famagusta which had been acquired by the company. The former owners were unable to assert their real title in the English courts directly but they tried instead to secure a preference over the generality of unsecured creditors by seeking the imposition of a remedial constructive trust over the property which would effectively claw the assets back from the insolvency pot. Their claim to a constructive trust was unknown to English law and an attempt to reframe their case in the tort of conspiracy was an inappropriate manipulation of the cause of action, both Rattee J and Mummery LJ holding to the Moçambique rule as restated in Hesperides. A claim to assert the older true title to land against an illegal newer title issued by an unrecognised government could not be reformulated in the tort of conspiracy merely to overcome the procedural bar to the action. Greek Cypriots have found a way out of their impasse by asserting their human right to their property.171
3
Recognition of foreign judgments affecting foreign land
[4.32] Judgments affecting land directly should be made in the courts local to the land; the site of the land points to the correct forum, selects the law to be applied to a land dispute, and determines the enforcement procedures available. Every state asserts territoriality over its own land. There will generally, therefore, be little call for cross-border element in an action for the recovery of land. Unusual facts such as those in Apostolidis v Oram172 suggest one possible reason for seeking enforcement in another territory. It is another case derived from the illegal and internationally unrecognised Turkish-backed occupation of the northern part of Cyprus. The Orams are two of the 6K Britons who have acquired holiday homes in the northern part of Cyprus. The Orams’ plot cost £50K and they spent £160K on building a holiday villa on it,173 not realising that it had been appropriated from one of the Greek Cypriots displaced174 and forced to take refuge in the south by the Turkish invasion. The owner of this particular building plot was a Greek architect, Meletis Apostolidis, who obtained a judgment in (southern) Cyprus to demolish the Orams’ home in northern Cyprus and for damages. This judgment Re Polly Peck International (No 2) [1998] 3 All ER 812 CA. HR 15318/89 Loizidou v Turkey (1997) 23 EHRR 513 E Ct HR; and innumerable subsequent cases. 172 Orams v Apostolides [2006] EWHC 2226, [2007] 1 WLR 241 Jack J. 173 Orams v Apostolides (n 172 above) [3] Jack J. 174 Figures vary but around 160K Greeks and 50K Turks were displaced: Independent July 19th 2006; Independent August 16th 2006. 170 171
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Actions Affecting Land
could not be enforced against the land in an area controlled by the Turkish government in the north, but when (southern) Cyprus became an EU member the claimant sought to register his judgment in the United Kingdom and enforce it against the assets of the Orams in England. Cherie Booth QC demonstrated her independence as a woman and as a member of the Bar by arguing the case for the Orams, no doubt to the discomfiture of our Government. In normal circumstances there would be no doubting the duty of mutual recognition of judgments given anywhere within the EU-27. However, the Orams were saved — for the time being — by the terms of the accession to the EU of Cyprus (that is, the southern half of the island) since a protocol175 provides for the application of the acquis (that is, of European law) to be suspended where the government of the Republic of Cyprus does not exercise effective control. The northern part of the island is therefore a haven of cheap land and an undeveloped charm reminiscent of the days of Lawrence Durrell176 free from the dictats of Brussels. Mutual recognition does not apply where the judgment relates to the northern occupied part of Cyprus.177 [4.33] Cyprus is an island on which everyone has a grievance about land. UN Secretary-General Kofi Annan developed a plan between 2002 and 2004 based on an earlier European framework to provide for the establishment of a United Cyprus Republic within the EU with Greek and Turkish constituent Cantons on the Swiss model with an alternating Presidency,178 a crucial element of the settlement being cash to solve the property disputes. Northern Cyprus accepted the terms but they were rejected by the Greek half of the island which subsequently secured membership of the EU in 2004. An initiative by the Turkish-dominated Republic of Northern Cyprus aims to provide monetary compensation for displaced owners or an equivalent property in the south or immediate restitution of land not currently used by someone else. Among the first cases to settle was one claim for compensation amounting to £550K. There is said to be a ‘state guarantee’ of title to British buyers but the only titles which are safe pre-date the 1974 invasion.179 [4.34] Outside the context of Cyprus, it would be positively wrong for foreign recognition to be given to a judgment affecting land in state A given by the courts of state B. After transfer of such a judgment to state C for enforcement, recognition would have to be refused. English courts cannot allow German courts to rule on French land. Assumption of jurisdiction in breach of the exclusive right to try land disputes given to the courts of the site is a ground to refuse recognition to a
Accession Act of Malta, Cyprus and 8 Eastern European States Protocol 10, [2003] OJ L236 955. Independent August 16th 2006. 177 Orams v Apostolides (n 172 above) J[30] Jack J. 178 K Annan Comprehensive Settlement of the Cyprus Problem (UN, November 21st 2002); N Tocc ‘EU Intervention in Ethnopolitical Conflicts: Cyprus’ (2004) 9 European Foreign Affairs Review 551–573. 179 Observer Property July 9th 2006, 20. 175 176
Public Registers
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foreign judgment under European rules180 and the same bar is imposed by English law when considering a non-European judgment, and presumably by all other legal systems.181
PUB LI C R EG I STER S
Public Registers [4.35] Local courts also have exclusive powers over proceedings which have as their object the validity of entries in public registers,182 domicile again being displaced. Most of the litigation has concerned registers maintained by companies of their members.183 The action may be to enforce a registration or to rectify a register but either way it must be brought in the courts of the country in which the register is kept. Re Hayward184 provides a good illustration. Indivisible halves in a Minorcan villa were registered in the names of Hayward (who had died) and Hulse. An action was brought by the administrator of Hayward’s insolvent estate for a declaration of his entitlement to the bankrupt’s half-share,185 an entitlement cast into doubt by a purported transfer of that share to his co-owner. This action was held to fall within the exclusive jurisdiction of the Spanish courts, because a major issue was the validity of entries in the Spanish land register.186 Similarly in Ferguson v Ferguson,187 a Scottish trustee in sequestration of a bankrupt’s estate sought an interdict (an injunction) to prevent the bankrupt from selling land in Spain and to vest it in the trustee, a case which turned on the correct registration in Spain and which therefore fell exclusively to the Spanish courts. [4.36] It would not, despite first appearances, be correct to deduce that all actions over land are directed to the local court on account of the need for a local register entry, since a restrictive policy is pursued by the European Court of Justice.188 A personal action to enforce a contract to sell land does not fall exclusively to the courts of the country in which the land is situated,189 even though a decision to validate a sale contract would make it necessary to amend the land register to reflect the change in ownership and, similarly, an English resulting See below [9.79]. Foreign Judgments (Reciprocal Enforcement) Act 1933, c 13, s 4(3). 182 Regulation on Civil Jurisdiction (n 14 above) §22[3]; ex Brussels Convention (n 33 above) §16[3]; Lugano Convention (n 39 above) §16[3]; CJJA 1982 sch 4 (n 47 above) para 11(c); Plender Contracts Convention (n 61 above) [6.27]. 183 Re Fagins Bookshop [1992] BCLC 118 Harman J; Formula One Holdings (No 2) (n 41 above) (membership of board of company controlling Formula One racing); also presumably registers of flat management companies. 184 Re Hayward [1997] Ch 45 Ch D, 56–57 Rattee J. 185 Hayward (n 184 above) 56G–57B Rattee J. 186 Hayward (n 184 above) 57D Rattee J. 187 Ferguson (n 125 above) 75F. 188 Reichert v Dresdner Bank (n 126 above) J[13]. 189 See below [10.25]. 180 181
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Actions Affecting Land
trust can be enforced, even though the land affected by the trust is in France and the French land registers will require alteration if the trust is found to exist.190 Procedural economy would be generated by leaving the whole case to the French courts, but that was not a sufficient reason to remove the trust action from the English courts. The ambit of the registration jurisdiction may, to some extent, depend upon local law, since many states will require the perfection of a transfer of land by a corresponding change in the register. A transfer occurring by way of succession after a death may only be recognised if the transfer is founded on a judgment by one of their national authorities.191 States with this form of legislation can tangentially and coincidentally expand the jurisdiction of their courts.192 It might be thought that the progression from paper-based transfer to electronic conveyancing to compulsory electronic conveyancing193 may somewhere along the line have just that effect on English jurisdiction.
TEN A N CI ES, HO LI DAY LETS A N D TI MESHA R ES
Tenancies, Holiday Lets and Timeshares 1
Tenancies
[4.37] Exclusive jurisdiction is conferred on the local courts in relation to tenancies,194 since local courts can make on-the-spot inquiries and inspections, and are best placed to manoeuvre through the minefield provided by national legislation on tenancies.195 But against this tenants are often in a comparatively weak social position and it is not right to compel them, when they need to sue a landlord, to travel to trial far from home.196 The general rule has proved so draconian in relation to holiday accommodation that it has been necessary to water it down. An autonomous definition of tenancies has been adopted for European purposes, disregarding local categorisation in favour of one that is continent-wide, drawing on the whole corpus of property law across the continent, but also reflecting the restrictive view given that exclusive jurisdictions are out of the ordinary run and should be narrowed. In Sanders v Van der Putte197 a florist’s shop in Wuppertal-Elberfeld, Germany, was leased by a landlord to Van der Putte. Webb v Webb (n 117 above); see below [11.39ff]. Green Paper on Succession and Wills SEC (2005) 270 [1]. 192 There are other examples of exclusive jurisdictions, eg over patents: Duijnstee v Goderbauer (n 113 above); Case 25/79 Sanicentral v Collin [1979] ECR 3423 ECJ. 193 Land Registration Act 2002 (n 124 above) ss 91–95, sch 6. 194 Regulation on Civil Jurisdiction (n 14 above) §22[1] ex Brussels Convention (n 33 above) §16[1]; Lugano Convention (n 39 above) §16[1]; CJJA 1982 sch 4 (n 47 above) para 11. 195 Rösler v Rottwinkel (n 89 above) J[10]; Lieber v Göbel (n 93 above) J[16]. 196 Rösler v Rottwinkel (n 89 above) J[12]; Jarrett (n 27 above) 13 Morritt LJ. 197 Sanders v Van der Putte (n 116 above); Hartley (n 116 above); White ‘CJJA 1982 II’ (n 24 above) 308–310. 190 191
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He alleged that he in his turn had entered into an agreement to ‘sub-let’ it to Sanders, and a Dutch court sitting in Arnhem found that an agreement of some sort did indeed exist. Buyer and seller were both Dutch, but the buyer sought to switch playing fields to the German courts. Exclusive jurisdiction over leases was granted to the courts of the locus of the land (Germany) but limited to claims between landlord (rendered by a roast beef translator as ‘lessor’198) and tenant acting as such. The court decided that Sanders’ agreement was a licence or franchise to share in the operation of the florist’s business and was not a true sub-letting,199 putting the case outside the exclusive sphere of the German courts and leaving the Dutch court in Arnhem free to take it. Further guidance about the nature of leases can be found from the discussion of timeshare agreements below.200 In essence, a tenancy is the same as a lease, a grant of the land for a specified time in return for a rent, indicative features being terms about entry into possession, use, maintenance, giving up possession, rent, and incidental charges.201 [4.38] When a case falls within the autonomous definition of ‘tenancy’ both real and personal actions are exclusive to the site. Disputes about any obligation of the landlord or tenant under the terms of the tenancy fall within the exclusive, local, jurisdiction. This includes real actions (as with land) and personal actions (unlike other land). In Rösler v Rottwinkel202 this was held to include any dispute about the existence of the tenancy, concerning the interpretation of its terms, its duration or repossession at its expiration and the repair of damage, thus far confirming the view expressed in the Jenard Report,203 but also including an action for the recovery of rent204 or of incidental charges for services such as water, gas, or electricity,205 on these points the decision differing from the Jenard Report. Although the common law was not consistent it was certainly possible to see a rent action as real so that, for example, Irish rent had to be sued for in Ireland206; repair obligations are also real.207 So, whether the action is real or personal, if it relates to a tenancy it is within the exclusive jurisdiction, whereas if Sanders v Van der Putte (n 116 above) J[15]. Jarrett (n 27 above) 13B Morritt LJ. Non-application to sale contracts was envisaged by the Schlosser Report (n 86 above) [169–171]; the same is true of English law even though equitable title passes under the contract: Schlosser at [172]. 200 White ‘CJJA 1982 II’ (n 24 above) 307. 201 Klein (n 88 above) AG[28] Geelhoed. 202 Rösler v Rottwinkel (n 89 above) J[29]. 203 Jenard Report (n 2 above) 35; Schlosser Report (n 86 above) [164]; White ‘CJJA 1982 I’ (n 24 above) 191. 204 A McClellan ‘Brussels Convention Case-law’ (1978) 15 CML Rev 228–243, 237 (Tribunal d’Instance, Aix-la-Chapelle, October 24th 1975); White ‘CJJA 1982 II’ (n 24 above) 307–309, 310 fn 79; Agnew v Usher (n 149 above); Ashurst v Pollard [2000] 2 All ER 772 Ch D, [21] Jacob J (rent after the tenant becomes bankrupt); on appeal [2001] Ch 595 CA; Carruthers Transfer of Property (n 80 above) [2.39]. 205 Rösler v Röttwinkel (n 89 above) J[26]. 206 Holding v Haling (1685) 3 Keble 150, 84 ER 646 Hales CJ; Lee (n 96 above) 622 fn 77; the same rule was adopted for overseas service at common law. 207 Tassell v Hallen [1892] 1 QB 321 Coleridge LCJ. 198 199
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Actions Affecting Land
it relates to other rights in land only real actions are exclusive to the courts of the site.208 [4.39] Money claims only indirectly connected with the tenancy are not directed exclusively to the courts where the land is sited, for example if the action is for loss of holiday enjoyment or for travel expenses. As Sanders v Van der Putte209 was decided it was a case concerning a licence to share the running of a florist’s business in rented property — a kind of franchise — and did not turn on the existence of a sub-tenancy. Exclusive jurisdiction was limited to claims between landlord and tenant acting as such.210 This dispute was not site-based and was therefore left to the Dutch court in Arnhem, with its personal powers over Dutch-domiciled defendants. In the same spirit the non-site Scottish courts accepted the task of adjudicating in Barratt International Resorts v Martin211 on the sacking of the manager of a timeshare development in Spain, since his probationary contract was made under Scottish law and his appointment as manager of the complex did not raise any land law issue, even if sacking him would lead inevitably to his eviction from his home in the development. So actions very peripherally connected to a tenancy are not exclusive to the courts of the site of the land.
2
Holiday lettings — forum
[4.40] Many holidays are taken in self-catering accommodation, a gîte, a Tuscan villa, or a beach-side apartment on the Costa del Sol, and the same rule should apply anywhere in Europe whenever a holiday-maker has exclusive use of non-serviced accommodation for a short period. Despite its short duration, the latter type of arrangement is seen as a ‘letting’ for the European forum rules and therein lies all manner of inconvenience. The equivalence of holiday lets and normal residential leases was settled under the original form of the Brussels Convention,212 despite the obvious conflict with the underlying policy of the Convention,213 so exclusive jurisdiction was ceded to the courts for the place where the holiday took place. Under the amended rules this remains a possible forum though it is now usually the more inconvenient of two alternatives.214
208 Rösler v Röttwinkel (n 89 above) J[26]; Lieber v Göbel (n 93 above) J[13]; Dansommer (n 88 above) J[23]. 209 Sanders v Van der Putte (n 116 above). 210 Jarrett (n 27 above) 13A Morritt LJ. 211 Barratt International Resorts v Martin [1994] SLT 434 Court of Session OH, 437J–K Lord Sutherland. 212 Rösler v Rottwinkel (n 89 above) J[21–25]; Jarrett (n 27 above) 12–13 Morritt LJ; Schlosser Report (n 86 above) [166]. 213 TC Hartley ‘Jurisdiction over Holiday Lets’ (1985) 10 EL Rev 361–363, 361. 214 See below [4.41].
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Rösler v Rottwinkel215 demonstrates the site-based starting point. Four Germans rented a holiday villa in Italy from its German owner, and, at least according to the landlord who was living in the adjoining property at the time, it was an archetypal German holiday involving unbearable noise, uninvited guests and an overflowing cesspool. Exclusive jurisdiction under the as-yet unamended Brussels Convention lay with the Italian courts, an extravagant and unacceptable result.216 It is bad enough to have to travel to your holiday destination to litigate but when it is to return to the Italian courts the result is quite intolerable. Powers of the local courts were reasserted in Dansommer.217 A German called Götz rented a house in Denmark owned by a Danish individual for a two-week holiday spanning late July and early August 1995. Dansommer, the tour operator, organised the letting and insurance and provided a guarantee against its own insolvency, but included no other services. The owner of the house claimed that Götz had not cleaned it and had damaged carpets and the safety mechanism on the oven. Dansommer, the agent, settled the owner’s claim and then (subrogated to him218) sought to pass on the cost to the holiday-maker. Götz ultimately won his appeal on the merits but not before getting tangled up in the preliminary question of jurisdiction. On this the European Court of Justice decided against the German court. An action for damage allegedly caused to holiday accommodation was an action relating to Danish land and having as its object Danish land, over which, at the time, only the Danish courts could give a ruling.
3
Holiday lettings — forum at the home of the holidaymaker
[4.41] A better alternative is to recognise the home of the holiday-maker as a legitimate forum. Instinct suggests that if a German owner lets his villa to German holiday-makers any dispute should be heard in the German courts, wherever they take their holiday. Disputes are essentially contractual, in which local knowledge and customs are insignificant factors.219 The overkill by which, until 1989, disputes about holiday lettings were directed automatically to the courts of the country in which the holiday took place has been ameliorated. Changes made in that year make available as an alternative forum the domicile of the holiday-maker. Three rules apply which are similar but with subtle differences. The Brussels Convention applied to Denmark until July 2007220 and the
Rösler v Rottwinkel (n 89 above) J[21–25]; Jarrett (n 27 above) 12–13 Morritt LJ. FA Mann ‘Exclusive Exotic Jurisdiction’ (1985) 101 LQR 329–330, 330. 217 Dansommer v Götz (n 88 above); Hjertviksten v Dansommer B-1500-00, [2001] UfR 2556, [2002] ECLYB [1228] (Norwegian summerhouse let to Dane; Lugano Convention (n 39 above) §16 applied). 218 Subrogation did not affect the issue, jurisdiction being determined as if the case was brought by the landlord direct against the tenant. 219 Rösler v Röttwinkel (n 89 above) 102–103 AG Slynn. 220 Brussels Convention (n 34 above) §16[1](b), as inserted by San Sebastian Convention (n 33 above) §6. 215 216
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Actions Affecting Land
Brussels I Regulation applies to the other EU-27 states221 and also as between parts of the United Kingdom.222 The third rule in Lugano applies to the EEA and EFTA states223; but it must be remembered that three EU states remain outside the Lugano Convention — Germany and Belgium generally and France in relation to this particular paragraph. The basic exemption (quoted from the EU Regulation) is for proceedings which have as their object: tenancies of immovable property concluded for temporary private use for a maximum period of six consecutive months.
An action is allowed in the home state of the tenant, but details vary about whether this must also be the home state of the landlord and whether or not the concession is withdrawn if the landlord is corporate. Basically, however, if a German takes a holiday in Spain, the concession is to allow the German courts as a possible venue as an alternative to the Spanish. [4.42] Some rules are common to all the Conventions. The basic target (according to the EU Regulation) is proceedings which have as their object: tenancies of immovable property concluded for temporary private use for a maximum period of six consecutive months.
All European variants direct a case to the courts of the state in which the defendant is domiciled as an alternative jurisdiction to the longer-established locus rule. If a German takes a holiday in Spain, the concession is to allow the German courts as a possible venue. [4.43] Other rules vary between the Conventions. The first is the detail of joint domicile. A precondition of joint domicile was imposed at San Sebastian for Brussels Convention cases seeking to use the alternative holiday forum and is retained for EU cases under the current Regulation, though the Lugano rule for EEA states is different, as will be explained. Within that scope it is a requirement (again quoting from the EU Regulation) that: the landlord and the tenant… are domiciled in the same… State.
Several cases have failed this test. In Dansommer224 a German called Götz rented a house in Denmark from its Danish owner so the parties lacked a joint domicile and the case had to be heard in Denmark, the locus of the holiday. A more relaxed view is taken in the EEA states, or at least most of them.225 Here all that is required to make available as an alternative forum the tenant’s domicile is that neither party, neither landlord nor tenant, is domiciled in the state where the 221 Regulation on Civil Jurisdiction (n 14 above) §22[1] rider; a compromise between Brussels and Lugano: W Kennett ‘The Brussels I Regulation’ (2001) 50 ICLQ 725–737, 730. 222 CJJA 1982 sch 4 (n 47 above) para 11(1)(b). 223 Lugano Convention (n 39 above) §16[1](b). From 2009 New Lugano (n 41 above) §22 will be identical to the Regulation on Civil Jurisdiction (n 144 above) §22. 224 Dansommer (n 88 above). Denmark is subject to the normal EU rule since July 2007. 225 See above [4.07].
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183
holiday is taken, the site of the land. Thus a Dutch landlord can sue an Austrian tenant about a holiday taken in Switzerland in the Austrian courts. Coincident domicile is not essential.226 [4.44] Another variation occurs in relation to corporate landlords, a matter of importance since many landlords letting holiday accommodation are companies. This is no problem if the case falls under the Regulation on Civil Jurisdiction,227 nor indeed under the Lugano Convention where an EEA state is one of the players,228 since in those states it is only necessary that the tenant should be a natural person. Personal jurisdiction is generally founded on the home (domicile) of the defendant, so this more relaxed view of holiday lettings seems consistent. Problems arise in Brussels Convention cases — older EU facts or Denmark facts before July 2007 — which allow the alternative forum of joint domicile only where ‘the landlord and the tenant are natural persons’, a point on which San Sebastian provided no flexibility. A tenant within that rule book who happens to rent from a corporate landlord will have to travel to the country where he took his holiday to defend an action, one example of such an unfortunate being Jarrett, whose timeshare was in a block with a corporate owner.229
4
Holiday lets: selection of law
[4.45] The previous passage has explained the forum selection rules for holiday lettings. Similar rules are needed for the selection of law. The present position is unsatisfactory. Contracts for very short-term holiday accommodation are subject to the law of the locus of the accommodation. A German landlord who owns a house in the south of Spain which he rents to German individuals should sue for rent, or be sued for a rent deduction on account of the state of the house, under Spanish law.230 The law of the site often looks wrong when the point of contention is a short-term holiday letting. In the example just given the closest connection is with the country where both parties reside (Germany) rather than the location of the holiday (Spain).231 It is open to domestic courts to reach just this result, treating the case as an exceptional one in which the holiday-maker’s residence establishes the closest connection, as the German
Dicey & Morris (n 3 above) II [23–029]. Regulation on Civil Jurisdiction (n 14 above) §22; Explanatory Memorandum to §22 (n 32 above); O Parker ‘Developments in Judicial Co-operation in Civil Matters in the EU’ [2002] NLJ 227–229. 228 Lugano Convention (n 39 above) §16[1](b). Belgium and Germany do not subscribe and France has derogated from this particular provision. New Lugano (n 41 above) §22 will follow the modern EU rule as from 2009. 229 Jarrett (n 27 above) 13G–14A, Morritt LJ. 230 Rome Convention (n 55 above) §4[3]; consumer protection will not apply even if the landlord is trading since §5[4] does not apply to a contract for services ‘to be supplied to the consumer exclusively in a country other than that in which he has his habitual residence’. 231 Giuliano Lagarde Report (n 53 above) §4, [4]. 226 227
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courts have done.232 Selection of law needs to run alongside forum, and to achieve this the Rome Convention would need a specific rule to match the forum rule for private tenancies to a six-month maximum.233 The proposal for the Rome I Regulation would provide precisely this; the law of joint domicile would apply to: contracts which have as their object tenancies of immovable property concluded for a temporary private use for a maximum period of six consecutive months… provided that the tenant is a natural person and that the landlord and the tenant are domiciled in the same country.234
This selection would be presumptive only, giving the possibility of a closer connection with some other law.
5
Package tours
[4.46] Holidays taken in a hotel room are organised under contractual arrangements235 and any disputes are personal matters. Disputes arising from a holiday package including a bundle of travel and holiday accommodation organised by a tour agent are also contractual even if exclusive rights are given to the accommodation.236 This appears from Hacker.237 The claimant was one of a group of German tourists for whom a German travel agent organised accommodation for two weeks in August 1989 spent in Ameland, a part of the Netherlands, under a package by which several services were bundled up with a holiday let.238 Jurisdiction over the entire German contract could not sensibly belong to the Dutch courts, and the European Court of Justice took outside the exclusive jurisdiction the instant case and the judgment excludes any contract whereby a travel business in one EU state undertakes to procure for a client domiciled in the same state the use for several weeks of holiday accommodation not owned by it in another contracting state and to book the travel arrangements. Exclusive jurisdiction will vest in the state of the holiday destination for a bundle of insurance on top of accommodation,239 but not where several services are bundled up together. 232 Bundesgerichtshof October 12th 1989 [1990] IPRAX 318 (German travel agency supplying local customers with holiday houses in France). 233 Regulation on Civil Jurisdiction (n 14 above) §22; see above [4.41]. 234 Rome I Green Paper (n 53 above) [3.2.6]. 235 Royal Classic Rumaensk Vinimport v Sörensen B-57-04 [2004] VfR 1404, [2004] ECLYB [218]. 236 C Guyot & H Dyson ‘EU Case-law in the Field of Tourism’ (2004) 4 International Travel Law Journal 199–209; see below [6.18] n 118. 237 Hacker v Euro-Relais (n 117 above); Jarrett (n 27 above) 11 Morritt LJ; A Briggs ‘The Brussels Convention’ (1992) 12 Yearbook of European Law 657–674, 657–660; R Plender ‘Tenancies of Immovable Property’ (1992) 63 British Yearbook of International Law 607–608. Note also, slightly off point, Carter v Lotus Leisure Group [2002] 2 P & CR 2 @ 26 CA (agreement tour operator not to rent chalets other than from a middleman called Carter at Courcheval in the French Alps in 1995). 238 Hacker v Euro Relais (n 117 above) AG[33] Darmon. 239 Dansommer (n 88 above).
Tenancies, Holiday Lets and Timeshares
6
185
Timeshare forum
[4.47] Timeshares are considered in detail in a later chapter.240 Timesharing agreements were bound to give rise to problems,241 but the guidance about forum given in Klein v Rhodos Management242 could not be more unhelpful. The European Court of Justice declined to lay down any generic rule for timeshare forum, fearful of being over- or under-inclusive.243 A wide variety of legal vehicles continue to be used for timesharing despite harmonisation of other aspects244 and this is reflected in a variety of possible conflicts solutions. There is no simple, single European forum for resolving disputes, but rather a host of specific cases.245 Klein was a German who bought a week at the Sun Beach Holiday Club in Greece over a period of 40 years from an Isle of Man company at a capital price of €6.7K with an additional €175 for three years’ membership of an exchange club and an ongoing annual maintenance charge of €160.246 The scheme was set up as a club so that the Kleins did not acquire rights in a specific apartment but merely the right to a holiday in one apartment at the club’s resort of a specified type for one week each year over nearly 40 years,247 the proprietary aspects thus being subjugated to the rights of club membership.248 This was not a part ownership or tenancy but a complex personal contract involving club membership and outside the exclusive jurisdiction.249 Perhaps the Advocate-General’s opinion was more convincing when he argued that in applying the exclusive jurisdiction one should search for the substance of the transaction and that, when the veil was lifted, a true timeshare could be discerned lurking beneath the club format.250 Timeshare cases often need to be resolved by a court with geographical proximity to the seat of the dispute,251 but interval owners will be better placed litigating at home as consumers. Many timeshare disputes are treated as contractual and for those it will be possible to impose a choice of forum or a choice of law, an operator’s flag of convenience, a timesharers’ flag of inconvenience. However, any choice of law is limited because domestic law may not allow a choice which has the effect of causing the loss of European rights guaranteed by the Timeshare Directive.252 See below [ch 6]; conflicts are considered at [6.62ff]. White ‘CJJA 1982 II’ (n 24 above) 307; Dicey & Morris (n 3 above) II [33-233]; Plender Contracts Convention (n 61 above) [6.27]. 242 Klein (n 88 above). 243 Klein (n 88 above) AG[20–22] Geelhoed. 244 Timeshare Directive 94/47/EC, [1994] OJ L280 83, R[3]; Klein (n 88 above) AG[21] Geelhoed; see below [6.40ff]. 245 Klein (n 88 above) AG[23] Geelhoed. 246 This was not therefore a case like C-423/97 Travel Vac v Sanchis [1999] I ECR 2195 ECJ, in which the value of services predominated; see Klein (n 88 above) J[21–22]. 247 Klein (n 88 above) J[19]. 248 Klein (n 88 above) J[20]. 249 Klein (n 88 above) J[26–29]. 250 Klein (n 88 above) AG[24–27] Geelhoed. 251 Klein (n 88 above) AG[30]. 252 Timeshare Directive (n 244 above) §9; Remien (n 1 above) 54. 240 241
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A timeshare dispute will qualify for the exclusive forum rules where its format is to create part-ownership or a tenancy, where a timeshare interval is given in a specific apartment. Real character was so clear of the timeshare on the Algarve considered in Jarrett v Barclays Bank253 that no European reference was required. An autonomous definition overrode the Portuguese law of the site254 in the interest of uniformity across the continent of Europe,255 and was satisfied by the Jarretts’ exclusive occupation of land,256 albeit for a limited period each year and even though it was to last in perpetuity.257 Despite all this the Jarretts were allowed to pursue their case in the Ipswich County Court because their particular claims fell outside the exclusive zone allocated to the Portuguese courts given that they were claiming against the timeshare sellers for misrepresentation and against the bank as creditor under a three-party consumer credit agreement. These personal actions could proceed in England, but any proprietary aspect of the ownership of the timeshare interval would have to be tested in Portugal.
PER SO N A L ACTI O N S
Personal Actions 1
Personal actions affecting land
[4.48] Common law actions of trespass which do not equate to the old ejectment are not restricted to land in England and there is no bar on action in relation to land out of the jurisdiction if framed as personal actions in trover, slander of title, account, debt, covenant, or assumpsit,258 or as equitable claims which seek personal orders against English trustees.259 The dividing line seems to have been the type of remedy which is sought. A case came nearest to the line when the action was to enforce a personal obligation but as a peripheral issue it became necessary to adjudicate on a foreign title. Story, the American jurist, stated a bar in such a case in the first edition of his book on Conflicts,260 but in 253 Jarrett (n 27 above); A Briggs ‘Exclusive Jurisdiction’ (1996) 67 British Yearbook of International Law 577–578 (‘easy illustration’); Re A Claim for Payment for a Timeshare [1997] ILP 524 District Court Damstadt. 254 Arguably Morritt LJ was running ahead of European developments, since his opinion was contrary to the travaux preparatoires: Jenard Report (n 2 above) 35; Schlosser Report (n 86 above) [168]. 255 Reichert v Dresdner Bank (n 126 above); Hacker v Euro Relais (n 117 above). 256 Barratt International Resorts v Martin (n 211 above) 437J–K Lord Sutherland (dispute about sacking a manager of a timeshare development did not involve rights in rem). 257 Jarrett (n 27 above) 11F–G, Morritt LJ. The last point is a divergence from the common law, which does not allow a perpetual lease. 258 Rogers v Dove (1652) Style 331, 82 ER 752; Holman v Johnson (1775) 1 Cowper 41, 98 ER 1120. 259 Lee (n 96 above) 624–625; particularly on the proscribed list were writs of possession, or a writ of partition or a sequestration, at 626 fnn 101–104; Arglasse v Muschamp (1682) 1 Vern 75, 23 ER 322; Re Earl of Derby (1611) 12 Coke’s Report 114, 77 ER 1390. 260 J Story Commentaries on the Conflict of Laws (Edinburgh, Thomas Clark, 1st edn, 1835), 21–22; Lee (n 96 above) 629.
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fact this was a solecism, the title bar a myth perpetrated by Story, and courts may often need to determine a foreign title in order to award an in personam remedy here.261
2
Contract
[4.49] It will be demonstrated below that both European rules and the earlier common law did allow personal actions over foreign land, for example where the object was to enforce a contract, but the issues here are of sufficient complexity as to merit a separate chapter.262
3
Trusts
[4.50] If this chapter deals with real actions and a future chapter deals with personal claims, equity lawyers will be looking here for a discussion of the enforcement of trusts of foreign land. In fact, however, the treatment will have to be deferred because the European Court of Justice considers the enforcement of trusts to be a matter of personal obligation and not a matter of proprietary obligation. The issue under discussion is the controversial ruling of the European Court of Justice in Webb v Webb263 in which an action to enforce a trust of land in France was held to be a personal action by the beneficiary against the trustee, and so within the jurisdiction of the English courts since the defendant trustee was domiciled in England. This is fair enough for civilian-type trusts, which are indeed essentially contractual,264 but it defies all logic for trusts recognised in equity, is the opposite to the basis on which the European conflicts club rules were negotiated, 265 and is so counter-intuitive that it will require detailed discussion below. As a result it is convenient also to defer discussion of the law applicable to cross-border trust issues.266
4
Damage to foreign land
[4.51] Actions for damage to land aimed at securing damages for injury caused to the land will generally be site-based on account of the connected forum, though the home court of the defendant is an alternative.267 Identification of the Lee (n 96 above) 609, 624 fn 90; Dicey & Morris (n 3 above) II [23R–021]. See below [ch 10]. 263 Webb v Webb (n 117 above); Prazic v Prazic [2006] EWCA Civ 497, [2007] ILP 31. 264 See below [11.39]. 265 Schlosser Report (n 86 above) [105–108]; V Latham ‘Creation and Administration of a Trust in the Conflict of Laws’ (1953) 6 CLP 176–195; White ‘CJJA 1982 I’ (n 24 above) 191; Dicey & Morris (n 3 above) II [29]. 266 See below [11.36]. 267 See below [10.53]. 261 262
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connected forum proceeds from two alternatives — the place where a harmful event occurred and the place where a loss is sustained268 — but each of these will generally coincide at the site of the land, as will threatened damage. Environmental claimants are allowed non-site claims in neighbouring states, and indeed all tort actions have a non-site permissible alternative. [4.52] Tort law lacks a European rule book. It is possible for English courts, as the home court of a defendant, to rule on a tort to land elsewhere in Europe, and selection is currently made on the basis of domestic legislation passed in 1995.269 The forum will characterise the issue as one of tort.270 Applicable law is determined from the country in which the events constituting the tort occur, and since physical land can only be damaged at its site, the most significant connection is with the location of the property.271 Determination of whether the conduct which has occurred is an actionable wrong is carried out using the applicable law,272 and it is no longer necessary to establish double actionability, that the wrong would also be a tort at home.273 European rules are proposed under the moniker ‘Rome II’ for the selection of law to apply to tortious obligations,274 but the intended uniformity will be thwarted by an opt-out by the United Kingdom, Ireland and Denmark. The site rule is not sufficiently firmly grounded in this proposal.
5
Mortgage actions
[4.53] Mortgages are problematic because of their dual character, part personal obligation in debt and part charge on land. English courts have been prepared, historically, to enforce mortgages of foreign land, assuming a personal jurisdiction over the debtor. In this way they gave judgments affecting land that lay beyond their legitimate jurisdiction. An English judgment may thus be decisive of the title to the foreign land, at least between borrower and lender.275 Foreclosure was a case in point, since the effect of the order absolute was to bar the
268 Regulation on Civil Jurisdiction (n 14 above) §5[3]; ex Brussels Convention (n 33 above) §5[3]; Lugano Convention (n 39 above) §5[3]; CJJA 1982 sch 4 (n 47 above) para 3(c); Civil Procedure Rules (n 20 above) 6.20.8; Case 21/76 Mines de Potasse d’Alsace [1976] ECR 1735 ECJ, J[15]; TC Hartley ‘The Place of Commission of a Tort’ [1977] EL Rev 143–145; see below [10.45]. 269 PIL (MP) Act 1995 (n 160 above) ss 9–15. 270 PIL (MP) Act 1995 (n 160 above) s 9(2). 271 PIL (MP) Act 1995 (n 160 above) 1995 s 11; this to be displaced under s 12 in favour of another law which is substantially more appropriate. Displacement to a non-site law may be easier when a thing is immovable in law but movable in its physical nature and also when it is intangible. 272 PIL (MP) Act 1995 (n 160 above) s 9(4). 273 PIL (MP) A 1995 (n 160 above) s 10. English law would differentiate trespass (direct damage), nuisance (indirect), negligence and the escape of dangerous things, but the crucial thing is the foreign delict. 274 Proposal for a Regulation on the Law Applicable to Non-contractual Obligations (‘Rome II’) COM/2003/0427 final. 275 Paget v Ede (1874) LR 18 Eq 118, 126 Bacon VC.
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borrower’s title to his land. Toller v Carteret276 is a most dramatic illustration in which the English Court of Chancery foreclosed a mortgage secured on the island of Sarke, as it was then called, even though the Channel Islands were part of the Ducky of Normandy and so subject to the courts in Guernsey. Foreclosure switched ownership of the island from borrower to lender.277 The security itself is subject to the site rule, both for immovable security and movables, for example a retention of title affecting goods until they are paid for,278 and the enforcement of a debt in rem by a third party debt order (formerly called a garnishee) against an asset belonging to the debtor such as a bank account which earmarks the property for payment of the judgment debt. In rem enforcement is governed by the law of the site of the property being subjected to the debt order.279
6
A taster of personal conflicts to come
[4.54] The rules for personal actions are considered in the context of contracts.280 To anticipate: 1. Jurisdiction in personal actions is non-exclusive. 2. Parties may choose a forum and, separately, a law to be applied. 3. Otherwise the law will generally select several alternative forums. One forum will be connected. For example, in the case of a contract it will be related to the performance of the contract or in the case of a tort where the damage occurs, but where the thing affected is land it will generally be site-based. 4. An alternative forum is always available in the home court of the defendant, determined by domicile or, in other words, semi-permanent residence. A consumer may be able to insist upon being sued in his home court. 5. As between alternative forums there is a strict regime for priority of actions on a first sued basis. 6. Law will generally be selected on a connected basis similar but not identical to the connection used to determine forum and where the subject matter of the dispute is land the law will generally be site-based. So it will be possible to take a connected action in a site-based forum using site-based law, but also possible to sue in the home court of the defendant, when the home court may be required to apply a foreign, site-based, law.
276 Toller v Carteret (1705) 1 Salkend 404, 91 ER 351 Wright LK; Baciocchi v Banque Cantonale de Geneve [2000] II JCP 10248, [2000] ECLYB [1074] (Swiss loan secured on land in France governed by Swiss law). JD Falconbridge Essays on the Conflict of Laws (Toronto, Canada Law Books, 2nd edn, 1954) 618 says that this is not easy to justify. 277 Powers to make a charging order were site-based: Mority v Stephan (1885) 58 LT 850 North J; Kolchmann v Meurice [1903] 1 KB 534 CA. 278 Hoge Raad Netherlands [2001] NJ 375, [2001] ECLYB [1029]. 279 Société Eram Shipping Co v Companie Internationale de Navigation [2003] UKHL 30, [2004] 1 AC 260; Kuwait Oil Tanker Co (n 87 above) [16] Lord Hoffmann. 280 See below [ch 10].
MA R KETI N G LA N D
5 Marketing Land Pointillism. Consumption of Land. Unfair Commercial Practices Affecting Land. Doorstep Selling of Land. Distance Rentals. Unfair Marketing Practices. Unfair Advertising and Statements. Internet Advertising (E-commerce). Information in an Invitation to Purchase. Information about Distance Contractors. Withdrawal Rights. Credit Cancellation. Remediation and Reform.
PO I N TI LLI SM
Pointillism 1
Land law and consumer law
[5.01] Consumer protection1 principles apply across a Europe consisting of the EEA-30.2 History can safely be left to others.3 Transactions with land always involve internal market principles but they may also be governed by consumer protection rules in order to correct the imbalance of transactional power where one contracting party is in a weaker position.4 In such cases the two conceptual structures overlap. That they are distinct is no doubt an accidental result of the division of responsibilities between two Directorates. Parties involved in transactions with land generally have little to gain from consumer protection because: 앫 marketing controls are confined to transactions of the business-to-consumer pattern, 앫 few buyers of land are consumers, and 앫 land is rarely seen as a product in consumer transactions. 1 S Weatherill EU Consumer Law & Policy (Cheltenham, Edward Elgar, 2005, 1843769638); P Nebbia & J Askham EC Consumer Law (Richmond, Richmond Law, 2004, 1904501214); H Schulte-Nolke A Casebook on European Consumer Law (Oxford, Hart, 2002, 1-841-13227-6). 2 EEA Agreement [1992] OJ L12 13 as adjusted [1994] OJ L1 572 and amended [2004] OJ L130 3, §72 and Annex XIX; the latter adopts all the CP Directives discussed in this book. 3 Nebbia & Askham (n 1 above) 5–10; Weatherill (n 1 above) ch 1; B Pasa & GA Benacchio The Harmonisation of Civil and Commercial Law in Europe (Budapest, Central European University Press, 2005, 963-7326-35-9) 8–17. 4 Case 150/77 Betrand v Paul Ott [1977] ECR 1437 ECJ, J[21].
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[5.02] When all these hurdles are surmounted, a certain amount of clear running can be discerned, concrete situations where marketing controls apply to land. These are as follows: 앫 unfair commercial practices with land,5 앫 doorstep selling of finance for land, that is either during unsolicited visits to the home of a consumer or sales conducted during an organised outing away from the business premises of the seller; however, the protection in this case is largely illusory, though much ink will be spilled in this chapter to establish that,6 앫 distance rentals, where a rental is agreed over the internet or by some other means of distance communication,7 and 앫 advertising is controlled if it is misleading or comparative.8 Controls on unfair contract terms9 are by far the most important contribution to a substantive European land law and are treated separately, as are consumer credit agreements10 and timeshares.11 [5.03] European law lacks a coherent rationalisation of the circumstances in which a consumer is awarded transactional protection. A substantial body of law has been built up from an accumulation of individual Directives but each has a discrete area of protection, and whilst these overlap large gaps are left uncovered between them. Kötz12 called this ‘pointillism’ in reference to Seurat’s artistic technique, thinking of the discrete points which make up the picture. This does some disservice to the neo-impressionist theory of optical mixtures
5 Unfair Commercial Practices Directive 2005/29/EC [2005] OJ L149 22; Explanatory Memorandum COM (2003) 356 final; Consultation on Implementing the EU Directive on Unfair Commercial Practices (DTI, December 2005, URN 05/1815); Government Response to the Consultation Paper on Implementing the Unfair Practices Directive (URN 06/2121, 2006); Draft Consumer Protection from Unfair Trading Regulations 2007 in Consultation on Draft Consumer Protection from Unfair Trading Regulations 2007 (London, DTI, 2007, URN 07/1047). 6 Directive on Contracts Negotiated Away from Business Premises (‘Doorstep Selling Directive’) 85/577/EEC, [1985] OJ L372 31; Consumer Protection (Cancellation of Contracts Concluded Away from Business Premises) Regulations 1987, SI 1987/2117. 7 Distance Selling Directive 97/7/EC [1997] OJ L144 19; Consumer Protection (Distance Selling) Regulations 2000, SI 2000/2334; Distance Marketing of Financial Services Directive 2002/65/EC [2002] OJ L271 16; Financial Services (Distance Marketing) Regulations 2004, SI 2004/2095. 8 Misleading and Comparative Advertising Directive 84/450/EEC [1984] OJ L250 17, as amended by 97/55/EC [1997] OJ L290 18; Misleading and Comparative Advertising Proposal COM (2006) 222 final (business-to-business parts to be consolidated); Control of Misleading Advertisements Regs 1988, SI 1988/915 as amended by SI 2000/914; Draft Business Protection from Misleading Marketing Regs 2007 in Consultation on 2007 Draft Regs (n 5 above). 9 Unfair Terms in Consumer Contracts Directive 93/13/EEC [1993] OJ L95 29 in force July 1st 1995; Unfair Terms in Consumer Contracts Regulations 1999 SI 1999/2083, as amended by SI 2001/1186. 10 Consumer Credit Directive 87/102/EC [1987] OJ L42 48, as amended; see below [9.02]. 11 Timeshare Directive 94/47/EC [1994] OJ L280 83, in force April 30th 1997; for UK domestic legislation see below [6.08]. 12 H Kötz ‘Gemeineuropäisches Privatrecht’ in H Kötz Festscrift für Konrad Zweigert (Tübinger, Mohr, 1981) 487; CU Schmid ‘The Emergence of Transnational Legal Science in European Private Law’ (1999) 19 OJLS 673–689, 673.
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that a truer colour was created when individual points of pure colour were viewed from a distance, the points mixing to form a coherent picture in the spectator’s eyes. Kötz was thinking of the dottiness of European rules not their fusion. Blobs of primary colour that may be relevant in land law have already been identified.
2
The lowest common denominator
[5.04] Protection for European consumers overrides domestic systems but most regimes — certainly those applying to land — call for a minimalist harmonisation, which creates a European base line from the lowest common denominator.13 That minimum is protected and guaranteed against waiver of the rights granted14 and also against any attempt by the trader to choose a flag of convenience outside Europe since choice of law is restricted to states which themselves meet the European minimum,15 or a forum from hell.16 The flip side of national freedom is a maddening lack of consistency with most consumers stuck near the base line, but a few consumers benefited from the bar set much higher in their state. In no sense can this create an internal market within which competition is on even terms. Consumers then have to be protected against the provision of a written contract in Bulgarian.17 State frontiers can be widened by asserting extra-territorial effect for national consumer protection laws, so that, for example, United Kingdom legislation affecting timeshares often applies to an apartment physically located in Spain.18 Several national regimes may overlap in their application to a single transaction. Marketing a land product across Europe remains a nightmare.
13 Unfair Terms Directive (n 9 above) §8; Consumer Credit Directive (n 10 above) §15; Timeshare Directive (n 11 above) §11; Misleading and Comparative Advertising Proposal (n 8 above) §8; Unfair Practices Directive (n 5 above); see below [5.11]. 14 Doorstep Selling Directive (n 6 above) §6; Contracts Away from Business Premises Regs 1987 (n 6 above) reg 10; Distance Selling Directive (n 7 above) §12[1]; Distance Selling Regs 2000 (n 7 above) reg 25; Distance Marketing of FS Directive (n 7 above) §12[1]; FS Distance Marketing Regs 2004 (n 7 above) reg 16. 15 Distance Selling Directive (n 7 above) R[23], §12[2]; Distance Selling Regs 2000 (n 7 above) reg 25(5) (all EEA states in UK law); Distance Marketing of FS Directive (n 7 above) R[8], §12[1]; FS Distance Marketing Regs 2004 (n 7 above) reg 16(3); A Bigos ‘Jurisdiction over Cross-border Wrongs on the Internet’ (2005) 54 ICLQ 585–620. 16 See below [10.31]. 17 Often left to national law: Distance Selling Directive (n 7 above) R[8]; Distance Marketing of FS Directive (n 7 above) R[31]. 18 See below [6.63ff].
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Consumption of Land 1
Buyers of land as consumers: the B2C pattern
[5.05] Even the hipsters at the Law Commission have picked up the B2C (business-to-consumer) jargon of modern consumer law,19 and if land lawyers are to avoid lagging behind they too must divide their contracting parties in line with commercial law, B designating businesses and C for consumers. Obviously enough contracts attracting standard consumer protection are made by a business to a consumer (B2C) and equally obviously most sales of land do not fit this pattern. However, those that do may receive consumer protection. European legislation has arrived at a more or less standardised reach, even if the exact formulation continues to vary from area to area. This applies to the marketing of land,20 consumer credit21 and timeshares.22 The ultimate flowering of this small jurisprudential plant being found in the Directive against unfair business-to-consumer commercial practices, where, trader means any natural or legal person who, in commercial practices covered by this Directive, is acting for purposes relating to his trade, craft, business or profession and anyone acting in the name of or on behalf of a trader.23
This encapsulates three definitional elements on the B side.24 The business is represented by a ‘trader’ or ‘supplier’, whether an individual or a company, but a trader is only caught when acting within the scope of the legislation in question, and there is a separate requirement that he should also be acting in a commercial or professional capacity — the precise purpose being variously described as business, trade, a profession or commerce.25 A common theme also lies behind the various definitions of the C side, the consumer26; the basic elements are (1) the H Beale and T Goriely ‘An Unfairly Complex Law’ [2005] NLJ 318–319. Distance Selling Directive (n 7 above) §2[1]; Distance Selling Regs 2000 (n 7 above) reg 3; Distance Marketing of FS Directive (n 7 above) §2[a]; FS Distance Marketing Regs 2004 (n 7 above) reg 2; Doorstep Selling Directive (n 6 above) §1[1]; Contracts Away from Business Premises Regs 1987 (n 6 above) reg 3(1). The Electronic Commerce Directive 2000/31/EC, [2000] OJ L178 1, applies to both B2B and B2C contracts, but not C2C; see below [5.60], [7.66], [8.20]. 21 Consumer Credit Directive (n 10 above) §1[2](a), (e), and references to ‘consumer’ passim. 22 Timeshare Directive (n 11 above) §2 (purchaser outwith profession); the domestic position is complex, see below [6.17]. 23 Unfair Practices Directive (n 5 above) §2[A-d]; EM (n 5 above) [34]; Misleading and Comparative Advertising Directive (n 8 above) §2 as amended by Unfair Practices Directive §14. 24 Doorstep Selling Directive (n 6 above) §2; Distance Selling Directive (n 7 above) §2[3]; Distance Marketing of FS Directive (n 7 above) §2[c]; Misleading and Comparative Advertising Directive (n 8 above) §2[3] as substituted by Unfair Practices Directive (n 5 above) §9[2]; also UK SIs transposing these Directives. 25 P Hellwege ‘Consumer Protection in Britain in Need of Reform’ [2004] CLJ 712–742, 738; UK Consultation (n 5 above) [11] (regular use of e-Bay to sell goods). 26 Doorstep Selling Directive (n 6 above) §2; Distance Selling Directive (n 7 above) §2[2]; Distance Marketing of FS Directive (n 7 above) §2[d]; P Rees ‘B2C marketing of FS’ (2003) 5 European Business Law 8–9; Unfair Practices Directive (n 5 above) §2[a]; also UK SIs transposing these Directives. 19 20
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restriction to a natural person, (2) a focus on transactions falling within the scope of the particular regime in issue, and (3) the requirement to act outwith any trade or profession.27 The definition is autonomous.28 A person who buys a brand-new flat from the developer is a consumer but a person buying a private house from a seller, even one who happens to be a professional, falls into the unprotected C2C pattern. So the growth of land law is constrained but not totally curtailed by the need to fit the B2C pattern. For example, very many residential tenants will attract B2C protection. [5.06] Unfair contract terms are only affected when the contract fits the B2C pattern, both the European Directive and its domestic transposition.29 The latter applies to unfair terms in any contract concluded between a ‘seller or supplier’ on the one hand and, on the other, a ‘consumer’.30 A consumer must be a natural person — so a company cannot claim European protection31 — and acting otherwise than for his trade, business or profession. A ‘seller or supplier’ is any natural or legal person who enters into a contract for purposes relating to trade, business, or profession (which may be public or private).32 In this type of contract one party will be in a weaker position than the other when negotiating the terms of the contract. [5.07] A qualification is needed. Consumers will generally be the weaker party but it is possible for contracts on a lavish scale to fail for unfairness, since the quality of the contract determines whether the recipient is to be classed as a consumer, according to which of the various decisions in Standard Bank London v Apostolakis is taken.33 A Greek couple, both professionals but acting outside their respective professions, invested 57 million drachma (€1.1 million) in precious metals margin trading, a deal which turned sour when the drachma devalued. Although neither spoke any English the bank sought to enforce a term directing disputes arising from foreign exchange agreements to the English courts. This outrageous provision was struck down by the English courts: the forum clause was found to be unfair under the European unfair 27 The Consumer Guarantee Directive 99/44/EC [1999] OJ L171 12 does not apply if neither guarantor nor borrower is acting in course of trade or profession: C-208/98 Berliner Kindl Brauerei v Seipert [2000] I ECR 1741 ECJ, J[22] (guarantee to brewery for opening restaurant; debt not in course of business); European Parliament Resolution [1997] OJ C115 27, [16]. German domestic protection is better than under the Directive: Bundesgerichtshof XI ZR 169/05 [2006] 06 ECL [7]. 28 C-269/95 Benincasa v Dentalkit [1997] I ECR 3767 ECJ; Canada Trust Co v Stolzenberg (No 2) [2002] 1 AC 1 HL, 15H Lord Hoffmann. 29 Unfair Terms Directive (n 9 above) §2(b), (c); see below [5.12]. 30 Unfair Terms Regs 1999 (n 9 above) reg 4(1). 31 C-541/99 etc Cape SNC v Idealservice [2001] I ECR 9049, ECJ. 32 Unfair Terms Directive (n 9 above) §2; Unfair Terms Regs 1999 (n 9 above) reg 3(1); cf Unfair Terms in Consumer Contract Regs 1994, SI 1994/3159, reg 2(1). These affect a ‘seller’ of goods or a ‘supplier’ of services, who must be acting for purposes relating to his business (as defined). 33 Standard Bank v Apostolakis (No 1) [2000] ILP 766 Longmore J; (No 2) [2001] Lloyd’s Rep Bank 240 Steel J; Benincasa (n 28 above) was distinguished. Thus a loan secured on commercial property may be a consumer credit agreement: Evans v Cherry Tree Finance [2007] April 13th, [2007] WL 2186988 Ch D.
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terms regime,34 a decision that Apostolakis and his wife were indeed consumers. They returned to Greece to litigate, but the Greek courts ruled35 that the transactions for the purchase and resale of assets intended to be realised at a profit were commercial in character, and that consumer transactions were limited to the satisfaction of an individual’s own needs in relation to private consumption.36 Investors in derivatives were outside this paradigm. Hence the admittedly unequal jurisdiction clause was valid and the English decision had been manifestly incorrect. The Apostolakises may still be in the Limbo thus created for unwanted litigants! [5.08] Domestic law is of nightmarish complexity37 because domestic law under the Unfair Contract Terms Act 1977 had a wider remit than the European regime and the two do not mesh well together. Fortunately, this book can ignore the 1977 Act since it does not apply to land,38 but in non-land contracts it can protect B2B contracts which lie unprotected at European level. The Law Commission is in the process of trying to introduce some coherence,39 with businesses segregated according to the size of the workforce. All businesses will be protected domestically against standard terms and micro-businesses (of up to nine employees) will also receive domestic protection against non-negotiated terms.40 [5.09] Permutation of the B and C parties creates three further patterns of contract (apart, that is, from B2C contracts), each of them lacking European consumer protection though with varying degrees of need for protection. All is fair in B2B trading; just as you may hurt your enemy or, more likely, your lover, you may try out your dubious commercial tactics on your competitors and business customers.41 No tenderness is shown towards businesses when pressured into agreeing unfair terms, not even a small trader buying from a multi-national. Our domestic Regulations which copy out the Directive into British law do not offer any protection to an accountant guaranteeing the debts of his partnership,42 34 Unfair Terms Regs 1999 (n 9 above) reg 3; Regulation on Civil Jurisdiction (‘Brussels I’) (EC) 44/2001 [2001] OJ L12 1, §§15–17. 35 Greek decision 8032/2001 [2003] ILP 29 Polimeles Protodikeio Athens. 36 Benincasa (n 28 above) was followed. 37 FMB Reynolds ‘Unfair Contract Terms’ (1994) 111 LQR 1–3. 38 Unfair Contract Terms Act 1977, c 50; see below [5.12]. 39 Unfair Terms in Contracts and Unfair Contract Terms Draft Bill (Law Commission 292, 2005); H Beale & T Goriely ‘An Unfairly Complex Law’ [2005] NLJ 318–319; A Wood ‘Unfair Contract Terms: First Reactions’ (2005) 26 Business Law Review 110–112; E Macdonald ‘Unifying Unfair Terms Legislation’ (2004) 67 MLR 69–93, 72–74. 40 Draft Bill (n 39 above) cl 22, sch 3. 41 Legislation to protect against unfair competition may follow: Unfair Practices Directive (n 5 above) R[8]. 42 Unfair Terms Directive (n 9 above) §1[1]; Unfair Terms Regs 1999 (n 9 above) reg 3(1); Williamson v Bank of Scotland [2006] EWHC 1289 (Ch), [2006] BPIR 1085, [45–46] Judge George Bompas; Allen Wilson Shopfitters v Buckingham [2005] EWHC 1165 (QB); E MacDonald ‘Mapping the Unfair Contract Terms Act 1977 and the Directive on Unfair Terms’ (1994) JBL 441–462, 457–458.
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and the European regime offered no protection to two Italian companies which installed vending machines for the exclusive use of their employees against an exclusive jurisdiction clause diverting any dispute to the Viadana Magistrate.43 Enterprises should be protected44 as they are by the domestic regimes of Germany, the Netherlands, Portugal and Spain,45 and to some extent under United Kingdom law relating to unfair terms46 and misrepresentations,47 and European protection does extend to misleading and comparative advertising.48 Another type of contract crying out for protection is a private contract between two non-business individuals (C2C) but European law does not see the recipient as a consumer in need of protection. The cassation in UFC v Papeterie Tissot49 concerned a contract for the sale of a French house between two private individuals, a vendor and purchaser on an equal footing and so outside the unfair terms regime. The purchaser complained about the terms of a standard contract, and sought to draw into the litigation the publisher of the precedent book from which the contract had been taken, but the publisher was not in any way a party to the contract in issue and a consumers’ association was unable to join in the fun since there was no consumer contract. Distance buying from the owner in person over the internet attracts no protection. European law is also deaf to complaints from a business when buying from a private individual (C2B). Transactional contract law is a national concern.
2
Land as a consumer product
[5.10] Land is generally not considered to be a consumer product, for example in the context of doorstep and distance selling, though very strong controls apply in the niche market for timeshares. Earlier UK legislation tended to bend to the interests of the consumer solely in the case of goods,50 content perhaps to accept that a house buyer is generally advised by a professional conveyancer. European law often restricts its consumer protection to buyers of goods in the narrowest sense, for example, in relation to product liability 51 and consumer sales and Cape v Idealservice (n 31 above) J[16]. O Lando ‘Liberal Social and Ethical Justice in European Contract Law’ (2006) 43 CML Rev 817–833, 829. 45 Law Com (n 39 above) [IV](a). 46 Unfair Contract Terms Act 1977 (n 38 above) s 3; this is of limited value in the context of this book because sch 1 para 1 provides that s 3 does not apply to land. 47 Trade Descriptions Act 1968, c 29, s 1(1); UK Consultation (n 5 above) [46]. 48 Misleading and Comparative Advertising Proposal (n 8 above) (B2C parts are transferred to the Unfair Practices Directive (n 5 above) and the remainder B2B will be consolidated; §1 will protect traders as defined in §2[d]; Draft Business Protection Regs 2007 (n 8 above). 49 UFC v Papeterie Tissot [1999] II JCP 10205, [2000] ECLYB [2216] French Cassation 1e ch civ. 50 Unfair Contract Terms Act 1977 (n 38 above) sch 1 para 1 restricting the scope of s 3; see below [5.12]. 51 Product Liability Directive 85/374/EEC [1985] OJ L210 29 only applies when defective components are incorporated into a building. It is perhaps open to question whether land is covered by the Indication of Prices of Products offered to Consumers Directive 98/6/EC [1998] OJ L80 27. 43 44
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guarantees.52 National law may apply the European legislation in order to keep domestic law applying to land and movables in step, as Germany did with the consumer sales legislation which provides a default system for sales of land and construction contracts.53 In other cases such as doorstep and distance selling a wide potential ambit is curtailed by exclusions for land, though not always watertight.54 European law has intervened to protect purchasers of timeshare units which may or may not be interests in land,55 and borrowers offering their land as security for consumer credit transactions occupy an intermediate position.56 So in general the protection of land-buyers as consumers is limited and patchy, but there are major exceptions calling for further discussion, that is unfair commercial practices, unfair contract terms and electronic commerce.
(1)
Unfair commercial practices
[5.11] Controls on unfair commercial practices treat land (immovable property) as a product in the same way as movable goods and services, the Directive affecting any conceivable thing that might be bought.57 Goods and non-financial services are subject to a maximal harmonisation, so that the same standard of unfairness of commercial practice has be applied in every EU-27 state once tougher national laws have been phased out over a transitional period due to end, unless extended, in 2013.58 Domestic law may not set the bar higher or lower, though British law apparently requires relatively little tinkering.59 Be that as it may, land, our primary concern, is treated quite differently, since domestic law may continue to impose ‘requirements which are more restrictive or prescriptive’, the more familiar minimal alignment.60 It is unnecessary to change legislation solely concerned with land.61 Marketing rules for land are bound to reach the European base line but are not bound to stop at that point. Legislation which embraces land and goods will either need to be changed or to be split into 52 Consumer Guarantees Directive (n 27 above) §1[1–2]; C Twigg-Flesner ‘Consumer Goods Directive’ (1999) 7 Consumer Law Journal 177–192; CU Schmid ‘European Influences on Real Property Law’ (Lund, EULIS, 2003) 10; C Bright & S Bright ‘Europe, the Nation State and Land’ ch 14 in S Bright & J Dewar Modern Studies in Property Law (Oxford, OUP, 1998, 0-19-876455-3) 373. 53 Bürgerliches Gesetzbuch (German Civil Code) §§631ff; Schmid (n 52 above) 10. 54 See below [5.19ff], [5.33ff]. 55 Timeshare Directive (n 11 above); see below [6.13ff]. 56 Consumer Credit Directive (n 10 above) §2[1](a), 2[3]; UK Consultation (n 5 above) 68; see below [9.02ff]. 57 Unfair Practices Directive (n 5 above) §2[c]. 58 Unfair Practices Directive (n 5 above) §3[5]–[6]; Doorstep Selling and Cold Calling (DTI 2004/1331) [11.4]; J Stuyck, E Terryn & J Van Dyck ‘Confidence Through Fairness’ (2006) 43 CML Rev 107–152, 115, 123. 59 UK Consultation (n 5 above) [42]. 60 Unfair Practices Directive (n 5 above) §3[9]; UK Consultation (n 5 above) [47]; Stuyck, Terryn & Van Dyck (n 58 above) 123; for financial services see below [5.34ff]. However, the Draft Unfair Trading Regs 2007 (n 5 above) refer throughout to a ‘product’ including land so all the substantive provisions will apply immediately to land. 61 eg Accommodation Agencies Act 1953, c 23; Estate Agents Act 1979, c 38 (as amended in 2007); Property Misdescriptions Act 1991, c 29; UK Consultation (n 5 above) 92, 95.
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parallel regimes.62 Land transactions are complex and involve major risks, as do financial services, so it is appropriate to impose positive disclosure requirements.63 That land is treated as a product when unfair commercial practices are deployed ends the old tendency to fight shy of property law. Implementation of the Directive at the end of 2007 (or in April 2008 in the case of the United Kingdom) will have a massive impact on the marketing of land since its basic tenets are that intervention is justified not when conduct is unconscionable but when there is bad faith, a widening of protection which is revolutionary and welcome. English traditions of marketing land will have to change, and change for the better.
(2)
Unfair land contracts
[5.12] Schmid says that: the Unfair Terms Directive does not contain an exception for contracts dealing with real property or contracts concerning other rights relating to real property. Therefore, standard clauses used in such contracts are subject to the terms of the directive.64
This was not true of pre-European domestic British law,65 but where protection is European the unfair terms legislation applies to land contracts as it does to goods. This was unclear in the 1994 version of the implementing Regulations which referred to goods,66 though what was intended67 was the French word ‘biens’ denoting ‘property’ in general, so that a ‘vendeur des biens’ could be selling movable property or land. Any possible doubt is removed by the 1999 rewrite of the Regulations68 which copy out the wording of the Directive more precisely and omit the earlier misleading reference to goods. Land contracts are protected against unfair terms.69
(3)
E-commerce
[5.13] The Directive regulating e-commerce applies to all forms of contract.70
62 The Mock Auctions Act 1961, c 47, and the Tourism (Sleeping Accommodation Price Display) Order 1977, SI 1977/1877, will be revoked: Draft Unfair Trading Regs 2007 (n 5 above) sch 4. 63 Unfair Practices Directive (n 5 above) R[9] §3[9] (there is a longer-term possibility of full harmonisation). 64 Schmid (n 52 above). 65 Unfair Contract Terms Act 1977 (n 38 above) sch 1 para 1; see below [8.30] n 164. 66 Unfair Terms Regs 1994 (n 32 above) regs 3(1), 3(2)(b) and passim (references to seller); Bright (n 52 above) 339. 67 M Allen ‘Teleological Interpretation in Land Law’ (1995) 58 MLR 696–701. 68 Unfair Terms Regs 1999 (n 9 above). 69 Newham LBC v Khatun [2004] EWCA Civ 55, [2005] QB 37; the case law is discussed below at [8.27ff]. 70 E-Commerce Directive (n 20 above) §2. However, its practical application is limited since states are allowed by §9 to limit e-contracting for land; see below [8.11].
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Unfair Commercial Practices Affecting Land 1
Unfair commercial practices
[5.14] Commercial practices affecting consumers when buying land will be regulated by the Unfair Commercial Practices Directive.71 This legislation has evolved significantly since the original proposal72 and has already generated a considerable literature.73 It has attracted enthusiastic support from the United Kingdom government, along with a little uncertainty about how to go about implementation.74 A framework is laid down for fairness of commercial practice, including misleading B2C advertising and inertia selling in distance contracts,75 whilst respecting existing sectoral rules.76 The Directive bites on marketing techniques affecting land as it does for all other forms of property, though harmonisation is minimal for land and financial services.77 Unfair commercial practice must be banned by the end of 2007, though the United Kingdom is running late and will have its Regulations in force on April 6th 2008.78 United Kingdom transposition should be relatively painless; we can expect a single piece of legislation looking more or less like the Directive and minor reform of overlapping legislation to incorporate the transactional decision test and pre-contract information requirements.79 Detailed changes will be made to existing consumer legislation,80 but there may be little substantive change for most honest traders.81
2
Contract
[5.15]
There are a number of vital limitations on the scope of the new European
Unfair Practices Directive (n 5 above). Unfair Practices Proposal 2003/0134 (COD), EM COM (2003) 356 final, Common Position 2003/0134 (COD), Parliamentary Amendments TA-PROV (2005) 0048. 73 H Collins The Forthcoming EU Directive on Unfair Commercial Practices (The Hague, Kluwer, 2004, 9-041-12224-9); G Black ‘Unfair CP Directive’ (2005) 33 Scottish Law Times 183–187; C Handig ‘A Milestone’ (2005) 16 European Business Law Rev 1117–1132; G Howells ‘Unfair Practices Directive’ [2003] ECLYB lxx–lxxiv; C Twigg-Flesner ‘Deep Impact?’ (2005) 121 LQR 386–389. 74 UK Consultation (n 5 above) 7. 75 See below [5.40ff]. 76 Unfair Practices Directive (n 5 above) R[10], §3[4]; EM (n 5 above) [44–45]; Draft Unfair Trading Regs 2007 (n 5 above) reg 2. 77 See above [5.11]. 78 The transposition deadline under §19 is December 12th 2007 but legislation has to be in place six months earlier. 79 UK Consultation (n 5 above) [198ff]; Draft Unfair Trading Regs 2007 (n 5 above) regs 2–7, sch 1. 80 Draft Unfair Trading Regs 2007 (n 5 above) schs 2–4; UK Consultation (n 5 above) ch 12; Government Response (n 5 above) 9ff; Consultation on 2007 Draft Regs (n 5 above) [3.61ff]. 81 Black (n 73 above). 71 72
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legislation. Facilitative contract law remains national,82 in particular domestic rules about the validity, formation and effect of contracts. The UK government is unlikely to change the rules of contractual validity, so contracts will not be voidable on proof of undue influence in the European sense.83 Unfair commercial practices must be proscribed in the sense that there will be powers to stop any such practice by injunction, but enforcement will be left primarily to civil law.84 It will be up to national governments to decide whether to impose criminal sanctions. The United Kingdom offence of unfair trading will require mens rea wheras the specific matters — unfair actions, omissions and blacklisted practices — will attract strict liability subject to defences of due diligence and innocent publication.85 The interesting question is the extent to which an individual consumer aggrieved by a trader’s conduct will be allowed to take action on his own account. There is no obligation under the Directive to allow such an action.86 If a European unfair commercial practice is proved it will not affect a transaction unless it is an invalidating factor under pre-existing domestic law, but the real issue is whether it should sound in damages. This is easily achieved by the imposition of a statutory duty,87 for which there are plenty of precedents in European transpositions, and one might anticipate that this will be the eventual outcome.88 Indeed, the proposal is that every substantive article should form a separate statutory duty. Legal action would be rare on account of costs and the civil reach of the common law will not be greatly extended given the wide range of trading activities which already sound in damages, but implementation of a right of civil action would increase transparency, improve compliance, and assist consumers to resolve problems.89 So the decision to treat land as a product, in relation to which unfair commercial practices will be outlawed, ends the old tendency to fight shy of property law. Implementation of the Directive in two years time will have a massive impact on the marketing of land, not least because its basic tenets are so widely divorced from common law traditions. Undue influence, European style, is not conceptualised in equitable terms as pressure equivalent to that needed to divest a 82 Unfair Practices Directive (n 5 above) §3[2]; N Reich ‘A European Constitution for Citizens: Reflections on the Rethinking of Union and Community Law’ (1997) 3 ELJ 131–164, 142ff; Schmid (n 12 above) 675–677; JK Winn & J Haubold ‘Electronic Promises: Contract Law Reform and E-Commerce in a Comparative Perspective’ (2002) 27 EL Rev 576–588, 572–573. 83 The common law standard for undue influence and duress is much higher: Twigg-Flesner (n 73 above) 386. 84 UK Consultation (n 5 above) [116ff]; Government Response (n 5 above) 5–7 (private action for all breaches too wide, so the issue is being referred to the Law Commission); see below [5.89]. 85 Draft Unfair Trading Regs 2007 (n 5 above) regs 8-19; UK Consultation (n 5 above) [6]; Consultation on 2007 Draft Regs (n 5 above) [3.21ff]. 86 Unfair Practices Directive (n 5 above) R[9]. 87 UK Consultation (n 5 above) [176ff]; Draft Unfair Terms Regs 2007 (n 5 above), regs 8, 9–12. 88 UK Consultation (n 5 above) [180–192]. 89 Draft Unfair Trading Regs 2007 (n 5 above) reg 27 inserting Enterprise Act 2002, c 40, sch 13 para 9C; ss 8–19; Draft Unfair Trading Regs 2007 (n 5 above) sch 2 para 86 amending Enterprise Act 2002 (Part 8 Community Infringements of Specified UK Laws) Order 2003, SI 2003/1374; Consultation on 2007 Draft Regs (n 5 above) [3.51ff].
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religious acolyte of her entire fortune,90 but merely as conduct strong enough to change the transactional decisions of an average consumer91; indeed, the whole shift from unconscionability as the threshold to bad faith is a lowering of the bar which is revolutionary and welcome. Equally revolutionary is the concept of unreasonable omission of information — the failure to disclose — which sits even more uncomfortably with English traditions. It remains to be seen to what extent property law will change, but the changes to marketing land will be real indeed.
DO O R STEP SELLI N G O F LA N D
Doorstep Selling of Land 1
Day tripping
[5.16] Contracts made away from the trader’s business premises are curbed by a Directive which creates a regime colloquially and inaccurately described as the Doorstep Selling Directive. It bites if a trader makes an arrangement to supply goods or services to a consumer during an excursion organised by the trader away from his business premises.92 This has attracted a fair share of commentary93 but scarcely enough to cope with all the complexities. What happens on that excursion may be the conclusion of a contract, or the making of a binding offer by the buyer, or the making of an offer for subsequent acceptance by the trader.94 The classic example of an excursion to buy land is Travel Vac v Sanchis.95 Sanchis was a Valencian who bought week 19 in a timeshare apartment at the Parque Denia residential development from a Valencian company under an arrangement signed at the timeshare complex in Denia, to which Sanchis had gone at the invitation of the seller.96 The offer was made at the apartment complex in the town of Denia (Spain) when the premises of Travel Vac were located at 5-60 Calle Profesor Beltran Baguena in the city of Valencia, so the contract was clearly negotiated away from the vendor’s normal business premises,97 the sales suite not being marked as premises where sales are made to
Allcard v Skinner (1887) 36 Ch D 145 CA. See below [5.43]. 92 Doorstep Selling Directive (n 6 above) §1[1]; C-481/99 Heininger v Bayerische Hypo- und Vereinsbank [2001] I ECR 9945 ECJ, J[3ff]; Contracts Away from Business Premises Regs 1987 (n 6 above) reg 3(1)(d). 93 Weatherill (n 1 above) 94–98; Pasa & Benacchio (n 3 above) 32–36; L Niglia ‘The Non-Europeanisation of Private Law’ (2001) 4 ERPL 575–599, 584–585. 94 Doorstep Selling Directive (n 6 above) §1[2]. 95 C-423/97 Travel Vac v Sanchis [1999] I ECR 2195 ECJ; as to why this fell outside the land exemption see below [5.19]. 96 Travel Vac (n 95 above) J[9]. 97 Travel Vac (n 95 above) J[29]. 90 91
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the public.98 Antelm Sanchis lived in Valencia, so he had to drive 70 km down the E15 to Denia, a significant journey99 which could be treated as an organised excursion given that the trader had told him on which day to travel and at what time.100 Sanchis had succumbed to letters pressing him to visit the timeshare complex, the offer of a luxury free gift, and numerous telephone calls. Once at the complex consumers were trapped for several hours while being plied with alcoholic drinks.101
2
The ‘doorstep’
[5.17] People call it the Doorstep Selling Directive102 but this is a misnomer, even for that limb which applies to visits to the consumer’s home. In fact the foot may be jammed in the door at the consumer’s place of work rather than his home, and of course many unsolicited visitors will eventually wheedle themselves inside the front door.103 No doubt the travelling chimney brush seller is kept standing outside, as is the spiv who arrives with the steaming remnants of a job lot of tarmac — ‘just the right quantity for your drive, sir’ — but the salesman of double glazing or foreign investment opportunities must eventually get inside the home. The doorstep is the first point of contact on an unsolicited visit but not necessarily the point of sale, and it goes without saying that the Directive applies to post-2001 homes104 constructed without a doorstep for ease of disabled access. A ‘visit’ is required, more than simply delivering a leaflet.105 It must be unsolicited, that is not at the express request of the consumer106 or made to a consumer who could not know that the visitor was a trader.107 Our domestic law also includes a case where the trader has telephoned the consumer out of the blue indicating that he is willing to visit the consumer and where the marketing visit is by a person related to the trader who ultimately sells a product.108 Subject to domestic rules, a visit is solicited if the consumer asks the trader to visit even if he ends up buying a different product from that in which he expressed an interest.109
Travel Vac (n 95 above) J[37]. Travel Vac (n 95 above) J[35]. 100 Travel Vac (n 95 above) J[28], J[36]. 101 Travel Vac (n 95 above) J[31]. 102 Contracts Negotiated Away from Business Premises Directive (Doorstep Selling) (n 6 above). 103 Doorstep Selling Directive (n 6 above) §1[1]. 104 Building (Amendment) Regs 2001, SI 2001/3335, Part M (disabled access). 105 Havair v Vile [2000] CLYB [848] County Ct. 106 Doorstep Selling Directive (n 6 above) §1[1]; Heininger (n 92 above) J[3ff]; Contracts Away from Business Premises Regs 1987 (n 6 above) reg 3(1). 107 Doorstep Selling Directive (n 6 above) §1[2]. 108 Contracts Away from Business Premises Regs 1987 (n 6 above) reg 3(3), reg 4A added by SI 1998/3050. 109 Doorstep Selling Directive (n 6 above) §2[3]. 98 99
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[5.18] Agents in Germany seem particularly addicted to pitching dodgy investments in land on random visits to punters’ homes, as shown by the Heininger110 family of cases. The Heiningers themselves bought an apartment in East Germany, encouraged by the availability of tax concessions in the east. The deal was set up by an estate agent acting on a self-employed basis as agent for the bank, who made several unsolicited visits to their home, though they signed the Grundschuld (mortgage) at the offices of the bank to cover borrowing of €75K. The pitch for the loan made to the Heiningers in their own home had the potential to be a doorstep sale.111 Schulte112 concerned old apartment blocks, again in Germany, which were bought up, renovated, and let out, the promise being that rental yields would cover the mortgage repayments of investors funding the scheme. The Schultes agreed a deal set up in three home visits and the paperwork was signed at their home. The promised rental yields failed to materialise, leading to default on the mortgage, their problems exacerbated by over-optimistic valuations.113 Yet another case, Crailsheimer,114 concerned investments in self-catering apartments in Stuttgart let to business people on a short-term basis, a kind of self-catering hotel; in this case several visits to the borrowers at home were involved to present calculation models, and later to complete the applications and to return the signed loan agreements.115 Home visits give rise to ‘doorstep’ deals: the puzzle discussed below116 is how each case dodged the land exemption.
3
Doorstep selling of land
[5.19] Land contracts are not generally affected even if they are negotiated away from business premises because of the term which precludes the application of the doorstep selling regime to: contracts for the construction, sale and rental of immovable property or contracts concerning other rights relating to immovable property.117
That bald formulation is misleading, given the eccentric interpretations adopted by the European Court of Justice, since doorstep protection does apply to the purchase of a timeshare118 and also to a credit agreement secured on land.119 Let 110 Heininger (n 92 above). Under the Directive, and German law as amended to fit, it is not necessary for a bank to be bound for the bank to know that a doorstep selling situation has been created by an agent; a bank must enquire: Bundesgerichtshof XI ZR 255/04, [2006] 08 ECL [64]; Bundesgerichtshof II ZR 327/04, [2005] ECLYB [1573]. 111 Heininger (n 92 above) J[25]; R Jordans ‘Recent ECJ Decisions on Doorstep Cancellation Rights: a German Perspective’ (2006) 21 Butterworths Journal of International Banking & Finance Law 75–78. 112 C-350/03 Schulte [2005] I ECR 9215 ECJ. 113 Schulte (n 112 above) J[52]. 114 C-229/04 Crailsheimer [2005] I ECR 9273 ECJ. 115 Crailsheimer (n 114 above) J[21]. 116 See below [5.19ff]. 117 Doorstep Selling Directive (n 6 above) §3[2](a). 118 Travel Vac (n 95 above). 119 Heininger (n 92 above).
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us consider first the bulk of cases in which the land exclusion is applied. The Heiningers120 bought an apartment in the eastern Länder (regions) of Germany, planning to make use of tax concessions, and when it turned out to be a bad investment they could not upset the purchase of the flat, even though it had been pitched to them in their home, under disadvantageous ‘doorstep’ conditions. The same is true of the deal to renovate residential apartment blocks in Schulte121 and the scheme to set up business-orientated self-catering apartments in Crailsheimer.122 In general a deal to buy land cannot be upset because of the circumstances in which it was negotiated.123 For this reason the litigation in each of the three cases just discussed focused on the land finance deal and whether it was then possible to attack the land purchase deal as being connected to the finance deal.124 [5.20] The European Court of Justice has treated the land exemption as a derogation from the general scope of the protection of consumers in their home and by interpreting the derogation narrowly is steadily chipping away at the apparent exemption for sellers of land. What were the Court thinking of in Travel Vac v Sanchis?125 He, Sanchis, bought week 19 in a furnished time share apartment in Parque Denia on an organised buying excursion.126 His purchase in September 1996 was just too early to benefit from cancellation rights under the Timeshare Directive,127 but the European Court of Justice preemptorily dismissed the suggestion that the timeshare and doorstep protections were mutually exclusive, since there were no express exclusions and no necessity to imply an exclusion.128 Thus the real issue was whether a mixed contract for land and services fell into the doorstep selling regime or into the land exemption. The case for exclusion is simple. A contract for a true timeshare will confer rights in the timeshare apartment itself, a tiny sliver of interest amounting to a 1/51st undivided share in a furnished flat. Spanish timeshares generally do create real rights in the immovable property itself,129 and it seems that Sanchis probably had a true timeshare that was swappable. The fact is that the European Court of Justice did not find it necessary to resolve the nature of the Sanchis timeshare. Technical distinctions were not thought of the least importance, and the doorstep selling regime was applied irrespective. Heininger (n 92 above). Schulte (n 112 above). 122 Crailsheimer (n 114 above). 123 It may nevertheless be better to offer a cancellation right because if a seller misjudges the land exemption he will have failed to provide notice of the right of cancellation and the transaction will remain cancellable indefinitely, whereas if notice is given all possibility of cancellation soon elapses; see below [5.74]. 124 See below [5.80ff]. 125 Travel Vac (n 95 above). 126 Travel Vac (n 95 above) J[9]; see above [5.16]. 127 See below [6.31ff]. 128 Travel Vac (n 95 above) J[22–23]. 129 Sanchis argued, but only half-heartedly, that he had no right in any particular flat: Travel Vac (n 95 above) J[19]. 120 121
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Marketing Land
[5.21] Let us assume, as seems probable, that Sanchis had a contract for the sale of land mixed up with a contract for associated services, by which Travel Vac were to maintain the building, manage the timeshare scheme, and lay on communal services, along with membership of the leading timeshare exchange club, Resort Condominium International.130 An overall price of 1 million pesetas was apportioned (by Travel Vac themselves and to their own disadvantage?) so that only three-tenths paid for the apartment, with the remaining seven-tenths consisting of tax, joint ownership of the furniture, services and membership of the exchange scheme.131 So it happened that the value of the services exceeded the use value of the flat.132 Surely this was a land contract, and the land component should have excluded the doorstep regime completely, or at least that part should have been severed so that the timeshare component of the contract was door-steppable (that is, free of control)? Instead the European Court of Justice took the strange decision to allocate the entire contract to one camp or the other, an allocation made not on the basis of the feeling of the contract133 but solely on economic value.134 As the Commission had argued, so the Court decided.135 This extra-legislative extrusion may be difficult to apply. We know how it works with a 3:7 split, and may presume therefore that the reverse is true if the split is 7:3, but what of 51:49 as against 49:51? The economic test applied must, it is felt, be a particular illustration of an underlying qualitative test. The decision in Sanchis is one way to make an inadequately drafted Directive work, but not the best way. On any normal reading of the land exclusion, and the United Kingdom transpositor was indeed a very normal reader, that was enough to ensure that Travel Vac were unhindered in their marketing of Sanchis’ timeshare. [5.22] Of course, if the contract is for the sale of a house or flat that is under construction the contract is outside doorstep protection because both the sale and the construction elements are separately excluded,136 so the point at which the value tips from construction-predominant to land-predominant is not the point at which protection accrues. Construction contracts must be all in or all out, and the rule is all out. All in would have been better. After all, a developer of a flat scheme could act exactly as the timeshare vendor in Denia, or worse, and there is no reason to exempt a seller who resorts to organising excursions or dropping in on potential buyers at home.
Travel Vac (n 95 above) J[10]. Travel Vac (n 95 above) J[11]. Surely the inclusion of any tax on land is very odd. 132 This is tested by reference to a single legal transaction and it is not legitimate to split the overall deal into its component parts: Schulte (n 112 above) J[78]. 133 A contract to buy a flat ‘feels’ like a land contract, even if the block of flats is in such serious disrepair that the capitalised value of the service charge exceeds the value of the flat. 134 Travel Vac (n 95 above) J[17]. 135 Travel Vac (n 95 above) J[25]. 136 Doorstep Selling Directive (n 6 above) §3[2](a). In the UK this is an ‘excepted contract’: Contracts Away from Business Premises Regs 1987 (n 6 above) reg 3(2). 130 131
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207
Finally, one should mention the de minimis exception137 up to €60 (£35), the exclusion of insurance contracts,138 and one or two minor exceptions unlikely to affect buyers of land.139
4
Land in the United Kingdom and property repairs
[5.23] National transposition is, unsurprisingly, erroneous in several states, not least the United Kingdom. It could scarcely be otherwise given the unpredictability of the Travel Vac decision.140 Regulations made in 1987 eschew the widespread colloquialism ‘doorstep’ for Teutonic literalism in applying consumer protection to the Cancellation of Contracts Concluded Away from Business Premises. Better to be a cavalier, Wrong and Wromantic, than a roundhead, Right and Repulsive,141 but worse still to be like the transpositor, Wrepulsive and Wrong. It gives a wider exception than is justified by European case law because the inherent scope of the domestic transposition is limited to movable goods, using a domestic definition rehashed from the sale of goods legislation.142 That does not sit well with the protection of a timeshare sold on a day trip and indeed if (European) goods equated to (English) goods both the European and English exclusion of land would be superfluous. British transposition confines its scope to sales of goods and then treats as an ‘excepted contract’ ‘any contract (i) for the sale or other disposition of land, or for a lease …’,143 an exclusion which must lack all content. The European legislation must use ‘goods’ in a wider sense, rather like the ‘biens’ of the European Convention, since only then does it make some sense to exclude land.144 A further category of ‘excepted contract’ is for mixed construction and land sale contracts, as already considered.145 A contract for a new-build house or flat is located firmly in the excepted land category. [5.24] Contractors selling repairs to land might possibly be seen as land contractors and so free to doorstep, but they are brought back in to the net as traders who make ‘contracts for the supply of goods and for their incorporation 137 Doorstep Selling Directive (n 6 above) §3[1]; Contracts Away from Business Premises Regs 1987 (n 6 above) reg 3(2). 138 Doorstep Selling Directive (n 6 above) §3[2](d); Contracts Away from Business Premises Regs 1987 (n 6 above) reg 3(2)(d), using the Insurance Companies Act 1982 definition. 139 Supply of food or drink to a household by regular roundsmen, catalogue sales and contracts for securities. 140 See above [5.16]. 141 WC Sellars and RJ Yeatman 1066 And All That (London, Methuen, 1930) ch 35. 142 Contracts Away from Business Premises Regs 1987 (n 6 above) reg 2(1); Sale of Goods Act 1979, c 54, s 61(1). 143 Contracts Away from Business Premises Regs 1987 (n 6 above) reg 3(2). ‘Land mortgage’ includes any security charged on land or a Scottish heritable security. ‘Security’ in relation to a contract means a mortgage, charge, pledge, bond, debenture, indemnity, guarantee, bill, note or other right provided by the consumer, or at his request (express or implied), to secure the carrying out of his obligations under the contract. 144 E Conv HR Protocol 1 (Paris, 1952, CETS 9) §1, generally translated as ‘possessions’. 145 See above [5.22].
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Marketing Land
in immovable property or contracts for repairing immovable property’.146 The United Kingdom adopts an almost clean transposition, a copy out, but there is a sting in the tail in the shape of a (wrongful) exclusion of repairs financed by a secured loan, a tricky point which needs to be considered anon.147 Taken collectively, property repairs are the most important economic area affected by the doorstep selling controls. Property maintenance is high volume and high value. Home visits generate £2.4 billion a year worth of business, of which £1.6 billion is spent on double glazing, and another £250 million on conservatories. Around 4 per cent of double glazing contracts are cancelled, more than 6K a year, but many attempted cancellations fail, and there are many other abuses.148 [5.25] Investigation of a ‘supercomplaint’ about home improvements149 revealed that 94 per cent of British consumers were unaware of rights after unsolicited visits. Hence the proposed ban on cold calling.150 Around six out of ten contracts follow solicited visits, in which there is currently no cooling-off period, a lacuna that should be plugged. During the period allowed for cooling-off both the commencement of work and taking advance payments should be banned, and that period should be left for the perusal and digestion of the information provided about cancellation rights and the information provided in writing about pricing on the principle of transparency, either a price list or a detailed quotation.151 The Consumers, Estate Agents and Redress Act 2007152 extends cancellation rights to contracts made during visits that are solicited.
5
Doorstep selling of land finance
[5.26] An overwhelming case can be made for controlling sales of credit on the doorstep,153 but the European legislator seemed to eschew that area since the doorstep selling regime has a wide land exception encompassing straightforward sales and all other contracts for rights relating to land.154 A cursory reading suggests complete freedom in the marketing of secured loans, but the European Court of Justice by a strict reading of the derogation155 has succeeded in reversing the legislation and taking control of secured loan financing sold on the doorstep
Doorstep Selling Directive (n 6 above) §3[2](a). Contracts Away from Business Premises Regs 1987 (n 6 above) reg 3(2); see below [5.82ff]. 148 Doorstep Selling and Cold Calling (n 58 above) [3.5], [12]. 149 Doorstep Selling and Cold Calling (n 58 above) [3.8]; ‘OFT Seeking to Close Doorstep Selling Loophole’ [2004] NLJ 757. 150 Doorstep Selling and Cold Calling (n 58 above) [8]; Property Repairs (Prohibition of Cold Calling) Bill 2004 (a Private Member’s bill which fell). 151 Doorstep Selling and Cold Calling (n 58 above) [4–10]. 152 Consumers, Estate Agents and Redress Act 2007, c 17, s 59; this is very different from the proposals of the Doorstep Selling (Property Repairs) Bill 2004. 153 Doorstep Selling Directive (n 6 above) R[4–5]; Heininger (n 92 above) J[27], J[34]. 154 Doorstep Selling Directive (n 6 above) §3[2](a); Heininger (n 92 above) J[25–26]. J[29]. 155 C-203/99 Veedfald [2001] I ECR 3569 ECJ, J[15]; Heininger (n 92 above) J[30]. 146 147
Doorstep Selling of Land
209
or away from business premises. Heininger156 establishes the possibility of the cancellation of a loan secured on a flat under the Doorstep Selling Directive, after the parallel right of cancellation as a consumer credit agreement has elapsed. The consequences of withdrawal are left to national law, and the issue now up for grabs is the extent to which European law prescribes those consequences. The right may, or may not, be almost worthless. An assessment of the likely outcome can only be made after the issue has been placed in context. [5.27] Tax concessions were granted on investments in land situated in former East Germany, and these encouraged the Heiningers, Georg and Helga, to buy a flat there in 1993. In order to do so they borrowed €75K from a bank, secured by a Grundschuld, a charge on the land similar to a mortgage.157 The deal was set up by an estate agent acting on a self-employed basis as agent for the bank, who made several unsolicited visits to their home, though they signed the mortgage at the offices of the bank. The pitch for the loan made to the Heiningers in their own home had the potential to be a doorstep sale.158 It took five years, until January 1998, for it to become apparent that their eastern adventure would turn out to be a bad investment. The Heiningers then wanted to withdraw from the loan and purchase, by revoking their declaration of intent to enter into the loan agreement, claiming to use the German doorstep selling law.159 Since the door-stepping agent had not informed them of their right of cancellation and in those circumstances it was unlimited in time, the Heiningers were still in time to resile.160 [5.28] Control of the Heiningers’ agreement seemed to be precluded by the exception to the doorstep selling regime for all contracts for rights relating to land, wording surely intended to include an agreement to provide security over land?161 The European Court of Justice reached the opposite conclusion.162 An advance used to fund the acquisition of land is linked to the land by the use of a charge to secure the loan on the land, but that linkage was not enough for the entire credit agreement to become a contract concerning a right relating to the land.163 Rather, the subject matter is a grant of funds and a correlative obligation to repay what is borrowed with interest.164 This nature is determined from the limited perspective of the consumer, since the provision of security is the key so far as the lender is concerned and the reason a loan is offered at a beneficial interest rate. The Heiningers’ credit cancellation right was already time-expired165 156 157 158 159 160 161 162 163 164 165
Heininger (n 92 above). Heininger (n 92 above) J[16–17]. Heininger (n 92 above) J[25]. Gesetz über den Widerruf von Haustaugeschaften, BGBl I 122, §1. Heininger (n 92 above) J[17]. Doorstep Selling Directive (n 6 above) §3[2](a); Heininger (n 92 above) J[25–26], J[29]. Veedfald (n 155 above) J[15]; Heininger (n 92 above) J[30]. Heininger (n 92 above) J[32]. Heininger (n 92 above) J[33]. Heininger (n 92 above) J[36–39]; see below [5.82].
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so they got extra time to cancel by being placed in the doorstep selling regime. The decision not to apply the doorstep land exclusion is ludicrous, considering secured lending solely from the perspective of the borrower as primarily concerned with a loan and its repayment whilst the lender regards the security over the land as of paramount importance. Nevertheless Heininger is established as a fount of authority followed so far in two further cases, Schulte166 and Crailsheimer,167 in each of which the consumer was able to resile from loans used to finance land acquisitions. Given the artificiality of the European Court of Justice’s decisions, it is no surprise to find erroneous transposition and practical uncertainty, and particularly uncertainty on the key issue which is whether a Heininger cancellation is a protection without content, a trap even? This last issue is crucial and hangs in the balance and it turns on whether it is the finance deal or the land acquisition and finance combined for which cancellation is to be allowed, an issue considered below.168
6
Doorstep selling of land finance in the United Kingdom
[5.29] The United Kingdom transposition reveals a familiar voyage in the Parliamentary Counsels’ Office from a clear European concept written in defective English through a process of translation into precise legislative English where the end point of the journey just happens to be completely different from the destination reached by the European Court of Justice on its parallel voyage of interpretation. Regulations transposing the controls in the United Kingdom are limited to goods (English sense), leaving the domestic scope too narrow to catch those (few) cases where land is partially within the European net. Nevertheless a contract for a loan secured on land might be treated as a contract for a financial service, and so it is necessary to exclude loans where the security is land, an exclusion carried out for four categories of financing contracts: 앫 앫 앫 앫
land mortgages,169 finance for the purchase of land, bridging loans in connection with the purchase of land, or finance for goods supplied so as to be incorporated into land or for the repair or improvement of a building, where secured by a land mortgage.170
Schulte (n 112 above). Crailsheimer (n 114 above). 168 It is possible that a consumer may obtain damages for failure of advice, a useful second prize: Oberlandesregericht München 19 U 3717/04, [2006] 04 ECL [63]; see below [5.82]. 169 Contracts Away from Business Premises Regs 1987 (n 6 above) reg 3(2). ‘Land mortgage’ includes any security charged on land in the form, eg, of a mortgage, charge, pledge or debenture, indemnity, or guarantee, when provided by the consumer and also out of protection is a guarantee provided at the request (express or implied) of a consumer, as well as a Scottish heritable security. 170 Contracts Away from Business Premises Regs 1987 (n 6 above) reg 3(2). 166 167
Distance Rentals
211
So doorstep selling of a loan secured on land is not controlled by United Kingdom domestic law, and this does not chime with European law as expounded judicially. Mortgages should be controlled if sold on the doorstep or during an excursion. How could Parliamentary Counsel have thought otherwise! Domestic laws may go further and introduce a total or partial prohibition on the conclusion of contracts away from business premises,171 but this step has not been taken in our domestic law.
DI STA N CE R EN TA L S
Distance Rentals 1
The European regimes
[5.30] Two regimes exist, according to the nature of the thing being sold at a distance, and these operate in parallel with a common underlying structure.172 So far as land is concerned each regime includes rentals but excludes other land contracts.173 The first covers goods and non-financial services174 with a few minor exceptions175 and has been implemented in the United Kingdom176 and elsewhere in the EU.177 Financial services include banking, credits, insurance, personal pensions, investments and payments178 and at first fell into a gap.179 Marketing over the internet is increasing and hence there is more cross-border selling and a need for a high degree of consumer protection.180 Hence the adoption in 2002 of a second Directive181 relating specifically to the distance selling of financial Doorstep Selling Directive (n 6 above) R[11]. M Donnelly & F White ‘Distance Selling Directives — Time for Review’ (2005) 56 NILQ 200–236, 200. 173 Weatherill (n 1 above) 104ff; Pasa & Benacchio (n 3 above) 69ff; Guide for Businesses on Distance Selling (Office of Fair Trading, 2006); see below [5.33ff]. 174 Distance Selling Directive (n 7 above); VK Bange ‘Impact of the Distance Selling Directive’ (2000) 10 International Technology & Computer Law Journal 3–6; J Newton ‘Keeping the Customer in the Know’ (2001) 3 European Business Lawyer 16; P Meads ‘Distance Selling’ (2002) 13 International Company & Commercial Law Review 179–182. 175 Those not relevant to land are given in Distance Selling Directive (n 7 above) §3[1]. 176 Distance Selling Regs 2000 (n 7 above); ES Singleton ‘Distance Selling Regs’ (2000) 164 Justice of the Peace 98–99, 104. 177 Some random examples: Malta Distance Selling Regulations 2001 [2001] ECLYB [589]; Netherlands [2000] Stb 617, [2001] ECLYB [553]; Germany [2000] BGBL (D) I 897, [2000] ECLYB [580]; JL Achirica ‘Distance Selling in Spanish Law’ [1998] 6 Consumer Law Journal 339–358; Decree 2005-1450 [2006] JORF 18364, [2006] 01 ECL [54]. 178 Distance Marketing of FS Directive (n 7 above) §2[b]. 179 Donnelly & White (n 172 above) 207. 180 Distance Marketing of FS Directive (n 7 above) R[2–6] 181 Distance Marketing of FS Directive (n 7 above); Green Paper FS — Meeting Consumers’ Expectations COM (96) 209 final; a review has been delayed until 2008: §20; Communication from the Commission concerning Distance Marketing of FS COM (2006) 161 final. 171 172
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Marketing Land
services182; it has, of course, been taken up in the United Kingdom183 and Europe-wide by transposition into the civil codes of continental countries184 in order to approximate laws.185 Activities are divided so as to fall into one or other Directive but not both.186
2
Means of contracting at a distance
[5.31] Distance contracts are those made over the internet or by any other means of communication at a distance when the circumstances are such that the trader and the consumer never meet face-to-face. Contracts can be concluded between parties who are not physically present simultaneously.187 A consumer who goes shopping in person can see the product on offer and pay then and there. Cheaper prices are found on the internet but without a chance to examine what one is buying and with an inherent risk of fraud when payment is made in advance.188 So the absence of face-to-face dealing calls for special controls when the case fits into the B2C pattern189 but not, for example, for an e-mail exchange between two private individuals. Marketing over the internet enables traders from elsewhere in Europe to sell in the internal market, with internal boundaries crossed unnoticed and without border checks.190 Pan-European marketing implies the need for a continental scale to consumer protection laws to a common minimum standard.191 [5.32] Distance methods of communication are included in a list which is indicative and non-exhaustive.192 Print media include general printed circulars, letters addressed to specific consumers, press advertisements with attached order 182 A Davis ‘Proposed EC Directive on Distance Selling of FS’ (2001) 9 Journal of Financial Regulation and Compliance 56–66; N Moloney ‘Distance Marketing of FS’ (2000) 21 Company Lawyer 198–206; P Reese ‘Distance Marketing of FS’ (2004) 20 Computer Law & Security Report 53–56; M Orlino ‘Cross-border On-line FS’ (2004) 15 European Business Law Review 367–379; K Felke & R Jordans ‘Implementation in the UK and Germany’ (2004) 29 Journal of International Banking Law and Regulation 188–192. 183 FS Distance Marketing Regs 2004 (n 7 above). 184 Spanish Law 47/2002 [2003] ECLYB [350]; Decree 2005-1450 (n 177 above). 185 Distance Marketing of FS Directive (n 7 above) R[13], §1[1]. 186 Distance Selling Directive (n 7 above) §3[1] amended by Distance Marketing of FS Directive (n 7 above) §18[1]; Distance Selling Directive Annex II (list of excluded FS) repealed by Distance Marketing of FS Directive §18[2]; Distance Selling Regs 2000 (n 7 above) reg 5(1)(c) as amended by FS Distance Marketing Regs 2004 (n 7 above) reg 25. 187 Distance Selling Directive (n 7 above) §2[1]; Distance Selling Regs 2000 (n 7 above) reg 3(1); Distance Marketing of FS Directive (n 7 above) R[15], §2[a]; FS Distance Marketing Regs 2004 (n 7 above) reg 3. Also where an intermediary is used. An important authority on when a distance contract is made is Robertson’s Electrical v Customs & Excise Commissioners [2007] STC 612 (VAT tax point at date of on-line payment). 188 Donnelly & White (n 172 above) 201, 202. 189 See above [5.05]. 190 Distance Selling Directive (n 7 above) R[1–3]; Donnelly & White (n 172 above) 203. 191 Distance Selling Directive (n 7 above) R[4], §1. 192 Distance Selling Directive (n 7 above) §2[4], Annex I; Distance Selling Regs 2000 (n 7 above) reg 3(1). Curiously this is taken as read in relation to financial services.
Distance Rentals
213
form, and catalogues. Telephone marketing is controlled, including videophone and videotext, whether the caller is human or an automated machine, though controls remain inadequate. Broadcast media include teleshopping and radio adverts. Fax (facsimile machine) has had its day though spamming is just as irritating as cold calling.193 European commerce is now developing via electronic mail and other internet technologies. Principles are stated with sufficient flexibility to enable adaptation to new technologies as they emerge194 though this entails lack of clarity and significant problems for suppliers of financial services.195 A miscellany of other points: a consumer is entitled to change the means of distance communication used196; auction sales are excepted but the status of eBay is unclear197; and some means of distance communication may be banned as unfair practice.198
3
Land, finance for land and rentals
[5.33] Distance contracts for land are generally outside the scope of protection. All products are within the initially wide embrace but this is hacked into shape by a wide-ranging exemption for the majority of land contracts except for rental. So a business can contract to sell land to a consumer over the internet without a face-to-face meeting, without worrying about information requirements and withdrawal rights.199 The exclusion consists of any distance contracts for the construction and sale of immovable property or relating to other immovable property rights apart from rental.200 Transposition to British law201 excludes land and buildings separately, with the European exception of rental agreements repeated in both limbs, but why the transpositor thought this necessary is hard to tell given the general legislative practice of treating a building as land.202 [5.34] Land finance is an example of a financial service which, if arranged over the internet or otherwise at a distance, is subject to a separate Directive in which the land exclusion is permissive, meaning that national legislation is free to apply
See below [5.52]. Distance Selling Directive (n 7 above) R[9]; Distance Marketing of FS Directive (n 7 above) R[15]. 195 S MacKenzie ‘To Be or Not to Be a Distance Contract’ (2004) 09 Compliance Monitor 13–15. 196 Distance Marketing of FS Directive (n 7 above) §5[3]; FS Distance Marketing Regs 2004 (n 7 above) reg 8(4); unless incompatible with the contract or the nature of the FS provided. 197 Distance Selling Directive (n 7 above) §3[1]; Distance Selling Regs 2000 (n 7 above) reg 5(1)(f); Donnelly & White (n 172 above) 210. 198 See below [5.52]. 199 See below [5.64ff], [5.73ff]. 200 Distance Selling Directive (n 7 above) §3[1]. The Netherlands excluded construction of buildings but not the sale of land: Communication on Distance Contracts (n 181 above) [4]; otherwise implementation is good; Annex I of the Directive has a table of implementing measures. 201 Distance Selling Regs 2000 (n 7 above) reg 5(1). Harmonisation is minimalist, so national law could apply the European regime to land. 202 Law of Property Act 1925, c 20, s 205(1)(ix). 193 194
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Marketing Land
the European rules to land; the scope of the permitted exception being contracts to provide credit203: 앫 intended primarily for the purpose of acquiring or retaining property rights in land or an existing or projected building or for the purpose of renovating or improving a building; or 앫 secured either by mortgage on immovable property or by a right related to immovable property.204 Where local law at the time of adoption of the Directive allowed time for reflection for credit secured on land of these types, it must still be allowed to consumers resident in that state. [5.35] The market in financial services is mutating rapidly, as can be seen from the need for revision of the regulatory ambit of the Financial Services Authority which took over control of the mortgage market at the end of October 2004.205 At first it covered any contract to provide credit under which the borrowers’ repayment obligation is secured on land, but this had to be extended to cover closely related forms of financial activity under which a financier acquires a major interest in land from the person in receipt of the finance, a major interest being a legal or equitable fee simple absolute or a term of years absolute. Newly covered, therefore, are home reversion schemes in which an elderly person sells their home to a reversion provider in return for a lump sum, income and rent-free occupation of their home for life.206 A level playing field is created for an Islamic finance product, the ijara, and for flexible tenure products which enable home-owners to increase or decrease equity ownership by transferring interests to and from a private sector finance provider. [5.36] Rental contracts by which an arrangement to take accommodation is concluded over the internet or otherwise at a distance are affected by marketing controls.207 English jargon defines a ‘rental agreement’ in terms of exemption from formality, that is the short leases and contracts for three years or less which could be made without writing.208 The more generic European wording applies to an agreement made in Britain to rent accommodation elsewhere in Europe.209 203 Distance Marketing of FS Directive (n 7 above) §6[3]. National laws are collected together by the Commission: §6[4–5]. 204 As to France and Belgium see below [9.01] n 1. 205 Financial Services and Markets Act 2000, c 8, s 22, sch 2 para 23; also sch 2 para 23A to be introduced by the Financial Services (Land Transactions) Act 2005, c 24; a very helpful Explanatory Memorandum was attached to the Bill. 206 Regulating Home Reversion Plans (HM Treasury, 2003); Defining Home Reversions (HM Treasury, 2004); Consultation Responses (HM Treasury, 2004). 207 Distance Selling Directive (n 7 above) §3[1]. 208 Distance Selling Regs 2000 (n 7 above) reg 5(2)(a); Law of Property (Miscellaneous Provisions) Act 1989, c 34, s 2(5)(a); this is more or less the same exemption as Law of Property Act 1925 (n 202 above) s 54(2); P Sparkes ‘Informal Short-term Leases’ [1992] Conveyancer 252–262, 337–342. Corresponding provisions elsewhere in the UK are Requirements of Writing (Scotland) Act 1995, c 7, s 1; Statute of Frauds (Ireland) 1695, 7 & 8 William III c 22, s 11. 209 Distance Selling Regs 2000 (n 7 above) reg 5(3).
Distance Rentals
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[5.37] Agreements to provide accommodation short of a property rental are subject to a partial exclusion for: contracts for the provision of accommodation, transport, catering or leisure services, where the supplier undertakes, when the contract is concluded, to provide these services on a specific date or within a specific period.210
Many of the sharpest-cutting provisions against distance contracts are disapplied but there are two important controls: (1) the consumer has the right to be informed if the accommodation is unavailable and to be offered a refund at the latest within 30 days, and (2) the supplier may substitute equivalent accommodation provided that the consumer has been informed of this possibility in advance in a clear and comprehensible fashion.211
4
Timeshares
[5.38] Timeshares bought at a distance may potentially attract the protection of the distance contracting regime as well as the timeshare regime: internet marketing of timeshare could be a real menace,212 there is a strong case for protection, and there is no clearly expressed legislative intention to segregate the two regimes.213 All then turns on the nature of the particular timeshare contract. If it is a land transaction no extra protection accrues because of the land exemption from the distance selling regime214; if it is a contract for accommodation the two limited controls just described will apply.215 If a timeshare is a rental the full distance selling regime applies. Transposition in the United Kingdom is erroneous because it excludes completely timeshare agreements216 and timeshare credit agreements.217 A complete exclusion as enacted assumes that a timeshare agreement is a land contract, is not a rental, and not an accommodation agreement. All three points are wrong: 1 A timeshare agreement will not be a contract for a sale of immovable property if the timeshare is points-based or where the value of services predominates over the value of the accommodation.218 The domestic definition219 relied upon should include all timeshares in the European sense as well as some Distance Selling Directive (n 7 above) §3[2]; there is a rider relating to outdoor leisure events. Distance Selling Directive (n 7 above) §7[2–3]. 212 Report March 2000 COM (2000) 127 final, [4.1]. 213 Communication on Distance Contracts (n 181 above) shows that Hungary, Denmark, Slovenia and the UK exclude distance controls of timeshare selling, but all other states allow it; see above [6.33]. 214 See above [5.33]. 215 See above [5.36]. Distance Selling Regs 2000 (n 7 above) reg 19(2)–(8) needs amendment. 216 Distance Selling Regs 2000 (n 7 above) reg 6(1) disapplying regs 7–20. 217 Distance Marketing of FS Directive (n 7 above) §6[7]; instead Distance Selling Directive (n 7 above) §6[4] or Timeshare Directive (n 11 above) §7 apply. 218 See below [6.14]. 219 Distance Selling Regs 2000 (n 7 above) reg 6(1); Timeshare Act 1992, c 35; see below [6.33]. 210 211
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(timesharing in caravans or as an investment) which is purely domestic. A timeshare may or may not create rights in particular land according to the way that a timeshare is structured and the domestic exclusion of timeshares from distance controls needs reshaping to apply only where the timeshare happens to be a true sale of land. 2 Is it a rental? If the timeshare is in the United Kingdom, the question is whether the lease falls into the short lease exemption, which turns on whether the term is for more or less than three years. The transpositor seems to have assumed that the term must be continuous, but he was obviously trained in pre-1926 law when a lease was short only if the time from its grant to its termination fell within three calendar years; as reworded in 1925 the crucial question for timeshares in England is the length of the term. Each sliver of exclusive possession under a discontinuous term must be added together to find an aggregate, so that one week intervals aggregated over an 80 year term would last less than two years, but a two week interval would give an overall term too long to fit within a three year rental exemption. If a right stretches from 4 pm on Saturday to 10 am on the Saturday following should one count a full week or should one count up hours like an office worker waiting for the weekend? The outcome is a matter of chance. Most intervals will be spent overseas when all one needs to ask is whether the agreement amounts to a rental. 3 This is the converse of the last point, since if a timeshare is not an ordinary rental it will be an accommodation agreement. 220
5
Policy objectives
[5.39] Apart from a ban on inertia selling, the main policy objectives of the distance selling regime are to provide: 앫 comprehensive information at a pre-contract stage; and 앫 withdrawal rights linked to a cooling-off period.221 UN FA I R MA R KETI N G PR ACTI CES
Unfair Marketing Practices 1
General ban on unfair commercial practices
[5.40] Unfair practices will be prohibited in commercial B2C marketing,222 proposals which have met with a general welcome but much picking at
220 221 222
Sparkes (n 208 above) 337–342, 253. See below [5.64ff], [5.73ff]. Unfair Practices Directive (n 5 above) §5, Unfair Practices EM (n 5 above) [53ff].
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details.223 Commercial practices are widely defined. Pre-contract activities already controlled included advertising, commercial communications and marketing, but the new regime extends wider to any acts or representations made in connection with the promotion, sale or supply of a product by a trader to a consumer, the active side, and on the passive side it will also catch omissions in commercial communications, most notably when an invitation to purchase is made.224 Practices may also take place at the point of sale (though excluding from the European ambit rules of contractual formation) and also included for the first time are commercial practices occurring after sale (after-sales service).225 Apart from the inherent limitation to B2C contracts,226 there will be no impact on intellectual property rights, competition rules or health and safety principles.227 Building regulations and standards of fitness for rental property remain national concerns and need not be kept in line with other European states. Brussels will eschew control over professions, their authorisation regimes, and ‘deontological’ codes of conduct — such as the Law Society rules about solicitors practising as conveyancers.228 Two vital limits do exist on the EU scope, already discussed. Facilitative contract law remains national, in particular domestic rules about the validity, formation and effect of contracts,229 and further, the Directive does not alter national rules for individual actions brought by those who have been harmed by an unfair commercial practice, though as suggested above some at least of the fair trading duties may well end up in the United Kingdom as statutory duties.230
2
General prohibition
[5.41] Fairness is tested at three levels.231 A general clause requiring fair trading is a departure for the common law but on the continent it will do no more than replace a multiplicity of similar rules 223 C Handig ‘A Milestone in European Unfair Competition Law?’ (2005) 16 European Business Law Review 1117–1132; G Howells, H Micklitz & J Wilhelmsson European Fair Trading Law (Aldershot, Ashgate Dartmouth, 2006, 0-7546-458-4); C Poncibo & R Incardona ‘A Faltering First Step’ (2005) 1 London Law Review 317–337; Stuyck, Terryn & Van Dyck (n 58 above) 143 (major step forward but not without faults). 224 Unfair Practices Directive (n 5 above) §2[d]; see below [5.50]. 225 Unfair Practices Directive (n 5 above) R[13], §3[1], Unfair Practices EM (n 5 above) [30], [59]. 226 See above [5.05]. 227 Unfair Practices Directive (n 5 above) R[9], §3[2]–[3]. The scope also excludes general criminal laws against fraud, theft and harassment: UK Consultation (n 5 above) [45]. 228 Unfair Practices Directive (n 5 above) §§2[l], 3[8]. For native English speakers deontology is the science of duty, that branch of knowledge dealing with moral obligation. 229 Unfair Practices Directive (n 5 above) R[9], §3[2]; UK Consultation (n 5 above) Annex I suggests no change for the Misrepresentation Act 1967 c 7, Unfair Terms Regs 1999 (n 9 above) and Unfair Contract Terms Act 1977 (n 38 above). 230 See above [5.15]. 231 Stuyck, Terryn & Van Dyck (n 58 above) 109, 133 (interplay between grand general clause, small general clauses and blacklist).
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with a single standard.232 Calls on the autonomous general prohibition should be infrequent, but its loose texture will catch new scams as they are thought up. It will apply to any B2C commercial practice within the scope of the Directive. Those affected are practices contrary to the standard of professional diligence with a materially distorting effect. None of this takes into account the motives of the trader.233 These aspects are now considered in turn.
(1)
Lacking professional diligence
[5.42] A trader who fails to display professional diligence runs the risk that his practice will be found to be unfair, that is, he falls short of the standard of special skill and care which a trader may reasonably be expected to exercise towards consumers, commensurate with honest market practice and/or the general principle of good faith in the trader’s field of activity.234 Conduct short of that standard is potentially unfair, but it becomes a prohibited practice only if it also meets the test of material distortion considered next below. In other words, all of these tests are cumulative.235
(2)
Material distortion and the average consumer
[5.43] Distortion of economic behaviour will be determined according to a single autonomous test.236 Commercial practices will be barred only if they influence directly transactional decisions made by consumers, that is, they affect the decision to buy, how and on what terms, how to pay, whether to retain or dispose of a product, whether to exercise a contractual right, and whether to act or to refrain from acting.237 Matters of taste, decency and social responsibility remain a national responsibility.238 Europeans are sophisticated enough to enjoy product placement and brand differentiation commercials without taking them literally, and these practices will remain legitimate.239 Practices must also be material. A free cup of coffee will have a minimal impact on an average consumer, but the offer of a free copy of European Land Law might be a much more significant enticement.240 232 Unfair Practices Directive (n 5 above) R[13], EM [20], EM [49–52]; Draft Unfair Trading Regs 2007 (n 5 above) reg 3; C-73/04 Klein v Rhodos Management [2005] I ECR 8667 ECJ, AG[11] Geelhoed (good faith argument left to German court). The UK criminal sanction requires mens rea under Draft Unfair Trading Regs 2007 (n 5 above) reg 8. 233 Black (n 73 above). 234 Unfair Practices Directive (n 5 above) §2[h]; Draft Unfair Trading Regs 2007 (n 5 above) reg 2. 235 UK Consultation (n 5 above) [74]. 236 Unfair Practices Directive (n 5 above) R[11]. 237 Unfair Practices Directive (n 5 above) R[7], §2[k]. Aggressive debt collection would be covered because deciding how and whether to make payment is a transactional decision: UK Consultation (n 5 above) [32–34]; Draft Unfair Trading Regs 2007 (n 5 above) reg 2. 238 Unfair Practices EM (n 5 above) [39]; Unfair Practices Directive (n 5 above) R[7] gives the example of banning commercial solicitation in the street. 239 Unfair Practices Directive (n 5 above) R[6], §5[3]. 240 Unfair Practices Directive (n 5 above) R[6], §§6[1], 7[1], 8. See also, in the spirit of the Starship Enterprise, the definition of ‘to materially distort the economic behaviour of consumers’:
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Distortion and materiality are both to be assessed against the benchmark of an average consumer,241 codifying the test elaborated by the European Court of Justice.242 An ‘average consumer’ is reasonably well informed and reasonably observant and circumspect, account being taken of social, cultural and linguistic characteristics.243 This benchmark could vary from state to state,244 but who will want to blink first and admit that their shoppers are particularly gullible? Perhaps the French can give a lead here. The average taken may be of all consumers, or of a specific group which is targeted by the marketing,245 this being a matter of national judgment, and another case where a practice is tested against a specific subset is where the practice reaches all consumers but has a greater distorting effect on those vulnerable through mental or physical infirmity, age or particular credulity.246 The Directive is too cocky by half about the average consumer test247; common lawyers would be much more wary of the superficial simplicity of the concept of reasonableness. [5.44] In the English wording of the Directive there is an ambiguity about whether the test to be applied is solely objective. An action,248 to take one example, is tested to see whether it is likely to deceive the average consumer and whether it is likely to cause him to take a transactional decision he would not otherwise have done. Ask not whether a particular consumer has been misled but what the impact would have happened had he been a reasonable consumer. Why then does the text contain the alternative test that conduct deceives him and causes him to change his transactional decision-making? Conduct cannot deceive a phantom consumer, it can only be likely to deceive, so the inclusion of the words ‘deceives’ and ‘causes’ seems to suggest that the conduct may also be tested against a real person, a consumer who has been addressed and misled. If that were genuinely intended it would be necessary for the two verbal forms, hypothetical and real, to be matched by two nouns, when in fact there is only the single noun ‘him’, meaning, apparently, an average consumer rather than a real §2[e]; better, surely, to use French than American; Draft Unfair Trading Regs 2007 (n 5 above) regs 5–7. 241 Unfair Practices Directive (n 5 above) §§5[2](b), 6[1], 6[2], 7[1], 7[2], 8; Unfair Practices EM (n 5 above) [66]; Draft Unfair Trading Regs 2007 (n 5 above) reg 2 applied in regs 3–7. 242 Unfair Practices Directive (n 5 above) R[18]; Unfair Practices EM (n 5 above) [35]; C-315/92 Verband Sozialer Wettbewerb v Clinique Labatories SNC and Estee Lauder Cosmetics [1994] I ECR 317 ECJ; C-210/96 Gut Springheide v Oberkreisdirektor des Kreises Steinfurt [1998] I ECR 4657 ECJ. 243 Unfair Practices Directive (n 5 above) R[18], §2[b]; the test is qualitative not statistical, that is, very close to the common law concept of reasonableness: Twigg-Flesner (n 73 above) 388 (with added requirement of detrimental reliance by reasonable recipient). 244 Twigg-Flesner (n 73 above) 388; UK Consultation (n 5 above) [67]. 245 Unfair Practices Directive (n 5 above) R[19], Unfair Practices EM (n 5 above) [30]. 246 UK Consultation (n 5 above) [74–78]; at [79–83] it states that the specific duties in Unfair Practices Directive (n 5 above) §§6–9 are intended to incorporate the vulnerable/targeted group variations. 247 Howells (n 73 above) lxxii. 248 Unfair Practices Directive (n 5 above) §6[1]; but Draft Unfair Trading Regs 2007 (n 5 above) reg 5(2) is all objective.
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one. This ambiguity needs to be excised before unfair commercial practice becomes a tort in English civil law, since the two types of civil liability would be quite different. A claimant will presumably need to show both that he has been deceived personally and, additionally, that a reasonable person would have been deceived. Clearly an objective test was wanted and intended, but we are really entitled to expect precision.
3
Other unfair practices
[5.45] Fairness is a concept which lacks clarity, so it is best twisted to its negative form for ease of definition, unfairness being clearer than fairness.249 The residual prohibition on unfair practices, just considered, is supplemented by specific rules which place dubious practice into five categories — misleading practices that are blacklisted, misleading actions, misleading omissions, blacklisted aggression and other aggressive practices. Further the Directive incorporates some special rules such as the controls on misleading advertisements and invitations to purchase. The Directive headings are therefore rearranged here into a more functional structure.
4
Marketing and promotions
[5.46] Some methods of marketing are so unfair that they are blacklisted.250 In these cases the impact on an average consumer can be taken as read. Examples are confusing promotions [13], pyramid promotions in which a consumer is paid to introduce other consumers into the scheme [14]251 and prizeless competitions [19].252 Less intrusive marketing techniques still need to avoid misleading by actions and hence being considered aggressive.253 Many states control cross-border sale promotions and it was proposed to free up European rules by imposing a continent-wide cap on the level of domestic protection, but this was stalled by opposition from Germany, France and Italy and the whole idea was thrown into the Bonfire of the Commission’s Vanities in 2006.254 So there will be no common standard for discounts, offers of free gifts, premiums, many promotional contests, games or loyalty programmes. The 249 Unfair Practices EM (n 5 above) [30]. Billy Bragg in concert once posed the example of that group of football fans defined by their dislike of Manchester United FC though no doubt Chelsea FC is now a more apt example. 250 Unfair Practices Directive (n 5 above) R[17], §5[5]; Annex 1 [1–23]; Draft Unfair Trading Regs 2007 (n 5 above) reg 3(5)(d), sch 1. 251 Unfair Practices Directive (n 5 above) Annex I [14] is already proscribed in the UK by the Trading Schemes Regulations 1997, SI 1997/30; UK Consultation (n 5 above) 88. 252 Blacklisted advertising is considered below [5.52]. 253 See below [5.47]. 254 Sales Promotions Proposed Regulation COM (2002) 585 final R Azim-Khan ‘Cross-border Sales Promotions’ (2002) 4 European Business Law 16. This proposal was dropped on March 17th 2006.
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United Kingdom is already liberal in the freedom to put on such promotions and is not greatly affected either way.
5
Aggression
[5.47] Aggressive commercial practices were not previously regulated by European law,255 but they can significantly impair the consumer’s freedom of choice.256 Those on the blacklist because they are bad enough to intimidate on average consumer are257: 앫 keeping consumers on the premises [24], 앫 prolonged or repeated visits to a home after a request to leave and not to return [25], 앫 persistent unwanted solicitations by telephone etc (excluding legitimate enforcement of contractual rights) [26], 앫 requiring documents irrelevant to an insurance claim or persistent failure to respond to correspondence [27], 앫 pester power — exhorting children to persuade their parents to buy a product [28],258 앫 inertia selling — unsolicited supply of products for which payment or return is demanded [29]259; a demand for payment is prohibited for goods and non-financial services260 and for financial services,261 stating that a trader’s job or livelihood is in jeopardy [30], 앫 creating the impression a prize has been won when it does not exist or is subject 앫 to a cost [31]. [5.48] Beyond those specific irritations there is a wider prohibition of aggressive marketing practices, such as harassment, coercion and undue influence. The first two require no definition. Undue influence, EU style, involves exploitation of a position of power to apply pressure, without using physical force, in a
Unfair Practices Directive (n 5 above) R[11]. Unfair Practices Directive (n 5 above) R[16], §8; Unfair Practices EM (n 5 above) [70]; Draft Unfair Trading Regs 2007 (n 5 above) reg 7. 257 Unfair Practices Directive (n 5 above) §5[5], Annex 1 [24–31]; Unfair Practices EM (n 5 above) [30]; UK Consultation (n 5 above) [105ff]; the list is entrenched; Draft Unfair Trading Regs 2007 (n 5 above) sch 1 para 24ff. 258 The main selling point of the Directive in press releases; eg Times February 25th 2005. 259 Unfair Practices Directive (n 5 above) Annex 1 [29]; Draft Unfair Trading Regs 2007 (n 5 above) sch 1 para 29. 260 Distance Selling Directive (n 7 above) R[16], §9, as amended by Unfair Practices Directive (n 5 above) §15; Distance Selling Regs 2000 (n 7 above) reg 24. 261 Distance Marketing of FS Directive (n 7 above) R[25], §9, as amended by Unfair Practices Directive (n 5 above) §15; FS Distance Marketing Regs 2004 (n 7 above) reg 15. The rules bite at the time of the original agreement, or on a variation or after a break of a year; but there is nothing to prevent tacit renewal so long as the break in service is less than a year: Distance Marketing of FS Directive (n 7 above) R[16], §1[2]; FS Distance Marketing Regs 2004 (n 7 above) reg 5. 255 256
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way which significantly limits the consumer’s ability to make an informed decision.262 Relevant factors are the timing, nature and persistence of the practice; any threatening or abusive language or behaviour; exploitation of a specific misfortune; non-contractual barriers to exercise of rights; and threats to take an action that cannot legally be taken.263 Conduct becomes material if, taken in the round, it would have a significant impact on an average consumer.264
6
Cold calling and spamming
[5.49] Distance selling should not rely on ‘cold calling’ and ‘spamming’. The International Marketing Supervision Network aims to secure co-operation to prevent illegal marketing practices.265 Use of automatic calling machines and fax machines should require the consumer’s prior consent, an opt-in.266 Otherwise an opt-out system allows traders to use other distance systems unless and until there is a clear objection from the consumer.267 Neither has been implemented by the truly Euro-sceptic United Kingdom.
7
After-sales service
[5.50] Some methods of after-sales service are blacklisted, notably its provision in a foreign language without warning or making false claims about local availability.268 Other after-sales activities are regulated by the general controls on misleading actions and aggression. So, builders need to be careful about remedying defects after sale and landlords need to take care about repairing and other post-rental obligations.
262 Unfair Practices Directive (n 5 above) §2[h]. It is not necessarily related to the English law concept of the same name, which has a much higher threshold of conduct which renders a contract voidable: UK Consultation (n 5 above) [187]; at [107] an example of European undue influence is a promise to reschedule an existing debt if a consumer buys another product; Draft Unfair Trading Regs 2007 (n 5 above) reg 7(3)(b). 263 Unfair Practices Directive (n 5 above) §9; Draft Unfair Trading Regs 2007 (n 5 above) reg 7(2). 264 Unfair Practices Directive (n 5 above) R[16], §§5[4](b), 8; Draft Unfair Trading Regs 2007 (n 5 above) reg 7(1). 265 Report on Distance Selling Complaints March 2000 COM (2000) 127 final, [5]. 266 Distance Selling Directive (n 7 above) §10[1]; Distance Marketing of FS Directive (n 7 above) §10[1]. 267 Distance Selling Directive (n 7 above) §10[2]; Distance Marketing of FS Directive (n 7 above) §10[2]; eg entry in a register set up for the purpose: (2001) 86 EU Focus 25–26. 268 Unfair Practices Directive (n 5 above) Annex 1 [8, 23]; Draft Unfair Trading Regs 2007 (n 5 above) sch 1 para 8.
Unfair Advertising and Statements
223 UN FA I R A DVERTI SI N G A N D STATEMEN TS
Unfair Advertising and Statements 1
Advertisements
[5.51] Advertisers269 make representations in order to promote a business supply of goods or services, the products to be promoted including rights in land.270 It could take place in a wide variety of media so it is likely to reach all sorts of people, and to percolate readily across national frontiers. Patchy national laws have, in the past, made it difficult to mount a pan-European advertising campaign,271 so there was a strong case for EU-wide controls on misleading advertisements. The legislative history is slightly complex and each regime varies in detail.
(1)
Misleading advertising to consumers
The directive on misleading advertising272 will continue to protect consumers,273 until the Unfair Commercial Practices Directive bites late in 2007. Products affected include movable goods, services of the financial and non-financial varieties, and land.274 Advertisements are misleading if the presentation or other features are likely to deceive, applying objective criteria and imposing an onus on the advertiser to prove the material accuracy of factual claims made.275 Features tested include276: 앫 characteristics of the land or services, such as availability, nature, execution, composition, method and date of provision, fitness for purpose, uses, quantity, specification, geographical or commercial origin or the results to be expected from their use, or the results and material features of tests or checks carried out on the goods or services; 앫 the price and conditions, including any fixed price, the manner in which a variable price is calculated, and the conditions on which the land is supplied or services are provided;
269 Misleading and Comparative Advertising Directive 84/450/EEC [1984] OJ L250 17, as amended by 97/55/EC [1997] OJ L290 18; B2C parts are included in Unfair Practices Directive (n 5 above) §6 (misleading actions) and §9 (amendments to earlier Directive); B2B parts to be consolidated by the Misleading and Comparative Advertising Proposal (n 8 above); Draft Business Protection from Misleading Marketing Regs 2007 (n 8 above); Nebbia & Askham (n 1 above) ch 12. 270 Misleading and Comparative Advertising Directive (n 8 above) §2[1]. 271 Misleading and Comparative Advertising Directive (n 8 above) R[1–5]. 272 Misleading and Comparative Advertising Directive (n 8 above); first targeted at misleading adverts in 1984 (n 8 above), but extended to include comparative adverts in 1997 (n 8 above). 273 Misleading and Comparative Advertising Directive (n 8 above) §1. 274 Misleading and Comparative Advertising Directive (n 8 above) §2[1]. 275 Misleading and Comparative Advertising Directive (n 8 above) R[8], §2[2], also R[18], §6. 276 Misleading and Comparative Advertising Directive (n 8 above) §3.
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앫 the advertiser, his nature and attributes including his identity and assets, his qualifications and ownership of intellectual property rights or his awards and distinctions. National systems may give more extensive protection.277
(2)
Unfair commercial advertising to consumers
[5.52] The Directive against misleading advertising will be confined to traders and the protection of consumers against advertisements will be transferred to the unfair commercial practice regime when the new Directive is transposed late in 2007.278 False advertising will be treated as one example of a misleading action.279 Unfair advertising is either untruthful because of the inclusion of false information or deceptive in its overall presentation or otherwise, judged in each case in its transactional decision-making potential from the standpoint of the average consumer.280 Aspects considered are: 앫 the existence or nature of the product; 앫 the main characteristics of the product,281 such as its availability, benefits, risks, execution, composition, accessories, after-sale customer assistance and complaint handling, method and date of manufacture or provision, delivery, fitness for purpose, usage, quantity, specification, geographical or commercial origin or the results to be expected from its use, or the results and material features of tests or checks carried out on the product; 앫 the extent of the trader’s commitments, the motives for the commercial practice and the nature of the sales process, any statement or symbol in relation to direct or indirect sponsorship or approval of the trader or the product; 앫 the price or the manner in which the price is calculated, or the existence of a specific price advantage; 앫 the need for a service, part, replacement or repair; and 앫 the nature, attributes and rights of the trader or his agent, such as his identity and assets, his qualifications, status, approval, affiliation or connection and ownership of industrial, commercial or intellectual property rights or his awards and distinctions. 277 Misleading and Comparative Advertising Directive (n 8 above) R[19], §7. This liberty will end under the regime for unfair commercial practice and never applied to comparative advertising. 278 Misleading and Comparative Advertising Directive (n 8 above) §§1, 4[1], as amended by Unfair Practices Directive (n 5 above) §9[1], [4]; Draft Unfair Trading Regs 2007 (n 5 above) reg 5; the amendments omit consumers from the lists of those protected. 279 Unfair Practices Directive (n 5 above) §6[1]; Unfair Practices EM (n 5 above) [30], [61]. The list of factors below omits (g) which can only apply to goods. Transposition is discussed in UK Consultation (n 5 above) [84ff] which suggests that the exhaustive list of factors will have to be reproduced unchanged. 280 See above [5.43]. 281 National rules can determine what are to be treated as the ‘main’ characteristics of particular products: Unfair Practices Directive (n 5 above) R[14]; UK Consultation (n 5 above) [103]; Draft Unfair Trading Regs 2007 (n 5 above) reg 5(6).
Unfair Advertising and Statements
225
In order to avoid information overload, there are no specific disclosure requirements in advertisements,282 but only at the later stage at which the trader makes to a specific consumer an invitation to purchase.283 Advertisements must continue to meet existing European standards for information,284 affecting, for example, distance contracts285 and timeshares.286 Further, the content of an advertisement — like any other information provided in marketing — must not mislead by omission of material information,287 nor will it be acceptable to hide material information or to provide it in a way that is unclear, unintelligible, ambiguous or untimely or to conceal its commercial intent.288 [5.53] One or two forms of advertising are blacklisted since they are always apt to distort the consumption of an average consumer and are unfair.289 Worst is bait advertising — an offer at a specified price of a product which the trader will not be able to supply — and bait and switch where the bait is made to promote a different product. These are the staples of the timeshare industry. Another proscription applies to ‘advertorials’ — advertisement features paid for but not marked as such.290
(3)
Comparative advertising targeted at consumers
[5.54] Consumers are currently protected by the comparative advertising regime291 but this function is being transferred to the unfair commercial practices regime.292 It will be unfair to advertise to consumers in a comparative way, or to use any other comparative marketing technique, if it creates confusion with any products, trade marks, trade names or other distinguishing marks of a competitor.293 Builders who advertise new-build apartments need to be careful when referring to developments by other companies. Account should be taken of
282 Unfair Practices Directive (n 5 above) R[14], §6[1], Unfair Practices EM (n 5 above) [65]; Draft Unfair Trading Regs 2007 (n 5 above) reg 6. 283 See below [5.60]. 284 Unfair Practices Directive (n 5 above) §7[5], Annex II; also rules for doorstep selling (n 6 above), package holidays (Package Travel Directive 90/314/EEC [1990] OJ L158 59) and unfair contract terms (n 9 above). 285 Distance Selling Directive (n 7 above) §§4–5; Distance Marketing of FS Directive (n 7 above) §§3–4; see below [5.61]. 286 Timeshare Directive (n 11 above) §3[3]; see below [6.24ff]. 287 Unfair Practices Directive (n 5 above) §7[1]; C-44/01 Pippig Augenoptik [2003] I ECR 3095 ECJ, J[50] (misleading to omit brand); Draft Unfair Trading Regs 2007 (n 5 above) reg 6(1). 288 Unfair Practices Directive (n 5 above) §7[2]; Draft Unfair Trading Regs 2007 (n 5 above) reg 6(2). Regard shall be had to any spatial and temporal limitation imposed by the medium used for communication. 289 Unfair Practices Directive (n 5 above) R[17], §5[5], Annex 1; Draft Unfair Trading Regs 2007 (n 5 above) sch 1 paras 5, 6, 11. 290 Unfair Practices Directive (n 5 above) Annex 1 [5–6], [11]. 291 Misleading and Comparative Advertising Directive (n 8 above) §3a, inserted in 1997 (n 8 above). 292 Unfair Practices Directive (n 5 above) §14. 293 Unfair Practices Directive (n 5 above) §6[2](a).
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all features of the advertising to determine whether it is misleading to such an extent as to change the transactional decision-making of the average consumer.
(4)
Advertising to business
[5.55] The misleading advertising regime, already described, protects businesses against the unfair consequences of misleading advertising and will continue to do so after the regime is narrowed to move consumer protection elsewhere,294 and national law may protect businesses further.295 Controls on comparative advertising were added in 1997.296 This regime protects businesses now and will continue to do so in future, though national controls must be neither wider nor narrower.297 Advertising is comparative if it identifies a competitor or their products, explicitly or by implication,298 usually of course in order to compare prices.299 EU sectoral rules must be observed and also national bans on comparing professional services.300 It should be legitimate to compare like for like on objective grounds — based on material, relevant, verifiable and representative features — but not simply to knock a competitor, to mislead or to sow confusion.301
(5)
TV advertising
[5.56] This is controlled by the Directive creating ‘TV without frontiers’, chapter IV302 of which contains detailed rules about advertising breaks, subliminal images, surreptitious adverts and controls on advertising particular products such as alcohol and tobacco.
294 Misleading and Comparative Advertising Directive §1 (n 8 above) as amended by Unfair Practices Directive (n 5 above) §14; see above [5.54]. 295 Misleading and Comparative Advertising Directive (n 8 above) §7[1] as amended by Unfair Practices Directive (n 5 above) §14[5]. 296 Misleading Advertising Directive (n 8 above) as amended by the Comparative Advertising Directive 1997 (n 8 above). 297 Misleading and Comparative Advertising Directive (n 8 above) §7[1–2]. Misleading aspects of a comparison are judged by the European standard ignoring any harsher national rule: Pippig Augenoptik (n 287 above) J[42]. 298 Misleading and Comparative Advertising Directive (n 8 above) §2; Pippig Augenoptik (n 287 above) J[35]; C-112/99 Toshiba Europe [2001] I ECR 7945 ECJ, J[30–31]. 299 Pippig Augenoptik (n 287 above) J[50]; C-356/04 Lidl Belgium v Franz Colruyt [2007] 1 CMLR 9 @ 269 ECJ (basket of supermarket prices); C-381/05 De Landtsheer Emmanuel v Comité Interprofessionel du Vin de Champagne [2007] 2 CMLR 43 ECJ (use of champagne analogy in marketing beer); Bundesgerichthof 1 ZR 124/03, [2006] 12 ECL [45] (factual information re earnings of lawyer’s firms). 300 Misleading and Comparative Advertising Directive (n 8 above) R[20–22], §7[3–5]. 301 Misleading and Comparative Advertising Directive (n 8 above) R[7–9], §§1, 3a[1] as amended. An onus may be placed on the advertiser under §6[a]. Other grounds relate to intellectual property rights. 302 TV Without Frontiers Directive 89/552/EEC [1989] OJ L298 23, §§10–23.
Unfair Advertising and Statements
2
227
Invitation to purchase
[5.57] Specific disclosure is required when a trader makes to a consumer an invitation to purchase.303
3
False statements
[5.58] Some false statements are so inherently unfair and have such a disorting effect on the behaviour of the average consumer that they are blacklisted.304 Notable examples are claims about codes of conduct or quality marks or trade endorsement [1–4], stated time limits on product availability [7], title to sell a product [9], consumer rights distinctive to the trader [10], threats to the security of the consumer or his family [12], liquidation or removal sales [15], cures for illness or dysfunction [17], market conditions [18], descriptions of ‘free’ products [20], invoices implying that an order has been made [21], the private capacity of the seller [22].305 There are a number of other blacklisted practices.306 By all means advertise your new flat development in Spain, but be wary of paying a friend to write a feature for a magazine writing it up as the perfect cure for stress and boasting that a team of English-speaking plumbers are on call round the clock to solve any drainage problems! Lies less black than those above may be tested as misleading actions,307 or in the case of half-truths as misleading omissions. Existing United Kingdom legislation about (mis)statements made in trade has been brought into line with the unfair trading rules. Current legislation about price indications308 is amended to reflect the new transactional decision test,309 and legislation about notices of unfair contract terms also survives.310
4
Misleading endorsements
[5.59] False or deceptive information about endorsements may have a significant distorting economic impact,311 for example statements or symbols about See below [5.63]. Unfair Practices Directive (n 5 above) R[17], §5[5]; Annex 1 [1–23]; UK Consultation (n 5 above) [111ff]. 305 UK Consultation (n 5 above) 64, suggests that this is almost identical to the Business Advertisements (Disclosure) Order 1977, SI 1977/1918. 306 See above [5.47]. 307 See above [5.46]. 308 Trade Descriptions Act 1968, c 29; Draft Unfair Trading Regs 2007 (n 5 above) sch 2 paras 6–11. 309 Consumer Protection Act 1987, c 43, Pt III; Consumer Protection (Code of Practice for Traders on Price Indications) Approval Order 2005, SI 2005/2705; Price Indications (Method of Payment) Regs 1991, SI 1991/199; Draft Unfair Trading Regs 2007 (n 5 above) sch 4. 310 Fair Trading Act 1973, c 41, s 23; Consumer Transactions (Restrictions on Statements) Order 1978, SI 1978/127; Draft Unfair Trading Regs 2007 (n 5 above) sch 4. 311 Unfair Practices Directive (n 5 above) §§5[4](a), 6[1], Unfair Practices EM (n 5 above) [30], [61]; Draft Unfair Trading Regs 2007 (n 5 above) sch 1 para 3. 303 304
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sponsorship or approval of the product. Other aspects are: the price, its calculation and any price advantage; the need for a service or repair; attributes of the trader or his agent; or the consumer’s rights or risks he may face. Marketing should not create confusion with a competitor’s products, trade names or distinguishing marks.312 The European regulators accept the role of codes of conduct,313 and protect their role by imposing a ban on misleading practices relating to codes such as non-compliance by the trader with firm commitments in codes of conduct by which the trader has undertaken to consumers to be bound. Code owners may have control of misleading practices within their domain, but European injunctive powers are not displaced.314 This could have a powerful effect in the world of timeshares given the tight rein held by the main trade body, the Organisation for Timeshare in Europe.315
I N TER N ET A DVERTI SI N G (E-CO MMER CE)
Internet Advertising (e-Commerce) [5.60] False or deceptive information about endorsements may have a significant effect. A European community without borders has sprung up as a result of the development of the world wide web. By 2004 the internet had penetrated into more than 40 per cent of European homes and 60 per cent of businesses maintained websites.316 The web makes it easy for different nationalities to contract with one another, reducing language as a barrier and eliminating completely considerations of geographical location.317 Internet sales are important for on-line ordering of goods and for ordering services, and many services are capable of delivery over the internet, and it has quickly established itself as a key tool for advertising houses for sale. Where land is marketed from a website the E-Commerce regime applies, but its practical ambit is limited because national law is allowed to exclude land from e-contracting though e-rentals must be allowed; so the practical impact of the Directive depends upon the national implementation.318 If land is bought on-line it is likely to be paid for using on-line finance. Since the internet is virtual in character and lacks geographical 312 Unfair Practices Directive (n 5 above) §6[2](a); Draft Unfair Trading Regs 2007 (n 5 above) reg 5(3)(a). 313 Unfair Practices Directive (n 5 above) §6[2](b); ‘code’ and ‘code owner’ are defined by §2[f]; [g]; also correspondingly in Misleading and Comparative Advertising Directive (n 8 above) §2, as amended by Unfair Practices Directive (n 5 above) §9; Draft Unfair Trading Regs 2007 (n 5 above) reg 5(3)(b). 314 Unfair Practices Directive (n 5 above) R[20], §§10, 11, 17 (information about codes). 315 See below [6.09]. 316 Tourism and the Internet in the EU (Eurostat 20/2006); Internet World stats (2007) gives 38.9% in March 2007, 28% of world users drawn from 12% of world population. 317 E-Commerce Directive (n 20 above) R[1–2]. 318 See below [8.11].
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grounding, regulation is needed on a pan-European scale, but confined to specific legal obstacles and the minimum necessary to meet the logic of the internal market.319 In fact it is probably too minimalist at present. The E-Commerce Directive320 sets up a ‘light and flexible’ legal framework, supposedly technologically neutral, for electronic advertising and contracting.321 Here we consider B2B or B2C322 offers of land or land-related services from a website where an on-line order form is filled in and a contract made by clicking an ‘I accept’ button. Consumers are entitled to better protection because they can insist on the mandatory protections of the legal system of the state in which they have their habitual residence.323 It affects contracting by technological means over the internet and not contracting by an exchange of electronic mail or equivalent individual communications by natural persons acting outside their trade, business or profession.324 [5.61] Electronic services are described as ‘information society services’.325 These are free to move between EU states326 with national provisions approximated327 providing services via the internet, including commercial communications and electronic contracting.328 National monopolies remain for the notarisation of contracts and the formal validity of land contracts.329 Information society services are regulated by national law,330 within a level playing field called the ‘coordinated field’, though there does not need to be a specific national e-commerce regime,331 so that all service providers are required to meet broadly similar requirements when taking up or pursuing the activity of an information society service. A country of origin principle applies.332 This means that a service provider who meets his home state rules is then free to provide the same services throughout Europe. There is a delicate balance between the freedom to advertise legitimate services and the need to regulate the E-Commerce Directive (n 20 above) R[3], R[5–6], R[10]. E-Commerce Directive (n 20 above). 321 Digital signature and e-mail signature is considered below [8.01ff], [8.14]. 322 E-Commerce Directive (n 20 above) §§2[d]; Report on the Application of the Directive on E-Commerce COM (2003) 702 final [1]; see above [5.05] n 20. 323 E-Commerce Directive (n 20 above) §§2[d], 4–5; see below [10.15]. 324 E-Commerce Directive (n 20 above) R[18]. 325 E-Commerce Directive (n 20 above) §2[a]; the definition in §2[a] is borrowed from Technical Standards Information Directive 98/34/EC [1998] OJ L204 37, §1[2], as amended by Directive 98/48/EC, [1998] OJ L217 18. 326 E-Commerce Directive (n 20 above) §1[1]. 327 Non economic, unremunerated, services are included: E-Commerce Directive (n 20 above) R[18]. 328 E-Commerce Directive (n 20 above) §1[2]. 329 E-Commerce Directive (n 20 above) §3[3], Annex; see below [8.10]. 330 E-Commerce Directive (n 20 above) §3–5. 331 E-Commerce Directive (n 20 above) §2[h]. 332 E-Commerce Directive (n 20 above) R[23], §1[4]. M Hellner ‘The Country of Origin Principle in the E-Commerce Directive — a Conflict with Conflict of Laws’ (2004) 12 ERPL 193–213; Financial Services and Markets Act 2000, c 8, s 138; E-Commerce Directive (Financial Services and Markets) Regs 2002, SI 2002/1775 as amended by SI 2004/3378. 319 320
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dissemination of, say, hard-core pornography. States may restrict electronic services in a proportionate way for reasons of public policy, to assist the prosecution of offences, to protect public health, public security and protection of consumers.333 Restrictions have to be reported to, and are supervised by, the EU Commission.334 Liability does not usually attach to an internet service provider who acts as a ‘mere conduit’ for information or provides a ‘caching’ service (temporary storage), such a provider being under no general obligation to monitor what they transmit, though they have to respond to ‘take-down’ notices.335 [5.52] The internet makes it easy to advertise to business and consumers elsewhere in Europe. Some control is imposed by the E-Commerce Directive on advertising from websites. An advertisement or ‘commercial communication’ is defined as any form of communication designed to promote, directly or indirectly, the goods, services or image of a company, organisation or person; regulation applying to commerce and the professions.336 Businesses are not affected when providing a domain name or e-mail address, or disseminating independent services about goods and practices. If a commercial communication is provided electronically as part of an information society service it must make clear that it is a commercial communication and identify the person on whose behalf it is made.337 Additional requirements kick in at the order and contract stage.338 I N F O R MATI O N I N A N I N VI TATI O N TO PUR CHA SE
Information in an Invitation to Purchase 1
Invitations to purchase
[5.63] Disclosure requirements affect a trader at the pre-contract stage when he makes to a consumer an invitation to purchase by communicating the main characteristics of the product and the price so as to enable the consumer to make a purchase.339 An invitation should state340: E-Commerce Directive (n 20 above) R[24], §3[4], §3[5] (urgent action). E-Commerce Directive (n 20 above) §3[6]. 335 E-Commerce Directive (n 20 above) R[43], §§12–15; E-Commerce Report (n 322 above) [4.6]. 336 E-Commerce Directive (n 20 above) §2[f]; on the latter see below [7.66]. 337 E-Commerce Directive (n 20 above) §6; this is additional to other European information requirements. National law may restrict unsolicited commercial communications: E-Commerce Directive (n 20 above) §7; Processing of Personal Data Directive 2002/58/EC [2002] OJ L201 37; E-Commerce Report (n 322 above) [4.3]. 338 See below [8.20ff]. 339 Unfair Practices Directive (n 5 above) R[14], §2[i]; Draft Unfair Trading Regs 2007 (n 5 above) reg 2. 340 Unfair Practices Directive (n 5 above) §7[4] (unless apparent from the context); Draft Unfair Trading Regs 2007 (n 5 above) reg 6(4); UK Consultation (n 5 above) [27–29], [102]. These details are not required in advertisements: R[14]; Unfair Practices EM (n 5 above) [65]; Howells (n 73 above). 333 334
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앫 앫 앫 앫
the main characteristics of the product,341 the trading name and address of the trader and any trader for whom he is acting, the price, inclusive of taxes,342 unusual arrangements for payment, delivery, performance or complaint handling, and 앫 any right of withdrawal or cancellation.343 These bare bones are what a consumer really needs when deciding whether to commit to a deal, whilst avoiding information overload. Omissions outside advertisements and invitations to purchase — perhaps in after-sales service — could be misleading if related to information that was material (including EC required information) and that an average consumer would want before making a transactional decision, and also if material information is hidden or provided in a way that is unclear, unintelligible, ambiguous or untimely or to conceal its commercial intent.344
I N F O R MATI O N A B O UT DI STA N CE CO N TR ACTO R S
Information about Distance Contractors 1
Durable form of information
[5.64] Electronic technologies disseminate information to be read on a screen, but the content is ephemeral since the content of websites changes and sites can disappear entirely. Transience is overcome by rules requiring information to be provided to an individual consumer in a form that has a degree of permanence. An internet marketer will probably not want to provide information in old-fashioned writing, though it will always be open to an old-fashioned consumer to request a written statement of terms. In an electronic contracting process, it will be most convenient to provide information electronically and this is perfectly acceptable so long as the medium is ‘durable’. Information needs to be addressed to an individual consumer in a form which enables him to store it for future reference and to reproduce it unchanged. Suitable media are floppy discs, CDs, DVDs or memory sticks, but most commonly it will be an electronic message sent to the consumer which he can then save to his hard disk. This implies that the consumer will need his own e-mail account and will not, for example, be able to place an order from a computer in a public library without his own account. It
National law may indicate the main characteristics to spell out for particular products. It this is not fixed, a method of calculation. 343 See below [5.72ff]. 344 Unfair Practices Directive (n 5 above) §7[1–2]; the tests are explained above in the context of advertisements. 341 342
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is not sufficient to make an internet website available for visits, since the content is not proof against changes.345
2
Prior information
[5.65] A consumer must be provided with an appropriate level of information in good time before the conclusion of a distance contract.346 Having overcome the information deficit one must avoid an overload of legal guff.347 The commercial purpose of information should be clear, and its format clear and comprehensible, with particular care needed when dealing with minors and others unable to give a free consent.348 Requirements may be added by EU sectoral349 or national rules.350 They fall into four groups. [5.66] The supplier. A person who supplies goods or non-financial services at a distance must give his identity and, if payment is required in advance, his address. This applies to a property rental offered at a distance. More sophisticated rules have been developed for financial services: the supplier must state his main business, the address351 must include his establishment (in every case, not just where payment is in advance) and any other relevant address; in addition details are needed of the suppliers’ national representative and of any professional with whom the consumer has had dealings, and details are also required of any trade registration of the supplier. [5.67] The product. Information about the product to be provided at the pre-contract stage is: 앫 the main characteristics of the product, 앫 an inclusive price, indicating any taxes or costs borne by the consumer; financial services offered at a variable price should indicate a verifiable basis for the calculation of the price and a warning of the possibility of market fluctuations, 345 Distance Selling Directive (n 7 above) R[11]; §§4[1], 5[1]; Distance Selling Regs 2000 (n 7 above) reg 8; Distance Marketing of FS Directive (n 7 above) R[20], §§2[f]; FS Distance Marketing Regs 2004 (n 7 above) reg 3. 346 Distance Selling Directive (n 7 above) §4[1]; Distance Selling Regs 2000 (n 7 above) reg 7(1) (this adds (1) rights of substitution of goods and (2) the cost of returns); Distance Marketing of FS Directive (n 7 above) R[21], §3; FS Distance Marketing Regs 2004 (n 7 above) reg 7, sch 1. Exceptions may be made where it is up to the consumer to request information, other than the basics, the identity of the supplier, the main characteristics of the services and their price. 347 Donnelly & White (n 172 above) 213–214. 348 Distance Selling Directive (n 7 above) §4[2]; Distance Selling Regs 2000 (n 7 above) reg 7(1)–(3); Distance Marketing of FS Directive (n 7 above) §3[2]; FS Distance Marketing Regs 2004 (n 7 above) reg 7(2)–(3). 349 Distance Selling Directive (n 7 above) R[11]; §13. 350 Distance Marketing of FS Directive (n 7 above) §4[2] (if reported to the Commission). 351 All addresses must be geographical and not eg web addresses; the address supplied must be the one relevant to the consumer’s dealings.
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앫 any limit to the validity of the price, 앫 arrangements for payment, delivery and performance, 앫 premium rates for telephone calls and similar additional costs for use of the means of distance communication, 앫 the minimum duration of supply, and 앫 costs of early termination. [5.68] Withdrawal. The existence of a right of withdrawal, the terms and procedure, or the absence of a withdrawal right.352 [5.69] By the time that the financial services controls were worked up into a directive a number of additional pieces of information in relation to legal matters had been identified: 앫 앫 앫 앫 앫 앫
selection of the language of the contract, information and communications, selection of law governing relations with the consumer,353 selection of a forum for disputes, out-of-court complaint and redress mechanisms, any relevant supervisory authority, and guarantee funds or compensation arrangements.354
No doubt the same rules ought to be applied to goods and non-financial services.355
3
Information in telephone calls
[5.70] Telephone calls (or, as you call them, voice telephony communications) are a common means of marketing.356 Any telephone call to a consumer should begin by setting out the identity of the supplier and the commercial purpose of the call357 with considerable additional detail in the case of financial services, covering358: 앫 identity of the caller and his link with the supplier, 앫 main characteristics of the financial service, 앫 inclusive price, either fixed or variable but with a verifiable basis for calculation; the price quoted to be accompanied by a warning of other taxes and costs falling on the consumer,
Except under Distance Selling Directive (n 7 above) §6[3]. This must be an EU state. 354 Excluding deposit guarantee schemes and investor compensation schemes. 355 Donnelly & White (n 172 above) 215. 356 Distance Marketing of FS Directive (n 7 above) §3[3]; FS Distance Marketing Regs 2004 (n 7 above) reg 7(4), sch 2. 357 Distance Selling Directive (n 7 above) §4[2]; Distance Selling Regs 2000 (n 7 above) reg 7(4). 358 Distance Marketing of FS Directive (n 7 above) §3[3]; FS Distance Marketing Regs 2004 (n 7 above) reg 7(4), sch 2. 352 353
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앫 withdrawal, the existence or absence of the right and its terms, and 앫 availability of full information.359
4
Contractual information
[5.71] Specific information must be provided by distance contractors necessary for proper performance of the contract, irrespective of the means of communication used,360 and in good time during the performance of the contract, at the latest at the time of delivery of goods or when the consumer becomes bound to take financial services. If pre-contract information has been provided in full, the post-contract information is: 앫 conditions and procedures for withdrawal,361 앫 the loss of the right to cancel when the client requests an immediate commencement of the service,362 procedure for ending a contract of unspecified duration or exceeding one 앫 year, 앫 a geographical address for complaints,363 and 앫 details of after-sales services and guarantees. A paper copy can be requested at any time during a contract for financial services.364
WI THDR AWA L R I G HTS
Withdrawal Rights 1
Incoherence
[5.72] European protection often takes the form of the provision of a right of withdrawal from a consumer contract. Coherence is lacking,365 since even the 359 Information communicated during the pre-contractual phase must match the subsequent contractual obligations: Distance Marketing of FS Directive (n 7 above) §§3[4], 5. 360 Distance Selling Directive (n 7 above) §5; Distance Selling Regs 2000 (n 7 above) reg 8; Distance Marketing of FS Directive (n 7 above) §5[1]; FS Distance Marketing Regs 2004 (n 7 above) reg 8. It is also necessary to comply with other EU rules, eg on misleading advertising and on the contents of an insurance policy. 361 Distance Selling Directive (n 7 above) §6, including the cases referred to in §6[3]. 362 Distance Selling Regs 2000 (n 7 above) reg 8(2)(b) inserted by Distance Selling (Amendment) Regs 2005, SI 2005/689, sch 1 para 1. 363 This is all that is required if services are performed and invoiced distantly on a single occasion: Distance Selling Directive (n 7 above) §5[2]; Distance Selling Regs 2000 (n 7 above) regs 9–10. 364 Distance Marketing of FS Directive (n 7 above) §5[3]; FS Distance Marketing Regs 2004 (n 7 above) reg 8(2). 365 D Staudmayer ‘The Commission Communication in European Contract Law and Future Prospects’ (2002) 51 ICLQ 673–688, 677; Hellwege (n 25 above).
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period allowed varies between the regimes for doorstep selling, distance selling, and timeshares, as will appear, and further harmonisation is needed.366 National tinkering has created additional cross-border friction,367 without discernible policy advantages, and the possibility of overlapping protections means that it is in practice necessary to take the longest period.368
2
Distance contracts for land
[5.73] Things bought distantly over the internet cannot be examined in advance,369 so the consumer may withdraw without giving any reason and at least seven working days are allowed.370 This applies particularly to rentals, the form of land contract most likely to be affected by the European distance selling regime.371 The period for reflection begins on the receipt of goods372 or at the time that a contract for services is concluded. Withdrawal is not possible if the consumer has waived the right by asking for the provision of services to begin within the withdrawal period nor where the price is subject to uncontrolled fluctuations on the financial market.373 However, the obligatory information includes notice of the withdrawal right and if that is omitted the period is three months from the receipt of goods or the conclusion of a contract for services, a period which can be curtailed to seven days by late provision of the information.374 A consumer who wishes to withdraw is obliged to return any goods supplied and to pay the direct cost of return, but otherwise cancellation should be without penalty and free of charge, and any prepayment made by the consumer should be reimbursed as soon as possible and certainly within 30 days.375 If payment has been by payment card any debit must be recredited and
366 Distance Selling Directive (n 7 above) §6[1]; Statement by the Council and the Parliament re §6[1] [1997] OJ L144 19. 367 Hellwege (n 25 above) 713. 368 Hellwege (n 25 above) 720, 738ff. 369 Distance Selling Directive (n 7 above) R[14]; Hellwege (n 25 above) 714. The period differs from doorstep selling in counting only working days (@ 717). 370 Periods may be varied by national law; in Germany it is 14 days: P Meeds ‘Distance Selling’ (2002) 13 International Company & Commercial Law Review 179–182. 371 See above [5.36]. 372 The consumer must be told if the goods or services ordered are unavailable, and offered a refund, and any wait for execution of an order exceeding 30 days must be agreed to by the consumer. Rights to substitute alternative goods depend on national legislation: Distance Selling Directive (n 7 above) §7; Distance Selling Regs 2000 (n 7 above) reg 19. Substitutions must be agreed in the contract. 373 Distance Selling Directive (n 7 above) §6[3]; Distance Selling Regs 2000 (n 7 above) reg 13. There are a number of other exceptions relating to goods and betting. 374 Periods may be varied by national law. Germany allows four months where information is not provided and Sweden one year: Meeds (n 370 above). 375 Distance Selling Directive (n 7 above) §6; Distance Selling Regs 2000 (n 7 above) regs 10, 14, 17; Hellwege (n 25 above) 727 points out gaps in the distance selling regime.
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any fraudulent use of his payment card in connection with distance contracts must be cancelled.376 Procedure for withdrawal is determined by national law.377 For example the United Kingdom prescribes in detail the procedure for giving notice of cancellation.378
3
Distance contracts for financial services
[5.74] Financial services affecting land are largely outside European control.379 When they are and when those financial services are agreed over the internet, the consumer must be allowed 14 calendar days in which to withdraw from the contract without penalty and without giving any reason,380 a period extended to 30 calendar days for life insurance cover and personal pensions. 381 There seems no good reason to allow only 7 days for non-financial services but 14 if they are financial. Performance of the contract may only begin after the consumer has given his approval,382 a matter on which national law may impose the burden of proof on the supplier,383 but an express request for performance to start precludes withdrawal thenceforth384 and there are a few other minor exceptions.385 A consumer should be adequately informed about his withdrawal rights,386 and if this is not the case the withdrawal period will not start until he has finally received proper information.387 National law may suspend the 376 Distance Selling Directive (n 7 above) §8; Distance Selling Regs 2000 (n 7 above) reg 21; Distance Marketing of FS Directive (n 7 above) §8; FS Distance Marketing Regs 2004 (n 7 above) reg 14. The former UK rule exposing the consumer to the first £50 of loss is abrogated. 377 Distance Selling Directive (n 7 above) R[14]; Communication on Distance Contracts (n 181 above) [7] discusses withdrawal and Annex IV has a summary of the length of national cooling off periods which are generally seven working days (eg the UK) or fourteen days. 378 Distance Selling Regs 2000 (n 7 above) reg 10(4); Hellwege (n 25 above) 723–725 finds this mix of the two cancellation traditions ‘inelegant’. 379 See above [5.34]. 380 Distance Marketing of FS Directive (n 7 above) §6[1]; FS Distance Marketing Regs 2004 (n 7 above) reg 10(2). 381 Distance Marketing of FS Directive (n 7 above) §6[1]; FS Distance Marketing Regs 2004 (n 7 above) reg 10(5); Life Insurance Directive 90/619/EC, [2002] OJ L330 50, §15[1](1) is amended to match by Distance Marketing of FS Directive (n 7 above) §17. 382 Distance Marketing of FS Directive (n 7 above) §7[1]; FS Distance Marketing Regs 2004 (n 7 above) reg 13. 383 Distance Marketing of FS Directive (n 7 above) §15[1]. To place it on the consumer is an unfair term. 384 Distance Marketing of FS Directive (n 7 above) R[24], §6[2]; Distance Selling Amendment Regs 2005 (n 362 above) amending regs 8(2)(iii), 8(3), 12, 13 and inserting reg 12(3A); SI 2005/689 EM [2.1]. 385 (1) Services whose price depends on fluctuations in the financial market eg foreign exchange transactions or stock exchange and forward interest-rate agreements; and (2) travel insurance and similar short-term insurance of less than one month’s duration: Distance Marketing of FS Directive (n 7 above) §6[2]; FS Distance Marketing Regs 2004 (n 7 above) reg 11. 386 Distance Marketing of FS Directive (n 7 above) R[23]. 387 Distance Marketing of FS Directive (n 7 above) §§5[1–2]; UK law talks of a ‘conclusion day’: FS Distance Marketing Regs 2004 (n 7 above) reg 10(1), (3), (4). Time runs in relation to life assurance when the consumer is informed of the conclusion of the distance contract.
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enforceability of contracts relating to investment services for the duration of the withdrawal period. [5.75] The consumer must be given practical instructions about how to exercise the right of withdrawal,388 any notice being on paper or on some other durable medium accessible to the recipient and notified to the supplier within the relevant deadline, but dispatch before the deadline suffices.389 United Kingdom law prescribes methods of giving for the various means of distance communication.390 Notice to terminate should be in writing or other durable medium accessible to the supplier, oral cancellation only working where the supplier has indicated that this will suffice.391 United Kingdom law allows letter, fax or e-mail but not phone, website or text message.392 There is no particular form of words. [5.76] National law determines the legal effects of winding up a contract. In the United Kingdom the choice is for termination of a distance contract as at the time at which the notice of cancellation is given.393 Presumably the transpositor chose not to treat the contract as void so as to preclude restitutionary remedies.394 European rules state that cancellation must be without any penalty,395 payment being limited proportionately so that the consumer only has to pay for that proportion of the service actually provided,396 and only after the consumer was informed about the amount payable in advance, and after the consumer has made a prior request for performance to commence.397 Pre-payments need to be returned, subject only to proper deductions, within a maximum of 30 calendar days from notification to the supplier of withdrawal.398 The consumer also has 30 days to return any sums or property received from the date that he dispatches his notification of withdrawal.399
Distance Marketing of FS Directive (n 7 above) §6[6]. Distance Marketing of FS Directive (n 7 above) §§3[1](3)(d), 6[7]. Proof is governed by national law. 390 FS Distance Marketing Regs 2004 (n 7 above) reg 9(4). 391 FS Distance Marketing Regs 2004 (n 7 above) reg 9(3). 392 FS Distance Marketing Regs 2004 (n 7 above) reg 10(4). 393 FS Distance Marketing Regs 2004 (n 7 above) reg 9(1)–(2). This creates mutual obligations of restoral. 394 Hellwege (n 25 above) 712 points out that this depends on whether, as Peter Birks suggested, there is a general ground of restitution to avoid unjust enrichment. 395 Distance Marketing of FS Directive (n 7 above) §6[7]–[8]. Sanctions are left to national law: §11. 396 Distance Marketing of FS Directive (n 7 above) §7[1]; FS Distance Marketing Regs 2004 (n 7 above) reg 13(6)–(9). By §7[2] national law may prohibit any payment when withdrawing from an insurance contract. 397 Distance Marketing of FS Directive (n 7 above) §3[1](3)(a). 398 Distance Marketing of FS Directive (n 7 above) §7[4]; FS Distance Marketing Regs 2004 (n 7 above) reg 13(3). 399 Distance Marketing of FS Directive (n 7 above) §7[5]; FS Distance Marketing Regs 2004 (n 7 above) reg 13(11)–(12). 388 389
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Doorstep selling cancellation
[5.77] The Doorstep Selling Directive covers contracts made during unsolicited home visits and contracts concluded during an excursion away from the trader’s business premises. Some land contracts and most secured lending are affected.400 A consumer will be unprepared for contractual negotiations that take place in these circumstances and lacks an opportunity to compare rival offers properly. Hence seven days are allowed for reflection401 and hence the freedom to cancel without giving any reason or alleging any misconduct or manipulation by the trader is required.402 The consumer is given a second chance to form a free will.403 Consumers are entitled to know in advance, and in writing, of their right of cancellation and the period for it, together with the name and address of a person against whom that right may be exercised.404 Notice of renunciation should be sent by the consumer within a period of not less than seven days (the precise period being left to national transposition) from receipt by the consumer of the notice advising him of his cancellation right, but it is sufficient to dispatch notice before the end of that period.405 Procedure is laid down by national law. [5.78] Sanchis406 bought a timeshare made on an organised day trip to the town of Denia and promised that when he had returned home to Valencia he would appear at the resort-owner’s bank to sign a confirmatory document. He failed to do so because, when he got home, he decided that he wanted to cancel the purchase, and so he went instead to the seller’s offices in Valencia and stated orally that the whole contract was of no effect.407 According to the terms of the contract, cancellation had to be by way of an authenticated (notarised) document, but Spanish law408 requires no particular form for a notice, and Sanchis argued successfully that the European concept of ‘sending notice’ meant only a notification satisfying domestic rules about form, meaning that in Spain an oral communication was effective.409 States are free to make it easier for consumers to renounce. The Directive refers to ‘writing’ only when explaining how to calculate
400 Doorstep Selling Directive (n 6 above); C Joerges ‘Impact of European Integration in Private Law’ (1997) 3 ELJ 378–406, 403ff; see above [5.19ff]. 401 Doorstep Selling Directive (n 6 above) R[7–9]. 402 Doorstep Selling Directive (n 6 above) R[4]; Contracts Away from Business Premises Regs 1987 (n 6 above) reg 5ff; Travel Vac (n 95 above) J[39–43]; Crailsheimer (n 114 above) J[41–45]; Hellwege (n 25 above) 716 suggests that exploitation should be a requirement. 403 Hellwege (n 25 above) 715. 404 Doorstep Selling Directive (n 6 above) §4. Consequences of failure to provide information are left to national law: see below [5.76]. 405 Doorstep Selling Directive (n 6 above) §5[1]; Hellwege (n 25 above) 717. 406 Travel Vac (n 95 above). 407 Travel Vac (n 95 above) J[13]. 408 Spanish Doorstep Selling Law 26/91, Boletin Oficial del Estado November 26th 1991, §5[2]. 409 Travel Vac (n 95 above) J[12], J[45–48].
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the seven-day period when notice does happen to be given in writing, and it does not impose a requirement of writing.410 A post-doorstep cancellation releases the consumer from any obligations under the cancelled contract, but other effects such as reimbursement of advance payments and the return of goods received are left to national laws.411 The Travel Vac412 contract liquidated compensation caused to the seller by the consumer’s cancellation at 25 per cent of the total price of the transaction, but this stipulation fell foul of European law which imposed nullity of obligation on cancellation, a discharge which extinguishes any penalty clause.413
5
Doorstep cancellation procedure in the United Kingdom
[5.79] United Kingdom law couches the consumer’s rights in terms of a ‘notice of cancellation’,414 and lays down ‘prescribed information’ the trader is required to give the consumer in advance in writing,415 failing which the contract is unenforceable.416 A notice given here should be in writing but may express the consumer’s intention to cancel in any way; a blank form is provided but it is not necessary to use this.417 Notice needs to be served on the trader, or a person nominated by him for the receipt of notice; this may be done by personal delivery to an individual, by posting to his proper address or by leaving it at a proper address; service on a corporate seller may be effected on the secretary or any clerk and on a partnership by serving on any partner or a person having the control or management of the business.418 Proof of posting suffices even if it is never actually received.419 Our domestic law provides for notice to cancel the contract as if it had never been entered into by the consumer: prepaid sums are repayable, goods must be returned and any part-exchange unravelled.420
Travel Vac (n 95 above) J[50–51]. Doorstep Selling Directive (n 6 above) §§5[2], 7; Travel Vac (n 95 above) J[6–7]. Hellwege (n 25 above) 731–734 finds three gaps in the Contracts Away from Business Premises Regs 1987 (n 6 above) reg 5ff: failure to cover mixed services and goods, goods received but subsequently destroyed, and failure to give notice of the cancellation right. 412 Travel Vac (n 95 above) J[53–60]. 413 Travel Vac (n 95 above) AG[59] Alber, J[55–56]. 414 Contracts Away from Business Premises Regs 1987 (n 6 above) regs 2(1), 4(5). 415 Contracts Away from Business Premises Regs 1987 (n 6 above) reg 4(1)–(4), sch pt I (information). If an offer is made on the doorstep, the time is when the consumer makes an offer. 416 Contracts Away from Business Premises Regs 1987 (n 6 above) reg 4(1). It is also an offence to contract without giving the information: regs 4A-4H inserted by SI 1998/3050; reg 4C allows the prosecution of parties other than the trader. 417 Contracts Away from Business Premises Regs 1987 (n 6 above) sch pt II. 418 Contracts Away from Business Premises Regs 1987 (n 6 above) reg 11(1); the last address known to the server of the document is treated as a proper address: reg 11(2). 419 Contracts Away from Business Premises Regs 1987 (n 6 above) reg 4(6). 420 Contracts Away from Business Premises Regs 1987 (n 6 above) regs 4(1), 4(5), 5(1), 7, 8. On related credit agreements, see below [5.79]. 410 411
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Credit Cancellation [5.80] Land purchase usually needs to be financed and if the deal turns sour the question is not so much whether the acquisition of the property right can be undone but more whether the finance deal can be undone. In truth a right to cancel one without the other is decidedly limited, a trap even, and the real question is whether the buyer is able to link together the two transactions enabling him to wriggle out of both at the same time.
1
Credit sold at a distance
[5.81] Let us start with a simple point. Is it possible to cancel a mortgage sold over the internet? This, at least, is straightforward. European law421 allows the exclusion of withdrawal rights for two categories of secured loan, that is: (1) where the purpose of the credit is to acquire or to retain property rights in land or an existing or projected building or for renovating or improving a building; or (2) any credit secured by mortgage on immovable property.422 True, this exclusion only applies if it has been adopted by national law, as it has in the United Kingdom,423 and a withdrawal period can be allowed for all residents of a state where the reflection time was available at the time of its introduction. Cancellation will be allowed of other contracts for financial services, including an attached contract for financing a service.424 Land sold at a distance will almost always be free of distance selling controls, but rentals and timeshares may be caught.425 It may be unlikely that credit will be associated with a rental, but let us suppose that it might be necessary to borrow to secure the rental deposit. In this case the question of cancellation might arise under the distance selling regime.426 The credit may be provided by the supplier of the land or by a third party under an arrangement with the supplier. A linked cancellation right arises whether the price is covered by credit in whole or in part. 421 Distance Marketing of FS Directive (n 7) §6[3]. Provisions are without prejudice to national rules about cancellation or termination or non-enforceability and the consumer’s right to fulfil his contractual obligations early and irrespective of the national rules for the effects on winding up. 422 This includes a right related to immovable property as security, to account for countries such as France where guarantees are the standard form of security. 423 FS Distance Marketing Regs 2004 (n 7 above) reg 11(1)(d). The exemption for secured credit is limited to legal mortgages; a potential problem is the position where registration is pending: P Susman ‘Another Fine Mess!’ [2005] NLJ 770–772. 424 Distance Marketing of FS Directive (n 7 above) §6[7] second para; FS Distance Marketing Regs 2004 (n 7 above) reg 12 (‘attached contract’). 425 See above [5.33]. 426 Distance Selling Directive (n 7 above) §6[4]; Distance Marketing of FS Directive (n 7 above) §6[7] is excluded.
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Details are left to national legislation, but the cancellation must, at least, be ‘without penalty’. An arrangement which covers the price, or part of the price, under a distance contract is described as a ‘related credit agreement’427 when the distance contract is cancelled. As usual the person putting up the money may be either the supplier or another person acting under an arrangement with him.428 There is a related right to cancel the credit agreement provided that provision of the service has not started,429 and no interest may be charged if the credit is repaid within one month of cancellation or before the date on which the first instalment is due,430 and the consumer should be given a recalculated written statement of account in writing before being asked for any payment. Any security provided under a distance contract which is cancelled is treated as never having had any effect, and the land must be returned free of the security and forthwith.431 No repayment will be due until the security has been returned.432 Changes are proposed.433
2
Credit sold on the doorstep or away from business premises
[5.82] An acquisition of land is usually financed by a mortgage secured on the land, the two distinct transactions forming a single economic unit. If the investment in land has been sold at the consumer’s home or on an organised excursion it is possible that the mortgage agreement can be cancelled under the protections against doorstep selling, though only in the period immediately after the mortgage has been concluded. The loan has to be repaid in full, immediately, and with interest at the agreed market rate; further, the cancellation may prove to be a trap because the agreement to buy the land will probably continue to stand: it will not generally enjoy doorstep protection because of the land exclusion, and it will not normally fall with the mortgage unless national law has adopted legislation allowing the cancellation of associated or linked contracts.434 [5.83] Lenders commonly omit to notify the consumer that he has rights of cancellation arising from the marketing of a loan on the doorstep or during an excursion, and in such circumstances the delayed right of cancellation is possible since the right continues indefinitely, 435 possibly for many years after the Distance Selling Regs 2000 (n 7 above) reg 3(1). Distance Selling Regs 2000 (n 7 above) reg 14(5). 429 Distance Selling Amendment Regs 2005 (n 362 above) regs 12–13; information is required under reg 8 about how the right to cancel is affected by agreeing to performance of services. 430 Distance Selling Regs 2000 (n 7 above) reg 16. 431 Distance Selling Regs 2000 (n 7 above) reg 14. 432 Distance Selling Regs 2000 (n 7 above) reg 16. 433 A cancellation right comparable to the doorstep regime is one possibility: Hellwege (n 25 above) 715. 434 See below [5.83]. 435 See above [5.82]. 427 428
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acquisition. The consumer can make the choice when it has become clear whether or not the land would turn out to be a poor investment. This was the case in the leading European Court of Justice decision in Heininger436 and in its clones, Schulte437 and Crailsheimer.438 [5.84] Control of the procedure for cancellation of a doorstep contract is ceded to national law, but the time limit is European.439 German domestic law restricted the consumer’s cancellation right to one year from conclusion of the contract on the doorstep, even when, as in Heininger, the consumer had never been told of his right of cancellation, but this was overridden by European law which allows a seven day period to run from the date when a consumer finally receives notice of his right, however many years down the line.440 Banks pleaded for legal certainty but this cry went unheeded because it had been the lender’s choice to ignore their consumers’ rights and their failure to take straightforward steps for their own protection.441 All titles become insecure if subject to cancellation rights that are unlimited in time, a point recognised by more recent legislation in related fields.442 [5.85] The first issue to arise is which of overlapping cancellation rights is in play? The Heiningers lacked rights to cancel under the European regime for consumer credit because although their finance deal fell within its general scope,443 it also fell within the exclusion of credit used for the acquisition of a building.444 German law445 was rather different: it applied to a partial exemption for land,446 but limited the maximum withdrawal period in any event to one year,447 so the Heiningers were too late to claim their limited domestic protection. Not only were they out of time but, worse, German law448 precluded use of the domestic doorstep regime in a case which was actually or potentially within the German consumer credit legislation.449 This last point was an improper Heininger (n 92 above). Schulte (n 112 above). 438 Crailsheimer (n 114 above). 439 Doorstep Selling Directive (n 6 above) §§4[3], 5[1]. 440 Heininger (n 92 above) J[41], J[45–46]. 441 Heininger (n 92 above) J[47]. The court declined at J[49ff] to make its judgment prospective even though the bank had acted in good faith, because this could only be done where there is a risk of serious difficulties as in C-128/93 Fisscher [1994] I ECR 4583 ECJ, J[18]. 442 Distance Selling Directive (n 7 above) §6 (three-month long-stop). 443 Consumer Credit Directive (n 10 above) §1[1], §1[2](c); Heininger (n 92 above) J[8ff]. 444 Consumer Credit Directive (n 10 above) §2[1](a); there is a partial exclusion for a mortgage secured on land as opposed to a building; see below [9.02]. 445 Gesetz über Verbraucherkredite ‘VerbrKrG’ amending the German Code of Civil Procedure, 1990 BGBl I, 2840. 446 VerbrKrG (n 445 above) §3[2] excludes many aspects of the credit regime where the loan is secured on land; Heininger (n 92 above) J[14]. 447 VerbrKrG (n 445 above) §7; Heininger (n 92 above) [15]. 448 Haustürwiderrufsgesetz (HWiG) §5[2] gave priority to VerbrKrG (n 445 above); this has subsequently been changed. 449 UK law excludes from the doorstep selling regime any cancellable consumer credit agreement: Contracts Away from Business Premises Regs 1987 (n 6 above) reg 4(7); but this excludes small 436 437
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transposition,450 and consumers should have the right to use either the credit or the doorstep cancellation right to their advantage. [5.86] National law had to decide the effects of cancellation on the land purchase contract and the security agreement.451 Did cancellation of the security leave in place the purchase and the debt? Mr and Mrs Heininger thought so, since the order they sought was for the bank to reimburse to them all capital and interest payments along with the costs incurred in connection with the execution of the loan agreement, not to mention a declaration that no rights at all accrued to the bank under the loan agreement.452 The European Court of Justice sent the case back to Germany with the observation that the effects were for the domestic courts using domestic laws. The Heiningers’ expectations were miles apart from German law as it stood at the time. The loan had to be repaid after cancellation with interest — and in order to do this they also needed to cancel the land purchase. Into the trap thus created fell the Schultes.453 They had invested in a refurbishment scheme for 1960s apartment blocks in Germany, investments which had been pitched to them in their home, borrowing to finance the deal, with the intention that the loan should be serviced from rental income. Arrears arose when the yield fell short of expectations and the bank began enforcement proceedings. The Schultes responded by cancelling the loan agreement believing that in this way they would release themselves from all obligations.454 In this they were sadly mistaken. Far from escaping all liability on the loan, they rendered the loan repayable,455 immediately456 and with interest.457 A second illustration of the disadvantage in cancellation of the loan agreement in isolation458 is provided by Crailsheimer.459 The couple had made a dodgy investment in self-catering apartments for business types visiting Stuttgart which had been pitched to them by a broker at their home using finance provided by the DSL Bank. When they were in default, the Crailsheimers attempted to use the doorstep regime as a defence, the issue referred to the European Court of Justice. It was decided that the borrowers were obliged to repay the loan, money still tied up in the land, and the repayment was immediate, in a single tranche, and with interest at the market rate.
agreements, granting credit up to £50: Consumer Credit Act 1974, c 39, s 74(2A) as amended in 1987 by reg 9. Query whether this complies with European law after Heininger (n 92 above). Heininger (n 92 above) J[25ff]. Heininger (n 92 above) J[35]; Schulte (n 112 above) J[68–69]. 452 Heininger (n 92 above) J[18]. 453 Schulte (n 112 above). 454 Schulte (n 112 above) J[54]; this took place after Heininger (n 92 above) was decided in the ECJ but before the domestic proceedings to decide the effect of the referral. 455 Schulte (n 112 above) J[82–86]. 456 Schulte (n 112 above) J[88–89]; immediate release of the bank follows from immediate release of the consumer. 457 Schulte (n 112 above) J[93]. 458 Schulte (n 112 above) J[56]. 450 451
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Marketing Land
Effect on the purchase agreement
[5.87] What is the effect of cancelling the loan agreement? And can the agreement for purchase of the land be cancelled as a knock-on consequence? The last is the crucial question, since without a cancellation right all the rest is meaningless, and there is now, perhaps, a glimmer of light in the general gloom for consumers. In the subsequent domestic decision of Heininger the Bundesgerichtshof460 addressed the consequences only obiter. German law461 provided for the purchase contract to be cancelled as well if they were ‘interconnected transactions’ but this could not apply (at the time) to mortgage loans granted under usual market conditions. So domestic law left in place the purchase contract and the obligation to repay the loan. Banks were not to be left with a stockpile of unmarketable flats in the east. German law has been amended to grant the consumer a right to cancel the mortgage arrangement in full, whether or not it was concluded on the doorstep.462 [5.88] In Schulte a loan used to finance a purchase of land formed a single economic unit with the purchase agreement,463 but European law did not create any formal linkage and lacked rules on connected contracts.464 So there was no right to cancel the purchase agreement. National law was free to state an effect on a linked contract, but it was not required to do so,465 and the nature of that effect was left to national law.466 However, these issues were most likely to occur where the consumer had not been told of his doorstep rights of cancellation467 and here the issue is different because the failure to read the consumer his rights causes him to miss the opportunity to avoid exposure to the risk that the investment will not flourish. It seems that domestic law must adopt appropriate provisions to guard against the risk, from this passage of the European Court of Justice ruling: Member states… must ensure that their legislation protects consumers who have been able to avoid exposure to such risks by adopting suitable measures to allow them to avoid bearing the consequences of the materialisation of those risks.468
Here then is a glimmer of light for consumers.469 It is difficult to discern the consequences of this judicial innovation without more case law but it seems clear that Crailsheimer (n 114 above) AG[38ff] Leger; Schulte (n 112 above) J[46ff]. Bundesgerichtshof XI ZR 91/99 [2002] ECLYB [417]; Bundesgerichtshof XI ZR 151/99 [2003] ECLYB [265]. 461 German Consumer Credit Act §9; now Bürgerliches Gesetzbuch (German Civil Code) (n 53 above) §§358ff. 462 BGB (n 53 above) §491[3](1) exception deleted; the ‘doorstep cancellation right’ (BGB amended §312) was limited correspondingly; BGB amended §358[3], third sentence. 463 Schulte (n 112 above) J[74]. 464 Schulte (n 112 above) J[76]. 465 Schulte (n 112 above) J[85]. 466 Schulte (n 112 above) J[79]; Heininger (n 92 above) J[35]. 467 Schulte (n 112 above) J[94]. 468 Schulte (n 112 above) J[99]; Crailsheimer (n 114 above) J[49]. 469 Damages could be a useful second prize: Oberlandesgericht Bremen ZU 20/02 [2006] 07 ECL [37]. 459 460
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domestic doorstep regimes around Europe will be found wanting, and in particular that the current United Kingdom transposition does not meet this dictum.
R EMEDI ATI O N A N D R EF O R M
Remediation and Reform 1
Remediation
[5.89] Consumer protection is nothing without adequate enforcement. Again there is an unhappy mish-mash of national and European controls. Authorisation and supervision regimes are left to national authorities,470 so long as they meet the European standard in terms of having adequate bite. Host state enforcement catches, or at least may do so if national legislators so choose, both businesses trading out of the state and those trading into it as host. There were thoughts of switching to a country of origin principle, so that the commercial practices of, say, a Spanish company could be tested for fairness on Spanish standards when trading in Spain or in France or in Britain, but the original proposal has not survived into the enacted form of the regime for unfair commercial practices.471 Instead the basic technique is to identify a group of public bodies charged with enforcement and having standing to bring proceedings,472 for example, in the United Kingdom, typically the Director General of Fair Trading or local weights and measures authorities.473 Standing to seek injunctions is also conferred on consumer organisations,474 even in European countries beyond their normal base of operations.475 Control is maintained through injunctions, pre-emptive injunctions, interim injunctions, and the self-descriptive ‘stop now’ orders,476 supported on occasion by the publication of decisions and corrective statements,477 and increasingly through codes of practice.478 470 See eg: Distance Marketing of FS Directive (n 7 above) R[7], §16; FS Distance Marketing Regs 2004 (n 7 above) regs 3, 4 (EEA is base). Joined up enforcement across the EU is planned to target €3.5 billion a year in frauds: Guardian December 30th 2006. 471 G de Baere ‘Principle of Origin — a Hidden Conflict Rule’ (2004) 11 Maastricht Journal 287–319; J Hornle ‘Country of Origin Regulation in Cross-border Media’ (2005) 54 ICLQ 89–126. 472 Unfair Practices Directive (n 5 above) R[21], §11; UK Consultation (n 5 above) [138ff], [194]. 473 eg Distance Selling Regs 2000 (n 7 above) reg 3(1). 474 Unfair Practices Directive (n 5 above) R[21], §11; UK Consultation (n 5 above) [138ff], [194]; Draft Unfair Trading Regs 2007 (n 5 above) reg 20ff. 475 Injunctions Directive 98/27/EC [1998] OJ L166 51, §4; Enterprise Act 2002, c 40, pt 8; Misleading and Comparative Advertising Directive (n 8 above) §4[1] as amended by Unfair Practices Directive (n 5 above) §14[4]. 476 Stop now orders were introduced to the UK in June 2001: Stop Now Orders (EC Directive) Regs 2001 SI 2001/1422; S McCalla ‘Stop Now Orders’ [2001] NLJ 751–752; also Unfair Practices Directive (n 5 above) §11. 477 UK Consultation (n 5 above) [142ff]; Misleading and Comparative Advertising Directive (n 8 above) §§4–5. 478 Unfair Practices Directive (n 5 above) R[20], §§2[f], 2[j], 10[2]; Unfair Practices EM (n 5 above) [72ff]; UK Consultation (n 5 above) [170ff].
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Criminal sanctions are often added by national legislators. A massive review of criminal enforcement has been provoked because the existing due diligence defence has to be amended to reflect the average consumer test.479
2
Common Frame of Reference
[5.90] A review of the consumer acquis is under way that will eventually lead to a Common Frame of Reference which includes, for example, common definitions of consumers and traders and coherent withdrawal periods.480
479 UK Consultation (n 5 above) [153ff]; Draft Unfair Trading Regs 2007 (n 5 above) regs 8–19, schs 2–4. 480 Green Paper on Review of the Consumer Acquis (2006) COM 744); see below [8.50].
TI MESHA R E
6 Timeshare Regulation of Timeshare Marketing. Timeshares and Timeshare-likes. Information. Withdrawal Rights. Timeshare Vehicles. Unregulated Aspects. Cross-border Timesharing. Reform.
R EG ULATI O N O F TI MESHA R E MA R KETI N G
Regulation of Timeshare Marketing 1
Controls
[6.01] Timeshare marketing is regulated by a European Directive1 which applies across EEA-30.2 The basic rights are to information at the pre-contract stage and a time for reflection before rights become binding. European regulation interacts in a complex way with the pre-existing domestic legislation which has required tortuous reshaping to make it fit the new scheme.3 Imposition of European controls has crippled an industry which set out with high aspirations4 but which came to rely on dubious marketing techniques. Unfortunately the definition of timeshares has proved to be full of holes and it has been all too easy for unscrupulous traders to evade the European regime by designing ‘timeshare-like’ products, code for ‘not a timeshare’. Strict European controls have trapped many existing owners, and the current problems involve resale and the management of existing blocks.5 The whole situation is under review by the Commission.6
1 Timeshare Directive 94/47/EC [1994] OJ L280 83; Timeshare Transposition Report Application of the Timeshare Directive SEC (1999) 1795 final. 2 EEA Agreement [1992] OJ L12 13 as adjusted [1994] OJ L1 572 and amended [004] OJ L130 3, §72, Annex XIX. 3 Timeshare Act 1992, c 35; Timeshare Regulations 1997, SI 1997/1081; Timeshare Act 1992 (Amendment) Regs 2003, SI 2003/1922; Timeshare (Cancellation Information) Order 2003, SI 2003/2579. 4 J Edmonds International Timesharing (London, Information Services for Lawyers, 2nd edn, 1986, 0-9004-176-7X). 5 See below [6.50ff]. 6 Review of the Timeshare Directive (Health & Consumer Protection Directorate, 2006); Responses to the Timeshare Consultation (Health & Consumer Protection Directorate) [XI] (review process and stakeholders), [X] (policy); Timeshare and Long-term Holiday Products Proposal, Explanatory Memorandum and Impact Assessment COM (2007) 303 final; this was published on June 7th 2007,
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2
Timeshare
The market
[6.02] Timeshare developed as a way of allocating access to mainframe computers7 but the term was soon appropriated to a particular method of sharing holiday accommodation. An outside observer looking at a hotel block or a tourist village would not be able to tell whether it was intended for outright sale as second homes or developed as a timeshare resort or used for the rental market to package tourists, and indeed many resorts are mixed.8 The difference is the basis of occupation: unlike rentals, timeshare is sold long-term, and, unlike holiday homes, what is sold is a limited right. A right to occupy accommodation for a particular week in the year means that one particular apartment is shared with up to 51 other owners. In essence timeshare is part ownership by way of consecutive sharing of holiday accommodation sold long-term by the week.9 If a particular family buy, say, week 24 in apartment 10, they can return year after year to that particular resort for that particular week in that particular flat, their friends in the neighbouring apartments doing the same. What fun. It all began as a loose kind of limited and intermittent leasehold, but the market has evolved so as to allow floating weeks and degraded to the point where most timeshares are confined to use rights and there are a multitude of ‘timeshare-like’ products which do not give rights in any specific accommodation, a holiday package10 devoid of land law elements. So misleading has ‘timeshare’ become that Spanish law now precludes any promise of ‘property’ and even the local word for ‘timeshare’ and insists on a circumlocution — a ‘right of rotational enjoyment of immovable property for tourist use’, perhaps most closely translated as a ‘use in turn’.11 ‘Interval’ is generally the best description of the interest acquired by the timesharer. Authoritative statistics about the market are hard to come by.12 Worldwide, timeshare is a $10 billion business, the largest slice being in America where timeshare was conceived as a means of offloading unwanted and unsaleable flats.13 Europe follows in second place, with a quarter of all resorts, 1.5K of them, too late for incorporation throughout this chapter but considered in outline at the end of the chapter: see below [6.66]. G Leposkis Timeshare Basics (Timeshare Today, ). C-73/04 Klein v Rhodos Management [2005] I ECR 8667 ECJ. 9 G Vedrickas Independent Property May 7th 2003; THS Bourne ‘Timeshare — the Way Forward’ [1992] NLJ 1581–1582, 1581. 10 See below [6.13ff]. 11 Spanish Timeshare Law 42/1998 (1998) 300 Boletin Oficial del Estado 42076; see below [6.41ff]. 12 Facts & Statistics (Timeshare Consumers Association, ); Resort Timesharing Worldwide (Parsipanny, New Jersey, Ragatz Associates, 2003); The European Timeshare Industry in 2001 (London, TRI Hospitality Consulting, 2001, 0-9541516-0-7) [1.1]. 13 On the USA (not otherwise considered in this chapter) see Edmonds (n 4 above) ch 8; ARDA Model Timeshare Act Guiding Principles (Orlando, Florida, American Resort Development Association, , 2004); BN McLellan & MD Lipton ‘Property Framework for Model Timeshare Codes’ (1989) 14 ILP 8–13. 7 8
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thinly spread across 25 different countries. Engineer Louis Pomier converted his ski chalet at SuperDevoluy in the French Alps some time around the middle of the 1960s, the first proper timeshare with fixed weeks,14 sold with the effusion ‘Don’t rent a room, buy the hotel; its cheaper’.15 From a cautious start in the mid-1970s the European taste for timeshares developed to the tune of half a million interval-owning families in 1988, a figure which has since peaked at 1.4 million, colonising 83K units.16 The price of one good week of Spanish sun each year in perpetuity, with international cuisine and Watney’s red barrel laid on,17 is about £10K,18 and this can be enjoyed without the commitment of year-round ownership. Some 200 resorts are concentrated in the Canary Islands with a year-round peak season blessed by a temperature ranging plus or minus 10 degrees from a mean of 24ºC. Tenerife is particularly packed,19 and exemplifies the dark side with its ‘underbelly of violence’; it was on Tenerife that the horrific and widely reported gangland-style murders of the Robinsons took place20 and this was also where John Palmer perpetrated his timeshare frauds.21 In general the Iberian Peninsular is a good area to avoid, given the substantial timesharing communities in mainland Spain, the Balearics and Portugal, with more modest numbers in France and Italy. Clearly beach resorts predominate.22 [6.03] A small subset provides for timesharing in the country, and indeed in Britain and Ireland this market exceeds £100 million annually.23 It all started in Loch Rannoch24 but has spread to the lowlands. Closest to Southampton, for example, near Lymington in the New Forest, is the Macdonald Elmers Court Resort, a converted Regency manor house in 23 acres of grounds overlooking the Solent with views to the Isle of Wight, now owned by the house builder Barratts.25 That caters for a niche clientele, affluent and sophisticated, a group also migrating towards prime city locations such as Glasgow, not to mention the greater enticements of Paris and Rome, though acquisition costs in city centres reduce profitability.26
14 Timeshare Industry 2001 (n 12 above) [1.2]; G Leposkis Timeshare Basics (n 7 above); however, Edmonds (n 4 above) 7 states that evolution began in Spain. 15 T Bourne ‘Time for a change’ [1997] NLJ 594–595, 594. 16 Timeshare Directive Review (n 6 above) [II.1]; J Rogers Prosser ‘Property Abroad’ [1989] 39 LSG 12–14 (165K Brits); C Jenkins ‘UK Timeshare Legislation’ [1992] 41 LSG 24. 17 Travel Agent sketch Monty Python’s Flying Circus episode 31 (London, BBC). 18 Vedrickas (n 9 above) 14. 19 Timeshare Industry 2001 (n 12 above) [2.1.4], [3.2.1]. 20 Guardian January 26th 2006. 21 See below [6.52]. 22 Timeshare Industry 2001 (n 12 above) [3.2.1], Table [3.11]; Timeshare Directive Review (n 6 above) [II.1] (€2.5 billion spending in Spain, 85K jobs), [III.4] 86% in Spain. The Timeshare Proposal Impact Assessment (n 6 above) suggests that timeshare adds €4.2 billion to Spanish GDP, 6% of the world market, and that EU GDP is enhanced by €10 billion. 23 S Marks Paradise Lost: CAB clients’ Experience of Timeshare (London, CAB, 2003) [1.1]. 24 Edmonds (n 4 above) 7. 25 Macdonald Resorts . 26 Timeshare Industry 2001 (n 12 above) [4.5.2].
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Timeshare
[6.04] Brits have taken up timesharing above any other nationality, a hollow boast comparable to our world leadership in the 1980s in football hooliganism. One-third of all European owners are from the UK, a number variously estimated at 400–500K.27 Three-quarters travel abroad, mostly to Iberia, with modest numbers of sophisticates in Italy and France. Germany and Austria stand next in line as timeshare consumers, together accounting for another fifth of the European market, with the rest spread thinly across Italy, France, Spain and Scandinavia. Be warned: the typical European owner is in the upper middle income bracket, married, usually free of children, and middle-aged or worse; the median age for British and German buyers is 60. Timeshare is not cool.28 [6.05] Timeshare has become a two-tier market, perhaps roughly equal in size.29 High quality accommodation is provided at the top end of the market, often branded with the name of a major hotel chain where satisfaction is high and modest growth is possible.30 There is also the possibility of investment in a scheme such as the Pierre & Vacances brand promotion of Residences de Tourisme,31 a buy-and-rent-back scheme designed as a medium-term investment advertised with a guaranteed rental income. These at any rate are the claims. Below is a world devastated by the European controls32 introduced in 1997 which abruptly cut growth from 15 per cent each year to below 2 per cent, the coincidence of timing being no coincidence.33 Europe outlawed the shabby sales practices needed to sell marginal timeshares. Ten years on ownership is falling, many units are unsold, resorts are being converted to other uses, and resale prices have collapsed. Satisfaction is low, owners have formed themselves into action groups, occupancy averages only 77 per cent, one in seven owners is a ‘no show’ and half want to sell.34 Timeshare in this sector is a dirty word.
27 TCA Facts & Statistics (n 12 above); Vedrickas (n 9 above); Timeshare Directive Review (n 6 above) [II.1]. 28 Timeshare Industry 2001 (n 12 above) [3.3.1], Tables [3.36–3.37]; TCA Facts & Statistics (n 12 above). However, Timeshare Directive Review (n 6 above) [II.2] gives 15% positive, 35% neutral and 50% negative, dissatisfaction higher in Europe than elsewhere in the world. 29 Edmonds (n 4 above) 1, 5, gave a gung ho assessment of the early days. Satisfaction declined from 64% in 1996: Paradise Lost (n 23 above) [1.3]. 30 Timeshare Industry 2001 (n 12 above) [3.1.2], Table [3.2]. The Yellowstone Club limited to 150 prestige members has a reported joining fee of £4 million, Sunday Times August 28th 2005, since ‘lots of people can afford £250K’; they do not appear to be targeting UK academics. 31 Observer January 22nd 2006. 32 Timeshare Directive (n 1 above); see below [6.17]. 33 Timeshare Industry 2001 (n 12 above) [1.1], [3.1.1]; TCA Facts & Statistics (n 12 above); Timeshare in Europe 2005 (Nottingham, Timeshare Consumers Association, , 2005) (continuing decline); R Mullerat ‘Time Sharing in Europe: Present and Future’ (2002) 13 ICCLR 50–52, 50 (thinks it is flourishing!). However, Timeshare Directive Review (n 6 above) says 5% growth since 1996. 34 Timeshare in Europe 2004 — An Industry at the Cross Roads (Nottingham, Timeshare Consumers Association, 2004) 18; Timeshare Industry 2001 (n 12 above) [3.2.5], Table [3.26]. However, Timeshare Directive Review (n 6 above) gives a 91% usage figure.
Regulation of Timeshare Marketing
3
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Marketing
[6.06] Timeshare was once a great money-spinner for the developer, likened by one journalist to an illegal drug with a street market completely out of proportion to the cost of production.35 In theory, if an apartment could be sold outright for say £100K, the same flat can be sold on a timeshare basis 50 times over36 for perhaps £10K, increasing the yield five-fold. However, the seasonality of the holiday market means that much of the accommodation in a typical timeshare remains unsold in the ‘shoulder’ and off-peak seasons.37 At least half of sales income is eaten up by marketing,38 leaving small residual values. The very word timeshare makes the vast majority of the population shudder.39 Your author has never encountered a timeshare pitch but, apparently, ‘unless you have always holidayed well off the beaten track you will undoubtedly have been stalked’.40 A hard sell was needed to convert punters to buyers, given a conversion rate worse than one in 20.41 Techniques include leafleting, telemarketing, fly buy, drive to, owner referrals, in house sales, exchange of guests, affinity list mailing, off-site sales offices, and targeting existing owners. Bait and trap predominates. A punter is lured to a sales presentation offering a desirable product (the bait) where he is plied with alcohol,42 and a timeshare is then substituted for the bait product.43 This, and similar techniques, is soon to be outlawed.44 Most complaints relate to selling techniques and misleading claims,45 no surprise given that blaggers in Tenerife were told to ‘start lying, cheating and conning people’.46 Hence the case for European intervention to protect potential purchasers against high pressure sales techniques in Europe and in UK domestic law.47 Touts have been largely eliminated, pushing the 35 Simon Calder Independent August 3rd 2001; a review of B Levy Blaggers (Edinburgh, Mainstream, 2001, 1-84018-134-6). 36 The year has just over 52 weeks, but sales for 51 weeks are standard to allow one week for maintenance, as in C-423/97 Travel Vac v Sanchis [1999] I ECR 2195 ECJ. A free week is now a legal requirement in Spain and Portugal. 37 Industry at the Cross Roads (n 34 above) 6. 38 Industry at the Cross Roads (n 34 above) 14; Edmonds (n 4 above) 9 says 45% marketing, 30% acquisition and development costs and 25% profit. 39 Bruce Bailey on the TCA website (n 12 above). 40 Vedrickas (n 9 above) 14. 41 Industry at the Cross Roads (n 34 above) 14. 42 Travel Vac (n 36 above) J[31]. 43 A requirement to attend a sales presentation should be made clear in advance: Code of Ethics (OTE (n 12 above), 2005) [V 1.1]; greater controls are needed: European Parliament Resolution on Timeshares PS_TA (2002) 0368, 2000/2208 (1Nl) [30]. 44 Unfair Commercial Practices Directive 2005/29/EC [2005] OJ L149 22, Annex 1 [5–6]; Paradise Lost (n 23 above) [5–6]; see above [5.40ff]. National law in some states already imposes a duty to act in good faith: Klein (n 8 above) AG[11] Geelhoed (outside ECJ jurisdiction). No changes are planned to timeshare legislation pending a specific review: Government Response to CP on Implementing the Unfair Commercial Practices Directive (URN 06/2121, 2006) 13. 45 Industry at the Cross Roads (n 34 above) 20; Paradise Lost (n 23 above) [1.4]. 46 Levy as reviewed by Calder (n 35 above). 47 Trade Descriptions Act 1968, c 29; Control of Misleading Advertisements Regs 1988 SI 1988/915.
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timeshare trade past respectability into staidness, devastating the resale market and adding considerably to the cost of accommodation.
4
Timeshare legislation
[6.07] It is greatly to the credit of the European Commission that the Timeshare Directive 199448 has swept the continent clear of timeshare blaggers and spivs. Two important rights were conferred on consumers, information rights and the right to a cooling-off period during which a potential purchaser can change his mind and withdraw.49 Consumers cannot waive their rights50 and minimum European standards are imposed by restricting any selection of law to those from within the EU or EEA.51 The European standard set is a lowest common denominator,52 and it is that bare minimum that has been adopted in most European states. The European Parliament has called for a consistent and higher standard everywhere.53 States in the majority opting for a literal transposition54 included Denmark, Finland, the Netherlands, Ireland, Italy,55 Luxembourg, Sweden, Germany and Austria. Timeshare legislation already existed in the United Kingdom as it did in Portugal,56 France57 and Greece,58 and all four of these early adopters continue to afford protection going beyond the European base line. A fifth timeshare-plus state may be added, that is Belgium, where the cooling-off period is longer and there are stronger guarantees for blocks under construction. Eastwards expansion has brought ten further transpositions, including the British holiday destination of Cyprus,59 but details are available via the European information network if, say, a regular winter week in Vilnius takes the fancy. [6.08] The United Kingdom enacted its Timeshare Act in 199260 and this has subsequently been adapted to transpose and incorporate the European Directive in a truly horrible and messy way. Existing legislation had a wider scope but gave a lower level of protection, and it was decided to retain this for cases continuing Timeshare Directive (n 1 above) as from April 30th 1997. Timeshare Directive (n 1 above) R[8–9]; see below [6.24ff], [6.31ff]. 50 Timeshare Directive (n 1 above) §8; Timeshare Act 1992 (n 3 above) s 12(4). 51 See below [6.65]. 52 Timeshare Directive (n 1 above) R[1–2], §11. Minimal harmonisation leads to a ‘kaleidoscope’: Mullerat (n 33 above) 50. 53 European Parliament Resolution on Timeshare (n 43 above) R[E–H], [2]. 54 Timeshare Transposition Report (n 1 above) [I.B.1]. 55 Legislative Decree 1998/427 [1998] Gazzetta Ufficiale (Serie Generale) 291, 48. 56 Decree 275/93; JM Seneyto ‘Time-sharing’ (1997) 7 European Legal Bulletin 56–57; Decree 22/2002 [2002] ECLYB [624] (latest amendment). 57 Law 98-566 [1998] JO 10486. 58 C-401/98 Commission EC v Greece (Timeshare Transposition) [1999] I ECR 5543 ECJ; Presidential Decree 293/2001 [2001] Fek A 205. 59 Timesharing Act 2001 [2001] EE I 3496, 3517, [2002] ECLYB [1382]. 60 Timeshare Act 1992 (n 3 above); HW Wilkinson ‘Ointment for the Sting?’ [1992] Conv 301–308; step forward the Bill’s sponsor Andrew Hunter MP for Basingstoke. 48 49
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to fall outside the European legislation; to this domestic foundation was added a European superstructure with a narrower ambit of protection but a higher level of protection, an adaptation accomplished in the worst possible drafting style in 1997.61 The narrower higher European core protects consumers buying timeshare accommodation in buildings, while a lower level of domestic protection applies to timeshares in mobile homes and boats, to business purchasers, and investors.62 One good word should be said, parenthetically, for the United Kingdom transposition, since the duties on timeshare sellers are at least treated as statutory duties, allowing civil proceedings for loss caused by an infringement.63 Resuming the chronological narrative, worse was to follow. The original transposition required information and notice of withdrawal rights to be provided in a document separate from the timeshare contract, with complex provisions to ensure that these two documents were cross-referenced to each other.64 Most European countries started with a clean slate and so were able to take the more direct approach of integrating the European information into the contract itself, a system at once more comprehensible to consumers and less onerous for business. After two rounds of consultation,65 United Kingdom information and cancellation requirements were brought into line with the European norm in 2003 with a unitary system in which the contract itself contains the necessary information.66 What results is truly as opaque as it would be possible to devise and repugnant to the needs of consumers: where they need light let them have darkness.
5
Self-regulation
[6.09] The upper end of the market consists of members of the Organisation for Timeshare in Europe who are subject to a Code of Ethics, developed in co-operation with the European Commission. Fair and proper standards of business practice are required. All holiday products are affected including true timeshares and all timeshare-like products — vacation-ownership, holidayownership, points clubs, fractionals and similar.67 Also all-embracing is the definition of the activities covered — development, marketing, sale, resale, financing, resort management and exchange services68 — and there is a key requirement to Timeshare Regs 1997 (n 3 above); T Bourne ‘Changing Times?’ [1998] NLJ 654–655. Timeshare Act 1992 (n 3 above) s 1A(3). 63 Timeshare Act 1992 (n 3 above) s 12(2); also s 10A inserted in 1997 and amended in 2003 (n 3 above). 64 Timeshare Act 1992 (Cancellation Notices) Order 1992, SI 1992/1942; Timeshare Act 1992 (Repayment of Credit on Cancellation) Order 1992, SI 1992/1943; both now repealed by the Cancellation Information Order 2003 (n 3 above). 65 Timeshare Consultation CCP 007/02 DTA (DTI, 2003); ‘Timeshare Sales Improving the Protection of Consumers — Summary of Responses to Consultation’ (Department of Trade and Industry, 2002). 66 See below [6.32]. 67 OTE Code of Ethics (n 43 above) [II.1], [III] (Timeshare Activities, Timeshare Interests and New Holiday Products); see below [6.19ff]. 68 OTE Code of Ethics (n 43 above) [II.1], [III] (Timeshare Activities). 61 62
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accept responsibility for the acts of all employees and agents.69 Other key points are: 앫 앫 앫 앫
a minimum 15-day cooling-off period on all products,70 compliance with other regulatory requirements, holidays must be available when promised, and proper long-term maintenance and management of resorts.71
This Code covers only the best 30 per cent of the market.72
TI MESHA R ES A N D TI MESHA R E-LI KES
Timeshares and Timeshare-likes 1
Patchy coverage of the Directive
[6.10] Given the massive impact of the Timeshare Directive on marketing techniques, it may seem odd that its overall legacy remains equivocal, mainly because of its patchy coverage.73 Marketing controls apply only to true timeshares, a limitation which has generated mutations called ‘timeshare-like’ products designed to sidestep the controls, and often intentionally misnamed. The same capital sum can be charged for the same accommodation but with no legal protection and little guarantee of product delivery.74
2
Accommodation in a building
[6.11] True timesharing takes place in an immovable property, meaning a building or part of a building providing holiday accommodation.75 United Kingdom legislation predating the Directive referred to any living accommodation used by timeshare users,76 but this was subsequently remodelled and constricted to European cases where accommodation is provided in a building,77 69 OTE Code of Ethics (n 43 above) [I.E]. Market activities are often split between related companies, which creates an ethos of buck-passing. 70 OTE Code of Ethics (n 43 above) [V.1.2]. 71 OTE Code of Ethics (n 43 above) [V.7]. 72 Only 67 out of 1,100 companies: Industry at the Cross Roads (n 34 above) 11. 73 Timeshare Directive Review (n 6 above) [I], [III], [V], [VII.1–2]; UK Government Timeshare Response (n 6 above) [6–7]. 74 These generate 89% of timeshare-type complaints dealt with by Citizens’ Advice Bureaux: Paradise Lost (n 23 above) [4.2] and passim; they also keep UK MEPs fully employed handling complaints: Timeshare Directive Review (n 6 above) [VII]. 75 Timeshare Directive (n 1 above) §2. 76 Timeshare Act 1992 (n 3 above) ss 1(1)(a), 1(2)(a). 77 Timeshare Act 1992 (n 3 above) s 1(2) as amended in 1997 (n 3 above). This does not need to be limited to meet the Unfair Practices Directive (n 44 above) since tighter national controls are allowed for land: Consultation on Implementing the EU Directive on Unfair Commercial Practices (DTI, December 2005, URN 05/1815) 82.
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leaving lesser domestic protection for mobile homes and caravans.78 The right may attach to one particular piece of accommodation or it could be one or more immovable properties, since the Directive applies where there is a right to pick an apartment from a pool of accommodation.79 Pooled arrangements necessarily involve a booking system where use is subject to availability, but floating schemes give much-needed flexibility. [6.12] Accommodation in caravans and boats are examples of timeshare-like products. Timeshares in caravans escape control in Spain80 and most of Europe81 but UK domestic law provides a domestic-only protection at a minimal level.82 Timeshare has also been found to be a fruitful way of selling holidays on canal narrow boats — and indeed it is difficult to see how one could possibly market as a holiday a week coopedup with one’s partner and children in cramped accommodation without an extremely hard sell — but intervals in narrow boats are completely unprotected in the UK, Spain, and across Europe,83 unless the seller happens to be subject to the trade Code of Conduct.84
3
Specific accommodation
[6.13] At one extreme of the spectrum of possible use patterns are the fixed periods operated according to a predetermined schedule of dates each year, a scheme well suited to resorts with a clearly defined peak season, such as a ski resort or a Spanish beach holiday.85 Fixed weeks which give rights to use one specific apartment are clearly protected in European law but this kind of scheme is inflexible.86 Hence the growth of schemes (also European-protected) with rights to choose accommodation from a pool of accommodation,87 and points schemes. Membership of a Points Club is obtained by prepayment of a capital sum which is converted into ‘points’ which can then be exchanged for weeks of accommodation.88 Points values are attached to particular holidays, according to See below [6.12]. Timeshare Directive (n 1 above) §2; Timeshare Act 1992 (n 3 above) s 1(1)(a); see below [6.13]. 80 Spanish Timeshare Law (n 11 above). 81 Timeshare Directive (n 1 above) §§ 1, 2. 82 Timeshare Act 1992 (n 3 above) s 1(1)(a), using a definition borrowed from the Caravan Sites and Control of Development Act 1960, c 62, s 29(1). This may now need revision to meet the Unfair Practices Directive (n 44 above) since tighter national controls are not allowed for chattels: UK Consultation (n 77 above) 82. 83 Timeshare Directive (n 1 above) §§1, 2; Timeshare Act 1992 (n 3 above) s 1(1)(a); Paradise Lost (n 23 above) [4.20ff]; Spanish Timeshare Law (n 11 above). 84 OTE Code of Ethics (n 43 above) [III] (‘timeshare interests’ includes intervals in movables); Timeshare Industry 2001 (n 12 above) [3.2.2], [4.5.1]. 85 Timeshare Industry 2001 (n 12 above) [4.9.4]. 86 A ‘ceded right’ is a fixed week ceded to an exchange club to enable the owner to book weeks elsewhere: Industry at the Cross Roads (n 34 above), 5. 87 Timeshare Directive (n 1 above) §2; Timeshare Act 1992 (n 3 above) s 1(1)(a). 88 OTE Code of Ethics (n 43 above) [III], [V.4]. Names for this timeshare currency vary. 89 Timeshare Industry 2001 (n 12 above) [4.5.3]. 78 79
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resort, season, and apartment size, and it becomes possible to switch holiday destination.89 Floating weeks enable the timesharer to select dates each year within seasonality bandings paying with a points entitlement. All these schemes involve a booking system, with reservations subject to availability, and there is an issue of ensuring that there is sufficient accommodation available to cater for points sold.90 Club members still have to pay an annual management fee but its calculation is uncertain where there is no link to specific accommodation.91 Information about points clubs which ought to be provided is collated in the main trade Code of Practice.92 [6.14] There are reputable points clubs. Hapimag uses the system in Europe and Disney has exported the system from its timeshare in Orlando for the new Marriott Disney Hilton Club at San Antem in Mallorca where weeks cost upwards of £8.6K not counting the annual maintenance charge. These schemes are usually personal, non-bequeathable and unmortgageable. There are also many dubious outfits and some points clubs are poor value.93 European law does not apply once all link is removed between a particular resort and the holiday entitlement with a flexible holiday package,94 so these points clubs are timeshare-like, that is, not true timeshares.95 Comparable European-level protection has to be offered by the elite membership of the main trade organisation,96 but fringe players use points clubs as a way of evading European controls. They were given all the help they are likely to need by the European Court of Justice in Klein v Rhodos Management.97 A German couple bought from an Isle of Man company membership of a club entitling them to vacations with the Sun Beach Holiday Club based at a specific hotel complex in Greece. They could take a one-week holiday for 40 years at a global cost of €6.7K with an annual maintenance fee of €160 and membership of the main exchange club for three years. Thus the scheme provided for an apartment of a specified type, though not necessarily the same one each year, in a specific holiday complex subject to the possibility of exchange, each year for nearly 40 years.98 This was not a tenancy99 but a club membership contract, and it followed that the German courts had jurisdiction over disputes; the case was not within the exclusive
OTE Code of Ethics (n 43 above) [V.4.1]. Timeshare Industry 2001 (n 12 above) [4.5.4]. 92 OTE Code of Ethics (n 43 above) [V.4.4]. 93 Department of Trade and Industry Response (n 6 above) Annex A suggests that holiday clubs are the main problem they encounter. 94 Timeshare Industry 2001 (n 12 above) [4.5.3]; also outside the Spanish Timeshare Law (n 11 above). But UK law does apply domestic protection whenever there is a pool of accommodation: Timeshare Act 1992 (n 3 above) s 1(1)(a). 95 Paradise Lost (n 23 above) [2.27]. 96 OTE Code of Ethics (n 43 above) [II.1], [III] ‘Timeshare Interests’. 97 Klein (n 8 above). 98 Klein (n 8 above) J[19], J[20], J[24]. 99 Klein (n 8 above) J[26]. Club membership may also have been the form of Sanchis’ time-share contract: Travel Vac (n 36 above) J[22]. 90 91
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jurisdiction of the Greek courts of the site.100 The contrary opinion given by the Advocate General favouring lifting the club veil to find a true timeshare arrangement lurking behind is more convincing,101 since non-accommodation aspects were marginal.102 [6.15] Holiday clubs are the chief unregulated product evolved to sidestep the Timeshare Directive. Cut-price vacations are promised in return for an upfront fee — possibly as much as £5K103 — as in a timeshare, the accommodation offered often being unsold timeshare stock. However, holidays can be selected out of a brochure from a variety of resorts, and this detachment of the rights from specific property creates a legal vacuum for the clubs with only ordinary consumer protection laws to shield buyers against high pressure selling techniques. Often there is not enough accommodation available to book. Annual fees to a holiday club may be £250, the same as for the same non-club holiday bought over the internet without the membership fee which suggests that membership is worthless.104 Holiday clubs should be brought within the net of European protection.105
4
Global price
[6.16] A timeshare differs from a holiday rental106 because a global price is paid at the outset.107 For example, week 47 in a timeshare in Albuferia on the Portuguese Algarve cost the Jarretts £2.7K in 1990.108 Many buyers need to borrow. Insertion of the global price requirement into earlier United Kingdom legislation is messy to say the least.109
5
Consumers and investors
[6.17] European competence is based on consumer protection necessarily confining the reach of EU legislation to B2C contracts, a restriction inherent in
100 Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (EC) 44/2001 [2001] OJ L12 1, §22; see above [4.47]. 101 Klein (n 8 above) AG[24ff] Geelhoed. 102 Klein (n 8 above) AG[30] Geelhoed. 103 Paradise Lost (n 23 above) [1.8]. 104 Paradise Lost (n 23 above) [2.9]. 105 DTI Response to Consultation (n 6 above) 3. Timeshare Directive Review (n 6 above) [V] refers to travel discount clubs. 106 A timeshare is like a contract to take a hotel room rather than property protected by EC §295 ex §222: Timeshare Directive (n 1 above) R[5–6]; see above [3.18]. 107 Timeshare Directive (n 1 above) §2. 108 Jarrett v Barclays Bank [1999] QB 1 CA. 109 Timeshare Act 1992 (n 3 above) s 1(3A) as amended in 1997 and again in 2003 (n 3 above); a global price is only required for the higher level EU protection (ss 1A–1E, 2(2B)–2(2E), 3(3), 5A, 5B and 6A) with lower level domestic protection available for pay as you holiday contracts.
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the Directive.110 The seller is described in the Directive as a ‘vendor’,111 old-fashioned maybe but much better this than the horrible ‘offeror’ served up by our domestic legislator.112 New (this book), old (Brussels) or ancient (Parliamentary Counsel), the seller will generally be a company and must be acting professionally in establishing or transferring timeshare rights. For the other party, the buyer of a timeshare, the European translator speaks of a ‘purchaser’, an offence against the vernacular that pales into insignificance when compared to the barbarism of the United Kingdom’s ‘offeree’113; this must be an individual (a natural person) acting as a consumer outwith any professional capacity,114 a rule repeated in domestic law.115 Perhaps there is no good reason to protect speculative buyers, but surely anyone who contemplates investment in timeshares is in serious need of protection from themselves?
6
Three year plus duration
[6.18] A true timeshare creates fractional use rights for at least three years,116 a minimum that has been transposed directly across most of Europe.117 Shorter contracts are often left unprotected, though they are caught in Finland, and Portuguese law deserves especial applause because it treats a short contract as a nullity, so that a timeshare is either banned or it is fully protected. The particular rule adopted is mistaken because developers have been encouraged to offer contracts for less than three years (the so-called ‘holiday packs’) with the sole purpose of circumventing European controls. Holiday packs are part package tour118 and part timeshare, but they evade controls by reason of their short duration.119 Spain is notorious for unregulated products lasting 35 months — one month shy of the Directive — followed by a rolling renewal until the punter is persuaded into a full purchase.120 The main trade Code121 requires members Timeshare Transposition Report (n 1 above) [II.C.4.b] discussing Denmark. Timeshare Directive (n 1 above) §2. 112 Timeshare Act 1992 (n 3 above) s 1(4)(a); an error according to the Microsoft Word dictionary, though needless to say it is in the OED. 113 Timeshare Act 1992 (n 3 above) s 1(4)(a). 114 Timeshare Directive (n 1 above) §2. 115 Timeshare Act 1992 (n 3 above) s 4(1) for European-based protection. Edmonds (n 4 above) 9 suggested that half of early buyers were investors. 116 Timeshare Directive (n 1 above) §2; Timeshare Act 1992 (n 3 above) s 1(1)(b). 117 eg Spanish Timeshare Law (n 11 above). 118 A package involves two or more services combined and provided over a holiday period lasting more than 24 hours. Package Travel Directive 90/314/EEC [1990] OJ L158 59, §2; Package Holiday Regs 1992, SI 1992/3288, reg 2; M Chapman ‘A Voyage round Reg 2(1) of the Package Travel Regs 1992’ (2004) 3 International Tourist Law Journal 129–134; C-400/00 Club Tour v Garrido [2002] I ECR 4051 ECJ; Keppel-Palmer v Exus Travel [2003] EWHC 3529; A Saggerson ‘One Man’s Mansion is Another Woman’s Monstrosity’ (2003) 4 International Tourist Law Journal 185–188 (inclusion of limousine transport altered the villa rental contract into a regulated package holiday). 119 Timeshare Industry 2001 (n 12 above) [4.5.5]; Paradise Lost (n 23 above) [4.15ff]. 120 Timeshare Transposition Report (n 1 above) [III.A.1]. 121 OTE Code of Ethics (n 43 above) [V.6]. 110 111
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bound by it to treat these ‘-likes’ as timeshares with respect to information and cooling-off, and with marketing to avoid confusion with true timeshares. [6.19] An exit package is offered to people who attend an initial sales presentation for a timeshare but decide against buying to allow trial usage of a resort for a short period, treated by the trade Code of Conduct in the same way.122 A particular dodge is the use of ‘collaterals’. No payment can be taken for a true timeshare until the cooling-off period has expired, but this control can be evaded by the use of two contracts side by side; the first sells a timeshare without an advance payment whereas the second sells a 35-month trial with advance payment in full, a dodge which needs to be squashed.123
7
Interval (week)
[6.20] A timeshare involves a period of each year, either specified in advance or specifiable.124 The basic unit of timeshare currency is the week, and the Directive says that the interval ‘may not be less than one week’,125 a minimum enforced across Europe. Jarrett v Barclays Bank,126 to give a reported example, concerned week 47 in a timeshare in Albuferia on the Portuguese Algarve. European protection accrues only if the annual utilisation period is at least seven days,127 but a majority of states cover all timeshare contracts or else outlaw sub-weekly contracts128; a general ban may have been intended since the definition of a timeshare states that the duration ‘may not be less than one week’.129 Unthoughtful transposition has created a category of unregulated timeshares in some states where the annual period is six days or less,130 a niggle calling for an amendment to the Directive. [6.21] Seven out of ten holdings are multiples.131 A tiny minority of idlers have seven or more weeks. UK legislation formerly imposed a maximum of one 122 OTE Code of Ethics (n 43 above) [III] (definition of a ‘New Holiday Product’, oddly expressed but treated as a timeshare interest). 123 Industry at the Cross Roads (n 34 above), 22; European Parliament Resolution on Timeshare (n 43 above) [10], [16]. 124 Rendered in the Timeshare Act 1992 (n 3 above) s 1(1)(a) as ‘specified or ascertainable’. 125 Timeshare Directive (n 1 above) §2. 126 Jarrett (n 108 above) CA; Travel Vac (n 36 above) (19th week in Valencian timeshare). 127 Timeshare Directive (n 1 above) §2. There is always bound to be a handover period. Holidays in Canynick Cottages at Newquay were weekly, for a period running from 3 pm one Saturday until 10 am on the Saturday following: Cottage Holiday Associates v Commissioners for Customs and Excise [1983] QB 735 Woolf J, (R[aa] at 738). Literally these would be outside the European Directive, but common sense is required. 128 Timeshare Transposition Report (n 1 above) [II.A.3]. 129 Timeshare Directive (n 1 above) §2. 130 Netherlands, Ireland and Italy. 131 Resort Timesharing Worldwide (n 12 above); Timeshare Industry 2001 (n 12 above) [3.3.1], Table [3.37]; TCA Facts & Statistics (n 12 above) gives an average of 1.3 weeks, but the Commission thinks that 1.45 million households own 2.9 million weeks, ie almost 2 weeks each: Timeshare Directive Review (n 6 above) [II.1].
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month,132 presumably to draw a clear line between timeshares and ordinary domestic rentals, but we now follow the European model more closely in referring to ‘any ascertainable period of a year’,133 though at least we catch sub-weekly deals. Longer use rights in a single property are often described as a fractional, a market much more akin to co-ownership given that each flat has fewer owners.134 Fractionals became attractive in the USA after changes made in 1986 to the taxation of second homes, and a few exist in Spain and Portugal. Each owner can occupy for a portion of the year of between four and thirteen weeks, but weeks are spread across the seasons and generally usually used in person rather than being traded. This is a sound market with considerable scope for expansion, a shared holiday home but much cheaper than an outright purchase. [6.22] Sub-weekly arrangements are a second kind of holiday pack.135 In industry speak, these ‘exploit the trend towards flexibility of split weeks’, and even daily usage may be the pattern in cities, but in plainer language these evade the Directive by creating an interval lasting less than a week. Biennials might also be a problem, though they seem to be few and far between in Europe. Industry illiterates call them ‘bi-annuals’,136 by which they mean the right to a holiday which rolls round every other year. Even if this is a relatively small problem, the Directive should be amended to gather in such arrangements.
8
Tightening the European screw
[6.23] ‘Timeshare’ needs redefinition so as to catch any provision for multiple holidays which combines a global price and continuing maintenance or membership fees.137 The Organisation for Timeshare in Europe defines a ‘timeshare interest’ as138: An interest which entitles the owner to use periodically only and for touristic purposes, accommodation in a specified immovable or movable or class of immovables or movables, for a specified period or class of periods during a specified term, and where the initial payment for the interest is significantly greater than later related periodical payments.
A looser definition of this kind could close the loopholes represented by timeshare-like products. Self-regulation can go so far but it cannot deal with rogues139 so something like the Code definition needs to be made legislative. Timeshare Act 1992 (n 3 above) s 1(2)(b). Timeshare Act 1992 (n 3 above) s 1(1)(a) as amended in 1997 (n 3 above). 134 Industry at the Cross Roads (n 34 above), 5. 135 See above [6.19]. 136 Timeshare Industry 2001 (n 12 above) [4.9.3]. 137 European Parliament Resolution on Timeshare (n 43 above) [26]; Paradise Lost (n 23 above) [6]; R Mullerat & B Mullerat ‘A Self-defending Industry’ (2002) 2 Business Law International 252–263; Mullerat (n 33 above); see below [6.66]. 138 OTE Code of Ethics (n 43 above) [III]. Oddities of translation have been left in place. 139 Timeshare Directive Review (n 6 above) [X]; the preferred option seems to be a vertical revision. 132 133
Information
261 I N F O R MATI O N
Information 1
Form and language
[6.24] All timeshare contracts within the European regime must be in writing.140 A consumer should be able to comprehend the terms and his ability to do so depends primarily upon the language used for the information document and contract.141 In essence the buyer may be entitled to information in the language of his state of residence or of the state of his nationality — at his choice — and also the language of the locus of the timeshare.142 Domestic law determines which is the definitive version and which a certified translation,143 the United Kingdom opting for information and contract to follow the consumer’s residence with a translation according to the site.144 Criminal sanctions are general, but these may be supported by nullity or voidability at the buyer’s option.145
2
Advertising
[6.25] Advertising material must indicate the possibility and means of obtaining the information document.146 Any brochure must give full and accurate information, including a general description of the property, and how further information may be obtained.147
3
Pre-contract information
[6.26] Once a person passes beyond inquisitiveness to the stage of becoming a prospective purchaser, information has to be provided. If construction of the apartment is complete, a concise accurate statement is required of the following148: 140 Timeshare Directive (n 1 above) §4; Timeshare Directive Review (n 6 above) [VII.4]; Timeshare Act 1992 (n 3 above) s 1D, inserted in 1997 (n 3 above). 141 Meaning official EU languages, except that it should be EEA languages as in the UK. 142 Possibly numerous where accommodation is pooled. 143 Timeshare Directive (n 1 above) R[10], §4; Timeshare Act 1992 (n 3 above) s 1E as amended in 1997 (for buildings bought by consumers); Timeshare Transposition Report (n 1 above) [II.E]. 144 Timeshare Act 1992 (n 3 above) ss 1D, 1E. 145 Nullity: Austria, France, Spain and Sweden and Germany (contract itself); voidability: Belgium and Germany (pre-contract information). Penalties for failure to provide the basic requirement are generally more onerous than for defaults in translations. The integrity of a contract is rarely threatened for failure to translate, except in France (null and void), and Sweden and Belgium (voidability). 146 Timeshare Directive (n 1 above) §3[3]; Timeshare Act 1992 (n 3 above) s 1B inserted in 1997 (n 3 above). 147 Timeshare Directive (n 1 above) R[7], §3. 148 Timeshare Directive (n 1 above) §4, Annex; Timeshare Act 1992 (n 3 above) s 1A inserted in 1997 (n 3 above); Timeshare Transposition Report (n 1 above) [II.C].
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Timeshare
앫 the identities and domiciles of the parties, the seller’s legal status, and the identity and domicile of the owner, 앫 the precise right which is the subject of the contract, including any conditions, 앫 the location of the site and an accurate description of the property, 앫 services (lighting, water, maintenance, refuse collection) to which the purchaser will have access and on what conditions, 앫 common facilities, such as a swimming pool or sauna, to which the purchaser may have access, and on what conditions, 앫 principles governing maintenance, repairs, administration and management, 앫 costs: the price to be paid by the purchaser to exercise the contractual right to the timeshare; also an estimate of the costs for the use of common facilities and services; the basis for the calculation of the service charges, any mandatory statutory charges such as taxes or fees; and administrative overheads for management, maintenance and repairs, 앫 the right to cancel the contract and the method of exercising this, meaning the person to whom any letter of cancellation or withdrawal should be sent, and the costs of withdrawal; also arrangements for the cancellation of any credit agreement linked to the contract in the event of cancellation or withdrawal from the contract. [6.27] Many timeshares are bought ‘off plan’ while the apartment block is still incomplete, in which case the following additional information is required149: 앫 앫 앫 앫
the state of completion, a reasonable estimate of the deadline for completion, the number of the building permit and details of the competent authorities, the state of completion of the services (gas, electricity, water and telephone connections), and 앫 a guarantee regarding completion of the immovable property or for repayment of advance payments on non-completion. The European minimum is extended in many EU states,150 for example to embrace information about guarantees151 or to require inclusion of all the contractual information (listed below) at the pre-contract stage.152 Criminal sanctions are almost universal,153 but there is also the possibility of contractual or restitutionary remedies.154
Timeshare Directive (n 1 above) Annex (d); numbers refer to sub-paras. Austria, Denmark, Spain, Finland, the Netherlands, Italy, Luxembourg and Portugal. 151 Belgium. 152 The Netherlands. 153 Timeshare Transposition Report (n 1 above) [II.C.3]. 154 Nullity (France and Spain); voidability (Germany and Belgium); damages (Netherlands and Sweden). 149 150
Information
4
263
Contractual information
[6.28] European law requires repetition in the final sale contract of all pre-contract information, with changes limited to those agreed or those beyond the seller’s control, all of which must be mentioned expressly.155 This regurgitation is supplemented by the following new items156: 앫 앫 앫 앫
the exact cooling-off period and when the buy may start to timeshare, reassurance that there are no unstated costs, charges or obligations, details of any exchange or resale schemes and their costs, and the date and place of signature by each party.
National implementation varies. This list of contractual information is accepted as it stands in most countries.157 Belgium adds particulars of administration and management of the immovable property and of encumbrances on the land. Portugal demands more precise description of the accommodation units, designation of which units will be the object of real rights, a statement of the percentage of timeshares in a resort, and additional guarantees for good administration, maintenance and protection against undisclosed encumbrances. Spain has both the largest timeshare market and the longest list of additional information requirements, as follows158: 앫 앫 앫 앫 앫 앫 앫 앫 앫 앫 앫
the use regime (the date of the deed, its notarisation and registration), nature of the right sold (notably its expiry date), description of the building and the flat, for a development under construction, the current stage of construction, a completion deadline, the building licence, a quality statement for construction materials, and a guarantee for post-building defects, total price including fees, updating of management fees, usually indexed to retail prices, communal services and installations, any exchange scheme, registration details of the promoter, the seller and any exchange company, duration of the timeshare regime, and information to enable the buyer to check the ownership and the charges of the real estate at the land registry and to register the right after completion.
Penalties are left to domestic law, and criminal sanctions are usual for failure to
Timeshare Directive (n 1 above) §3. Timeshare Directive (n 1 above) §4, Annex (letters refer to paras of this Annex). 157 Timeshare Transposition Report (n 1 above) [II.D.2] (Belgium, Denmark, Spain, France, Luxembourg and Portugal). In the UK: Timeshare Act 1992 (n 3 above) s 1C, sch, inserted in 1997 and amended to bring information on cancellation rights more into line with European practice in 2003 (n 3 above); see below [6.32]. 158 Spanish Timeshare Law (n 11 above). 155 156
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give comprehensive contractual information.159 Our domestic law imposes criminal sanctions on sellers and others160 but with a defence of due diligence,161 and time limits for mounting prosecutions,162 and also allows collective enforcement by regulators and consumers’ organisations.163 In a few states a contract lacking content is a nullity,164 but everywhere the real sanction is extension of the cooling-off period.165
5
Timeshare-like products
[6.29] EU information requirements do not apply to timeshare-like products, though the main Code of Conduct applies indifferently to all forms of holiday product.166
6
Reform of information requirements
[6.30] Parliament wants the information document to include all contractual information and some supplementals167: 앫 resale rights and any guaranteed price, 앫 exchange and points rights, 앫 current annual or user costs and the system for assessing those costs under a members’ club (or similar), 앫 rights to audit future costs, 앫 additional leisure facilities, and 앫 avenues of redress. The penalty for providing inadequate information should be nullity.168
159 Failure by Ireland to state an explicit penalty led to an infringement procedure: Timeshare Transposition Report (n 1 above) [II.D.3.b]. 160 Timeshare Act 1992 (n 3 above) s 9. 161 Timeshare Act 1992 (n 3 above) ss 2(3), 8(1). 162 Within three years of the offence and one year from its discovery by the prosecutor: Timeshare Act 1992 (n 3 above) s 11. 163 Timeshare Act 1992 (n 3 above) s 10, sch. 164 Germany, Belgium, France, Sweden and Luxembourg. 165 See below [6.35]. 166 OTE Code of Ethics (n 43 above) [III] (‘new holiday product’ treated as ‘timeshare interest’). 167 European Parliament Resolution on Timeshare (n 43 above) [24]; Timeshare Directive Review (n 6 above) [VII.4]. 168 European Parliament Resolution on Timeshare (n 43 above) [25].
Withdrawal Rights
265 WI THDR AWA L R I G HTS
Withdrawal Rights 1
Cancellation rights
[6.31] Cancellation rights are central to the European protection of timesharers. The buyer has a chance to reflect upon his decision to contract169 and to withdraw if he chooses to do so without giving any reason. This protection is available to someone who buys a true timeshare but not to timeshare-like products.170 Time for giving notice under the European rules starts to run at the time of entry into a contract, a concept which includes any preliminary contract binding on both sides. European law allows a minimum of 10 calendar days,171 the period adopted in most states across the continent,172 including Portugal which cut its pre-Directive 14-day allowance to the 10-day European minimum. Austria and Gibraltar allow 14 days, a longer allowance also retained from the Timeshare Act 1992 for United Kingdom buyers,173 while a princely 15 days is available in Belgium, (Southern) Cyprus, and Germany. France has a distinctive and advantageous system: the seller makes a firm commitment in writing which is irrevocable for a 7-day period; return by the buyer of his signed acceptance will then trigger the 10-day cooling-off period, so the overall period for reflection will generally be longer and the voucher system ensures that a consumer knows of his rights. The European period is too short. Most timeshare contracts are concluded during holidays abroad in circumstances not conducive to contractual negotiations, and potential buyers should have a chance to return home and take advice. It would be best to return to the original, unenacted, European proposal to allow 28 days where the timeshare was situated in a country different from that of the buyer’s residence.174 [6.32] In the United Kingdom, cancellation rights are central to the Timeshare Act 1992. A commercial seller must ensure that a buyer is given notice of this right before allowing him to enter into a timeshare agreement,175 this information to be included within the agreement itself.176 This is a change from the original domestic scheme which required the notice of the cancellation right to be separate from the purchase contract, a complexity which placed sellers at a 169 Timeshare Directive (n 1 above) R[11]; also Timeshare Act 1992 (n 3 above) long title; Timeshare Directive Review (n 6 above) [VII.5]. 170 Unless covered by OTE Code of Ethics (n 43 above) [1.2]. 171 Timeshare Directive (n 1 above) §5; the period is extended if the last day is a public holiday. 172 eg Dutch Civil Code §48C as amended in 1997, (1997) Staatsbiad 287/8 [1997] ECLYB [408]; Norwegian Timeshare Law 1997 [1997] Norsk Lovtidend 1129, [1997] ECLYB [405]; Timeshare Transposition Report (n 1 above) [II.F.2]. 173 Timeshare Act 1992 (n 3 above) s 2(2)(a). 174 Timeshare Proposal [1992] OJ C222 5; Timeshare Transposition Report (n 1 above) [III.B.1]. 175 Timeshare Act 1992 s 2(1) as amended in 2003 (n 3 above). 176 Timeshare Act 1992 s 2(2) as amended in 2003 (n 3 above).
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Timeshare
disadvantage as against European competitors. Separate forms are abolished and cancellation information must be incorporated into the timeshare contract along with prominent warnings and a blank cancellation form,177 though the fullest statements are much attenuated if the buyer has domestic (as opposed to European) protection.178 The required information appears with a blank cancellation notice at the end of the timeshare agreement, accompanied by a prominent warning of the last date for cancellation adjacent to the point of signature.179 Enforcement against the buyer is not allowed during the cancellation period,180 unless the purchaser has affirmed the contract. Cancellation ends all rights but more importantly also all obligations under the timeshare agreement, and leads to the recovery of any prepaid sums.181 [6.33] Once the timeshare specific period has passed, reliance has to be placed on remedies for misrepresentation. It is also possible for timeshare buyers to have rights under other European Directives, notably the right to cancel an agreement marketed on the doorstep or during an organised excursion,182 the latter possibility of overlapping Directives being demonstrated by Travel Vac v Sanchis,183 an addition to the timeshare-specific rules which should be made explicit.184 It also seems that the Distance Selling Directive might help though the United Kingdom transposition mistakenly precludes any dual cancellation185; protection is certainly needed.186 Withdrawal periods are inconsistent,187 a problem being addressed by the Common Frame of Reference.188
2
Ban on advance payments
[6.34] Proper space for reflection is backed-up with a European prohibition on taking advance payments from a purchaser before the end of the cancellation 177 Timeshare Act 1992 (n 3 above) s 2 as amended; Timeshare Amendment Regs 2003 (n 3 above); Cancellation Information Order 2003 (n 3 above) arts 2, 3(1)(b), sch 1 pt II; Timeshare Consultation (n 65 above) [4.2–4.4]. 178 Cancellation Information Order 2003 (n 3 above) art 3, sch 1 pt 1; see above [6.12], [6.17]. 179 Timeshare Act 1992 (n 3 above) s 2(2F) as amended; Cancellation Information Order 2003 (n 3 above) arts 2, 3(3), 3(5), 5(1), 5(3), sch 1 pt II, sch 4 pt I. The latter may require reconsideration in the light of the Unfair Practice Directive (n 44): UK Consultation (n 65 above) 83. 180 Timeshare Act 1992 s 5(1) as amended in 1997 and again in 2003 (n 3 above). During an offer phase the offer is cancelled thus preventing formation of a contract: s 5(5) as amended in 2003. 181 Timeshare Act 1992 (n 3 above) s 5(6)–(8). 182 Contracts Negotiated Away from Business Premises Directive (Doorstep Selling Directive) 85/577/EEC [1985] OJ L372 31; Consumer Protection (Cancellation of Contracts Concluded Away from Business Premises) Regulations 1987, SI 1987/2117. 183 Travel Vac (n 36 above) J[22]; see above [5.20]. 184 European Parliament Resolution on Timeshare (n 43 above) [17]. 185 See above [5.76]. The Commission Communication on Distance Contracts COM (2006) 514 final suggests that this is also true of Hungary, Denmark and Slovenia. 186 Paradise Lost (n 23 above) [4.31ff]. 187 D Staudenmayer ‘The Commission Communication on European Contract Law and the Future Prospects’ (2002) 51 ICLQ 673–688, 677. 188 See above [5.87].
Withdrawal Rights
267
period.189 The typical national penalty law is a fine,190 but Spanish law obliges the seller to reimburse twice the amount taken as an advance payment.191 A European Commission proposal to lift the ban at least where the buyer approaches the seller192 is opposed by the European Parliament,193 though both institutions agree that any money that is paid should be held by a stakeholder.194 Loopholes allow unscrupulous sellers to evade the restriction, but these need to be closed.195
3
Failure to provide timeshare information
[6.35] The ten-day European cooling-off period will be extended if the seller fails to provide relevant information at the time of signature of a contract,196 and the cancellation period will not start until the want of information is made good, though there is a three-month long-stop.197 The European period is thus three months and ten days, as opposed to the UK law applied to a European protected timeshare of three months and fourteen days.198 Belgian law allows a full year after a serious non-compliance, an ample allowance which should be extended Europe-wide.199 A major advantage of cancellation under the doorstep code is that the contract remains voidable indefinitely after failure to furnish notice of the cancellation rights.200
4
Procedure for cancelling a timeshare
[6.36] Proof of withdrawal is governed by national law,201 which commonly requires writing202 or registered mail.203 Onerous procedural requirements could conflict with the basic spirit of the Directive and for this reason the former 189 Timeshare Directive (n 1 above) R[12], §6; also timeshare-like products bought from OTE members: OTE Code of Ethics (n 43 above) [III] (‘timeshare interests’). 190 Timeshare Transposition Report (n 1 above) [II.H.3]; Timeshare Act 1992 s 5B as amended in 1997 (n 3 above). 191 Spanish Timeshare Law (n 11 above). 192 Timeshare Transposition Report (n 1 above) [III.B.3]; DTI Responses to Consultation (n 65 above) 7. 193 European Parliament Resolution on Timeshare (n 43 above) [7]; [8] (stronger guarantees needed for unbuilt units). 194 Where deposits are taken (presumably for timeshare-like products) third-party holding requirements exist in Austria, Denmark, Germany, Ireland, Italy, Norway, Spain and Sweden. 195 See above [6.18]. 196 Timeshare Directive (n 1 above) Annex points (a), (b), (c), (d)(1–2), (h), (i), (k), (1), (m). 197 Timeshare Directive (n 1 above) §5. 198 Timeshare Act 1992 (n 3 above) s 5A inserted in 1997 (European scope); protection within the domestic sphere is unlimited in duration. 199 European Parliament Resolution on Timeshare (n 43 above) [3]. 200 Travel Vac (n 36 above); see above [5.74] 201 Timeshare Directive (n 1 above) §5[1]; compare the more prescriptive Distance Selling Directive 97/7/EC [1997] OJ L144 19; §5; see above [5.70]. 202 Timeshare Act 1992 (n 3 above) s 12(6); also Germany, Austria and many others. 203 Belgium, Italy and Luxembourg. Fax also suffices in Spain.
.
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Timeshare
requirement to use a notarial deed in Spain contradicted European law.204 Posting is sufficient by midnight on the last day and more generally United Kingdom law treats notice as given at the time of posting if pre-paid and properly addressed.205 In France the seller’s offer contains a detachable coupon to be used in withdrawal which contains the address of the seller to be used. United Kingdom agreements must contain a blank notice in a prescribed form though the consumer is free to express himself in words of his own choosing(!).206
5
Timeshare credit contract
[6.37] Credit is an integral part of many timeshare purchases since a global sum has to be paid in advance which often has to be funded by borrowing. This is a niche market dominated by a small number of specialist lenders, notable players in the United Kingdom being First National Bank and Paragon Finance. Advances are up to 80 per cent of the purchase price repayable over no more than 10 years, and commonly in fact cleared rather sooner. Most loans are unsecured, which serves to increase the interest rate. Consumer groups believe that lenders often make a poor assessment of whether the buyer can afford a purchase.207 [6.38] Credit will usually be provided in a separate credit agreement. Any credit agreement may be cancelled by the borrower without any penalty in the same circumstances as the timeshare agreement, but national legislation determines procedure208 and also the effect of cancellation of a timeshare agreement on any linked credit agreement.209 British law describes the arrangement to provide credit as a timeshare credit agreement210 whenever the creditor knows or has reasonable cause to believe that any part of the credit is to be used to finance entry by the consumer into a timeshare agreement. Cancellation rights accrue under the timeshare regime to the exclusion of the consumer credit regime.211 Two separate cancellations are required, with a common 14-day period,212 the second of which terminates rights and obligations under the credit agreement.213 The buyer is required to repay what he has borrowed, but free of interest Timeshare Transposition Report (n 1 above) [G.3]. Timeshare Act 1992 (n 3 above) s 12(3). 206 Timeshare Act 1992 (n 3 above) s 12(1). 207 Industry at the Cross Roads (n 34 above), 13; but Edmonds (n 4 above) 97 indicates that only 7% of early UK purchasers needed finance. 208 Timeshare Transposition Report (n 1 above) [II.I.2]. 209 Timeshare Directive (n 1 above) R[13], §7. 210 Timeshare Act 1992 (n 3 above) s 1(5) (if not itself a timeshare agreement); ‘credit’ includes a cash loan and any other form of financial accommodation: s 12(6). 211 Consumer Credit Act 1974, c 39, s 67; Timeshare Act 1992 s 6A inserted in 1997 (n 3). This reversed the original 1992 scheme which left cancellation to the consumer credit regime but allowed the timeshare to be cancelled as a linked agreement: Global Marketing Europe v Berkshire Trading Standards Department [1974] July 21st Div Ct; R Percival (1995) 5 Crim L Rev 431–432; RG Lawson (1995) 159 Justice of the Peace 24–26, 24. 212 Timeshare Act 1992 ss 3(1), 4(2) both as amended in 2003 (n 3 above). 213 Timeshare Act 1992 ss 5–7 as amended in 2003 (n 3 above). 204 205
Timeshare Vehicles
269
provided repayment occurs within one month or before the first instalment is due. A delay beyond those dates will lead to a recalculation of the account as nearly as may be in accordance with the original agreement and only when that recalculated statement is produced will money become due to the creditor.214 After the withdrawal period has expired credit agreements may remain vulnerable to rescission if they were induced by misrepresentations.
6
Information about timeshare credit
[6.39] Information about credit cancellation rights is required in both aspects of the transaction, the timeshare purchase and the credit deal, usually in two separate linked documents.215 Fullest information is required where European protection is attracted whereas a much thinner warning suffices if protection is purely domestic (eg, where money is advanced to a company as opposed to an individual consumer).216 The borrower is told that he has a timeshare credit agreement, the identity of the proper recipient for the cancellation notice and the final date for giving notice (at least 14 days hence); there follows a statement of the rules about posting; a blank form of notice and a statement of the rules, outlined above, about the consequences of cancellation on future instalments and accounts. All this should appear at the end of the agreement with a prominent reminder adjacent to the point of signature of the last day for cancellation.217
TI MESHA R E VEHI CLES
Timeshare Vehicles 1
No harmonisation
[6.40] European law leaves wide open218 the nature of the right granted to a timesharer, and indeed the heterogeneity of legal vehicles in use is almost welcomed across EU states as recognised and adopted.219 An open textured definition is designed to cope readily with the various practices of EU states, and most states have refrained from stepping where Brussels feared to tread, though the European Parliament has now stepped in with a call for a clearer regulation of Timeshare Act 1992 s 4(2)(b) as amended in 2003 (n 3 above). Timeshare Act 1992 (n 3 above) ss 2, 2(2B) as amended (n 3 above); Timeshare Act 1992 s 3 as amended in 2003 (n 3 above); Cancellation Information Order 2003 (n 3 above) arts 2, 3(1)(c), 4(1), sch 1 pts II–III. 216 Cancellation Information Order 2003 (n 3 above) art 4(1)(b), sch 3 pt I. 217 Timeshare Act 1992 (n 3 above) ss 3(2)(a), 3(6) as amended (n 3 above); Cancellation Information Order 2003 (n 3 above) arts 2, 4(2)–(4), 5(1–3), sch 4 pt II. 218 Timeshare Directive (n 1 above) R[3–4], §1. 219 Timeshare Directive (n 1 above) R[3]; Klein (n 8 above) AG[21] Geelhoed. 214 215
270
Timeshare
all rights to use immovable properties on a timeshare basis within a single framework, and a requirement for all grants to be registrable.220 At present all rests on resort documentation, which is generally constructed along the lines of a residential flat development but manages to be even more complex, commonly covering fifty closely printed pages.221 There are five main vehicles in use: part ownership, leasehold, trust, company and use-right.222
2
Deeded schemes of part-ownership
[6.41] Some states allow direct co-ownership which gives in rem rights in the land, notable examples being Italy, Spain and Portugal.223 The scheme is unthinkable in England and Wales where the legal title in a freehold estate is limited to no more than four persons, as is registration of land.224 However, the scheme is feasible in common law countries which did not adopt the Cherry reforms in 1925. America is the home of timeshare, where specific tax concessions for second homes were an influential factor in the evolution of the concept. The first deeded timeshare was created in California in 1973225 but Florida now dominates the US industry, and there and elsewhere across the 50 states some 90 per cent of the market uses a tenancy in common,226 or ‘fee simple’ interest. It is just as if the buyer of a week has inherited the flat but has to share it with 50 cousins holding undivided shares in the capital value, the only difference being that his use right is confined to a specific week each year. Fractional ownership is evidenced by a deed tied to a specific unit,227 title to which can be transferred in the same way as outright ownership of a flat. This is all linked to a condominium structure, involving a declaration of restrictions registered prior to any sales, governing management of the block as a whole through a not-for-profit owners’ association. Much of this is familiar from residential management flat schemes. [6.42] Civilian timeshares were originally perpetual, a kind of intermittent freehold, though analysed of course in terms of propriété. Portugal still presumes real rights to be perpetual unless a limit exceeding 15 years is stated in the contract.228 European Parliament Resolution on Timeshare (n 43 above) [6], [11]. Industry at the Cross Roads (n 34 above) 13. 222 Timeshare Directive Review (n 6 above) [IV.2]. 223 Timeshare Directive Review (n 6 above) [IV.2]; B Pasa & GA Benacchio The Harmonisation of Civil and Commercial Law in Europe (Budapest, Central European University Press, 2005, 963-7326-35-9) 65. 224 Law of Property Act 1925, c 20, ss 34, 36; Land Registration Act 2002, c 9, s 2(a)(i). It might be feasible to create a commonhold under the Commonhold and Leasehold Reform Act 2002, c 15, but as yet there are virtually none even for residential flats, their use having been blocked by the lenders’ lobby. 225 Leposkis Timeshare Basics (n 7 above). 226 English readers have to think back to pre-1926 days. 227 Rarer are undivided interests in which the purchaser receives an undivided co-ownership interest in the development as a whole, for example, one week out of 50 in one of 20 villas gives an undivided 1/1,000 interest in the whole. 228 Timeshare Transposition Report (n 1 above) [B.2]. 220 221
Timeshare Vehicles
271
More recent practice is to impose a maximum duration on the timeshare — perhaps 25, 50 or 80 years in the manner of a leasehold — after which there is a reverter to the developer who retains a prospect of redevelopment rights229; the guaranteed period for use of associated recreational rights such as access to a golf course may be even shorter. In the same way Spain allows a perpetual interest or one that is time-limited, the maximum duration before reversion to the developer being 50 years. Most continental timeshares are akin to a leasehold. Timeshare is said to be ‘deeded’ when it is equivalent to a fractional ownership, and not a merely personal use right. On the Iberian peninsular, both Spain230 and Portugal have created specific legal frameworks for timeshare contracts, two siblings with a strong family resemblance but individual identities. Divided ownership is the basic legal vehicle, though the Spanish word for ‘ownership’ has become an unmentionable in a timeshare contract. Purchasers in Spain receive an individual title deed or escritura which conveys an interest in land to the buyer, an interest corresponding to the number of time intervals acquired. Formalities are the same as for a real contract in terms of authentication of documents and entry in the land register — all ‘owners’ must be registered — with fees for the notary and registration added to the purchase price.231 Greater security is conferred, though at the price of cumbrous management procedures and complex transfer formalities.232 Spain also allows a limited real property right, a tenancy for a period of between three and fifty years with the rent paid in advance as a premium,233 but failure to use either of these forms results in nullity. Predetermined enjoyment of land by turn is allowed for periods of time, with protection for purchasers and a tax rule book. [6.43] Current Portuguese timeshare legislation permits the establishment of a special real right of residence (subject to official authorisation and the formalities governing rights in land), as well as the ‘non-real’ rights discussed below,234 and holiday accommodation rights and holiday clubs are also regulated. This variety of contractual organisation of timeshare rights fits within an overarching legal framework. If a real right is chosen, it must last for at least 15 years if it is to escape nullity; and it will be subject to usual land formalities of authentication (notarisation) and entry in a register.235 [6.44] Real rights are often one among several vehicles and if so they are generally the default expectation. This is so in Italy, where the use of the native term Timeshare Industry 2001 (n 12 above) [1.3]; Jenkins (n 16 above) (Greece). Spanish Timeshare Law (n 11 above); Seneyto (n 56 above); M Torres ‘Timeshare in Spain’ (1998) 20 Comparative Law Yearbook of International Business 3–23; TCA website (n 12 above). Edmonds (n 4 above) ch 10 describes the older law; the theoretical right of a Spanish co-owner to call for sale and division could be postponed for a fixed period up to 10 years, Edmonds at 15. 231 Spanish Timeshare Law (n 11 above). 232 Timeshare Industry 2001 (n 12 above) [4.9.1]. 233 Spanish Timeshare Law (n 11 above). 234 See below [6.41]. 235 Rights in rem were first introduced by Law 355/81 as amended by Law 368/83; later see Legislative Decree of May 22nd 1999; amended by Law 22/2002 [2002] DR 880, [2002] ECLYB [624]. 229 230
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Timeshare
for ‘timeshare’ is limited to the creation of real rights, and German practice also assumes that each buyer of a timeshare fraction will be entered in the land register as a part-owner of the flat236 whilst allowing less secure ‘trust’ based rights; if a use-right that is circumscribed is granted the buyer must be told so explicitly and warned that he is acquiring an unexpectedly limited right.237
3
Leases
[6.45] As indicated, many continental deeded schemes provide for time-limited rights so that they are essentially a species of leasehold and Greek timeshares also adopt a tenancy model.238 As for Portugal, we learn from Jarrett v Barclays Bank239 that week 47 in a timeshare in Albuferia on the Portuguese Algarve was bought by the Jarretts in the form of a lease of immovable property, and the particular conflicts issue that arose was contractual rather than proprietary240 though this case pre-dates the current statutory regime. Special statutory vehicles such as those just described are needed to create proprietary in rem character in a civilian system. [6.46] This is not so in English law where a leasehold creates an estate with proprietary force. So one approach in England and Wales is to use a leasehold vehicle, the overall length of the term being curtailed to reflect the limited commercial life of timeshare developments, possibly for a period as short as 15 years, the lease allowing a match between the period of use allowed and the anticipated lifespan of the resort building. A term of years absolute can be created in discontinuous fractional interests like the timeshare interval, so no proprietary innovation is involved. In the case of the 14 Canynick Cottages at Newquay, each cottage was divided as a timeshare and individual weeks were sold over an 80-year period, the rent being a peppercorn but with a lump sum premium. This was a valid common law lease for a single term, only the periods of enjoyment being discontinuous.241 It is treated as lasting for a period equal to the summation of the discontinuous weekly periods of occupation; it followed that the interest granted was for less than 21 years and was not a major interest in the land and VAT was payable.242 Substantive registration will be possible whenever the term is discontinuous, but it is rarely compulsory since the term will generally be less than seven years in total.243 That duration, less than seven years, 236 Law on Property Ownership in Respect of Flats (WEG) §31; also in Austria: Timeshare Law 1997 [1997] Bundesgesetzblatt 1–167, [1997] ECLYB [390], §10. 237 Bundesgerichtshof V ZR 184/94 [1995] NJ 615, [1996] ECLYB [2091]. 238 Timeshare Directive Review (n 6 above) IV.2. 239 Jarrett (n 108 above). 240 See below [10.31]. 241 Cottage Holiday Associates (n 127 above); Smallwood v Sheppards [1895] 2 QB 627 Wright J. 242 See above [3.62]. 243 Land Registration Act 2002 (n 224 above) s 3(1)(a); Timeshare Transposition Report (n 1 above) [III.A.1]. Registration will be compulsory if the discontinuous periods add up to more than seven years: s 4(1)(c), 4(2).
Timeshare Vehicles
273
raises the probability that the freehold owner will be subject to structural repairing obligations; a consequence not necessarily undesirable.244
4
Corporate vehicles
[6.47] Co-operative forms of timesharing involve the purchase of shares in a not-for-profit corporation which may be linked to a lease as in an English flat scheme.245 Timesharing vehicles available in Germany involve a form of partnership, membership of an association or a business venture providing the right to occupancy.246 France is the clearest example of the use of corporate timesharing vehicles. French law started with a co-ownership scheme that was not unlike a condominium involving ordinary residential flats, but a specific corporate scheme was introduced by legislation, using the Société Civile d’Attribution.247 Corporate structures have the benefit of giving each interval a shareholding which creates a saleable interest free of the horrors of French succession law.248 The societé holds the timeshare block on behalf of shareholders subject to land and local authority taxes.249 British law no longer exempts share ownership and collective investment schemes.250
5
Trust
[6.48] Timeshare schemes in common law countries, that is in Britain and Ireland, generally rely upon trust schemes.251 The common law trust is an ideal and flexible vehicle for utilising an asset for a group of people called beneficiaries. Legal ownership is held by a specialist independent trustee252 who holds the land on trust for the club membership. Management powers are inherent in the legal ownership, and administration and management are easily achieved in a flexible vehicle, except to the extent limited by the estate documentation. Use of accommodation and recreational facilities is conferred during a particular week or within a defined season, for a specified number of years. The buyer receives a 244 Landlord and Tenant Act 1985, c 70, ss 11–17; a probability recognised by Woolf J in Cottage Holiday Associates (n 127 above); he was discussing Housing Act 1961, c 65, ss 32–33. 245 Edmonds (n 4 above) explains the various schemes and annexes A–D give precedents for a lease, a licence, club rules and a club trusteeship. 246 German Timeshare Sales Law 1996 [1996] I Bundesgesetzbtatt 2154, [1997] ECLYB [406], §1; German consolidation [2000] BGBL (D) I 2452. 247 Timeshare Directive Review (n 6 above) IV.2; Pasa & Benacchio (n 223 above) 65. 248 Edmonds (n 4 above) ch 9; H Dyson ‘New French Law on Time-sharing’ (1987) 281 LSG 1000–1001; C Jenkins ‘UK Timeshare Legislation’ [1992] 41 LSG 24; Timeshare Industry 2001 (n 12 above) [3.4.7], [4.9]; leases have been an alternative since 1998. 249 S Smith ‘Timeshare: the Exception Française (2001) 15 Trusts & Estates 7–8. 250 Timeshare Reg 1997 (n 3 above) reg 2(3). 251 Timeshare Directive Review (n 6 above) IV.2; Pasa & Benacchio (n 223 above) 65. 252 Timeshare Industry 2001 (n 12 above) [4.9.2]; this or some similar protection is required by OTE Code of Ethics (n 43 above) [V8].
274
Timeshare
certificate of membership in the club, which sets out the scope of his use right, but this is generally described as ‘non-deeded to reflect the lack of formal title.253 The interest will be a beneficial interest which confers an equitable proprietary right in a common law country, not as strong as legal ownership but protected against insolvency. Purchasers may nevertheless feel less than adequately secure against mortgages made by the trustees. A trust scheme easily accommodates the possibility of a reversion for redevelopment after the life of the development — 50 years or so — or the alternative possibility of sale of the site and a distribution of the proceeds between all timesharers. European protection accrues even if timeshare rights are personal, or are the subject of a transfer or an undertaking to transfer.254 Timeshare trusteeship is a specialist market cornered in Europe by three major players — FNTC, Hutchinson & Co, and Continental.255 Functions include holding title to the resort, maintaining the register of members, overseeing management in the early years, effecting insurance and convening meetings of owners. A trust deed defines the relationship between the parties and particularises respective duties and obligations. The trustee may also deal with first-time sales on new-build developments, collecting purchase monies and holding them in escrow pending physical completion of an apartment. Trustees may also be involved in collecting service charge payments and chasing-up defaulters.
6
Use right
[6.49] It is possible to adopt a ‘trust’ scheme in civilian states where a trust-like device is available within the particular legal system.256 Germany, for example, allows a quasi-trusteeship in which the ‘trustee’ is registered, but this is a second-tier vehicle and the buyer must be told explicitly that his right is circumscribed and should not be left to piece this together for himself from the small print of the contract257 and the Portuguese legislation also allows ‘non-real’ rights of utilisation which may be time-limited.258 In such a scheme a ‘trustee’ is registered as proprietor of the land and the timesharer has a less secure use right, a considerable reduction in the security of his position of which he must be told explicitly so that he is warned that the right he is acquiring is unexpectedly limited.259 In a civilian state the interest is personal in character, more contract 253 A common law system could provide either a beneficial interest in a specific apartment or in club assets generally, associated with a non-proprietary licence, but this would be very insecure; see also Cottage Holiday Associates (n 127 above) 739 Woolf J. 254 Timeshare Directive (n 1 above) §2[1]. 255 Collectively these hold around 350 European resorts: Timeshare Industry 2001 (n 12 above) [4.10]. 256 See below [11.34ff]. 257 Bundesgerichtshof V ZR 184/94 (n 237 above). 258 Legislative Decree of May 22nd 1999; Timeshare Transposition Report (n 1 above) [III.A.1]. 259 Bundesgerichtshof V ZR 184/94 (n 237 above).
Unregulated Aspects
275
than beneficial interest, and not a sound basis for a substantial investment. The same lack of security is true of trust schemes in common law countries where the beneficial interest is confined to a share of the value of the development and where the only use-right is a licence.260 These rights are very insecure and unmortgageable.
UN R EG ULATED A SPECTS
Unregulated Aspects 1
Resale
[6.50] Timeshares depreciate as rapidly as cars.261 Many owners wish to sell after four or five years, and most after nine, including an estimated 150K owners in the United Kingdom. The volume of resales actually accomplished each year is no more than 8K.262 This staleness in the market is a direct though unintended effect of the European Directive, which saved many Europeans from stepping on to the merry-go-round but trapped those already upon it to a nightmare where an unrealisable asset is subject to rising maintenance charges.263 New blood is vital to secure a healthy secondary market. Consumers groups want, odd as it may seem, a softer line from Brussels to stem the slump in the market.264 It is a buyers’ market or, as the industry smoothies put it, ‘timeshare is not a financial investment’ but ‘an investment in high quality future holidays’.265 Factors in pricing are the size of the unit, the desirability of the week as compared to the school holiday peak and the class of the resort. Larger units in ‘Gold Crown’ resorts cost up to €15K for ‘deep red’ weeks in the peak season when bought new from a developer,266 but the same interval can be bought from an existing consumer at less than a third of the price. Developers often try to block resales, in order to bolster demand for unsold intervals, with hefty transfer fees. A lucky 10 per cent have highly saleable units. Most have intervals in smaller flats, less desirable resorts, or marginal seasons, factors which cause prices to drop dramatically, a market where even the recovery of one-fifth of the price on a resale is good. [6.51] A resale transaction is a sale of a timeshare interest, subsequent to the original sale by a developer, by a broker acting on behalf of a private individual to another individual.267 Two contracts are in play. The European market is carved See above [6.48] n 253. Vedrickas (n 9 above) 14. 262 TCA Facts & Statistics (n 12 above). 263 European Parliament Resolution on Timeshare (n 43 above) [6]. 264 Industry at the Cross Roads (n 34 above) 27; but the TCA now favours tougher laws and better self-regulation: Timeshare in Europe 2005 (TCA (n 12 above), 2005). 265 Timeshare Industry 2001 (n 12 above) [4.10]. 266 Timeshare Industry 2001 (n 12 above) [3.2.4], Table [3.24]. 267 OTE Code of Ethics (n 43 above) [III] (Resale Agencies, Contracts and Transactions). 260 261
276
Timeshare
up between five main brokers charging fees in the range €300 to €800.268 Fees are often solicited in advance for listing, with sellers being given false promises while willing buyers are lined-up, and there is also concern about promises of resale at unrealistic prices.269 Representations should be legal, decent, honest and truthful, it should be unlawful to demand fees in advance, and buyers should have time for reflection before money changes hands.270 [6.52] Some resale schemes are fraudulent, particularly those offered by cold calling with requests for advertising fees upfront by companies which then disappear. John Palmer was acquitted of handling the Brinks Mat millions but he was later sent to prison for eight years over a fraud involving more than 16K punters at the Flamingo Club resort in Tenerife in the early 1990s.271 Punters with existing timeshares were sold new intervals but having paid for the second they found they were unable to sell the old one, a situation created by false assurances about resale values. This is the so-called ‘buy sell’ con, and others fell victim to the ‘buy let’ scam where the false assurances related to rental yields. Registration fees for the resale clubs yielded £400K, part of an overall profit estimated at £30m,272 which defective asset recovery procedure has failed to hold.273 Largescale frauds on the Costa del Sol have also been reported.274 Another more basic fraud is the sale of fresh air (that is, the sale of an apartment in an unbuilt block).275 New legislation against unfair commercial practices will help, particularly as this is not limited to the initial sale.276 [6.53] Timeshare protection should be extended to resale by professional resellers as the Commission now intends.277 The contents of the Code of Ethics give a fair indication of what a person buying under a resale contract should be concerned about.278 As with a normal flat, certification must be obtained from the trustee company that the interval is free of debt or in other words that management fees are paid up to date.
Industry at the Cross Roads (n 34 above), 10. Paradise Lost (n 23 above) [3.3–3.4], [4.25ff]. 270 OTE Code of Ethics (n 43 above) [V.3]; European Parliament Resolution on Timeshare (n 43 above) [13], [29]. It is open to question whether the Timeshare Directive (n 1 above) applies to a B2C resale — a point that should be made clear — but a C2C resale is not affected. 271 R(CP) v Palmer (No 2) [2002] EWCA Crim 2683, [2003] 2 Cr App R (S) 2. 272 Observer January 22nd 2006. 273 R(CP) v Palmer (No 1) [2002] EWCA Crim 2202, [2003] 1 Cr App R (S) 112 (notice of confiscation proceeding used wrong legislative scheme). 274 Times May 27th 2006; Guardian May 27th 2006 275 Industry at the Cross Roads (n 34 above), 22. 276 Unfair Practices Directive (n 44 above); Timeshare Directive Review (n 6 above) [VII]; UK Government Response (n 6 above) [15]; Unfair Practices Response (n 44 above) 13; see above [5.50]. 277 Timeshare Directive Review (n 6 above) [V], [VII.3]; domestic UK protection under Timeshare Act 1992 will not apply C2C but will apply B2C and resale is covered by the Spanish domestic system and by OTE Code of Ethics (n 43 above) [V.3]. 278 OTE Code of Ethics (n 43 above) [V.3.3]. 268 269
Unregulated Aspects
2
277
Exchange
[6.54] Flexibility is the key to successful timesharing. An exchange scheme enables the owner of an interval to swap it for another week or for a week at another development. Membership of Resort Condominium International, the largest international exchange club,279 carried considerable monetary value in Travel Vac v Sanchis.280 Three-quarters of owners join an exchange company and there is widespread satisfaction with the service provided.281 Turnover exceeds €300 million each year, generated by a membership fee and a fee charged for a successful exchange averaging €225 per week.282 Exchange is based on trading power, that is, the relative value of the week offered as against the week wanted. As with resale, relevant factors are the region, the resort quality (Gold Crown is best),283 the apartment size (2+ beds are best), and the colour of the week (deep red for the school holiday peak.) Floating weeks need to be booked, and so fixed in a particular year, before they can be exchanged. Consumers are entitled to clear and accurate information about any exchange programme, including the terms, conditions, fees and procedures for making exchanges.284 The European Parliament wants a legislative framework285 and the Commission seems now to be agreed.286
3
New blocks
[6.55] Investment in timeshares provides an unenviable choice between distressed inventory (old developments)287 and thin air (incomplete blocks). Protection of advance payments is a serious concern288 since the Directive has not overcome the serious risk of loss of money if the developer becomes insolvent or is dishonest.289 Consumers need to be very wary of buying into a scheme under construction and to seek guarantees regarding the state of completion of the property and for reimbursement of payments in the event of
279
Second in size is Interval International (II); smaller companies operating via the web offer lower
fees. Travel Vac (n 36 above) J[9–11]. Industry at the Cross Roads (n 34 above), 9; Timeshare Industry 2001 (n 12 above) [3.2.3]. 282 Industry at the Cross Roads (n 34 above), 16. Membership of RCI in 1992 cost 350 DEM (=€175) for three years: Klein (n 8 above) J[8]. 283 Inspection of resorts by exchange clubs is a valuable quality check: Bourne (n 9 above). 284 OTE Code of Ethics (n 43 above) [V.2]. 285 European Parliament Resolution on Timeshare (n 43 above) [13]. 286 Timeshare Directive Review (n 6 above) [V], [VII.3 ]; again the Unfair Practices Directive (n 44 above) will help; the UK Government Response (n 6 above) [16] suggests more information requirements; no action will be taken in isolation: Unfair Practices Response (n 44 above) 13; see below [6.66]. 287 Timeshare Industry 2001 (n 12 above) [4.3.1]. 288 Timeshare Directive Review (n 6 above) [V], [VII.6]. 289 Pasa & Benacchio (n 223 above) 67. 280 281
278
Timeshare
non-completion.290 Guarantees are often inadequate291 as the buyer does not discover defects until something goes wrong. Parliament wants a guarantee that advance payments made by a purchaser for unbuilt units will be returned in full and promptly, a possible model for tougher rules being the existing controls of package travel.292 France and Belgium are among the states which already pep up the European standard for guarantees.293 Portugal294 requires developers to guarantee exercise of the right to use the property during the agreed period and compensation for any period of non-access, as well as proper security for sound administration and upkeep of the property, and protection against undisclosed mortgages. Spanish law requires additional insurance policies to cover the development phase and the subsequent civil liability. It is also of course important to ensure planning controls have been observed, a matter on which Portuguese legislation has been tightened enormously since the early days when only one of the first 25 timeshares on the Algarve complied with the law,295 and Spanish legislation is also much tighter. French new-builds require production of details of the contract for works, building and planning consents, a financial guarantee for completion and a suitable guarantee to cover the failure of the company or its shareholders.296 The Timeshare Consumers Group advice is not to buy ‘off plan’ and also to check whether early buyers in a block have formed an action group!
4
Management
[6.56] The Directive clamps down on marketing but fails to deal with post-sale problems,297 particularly maintenance and management fees. Management structures are unregulated at the European level. A timeshare development is basically similar to a flat development, though involving many more unit-holders because the ownership of each apartment is fragmented in up to 51 slices of timeshare. Overall ownership of the development, common parts and structural features should be vested in a trustee company, the whole subject to the fractional ownership of individual intervals. Ideally management functions should be vested in a club representing all interval owners and control should be handed over to members promptly. However, many schemes are cruder with the developer retaining control of management and repairs and hence collecting service charges. Buyers need to be wary of proprietary clubs under the control of
Timeshare Directive (n 1 above) §7. Timeshare Directive (n 1 above) Annex [d5]. 292 European Parliament Resolution on Timeshare (n 43 above) [8]; Package Travel Directive (n 118 above) §7; Timeshare Directive Review (n 6 above) [VII.6]. 293 Timeshare Transposition Report (n 1 above) [II.B.2]. 294 Portuguese Law 275/93. 295 RJ Pugh ‘Conveyancing in Portugal’ (1986) 83 LSG 22–23. 296 Dyson (n 248 above). 297 Paradise Lost (n 23 above) [1.6], [2.25], [6]. 290 291
Unregulated Aspects
279
the developer which are as different from true members’ clubs as chalk and cheese.298 [6.57] Management is generally divided from development and marketing functions, this contributing to the buck-passing mentality in many resorts.299 The main trade code requires members to take responsibility for the acts of all employees and agents300 and an important first step would be for European legislation to mimic Spain301 and require registration of all resorts and operators.302 There is space for a brief look at national systems. In France timesharing is corporate in character,303 the body of timesharers formed into a company with limited liability, one interval represented by one share. Most decisions about the block are made by a simple majority vote, but a manager or gérant has day-to-day control. All this closely resembles a residents’ management company for a block of flats in England. Internal management of a French timeshare is controlled by the document setting up the block scheme which describes use-rights and rights over common parts and which also allocates maintenance costs and the service charge. Non-payment can in extremis lead to seizure and sale. A Spanish law applies to all developments after the start of 2001304 and to existing resorts from 2003 though existing structures can be continued if registered. An ‘Owners Community’ must be set up (ie, a management club) in which each owner will have one vote for every week owned, with a two-thirds majority required for major changes and a simple majority (50 per cent) for all other decisions. [6.58] Blocks always require communal management arrangements and therefore a service charge has to be paid to cover repairs, structural maintenance (with provision for a sinking fund), taxes and outgoings. Other aspects to be paid for include leisure facilities, security, servicing of apartments and insurance. A global cost is calculated and then apportioned between the weeks sold so as to produce an annual maintenance fee for each owner, adjusted for apartments or villas of different sizes.305 Maintenance charges may be in the range £200–£400,306 more in colder climes, all adding up to a €2 billion a year market in management.307 Edmonds (n 4 above) 20. European Parliament Resolution on Timeshare (n 43 above) R[D]; Paradise Lost (n 23 above) [2.11–2.12]. 300 OTE Code of Ethics (n 43 above) [I.E] (only 30% of total market above). Companies apparently trade under a name different from that registered in order to evade the OTE Code. 301 Spanish Timeshare Law (n 11 above). 302 European Parliament Resolution on Timeshare (n 43 above) [28]; Paradise Lost (n 23 above) [4.8ff], [4.13ff], [6]. 303 Law 86/1986; Dyson (n 248 above). 304 Spanish Timeshare Law (n 11 above). 305 Timeshare Industry 2001 (n 12 above) [4.5.4]. 306 Timeshare Industry 2001 (n 12 above) [3.2.5], Table [3.29]; TCA Facts & Statistics (n 12 above); Paradise Lost (n 23 above) [2.9]. A survey of Annual Ownership Costs (Timeshare Consumers Association (n 12 above), 2005) found a rise of 25% over the period 2001–2004. Overall averages for all types of accommodation were €357 in Spain, and €459 in the UK. 307 Timeshare Directive Review (n 6 above) [II.1] gives €290 million a year in Spain alone. 298 299
280
Timeshare
The main concern is large, uncontrolled increases in annual fees, with no incentive to keep costs down and little transparency about how fees are spent.308 Consumers are defenceless against promoters to prevent disproportionate increases in maintenance costs.309 Mechanisms are needed to reconcile the need for proper maintenance with restraint on increases in annual maintenance costs.310 Fraud is so endemic that consumer groups say that 20 cents in every € are creamed off.311 It would help if management fees had to be held in trust.312 [6.59] Maintenance fee delinquency313 can result in repossession and sale, with repossessions generally around five per cent.314 Repossessions have increased very substantially each year since 1997315 and it appears that many developers are actively driving out owners, blocking sales in order to recover possession, with rates of repossession reaching 25 per cent in exceptional cases.316 Other developers refuse to accept walk-aways but rather lock owners in to management fees for the life of the development by enforcing fees through legal action. [6.60] In the Paradise Lost of timeshare, problems of ownership now replace the problems of purchase, failure by the EU to intervene in the internal management of a timeshare block being an inevitable and unwelcome illustration of subsidiarity in action.317 A quarter of all complaints to the Commission in 1998 related to timeshares, the majority of which fell outside the scope of European law.318 Portugal is an exemplar of a state which addresses practical problems of ownership, but most states do not go beyond the directed minimum.
5
Dispute resolution
[6.61] Litigation is a long and complicated route to solving cross-border disputes over small sums of money.319 Alternative dispute resolution is the answer. A trial in Belgium is being worked up into a pan-European scheme to be conducted through the Chartered Institute of Arbitrators. This scheme320 applies only to timeshares entered into after March 2005, is expensive321 and requires a The unfair terms regime may apply: see below [8.24]. European Parliament Resolution on Timeshare (n 43 above) R[C]. 310 European Parliament Resolution on Timeshare (n 43 above) [14]. 311 Industry at the Cross Roads (n 34 above) 16. 312 DTI Responses to Consultation (n 65 above) [6]; Paradise Lost (n 23 above) [6]. 313 Timeshare Industry 2001 (n 12 above) [3.2.5]. 314 Industry at the Cross Roads (n 34 above) 19. 315 TCA Facts & Statistics (n 12 above). 316 Industry at the Cross Roads (n 34 above) 19. 317 Timeshare Directive (n 1 above) R[3–4]; Industry at the Cross Roads (n 34 above) 17; the OTE Code of Ethics (n 43 above) [V.7] does cover management. 318 Timeshare Transposition Report (n 1 above) [III] at 23; European Parliament Resolution on Timeshare (n 43 above) R[A–B]. 319 Mullerat (n 33 above) 51. 320 Arbitration Scheme for European Timeshare Industry (OTE (n 12 above), 2005). 321 Fee for consumer range from £75–£300. 308 309
Cross-border Timesharing
281
complainant to exhaust any internal complaints procedure (60 days) and a conciliation process (120 days). Its use is excluded by taking legal action, and does not cover loans, succession on death, management or exchange, or indeed every issue where it might be useful. No wonder that 90 per cent of admissible complaints are resolved to the satisfaction of the consumer.322 Radical change will be needed to meet the Parliamentary aspiration to achieve wider access to alternative dispute resolution.323
CR O SS-B O R DER TI MESHA R I N G
Cross-border Timesharing [6.62] Cross-border activity is one of the central features of timesharing324 and so issues of geographical reach, selection of law and forum are inevitable.
1
Reach of United Kingdom legislation
[6.63] European protection must apply throughout the EEA-30,325 so each state must apply protection where timeshare accommodation is situated within its territorial boundaries as the United Kingdom has done.326 As well as units in United Kingdom resorts, our law applies if the timeshare agreement is governed by United Kingdom law.327 It also applies if either party is present within the United Kingdom jurisdiction at the time that the agreement is entered into,328 a rule which might operate very arbitrarily if local law suspends the start of the agreement during a domestic cooling-off period, perhaps allowing time for the buyer to return home from holiday before the agreement is created.329 Finally, and most importantly,330 UK law applies to any accommodation situated in any EEA state where the buyer is ordinarily resident in the United Kingdom.331 This protects Brits buying in Spain or Portugal or France.
OTE Code of Ethics (n 43 above) [VI] (complaints handling and sanctions). European Parliament Resolution on Timeshare (n 43 above) [15]. 324 Timeshare Directive Review (n 6 above) [VI]. 325 Timeshare Directive (n 1 above) §9; EEA Agreement (n 2 above); Timeshare Act 1992 (n 3 above) s 12(6) as amended by Timeshare Regs 1997 (n 3 above) reg 2(9). 326 Timeshare Act 1992 (n 3 above) s 1(1)(a); this includes pooled accommodation where any part of the pool is in the UK under s 1(7B), inserted in 1997. 327 Timeshare Act 1992 (n 3 above) s 1(7)(a), also s 1(7A)(ab) as amended by Timeshare Amendment Regs 2003 (n 3 above) sch 1 para 1(3) (UK forum). 328 Timeshare Act 1992 (n 3 above) s 1(7)(b). Contrast the Package Holiday Regs 1992 (n 118 above) reg 3 which apply where a package is sold or offered for sale within UK territory. 329 Jenkins (n 16 above) 1992; Bourne (n 9 above). 330 Timeshare Act 1992 s1(7A)(a) inserted by Timeshare Regs 1997 (n 3 above) reg 2(8). 331 Further amended by Timeshare Amendment Regs 2003 (n 3 above) sch para 1. 322 323
282
Timeshare
Bourne was quite right when he observed that the implications were wide and not thought through.332 [6.64] France, Luxembourg and Belgium also provide global protection for their residents,333 as does Austria,334 and Germany has a special set of rules on collisions between German contract law and foreign law where the property concerned is situated abroad.335 Transposition into Spanish, Portuguese and Italian law originally applied only to property situated in their respective territories, a limited reach which failed to take proper account of the possibility of those states being the correct forum for contractual disputes about a timeshare situated in another EEA state and which has therefore needed expansion.336
2
Selection of timeshare law
At first one might think that timeshare law should be site-based, but timeshare agreements often cover land in several European states.337 A purchaser may not validly renounce enjoyment of his Directive rights, nor may the vendor free himself from his responsibility since any term to that effect is not binding on the purchaser. Unenforceability of this term is supplemented in some states by additional penalties.338 Purchasers must not be deprived of their European rights in relation to any timeshare within the EEA-30 boundaries339 by a choice of law clause. Consumer protection would be put at risk if a timeshare seller could choose which law to apply. English law could be chosen to govern the sale of a French timeshare, since both systems emulate minimum EU safeguards, but it would be a problem to shift the law regulating disputes to a jurisdiction outside the EU, because that law is not bound to recognise minimum standards. Timeshares on the continent cannot fly a flag of convenience from Liberia or Panama. Timesharing needs to be treated in the same way as consumer contracts to prevent forum shopping.340 Choice of timeshare forum is less of an issue, though several states do also regulate jurisdiction clauses. Three states have criminal sanctions against the inclusion of a clause governing jurisdiction,341 Spain
Bourne (n 15 above) 594. Also Rome Convention, [2005] OJ C334 1, §5[2] applies; see above [3.13]. 334 Timeshare Law 1997 [1997] Bundesgesetzblatt 1–167, [1997] ECLYB [390], §11. 335 Timeshare Sales Law 1996 [1996] I Bundesgesetzbtatt 2154, [1997] ECLYB [406], §8. 336 Timeshare Transposition Report (n 1 above) [K.3]. 337 Timeshare Consultation (n 65 above) Regulatory Impact Assessment. 338 Timeshare Directive (n 1 above) §8; Timeshare Act 1992 (n 3 above) s 12(4). Nullity in Austria, France, Luxembourg, Belgium and Portugal; also a ban on further business in Portugal. 339 Timeshare Directive (n 1 above) §9, R[14]. Protection is extended to timeshares in the EEA as well in Germany, Austria, Denmark, Finland, the Netherlands, the United Kingdom and Sweden; Timeshare Transposition Report (n 1 above) [E.2]. For example in EEA-3 Norwegian Timeshare Law 1997 (n 172 above). 340 European Parliament Resolution (n 43 above) [15]. 341 Belgium, Spain and France: Timeshare Transposition Report (n 1 above) [K.2]. 332 333
Reform
283
treats such a contract as null and void,342 and two other states only allow jurisdiction to be directed to a European contract club country.343
3
Forum for disputes
[6.65] Forum rules are determined by the legal vehicle adopted. If a lease is created, or similar interest in land, ownership disputes fall within the exclusive jurisdiction, whereas contractual disputes and disputes about non-proprietary timeshares will usually fall to the domicile-based personal jurisdictions.344 True land law issues must be determined by the law of the site,345 but many issues arising out of timeshares are contractual in nature and many ‘timeshare’ arrangements are not really interests in land at all, and in such cases there is the possibility of selection of the law but also of a restriction to the possible range of selection so that it becomes possible to choose the law applying to a contractual arrangement. It is possible for cases to fall outside the exclusive jurisdictions if the use value of the land is subsidiary to the value of the services provided.346
R EF O R M
Reform [6.66] How timeshare reform will shape up has become clearer as a result of the publication of a proposal for a new Directive covering Timeshare and Long-term Holiday Products, too late unfortunately for full incorporation into this chapter.347 It will replace the existing Directive completely though it merely restates or refines the existing law in relation to many areas such as pre-contractual information,348 rights to a written contract in a comprehensible language,349 rights of withdrawal from the timeshare contract350 and ancillary credit agreements351 and the ban on advance payments.352 342 Jurisdiction may not be conferred on any arbitration tribunal other than the Consumer Arbitration System or a joint body involving trade and consumer representatives. 343 French and Belgian residents; the European jurisdiction may be under the EU Regulation, the Brussels Convention (Denmark) or the Lugano Convention (EEA). 344 Klein (n 8 above). 345 See above [3.13], [3.16]. 346 Travel Vac (n 36 above). 347 Timeshare Proposal (n 6 above). 348 Timeshare Proposal (n 6 above) §3; information requirements extend to new situations as explained below. 349 Timeshare Proposal (n 6 above) §4. 350 Timeshare Proposal (n 6 above) §5; the period remains at 14 days with a long-stop of 3 months and 14 days where information is withheld at the time of contract. 351 Timeshare Proposal (n 6 above) §7. 352 Timeshare Proposal (n 6 above) §6. The industry fought hard for a repeal of this provision, which suggests how important it is as a protection for consumers: Explanatory Memorandum [2], Impact Assessment [3.10].
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The major change is in the scope of the legislation. Industry representatives fought hard against an extension but there continue to be many complaints about holiday clubs and extension was clearly appropriate.353 Protection will extend to timeshares and long-term contracts. A timeshare354 will be a contract with a duration extending for more than a year by which a consumer acquires for consideration the right to use accommodation for more than one period of occupation. Gone is the requirement for land, for a three-year duration, for weekly intervals and for a global price paid in advance, all changes that will help to make this new definition much more all encompassing. For example, short-term trial packs are now to be included. Ordinary leases ought to be excluded by applying the directive only when providing for more than one period of occupation, but the suspicion lingers that many ‘ordinary’ leases may get caught; there is no requirement for a ‘holiday’ element. Only B2C arrangements are included, as at present. The major novelty is to catch long-term contracts. 355 This will be a contract for holiday accommodation which lasts for more than a year — including any tacit renewal or prolongation — and controls will apply where the primary aim is to acquire discounts on accommodation, possibly along with travel and services,356 but loyalty schemes will not be controlled where prizes are awarded rather than paid for. Another major extension is to resale and exchange contracts,357 at least those fitting the B2C pattern, excluding resales from one consumer to another; the extension to business resales is justified because this is one of the main sources of consumer complaints.358 Variations between the legal vehicles adopted for timesharing in different countries are not seen as a practical problem and no harmonisation is proposed.359
Timeshare Proposal (n 6 above) [3]. Timeshare Proposal (n 6 above) §2[1](a). 355 Timeshare Proposal (n 6 above) §2[1](b). 356 Timeshare Proposal Impact Assessment (n 6 above) [3.5.2], [3.12]; long-term holiday products generate most complaints in the UK. 357 Timeshare Proposal (n 6 above) §2[1] respectively (c) and (d); information requirements are spelt out for long-term holiday products, resales and exchanges in Annexes III–V; Impact Assessment [3.6]–[3.7]. 358 Timeshare Proposal (n 6 above) Explanatory Memorandum [1]. 359 Timeshare Proposal Impact Assessment (n 6 above) [3.2]. 353 354
CO N VEYA N CI N G
7 Conveyancing Conveyancers and Lawyers. Practice Rights and Qualification. Towards a European Register: Mechanics of Transfer; Registration. Laundering Activity. Confiscation Orders. Conveyancers as Launderers. Conveyancers as Cops. Customer Due Diligence. Reporting. Internet Advertising by Conveyancers.
CO N VEYA N CER S A N D LAWYER S
Conveyancers and Lawyers 1
Themes
[7.01] Europe is a continent of 500K lawyers, one in every thousand Europeans,1 so one should never be more than a few miles from advice or a good argument. In fact this may even be an underestimate since the Council of Bars and Law Societies claims far more members.2 Their figures are interesting, though not too much can be drawn from comparisons of self-reported data when some are obviously estimates and others concrete. Nevertheless its membership can be divided roughly into five, with the United Kingdom the largest slice (156K), followed by Italy (140K), Spain (138K) and Germany (116K); the fifth slice consists of all the remainder of the Council and is just about the same size (163K) with France the most populous of these less-lawyered states but coming in at just over 41K. Numbers in Scandinavian countries are understandably small since conveyancing is non-legal. It is interesting to speculate about what causes this very unequal distribution pattern, though it may reflect national as against regional organisation of professions and thus unequal membership of the Council of Bars and Law Societies. In the short term at least the United Kingdom and Germany seem to have most to gain from an opening-up of the European market. We have a delicious prospect of English lawyers advising from homes-cum-offices in the Lot and the Garonne. Britain has twice the normal 1 UK Government Response to the Contract Communication (Consumer and Health Policy DG, ‘Reactions to the Communication on European Contract Law’). 2 Council of Bars and Law Societies (CCBE, ); this suggests a higher overall total of 713K.
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ratio of lawyers to non-lawyers and legal services collectively contribute 1.4 per cent to GDP.3 This is an important market and if there was a genuine internal market in legal services lawyers would be free to engage in legal work anywhere in Europe. Directives to free the market have been enacted in two stages, the first dealing with the provision of services.4 This was followed a quarter of a century later by legislation guaranteeing rights of establishment,5 that is to set up as a sole practitioner, partner or firm.6 There is also a complex scheme for the recognition of qualifications as a route towards legal qualification. European moves in the field of services and establishment do not go far towards creating a European conveyancing area because states may, and invariably do, exclude conveyancing services from the liberalisation.7 A recent survey conducted by ZERP at Bremen,8 supported by the British Government and the Law Society, has explored the European market with a view to greater liberalisation; the author was rapporteur for England and Wales. Its report will be required reading at bedtime. A new Services Directive9 will constitute a significant attack on restrictive rules but more action will be needed to overcome the stranglehold enjoyed by notaries across the continent. It appears that the Commission is about to bite into this juicy morsel. Until then conveyancing remains very much a national pastime with compartmentalised markets and local notaries free from competition, but common law firms have much to gain if these markets can be opened up. Europe is at present a world of many national groups of conveyancers; at least 30 for the EEA states, but of course more because the United Kingdom and other states have internal divisions. One need only consider the bewilderment of a London solicitor trying to convey a flat in Edinburgh and seeking to understand the Scottish jargon. The only common thread across the European profession is a sustained and mutual hatred of the money laundering rules which transcend the continent though they have been applied with additional vigour in Britain.10 Here then are our themes: compartmentalisation of the market in conveyancing services, commission action to open up the market, limited practice rights, moves towards e-transfer, e-registration and e-payment, and a necessary but bureaucratic system of anti-money laundering controls.11
International Financial Services London Report [2007] NLJ 270. Lawyers’ Services Directive 77/249/EEC [1977] OJ L78 17. 5 Lawyers’ Establishment Directive 98/5/EC [1998] OJ L77 36. 6 L Hickman ‘Break for the Borders’ [2004] 05 LSG 16–17. 7 See below [7.03]. 8 CU Schmid Conveyancing Services Market COMP/2006/D3/003 (Zentrum für Rechtspolitik, University of Bremen, 2007). 9 Services Directive 2006/123/EC [2006] OJ L376 36, to be implemented by the end of 2009. 10 See below [7.32]. 11 See below [7.04ff], [7.07ff], [7.21ff], [7.32ff]. 3 4
Conveyancers and Lawyers
2
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Conveyancing
[7.02] Lawyers are free to move and ply their trade across Europe but this freedom excludes conveyancers and probate practitioners. States may, and generally do, reserve to local lawyers the notarisation of formal documents, the administration of estates and the preparation of documents creating or transferring interests in land, both when providing legal services12 and when established abroad.13 Business structures which provide for independent practice are under attack in Germany, but it seems that the German variant of the Legal Services Bill which has cut away the lawyer’s monopoly will reserve conveyancing and other areas of traditional practice.14 Separate qualification is required in these fields. Most readers of this book will be familiar with the broad outline of the conveyancing process in England and Wales, and will probably have some inkling of how different it is from the practice on the continent of Europe. In England it is usual for two solicitors to be employed, one on either side of the conveyancing transaction, for buyers and sellers to be locked in chains of around six to ten transactions, and surveys are an endemic feature of the lending climate. It is also a market of high annual turnover — around 7 per cent of stock though varying with market conditions — and of over-active price rises.15 Nothing could contrast more starkly with the position across Europe, especially if one ignores the rest of Britain, Ireland and Scandinavia where the organisation of the profession is quite different. Notaries dominate conveyancing in almost all states of Western Europe — including France, the Benelux countries, Germany and Germanic countries such as Austria and Greece — and in the later eastern accession states on the continent — including the largest economies in the Czech Republic, Hungary and Poland. English buyers encountering the continental system for the first time have encountered a culture shock — all the books in the good life abroad genre commence with an obligatory comic description of the visit to the notary’s office, though few go as far as Maté who unfairly described the notario as ‘an official dreamed up by the Italian Government to certify any fantasy anyone wishes to put on paper’.16 This statement was obviously intended as a hyperbole for comic effect. For some reason there does not appear to be a corresponding clutch of ‘Good Life in Britain’ books written by French or Italian writers, but if there were no doubt English solicitors would appear just as strange from a continental perspective. English buyers are not used to a single official acting for both sides, nor the need for personal attendance at completion — a leisurely gavotte that has long since died out of English practice. A notary has generally three functions, to act for the parties in effecting a formal legal act such as the transfer of a house, to certify the authenticity of the document for official 12 13 14 15 16
Lawyers’ Services Directive (n 4 above) §1[1]. Lawyers’ Establishment Directive (n 5 above) §5[2]. [2007] 06 LSG 6. See above [1.03]. F Maté The Hills of Tuscany (London, Flamingo, 1999, 0-006-55192-0) 120.
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purposes and to the land registry, and to collect taxes on behalf of the state. The last two functions have been used to argue for an official status designed to secure exemption from normal internal market rules.17 Notaries are few in England and Wales. They alone can validate documents for use in foreign transactions, but because national law restricts conveyancing and probate work to home state notaries, there is little work beyond routine certification, and few solicitors have bothered with this additional qualification — around 900 across the country.18 So far the Commission has mainly expended its energies in challenging states where the notarial role has been restricted to its own nationals, after being prodded into action by Mark Kober-Smith, a solicitor of Kent if not a Kentish solicitor. Many states previously required notaries certifying documents to be nationals of the state whose document he was certifying. This was the case in the Napoleonic systems of France19 and Belgium, in Germany20 and Germanic states such as Austria and Greece, and in the three Latin states of the Mediterranean — Italy, Spain and Portugal. Internal market principles preclude nationality-based discrimination and although some states caved in to Commission pressure early on21 there are still seven western European countries which reserve notarial functions to their own nationals, states which are now being challenged by the Commission.22 English lawyers should be free to compete for notarial work, but the lucrative conveyancing and probate markets are still closed. Even that theory is being tested by various ruses. For more than one hundred years foreign notaries were allowed to lodge documents with Spanish land registries but recently regulations were introduced which said that non-Spanish notaries could no longer be used on account of the need to secure tax collection procedures.23 Again the nationality-based discrimination point has been taken by the Commission, though it must be noted that this is within the exempted sector of 17 EC §45 ex §55; this refers to activities connected even occasionally with the exercise of the exercise of official authority; this §45 which applies to establishment could apply to private firms but it should only apply to the official aspects of activity and not to all activity which happens to be undertaken by a notary; the same exception is applied to services by EC §55 ex §66; Handbook on Implementation of the Services Directive (EC, 2007) [2.1.2] at 14. A separate exemption in EC §39[4] ex §48[4] from the freedom of movement is restricted strictly to public administration. 18 M Smulian ‘Seal of Approval’ [2006] 05 LSG 20–21. They operate under the Public Notaries Act 1801. New functions of collecting evidence have recently been given: [2006] 02 LSG 4. Oversight of notaries is soon to be transferred from the Faculty Office of the Archbishop of Canterbury to the more prosaic Legal Services Board; Notary (Qualification) Rules 1998 . 19 [2006] 02 LSG 4. 20 [2000] BGBL (D) 1, 182, [2000] ECLYB [616]. 21 R Parnham ‘Freedom in Portugal’ (2002) 18 European Lawyer 38–41. 22 The Commission has referred to the ECJ the nationality rules for notaries in Belgium, Germany, Greece, France, Luxembourg and Austria, arguing that the ‘official authority’ exception applies only when a notary has governmental authority to impose a rule on parties against their wills, thus excluding all consensual transactions: IP/07/915, June 27th 2007. The Netherlands has changed its rules and any decision in relation to the other states will not affect the reserved fields of conveyancing and probate 23 Smulian (n 18 above).
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conveyancing. French notaries have also continued to play on the tax collection point for continued protection. It is conceivable that a more sophisticated restriction, not to nationals but to residents, might find favour, but this, of course, is much less disruptive of the business interests of notaries from outside. Some flexibility applied in the German Democratic Republic (the former east Germany) where the requirement of residence in east Germany was relaxed before re-unification24 so as to recognise contracts executed elsewhere and valid under the law of the place of signature provided the formality requirements did not diverge vitally from those of the place where the land is situated.25 A west German notary could formalise an east German contract. [7.03] All of this is of relatively small significance because of the national monopolies over the transfer of land and succession. Notarial involvement is required in conveyancing, probate and divorce and may be reserved to those qualified nationally. This acts to the detriment of home-buyers across the continent. Geimar suggests that notaries save money in the end by precluding legal disputes, with only one notarial deed in a thousand becoming subject to a court dispute,26 but this rate of litigation seems prodigious by common law standards. Geimer considers that notaries reduce costs, though this must be balanced against his assertion that land transaction costs in Germany are the lowest worldwide.27 Although we will have to wait for the final results of the Commission-sponsored Study of Conveyancing Services being conducted at Bremen28 to be sure, the statement does not appear to be accurate. Conveyancing costs increase from Scandinavian systems through common law systems (where most of the transfer costs are paid to estate agents) to Germanic systems to Romance systems, so that notarial systems are by far the most expensive in Europe.29 Price competition is in fact absent in most states where scale fees are prescribed, typically at one per cent of price. Scale fees for lawyers in Italy were held to hinder effective competition and have now been abolished.30 In some contexts notarial fees for official functions are treated by European law as taxes,31 and scrutinised in that way.
Federal Act on Lawyers (HAG) §16(2). Bezirksgericht Erfurt 2 T 12/92 [1992] NJ 417, [1992] ECLYB [5677]. 26 R Geimer ‘The Circulation of Notarial Acts’ (XXIII International Congress of Latin Notaries, ) 28. 27 Geimar (n 26 above) 29. 28 Schmid Conveyancing Services (n 8 above). 29 See below [7.04]. One should add that this is based on preliminary results and we must await with interest the publication of the final report. 30 C-94/04 etc Cipolla Fazari [2007] 1 CMLR 4 @ 139 ECJ, J[70]; in fact scale fees have subsequently been abolished; see below [7.05]. 31 C-56/98 Modelo v Diretor-General dos Registros e Notariados [1999] I ECR 6427 ECJ; P Cabral & A Knapp ‘Eyes Wide Shut’ (2000) 25 EL Rev 669–679; and other copycat cases. 24 25
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3
Conveyancing
Study of the Market in Conveyancing Services
[7.04] ZERP at Bremen has been conducting an investigation into Conveyancing Services at the instance of the Commission.32 The conclusions ought to lead to Community action to secure a more open and cheaper conveyancing system across the continent. This is not the place to expand at length upon the market in England and Wales. Oddities other than those already mentioned are the existence of two separate professions, though solicitors seem to hold perhaps 97 per cent of the market to only 3 per cent or so for licensed conveyancers, and widespread use of estate agents (95 per cent as opposed to half or less in many other states), the insistence by lenders upon surveys,33 and the inflation of prices which is the dominant feature of the market. In Scandinavia conveyancing is conducted by legally unqualified real estate agents and without legal involvement so it is perhaps not surprising that the legal fees are the lowest in Europe, especially in Denmark. The agent’s fee may be greater by conducting the legal work. However, no English person who has been involved in a house purchase would seriously be prepared to forgo legal representation. We pass therefore to the civilian notarial systems. [7.05] Across much of the continent the involvement of a notary is mandatory, sometimes for certification of the signature (the Czech Republic and Slovakia, friends reunited), or for the execution of the sale document (Spain and Germany34) and elsewhere the registration process (Italy and France). Competition between advocates and notaries is rare and only Hungary and the Netherlands are free from a numerus clausus of notaries, a limit on the number of people licensed to practice, a dead man’s shoes principle. Fees are fixed almost everywhere by an official scale, though here we must exclude the Netherlands again, Austria35 and Italy where the scale was abolished in 2006. Controls on prices are accompanied by strict controls on business structure and limits on advertisement reminiscent of the English profession pre-Thatcher. Overall transfer costs in Slovakia are by far the cheapest on account of the absence of transfer tax, but surely this paradise cannot survive for long? In an intermediate band from three to seven per cent are the Scandinavian countries and Britain and Ireland. Around or above ten per cent are the civil law notarial systems both Germanic and French with Belgium way out in front on fifteen per cent. No doubt this is a matter of concern to the Eurocrats moving to live around Brussels. In fairness to the local profession one should add that Belgium has swingeing land transfer taxes, so the legal fees are relatively low in proportion. All the above is well-known but the ZERP study will catalogue the position in great Schmid Conveyancing Services (n 8 above). These are common in the Britain, Ireland, Denmark, France and Italy but rare elsewhere. Common law applies a caveat emptor principle whereas civilian countries require disclosure of defects. 34 German CC §§313, 873, 925. 35 Here scales are maxima rather than fixed fees. 32 33
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detail. Common law countries are no longer as cheap as they were on account of the increases in stamp duty under the current Labour Government, and the combination of increased prices and a four per cent top band now makes moving around London a nightmare — million pound houses are no longer uncommon but duty of £40K gives one cause to swallow hard. In terms of level of legal fees these appear to vary radically but the Scandinavian countries are obviously cheapest, Spain, Britain and Ireland in the middle, and they are significantly higher in the Germanic and Romance countries and particularly Greece. There is perhaps a reverse correlation with market activity or is that too simplistic? In short when the Bremen Study appears it is likely to state facts which make the case for radical reform across Europe. The European economy will benefit from cheaper transfer costs and reduced duty in many states to stimulate greater fluidity in the land transfer market. Can all this be achieved without triggering the lunatic explosion of prices that is so destabilising English society?
4
Legalisation
[7.06] Rules on recognition and enforcement designed primarily for judgments apply equally to public acts such as ‘notarial deeds’ (‘actes authentiques’),36 prescribed for transactions with land and inheritances in many continental European states. Before a notarial deed can be enforced across borders, it is necessary to obtain an exequatur (an enforceability declaration) in the state where enforcement is sought. Public documents executed within the territory of one state may have to be produced in the territory of another contracting state,37 perhaps court documents, administrative documents, notarial acts, notarial authentications of signatures, official certificates placed on private documents, and certificates of registration. Legalisation is the formality by which diplomatic or consular agents of the country of production certified the authenticity of the signature, the capacity in which signature is made and the identity of any seal or stamp. Hague Convention XII38 limits legalisation for foreign public documents to a form of certificate known as an ‘apostille’. All EU states are signatories,39 as are also many parts of the Balkans, EEA states, Turkey, and smaller bites such as Andorra, Lichtenstein and San Marino, not to mention the Russian Federation40 and elsewhere in the world. Public documents which have to be produced in the territory 36 Regulation on Civil Jurisdiction §57; CU Schmid ‘European Influences on Real Property Law’ (Lund, EULIS, 2003) 10; for judgments see below [9.75ff]. 37 Hague Convention XII () §1. 38 Hague Convention XII (n 37 above); RH Graveson ‘The Ninth Hague Conference of Private International Law’ (1961) 10 ICLQ 18–35; EJ Griew ‘Hague Draft Convention on the Legalisation of Foreign Documents and the Forms of Wills’ (1959) 8 ICLQ 559–576. 39 Including Denmark since 2006; an EU proposal never came to fruition: O Remien ‘The Emerging EC Area of Freedom, Security and Justice’ (2001) 38 CML Rev 53–86, 54. 40 See (‘Conventions’, ‘Status Charts’).
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of a convention state can be relied on once the apostille is applied and that is the only formality permissible.41 The certificate may be placed on the document itself or on an ‘allonge’42 using the official language of the issuing authority although the French word ‘apostille’ must be used as a title. This certificate does not itself need to be legalised.43
PR ACTI CE R I G HTS A N D Q UA LI F I CATI O N
Practice Rights and Qualification 1
Services
[7.07] Freedom for lawyers to move around Europe has been a battleground for as long as there has been an internal market.44 Belgium applied a nationality requirement to legal work involving official services, but this monopoly for Belgian avocats was invalidated by the European Court of Justice in Reyners v Belgium.45 The first legislative step, taken in 1977,46 was a Directive enacted to secure a common market in lawyers’ services, and, although the Lawyers’ Services case47 shows that this long remained incomplete, it is now implemented fully across the EU-27.48 A lawyer who is established in his home state may provide services in a host elsewhere in the EU using home state qualifications and home state title49 with recognition accorded across Europe.50 Host state practice rules apply,51 and a more recent proposal for a radical shift to regulation by the country of origin proposal has been blocked by French opposition.52 Employed lawyers cannot practice if there is a bar on them in the host state, and a foreign lawyer may be required to establish his credentials and must work with a local practitioner in proceedings or before a public authority.53 41 Hague Convention XII (n 37 above) §3. More onerous requirements in other Conventions are overridden: §8. 42 Hague Convention XII (n 37 above) §§3, 4; one assumes the meaning here is ‘leaf of a table’, an additional sheet, rather than the alternative, ‘futtock’. 43 Hague Convention (n 37 above) XII §5. 44 J Lonbay ‘Free Movement of Persons’ (2004) 53 ICLQ 479–487 (recent developments). 45 Case 2/74 Reyners v Belgium [1974] ECR 631 ECJ (Dutch national with Belgian diploma able to act as Belgian avocat). 46 Lawyers’ Services Directive (n 4 above); J Hodgson ‘Expanding your Portfolio’ [2005] NLJ 368–369; this applies to EEA-30. 47 Case 427/85 Commission EC v Germany (Lawyers’ Services) [1988] ECR 1123 ECJ. 48 CCBE Tables of Implementation (n 2 above). In the UK, EC (Lawyers’ Practice) Regs 2000, SI 2000/1119 as amended for EU+10 by EC (Lawyers’ Practice) (Amendment) Regs 2004, SI 2004/1628; Bulgarian and Romanian lawyers are waiting as yet. 49 Lawyers’ Services Directive (n 4 above) §§1[1], 3. 50 Lawyers’ Services Directive (n 4 above) §2. 51 Lawyers’ Services Directive (n 4 above) §4[2]. 52 Services Directive (n 9 above); Commission Communication on Competition in Professional Services COM (2004) 83 final; A Laidlaw ‘Services Directive Hit as French Votes “Non”’ [2005] 23 LSG 15; see above [1.68ff]. 53 Lawyers’ Services Directive (n 4 above) §§4–7.
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[7.08] As already stated, the preparation of formal documents, administration of estates and conveyancing are usually preserved for local monopolies.54 [7.09] A Communication from the Commission in 200455 identified problems of fixed prices, recommended prices, advertising restrictions, entry restrictions, reserved rights, business structures and rules preventing multi-disciplinary practice. This has led to a new Services Directive56 which covers services that are non-financial.57 It will continue to be necessary for a service provider to comply with regulations of the host state where the service provision is to be carried out. Surviving barriers to full integration are now subject to attack.58 At the core of the Services Proposal are two lists, of requirements to be eliminated and of requirements that have to be evaluated.59 This lists have already been considered60 and will for example impose an outright ban on rules about the nationality of staff of a service provider and justification of quotas and territorial restrictions and also justification of rules about the form of legal vehicle for service providers which might affect alternative business vehicles. This list is not exhaustive. Whether or not to include the provision of legal services in the Directive and hence to free such services was a matter of heated debate,61 in which the Law Society lobbied hard for them to be included, scenting business on the continent.62 In the event lawyers are in,63 and a general attack on notarial monopoly may follow.64 There is an exclusion for notaries but only where their appointment has been approved by official act of government, they being placed here in a category which also includes bailiffs.65 The precise wording of this exclusion is as follows: The Directive shall not apply to the following activities…: (l) services provided by notaries and bailiffs, who are appointed by an official act of government.
It is believed that the transcription above is accurate but obviously the placing of the comma in this provision is absolutely crucial, and one can well imagine Lawyers’ Services Directive (n 4 above) §1[1]; see above [7.03]. Competition in Professional Services (n 2 above). 56 Services Directive (n 9 above). 57 Services Directive (n 9 above) §§2, 4, but excluding social housing; also financial services for which a ‘dynamic consolidation’ ‘reflecting stakeholder sentiments’ awaits: White Paper Financial Services Policy 2005–2010 (Internal Market DG, December 2005). 58 Services Directive (n 9 above) R[3]. 59 Services Directive (n 9 above) §§14–15; these relate to establishment by service providers. 60 See above [1.71]. 61 J Fleming ‘Services Directive under Attack’ (2005) 46 European Lawyer 9–10. 62 [2006] 08 LSG 6. 63 Opening Europe to lawyers occurs under the Lawyers’ Services Directive (n 4 above), since the Services Directive (n 9 above) excepts lawyers from §16 by virtue of §17[4]; however the attack on restrictions does apply to lawyers; J O’Keefe [2006] 04 LSG 12; Services Implementation Handbook (n 17 above) [7.1]. 64 J O’Keefe ‘Brussels Watch’ [2006] 42 LSG 11; T Buck ‘Notaries in 17 European Countries to Lose Privileges’ Financial Times October 11th 2006. 65 Services Directive (n 9 above) §2[l]. 54 55
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language versions varying in shades of meaning. Arguably the exclusion in the Treaty is wider-ranging.66
2
Establishment — freedom
[7.10] Lawyers may practise permanently and without restriction under their home professional title in another member state under the Establishment Directive which came into force in spring 2000.67 This system is distinct from that for other professions.68 Qualified lawyers benefit, as opposed to trainees, but establishment by qualified lawyers includes both self-employed and salaried lawyers.69 General principles determine the boundary between service provision and establishment.70 Lawyers may practise using their home country professional title71 and home state name for their firm or grouping.72 Large international firms have benefited most, Anglo-Saxon firms having made great inroads into German and Dutch markets,73 but the new rules also benefit solicitors ‘retiring’ abroad and practitioners in border towns.74 Perhaps much routine work will end up being outsourced to lower-cost accession states.75 [7.11] Practice can cover the law of either state, as well as Community and international law,76 though there are clearly problems of legal culture and language barriers in advising on host state laws.77 Home state registration must be maintained and, in addition, registration is required in the host state.78 Practice is subject to meeting host state standards of conduct and insurance and is subject to host state discipline.79 Foreign lawyers should consider the duty of an English lawyer when applying to an English court for the grant of a global freezing order.80 Home standards must also be maintained for three years, but full integration occurs after three years effective and regular practise in the host 66 EC §45 ex §55; this applies to service provision by EC §55 ex §66; however, both can be restricted by the Council. 67 Lawyers’ Establishment Directive (n 5 above), as from March 14th 2000; CCBE Tables of Implementation (n 2 above); P Nebbia ‘The New Directive on Lawyer’s Establishment’ [1998] ECLYB xlii–xlvi; Hodgson ‘Portfolio’ (n 46 above). The CCBE considers it directly applicable. For EEA-3 and accession states see below [7.17]. 68 Recognition of Professional Qualifications Directive 2005/36/EC [2005] OJ L255 22, §§50–51. 69 Lawyers’ Establishment Directive (n 5 above) §1[1]. 70 C-55/94 Gebhard [1995] I ECR 4186 ECJ; establishment might be possible in several states: Case 107/83 Advocats de Paris v Klopp [1984] ECR 2971 ECJ; see above [1.65]. 71 Lawyers’ Establishment Directive (n 5 above) §2. 72 Lawyers’ Establishment Directive (n 5 above) §12; C Toms ‘Associations of Lawyers in the EU’ (2005) 16 European Business Law Review 113–149. 73 ‘AS Invasion in 2000’ [2001] 01 LSG 17. 74 Hickman ‘Borders’ (n 6 above). 75 [2004] 18 LSG 1, 3. 76 Lawyers’ Establishment Directive (n 5 above) R[10], §5. 77 J Fleming ‘Lawyers who Aim to Live in Perfect Harmony’ [2002] 19 LSG 21–23. 78 Lawyers’ Establishment Directive (n 5 above) §3. 79 Lawyers’ Establishment Directive (n 5 above) §§6[1–3], 7. 80 Lewis v Eliades (No 1) [2002] EWHC 335.
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state, when the host state must treat the foreign registered lawyer in the same way as a lawyer qualified in the host state and home state regulation drops away.81 [7.12] Establishment may not impinge upon the reserved fields of probate and conveyancing without separate qualification82 and unaccompanied court work is barred.83 [7.13] Establishment rights for European lawyers have been implemented in the United Kingdom in full,84 though when two in every thousand are already lawyers it may be open to doubt whether we need an influx from the Continent, and it is believed that at least 600 lawyers are eligible to register.85 English lawyers led the fight for implementation elsewhere. A group of 29 English solicitors were prosecuted for practising illegally in the Greek port of Piraeus, but charges were dropped and Greece forced to implement the European establishment right.86 Legal action also failed against two English solicitors practising on the Portuguese Algarve,87 many states capitulated without a fight,88 and implementation is now complete. Establishment rights are implemented in England, Wales and Northern Ireland for a ‘European Lawyer’, that is a national of an EU state, first from EU-15 and later EU-2589 though Bulgarian and Romanian lawyers are currently waiting. A European Lawyer must register with the Law Society or Bar Council and can then practise in England and Wales as a host state using their home professional title, and similarly elsewhere in Britain. Traditional reserved categories of property transactions and probate are again reserved, though Irish lawyers are allowed to convey our land and to administer our deceased’s estates; that may be understandable but it is curious that lawyers from the Scandinavian countries are also allowed these inroads.90 [7.14] Home state discipline applies.91 A foreign lawyer may apply to become a Lawyers’ Establishment Directive (n 5 above) §10. Lawyers’ Establishment Directive (n 5 above) §5[2]; Hickman ‘Borders’ (n 6 above); C-506/04 Wilson v Luxembourg Bar [2007] 1 CMLR 7 @ 217 ECJ, J[74]. 83 Lawyers’ Services Directive (n 4 above); Wilson v Luxembourg Bar (n 82 above) J[74]. Fees may be restricted by national law in this situation: C-289/02 Amok Verlags [2003] I ECR 15059 ECJ. 84 Lawyers’ Practice Regs 2000 (n 48 above) as amended. 85 [2000] 31 LSG 9; [2001] 05 LSG 6; [2001] 03 LSG 8; Verwaltungsgerichtshof Mannheim 9 S 31/05 [2006] 03 ECL [56] (German admitted as UK solicitor could practise in Europe). 86 [2001] 17 LSG 6. 87 [2001] 03 LSG 8. 88 [2002] 38 LSG 5; [2004] 01 LSG 5; [2001] 05 LSG 6 (Netherlands). 89 Lawyers’ Practice Regs 2000 as amended (n 48 above) regs 6, 8 (joint practice), 15ff (registration). 90 Lawyers’ Practice Regs (n 48 above) regs 12–13; the exceptions introduced in 2004 are for Denmark, Finland and Sweden (Norway being an EEA-3 state); according to CCBE statistics (n 2 above) the total concession covers fewer than 10K lawyers, these states having non-legal transfer processes. 91 Lawyers’ Practice Regs (n 84 above) reg 25; Law Society ML Guidance for Foreign Lawyers (London, Law Society, 2005); Law Society Practice Rule 10.01 applies the CCBE (n 2 above) Code of Conduct and the Law Society also adheres to the International Bar Association International Code of Ethics. 81 82
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solicitor or barrister after passing an aptitude test, but this test is removed once the European Lawyer has three years’ standing and has carried on practice for that time; he can then practise under both titles.92
3
Establishment — restriction
[7.15] Restrictions on freedom of establishment are possible under European law but they must have a legitimate objective and must be proportionate (that is, the least necessary) for attainment of that objective. A requirement that a Liechtenstein domiciliary company was to have at least one professional board member (for example a lawyer or professional trustee) permanently resident in Liechtenstein failed this test. The applicant in Re Pucher93 was an Austrian resident, who had been refused authorisation to act as the qualified board member of a Liechtenstein domiciliary company even though he was qualified in Liechtenstein as a professional trustee. A residence requirement was incompatible with market freedoms, indirectly discriminatory in its effect and contrary to the principle of equal treatment,94 and of course this particular restriction did limit the potential board membership enormously to the disadvantage of other nationals.95 Any derogation had to be interpreted strictly, and this residence requirement was not proportionate to the public policy objective.96 It is interesting to speculate whether trusteeship could be limited given the importance of personal liability and the difficulty of suing people outside the jurisdiction. [7.16] An even better dodge for a small state is to impose a language requirement: do lawyers in Luxembourg need to speak Luxembourgish? After an inconclusive initial skirmish97 a second round involving an English barrister called Wilson98 secured the right to practise in Luxembourg without speaking the local language. The Establishment Directive sets out a complete harmonisation of conditions99 which do not mention language competence and so a professional cannot be subjected to language testing100 practice rules operating to stop practice outside an area of competence.101 This hands a powerful weapon back to the Lawyers’ Practice Regs (n 48 above) regs 29–30. E-2/01 Re Pucher [2002] July 1st EFTA Ct; Oberster Gerichtshof 6 Ob 124/Q92 [2000] wbl 86, [2000] ECLYB [483] (Austria); E-8/04 EFTA Surveillance Authority v Liechtenstein [2005] July 1st EFTA Ct. 94 E-3/98 Rainford-Towning [1999] 1 CMLR 871 EFTA Ct; C-212/99 Commission EC v Italy (Language Assistants) [2001] I ECR 4923 ECJ. 95 C-279/93 Finanzamt Koln-Altstadt v Schumacker [1995] I ECR 225 ECJ. 96 C-352/85 Bond van Adverteerders v Netherlands [1988] ECR 2085 ECJ; C-384/93 Alpine Investments v Minister van Financien [1995] I ECR 1141 ECJ; C-350/96 Clean Car Autoservice v Landeshauptmann van Wien [1998] I ECR 2521 ECJ. 97 C-168/98 Luxembourg v European Parliament (Practice as a Lawyer) [2000] I ECR 9131 ECJ, J[35–42] (application for annulment failed); Hickman (n 6 above). 98 Wilson v Luxembourg Bar (n 82 above). 99 Wilson (n 82 above) J[66]. 100 Wilson (n 82 above) J[70] 101 Wilson (n 82 above) J[73–74]. 92 93
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local profession. Other cases are in the pipeline.102 It is, however, perfectly proper for a law exam to be conducted by lawyers.103 Many states have restrictions on the form of business structure such as a partnership with a ban on non-lawyers and on multi-disciplinary practice. A movement for alternative business structures is sweeping the continent, led as ever by the United Kingdom.104 Reform is being driven by the Commission through national channels105 early products being the Legal Services Bills in the United Kingdom and in Germany.106
4
Establishment in the EEA and accession countries
[7.17] Practice rights and disqualifications were extended throughout the EEA in 2002.107 Re Pucher,108 the case just considered, related to restrictions on board representation on Liechtenstein domiciliary companies by suitably qualified professionals permanently resident in Liechtenstein. Switzerland operates a system based on bilateral agreements109 subject to a quota system.110 Instead of a big bang, attempts have been made to ensure a smooth transition for lawyers from and moving to accession states, the lubricant being the Council of Bars and Law Societies of the European Union (CCBE).111 In many countries there has been resistance from local bars112 but this has been seen off and European practice rights have been established,113 and implemented in the UK.114 The battle is being re-fought in the candidate countries,115 not so much Bulgaria with its liberalising regime,116 but mainly in Romania where the decision to open up legal services to foreign lawyers was contested bitterly,117 and registration requires at least an equal number of Romanian lawyers.118 No direct arrangement exists
J O’Keefe ‘Lawyers and Cartels in Judicial Firing Line’ [2006] 08 LSG 12. C-250/03R Mauri v Ministero della Giustizia [2005] I ECR 1267 ECJ. 104 C Toms ‘Associations of Lawyers in the EU’ (2005) 16 European Business Law Review 113–149. 105 C Tyre [2007] 05 LSG 6 (he is Chair of the CCBE). 106 [2007] 06 LSG 6. 107 [2002] 41 LSG 8. 108 Pucher (n 93 above); see above [7.15]. 109 EC (Lawyers’ Practice) (Amendment) Regs 2004 (n 48 above) (UK); Law 2004–1123 [2004] JORF17825, [2004] ECLYB 340 (France). 110 EU Accords on Free Movement of Persons June 2002 [2002] 41 LSG 8. 111 L Hickman ‘Joining the Club’ [2004] 04 LSG 24–25. 112 [2000] 43 LSG 6; H Meyers (2001) 22 European Legal Bulletin 43–45 (Hungary). 113 W Weiss (2001) 6 European Foreign Affairs Review 243–281; A Lazowski ‘Chapter II on Establishment in the Europe Agreements’ [2003] ECLYB 243–254 (Poland). Poland Foreign Lawyers (Amendment) Law 2005 [2005] Dz U 1240. 114 Lawyers’ Practice (Amendment) Regs 2004 (n 109 above). 115 A Pedain ‘With or Without Me’ (2002) 51 ICLQ 981–989 (ECJ neutral); B Bogusz ‘Right of Establishment for Accession State Nationals’ (2002) 27 EL Rev 472–482. 116 [2002] 11 LSG 6. 117 A Cosciug ‘Romania New Law for the Legal Profession’ (2003) 5 European Journal of Migration Law 249–257. 118 [2000] 43 LSG 6. 102 103
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with Turkey.119 There is some prospect of a global liberalisation through GATS, the General Agreement on Trade in Services,120 and freer access is being sponsored by the European profession.121
5
Recognition of qualifications
[7.18] Mutual recognition and homologation of qualifications has been agreed between all EU states by directive.122 It consolidates two General Systems, the first for University degrees, post-graduate qualifications and professions123 and a second for sub-degree qualifications.124 These are currently implemented in England and Wales,125 elsewhere in Britain and overseas for law degrees, other degrees, the Common Professional Examination, the Legal Practice Course, or certification of the completion of a training contract, and corresponding requirements of the Bar126 but the effect is direct anyway. Advice also currently relates to the older schemes.127 This is directed at training stages rather than practice.128 In principle it covers national qualifications.129 Hodgson describes recognition of qualifications as an uncharted alternative to home state qualification.130 So far as the object is academic, to enable a person to continue studies, recognition is a national responsibility, but the scheme of recognition for the professional purpose of providing a qualification to work is European. Lack of a particular diploma required by a profession is an obstacle to access and equivalent qualifications have to be recognised.131 A person lacking the appropriate national diploma must be allowed to pursue his profession in the host state. Some qualifications are listed132 in which case home state certification is all that
C-37/98 R(JR) Savas v Secretary of State for Home Department [2000] I ECR 2927 ECJ. [2000] 42 LSG 8. 121 CCBE (n 2 above); [2002] 41 LSG 6; [2005] 38 LSG 5. 122 Recognition of Professional Qualifications Directive (n 68 above) as from October 2007; it is not yet implemented in the UK. 123 Recognition of Professional Qualifications (First General System) Directive 89/48/EEC [1989] OJ L19 16. 124 Recognition of Professional Qualifications (Second General System) Directive 92/51/EC [1992] OJ L209 25 . 125 EC (Recognition of Professional Qualifications) Regs 1991, SI 1991/824. 126 EH Brezinka & W Obwexer ‘The Recognition of Diplomas within the Internal Market’ [2000–2001] 6 European Legal Forum 377–386; J Pertek ‘Free Movement of Professionals and the Recognition of Higher Education Diplomas’ [1992] Yearbook of European Law 293–324; J Lonbay ‘Lawyers Bending over the Borders’ (1996) 21 EL Rev 50–58. 127 MARKT/D/8327/2001-EN. 128 C-313/01 Morgenbesser v Avvocati di Genova [2004] ECR 13467 ECJ, J[47–62]. 129 Inclusion of notaries is without prejudice to EC §45 ex §55; Recognition of Professional Qualifications Directive (n 68 above) R[41]; see above [7.09] n 66. 130 Hodgson ‘Portfolio’ (n 46 above) 369; RCA White Workers, Establishment and Services in the EU (Oxford, OUP, 2004, 0-19-826776-2) ch 4. 131 First General System (n 123 above) §§2, 3. 132 eg licensed conveyancers: Recognition of Professional Qualifications Directive (n 68 above) Annex II §11. 119 120
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is required but for unlisted diplomas the host state must make a comparison.133 It has four months to reach a decision. [7.19] Morgenbesser134 shows how Community law applies to lawyers. Christine Morgenbesser had taken a French degree and had undertaken legal training short of full qualification.135 She then applied to the profession in Genoa to be registered as a practitioner in Italy only to be met by the reply that a practitioner in Italy must have a degree from an Italian university.136 In her situation the Genoese bar was required to assess her overall experience and skills in order to determine how comparable she was to a lawyer who had studied in Italy. This transition ought to be relatively painless, as would a transfer from France to Belgium137 or Norway to Sweden.138 The decision whether a qualification is broadly similar is left for local decision,139 assessing the extent to which the home state requirement meets host state requirements,140 on a case by case basis,141 no easy matter when, for example, Spanish lawyers face no post-degree training period.142 Evidence of good standing comes from the home state143 and of title from the host state.144 [7.20] Assessment of an individual’s qualifications may well identify gaps for which compensation will be required. Differences exist between legal systems and it will be necessary to show competence in aspects not covered by the qualification being recognised, but only those deficiencies.145 Host state aptitude tests are said to be onerous, even capricious, but an alternative is an adaptation period of up to three years.146 If the differences are considered to be too great full training will be required,147 and full training may be required after study in the United States which is outside Europe and its recognition principles.148 European law may step into other aspects of legal traineeship such as the reimbursement of
C-31/00 Dreessen [2002] I ECR 663 ECJ. Morgenbesser (n 128 above). 135 This meant that she could not claim establishment rights. 136 This raises a separate issue of nationality-based discrimination; see above [2.38]. 137 Fourgeau v Conseil de l’Ordre des Avocats au Bureau de Bayonne [2002] Dalloz Jurisprudence 121, [2002] ECLYB [498] 138 Tob v Styrelsen Für Sveriges Advokatsaufund Ö 2906-01 [2002] NJA 130. 139 C-238/98 Hocsman v French Ministrie d’Emploi et de la Solidarité [2000] I ECR 6623 ECJ. 140 Case 71/76 Thieffry v Conseil de l’Ordre des Avocats à la Cour de Paris [1977] ECR 765 ECJ; C-340/89 Vlassopoulou [1991] I ECR 2357 ECJ (Greek lawyer at Athens bar registered as Rechtanwalt in Germany). 141 C-330/03 Colegio de Ingenieros de Caminos v Administracion del Estado [2006] I ECR 801 ECJ. 142 Hickman ‘Borders’ (n 6 above). 143 First General System (n 123 above) §6. 144 First General System (n 123 above) §7. 145 Morgenbesser (n 128 above) J[63–71]. 146 First General System (n 123 above) §4; Recognition of Professional Qualifications Directive (n 68 above) §3[1]; J Hodgson ‘Portfolio’ (n 46 above); Swedish Law Society v H Ö 386–99 [2000] NJA 214, [2000] ECLYB [528] Sweden (recognition in Sweden of English solicitor). 147 Colegio de Ingenieros de Caminos (n 141 above). 148 Verwaltungsgerichtshof Mannheim (n 85 above). 133 134
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travel expenses which stops at a state boundary and therefore infringes the spirit of the internal market.149
MECHA N I CS O F TR A N SF ER
Mechanics of Transfer [7.21] There would be undoubted benefits in unification of the systems currently used for the transfer of title to land.150 Readers are likely to be familiar with the three-stage process in which there is first a contract, followed second by a transfer of title, followed finally by registration of the transfer. English law is distinctive in Europe because of the rule that equitable title passes under a contract giving a proprietary interest151 — even if most solicitors choose not to rely on the proprietary aspect of the contract by not bothering to enter a notice of the contract on the title. Even with that massive difference European conflicts rules treat the transfer action to enforce a contract as a matter of personal obligation.152 Maybe if the remedy sought is damages, but dubious surely if it is specific performance, the remedy which actually carries out the proprietary aspect by ordering that the transfer of title should be carried out.153 In the usual way European law wrongly classifies the equitable remedy as personal.154 The system is the best in Europe because one gets an obligation to buy and sell and therefore a guaranteed period of stability during which to organise completion, and only in that way is it possible to marshal chains of transactions which are the only way to avoid the cost of bridging finance. German law is somewhat similar in the two-stage process, the contract separate from the transfer, with a caution to give proprietary effect to the contract,155 but the action for transfer remains based on personal obligation. [7.22] The Schlosser Report156 is a convenient brief summary of the variant rules on land transfer, admittedly in the context of conflicts rules for common lawyers coming to the civilian systems. Ownership generally passes under a single sale contract. In the web of laws of France, Belgium and Luxembourg, ownership passes under the contract but this needs entry on the land register and the action to enforce it is a matière mixte (French law),157 but presumably a personal action in the terms of the European conflicts rules. This is not the place to enter in detail C-109/04 Kranemann v Land Nordrhein-Westfalen [2005] I ECR 2421 ECJ. AG Chloros ‘Principle, Reason and Policy in the Development of European Law’ (1968) 17 ICLQ 849–877, 871. 151 Lysaght v Edwards (1876) 2 Ch D 499, 506–510, Jessel MR. 152 Schlosser Report [1979] OJ C59 71, 172. 153 P Sparkes A New Land Law (Oxford, Hart, 2nd edn, 2003, 1-84113-380-9) [24.05], [25.29]. 154 See above [4.22ff]. 155 Schlosser (n 152 above) 170G. 156 Schlosser (n 152 above) 169–172; JM Carruthers Transfer of Property in the Conflict of Laws (Oxford, OUP, 2005, 978-0-19-92147-4). 157 Schlosser (n 152 above) 171. 149 150
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upon the fundamental divergences in the conceptual nature of property transfer between the various states. This ranges from the consensual tradition in France to tradition and delivery in Germany, via an intermediate mix of title and tradition in Spain.158 Much of this turns on the difficult concept of causa, the thing which gives binding character to contracts in many systems, and determines the relationship between a contract and a real agreement159; that is for another time. In terms of formality almost all states require transfers and gifts to be notarised160 but Italy is satisfied with writing.161
R EG I STR ATI O N
Registration 1
EULIS
[7.23] A pan-European initiative, EULIS,162 aims to provide access to information across European borders via internet technology and so increase the availability of information about land. Property data is rendered into a common format which enables access to data in a form that can be understood in any language. An exploratory project ran from 2002 to 2004 after which interoperability went live between the eight participating countries163 though the idea is spreading east164 and there is a standing invitation to others to join in. A decision is to be made in 2007 about the future direction of the project. Customers range from banks, lawyers, estate agents and property companies, through to governments and tax authorities. Register records of individual properties can be obtained online through a single portal. Users log on to their own national provider and use a property ID related to the cadastral unit (in English jargon the parcel of land shown on a title plan) to gain access to the computerised data about that property. This should underpin the development of a single European property market. [7.24] Care will be needed to avoid a position in which a single service achieves 158 S Cámara-Lapuente ‘Comparative Remarks on Land Registers within the Frame of European Private Law’ (2005) 13 ERPL 797–839, 808. 159 U Drobnig ‘Transfer of Property’ ch 39, 725–740, in A Hartkamp et al Towards a European Civil Code (The Hague, Kluwer, 3rd edn, 2004, 90-411-2280-X). 160 H Kötz & A Flessner European Contract Law (Oxford, Clarendon Press, 1998, 0-198-26498-4) 54. 161 Kötz & Flessner (n 160 above) ch 5. 162 European Legal Information Service, ; Cámara-Lapuente (n 158 above) 819; H Ploeger & B Van Lonen ‘EULIS: At the Beginning of the Road to Harmonisation of Land Registration in Europe’ (2004) 12 ERPL 379–387; B Bogusz ‘Modernising English Property Law: The Influence of Internal Market Principles’ (2006) European Business Law Review 1395–1419, 1410, 1417. 163 Austria, England and Wales, Finland, Lithuania, Netherlands, Norway, Scotland and Sweden. 164 Later entrants include the Czech Republic, Latvia, Poland and Slovakia; also in other directions to Iceland, Italy, Ireland and Northern Ireland.
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a monopoly and so is put in a dominant position in relation to property information services, which gives rise to the risk of abuse of dominant position.165 In the context of mortgages, the aim of equivalence of data content of particular fields of a register is warmly welcomed by the lending profession, but the Commission seems to be lukewarm in its response.166
2
The diversity of registers
[7.25] The earliest register in Europe appears to have been that set up in Spain in 1539.167 However, registration was inherently limited in its scope so long as it was confined to paper-based procedures, but now that registration and computers have found each other there is a new impetus for the globalisation of property law. We can envisage a register in which complete current up-to-date details of every property are recorded in a format to which access can be had from anywhere in Europe and where land can be traded on-line in the same way as shares. At present Europe is light years away from its destination. At least we now have the first glimmerings of a comparative literature.168 Pedrón169 identifies a hierarchy of registration principles in which registers of properties are better than by people (why land registration scores over the land charges system170) and where up-to-date record of entries is better than an historical file of documents (why title registration was adopted in preference to deeds registration).171 Cámara-Lapuente found deeds registration applying in France, Italy, Portugal and throughout Benelux; on the other hand substantive registration of title applies elsewhere in Austria, England and Wales, Scotland, Sweden, Denmark, Spain and throughout the eastern accession states which are starting afresh such as, for example, Hungary, Poland and the Czech Republic.172 The division in these lists breaks all known categorisations of legal systems, such as civilian/common law and Germanic/Latin,173 and indeed is a pure illustration
PNP Italia v Agenzia del Terrirotira [2005] Foro It 9 I 2515, [2006] 01 ECL 49; see above [3.54]. Mortgage Credit Forum Group Report The Integration of EU Mortgage Credit Markets (DG Internal Market, 2004) Recommendation [35]; Green Paper Mortgage Credit in the EU, COM (2005) 327 final [45–46]; London Economics Report: The Costs and Benefits of Integration of EU Mortgage Markets (Brussels, London Economics for DG Internal Market, 2005) [A1.6.3]; Mortgage Credit Responses (‘Comments on Green Paper’, ) by HM Treasury and Financial Services Agency 9 and by the European Economic and Social Committee [3.4.1]. 167 AP Pedrón ‘The Register as an Instrument of Security in Property Transactions’ in MES Jordán & A Gambaro Land Law in a Comparative Perspective (The Hague, Kluwer, 2002, 90-411-18799-087-95) 94; Bogusz (n 162 above) 1412ff. 168 Cámara-Lapuente (n 158 above); Pedrón (n 167 above). 169 Pedrón (n 167 above) 94–95. 170 Sparkes (n 153 above) [1], [20], [21]. 171 Sparkes (n 153 above) [1.02] fn 18. 172 Cámara-Lapuente (n 158 above) 832–833. 173 Cámara-Lapuente (n 158 above) 798. 808; 165 166
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of how legislative schemes will over the millennia erase the civilian/common law divide. [7.26] Computerisation is of limited use without remote access, but even in the sophisticated property market of Spain there is, or at least until recently was not, direct access. England and Wales, and separately Scotland, lead the world in computerisation of the actual conveyancing process though it is not yet operational, and certainly not yet compulsory.174 E-commerce developments do not directly apply to land175 but they point the way forward for electronic transfer of land. Spain, for example, is implementing electronic signatures and thus has also required procedures for electronic notarisation, using a cyber-notary.176 [7.27] Perhaps the competence of the Community is strongest in relation to mortgages which fall clearly within the capital movement freedom. Since these are intangible and invisible on inspection of the land,177 so registration is essential. Registration rules may need to be tested on internal market principles,178 especially the rule that capital must be free to move around the market without subtle hindrances. An important aspect of cross-border integration of mortgage procedures is registration, particularly the difficulties foreign lenders face in accessing national land registration systems179 and it is desirable to secure the sharing of information held in land registration systems between EU states. Lenders take it for granted that public registers should make all relevant information available to all parties or their representatives, that is that the Europe-wide register should be an Open Register.180
3
Geographical data (cadastre)
[7.28] Registration of title may or may not be associated with a cadastre,181 a separate geographical record of the extent of land within a title. This is a notoriously weak point in the otherwise superlative British systems since the scale of Land Registry plans is too small to serve any purpose other than identification. There are strong European moves towards a collective approach to geographical data, first through statistical data, NUTS,182 and then more importantly though 174 Land Registry website ; Sparkes (n 153 above) [7.18ff]; Bogusz (n 162 above) 1395. 175 See below [8.02] n 9. 176 [2000] 37 LSG 3; Spanish Decree [2000] RCL 2555, [2001] ECLYB [585]. 177 See below [9.36]. 178 C-222/97 Trümmer’s Application [1999] ECR 1661 ECJ, see above [1.49]. 179 Mortgage Credit Forum Group Report (n 166 above) [103ff], Recommendations [30–35]; Mortgage Credit Forum Group Report Executive Summary [6]; Green Paper Mortgage Credit in the EU (n 166 above) [44]. 180 As in England: Sparkes (n 153 above) [8.14]. 181 Cámara-Lapuente (n 158 above) 800. 182 Common Classification of Territorial Units for Statistics ‘NUTS’ COM (2001) 83 final [2001] OJ C180E 108; clearly the European Commission are fans of the late George Melly.
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the INSPIRE initiative183 designed to make spatial information accessible and capable of being shared by technical alignment of the data standards used for mapping information. It is concerned to make existing public sector datasets inter-operable and new data will not be collected at this stage. The system has run into the familiar problems of Ordnance Survey and postcode copyrights. Other initiatives are the e-Europa action plan184 and the CINDER centre for research.185
4
Cross-border payments
[7.29] Europe has achieved a partial monetary union with the euro as currency,186 though the United Kingdom has kept the pound and the economic merits of the single currency proposal remain open to debate. The availability of the euro has an important practical effect on cross-border conveyancing by removing the problem of exchange rate conversion within the Eurozone.187 It has created a large lending market within the Eurozone with a single interest rate and has caused a de facto convergence of interest rates even outside the zone, reducing the problems of market fluctuations in cross-border borrowing. Cross-border payments must be increasingly common in an internal market since payments have to be made across national boundaries and the idea is to equalise charges between cross-border transactions and domestic transactions. Transactions should be transparent and the burden of national declarations reduced. Europe is gradually edging towards a single payment area.188 A cross-border payment is made from an originator in one state to a beneficiary in another EU state, whether two different actors or one and the same person; the transaction is carried out via an institution in the first state with a view to making funds available at an institution in the second state, either by a transfer of credit or of euros.189
183 Proposal for Directive Establishing an Infrastructure for Spatial Information in the Community ‘INSPIRE’ 2004/175 (COD); . Towards the National Spatial Address Infrastructure (ODPM, 2005); the national proposal has recently been dropped: Guardian July 7th 2007. 184 Permanent Committee on Cadastre in the EU . 185 (Spanish) Cinder International Centre for Registration Law . 186 Treaty on EU §2 ex §B; P Beaumont & N Walker Legal Framework of the Single European Currency (Oxford, Hart, 1999, 1-841-13001-X); JA Usher Law of Money and Financial Services in EC (Oxford, OUP, 2000, 0-198-29877-3) ch 8; T Liakopoulos ‘Law of Money’ (1999) 10 European Business Law Review 205–217. 187 Law Society of Ireland’s Conveyancing Committee ‘Conveyancing in Euros’ (2001) 95(9) Gazette of the Law Society of Ireland 28–29. 188 R Steennot ‘The Single Payment Area’ (2003) 18 Journal of International Banking Law Review 481–487. 189 Cross-border Credit Transfer Directive 97/5/EC [1997] OJ L43 25, §§1, 2(f); for UK implementation see Cross-border Credit Transfer Regs 1999, SI 1999/1876.
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[7.30] Consumers, small businesses and medium-sized enterprises should be able to make a credit transfer within Europe rapidly,190 reliably and cheaply,191 with the transfer free from the point of view of the recipient.192 Payments up to the value of €50K are controlled.193 A quote must be provided in advance about the expected timescale, method of calculation of fees, the valuation date and the exchange rate on that day, with details of complaints and redress procedures194 and this creates a commitment.195 When a transfer is made the associated documentation must identify its amount, the charges, the valuation date and the exchange rate for any conversion.196 Standard formats are agreed for International Bank Account Numbers (IBAN) and Bank Identifier Codes (BIC). [7.31] More recent rules on cross-border payments in euros197 seek to remove, up to €50K, any price differential between a payment in euros made so as to cross a border as against a payment made within a single EU state.198 Implementation was progressive, for card payments and withdrawals from 2002, followed in 2003 by transfers and cheques. The financial limit below which equality applied of €12.5K199 was raised to a limit of €50K as from 2006.200 Transparency is required.201 A payment through the bank clearing system requires an International Bank Account Number (IBAN) which must be provided on request.202 Implementation in the United Kingdom allows civil proceedings against the transferring institution if the rules are broken.203 Information must be provided in a standard format to accompany a ‘wire transfer’.204 Further action is planned to make the Single Payments Area function fully from 2010, saving €100 billion, with a new legal framework and further changes to existing Directives.205 190 Transfer times range up to 5 days and in 10% of cases exceed times quoted by up to 3 days: Cross-border Credit Transfer Report COM/2002/0666 final [3.8.2]. Greater speed is intended: [4.3]. 191 Quotes average €20 but actual figures are higher: Credit Transfer Report (n 190 above) [3.2.2.2]. 192 Credit Transfer Report (n 190 above) [3.9.3]. 193 Credit Transfer Directive (n 189 above) §1. 194 Credit Transfer Directive (n 189 above) §3. The Commission found the level of information generally good but in UK less than 50% was adequate: Report COM/2002/0666 final [3.6.2]. 195 Credit Transfer Directive (n 189 above) §5ff, subject to force majeure: §9. §10 provides for dispute resolution. 196 Credit Transfer Directive (n 189 above) §4. 197 Cross-border Payments in Euros Regulation (EC) 2560/2001 [2001] OJ L344 13. 198 Payments in Euros Regulation (n 197 above) §1. 199 National reporting restrictions are removed up to this limit of €12.5K: Payments in Euros Regulation (n 197 above) §6 200 Payments in Euros Regulation (n 197 above) §3[1]; R Steennot ‘The Single Payment Area’ (2003) 18 Journal of International Banking Law Review 481–487. 201 Payments in Euros Regulation (n 197 above) §4. 202 Payments in Euros Regulation (n 197 above) §5[1]. 203 Cross-border Payments in Euros Regs 2003, SI 2003/488, reg 3 allows civil proceedings against the institution; sanctions for breaches of the Payments in Euros Regulation (n 197 above) §3; criminal penalties are imposed by reg 4 for breaches of the Regulation §§4–5. 204 Wire Transfers Regulation (EC) 1781/2006 [2006] OJ L345 1, in force by December 15th 2007 (name, address and account number of payer to accompany any transfer of funds exceeding €1K). 205 Payment Services in the Internal Market Proposal COM (2005) 603 final; an amended version was adopted by the European Parliament on April 24th 2007.
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Conveyancing LAUN DER I N G ACTI VI TY
Laundering Activity 1
European and international action
[7.32] Money laundering206 was first mentioned in connection with the activities of the Watergate conspirators, but from those farcical beginnings it has become a major international concern,207 accounting for anywhere between two per cent and five per cent of gross domestic product in Europe and elsewhere.208 Nor is this new; Richard Ford’s visit to Ronda in the 1840s elicited the information that 300K Spaniards were involved in smuggling, directly or indirectly, since ‘this alone allow[ed] the blunders of Chancellors of the Exchequer to be corrected’.209 [7.33] Laundering is at the core of all major criminal activity, since once profits have been obtained the proceeds have to be washed clean to hide their origins in organised crime and drug trafficking, while terrorism may be financed both by laundering of dirty money and by the diversion of clean money for illicit ends. Placement is the process by which money with an illicit origin is introduced into the world financial system, which is then moved though the system in a process of layering designed to blur the audit trail by changes in the assets. This all leads, at last, to integration, the process of bringing money back to the open system as money with an apparently clean origin.210 The layering process typically involves moving property across boundaries. Laundering is easiest to spot at the moment of placement and when borders are crossed during layering, so those are the areas at which legislation is concentrated. Much dirty money ends up invested in land, the English property market being the suspected destination of much of the proceeds of the IRA bank raid on the Belfast branch of the Northern Bank in 2005.211 Since capital is free to move across Europe within the confines of the internal market,212 pan-European preventative measures are called for in a concerted effort to put a stranglehold on movements of dirty money. The pace of change is extraordinary. Since 1991 Europe has already got through three separate Directives. The First came into force nationally at the start of 1993, was targeted at money handled by financial sector institutions, and was only concerned with the proceeds of drug trafficking.213 Our domestic legislation already took on the drug Throughout the notes the abbreviation ‘ML’ is used. P Aldridge Money Laundering Law (Oxford, Hart, 2003, 1-84113-264-0). 208 An International Monetary Fund estimate: D Roche ‘Black Economy keeps EU Snail Slithering Along’ (2004) 01 Euromoney 26. 209 R Ford Handbook for Travellers in Spain (London, John Murray, 2nd edn, 1847) vol 2, 485. 210 W Gilmore Dirty Money (Strasbourg, Council of Europe, 3rd edn, 2004, 978-92-871-5467-5). 211 Guardian March 30th 2005. 212 See above [1.26]. 213 First Money Laundering Directive 91/308/EEC [1991] OJ L166 77. 206 207
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smugglers214 and was also in a separate legislative stream turning to tackle the proceeds of other criminal activity.215 Ten years on from the First Directive came a Second,216 the ambit widened to take in lawyers and other professionals and to broaden the scope to the proceeds of any serious crime. It is of course the extension to conveyancing lawyers that makes this such a central concern of this book. EU states are free to enforce stricter controls on money laundering, an opportunity wholeheartedly embraced by the United Kingdom government, which has ‘gold-plated’ the European legislation and added knobs to it before copying it out domestically. Many of the offences reported are frauds on the revenue, so this is all a matter of self-interest. The Proceeds of Crime Act 2002217 has been supplemented by detailed regulations on money laundering,218 and with only the most minor of relaxations in 2005.219 [7.34] Already Europe has produced a Third Directive,220 though with continuity of interpretation,221 which brings in terrorist financing and updates procedures to reflect revised international standards.222 Three-yearly reviews are threatened,223 along with enhanced monitoring.224 Things are so tough domestically that the beefed-up protections across Europe will hardly be noticed here at home, and a straightforward transposition is promised leaving off the glitter.225 And we now have available a draft of the Money Laundering Regulations which are to take effect at the end of 2007.226 Europe is not by itself a large enough canvas. International co-ordination and co-operation are led by the Financial Action Task Force on Money Laundering (‘FATF’), an offshoot of the G-8 group of industrialised nations,227 whose Forty Recommendations set the international standard to which most countries now
Drug Trafficking Act 1986, c 32, re-enacted as the Drug Trafficking Act 1994, c 37. Criminal Justice Act 1988, c 33, re-enacted 1993, c 36. 216 Second Money Laundering Directive 2001/97/EC [2001] OJ L344 76, §3 provides for transposition by June 15th 2003 but Greece and others were late: Anti-ML Forum (IBA, ). 217 Proceeds of Crime Act 2002 c 29 (‘PoCA 2002’) in force February 24th 2003. 218 Money Laundering Regulations 2003, SI 2003/3075, in force June 15th 2003; R Alexander ‘The 2003 ML Regulations’ [2004] 8 JMLC 75–94. 219 Serious Organised Crime and Police Act 2005, c 15, ss 97–108; M Webster ‘Seriously Re-organised ML’ [2005] NLJ 930–931. 220 Third Money Laundering Directive 2005/06/EEC (on money laundering and the financing of terrorism) [2005] OJ L309 15, in force December 15th 2005; §41 provides for implementation by December 15th 2007. 221 Third ML Directive (n 220 above) R[47], §44. 222 See below [7.34] n 228. 223 Third ML Directive (n 220 above) §39. 224 Third ML Directive (n 220 above) §33. 225 Implementing the Third ML Directive — a Consultation Paper (HM Treasury, 2006) [1.17ff]; S Young ‘Laundered and Tailored Policy’ [2006] NLJ 1462–1463; R Rothwell ‘Draft ML Regs 2007’ [2007] 05 LSG 1 & 3. 226 Money Laundering Regulations 2007, SI 2007/2157, as from December 15th 2007; Implementing the Third ML Directive — Draft Money Laundering Regulations (HM Treasury, 2007). 227 First ML Directive (n 213 above) R[11]. 214 215
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adhere and no states currently refuse at least to co-operate.228 European law draws also on work undertaken by the United Nations in the field of drugs and organised crime, and by the Council of Europe on general criminal activities, and generally by the Organisation for Economic Co-operation and Development.229 EU-27 countries have agreed to back up these legislative initiatives with concerted action to include proposals for Europe-wide freezing orders,230 enhanced co-operation between national financial intelligence units, the extension of Europol competence, and action to protect EC finances.231
2
Laundering activity
[7.35] Money laundering is the cleaning of property derived from crime and closely associated with that is the offence of collecting property for use in financing terrorism. So the thing handled must be criminal property. Property is here defined in the widest possible sense to include every kind of asset, corporeal or incorporeal, movable or immovable, tangible or intangible, as well as legal documents or instruments evidencing title to such assets,232 a definition now expanded yet further to refer for the first time specifically to title documents in electronic or digital format.233 So-called ‘instrumentalities’ — things used or intended for use in the commission of a criminal offence — are also included234; this is surely a curious return to the deodand, the idea that a thing is forfeited to the Crown for having caused a death. The domestic British definition235 includes land along with money, personal property and things in action, and mentions specifically both legal and equitable entitlement, and it now covers cases where the alleged offender knows or suspects that it represents an illicit benefit.236 Laundering activities include various forms of conduct with such property237 when committed intentionally, or when an intent can be inferred from known 228 Financial Action Task Force Forty Recommendations (FATF, , 2003), replacing earlier versions dating back to 1990; Third ML Directive (n 220 above) R[5]. 229 UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (Vienna, 1988); UN Convention on Transnational Organised Crime (Palermo, 2000); Convention on Laundering, Tracing, Seizure and Confiscation of Proceeds of Crime (Council of Europe, 1990); J Fleming ‘Keeping It Clean’ [2001] 15 LSG 16–17. 230 Council Framework Decision 2003/577/JHA [2003] OJ L196 45. 231 Council Framework Decision 2000/642/JHA [2000] OJ L271 4; Europol Convention [1995] OJ C316 95 and Protocols 1996 and 1997; Criminal Law Protection of the Community’s Financial Interests Proposal COM/2001/0272 [2001] OJ 240E 125. 232 First ML Directive (n 213 above) §1[D], as substituted by Second ML Directive (n 216 above) §1[1]. 233 Third ML Directive (n 220 above) §3[3]; Council Framework Decision 2005/212/JHA [2005] OJ L68 49, §1. 234 Council Framework 2005 (n 233 above) §1; FATF 40 (n 228 above) [3]. 235 PoCA 2002 (n 217 above) s 340(3). 236 PoCA 2002 (n 217 above) s 340(3); on suspicion see n 239 immediately below and [7.58]. 237 First ML Directive (n 213 above) §1, as amended by Second ML Directive (n 216 above) §1[1]; Third ML Directive (n 220 above) §1[2].
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facts.238 Acts must be carried out with property known to be derived from criminal activity or from participation in such activity,239 and may be any of the following: 앫 conversion or transfer of property for the purpose of concealing or disguising its illicit origin or of assisting a person to evade the legal consequences of his action,240 concealment or disguise of the true nature, source, location, disposition, move앫 ment, rights with respect to, or ownership of property,241 and 앫 acquisition, possession or use of property (when knowledge of the illicit origin is required at the time of receipt).242 Extra grounds relate to financing terrorism.243 In 2005 arrests were running at about 600 for money laundering and 1K for drugs smuggling.244 [7.36] Proceeds to be laundered are derived from a criminal offence which is described as the predicate offence, a concept that has grown steadily wider so that we now have ‘all-crime’ confiscation. At first only drugs offences were considered245 but the Second Directive reached out to catch other criminal activities such as organised crime and terrorism.246 When the Third Directive bites predicate offences will include any kind of involvement in the commission of a serious crime, meaning247: 앫 앫 앫 앫
terrorism,248 drugs offences,249 activities of criminal organisations,250 serious fraud251 and corruption,
Third ML Directive (n 220 above) §1[5]; FATP 40 [2a]. UK domestic law is much wider because offences can be committed when the criminal source is merely suspected: PoCA 2002 (n 217 above) s 340(3) (‘criminal property’); this was not true pre-PoCA: R(CP) v Montila [2004] UKHL 50, [2004] 1 WLR 3141. 240 PoCA 2002 (n 217 above) s 328. 241 PoCA 2002 (n 217 above) s 327 includes removal of property from (eg) England & Wales; R Stokes & AA Arora ‘Duty to Report ML’ [2004] JBL 332–356, 341, say that the defences are untested. 242 PoCA 2002 (n 217 above) s 329; Stokes & Arora (n 241 above) 344. 243 See below [7.36] n 248. 244 Guardian July 15th 2005. 245 First ML Directive (n 213 above) §3[1](a). 246 Second ML Directive (n 216 above) R[7–10]; Council (Justice and Home Affairs) Joint Action Joint Action 98/699/JHA [1998] OJ L333 1 (money laundering), §1[1]. 247 Third ML Directive (n 220 above) R[7–10], §1[2]; First ML Directive (n 213 above) §1[E] as substituted by Second ML Directive (n 216 above) §1[1]; FATF 40 (n 228 above) [1] and Glossary (‘designated categories of offences’). 248 This is new to the Third ML Directive (n 220 above); hence the ML Regs 2003 (n 218 above) reg 2(1) which uses the PoCA 2002 (n 217 above) definition but adds offences under the Terrorism Act 2000, c 11; ML Regs 2007 (n 226 above) reg 2(1). 249 UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (n 229 above) §3[1](a). 250 Council (Justice and Home Affairs) Joint Action 98/733/JHA [1998] OJ L351 1 (organised crime). 251 Convention on Protection of the EC’s Financial Interests [1995] OJ C316 49, §§1–2. 238 239
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Conveyancing
앫 all offences punishable by a significant period of imprisonment,252 and 앫 any other crime designated nationally.253 Money laundering as thus defined in European law must be prohibited by national law,254 with criminal sanctions that are effective, proportionate and dissuasive.255 Since the United Kingdom already includes all these offences, recent refinements of the European list will make little change domestically.256 Many states are following Britain in using money laundering as a cloak for fuller enforcement of revenue laws and this is likely to make English conveyancers even more wary of the practice in some Latin countries of mis-declaring the value of land in order to reduce the tax due on a transfer. Money laundering will often cross national and continental boundaries. Proceeds may be removed far from the scene of the original criminal activities which generated the profits before an attempt is made to launder them.257 [7.37] Very often part of the chain of money laundering will occur in another state, either in the EU or elsewhere.258 United Kingdom domestic law has been redrafted so as not to impose criminal sanctions on acts carried out overseas which are lawful where they are carried out, and reporting requirements are limited correspondingly.259 [7.38] Crime comes in all shapes and sizes. Al-Qa’ida, the extreme Islamic terrorist network, depends partly on the sale of counterfeit designer handbags,260 apparently almost as lucrative as drugs, though terrorism is a threat far more potent than the odd dodgy fashion accessory. The provisions of the Third Directive will cover all aspects of the financing of terrorism, a first specific mention as one of the predicate offences, so handling money derived from terrorist activity counts as money laundering, as does the collection of lawful property intending or knowing it to be used for terrorism.261 National law must furnish criminal sanctions that are effective, proportionate and dissuasive.262
252 The precise limit (between 6 months and 1 year) will depend upon the national penal system: FATF 40 (n 228 above) [1]; the UK adopts 6 months. 253 Third ML Directive (n 220 above) §5. 254 Third ML Directive (n 220 above) §1[1]; First ML Directive (n 213 above) §2. 255 Third ML Directive (n 220 above) §39. Penalties are more in step under Council Framework Decision 2001/500/JHA [2001] OJ L182 1. 256 S Young ‘ML — the Third European Directive’ [2005] NLJ 1128–1129. 257 First ML Directive (n 213 above) §1; Third ML Directive (n 220 above) §1[3]. 258 First ML Directive (n 213 above) §1[C], substituted by Second ML Directive (n 216 above) §1[1]; Third ML Directive (n 220 above) §1[2]; also rules under §37[1]. 259 SOCPA 2005 (n 219 above) s 102 amending PoCA 2002 (n 217 above) ss 327–332; PoCA 2002 (ML Exceptions to Overseas Conduct Defence) Order 2006, SI 2006/1070; Webster (n 219 above). 260 Independent July 30th 2005 (Interpol report). 261 Third ML Directive (n 220 above) R[8], §§1[1], 1[4], 3[4]; Council Framework Decision 2002/475/JHA [2002] OJ L164 3, §§1–4. 262 Third ML Directive (n 220 above) §34; ML Regs 2007 (n 226 above) reg 45ff; penalties are more in line under Council Framework Decision 2002/475/JHA [2002] OJ L164 3. A modern day Bletchley Park is to tackle terror financing: Guardian February 11th 2006.
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Although the EU is following an international lead in including terrorism,263 and there are senses in which the laundering of criminal proceeds resembles the financing of terrorism, it is arguable that more differentiation of the two heads is needed, that terrorism is less similar to serious crime than the European legislators think.264
3
Conspiracy
[7.39] European law also requires national sanctions against conspiracies, defined as participation in, association with or conspiracy to commit, attempts to commit and aiding, abetting, facilitating and counselling the commission of any of the substantive actions.265 Domestic United Kingdom law proscribes attempts, conspiracy, aiding and abetting, counselling or procuring a money laundering offence.266 Prosecutions for substantive offences have been relatively rare, prosecutors generally preferring to charge conspiracies to overcome problems of duplicity.267 Until recently mens rea was required,268 as for substantive offences,269 meaning actual knowledge that the property had an illicit origin. Thus a charge failed against Saik, who ran a bureau de change near Marble Arch, after converting sterling to foreign currency when he suspected but did not know that the money being changed was the proceeds of crime. Conspiracy required intention and knowledge, requirements that subsumed the lesser mens rea of the substantive offence.270 Under the current legislative scheme the substantive offence is committed by one with suspicion that property he handles has a criminal origin but the logic of Saik appears to suggest that grounds to suspect are not enough for a conspiracy,271 odd as that result seems; statutory reform to catch suspecting conspirators is needed.
263 FATF 40 (n 228 above) TF9 [I–IV]; UN Convention on Suppression of Financing of Terrorism (New York, 1999). 264 A Kersten ‘Financing of Terrorism: a Predicate Offence to ML (2002) 4 European Journal of Law Reform 299–306. 265 Third ML Directive (n 220 above) §1[2](d). 266 PoCA 2002 (n 217 above) ss 327–329. 267 R(CP) v Saik [2006] UKHL 18, [2006] 1 AC 18, [123], Lord Brown; D Corker ‘Conspiracy to Launder Revisited’ [2005] NLJ 1070–1071. 268 Saik (n 267 above); this was under the Criminal Justice Act 1988 (n 215 above) s 93C(2), and presumably also under the different wording of PoCA 2002 (n 217 above). 269 R(CP) v Montila [2004] UKHL 50, [2004] 1 WLR 3141. Criminal property has to be in fact proceeds of crime or drug trafficking. 270 Saik (n 267 above) [23–25] Lord Bingham. 271 PoCA 2002 (n 217 above) s 340(3); see above [7.35] n 239.
312
Conveyancing CO N F I SCATI O N O R DER S
Confiscation Orders 1
European asset recovery
[7.40] EU-wide asset recovery is planned272 but at present this is organised domestically under a Council Framework and international patterns.273 Regimes vary wildly274 with Britain leading the field in rigour. Each local regime should provide for confiscation of any proceeds from offences, the confiscation of instrumentalities — things used to further a fraud — and also govern the tracing of proceeds, the freezing of assets pending confiscation decisions and the recovery of property after an order is made. This should cover all economic advantages from a European prescribed minimum list of offences which includes counterfeiting the euro, money laundering, trafficking in human beings, facilitating unauthorised entry, exploitation of children or child pornography, drug trafficking, and terrorism. There is no European requirement to confiscate profits whenever an offence is punishable by a significant period of imprisonment, though there is nothing to prevent this extension nationally. Confiscation may occur either because proceeds are proved to derive from crime or because the assets owned by a criminal are disproportionate to his income; the obvious conflict in the latter case with the presumption of innocence and with rights to property seems to be resolved in favour of the rule that confiscation regimes are broadly human rights compliant,275 though there is plenty of scope for procedural challenges for delay276 and so on.
2
United Kingdom asset recovery
[7.41] British confiscation regimes vary between each of the domestic jurisdictions277 but all are operated by the Assets Recovery Agency.278 It froze £85 million
[2005] 04 LSG 10. Council Framework 2005 (n 233 above) §§1–3 (implementation by March 15th 2007); this enhances Council Framework Decision 2001/500/JHA (n 255 above) §3; FATF 40 (n 228 above) [3]. 274 Second Commission Report on ML, COM (2006) 72, [2.3]; R Bowles, M Faure & N Garoupa ‘Forfeiture of Illegal Gains’ (2005) 25 OJLS 275–295, 279; they say that Italy has been in the vanguard. 275 T-306/01 Yusuf v Council EU [2005] II ECR 3533 CFI (freezing orders); R(CP) v Goodenough [2004] EWCA Crim 2260, [2005] 1 Cr App R (S) 88; HR 41087/98 Phillips v UK (2001) 11 BHRC 280 E Ct HR; R(CP) v Rezvi [2002] UKHL 1, [2003] 1 AC 1099. 276 R v Soneji [2005] UKHL 49, [2006] 1 AC 340 (over 6 months between sentence and confiscation order but order valid). 277 PoCA 2002 (n 217 above) pt 2, ss 6–91 (England and Wales), pt 3 (Scotland) and pt 4 (Northern Ireland); this re-enacts earlier legislation (n 215 above); Bowles, Faure & Garoupa (n 274 above); I Smith, T Owen & A Bodnar Asset Recovery: Criminal Confiscation and Civil Recovery (Oxford, OUP, 2007, 978-0-199-29898-3). 278 PoCA 2002 (n 217 above) ss 1–5. It is to be merged with the Serious Organised Crime Agency in April 2008. 272 273
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worth of assets in 2005, well below target but still with a substantial impact on criminal behaviour by preventing criminals flaunting their wealth.279 Confiscation may take place in the Crown Court or even in magistrates courts.280 Where a confiscation order might be made, there is the possibility of freezing the assets pending determination of the case,281 and indeed in the United Kingdom around €800 million is frozen annually.282 Freezing orders meet human rights conditionality.283 [7.42] Confiscation should follow shortly after conviction.284 Procedure is complex. The legislation differentiates defendants with a criminal lifestyle and those without. Lifestyle offences, which bring a person into the more draconian regime, are drug trafficking, money laundering, directing terrorism, people trafficking, arms trafficking, counterfeiting, offences involving intellectual property, pimping and brothel keeping, and blackmail, including both substantive and inchoate offences.285 After conviction for these offences it will be assumed286 that property without a source that can be accounted for derives from general criminal conduct.287 After conviction of a lesser offence it is possible to confiscate property but only when it derives from the particular criminal conduct of which a person is convicted, though when a case concerns property derived from a criminal conspiracy the value taken is the whole of the booty and not the share of the particular conspirator.288 This gives a ‘recoverable amount’ which can be confiscated which consists of the available amount (the free property of the criminal,289 not necessarily confined to that held when the confiscation is ordered290) plus the value of any tainted gifts he has made to put property out of the way of 279 Independent on Sunday January 1st 2006. In 2006–2007 some £12.5 million was confiscated, an outcome which attracted a critical National Audit Office Report: Independent February 21st 2007; Guardian May 24th 2007. 280 PoCA 2002 (n 217 above) s 6; SOCPA 2005 (n 219 above) s 97; on the transition to PoCA 2002 see Revenue and Customs Prosecution Office v Hill [2005] EWCA Crim 3271, [2005] Times December 27th. 281 PoCA 2002 (n 217 above) restraint order s 41; s 45 seizure to prevent removal; SOCPA 2005 (n 219 above) s 98, inserting PoCA 2002 s 245A (civil freezing). 282 Guardian July 15th 2005. 283 Yusuf v Council EU (n 275 above) J[284ff] especially J[299]. 284 Postponements are limited to two years from conviction: PoCA 2002 (n 217 above) s 14. 285 PoCA 2002 (n 217 above) sch 2. 286 PoCA 2002 (n 217 above) ss 241–242; earlier legislation dates from 1994; this reverses the normal burden of proof. 287 It is not enough to establish lifestyle without an identified lawful income, but the prosecution must establish as more probable than not that the money derived from fraud: Assets Recovery Agency v Olupitan [2007] EWHC 162 (QB), [2007] All ER (D) 112 (Feb) Langley J; the defendant is also known as Olubitan. The need for a presumption is shown by the case of Juan Antonia Roca who claimed that his €2.4 billion assets came from winning the lottery 80 times over: Independent May 18th 2007. 288 R(CP) v Olubitan [2003] EWCA Crim 2940, [2004] 2 Cr App R (S) 14 (also known as Olupitan). 289 This is all property not already subject to a confiscation; Re Adams [2004] EWHC 2739, [2004] Times December 6th, Lightman J (consultancy contract is not realisable). 290 Re O’Donoghue [2004] EWHC 176 Lightman J. A corporate veil may be lifted: R(CP) v Omar [2004] EWCA Crim 2320, [2005] 1 Cr App R (S) 86.
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confiscation.291 Receivers will be appointed to realise assets,292 and tainted assets will not be available to a spouse for distribution on divorce.293
3
United Kingdom civil recovery
[7.43] European frameworks294 allow the option of civil confiscation where no criminal conviction has occurred. This may require a person to demonstrate the lawful origin of his property, though clearly human rights issues arise. British law has embraced civil confiscation regimes295 and has applied the civil standard of proof on the balance of probabilities. Two cases have been widely reported in the press. Szepietowski faces eviction from his £6 million colonnaded mansion in Footballers Wives territory on St George’s Hill in Surrey because he is alleged by the authorities to have acted as solicitor for drugs barons, an allegation not backed up by any conviction and hotly disputed.296 Dylan Creavan was acquitted of a carousel VAT fraud but his assets have still been pursued by the Assets Recovery Agency and, reportedly, he has agreed to hand over £18.5 million, a villa in Marbella and a Knightsbridge flat.297 This is apparently on the basis that he was unknowingly in receipt of assets derived from crime. In cases where a criminal conviction does occur, one would expect the confiscation order to be sought as an adjunct to the criminal conviction,298 but if the confiscation order turns out to be a nullity on procedural grounds, then as in Singh299 the Assets Recovery Agency may have a second bite at the cherry by seeking a civil recovery order in respect of the proceeds of crime. Double proceedings are allowed, though clearly not double recovery. Disquiet must arise about this intrusion on the presumption of innocence and the possibility of freezing the assets of a person convicted of no crime,300 and the possibility of harassment by the authorities after an acquittal.
4
Domestic enforcement of foreign confiscations
[7.44] Mutual recognition applies to confiscation orders and freezing orders.301 PoCA 2002 (n 217 above) ss 7, 9, 77 (tainted gifts), 82 (free property), 83–84 (property). PoCA 2002 (n 217 above) ss 45–53. 293 Crown Prosecution Service v Richards [2006] EWCA Civ 849, [2006] 2 FCR 452. 294 Council Framework 2005 (n 233 above) §3[4]; FATF 40 (n 228 above) [3]. 295 PoCA 2002 (n 217 above) s 240ff. 296 Assets Recovery Agency v Szepietowski [2006] EWHC 2406, [2006] Times October 25th Silber J; an appeal by the Assets Recovery Agency was allowed at [2007] EWCA Civ 766, [2007] Times August 21st; Guardian September 29th 2006. 297 Assets Recovery Agency v Creaven [2005] EWHC 2726, [2006] 1 WLR 622, Stanley Burnton J; Guardian October 4th 2006. 298 PoCA 2002 (n 217 above) s 308(9). 299 Assets Recovery Agency v Singh [2005] EWCA Civ 580, [2005] 1 WLR 3747. 300 PoCA 2002 (n 217 above) s 245A inserted by SOCPA 2005 (n 219 above) s 93. 301 Council Framework Decision 2003/577/JHA; a new Framework is under negotiation; Criminal Justice (International Co-operation) Act 1990, c 5, s 9, as amended by SOCPA 2005 (n 219 above) s 95; also s 96. 291 292
Conveyancers as Launderers
315 CO N VEYA N CER S A S LAUN DER ER S
Conveyancers as Launderers [7.45] Clearly professionals must take extreme care to avoid exposing themselves to prosecution for substantive money laundering offences, and to do so they must take great care to avoid any transaction involving property or money known302 or suspected to derive from serious criminal activity,303 the so-called predicate offences.304 Since a professional is unlikely to deal with property known to derive from money laundering, the key is suspicion, a point discussed in relation to reporting by lawyers.305 Once property is criminal property because a conveyancer suspects that it derives from a predicate offence, there is a wide variety of forms of conduct that might amount to money laundering306 when committed intentionally307: the transfer of property to conceal its origin, concealment, acquisition knowing of the illicit origin,308 or collecting property for use in financing terrorism.309 Conveyancers will be even more wary of exposing themselves to prosecution for a conspiracy, particularly if the rule requiring knowledge to feed a mens rea proves not to hold good under the current domestic legislation.310 [7.46] Conveyancers will also be very wary of entering into any arrangement known or suspected to facilitate the acquisition, retention, use or control of criminal proceeds by another.311 As Stokes and Arora observe,312 the plausible boundaries of the offence of arrangement are limitless, but they do at least stop short of the conduct of litigation.313
302 Pre-PoCA (n 217 above) criminal property had to be the proceeds of crime or drug trafficking, so no offence was committed by handling property suspected to be (but not in fact) criminal proceeds: Montila (n 269 above). This does not seem to be true under PoCA 2002. 303 Bowman v Fels [2005] EWCA Civ 226, [2005] 1 WLR 3083, [47–50] Brooke LJ. 304 See above [7.36]. 305 See below [7.58]. 306 First ML Directive (n 213 above) §1, as amended by Second ML Directive (n 216 above) §1[1]; Third ML Directive (n 220 above) §1[2]. 307 Third ML Directive (n 220 above) §1[5]; FATP 40 (n 228 above) [2a]. Intent can be inferred from known facts. 308 Stokes & Arora (n 241 above) 344. 309 See above [7.36] n 248. 310 PoCA 2002 (n 217 above) s 340(3); see above [7.35] n 239. 311 PoCA 2002 (n 217 above) s 328. This is subject to any disclosure. 312 Stokes & Arora (n 241 above) 343. 313 Bowman v Fels (n 303 above) [65–66] Brooke LJ.
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Conveyancing CO N VEYA N CER S A S CO PS
Conveyancers as Cops 1
European conveyancers
[7.47] Customer due diligence and the reporting of suspicious transactions are required of professionals affected by the European Directives on Money Laundering, a scope of the most recent being defined inelegantly as ‘institutions and persons affected by this Directive’.314 At first only institutions were targeted and it was the extension to professionals by the Second Directive which led to the current untidy definition, though happily the Third Directive confines itself to one or two minor tweaks to the established scope.315 Property was always an obvious magnet for those with money to launder,316 but it was only under the Second Directive that duties were attached to conveyancers,317 who became the eyes and ears of the law.318 Categories of notaries and independent legal professionals are defined domestically. The basic unit seems to be the firm and its partners, since employed solicitors are excluded from the current definition, though they must report to their employers.319 However, the definition will be changed and the new regime will include all solicitors other than those employed by public authorities and companies which provide no legal services outside the company.320 The confidence in public authorities is touching. Lawyers, thus defined, become subject to the money laundering provisions when dealing with financial or corporate transactions or providing tax advice, where there is the greatest risk of legal services being misused for dishonest purposes.321 Money laundering is thus an active concern of conveyancers322 and other lawyers when they engage in professional activities treated as risk areas. Most obvious as a risk is when a lawyer acts on behalf of a client in any land transaction or assisting in the planning or execution of transactions concerning buying and selling of land.323 Professional trustees and advisors are caught when acting in the creation, operation or management of trusts,324 and lawyers when assisting in the planning or execution of transactions eg Third ML Directive (n 220 above) §7. Explanatory Memorandum to Third ML Directive Proposal, 2004/0137 (COD), §3. Little change is required domestically: Implementing the Third ML Directive (n 225 above) [2.10–2.11]. 316 First ML Directive (n 213 above) R[30], §12. 317 Second ML Directive (n 216 above) R[15]; Third ML Directive (n 220 above) R[19]. 318 The main heading above is a borrowing from and, one fears, a dumbing down of J Wadsley ‘Professionals as Policemen’ [1994] Conveyancer 275–288, 281. 319 Implementing the Third ML Directive (n 225 above) [2.12]; FATF 40 (n 228 above) Glossary (excluding solicitors who are employed). 320 ML Regs 2007 (n 226 above) regs 2(1), 3(9); an incorrect transposition? 321 Second ML Directive (n 216 above) R[16]. 322 First ML Directive (n 213 above) §2a inserted by Second Directive (n 216 above) §1[2]; reordered but otherwise reproduced in Third ML Directive (n 220 above) §2[1](3). 323 Third ML Directive (n 220 above) §2[1](3). 324 See below [7.49]. 314 315
Conveyancers as Cops
317
concerning buying and selling of business entities, managing clients’ assets, opening and management of accounts, and in corporate and partnership management. Reporting obligations do not apply to information obtained in the course of ascertaining the legal position for a client nor throughout the process of litigation, but the respect that is proper for professional confidentiality, a tricky area,325 must not be allowed to become a cloak for criminal laundering.326 Money laundering duties also apply to many other practitioners involved in land transactions such as auditors, external accountants and tax advisors; and (real) estate agents,327 a list which national law may extend.
2
Conveyancers under domestic law
[7.48] Customer due diligence and reporting duties apply in relation to matters appearing in the course of a relevant business carried on in the United Kingdom, ‘relevant business’ being the key concept.328 Conveyancers do not need to get tangled up in minutiae, since their business is indeed most relevant, consisting as it does of the provision by way of business of legal services… which involve participation in a financial or real property transaction.329
This will be reshaped when the new regime comes into force towards the end of 2007 and it will then apply to independent legal professionals when they participate (whether by acting for or on behalf of their client) or assist in the planning or execution of… property transactions concerning… the buying and selling of real property.330
New Land Lawyers will not be pleased to find that ‘real property’ is thought to need explication only in Scotland,331 implying that it is a natural term of English land law. It might perhaps give limited mileage to a defence run by a wily conveyancer caught up in pouring the proceeds of a drug factory into a leasehold property!332 Some related activities, especially financial advice, may be caught See below [7.64]. Second ML Directive (n 216 above) R[17]; Third ML Directive (n 220 above) R[13]. 327 First ML Directive (n 213 above) §2a as substituted by Second Directive (n 216 above) §1[2]; Third ML Directive (n 220 above) §2[1]. 328 PoCA 2002 (n 217 above) s 330; also sch 9 pt I as amended by PoCA 2002 (Business in the Regulated Sector) Order 2003 SI 2003/3074; ML Regs 2003 (n 218 above) reg 2(2); minor amendments are made by SI 2006/2385 (adds home reversion plans and home purchase plans) and SI 2007/208. 329 ML Regs 2003 (n 218 above) reg 2(2)(l). 330 ML Regs 2007 (n 226 above) reg 3(1). 331 It means ‘heritable property’: PoCA 2002 (n 217 above) sch 9 as substituted by Business in the Regulated Sector Order (n 328 above) sch para 3(8); ML Regs 2003 (n 218 above) reg 2(10). 332 Sparkes (n 153 above) [2.13]; no doubt a purposive interpretation is correct since the term ‘real property’ derives from the Directives, now Third ML Directive (n 220 above) §2[3](b)(i), and so this does not mean the same as in English law. 325 326
318
Conveyancing
under other aspects of the general description of ‘relevant business’ and so too may the activities of other professionals more peripherally involved in conveyancing transactions, such as estate agents, investment advisers, insolvency practitioners, accountants, auditors and providers of corporate management.333 The draft of the new Regulations will achieve more or less the same coverage though expressed in a slightly different way.334
3
Non-conveyancers
[7.49] Obligations were imposed from the outset on financial and credit institutions, 335 including EU-based branches of outside institutions.336 In domestic terms it is those conducting a relevant business.337 Tightened controls in this sector encouraged launderers to look to non-financial businesses, so the scope has been widened progressively, first by the Second Directive338 — the basis of the current domestic rules — and then tweaked again in the Third. Specific mention339 is now made of money transmission and remittance offices, insurance companies, investment firms, and collective investment undertakings, but more generally any undertaking carrying on specified financial businesses is now considered to be a financial institution, and also: 앫 trust or company service providers not already covered340 and 앫 insurance intermediaries (brokers) selling life or other investment-related insurance.341 National law may add other institutions likely to be used for money laundering or terrorist financing,342 and European law attaches money laundering duties to 333 ML Regs 2003 (n 218 above) reg 2(2) paras (a), (f), (j), (k), (m); estate agency is as defined in Estate Agents Act 1979, c 38, s 1 but with primary liability attaching to the firm rather than employees (note also the Consumers, Estate Agents and Redress Act 2007, c 17). ML Regs 2007 (n 226 above) reg 3(9) is similar; at [2.18] the attached report refers to a FATF (n 228 above) initiative relating to property professionals. 334 ML Regs 2007 (n 226 above) reg 3. 335 First ML Directive (n 213 above) §2a as substituted by Second ML Directive (n 216 above) §1[2]; Third ML Directive (n 220 above) §2[1]; 336 First ML Directive (n 213 above) §1[A], as substituted by Second ML Directive (n 216 above) §1[1]. 337 ML Regs 2003 (n 218 above) reg 2(2). In future there will no longer be a requirement that the regulated activity is a principal activity: Implementing the Third ML Directive (n 225 above) [2.17]; hence the different form of ML Regs 2007 (n 226 above) reg 3(1). 338 Second ML Directive (n 216 above) [4–5], [13–14]. 339 First ML Directive (n 213 above) §1[B] as substituted by Second Directive (n 216 above) §1[1]; Third ML Directive (n 220 above) §§2[1], 3[1–2]; Implementing the Third ML Directive (n 225 above) [2.5]; ML Regs 2007 (n 226 above) reg 3(1). 340 Third ML Directive (n 220 above) §2[1](c), 3[7]; FATF 40 (n 228 above) [12](e), [16](c); ML Regs 2007 (n 226 above) reg 3(3). This includes, eg, providing a registered office, acting as a trustee and arranging for another to be a trustee. 341 Third ML Directive (n 220 above) R[11], §§2[1], 3[2](b). 342 Third ML Directive (n 220 above) §4. It has been decided not to apply the rules to letting agents: Draft ML Regs 2007 (n 226 above) [2.18].
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high value dealers in cash343 and casinos.344 Conversely, standards can be reduced for institutions and high value dealers engaged only occasionally in financial activity.345
CUSTO MER DUE DI LI G EN CE
Customer Due Diligence 1
Evolution of the duty of diligence
[7.50] Institutions and professionals identified by the Money Laundering Directives are those obliged to carry out customer due diligence, meaning checks on clients and potential clients to identify any risk that their services are being used for money laundering. These rules apply to conveyancers, and it is that context on which the following discussion concentrates, though there is also some consideration of the experience of banks which have fallen foul of the existing rules. The basic responsibility under the Second Directive and domestic United Kingdom rules346 is to ‘know your client’. The Third Money Laundering Directive will enhance this duty and add347: 앫 identification of beneficial ownership, 앫 ongoing monitoring, and 앫 enhanced record keeping. This will require substantial additional detail.348 Checks may be enhanced in some cases or reduced in others on a risk-sensitive basis.
343 First ML Directive (n 213 above) §2a as substituted by Second Directive (n 216 above) §1[2] (limited to high-value goods such as precious stones, metals and works of art); Third ML Directive (n 220 above) §2, EM (n 315 above) §2 (any goods or services); Implementing the Third ML Directive (n 225 above) [2.5]. The threshold applies to a single transaction or linked operations but is surely much too high. Registration will be required by ML Regs 2007 (n 226 above) regs 22ff. 344 First ML Directive (n 213 above) §2a as substituted by Second Directive (n 216 above) §1[2]; Third ML Directive (n 220 above) §§2[1](f), 10 (all customers buying €2K chips); ML Regs 2007 (n 226 above) reg 10. 345 Third ML Directive (n 220 above) §2[2]; Commission Implementing Measures, Directive 2006/70/EC [2005] OJ L309 15, §4; the latter seems to extend to professionals, but the reference in §2[2] to §3[1] implies that it should be restricted to institutions; thresholds will be below €1K; ML Regs 2007 (n 226 above) reg 4(1), sch 2 para 1. 346 First ML Directive (n 213 above) §3 substituted by Second Directive (n 216 above) §1[3]; ML Regs 2003 (n 218 above) reg 4. 347 Third ML Directive (n 220 above) §8[1]. 348 Implementing the Third ML Directive (n 225 above) [3.7].
320
2
Conveyancing
Know your client
[7.51] Anonymity can be used to cloak criminal activities,349 so conveyancers, as well as other professionals and financial institutions, must ‘know their clients’. Identification checks should be carried out before accepting a new client under the European regime,350 and the domestic implementation.351 The latter create a category of relevant businesses which includes conveyancing, trust and probate work, tax advice and insolvencies, though not litigation nor the provision of legal advice.352 Conveyancing transactions will in any event trigger ‘know your customer’ duties since they apply to one-off transactions.353 Detailed checks are required to remove any positive suspicion of money laundering, irrespective of the value of the transaction.354 Identity must be proved with satisfactory documentary evidence and as soon as reasonable. There are some exceptions for customers that may be trusted, for example financial institutions, those vetted overseas, but duties are enhanced where the client is not present at a face-to-face interview355; indeed, there is a major shift towards a more risk-based approach to due diligence.356 Professionals (and of course institutions) must identify their customers when entering into business relations, be it business, professional or commercial,357 under current law so that the business relations are expected to be frequent, habitual or regular; but in future whenever a relationship has an element of duration.358 Due diligence involves acting on the basis of reliable and independently sourced documents.359 Institutions must establish identity before opening current accounts or savings accounts, or when offering safe custody facilities,360 and it goes without saying that accounts and passbooks must not be anonymous nor be issued in fictitious names.361 Breaches of ‘know your customer’ rules by the Royal Bank of Scotland when opening new accounts led to fines of 349 First ML Directive (n 213 above) R[16]; A Matthews & P Burrell ‘Verifying a Client’s Identity’ [2006] 16 LSG 25. 350 First ML Directive (n 213 above) §3 as substituted by Second ML Directive (n 216 above) §1[3]; Third ML Directive (n 220 above) §7. 351 ML Regs 2003 (n 218 above) reg 4; ML Regs 2007 (n 226 above) regs 5(1), 7(1). 352 See below [7.64]. 353 ML Regs 2003 (n 218 above) reg 2(2)(l); ML Regs 2007 (n 226 above) reg 7(1)(b) (€15K or more). 354 Third ML Directive (n 220 above) §6; ML Regs 2007 (n 226 above) reg 7(1)(c); also where there are doubts about the veracity of information. 355 See below [7.56]. 356 ML Regs 2007 (n 226 above) reg 7(2); this follows recent Guidance from FATF (n 228). 357 First ML Directive (n 213 above) §3[2] as substituted by Second ML Directive (n 216 above) §1[3]. 358 Third ML Directive (n 220 above) §§ 3[9], 7[1]; ML Regs 2007 (n 226 above) reg 2(1). 359 Third ML Directive (n 220 above) §8[1](a). 360 First ML Directive (n 213 above) §3[1] as substituted by Second ML Directive (n 216 above) §1[3]. 361 Third ML Directive (n 220 above) §5; EM (n 315 above) §5; FATF 40 (n 228 above) [5]; ML Regs 2007 (n 226 above) reg 6.
Customer Due Diligence
321
£750K.362 Checks are not required if the customer is also a credit or financial institution itself required to make checks,363 a principle of equivalence. In the past all client identification had to be complete before any business relationship could be initiated,364 but client identification can in future proceed hand in hand with the establishment of the business relationship, though accounts cannot be operated nor insurance pay-outs made before identification is complete.365
3
Ongoing diligence
[7.52] Until now customers have had to be identified at the outset with nothing to require checks on existing clients, but the Third Directive requires diligence procedures for existing customers at appropriate times on a risk-sensitive basis.366 When a customer is taken on, information must be obtained about the purpose and intended nature of the business relationship,367 and there will then be an ongoing requirement to scrutinise transactions undertaken throughout the course of a relationship to ensure that they are consistent with the customer, the business and the risk profile. Money transmission services have to identify the payer with any credit transfer.368 So this duty can be varied on a risk-sensitive basis, and increases if there are doubts about the veracity or adequacy of previously obtained customer identification data and, of course, if any active suspicion of money laundering arises.369 In such circumstances the business relationship must be terminated, and a report to the financial intelligence unit considered.370 Application to existing customers will be phased in.371
4
Identification of beneficial ownership
[7.53] Customer due diligence procedures are being extended to require verification of the beneficial ownership, as regards unlisted companies, trusts and similar legal arrangements.372 Benefit must be traced back to a natural person Guardian December 18th 2002. First ML Directive (n 213 above) §3[6], §3[9] as substituted by Second ML Directive (n 216 above) §1[3] (non-EU equivalence). 364 Third ML Directive (n 220 above) §8[2]. 365 Third ML Directive (n 220 above) §9; Third ML Directive EM (n 315 above) §8; Draft ML Regs 2007 (n 226 above) reg 6; Young (n 225 above) 1463. Failure of the identification process should lead to termination of the business relationship: ML Regs 2007 (n 226 above) reg 7. 366 Third ML Directive (n 220 above) §9[6]; ML Regs 2007 (n 226 above) reg 8; risk sensitivity derives from FATF Guidance (n 228 above). 367 Third ML Directive (n 220 above) §8[1](c). 368 Third ML Directive (n 220 above) §8[1](d), 9[6]. 369 First ML Directive (n 213 above) §3[8] as substituted by Second ML Directive (n 216 above) §1[3]; Third ML Directive (n 220 above) §8[1]; ML Regs 2007 (n 226 above) reg 7(1)(c)–(d). 370 Third ML Directive (n 220 above) §8[5]; ML Regs 2007 (n 226 above) reg 11. 371 Young (n 225 above) 1463. 372 Third ML Directive (n 220 above) §8[1]; ML Regs 2007 (n 226 above) reg 6(1)–(2); FATF 40 (n 228 above) Glossary. 362 363
322
Conveyancing
who is a ‘beneficial owner’,373 that is a person (a) who owns directly or indirectly or controls 25 per cent or more of the shares or of the voting rights of a company or (b) who is the ultimate beneficiary, directly or indirectly, of 25 per cent or more of the property of a foundation or trust or (c) on whose behalf a transaction or activity is being conducted. Problems in applying these provisions will be caused by classes of shares and the balance between vested and contingent beneficial interests.374 Existing trustees need to take precautions, as, of course, must future appointees.375 Practitioners, represented by STEP,376 had wanted to water down the rules for trusts and to exclude due diligence completely from trusts arising on property co-ownership.377 Instead, clarification has been provided about how the Directive rules will apply to trusts.378 In a fixed trust the beneficial owner is a person entitled to at least 25 per cent of the capital; since account is to be taken of interests in possession, defeasible interests and interests in remainder and in reversion, it seems that diligence requires a tricky capital valuation of interests. With discretionary trusts it seems that the duty applies to the whole class of beneficiaries ‘in whose main interest the trust is set up’. It seems to be necessary to identify every member of the class without regard to the 25 per cent limit — an impossibility when certainty rules allow a discretionary trust in which the beneficiaries cannot be listed in advance but only identified as beneficiaries when they come forward.379 It is also necessary to identify persons with control of the trust, including powers to advance trust assets, to vary the trust, to add beneficiaries, to appoint trustees, or to consent to the exercise of powers. There are also provisions about corporate beneficiaries. There is a modicum of good news. Perfectly normal commercial arrangements would have been complicated. For example, international corporate bonds where a trust vehicle is used to allow a large number of creditors to hold security over an asset, since it would have been necessary to treat differently cases with lots of bond holders and those where a single lender held a 25 per cent stake so as to trigger money laundering diligence. Happily it is now clear that special investigations will not be required for trusts involving the securitisation of assets, and only 373 Third ML Directive (n 220 above) §3[6]; companies listed on Official Stock Exchanges are excluded; detailed rules can be made under §37[1]. 374 Young (n 225 above). 375 T Graham & K James ‘Be Prepared’ (2005) 69 Trusts & Estates Law Journal 15–19; JG Goldsworth ‘ML Trust’ (2004) 11 Trusts & Trustees 21–22; G Schindler ‘Trusts and Estates Practitioners — the New Police?’ (2004) 61 Trusts & Estates Law Journal 2–3; L Counsell ‘Compliance Obligations for Trustees and Executors’ (2003) 44 Trusts & Estates Law Journal Supplement i–iv; J Fisher ‘Trusts and the Third ML Directive’ (2006) 4 Private Client Practitioner 12–13. 376 Society of Trust and Estate Practitioners, ; Law Society: [2007] NLJ 78; [2007] 03 LSG 1; [2007] 04 LSG 3. 377 P Hoult ‘Money Talks’ [2005] 16 LSG 16–17. 378 ML Regs 2007 (n 226 above) reg 6(3)–(6); on the genesis of this see letter from Ed Balls MP to Fiona Woolf, President of the Law Society, June 4th 2007 . 379 McPhail v Doulton [1971] AC 424 HL.
Customer Due Diligence
323
the personal representative needs to be identified when an estate is in the course of being administered.380
5
Diligence performed by third parties
[7.54] Repeated identification of customers causes delays and inefficiency in international business so existing customers of other institutions can often be accepted on trust.381 Third party diligence is based on equivalence of institutions and professions, if national law so allows,382 excluding non-professional groups such as estate agents, but allowing outsourcing and work by agents.383 Equivalence recognises the possible equivalence of institutions from non-European states which meet comparable international standards.384 Conversely a sanction which can be imposed on a non-equivalent state is to impose full duties in respect of the customers of its financial institutions, though currently no states are treated internationally as unco-operative.385
6
Simplified and enhanced due diligence
[7.55] Institutions and professionals need not apply customer due diligence in respect of customers who represent a low risk of money laundering, examples depending on national derogations, including386: 앫 앫 앫 앫
credit and financial institutions from EU states, listed companies, pooled accounts held by notaries and lawyers, and public authorities.
Some products and transactions have a low risk of money laundering, including387: 앫 life insurance policies where the annual premium is no more than €1K or the single premium is no more than €2.5K,
ML Regs 2007 (n 226) regs 6(8), 12 (trustees of debt assets); on securitisation see below [9.48]. Third ML Directive (n 220 above) R[27], §§11–12. 382 Third ML Directive (n 220 above) §§14–19; ML Regs 2007 (n 226 above) reg 13; Young (n 225 above) 1463. 383 Third ML Directive (n 220 above) §19. 384 First ML Directive (n 213 above) §3[9] as substituted by Second ML Directive (n 216 above) §1[3]; Third ML Directive (n 220 above) §§15–17; ML Regs 2007 (n 226 above) reg 12; this is all subject to national law. 385 Third ML Directive (n 220 above) §17; Implementing the Third ML Directive (n 225 above) [6]. 386 Third ML Directive (n 220 above) §§10–11, 12 (non-EU states); Commission Implementing Measures (n 386 above) §3[1–2]; ML Regs 2007 (n 226 above) reg 13. 387 Third ML Directive (n 220 above) §11[5]; Commission Implementing Measures (n 345 above) §3[3]; ML Regs 2007 (n 226 above) reg 13; figures can be adapted for inflation. 380 381
324
Conveyancing
앫 insurance policies for pension schemes if barring surrender and the use of the policy as collateral, 앫 a superannuation scheme providing a retirement pension to employees where the rules do not permit the assignment of a member’s interest, 앫 electronic money to a low monetary limit (€2.5K). Customer due diligence is not required unless national legislation imposes it. National law may also exempt those engaged in occasional financial activity.388 [7.56] Enhanced customer due diligence may be needed for some customers. Credit and financial institutions must examine with special attention any transaction particularly likely to be related to money laundering, backed up by additional documentary evidence, though this is now on a risk-sensitive basis.389 It may be appropriate to require funds to be credited from a financial institution.390 Three specific cases are identified and of these one will be of serious concern to a conveyancer, that is, a transaction which is not conducted face-to-face. Tighter controls are needed when dealing with a client not physically present for identification purposes, especially in internet transactions, possibly additional documents, certification of documents, certification by a trusted institution, or by requiring payments through an account with an institution.391 The other two cases are rarer. Holders or past holders of important public positions in countries where corruption is widespread are described as ‘politically exposed’ persons, with whom especial care is needed, as it is with family members and close associates.392 A shell bank is a credit institution having no physical presence in the jurisdiction in which it is incorporated393 and legitimate credit institutions must not deal with such a thing.
7
Record-keeping
[7.57] Proper records must be kept in writing for production to financial intelligence units investigating money laundering394 for at least five years, measured from:
388 Third ML Directive (n 220 above) §2[2]; Commission Implementing Measures (n 345 above) 2006/70/EC §4[1]; ML Regs 2007 (n 226 above) reg 4(2), sch 2 para 1. 389 First ML Directive (n 213 above) §5; Third ML Directive (n 220 above) §13; Draft ML Regs 2007 (n 226 above) reg 11. 390 Young (n 225 above) 1463. 391 First ML Directive (n 213 above) §3[11] as substituted by Second ML Directive (n 216 above) §1[3]; Third ML Directive (n 220 above) §13[2]. 392 Third ML Directive (n 220 above) §§3[8], 13[4]; Commission Implementing Measures (n 345 above) §2; ML Regs 2007 (n 226 above) reg 14(4)–(6). 393 Third ML Directive (n 220 above) §§3[10], 13[5]; FATF 40 (n 228 above) [18]; ML Regs 2007 (n 226 above) reg 16. 394 Third ML Directive (n 220 above) §§30–33; FATF 40 (n 228 above) [5], [10]. The reforms will be transposed directly: Implementing the Third ML Directive (n 225 above) [8]; ML Regs 2007 (n 226 above) regs 19–21.
Reporting
325
앫 the end of the relationship with the customer for customer due diligence process, 앫 execution of a transaction or the termination of the business relationship, 앫 the payment of cash of €15,000 or more. This strengthens the existing obligation.395
R EPO RTI N G
Reporting 1 Reporting procedures [7.58] Professional activity is one of the largest areas of potential for money laundering, with property purchase having a pivotal role.396 The response to this assessment is to require conveyancers to report suspicious transactions. Any suspicion should be raised with the reporting officer of the firm, who is then obliged to pass a report on to the national authority. Lawyers may be able to report to their professional body for onward transmission to the national authority. Most reports result in a clearance but unless and until this is received a block is put on the transaction. Professionals must be very wary of failing to make a report when they have suspicions, and of tipping-off clients, both serious offences with heavy sentences. A report is not required when the lawyer-client relationship is protected by professional confidentiality, but the line between reporting suspicions and guarding confidentiality has proved elusive. This skeleton now calls for some flesh. The Second Directive applied to notaries and independent legal professionals397 and established reporting arrangements which are carried forward to the Third Directive without much change. Bar associations and similar self-regulatory bodies could be designated nationally as the initial recipient of reports on possible money laundering cases from these professions.398 [7.59] Conveyancers, like other professionals and institutions affected by the European money laundering rules, must co-operate fully with the anti-money laundering authorities by making a report to the national Financial Intelligence Unit on their own initiative of any fact which might be an indication of money
395 First ML Directive (n 213 above) §4 as substituted by Second ML Directive (n 216 above) §1[4]; national law may set longer periods. 396 NCIS Threat Assessment 2004 (formerly available at ), [B.12]; business has now passed to the Serious Organised Crime Agency (). 397 A Srivastava ‘ML: Lawyers and the EU Directives’ [2002] NLJ 760–762. 398 First ML Directive (n 213 above) §§6–7 as amended by Second ML Directive (n 216 above) §§5–6; Third ML Directive (n 220 above) §23[2]; ML Regs 2007 (n 226 above) sch 3 includes, eg, the Bar Council and the Law Society.
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laundering, and by replying to requests for information.399 Primary responsibility is imposed on firms, each institution and professional office being required to designate a reporting officer, but the reports must reflect suspicious activity discovered by any director or employee.400 Reports are made to the Financial Intelligence Unit of the state, the body responsible for receiving and processing such reports of suspicious transactions401; in the United Kingdom this was formerly the National Crime Intelligence Service, which is now renamed the Serious Organised Crime Agency.402 United Kingdom reporting applies within a regulated sector and within that any suspicion must be reported,403 but conveyancers are always on call because the regulated sector includes any financial or real property transaction.404 Indeed, it covers almost all activities by solicitors, other than payments on account of costs, legal advice, litigation, will writing, and publicly funded work.405 Inside the regulated sector any knowledge or suspicion of money laundering must be reported. Domestic disclosures must use a prescribed form.406 Existing rules are so tough that few changes will be needed to implement the Third Directive, though we will implement the rule allowing professionals to report in the first instance to their professional organisation, the Law Society, Bar Council and corresponding accounting bodies and will require institutions, trust and company service providers and money services to report to the Financial Services Authority.407 A potential prohibited act is one which if not reported may be a contravention.408 Solicitors may be held criminally liable if they fail to report suspicions that funds they handle do not come from a bona fide source.409 Any large cash payment should attract suspicion. Negligencebased criminality in relation to professional assistance to money laundering is very harsh compared to European requirements410 and continental schemes and has high compliance costs. One solicitor was imprisoned for six months after 399 Third ML Directive (n 220 above) §22[1]; First ML Directive (n 213 above) §6[1] as substituted by Second ML Directive (n 216 above) §1[5]. The history from the Drug Trafficking Act 1986 (n 214 above) and Criminal Justice Act 1988 (n 215 above), through re-enactments, the ML Regs 1993, SI 1993/1933, to the PoCA 2002 (n 217 above) and ML Regs 2003 (n 218 above) and ‘all crime money laundering’ is traced by Stokes & Arora (n 241 above). 400 Third ML Directive (n 220 above) §22, 26; First ML Directive (n 213 above) §6[2] as substituted by Second Directive (n 216 above) §1[5]; PoCA 2002 (n 217 above) s 331; Stokes & Arora (n 241 above) 350. Firms must provide training and information: Third ML Directive (n 220 above) §§34–35; Stokes & Arora (n 241 above) 338; ML Regs 2007 (n 226 above) reg 21. 401 Third ML Directive (n 220 above) §22; Third ML Directive (n 220 above) EM §17; R[21]; Council Framework Decision (n 230 above) §§1–2; FATF 40 (n 228 above) [26ff]. 402 SOCPA 2005 (n 219 above) s 1. 403 Stokes & Arora (n 241 above) 342. 404 PoCA 2002 (n 217 above) sch 9 para 1 as amended by Business in the Regulated Sector Order 2003 (n 328 above). 405 D Corker ‘ML: Tread Warily (But Not Too Warily)’ [2004] NLJ 202–203. 406 PoCA 2002 (n 217 above) s 339; SOCPA 2005 (n 219 above) s 105. 407 Implementing the Third ML Directive (n 225 above) [10.29–10.30], [10.36–10.38]; ML Regs 2007 (n 226 above) reg 23. 408 PoCA 2002 (n 217 above) ss 327–329; D Winch ‘ML Made Simple’ [2004] NLJ 1720–1721. 409 R Booth ‘Solicitors and ML I’ [2003] NLJ 286; D Corker (n 405 above). 410 Bowman v Fels (n 303 above) [19], [30], Brooke LJ.
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paying large sums in cash received from a cocaine smuggler into a client account.411
2
What needs to be reported?
[7.60] Attention must be paid to any dubious activity, complex or unusually large transactions and unusual patterns of transactions lacking economic sense.412 Suspect actions include cash payments, transactions without commercial sense, last minute changes, and actors whose resources exceed the known sources of their wealth and, indeed, any suspicion that funds do not come from a bona fide source.413 Stricter national standards are allowed.414 This is taken with especial seriousness in Britain, so much so that few changes will be needed to implement the new Directive.415 Around 200K suspicious activity reports are made annually, one fifth being of interest to authorities416; around a tenth derive from conveyancing activity, divided half and half between solicitors and estate agents.417 However, only a quarter of deposit-taking institutions have made any report so the duties must be widely ignored.418 Failure to report suspicious transactions is extremely dangerous. Disclosure is required when knowing, suspecting or having reasonable ground to suspect.419 Turning a Nelsonian eye to dubious activity is properly regarded as participation in money laundering activity, to which serious criminal sanctions apply, though this extension to negligent non-disclosure was an innovation in 2003.420 Disclosure is not required if neither the name of an offender nor the location of any criminal property is known and the information the professional has will not help anyone else identify those facts, though this does not cover a case where it could identify another person or the whereabouts of any laundered property.421 One conveyancing solicitor was convicted422 after failure to disclose his doubts that the price of property derived from drugs, his suspicions being aroused, so he said, a year after the initial receipt, but where he had helped to have property put in fictitious names. The sentence was six months. Another solicitor from
Srivastava (n 397 above). Third ML Directive (n 220 above) §20; Third ML Directive EM (n 315 above) §17. 413 Not if asset obtained more than 12 years ago. 414 First ML Directive (n 213 above) §15. 415 Implementing the Third ML Directive (n 225 above) [7.01]. 416 Feedback should be provided where practicable: Third ML Directive (n 220 above) R[38]. 417 Lawyers made 10K reports in the UK in 2005; reports from only three other countries — Germany, Hungary and the Netherlands — reached double figures: Rothwell (n 225 above). 418 Stokes & Arora (n 241 above) 338. 419 PoCA 2002 (n 217 above) s 330. 420 Stokes & Arora (n 241 above) 346. 421 SOCPA 2005 (n 219 above) s 104 inserting PoCA 2002 (n 217 above) s 330(3A); Webster (n 219 above). 422 R(CP) v Duff [2002] EWCA Crim 2117, [2003] 1 Cr App R (S) 88; G Sumners ‘Reporting Suspicious Transactions’ [2006] NLJ 345–346. 411 412
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Shrewsbury423 was sent to prison, the sentence being reduced to six months on appeal, after acting in a sale from two drug traffickers to an estate agent at one-third of market price, the sale being designed to put the property out of the way of confiscation proceedings. It was no defence to rely on the word of the agent, since he had suspicions that had not been reported. Needless to say, the estate agent was also convicted. [7.61] Making a report can also be problematic. Professionals are protected against action for breach of contract or lack of confidence, and whistleblowers should be protected from threats and harassment,424 but clients will not take kindly to a report being made and especially so if it turns out that their activity was honest. Suspicion is well short of knowing, but beyond that there is a diversity of dictionary meanings, and the one which must be dismissed is that based on slender evidence, an inkling, mistrust or fleeting thought. Nor is a suspicion sufficiently settled if the professional forms the suspicion but dismisses it from his mind as an unworthy thought. What attracts criminal sanctions is a suspicion of money laundering thought possible and more than fanciful.425
3
Effect of a report on the transaction
[7.62] A moratorium is imposed on a transaction when a report is required. Professionals and institutions must refrain from carrying out suspect transactions until they have made a notification.426 Under United Kingdom law a report must be filed and the transaction is blocked for 7 days427 unless clearance is given sooner or the moratorium is extended to a total of 31 days428 or the professional is instructed not to execute the operation. The transaction can proceed after clearance from the authorities.429 The problem is that the information is subject to legal professional privilege and the client’s permission is needed to disclose it, but tipping the client off is an offence; the only solution seems to be to cease to act.430 A transaction may proceed where advance notification is impossible or is R(CP) v Griffiths [2006] EWCA Crim 2155. Third ML Directive (n 220 above) §§26–27; Third Directive EM (n 315 above) §23; FATF 40 (n 228 above) [4](a); First ML Directive (n 213 above) §9 substituted by Second ML Directive (n 216 above) §1[8]; PoCA 2002 (n 217 above) s 338. 425 R(CP) v Da Silva [2006] EWCA Crim 1654, [2006] 2 Cr App R 35; also Squirrell v National Westminster Bank [2005] EWHC 664 (Ch), [2006] 1 WLR 637 Laddie J; he applied Hussien v Chong Fook Ham [1970] AC 942 PC; also K v National Westminster Bank [2006] EWCA Civ 1039, [2006] 4 All ER 907; Stokes & Arora (n 241 above) 352; AN Brown ‘ML — A European and UK Perspective’ [1997] Journal of International Banking Law 307–310, 309. 426 Third ML Directive (n 220 above) §24[1]. 427 Srivastava (n 397 above). 428 PoCA 2002 (n 217 above) s 335; Bowman v Fels (n 303 above) [9], Brooke LJ (24 hours in 75% of cases). 429 PoCA 2002 (n 217 above) s 335. 430 Bowman v Fels Guidance (London, Law Society, 2006) [5]. 423 424
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likely to frustrate efforts to pursue the beneficiaries of a suspected money laundering operation, but the suspicions must be reported to the authorities immediately afterwards.431 [7.63] The effects are illustrated in case law concerning bank accounts. It is an offence to operate an account after a notification without official clearance.432 What not to do is demonstrated by Tayeb433: a bank in Derby refused to carry out a suspicious-looking transaction and returned the cash whence it had come. Unfortunately for them the transaction was perfectly proper, the money being the payment for the sale of a Libyan database, and refusal by the bank to pay out the money was a breach of their duty to honour their customer’s instructions. If suspicious they should have made a report which would have meant that they were not free to operate the account.434 The customer cannot obtain an injunction against the bank to get at his funds and the account is simply frozen until consent is obtained, and there is no chance to cross-examine the person making the report, the reporting officer rather than the employee who formed the initial suspicion. When a suspicious transaction report is made this fact should not be notified to the client nor any other person,435 it being an offence to ‘tip off ’ a person in a way likely to prejudice an investigation. An offence could be committed by notifying the person suspected or any third party, but information may be shared between professionals and financial institutions. Legal advisors in some states were allowed to inform their client that a report is being made,436 but this laxity is now to be removed and tipping off becomes a mandatory offence across Europe.437 In Britain no further amendments to tipping off will be required438 but everywhere legal advisors will continue to be free to seek to dissuade clients from illegal activity.439
431 Third ML Directive (n 220 above) §24[2]; First ML Directive (n 213 above) §7 substituted by Second ML Directive (n 216 above) §1[6]; PoCA 2002 (n 217 above) s 338. 432 C v S [1999] 1 WLR 1551 CA; Bank of Scotland v A [2001] EWCA Civ 52, [2001] 1 WLR 751. However, the authorities can be forced by judicial review to consider allowing the bank account to operate: (R(JR) UMBS Online v Serious Organised Crime Agency [2007] EWCA Civ 406. 433 Tayeb v HSBC Bank [2004] EWHC 1529, [2004] 4 All ER 1024 Colman J. 434 Squirrell (n 425 above); K v National Westminster Bank (n 425 above); P de Verneiul Smith ‘A Bank’s Duty to Disobey’ [2006] NLJ 1820. 435 Third ML Directive (n 220 above) §28[1]; however, information can be swapped between institutions: §28[3–5]; domestically: PoCA 2002 (n 217 above) s 342; Stokes & Arora (n 241 above) 351. 436 First ML Directive (n 213 above) §8[2], inserted by Second ML Directive (n 216 above) §1[7]; FATF 40 (n 228 above) [14]; PoCA 2002 (n 217 above) s 333; P v P [2003] EWHC 2260 (Fam), [2004] Fam 1 Butler-Sloss P; D Burrows ‘ML Guidance and the Family Lawyer’ [2004] NLJ 328. 437 J Ames [2005] 06 LSG 1 & 3. 438 Implementing the Third ML Directive (n 225 above) [7.32]. 439 Third ML Directive (n 220 above) §28[6].
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Legal privilege
[7.64] The Third Directive440 reinforces the existing concept of professional privilege; states are not obliged to apply reporting to notaries and independent legal professionals, auditors, external accountants and tax advisors in relation to information from clients in the course of ascertaining the legal position in defending or representing in judicial proceedings, including institution or avoiding proceedings, whether information is received before, during or after such proceedings. This is a response to lobbying by the continental Bars441 and the Law Society.442 It does not extend to conveyancing work as the common law privilege did,443 but other professionals giving legal advice are now in.444 Legal professionals should not be obliged to report clients while ascertaining the legal position for that client or while representing that client in judicial proceedings, whether before, during or after such proceedings,445 and the same goes for auditors, accountants and tax advisors to the extent that they are allowed to act in these ways.446 Bowman v Fels447 shows how the obligations on litigators are restricted as compared to conveyancers on account of confidentiality in relation to the client’s affairs.448 Solicitors acting in a divorce and advising the husband in connection with a claim to a beneficial interest in the matrimonial home became suspicious that tax had been evaded by a false claim for business expenses for an improvement. A notification was made and no clearance had been obtained at the time of the trial in question but it was held that the solicitor could and should act in connection with the trial of the claim. Information received in the course of litigation was not caught by the reporting obligation449 and problems could arise from litigation only where a false settlement to facilitate transfer of
Third ML Directive (n 220 above) §23[1]; ML Regs 2007 (n 226 above) reg 3(9). [2000] 47 LSG 6; D Corker ‘ML: Scope of Privilege’ [2003] NLJ 1896–1897 & 1447–1448 & 1896–1897. 442 [2005] NLJ 194; Third ML Directive (n 220 above) §28. Disclosures may be made between lawyers: §28[4–5]. 443 Three Rivers DC v Bank of England [2004] UKHL 48, [2005] 1 AC 610, [111] Lord Carswell; Balabel v Air India [1988] Ch 317 CA, 330 Taylor LJ. 444 PoCA 2002 (n 217 above) s 330 as substituted by SoCPA 2005 (n 219 above) s 104(3); ML Regs 2003 (n 218 above) reg 7 as amended by PoCA 2002 and ML Regs 2003 (Amendment) Order 2006, SI 2006/308 (as from February 21st 2006). 445 Third ML Directive (n 220 above) R[13], §20[2]; First ML Directive (n 213 above) §6[3] as substituted by Second ML Directive (n 216 above) §1[5]; Young (n 225 above); FATF 40 (n 228 above) [16]; ML Regs 2007 (n 226 above) reg 3(9). 446 Auditors, accountants and tax advisers; Implementing the Third ML Directive (n 225 above) [2.10–2.12]. 447 PoCA 2002 (n 217 above) ss 327–329; Bowman v Fels (n 303 above); P Hoult ‘Money Talks’ [2005] 16 LSG 16–17; S Young ‘Bowman v Fels: New Guidance’ [2005] NLJ 1514–1515; E Powles ‘All that Glisters is not Gold’ [2006] CLJ 40–43; S Atrill & A Barden ‘Legal Privilege and Mandatory Disclosure’ [2006] LMCLQ 11–17; new Law Society Guidelines are to be published in September 2007. 448 C-305/05 Ordre des Barreaux Francophone [2007] June 26th ECJ, J[33ff]. 449 PoCA 2002 (n 217 above) s 328. 440 441
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property or under an arrangement made after litigation was concluded.450 The official line is that litigation is covered from the issue of proceedings including freezing orders, etc, and final distribution of assets, also consensual resolution and ADR, but not sham litigation.451 Problems may recur if criminal property remains after litigation and the solicitor is then instructed in relation to conveyancing, since transaction work is a regulated activity and subject to the stiffer reporting regime.452 Professionals must be free to continue to conduct legal proceedings and give legal advice, European legislation requires that there is an exemption, and the legislator did not intend to affect the ordinary conduct of legal proceedings.453 The Belgian Cour d’Arbitrage has referred a case to the European Court of Justice to decide whether the existing (Second Directive) reporting duty conflicts with the status of confidentiality in professional practice.454 [7.65] So reporting requirements are limited to the conduct of regulated business such as conveyancing, and including administration of estates, trust work, and the provision of tax advice but excluding drafting of wills and acting to obtain a grant of probate.455
I N TER N ET A DVERTI SI N G B Y CO N VEYA N CER S
Internet Advertising by Conveyancers Professions across Europe will increasingly use the medium of the internet to advertise their services to businesses and consumers elsewhere in Europe. The E-Commerce Directive impinges on ‘commercial communications’, any form of communication designed to promote goods, services or business image.456 Regulated professions457 can advertise on-line, an innovation in many states,458 and in order to do so they need only comply at Community level with professional rules regulating the independence, dignity and honour of the profession, professional confidentiality and fairness towards clients and other members of the profession and also codes of conduct on professional ethics.459 Professions The last point was left open: Young (n 225 above). Bowman v Fels Guidance (n 430 above) [2]. 452 Bowman v Fels Guidance (n 430 above) [3]. 453 Bowman v Fels (n 303 above) [61–65] Brooke LJ. 454 Belgian Cour d’Arbitrage [2005] JT 787; [2006] 06 ECL [51]. 455 Law Society Pilot ML Guide (London, Law Society, 2006) 8 chs and 17 Annexes; ML Guidance on Private Client Work (London, Law Society, 2006). New Guidance will appear in September 2007. 456 Electronic Commerce Directive 2000/31/EC [2000] OJ L178 1, §2[f]. 457 E-Commerce Directive (n 456 above) §2[g] borrowing from First General System Directive (n 123 above) §1[d] and Second General System (n124 above) §1[t]. 458 Report on the Application of the E-Commerce Directive COM (2003) 702 final [4.4]. 459 E-Commerce Directive (n 456 above) R[32–33]; §§8[1], 8[4]; this supplements other European laws governing regulated professions; also codes of conduct for lawyers () and real estate agents (). 450 451
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are not affected when providing a domain name or e-mail address, or disseminating independent surveys about goods and practices. The E-Commerce regime does not apply to the activities of notaries or equivalent professions to the extent that they involve a direct and specific connection with the exercise of public authority, nor to the representation of a client and defence of his interests before the courts.460
460
E-Commerce Directive (n 456 above) §1[5](d); E-Commerce Report (n 458 above) [6].
CO N TR ACTS
8 Contracts Advanced E-Signatures. Simple E-Signatures. Buying Land from Websites. Unfair Terms Legislation. Unfairness of Terms. European Contract Law. The Contract/Property Interface.
A DVA N CED E-SI G N ATUR ES
Advanced E-Signatures 1
European E-Signatures
[8.01] European law lays down a framework for digital signatures in the Electronic Signatures Directive.1 As will be explained, the Electronic Commerce Directive2 which provides for equivalence between electronic and conventional forms of contracting is much less significant because it includes wide-ranging exclusions for land. Since neither is directly relevant to land transactions, it is their profound indirect influence that we are after. The E-Signatures regime3 has been transposed more or less faithfully across the EU-154 and it has since been extended to the eastern accession states and the EEA-3.5 Its basic approach is to secure the equivalence between handwritten and electronic signatures,6 but the equivalence is restricted and compartmentalised on national lines since formality varies considerably from state to state. What is equated is the effect of a signature and not the underlying formalities. [8.02] Even this equivalence is severely limited in scope because the E-Signature Directive does not cover the:
Electronic Signatures Directive 1999/93/EC [2000] OJ L13 19. Electronic Commerce Directive 2000/31/EC [2000] OJ L178 1. 3 S Mason Electronic Signatures in Law (London, Butterworths 2003, 0-406-97006-8) [4.37]; CH Ramberg ‘The E-Commerce Directive and Formation of Contract in a Comparative Perspective’ (2001) 26 EL Rev 429–450; V Sinisi ‘Digital Signature Legislation in Europe’ (2001) 16 Butterworths Journal of International Business and Finance Law 17–22. 4 J Dumortier et al The Legal & Market Aspects of Electronic Signatures (DG Information Society C 28-400, Leuven, Katholieke Universiteit, Leuven, 2006) [1.2.1]. 5 Dumortier E-Signatures (n 4 above) [1.2.1]. 6 E-Signatures Directive (n 1 above) §5; see below [8.09]. 1 2
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conclusion and validity of contracts where there are requirements as regards form prescribed by national… law nor rules and limits, contained in national… law, governing the use of documents.7
This in practice negates any direct effect in relation to land. Virtually every country has special formalities for land and so each conveyancing system has to be considered separately because of this limitation of scope. Since the base on which the European Directive is superimposed is so uneven it is no surprise to find that its practical effects vary widely.8 In most continental states a land transaction will require notarisation so whatever provision is made for e-signatures is nugatory in any event in the absence of cyber-notarisation.9 There is a considerable literature on the domestic implications of e-signature in Germany,10 France and Spain,11 Ireland12 and also in the eastern accession states.13 Domestic implementations include many misconceptions, and this may have affected adversely the uptake of qualified electronic signatures in the EU, and clarification is needed.14 [8.03] Primary legislation was required in the United Kingdom in the shape of the Electronic Communications Act 2000, which will need consideration separately in relation to advanced digital signatures and to simple e-signature,15 but it is by no means a direct transposition and nor is it easy.16 Existing statutory rules for written formality are numerous and far flung.17 What is most important for the property lawyer about the European framework for e-signatures is its impact in countries such as England and Wales that are preparing for electronic conveyancing.
E-Signatures Directive (n 1 above) §1 second para. Dumortier E-Signatures (n 4 above) [1.2.1]; Mason (n 3 above) [4.56]. 9 [2000] 37 LSG 3; Spanish Decree [2000] RCL 2555, [2001] ECLYB [585]. 10 T Noeding & K Bumberger ‘E-Signatures in German Civil Law’ (2001) 6 Communications Law 87–91. 11 B Nouel ‘Evolution of French Web Law’ (2001) 13 International Internet Law Review 4–5; R Mullerat ‘E-Commerce in Spain’ (1999) Internet Company & Commercial Law Review Special 61–64; S Cámara-Lapuente ‘Comparative Remarks on Land Registers within the Frame of European Private Law’ (2005) 13 ERPL 797–839, 817. 12 C Leland ‘Ireland Pursues E-Commerce Law’ (2001) 7 Computer & Telecommunications Law Review 30–32. 13 M Laszczyk ‘E-Signatures — Why Not?’ (2002) 3 World Internet Law Review 9–11 (Poland); P Allen & R Nespurek ‘Czech Republic E-Signatures Act’ (2000) 10 East European Forum Newsletter 9–10. 14 S Kelm ‘On the Implementation of the E-Signatures Directive’ (2005) 2 E-Signature Law Journal 5–13. 15 See below [8.04], [8.18]. 16 E-Commerce: Formal Requirements in Commercial Transactions (Law Commission, 2001). 17 Electronic Communications Act 2000, c 7, ss 7–10; Dumortier E-Signatures (n 4 above) Appendix 4. 7 8
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335
Towards e-formality in England and Wales
[8.04] Currently transactions with land are paper-based, though not for much longer. In England and Wales a legal estate in land can only pass by deed,18 a formal type of document attracting formalities which were redefined in 1989.19 In essence a deed is a written document including a formal statement of the intention to create a deed, signed by the executing party and signed and attested by a witness; such a document is brought into effect by delivery, for example by being released to the buyer at the time of completion when the purchase price has been paid. The legislation on deeds was enacted just too early for it to have been drafted with the possibility of electronic creation in mind and indeed the requirement that a deed ‘makes clear on its face’ that it is intended to be a deed seems to preclude the possibility of e-deeds, since how can a virtual digital file be said to have a face? A transfer of land will also need to use the correct Land Registry form, for which electronic versions are being developed. Contracts for the sale of land have lesser formalities — signed writing — which may be slightly easier to replicate electronically. Current formality requirements20 call for a document in writing signed by each party or, more usually in practice, for two documents that are exchanged each of the party signing his respective part before exchange. Again there are exceptions.21 Contracts can be created electronically if a word processed file equates to writing and a digital signature is attached.22 [8.05] A Consultation Paper issued in 2001 indicated the likely way forward for electronic conveyancing23 making use of the Electronic Communications Act 2000,24 which is not directly European-induced, and in particular the rulemaking power to allow electronic procedures for existing legislation.25 Contracts to deal with land, transfers of land and Land Registry applications to register transfers will become electronic to fit as parts of the e-conveyancing process.26 18 Law of Property Act 1925, c 20, s 52; but there are exceptions. There are lesser requirement of signed writing in s 53 in various forms for equitable interests, declarations of trusts and dispositions of subsisting equitable interests. 19 Law of Property (Miscellaneous Provisions) Act 1989, c 34, s 1. 20 Law of Property (Miscellaneous Provisions) Act 1989 (n 19 above) s 2. 21 Law of Property (Miscellaneous Provisions) Act 1989 (n 19 above) s 2(5) excepting contracts for short leases, public auctions, regulated contracts for financial services and the operation of resulting, implied and constructive trusts. 22 This is not too worrying if it is an advanced certified signature, see below [8.07], but e-mail exchanges are more worrying, see below [8.14]. 23 C Harpum Electronic Conveyancing — A Draft Order (Lord Chancellor’s Department, 2001). 24 E-Communications Act 2000 (n 17 above); this is discussed below in relation to simple e-signatures, see below [8.18]. 25 E-Communications Act 2000 (n 17 above) s 8. No doubt when the rules are finally introduced it will be under Land Registration Act 2002, c 9, s 95. The former cannot be used to insist on the use of e-formality whereas compulsion can and will be introduced under the latter: A Draft Order (n 23 above) [II.10]. 26 Land Registration Act 2002 (n 25 above) ss 91–95, sch 5. The Draft Order (n 23 above) refers to earlier legislation.
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The Draft Order addresses transfers and land contracts,27 the common feature being that a handwritten signature is dispensed with in favour of an advanced and certified e-signature (as next described) with reliance on the certification process as an equivalent to witnessing and a guarantee of authenticity.28 Further provision might be needed for short leases and also for deeds used for non-land purposes, the creation and disposal of equitable interests and for wills 29
3
E-Signature using dual key encryption
[8.06] Electronic signatures to be used in formal conveyancing will be ‘advanced electronic signatures’. In order to understand the legislative definition in the E-Signature Directive it is first necessary to paint a picture. Electronic signatures will be expensive, far more than the original official estimate of £5 per transaction after set-up costs,30 so it is not envisaged that a client will have a digital identity however unfortunate it may be for a landowner to lose personal touch with the transfer of his land in this way. Rather a lawyer will sign on behalf of a client engaged in a conveyancing transaction, that person being described as a ‘signatory’.31 The device used for signature, the ‘private key’, will be used to attach to a word-processed document a code which authenticates it and confirms when and by whom it has been executed and this will also encrypt it so as to jumble its text. Physically this key will take the form of a smart card32 that the conveyancer will insert into a card-reader on his desktop PC when he wishes to authenticate a transaction using signature software. Like a cash machine card this will in essence hold a Personal Identification Number, but a very long number in contrast to the short PINs we tap in at the supermarket check-out, and a prime number which cannot be factorised (divided) and which is therefore more difficult for a hacker to crack. Security also requires the card itself to be kept safe. Lawyers will have their own digital identity33 to be used in electronic conveyancing, especially when transacting across borders. Keys will be issued as a pair to be used in a process known as asymmetric encryption.34 The recipient of a document will need a second matching key, the public key, in order to decrypt it, read it, confirm the authenticity of the signature and check that the text has not been tampered with. This key cannot be used 27 Respectively Land Registration Act 1925, c 21, s 144A and Law of Property (Miscellaneous Provisions) Act 1989 (n 19 above) s 2A; A Draft Order (n 23 above) [I.10–I.11], [II.25ff] and [I.12–I.14], [II.51ff]; Mason (n 3 above) [2.19]. 28 A Draft Order (n 23 above) [II.17]. 29 A Draft Order (n 23 above) [II.8], [II.65]. 30 A Draft Order (n 23 above) Risk Assessment [12]. 31 E-Signatures Directive (n 1 above) §2[1]. 32 Dumortier E-Signatures (n 4 above) [4]. Mason (n 3 above) [4.39]; [2007] 14 LSG 4 (chip and pin proposal). 33 Council of Bars and Law Societies of Europe (CCBE, ) [2007] 02 LSG 15. 34 Law Com Formal Requirements (n 16 above) [3.31]; Mason (n 3 above) [3.28], [9].
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for new text creation nor for validation of documents. Creation of these keys is not a matter for the parties themselves but involves the intervention of an outside person, a Certification Service Provider, as described below.35 Signature will be carried out by using a secure signature creation device,36 meeting high technical standards of accuracy and security,37 coupled to technology to achieve secure signature verification.38 This means more than a password or on-line password generator.39 Properly certified procedures will add significantly to the cost. [8.07] With this preliminary explanation it is possible to understand readily enough the four essentials of an advanced electronic signature,40 that it must be: 앫 앫 앫 앫
uniquely linked to the signatory, capable of identifying the signatory, created under the sole control of the signatory, and so that any change of data is detectable.
A digital signature which can be used safely in conveyancing will meet these advanced standards, be coupled with a qualified certificate (as next described) and be created using a secure signature device, generally relying on dual key cryptography.
4
Certification
[8.08] Dual keys are provided to parties engaged in conveyancing by a certification service provider, which certifies the signature thus guaranteeing its authenticity and dispensing with the need for attestation of an e-signature by an independent witness. Much of the E-Signatures Directive is concerned with certification, aspects implemented nationally by statutory instrument.41 Certificated signatures are widely used in Spain and Italy, where they are employed in internet banking, but not as yet in the United Kingdom despite three Certification Service providers setting up, the best-known being the tScheme.42 Things will change as conveyancing goes electric. The ‘certificate’ is a document linking the attestation of a document to the signature key and so certifies the identity of the signatory to the other party to a transaction. Full effect is given to a ‘qualified
See below [8.08]. E-Signatures Directive (n 1 above) Annex III; transposition is generally literal but has been spurned by the UK; Dumortier E-Signatures (n 4 above) [2.8], [4.2–4.3]. 37 Dumortier E-Signatures (n 4 above) [1.2.2.5]. 38 E-Signatures Directive (n 1 above) Annex IV; Dumortier E-Signatures (n 4 above) [2.8]; again Annex IV has not been transposed in the UK. 39 Dumortier E-Signatures (n 4 above) [4.4]. 40 E-Signatures Directive (n 1 above) §2[2]; Dumortier E-Signatures (n 4 above) [1.2.1]. 41 E-Signatures Regs 2002, SI 2002/318; Mason (n 3 above) [4.75]. 42 B Pasa & GA Benacchio The Harmonisation of Civil and Commercial Law in Europe (Budapest, Central European University P, 2005, 963-7326-35-9) 80ff. 35 36
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certificate’ provided by a certification service provider.43 These are free to set up anywhere in Europe provided they accept the supervision of the country where they operate,44 the intention being a free circulation of e-signature products.45 A ‘qualified certificate’ must46: 앫 state it is a qualified certificate and its unique identity code, 앫 identify the certification-service-provider, the state of its establishment and its advanced e-signature, 앫 name the signatory or a pseudonym,47 앫 state any specific attribute of the signatory which is relevant, 앫 provide signature-verification-data to match the signature-creation-data controlled by the signatory, 앫 state the period of its validity, and 앫 state any limitations on the scope of its use or limits on the monetary value of transactions. Liability attaches to the certificator to compensate any person engaged in a transaction who suffers loss from reliance on a certificate,48 in the event of an error giving rise to problems in the transaction, and therein lies the inherent cost of the digital signature technology. A certificator will have to charge a fee high enough to cover the potential liabilities. As well as guaranteeing authenticity, the certificate also provides an assurance of non-revocation. Around one per cent of advanced electronic signatures are subject to revocation,49 but the Directive has no reference to a requirement of any intention to sign50 and the whole point of the procedure is that security is conferred by the act of signature. So any revocation of authority to sign must take place through the certifying authority.
5
Equivalence
[8.09] An advanced electronic signature with certification and secure creation is broadly equated to a handwritten signature. It must be remembered that the scope is limited so there is no requirement to apply equivalence to rules for the conclusion and validity of contracts nor to formal requirements prescribed
43 E-Signatures Directive (n 1 above) Annex II. Transposition is again satisfactory though requirements vary substantially from country to country: Dumortier E-Signatures (n 4 above) [2.8] 44 E-Signatures Directive (n 1 above) §§3, 4 45 Dumortier E-Signatures (n 4 above) [1.4]. 46 E-Signatures Directive (n 1 above) Annex I. Transposition is satisfactory: Dumortier E-Signatures (n 4 above) [2.8]; Mason (n 3 above) [4.48]. 47 E-Signatures Directive (n 1 above) R[25], Annex I; Dumortier E-Signatures (n 4 above) [1.2.2.1]. 48 E-Signatures Directive (n 1 above) §6; liability can be limited by imposing conditions or placing a financial limit on transactions covered; §7 provides for international recognition of certificates. 49 Dumortier E-Signatures (n 4 above) [4]. 50 E-Signatures Directive (n 1 above) §6[2]; Ramberg ‘Comparative Formation’ (n 3 above) 434.
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nationally.51 Within the scope of the Directive an advanced electronic signature based on a qualified certificate and created by a secure-signature-creation device will: satisfy the legal requirements of a signature in relation to data in electronic form in the same manner as a handwritten signature satisfies those requirements in relation to paper-based data.
It should also be admissible as evidence in legal proceedings.52 This provision has met with a variety of approaches to transposition, many literal53 or incorporated literally into the national Civil Code54 but otherwise with conditions attached to equivalence55 or limited to specific types of digital signatures,56 or (in Scandinavia) limited to cases where the law admits the use of electronic means.57 Silence reigns in the United Kingdom and Ireland and also in Switzerland; here the Law Commission has taken the view that our law requires signatures rather than handwritten signature and so there is no need to confer a specific legal status or equivalence on an advanced certified e-signature.58 The Directive needs clarification, the precise type of signature covered needs to be pinned down, and legal effectiveness does need to be guaranteed. Variant transposition and non-transposition presents a problem which detracts from the intended pan-European effect.59
6
Exclusion of land from E-Commerce regime
[8.10] Contracting by electronic means is regulated within Europe by the Electronic Commerce Directive60 which has been implemented nationally across EU-15 after some over-running of time-limits and has since been extended to the eastern accession states and the EEA,61 so that the current e-market is the EEA-30. The Directive has attracted a large literature in periodicals62 and E-Signatures Directive (n 1 above) §1. E-Signatures Directive (n 1 above) R[20], §5[1] (a) and (b) respectively; Dumortier E-Signatures (n 4 above) [2.2.2]; otherwise (if these requirements are not satisfied) see §5[2], below [8.17]. 53 Belgium, Greece, Finland, Portugal and Spain, also Malta, Lithuania, Latvia, Poland, Romania and Iceland. 54 France, Germany, Luxembourg, Poland and Hungary. 55 Austria, Netherlands, Czech Republic and Poland. 56 Italy and Estonia. 57 Denmark, Sweden and Norway. 58 See below [8.18ff]. 59 Dumortier E-Signatures (n 4 above) [5.4.1–5.4.2]; T Wright ‘E-Signatures — Not Worth the Paper They’re Written On?’ (2006) 8 E Business L 7–8. 60 E-Commerce Directive (n 2 above). 61 EEA Agreement [1992] OJ L12 3 as adjusted [1994] OJ L1 572 and amended [2004] OJ L130 3, Annex XIX. 62 A Lopez-Taruella ‘EC Regulatory Framework for E-Commerce’ (2001) 38 CML Rev 1337–1384; Ramberg ‘Comparative Formation’ (n 3 above); PC Ramberg ‘Electronic Communication’ in C von Bar & U Drobnig Study on Property Law and Non-Contractual Liability Law as it Related to Contract Law (DG Health & Consumer Protection, SANCO B5-1000/02/00574) [604ff]. 51 52
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books.63 Transposition64 is generally satisfactory and follows the Directive closely in most states though with a wider divergence appearing in the Netherlands65 and Britain displays its independence by separating general services from financial services.66 [8.11] E-Commerce follows the usual European pattern by excluding land. In general (land apart) it must be possible to contract electronically and national legal systems have been amended to make this possible and to annul any rule depriving such a contract of legal effectiveness or validity.67 Nevertheless national law may legitimately prevent electronic contracting in the following cases68: 앫 contracts that create or transfer rights in real estate (except for rental rights),69 an exclusion mirrored for other parts of the E-Commerce regime,70 앫 contracts requiring by law the involvement of courts, public authorities or professions exercising public authority; this includes cases where that involvement secures legal effectiveness against third parties, and also contracts requiring certification or attestation by a notary71; again this is mirrored for other parts of the E-Commerce regime72 and there is a separate exclusion for the representation of a client and defence of his interests before the courts, 앫 contracts of suretyship granted and on collateral securities furnished by persons acting for purposes outside their trade, business or profession, 앫 contracts governed by family law or by the law of succession. Exclusions have to be reported to and justified to the Commission.73 E-contracting is, therefore, possible for rental rights and business sureties. In short European legislation about E-Commerce has little immediate impact on
63 J Dickie Producers and Consumers in EU E-Commerce Law (Oxford, Hart, 2005, 1-84113-454-6); AD Murray ‘Contracting Electronically in the Shadow of the E-Commerce Directives’ in L Edwards New Legal Framework for E-Commerce in Europe (Oxford, Hart, 2004, 978-1-84113-451-Z). 64 Application of the Directive on E-Commerce COM (2003) 702 final. 65 E-Commerce Report (n 64 above) [3.1], [3.3]. 66 E-Commerce (EC Directives) Regs 2002, SI 2002/2013; E-Commerce Directive (Financial Services and Markets) Regs 2002, SI 2002/1775, as amended by SI 2002/2015, SI 2002/2157; E-Commerce Report (n 64 above) [3.2]. 67 E-Commerce Directive (n 2 above) §9[1]; see below [8.19] . 68 E-Commerce Directive (n 2 above) §9[2]. 69 A Lopez-Taruella ‘Regulatory Framework’ (n 62 above) 1367; Ramberg ‘Comparative Formation’ (n 3 above) 437–438 fnn 24–26. 70 Provisions about ‘information society services’ exclude the ‘formal validity of contracts creating or transferring rights in real estate where such contracts are subject to mandatory formal requirements of the law of Member States where the real estate is situated’; E-Commerce Directive (n 2 above) §3[3], Annex. 71 E-Commerce Directive (n 2 above) R[36], §9[2](b); Murray ‘Shadow’ (n 63 above) 80 explains the troubled history of this exclusion. 72 Information society service provisions do not apply to the ‘activities of notaries or equivalent professions’ when connected to ‘the exercise of public authority’, nor to the representation of a client in court: E-Commerce Directive (n 2 above) §1[5](d); E-Commerce Report (n 64 above) [6]. 73 E-Commerce Directive (n 2 above) §9[3].
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either movable or immovable property.74 It remains to be seen how long it is possible to sustain a position in which contract law is medium-neutral but property law remains based on paper and ink. Harmonisation in isolation will create unforeseen problems.75
SI MPLE E-SI G N ATUR ES
Simple E-Signatures 1
Informal e-transactions with land
[8.12] The question now considered is the extent to which e-signatures can be used for land transactions which are ‘informal’, that is without a formal certified digital signature created using dual key cryptography. Inbuilt safeguards should make formal digital signature secure and ensure that people do not contract to buy land unwontedly. Can the same be said for non-advanced methods? Again the two main European Directives interrelate. The E-Commerce Directive makes it possible to contract electronically and ensures that each legal system of the EEA-30 allows legal effectiveness and validity to electronic contracts,76 though this is all subject to a number of land exclusions as already explained.77 So e-contracts may be equivalent to paper-based contracts because: 앫 the contract is for rental or business surety, 앫 the particular contract is not for the ‘creation or transfer’ of rights in land, or 앫 the state allows e-signature a wider effect than is mandatory under European law.78 The E-Signature Directive facilitates the use of and recognition of e-signatures where there are no requirements as to form prescribed nationally and no rules or limits contained in national law.79 So the Directive may apply because: 앫 a state does not lay down formalities for land contracts, 앫 a particular transaction falls outside national formalities, for example a lease up to three years in England, or 앫 a state allows e-signature a wider effect than is mandatory under European law.
74 JK Winn & J Haubold ‘E-Promises: Contract Law Reform and E-Commerce in a Comparative Perspective’ (2002) 27 EL Rev 576–588, 568; K Kryczyka ‘An Action Required, a Mission Impossible’ (2005) 13 ERPL 149–170; G Griffiths ‘The Bastion Falls’ (2003) 8 Conveyancer and Property Law Journal 39–45. 75 Ramberg ‘Electronic Communication’ (n 62 above) [616], [619], [620]. 76 E-Commerce Directive (n 2 above) §9[1]. 77 See above [8.10]. 78 E-Commerce Directive (n 2 above) §9[2]; see above [8.09]. 79 E-Signatures Directive (n 1 above) §1 para 2.
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Simple methods of e-signature
[8.13] An electronic signature is data in electronic form logically associated with other electronic data and serving to authenticate the data with which it is associated.80 An electronic procedure thus requires an authenticating intention indicating to a reasonable observer an intention to be bound.81 Several methods could be identified.82 First there is the defective advanced signature. Suppose for example the parties use dual key cryptography but in order to save money do not have the transaction independently certified. Second there is web-based contracting. We are all familiar with ordering goods from a website, filling in an on-line ordering form and paying by credit card for the items placed into the virtual ‘shopping basket’. One can conceive of a landowner advertising property to rent in this way, especially for holiday rentals, with customers able to book directly using an on-line booking form. Signature could be made by typing the contracting party’s name into a text box or by clicking an ‘I accept’ box.83 Third there is the possibility of scanning a facsimile of a handwritten signature into a computer file and inserting this into a word-processed document in the same way as a handwritten signature.84 [8.14] All of these pale into insignificance in the land market as compared to the potentiality of e-mail. This is the crunch case because one would generally wish to negotiate the terms of a deal relating to land. There is no question that a contract, such as a guarantee, can be made by e-mail and that e-mail can fulfil the formality requirement of signed writing.85 A guarantee requires signed writing under the Statute of Frauds.86 J Fernandes Pereira v Mehta87 concerned a deal to keep afloat a bedding supplier on the terms that an application for liquidation would be adjourned on the terms that a personal guarantee would be given by a director of the company in the sum of £25K. Action was later taken to enforce that guarantee given by e-mail. The guarantee was given in an e-mail sent by a member of Mehta’s staff but it did not have Mehta’s name typed at the bottom. It was argued that the insertion of Mehta’s e-mail address automatically by the e-mail software as the message was sent was a signature but there was no intention here by Mehta to give authenticity to the document and this e-mail address was not intended to be a signature.88 Enforcement of the particular guarantee failed, but that is almost beside the point for the case shows that it is perfectly E-Signatures Directive (n 1 above) §2[1]. Law Com Formal Requirements (n 16 above) [3.28]. 82 Mason (n 3 above) [1.14], [3.2]; Law Com Formal Requirements (n 16 above) [3.31ff]. 83 Mason (n 3 above) [1.14]; Law Com Formal Requirements (n 16 above) [3.2]. 84 Law Com Formal Requirements (n 16 above) [3.2]. 85 Law Com Formal Requirements (n 16 above) [3.47ff]. 86 Statute of Frauds 1677, 29 Charles II c 3, s 4. 87 J Fernandes Pereira v Mehta [2006] EWHC 813 (Ch), [2006] 1 WLR 1543 Judge Pelling QC; K Rogers ‘Signing your E-Life Away’ [2006] NLJ 833; R Piper ‘Electronic Signatures’ [2006] 35 LSG 30 (argues that it was a signature). 88 Mehta (n 87 above) [30]. 80 81
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343
possible to effect a ‘signature’ of an e-mail message, for example by typing out at the bottom of it one’s full name, a last name alone, initials and last name, initials, and possibly even a pseudonym or code.89 [8.15] There are phenomenal problems with e-mail, and it is believed that urgent action is needed to preclude the possibility of contracting for land by e-mail. It is quite likely that an e-mail exchange where the text of each message is repeated (a single document type contract rather than an exchange) will lead ultimately to an offer and acceptance and may well have the names of each party typed in places that authenticate the acceptance of the final terms. Yet an e-mail exchange is essentially a contract by correspondence of the type that should not satisfy the land formalities.90 The Law Commission has taken the view that there is signed writing when an e-mail message is delivered so that it is capable of being read and that it is not necessary to have the consent in advance of the recipient to the use of e-mail.91 It is one thing to send a message to the inbox of a professional who advertises that he uses e-mail but quite another to allow delivery of documents with legal effect to e-mail accounts that are dormant or little-used, where perhaps the user has even forgotten the password to get access to it. A proper legal framework is required and virtual contracting for land should be restricted to formal digital signatures.
3
Contractual equivalence
[8.16] Where the E-Commerce regime applies to land — rentals and business sureties and perhaps some miscellaneous quasi-land contracts — national systems must be adjusted to allow contracts to be concluded by electronic means.92 Member States shall in particular ensure that the legal requirements applicable to the contractual process neither create obstacles for the use of electronic contracts, nor result in such contracts being deprived of legal effectiveness and validity on account of their having been made by electronic means.
4
Equivalence of signature
[8.17] An electronic signature must also be given equivalence, that is legal effectiveness and admissibility as evidence in legal proceedings.93 Effectiveness and admissibility cannot be removed on the grounds94 that it is: Mehta (n 87 above) [27]. Commission for the New Towns v Cooper (GB) [1995] Ch 259 CA; P Sparkes A New Land Law (Oxford, Hart, 2nd edn, 2003, 1-84113-380-9) [22.14]. 91 Law Com Formal Requirements (n 16 above) [3.2], [3.21ff], [3.56]. 92 E-Commerce Directive (n 2 above) §9[1]. 93 E-Signatures Directive (n 1 above) §5[2]. 94 E-Signatures Directive (n 1 above) §5[2]; Dumortier E-Signatures (n 4 above) [1.5.2], [2.2], [2.2.3], [5.4.3]. 89 90
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앫 in electronic form, or 앫 not based upon a qualified certificate, or based on a certificate by a non-accredited certificatory, or not created by secure means. The second of these requirements makes clear that simple e-signatures must be accorded legal effectiveness,95 though of course without prejudice to national rules about contracting and form.96 In most states this has been translated fairly straightforwardly with just some minor translation of language,97 but several states (including the United Kingdom98) have avoided transposition arguing that e-signature is already recognised.99 Few countries have completely correct transposition and many wrongly rely on case by case examination.100
5
Electronic Communications Act 2000
[8.18] Given how far flung are our existing rules for written formality, primary legislation was decided upon in the United Kingdom, the Electronic Communications Act 2000.101 This has two prongs. Electronic signature is something in electronic format logically associated with electronic data which purports to have that association in order to establish its authenticity or integrity.102 In any legal proceedings, electronic signature associated in that way is admissible in evidence to establish the authenticity or integrity of that data.103 The same presumption applies to any certification.104 It will be seen just how limited is this provision. It does not confer any positive value on e-signature and certainly does not state the weight to be attached to it, nor does it explain how the probative value varies between different types of e-signature.105 [8.19] Power is given to alter enactments or subordinate legislation by statutory instrument in order to facilitate electronic procedures,106 the rule-making power originally intended to be used to introduce e-contracts and e-transfers.107 This could relate to requirement for things to be done in writing, or evidenced in writing or using a deed or signature and also delivery and witnessing; it also covers giving notices, making statutory declarations and making Pasa & Benacchio Harmonisation (n 42 above) 80ff. E-Signatures Directive (n 1 above) §1 second para; see above [8.09]. 97 Austria, Belgium, France, Greece, Luxembourg, Netherlands, Ireland, Italy and Ireland. 98 See below [8.19]. 99 Denmark, Greece, Portugal, Spain, Finland, Sweden, Switzerland, Norway, Czech Republic, Estonia, Bulgaria and Romania. 100 Dumortier E-Signatures (n 4 above) [1.2.1], [2.2.4]. 101 E-Communications Act 2000 (n 17 above) s 7(1). 102 E-Communications Act 2000 (n 17 above) s 7(2); Mason (n 3 above) [4.3], [4.57], [4.64], [4.76]. 103 E-Communications Act 2000 (n 17 above) ss 7(1)(b), 7(3). 104 E-Communications Act 2000 (n 17 above) s 7(3). 105 Law Com Formal Requirements (n 16 above) [3.27]. 106 E-Communications Act 2000 (n 17 above) s 8; Mason (n 3 above) [4.77]. 107 See above [8.05]. 95 96
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payments.108 E-procedures may be introduced as an alternative to paper-based procedures but they cannot supersede them.109 Law Commission advice was that there was no need to engage in wholesale amendment of statutes,110 just as well given that there are estimated to be 6K statutes requiring writing of one form or another.111 Few statutes impose specific signature requirements, signature covers much more that just handwriting, and function is all important.112
B UYI N G LA N D F R O M WEB SI TES
Buying Land from Websites 1
Contracting from websites
[8.20] The E-Commerce Directive sets up a framework for buying goods and services from an on-line order form on a website.113 Electronic contracting must be allowed for rental rights and contracts of suretyship and collateral securities granted by persons acting within their trade, business or profession114 but national law may still legitimately prevent e-contracting115 for land, notarisation and e-sureties by consumers, and may require writing for matrimonial property regimes and succession arrangements.116 This may be an unlikely way to buy a house, but it is common to rent holiday cottages in this way, and land-related services could also be bought in this way, perhaps conveyancing or surveys. National legal systems have been amended so that it is possible to contract electronically, and this should be possible without hidden obstacles, and such a contract must have legal effectiveness and validity.117 The loose texture of this provision does not fit well with civilian codes.118 [8.21] The basic nature of the E-Commerce regime has already been described in the context of advertising.119 It is designed to create a secure environment to order things from websites, and is supposedly neutral as between different forms of technology and is also neutral in geometry between B2B and E-Communications Act 2000 (n 17 above) s 8(2); Dumortier E-Signatures (n 4 above) [1.2.2.7]. E-Communications Act 2000 (n 17 above) s 8(6)(a). 110 Law Com Formal Requirements (n 16 above) [3.42ff]. 111 Murray ‘Shadow’ (n 63 above) 80; Mason (n 3 above) [2.18]. 112 Law Com Formal Requirements (n 16 above) [3.24–3.26]; Mason (n 3 above) [2] (signatures in existing law), [3] (e-signature), [4] (legal status electronic signature). 113 Information society services and the ‘co-ordinated field’ E-Commerce Directive (n 2 above) §3–5, described above [5.60ff]. 114 E-Commerce Directive (n 2 above) §9[2]. 115 E-Commerce Directive (n 2 above) §9[2]. 116 See above [8.10]. 117 E-Commerce Directive (n 2 above) §9[1]. 118 Ramberg ‘Electronic Communication’ (n 62 above) [604]. 119 See above [5.60], [7.66] (professional services). 108 109
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B2C deals.120 Consumers are entitled to better protection because they can insist on the mandatory protections of the legal system of the state in which they have their habitual residence.121 It will apply where land or land-related services are ordered from a website where an on-line order form is filled in and a contract made by clicking an ‘I accept’ button; the E-Commerce regime does not regulate exchanges of e-mail122 nor private communications by natural persons acting outside a trade, business or profession.123 Providers are free to set up anywhere in Europe having complied with home state rules and national regulations to protect for example public morals.124 National monopolies remain for the notarisation of contracts and the formal validity of land contracts.125
2
Transparency: information requirements
[8.22] A website must provide information clearly, comprehensibly and unambiguously and prior to the order being placed by the recipient of the service about various aspects of the contractual procedure126: 앫 앫 앫 앫 앫
technical steps needed to conclude a contract, whether the concluded contract will be filed by and accessible via the provider, means for identifying and correcting input errors prior to ordering, languages offered for the conclusion of the contract, and any relevant codes of conduct.
Contract terms and general conditions provided to the recipient must be made available in a way that allows him to store and reproduce them.127 Nonconsumers may agree to receive less information.128
3
Placing and acknowledgement of orders
[8.23] The ordering process must enable the contracting party to identify and correct input errors prior to the placing of the order.129 An order placed electronically must be acknowledged without undue delay and by electronic means, though the acknowledgement may consist of on-line provision of the service paid 120 E-Commerce Directive (n 2 above) §§2[d]; E-Commerce Report (n 64 above) [1]; see below [5.05] n 20. 121 E-Commerce Directive (n 2 above) §§2[d], 4–5; see below [10.07]. 122 Though it may help to decide whether a ‘signature’ occurs; see above [8.12]. 123 E-Commerce Directive (n 2 above) R[18]. 124 See above [5.60]. 125 E-Commerce Directive (n 2 above) §3[3], Annex; see above [8.10]. 126 E-Commerce Directive (n 2 above) §10; this is in addition to any EU information requirements; E-Commerce (EC Directive) Regs 2002 (n 66 above) reg 9. It does not apply to private contracts by e-mail. 127 E-Commerce Directive (n 2 above) §10[3], R[34]. 128 E-Commerce Directive (n 2 above) §10[1]. 129 E-Commerce Directive (n 2 above) §11[2].
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for.130 An accessibility principle determines when an order is placed and when an acknowledgement has been given.131 Three states regulate the moment of contract — France, Luxembourg and Portugal — since the moment of receipt of an order is not necessarily the moment at which a contract is made, but throughout most of Europe this is left to national contract law without apparent problems.132 Parties who are not consumers may agree otherwise133 and most of these principles do not affect e-mail exchanges.134
UN FA I R TER MS LEG I SLATI O N
Unfair Terms Legislation 1
Substantive land law in B2C transactions
[8.24] Controls on unfair terms in B2C contracts affecting land are the most important substantive intrusion into substantive land law, derived from the Unfair Terms Directive135 passed in 1993.136 Transposition originally occurred under regulations made in 1994,137 but this original attempt has been replaced by a closer copy-out in 1999.138 An earlier chapter established the two most important limitations on the scope of this legislation. It applies to B2C contracts but not as between businesses (B2B) nor to any other pattern of contracts139; in particular, contracts between two private parties (C2C) cannot be assessed for fairness, a principle which ‘cuts across the grain of the legislation’.140 European unfair terms legislation affects land.141 Land lawyers can largely ignore the domestic regime in the English Unfair Contract Terms Act 1977 because, although it applies beyond the B2C paradigm, it contains a complete exclusion for land.142 The Law Commission is trying to create coherence out of
E-Commerce Directive (n 2 above) §11[1], R[34]. E-Commerce Directive (n 2 above) §11[1]. This principle also applies to contracts made by exchange of e-mails: §11[3]. 132 E-Commerce Report (n 64 above) [4.5]. 133 E-Commerce Directive (n 2 above) §11[1]. 134 E-Commerce Directive (n 2 above) §11[3]; §11[1] first indent, and §11[2], but §11[1] second indent about deemed time of delivery will apply to e-mail contracts. 135 Unfair Terms in Consumer Contracts Directive 93/13/EEC [1993] OJ L95 29 in force July 1st 1995. 136 S Weatherill EU Consumer Law and Policy (Cheltenham, Edward Elgar, 2005, 1-84376-963-8) 115ff; S Weatherill ‘Europeanisation in the ECJ’ (1995) 3 ERPL 307–328. 137 Unfair Terms in Consumer Contracts Regs 1994, SI 1994/3159, in force July 1st 1995. 138 Unfair Terms in Consumer Contracts Regulations 1999, SI 1999/2083, in force October 1st 1999, now as amended by SI 2001/1186; J Holbrook [1999] 09 Legal Action 26; HW Wilkinson ‘Unfair Contract Terms — A Hydra-Headed Monster’ [1999] NLJ 773–774. 139 See above [5.06]. 140 Newham LBC v Khatun [2004] EWCA Civ 55, [2005] QB 37, [77] Laws LJ. 141 See below [8.27]. 142 Unfair Contract Terms Act 1977, c 50; see below [8.30] n 164. 130 131
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the disparate domestic and European protections143 but any changes will not apply domestic rules to land.144 So protection for consumers of land is European and European protection is limited to consumers.
2
Scope of contracts
[8.25] ‘Contract’, when spoken of in the context of the Directive, must be understood as a term with an autonomous meaning; this certainly embraces an English bilateral contract with consideration passing in each direction, and irrespective of form protection applying equally to contracts concluded by word of mouth or in writing.145 The net is potentially cast much wider so as to include for example a gratuitous arrangement or even the fiduciary relationship between trustee and beneficiary. In Baker146 arguments about unfair terms in the rules of a pension fund were dismissed under the domestic Unfair Contract Terms Act 1977, but it is odd that the Unfair Terms Regulations 1999 were not thought to be relevant; the suspicion is that an exclusion clause for trustees may well offend the European unfair terms regime. It must be remembered that trusts are essentially contractual on the continent.147 [8.26] Perhaps the most difficult issue is the public/private law divide in continental jurisprudence. One case148 concerned the purchase by a couple of a parking lot in a municipal multi-storey car park which was under construction and whether they were obliged to pay in advance of the car park’s construction. German law of the time149 only required payment after satisfactory completion of the work, but this was displaced in the particular contract by a standard clause making the whole purchase price due immediately after conclusion of a bank guarantee which had been lifted from the public law rules governing building companies.150 Originally, no doubt, this clause had a public law character but the parties had impressed it with their own private law character, and thus one that could be scrutinised for good faith.151 The English courts find it much easier to trespass across the public/private divide and so the unfair terms regime applies to a public housing authority; the B side of the B2C transaction may be represented
143 Unfair Terms in Contracts (Law Com 292, 2005); A Wood ‘First Reactions’ (2005) 26 Business Law Review 110–112. 144 Unfair Terms Bill attached to Unfair Terms in Contracts (n 143 above) cl 22, sch 3 para 4 (disapplying cls 1, 9, 11). 145 Unfair Terms Directive (n 135 above) R[11]. 146 Baker v JE Clark & Co (Transport) [2006] EWCA Civ 464, [2006] Pension Law Reports 131. 147 See below [11.36]. 148 C-237/02 Freiburger Kommunalbauten v Hofstetter [2004] I ECR 3403, ECJ. 149 Bürgerliches Gesetzbuch (German Civil Code) §641. 150 German Law on Estate Agents and Building Companies (Makler- und Bautragerverordnung) §7. 151 S Whittaker ‘Unfair Contract Terms, Public Services, and the Construction of an EU Conception of Contract’ (2000) 116 LQR 95–102.
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by a public or governmental body152 since letting of public sector homes is a ‘trade’, what in the private sector would be done for profit.
3
Land
[8.27] Schmid says that: the Unfair Terms Directive does not contain an exception for contracts dealing with real property or contracts concerning other rights relating to real property. Therefore, standard clauses used in such contracts are subject to the terms of the directive.153
A point that is obvious to a German lawyer for long concerned English commentators. [8.28] The point has been settled definitively by Laws LJ in Khatun154 in the context of an outrageous policy by Newham London Borough Council requiring homeless families to sign a tenancy agreement before they had a chance to see the accommodation on offer. No wonder when one considers that housing officers had deemed it appropriate to offer a home above a public house to a Muslim. The Court of Appeal ruled that the unfair terms regime applied to an agreement for a tenancy affecting land and, having decided that, the particular term was inevitably found to be unfair. No basis existed to differentiate real property from personal. Laws LJ considered a wide range of material including the recitals to the Directive which spoke of goods and services,155 the German unfair terms regime and its application to land,156 travaux préparatoires which proved inconclusive157 and the analogy of other consumer protection Directives.158 In the end the crucial word ‘goods’ or ‘biens’ was interpreted in the same way as in the European Convention on Human Rights to mean ‘possessions’ which could be movables or land.159 Case law favoured the inclusion of land without the point having been decided160 and it was also sensible given the importance of the purchase of land.161 [8.29] One may deduce that the European Court of Justice will not take the
Khatun (n 140 above) [83–88] Laws LJ. CU Schmid ‘European Influences on Real Property Law’ (Lund, EULIS, 2003) 10. 154 Khatun (n 140 above). 155 Khatun (n 140 above) [54] Laws LJ. 156 Khatun (n 140 above) [62] Laws LJ. S Bright ‘Winning the Battle against Unfair Terms’ (2000) 3 LS 331–352, 338–342, adds France, Belgium. Sweden and Italy. 157 Khatun (n 140 above) [55–63], [80] Laws LJ. 158 Khatun (n 140 above) [64–67] Laws LJ. 159 E Conv HR Protocol 1 (Paris, 1952, CETS 9) §1; Khatun (n 140 above) [68], [70], [78] Laws LJ. 160 Starmark Enterprises v CPL Distribution [2001] EWCA Civ 1252, [2002] Ch 306, [70] Arden LJ; Khatun (n 140 above) [71] Laws LJ (obiter). 161 Khatun (n 140 above) [77] Laws LJ. 152 153
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Contracts
land point since they have not mentioned it in cases where it would have been available.162 [8.30] This was not true of pre-European domestic British law, since the Unfair Contract Terms Act 1977 did not apply to land,163 and the re-enactment that is proposed by the Law Commission will keep the scope of domestic protection the same.164 The regulation implementing the European regime applies to land contracts as it does to goods. Uncertainty permeated the 1994 version of the Regulations since it referred to goods165 which many writers166 took to mean that land buyers went unprotected. This was always an erroneous reading of the Directive and an incorrect transposition of the European Directive, and Allen167 pointed out the need for a teleological (purpose-based) interpretation. Why should the form of the asset matter when the internal market transcends national boundaries for land as for all other forms of capital? The internal market includes land,168 the basis for attacking unfair terms depends on consumer protection and not on the internal market, and anyway personal obligations arising from contracts are included in the scope of the community rather than the property exclusion.169 The French text is definitive in a way that the English text is not170 and its use of the word ‘biens’ denotes ‘property’ in general; a ‘vendeur des biens’ is selling property but it could be movable or immovable.171 Any possible doubt and the point is made clear in the 1999 rewrite of the Regulations172 which copies out the wording of the Directive more precisely and omits the earlier misleading reference to goods. Land contracts are protected against unfair terms.173
162 Freiburger (n 148 above) (contract to build and supply a parking space); contrast Freiberger AG[7–9] Geelhoed; Khatun (n 140 above) [71–73] Laws LJ; E Macdonald ‘Unfair Terms in Consumer Contracts’ (2005) 121 LQR 38–41; also cases on jurisdiction clauses see below [8.37]. 163 Unfair Contract Terms Act 1977 (n 142 above) sch 1 para 1; Electricity Supply Nominees v IAF Group [1993] 1 WLR 1059 QBD; Havenridge v Boston Dyers [1994] 2 EGLR 73 CA; Star Rider v Inntrepreneur Pub Co [1998] 1 EGLR 53 Blackburne J; C Harpum ‘Exclusion Clauses and Contracts for the Sale of Land’ [1992] CLJ 263–307 @ 267–268. 164 Unfair Terms Bill (n 144 above) cl 22, sch 3 para 4 (disapplying cls 1, 9, 11). 165 Unfair Terms Regs 1994 (n 137 above) regs 3(1), 3(2)(b) and passim (references to seller); Bright ‘Winning the Battle’ (n 156 above) 339. 166 S Bright & C Bright ‘Unfair Terms in Land Contracts: Copy Out of Cop Out?’ (1995) 111 LQR 655–673; JE Adams ‘Unfair Contract Terms and the Conveyancer’ [1995] Conveyancer 10; JE Adams ‘Unfair Contract Terms, the Conveyancer and the Regulations’ [1999] Conveyancer 8–10; S Cullen & M Pears ‘Unfair Contract Terms Directive’ [1994] 45 EG 143–144; Chitty on Contracts (London, Sweet & Maxwell, 29th edn, 2004, 0-421-84266-1) [15–012] (summary of history and compare the 27th and 28th edns). 167 M Allen ‘Teleological Interpretation in Land Law’ (1995) 58 MLR 696–701. 168 The point is drawn from German writing: Bright ‘Winning the Battle’ (n 156 above) 331–339. 169 See below [3.18ff] 170 Chitty on Contracts (n 166 above) [14–091], [15–012]. 171 UFC v Papeterie Tissot [1999] II JCP 10205, [2000] ECLYB [2216]; the particular contract was not in the necessary B2C pattern; see above [5.08]. 172 Unfair Terms Regs 1999 (n 138 above). 173 Bright ‘Winning the Battle’ (n 156 above) 338–342; C Bright & S Bright ‘Cop Out?’ (n 166 above) 373.
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[8.31] Application of the Directive to land was apparently assumed when the House of Lords heard Director General of Fair Trading v First National Bank.174 The case concerned provisions for charging interest on arrears of mortgage instalments and was bitterly contested on the issue of unfairness, the House of Lords ultimately coming to an astounding decision that the provision in issue was not unfair.175 Given that context of an aggressive contest by the bank, the concession176 that the secured home improvement loan fell within the remit of European testing for unfairness of the terms surely decides that a contract secured on land must be tested for fairness,177 especially as the 1994 Regulations were in issue where the point might be thought to have been more arguable than it is now.178 [8.32] There is a certain logic in maintaining the differentiation traditional in English law between land and goods. Supposed autonomy of the parties is largely a myth for consumers of goods, and the common law allows big business to impose whatever terms it wants. Freedom of contract in relation to land is not a sham. Standard Conditions of Sale are prescribed nationally, but each contract is drafted and approved individually by conveyancers acting on either side, and the terms agreed will vary as the balance in the market swings from a buyers’ to a sellers’ market and back again. Agreed terms reflect how desperate sellers are to sell and buyers to buy, true freedom of contract in the raw. A land exception is logical but should be directed at contracts negotiated after legal advice has been provided, that is to remove protection from a well-advised buyer of land.179 It is reasonable to curtail protection of a consumer who is professionally represented,180 but a mismatch is created when all transactions with land are excluded.
4
Fairness of particular contracts
[8.33] Contracts in the land sector fall into five main groups so far as fairness of terms is concerned.
(1)
House construction, repair and insurance
[8.34] Contracts for the sale of land will not often fall to be scrutinised for
174 Director General of Fair Trading v First National Bank [2001] UKHL 52, [2002] 1 AC 481; [2000] QB 647 CA; [2000] 1 All ER 240 Evans-Lombe J; E Macdonald ‘Scope and Fairness of the Unfair Terms Regs’ (2002) 65 MLR 763–773. 175 See below [8.42]. 176 Apparently because consumer credit agreement ignoring the fact that it was secured on land: First National Bank FI (n 174 above) [12] Evans Lombe J; CA [16] Peter Gibson LJ. 177 Standard Bank of London v Apostolakis (No 1) [2000] ILP 766 Longmore J. 178 First National (n 174 above) [107] Evans Lombe J at first instance. 179 Distance Selling Directive 97/7/EC [1997] OJ L144 19; §12[1]; Distance Marketing of Financial Services Directive 2002/65/EC [2002] OJ L271 16, §12[1]; for distance rentals see above [5.36]. 180 Consumer Credit Directive 87/102/EC [1987] OJ L42 48, as amended, §2[4].
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Contracts
unfair terms because they will generally fall into a C2C pattern,181 or for commercial property into a B2B pattern. However, a sale of a new home by a developer to the first owner of the home will fit the B2C pattern and so is within the Directive.182 Other cases concern new home guarantees such as the NHBC Build Mark Arbitration Agreement183 and contracts for the refurbishment of homes.184 Also covered is an agreement to give a pre-emption to a local authority on a resale of ‘right to buy’ property.185 The ‘real estate’ sector has the strongest showing on the European database of unfairness186 but on closer examination this means repairs to buildings rather than sales, and aspects such as maintenance and upkeep, decoration, heating, lift maintenance and alarm systems.187 Unfair terms proliferate in contracts for insuring houses or other land: a survey by Montpellier Law Faculty found a Danish sample to be clean but insurance policies from almost all other Member States were widely infected with unfair terms.188
(2)
Tenancies
[8.35] Unfair terms are very likely to appear in tenancies and ‘residential leases [are] clearly in the firing line’189 even under the 1994 Regulations since the grant was a provision of services; since 1999 the point has been too clear to bother to argue. A requirement to accept accommodation without viewing it or face cancellation of accommodation was unfair.190 Domestic protection was recommended thirty years back but this was never enacted.191 Of course, a lease is only caught in the net if the tenant is a consumer and the lease forms a B2C contract,192 so corporate and business tenants are left to their own devices. Thus a commercial tenant cannot challenge a term of a rent review provision that deems time to be of the essence for service of a counter-notice to challenge the rent proposed by the landlord. It would at least be open to a residential tenant who was a consumer to argue the unfairness of such a proviso.193 Unfairness can be tested in assured shortholds in the residential sector and this testing will, for example, invalidate a term that the shorthold tenant should pay for repairs of UFC v Papeterie Tissot (n 171 above) (but excluded because C2C pattern). Freiburger (n 148 above) (parking space); E Macdonald ‘Unfair Terms’ (n 162 above); M Dean ‘Unfair Contract Terms: The European Approach’ (1993) 56 MLR 581–590, 581. 183 Zealander v Laing Homes (2000) 2 TCLR 724 QBD. 184 Westminster Building Co v Beckingham [2004] EWHC 138, [2004] BLR 163. 185 Bundesgerichtshof IX ZB 104/00 [2003] ECLYB [119]. 186 Report on the Implementation of the Directive on Unfair Terms COM (2000) 248 final, Graph 14B. 187 Unfair Terms Implementation Report (n 186 above) Graph 14 B. 188 Unfair Terms Implementation Report (n 186 above) Annex II [A(2)]. 189 JE Adams ‘Unfair Contract Terms and the Conveyancer’ [1995] Conveyancer 10–11. 190 Khatun (n 140 above). 191 Second Report on Exemption Clauses (Law Commission 69, 1975). 192 Unfair Terms Directive (n 135 above) §2; Unfair Terms Regs 1999 (n 138 above) reg 3(1); see above [8.24]. 193 Starmark (n 160 above) [70] Arden LJ; Khatun (n 140 above) [71] Laws LJ (obiter). 181 182
Unfair Terms Legislation
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damage which they had not caused. One large landlord has given an undertaking to alter its terms194 and more general guidelines have been issued.195 Inclusion of tenancies makes it unnecessary to differentiate sharply at the lease/licence divide, licences indubitably being within the remit of testing for unfairness. This applies, for example, to service contracts for student accommodation,196 and unfair terms are said to be ubiquitous in the tourist sector, including rental agreements for holiday accommodation.197 One would expect unfair terms in agreements covering holiday clubs and timeshares, but action to eliminate unfair terms in timeshare contracts was co-ordinated by the Belgian outfit Test Achats.198
(3)
Mortgages
[8.36] Terms must be tested in home improvement loans secured on the home as shown in the leading case of Director General of Fair Trading v First National Bank199 and other authorities200; this is because the loan agreement is a consumer credit agreement whether or not it is secured on land.201
(4)
Choice of forum clauses
[8.37] Forum clauses in a B2C202 contract have to be tested203 if they have not been individually negotiated and they will be unfair if they direct complaints to the courts where the seller has his business and the clause causes a significant imbalance contrary to the requirement of good faith.204 In Standard Bank London v Apostolakis (No 2),205 for example, a Greek married couple would have been forced to litigate an investment dispute in London to which it was impracticable to travel and where they would not understand the language, but this would have resulted in definite unfairness. The same may be true of arbitration clauses.206 Times July 11th 2005 (William Pears Group). Unfair Terms in Tenancy Agreements (London, OFT, 2005). 196 Khatun (n 140 above) [78] Laws LJ; Chitty on Contracts (n 166 above) [15-018]; Bright ‘Winning the Battle’ (n 156 above) 340. 197 Report by Bishop & Robertson Chalmers referred to in Unfair Terms Implementation Report (n 186 above) Annex II [A(5)]; Law Com Unfair Terms in Contracts (n 143 above) [II.2]. 198 Unfair Terms Implementation Report (n 186 above) Annex II [A(3)]. 199 First National Bank HL (n 174 above); E Macdonald ‘Scope and Fairness’ (n 174 above); Chitty on Contracts (n 166 above) [15-017] referring to OFT guidance. 200 Apostolakis (No 1) (n 177 above); Falco Finance v Gough [1998] October 28th Macclesfield CC; Kindlance v Murphy [1997] High Ct of Northern Ireland; S Bright ‘Winning the Battle’ (n 156 above) 332 fn 10. 201 First National Bank FI (n 174 above) [12] Evans Lombe J; CA [16] Peter Gibson LJ. 202 Not B2B: C-269/95 Benincasa v Dentalkit [1997] I ECR 3767 ECJ; C541/99 etc Cape SNC v Idealservice [2001] I ECR 9049 ECJ. 203 Apostolakis (No 1) (n 177 above), (No 2) [2002] CLC 939, David Steel J; Greek decision 8032/2001 [2003] ILP 29, Polimeles Protodikeio, Athens. 204 C-240/98 Océano Grupo Editorial v Quintero [2000] I ECR 4941 ECJ, J[24]; this was said to be clearly unfair in Freiburger (n 148 above) J[27]. 205 Apostolakis (No 2) (n 203 above). 206 Williamson v Bank of Scotland [2006] EWHC 1289 (Ch), [2006] BPIR 1085, [41ff] Judge George Bompas; Picardi v Cuniberti [2003] BLR 487 Judge Toulmin QC; Bryen & Langley v Boston [2004] EWHC 2456. 194 195
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Contracts
Consumers should be protected against an unsatisfactory choice of law207 and especially against the choice of a non-EEA state which risks losing mandatory European protections.208
(5)
Professionals
[8.38] Fairness is also an issue in contracts by which professionals offer services in the conveyancing process, such as estate agents, surveyors and architects.209
UN FA I R N ESS O F TER MS
Unfairness of Terms 1
Substantive bad faith
[8.39] The first kind of bad faith is substantive unfairness, where a significant imbalance exists between the parties and in particular a business must not take advantage of a consumer’s weaker bargaining position.210 ‘Unfair terms’ affected by the Directive are identified by an overall evaluation against the requirement of good faith.211 Bad faith consists of unfair or inequitable or one-sided dealing or failure to consider the consumer’s legitimate interests and this will call for a review of the terms subsequently agreed as a result of the trader’s conduct. Civilian systems require all contracting parties to act in good faith towards each other — not just in B2C transactions — so much so that the French implementation dispenses entirely with any reference to good faith as a requirement212 and the Italian system also offers a sharp comparison with an inferior English law.213 Good faith had to be incorporated into UK law, a domestication to be welcomed214 and which ought to be extended.
H Collins ‘Good Faith in European Contract Law’ (1994) 14 OJLS 229–254 @ 231. Unfair Terms Directive (n 135 above) §6[2], R[22]; Unfair Terms Regs 1999 (n 138 above) reg 9; formerly Unfair Terms Regs 1994 (n 137 above) reg 7; Unfair Terms Bill (n 144 above) cl 18. 209 Bairstow Eves London Central v Smith [2004] EWHC 263, [2004] 2 EGLR 25 Gross J (rate of commission increased if payment deferred); Munckenbeck & Marshall v Harold [2005] EWHC 356 QBD (unfair term in standard RIBA contract for architect). 210 First National Bank HL (n 174 above) [17] Lord Bingham, [31] Lord Steyn; Macdonald ‘Scope and Fairness’ (n 174 above); Collins (n 207 above) 249. 211 Unfair Terms Directive (n 135 above) §3; Unfair Terms Regs 1999 (n 138 above) regs 4–5; Unfair Terms Bill (n 144 above) cl 7. 212 Chitty on Contracts (n 166 above) [15-045] fn 199. 213 P Nebbia ‘An Anglo-Italian Comparison’ ch 9 in M Van Hocke & F Ost Harmonisation of European Private Law (Oxford, Hart, 2000, 978-1-84113-137-5); P Nebbia ‘Law and Tradition and the Europeanisation of Contract Law’ [2004] Yearbook of European Law 363–382; P Nebbia Unfair Contract Terms in European Law (Oxford, Hart, 2007, 1-84113-594-1). 214 Dean ‘European Approach’ (n 182 above) 585; Collins (n 207 above); Pasa & Benacchio (n 42 above) 53–63. 207 208
Unfairness of Terms
355
[8.40] We should ignore as an irritant the contrary view215 that good faith cannot appropriately be incorporated into the common law. Nineteenth century ‘liberal’ (for this read conservative or commercial) ideology allowed business the freedom to impose grossly improper terms, so no wonder that the common law is the preferred medium for international business dealings, since it applauds knaves and rascals who exploit their contractual freedom. Now B2C contractors have to observe a principle of fair and open dealing.216 The original fear that contract law would be rent asunder by alien civilian imports has proved to be unfounded.217 Good faith should be extended so as to cover B2B and C2C dealings and something needs to be done to overcome the entrenched ‘liberal’ preconceptions of the English courts.218
2
Procedural bad faith
[8.41] Procedural unfairness involves bad faith in relying on an unfair surprise where a term operates to the disadvantage of a consumer which he would not have expected, thus negating a real choice.219 Here the term is not inherently unfair, as many terms are,220 but rather the complaint is that the consumer has not had the opportunity to which he was entitled to become acquainted with all the terms.221 [8.42] Thus where a home loan provided for repayment by instalments calculated so as to include interest on the principal and these were core terms fixing the bargain and not open to challenge as to fairness, the home loan agreement provided that if instalments were late, interest should be charged on the arrears. This provision, a ‘price escalation’ was held not to be a part of the core, it was not part of the central bargain between the parties,222 and thus a term levying interests on arrears of instalments was open to unfairness testing.223 Application of the test to the facts divided opinion between those thinking the clause unfair224 and the view which ultimately prevailed that it was fair.225 So the clause was 215 G Teubner ‘Legal Irritants: Good Faith in British Law or How Unifying Law Ends Up in New Divergences’ (1998) 61 MLR 11–32. 216 First National Bank (n 174 above) 250–251 Evans-Lombe J; Interfoto Library v Stiletto [1989] QB 433 CA, 439 Bingham LJ. 217 Law Com Unfair Terms in Contracts (n 143 above) [IV.(a)]. 218 See below [8.46]. 219 First National Bank CA (n 174 above) 686 Peter Gibson LJ; Pasa & Benacchio (n 42 above) 46ff; First National FI (n 174 above) [109] Evans Lombe J. 220 Macdonald ‘Unfair Terms’ (n 162 above). 221 Unfair Terms Directive (n 135 above) R[20], §3[3], Annex [i]. 222 Bright ‘Winning the Battle’ (n 156 above) 345, 349; approved First National Bank HL (n 174 above) [34] Lord Steyn. 223 First National Bank HL (n 174 above) [9–12] Lord Bingham, [34–35] Lord Steyn, [42–43] Lord Hope, [55] Lord Millett, [63–65] Lord Rodger. 224 The Director General and the CA. 225 Evans Lombe J and the HL, [13–24] Lord Bingham, [36–40] Lord Steyn, [44–46] Lord Hope, [53–57] Lord Millett.
356
Contracts
substantively fair. That decision may be hard to swallow, but the decision that it was not procedurally unfair is surprising in the extreme. The court extended the time for payment and so the borrowers were immune from further enforcement while paying the reduced sum ordered by the court. However, the bank’s common form of home loan agreement provided that even while the borrowers were following their court order that interest at the contractual rate continued to accrue on the arrears. When they had discharged the original principal and interest, they faced an additional bill for interest on the arrears. The court failed to appreciate this or it could have extended its order to cover this sum, and indeed the general court practice was in ignorance of it, yet the provision was not thought to be a procedural surprise against the borrowers.226 Confusion and hardship there was227 but this was said not to be unfairness. The unfair terms legislation will never function properly in common law countries until an autonomous and mandatory meaning of good faith is imposed across the EU.
3
Unintelligibility of terms
[8.43] All terms, whether in the core or more peripheral, must display intelligibility.228 A seller or supplier shall ensure that any written term of a contract is expressed in plain, intelligible language, and where there is any doubt the interpretation of a written term most favourable to the consumer should prevail.229 A sea change was required in English styles of drafting.230
4
Core terms
[8.44] Terms may not be tested for fairness if they define the main subject matter of the contract. This is intended to preserve contractual autonomy by leaving the determination of the adequacy of the services or goods supplied as against the price or remuneration agreed to the contracting parties. They strike the bargain. Given intelligibility, there is no assessment of the substantive fairness of core terms.231 There is no good reason why core terms should not be tested for procedural (as opposed to substantive) unfairness,232 nor any reason to exempt the core from fairness-testing as opposed to bargain-making. One example of a core is the definition of the insured risks in an insurance policy, the core which defines First National Bank HL (n 174 above) [58–60] Lord Millett. First National Bank HL (n 174 above) [44] Lord Hope, [65–66] Lord Rodger. 228 Unfair Terms Regs 1999 (n 138 above) reg 7(2); Bundesgerichtshof VIII ZR 48/05 [2006] NJW 996; [2006] 06 ECL [8]; the ‘core’ is discussed immediately below [8.44]. 229 Unfair Terms Directive (n 135 above) §5, Unfair Terms Regs 1999 (n 138 above) reg 7; previously Unfair Terms Regs 1994 (n 137 above) reg 6. 230 Chitty on Contracts (n 166 above) [15–051]. 231 Unfair Terms Directive (n 135 above) R[19], §4[2]; Unfair Terms Regs 1999 (n 138 above) reg 6(2). 232 As proposed by Unfair Terms Bill (n 144 above) cls 5, 6. 226 227
Unfairness of Terms
357
what the insurer is protecting against. Clearly an insurer charges more for comprehensive insurance of a car than for insuring it ‘third party’, so the width of the risk is a factor in calculating the premium charged to the consumer.233 Still, insurers should be required to meet procedural fairness requirements, to deliver what they have promised. That helps the bargain rather than gainsaying it. In a broad sense all terms are related to the price but that does not make all terms part of the core.234 Thus, in a home loan, providing for interest on arrears of interest is not core and is open to challenge.235 Indeed, any term increasing the price on late payment is suspect.236 Also safe from fairness scrutiny are mandatory statutory and regulatory provisions and implied terms, which impose default rules of law where no other arrangement has been established, along with principles drawn from international conventions, which are presumed not to contain unfair terms.237
5
Standard terms
[8.45] A term is subject to scrutiny if it has not been subject to individual negotiation; it may be an individual term, any term drafted in advance leaving the consumer unable to influence its substance, or any term of a pre-formulated standard contract. A contract which has been individually negotiated may still be tested in its standard parts if, overall, the agreement forms a pre-formulated standard contract. A term will be regarded as unfair if it causes a significant imbalance in the contractual rights to the detriment of the consumer contrary to the requirement of good faith,238 and, although the core and bargain cannot be tested, these elements may be relevant in assessing the fairness of other terms.239 Particular regard is had to the strength of the bargaining positions of the parties, whether the consumer had an inducement to agree to the term and any special order by the consumer. Relevant factors240 are: 앫 the nature of the goods or services at the time of conclusion of the contract, 앫 all circumstances attending conclusion of the contract at that time, and 앫 all other terms of the contract and any dependent contracts. 233 Unfair Terms Directive (n 135 above) R[19]; this is an application of the general test in §4[2] and not a free-standing exemption as many insurers seem to believe. It needs to be narrowed to make clear that procedural unfairness is open to challenge. 234 First National Bank HL (n 174 above) [34] Lord Steyn. 235 For the result that the term was fair see above [8.42]. 236 Bairstow Eves (n 209 above) (estate agent’s commission of 1.5% raised to 3% if unpaid for 10 days after completion). 237 Unfair Terms Directive (n 135 above) R[13], §1[2]; Unfair Terms Regs 1999 (n 138 above) reg 4(2); Baybut v Eccle Riggs [2006] All ER (D) 161 (Nov) (implied term at common law); Unfair Terms Bill (n 144 above) cl 22, sch 3. 238 Unfair Terms Directive (n 135 above) §3; Unfair Terms Regs 1999 (n 138 above) reg 5; the burden of proof falls on the seller or supplier 239 Unfair Terms Directive (n 135 above) R[19]. 240 Unfair Terms Directive (n 135 above) R[18], §4; Unfair Terms Regs 1999 (n 138 above) reg 6(1).
358
Contracts
The Directive has annexed to it a ‘grey’ list — indicative and non-exhaustive — of terms which may be regarded as unfair,241 subject to amplification in national laws,242 as follows: 앫 limitation of liability for death or personal injury, 앫 inappropriate limitation of the consumer’s rights in the event of inadequate performance, 앫 the seller having a choice whether or not to fulfil a condition, 앫 unilateral forfeiture of a deposit, 앫 disproportionate default charges, 앫 retention of advance payments on unilateral termination, 앫 termination without reasonable notice and without serious grounds,243 앫 automatic extension of a fixed term contract, 앫 terms with which the consumer had no opportunity of becoming acquainted in advance, 앫 unilateral alteration of the terms of the contract244 though variation of interest rates is allowed provided certain guidelines are satisfied,245 앫 unilateral alteration without valid reason of any characteristics of the product or service, 앫 fixing the price of goods at the time of delivery or allowing an increase without allowing a cancellation right, reasonableness depending upon the balance between the final price and the price agreed, though price-indexation clauses are allowed,246 앫 allowing the seller to interpret the contract, 앫 limiting liability for agents, 앫 obliging the consumer to carry out his obligations where the seller or supplier does not perform his, 앫 allowing unilateral transfer where this reduces the consumer’s guarantees, and 앫 limiting redress, for example by an arbitration clause or a transfer of a burden of proof.247
241 Unfair Terms Directive (n 135 above) R[17], §3[3]; Unfair Terms Regs 1999 (n 138 above) reg 5(5), sch 2; C-478/99 Commission EC v Sweden [2004] 1 ECR 4147 ECJ (transposition without the list). 242 Unfair Terms Regs 1999 (n 138 above) sch 2 part 2; Chitty on Contracts (n 166 above) [15–069]; UK law is unusual in relying on a non-binding list; most states have a black list or a combination of black and grey: Law Com Unfair Terms in Contracts (n 143 above) [III.2]. 243 Unfair Terms Directive (n 135 above) Annex [2](c); Hof Arnheim, Netherlands [2001] NJ 622, [2002] ECLYB [409]. Exceptions: (1) financial services and (2) contracts with a price linked to fluctuations in a stock market index or foreign currency exchange rate. 244 Subject to qualification re (1) financial services and (2) fluctuating price contracts. 245 There must be a valid reason and the consumer must be notified at the earliest opportunity and given an opportunity to dissolve the contract immediately; variation is allowed of any contract of indeterminate duration on the same conditions. 246 Price indexation is allowed. 247 Unfair Terms Regs 1999 (n 138 above) reg 5(6), as amended by Financial Services (Distance Marketing) Regs 2004, SI 2004/2005, reg 24.
Unfairness of Terms
359
A black list of prohibited terms would be better.248 Standard terms agreed between several traders may also be vulnerable to attack on competition grounds.249
6
Effect of unfair term
[8.46] Unfair terms will not bind a consumer, but once it is shorn of its unfair term the remainder of the contract will continue to bind the parties if it is capable of continuing in existence in that diminished state.250 Collective enforcement was beefed-up by the 1999 Regulations,251 so suppliers can now be prevented from continuing use of unfair terms,252 either at the insistence of consumer protection organisations253 or by enforcement agencies such as the Director General of Fair Trading.254
7
Variant national standards
[8.47] National law could set a higher standard of protection255 but perhaps not a stricter general standard of fairness.256 Even with the European base-line standard, good faith is variable257 and needs a common jurisprudence.258 The CLAB Database which collates national case law is a starting point259 but no adequate substitute for European Court of Justice supervision. In fact fairness is left to national courts, which is a recipe for variant de facto applications of a supposedly common standard.260 248 Study Group in Social Justice in European Private Law ‘Manifesto’ (2004) 10 ELJ 653–674; O Lando ‘Liberal Social and Ethical Justice in European Contract Law’ (2006) 43 CML Rev 817–833 @ 827–829. 249 P Nebbia ‘Standard Form Contracts: Between Unfair Terms Control and Competition Law’ (2006) 31 EL Rev 102–113. 250 Unfair Terms Directive (n 135 above) §6[1]; Unfair Terms Regs 1999 (n 138 above) reg 8(1); previously Unfair Terms Regs 1994 (n 137 above) reg 5(1); Unfair Terms Bill (n 144 above) cl 24. 251 Bright ‘Winning the Battle’ (n 156 above) 332 @ 336; Law Com Unfair Terms in Contracts (n 143 above) [III.6]. 252 Unfair Terms Directive (n 135 above) §7[1]; C-473/00 Confidis v Fredant [2002] I ECR 10875 ECJ; First National Bank HL (n 174 above) [33] Lord Steyn. 253 Unfair Terms Directive (n 135 above) §7[2–3]. The action is non-contractual for the purposes of conflicts rules: C-167/00 Verein fut Konsumenteninfomation v Henkel [2002] I ECR 8111 ECJ. 254 Unfair Terms Regs 1999 (n 138 above) regs 10–15; First National Bank CA (n 174 above) [17–20]. 255 Unfair Terms Directive (n 135 above) §8. 256 I Klauer ‘General Clauses in European Private Law and Stricter National Standards’ (2000) 8 ERPL 187–210, 204, 210. 257 O Lando & H Beale Principles of European Contract Law vol I (The Hague, Kluwer, 1999) 116; Dean ‘European Approach’ (n 182 above) 585. 258 Dean ‘European Approach’ (n 182 above) 589. 259 European Database of Case-law Concerning Unfair Contractual Terms (CLAB, ). 260 Freiburger (n 148 above) J[21]; but Quintero (n 204 above) was clearly unfair according to Freiburger at J[27].
360
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European Contract Law 1
The Contract Communication
[8.48] In 2004 the European Commission set out to the Parliament and Council in its Contract Communication its views on the future development of European Contract Law.261 A Common Frame of Reference will be developed to deliver greater coherence in the jurisprudence (the acquis) consisting of European legislation and case law and this will be supplemented by support for industry-led initiatives to develop Standard Contract Terms for particular types of contracts and a general Community Instrument encapsulating principles of law which may be adopted by contracting parties on an opt-in basis. Wilder proposals for a harmonisation of substantive contract law have evaporated,262 but the Communication nevertheless represents a decisive step in the long struggle to introduce some coherence into European civil law. This Communication had many precursors. The very first President of the European Commission called for a codification of European contract law.263 A new impetus was injected by the European Parliament in 1989 when it urged that a start should be made on the creation of a private law for the European Community, out of the disparate civil codes of member states, a call repeated in 1994 and again with more urgency in 2000.264 The Council of the Union has added to the pressure since the Council at Tampere in 1999, though pronouncements in favour of the concept paper over the political divisions in the Council, with the United Kingdom just one of the states opposed to the work.265 Eventually work was taken up by the Commission, which produced a ‘Green Paper’266 consultation on which led to an Action Plan (2003)267 and the Contract Communication itself.268 This attracted continued pressure for progress from the Council and Parliament.269
261 European Contract Law and the Revision of the Acquis: The Way Forward (‘the Contract Communication’) COM (2004) 651 final; Responses or ‘Contributions’ . 262 Contract Communication (n 261 above) [2.3]. 263 CU Schmid ‘Emergence of a Transnational Legal Science’ (1999) 19 OJLS 673–689, 673 fn 2. 264 European Parliament Resolutions A2-157/89 [1989] OJ C158 400, A3-0329/94 [1994] OJ C205 518, B5-0228-0229-0230 [2000] OJ C377 323, [28]; modified November 15th 2001. 265 Council EU Tampere SI (1999) 800 [39]; R Madelin ‘A Common Frame of Reference for a More Coherent European Contract Law’ (DG Health & Consumer Protection, 2004) 1. 266 Green Paper on Contract Law COM (2001) 398 final [2001] OJ C 255 1; W Van Gerven ‘Codifying European Private Law? Yes If ’ (2002) 27 EL Rev 156–176. 267 Action Plan on Contract Law COM (2003) 68 final [2003] OJ C63 1; M Kenny ‘Is the Commission Running Wild?’ (2003) 28 EL Rev 538–550; D Staudenmayer ‘The Commission Action Plan’ (2003) 11 ERPL 113–129; MW Hesselink ‘The Action Plan’ (2004) 12 ERPL 397–419. 268 D Staudenmayer ‘The Way Forward in European Contract Law’ (2005) 13 ERPL 95–104. 269 European Parliamentary Resolution 96-TA (2006) 109; Council Justice and Home Affairs Brussels JHA/15801/06.
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Our main task is to examine the impact of these proposals on property law270 but the contract law context is needed first.
2
Consumer review
[8.49] Substantive law has been developed in many aspects of consumer law since the 1980s, notably doorstep selling, distance contracting, package tours, unfair terms, time sharing, and delayed payments, to which must now be added the prohibition on unfair commercial practices.271 Individually these may be small and collectively patchy, but they do add up to a considerable and critical mass which is now indispensable.272 Existing directives and jurisprudence in the field of consumer protection should, it is generally agreed, be reviewed including aspects such as self-regulation, enforcement and levels of compliance. Questions will be asked about the following issues273: 앫 앫 앫 앫 앫 앫 앫 앫 앫
adequacy of the level of consumer protection, elimination of market barriers and distortions of competition, minimisation of compliance costs, gaps, inconsistencies and overlaps between directives, scope of the directives and the possibility of legislative merger, definitions, appropriateness of pre-contractual information requirements, harmonisation of withdrawal periods and procedures,274 and full harmonisation of European consumer law.275
Details of national legislation and jurisprudence will be collected and the domestic implementations of directives will be analysed, though the diagnostic phase is already running late. Even the doubters of the common law world recognise the value of this exercise in applied comparative law aimed at securing greater coherence in the law.276
270 Laeken Council Report JHA/13758/01 pressed for a study by the Commission of the differences in national property legislation and whether these constituted obstacles to the functioning of the internal market in practice. 271 See above [ch 5]. 272 N Reich ‘Rethinking Union and Community Law’ (1997) 3 ELJ 131–164, 142ff; D Staudenmayer ‘The Commission Communication and Future Prospects’ (2002) 51 ICLQ 673–688, 674, 679ff; S Grundman ‘Structure of European Contract Law’ (2001) 14 ERPL 505–528, 508, 510, 527. 273 Contract Communication (n 261 above) [2.1]; Laeken Council Report (n 270 above) [9–13]; Green Paper on Review of the Consumer Acquis COM (2006) 744 final. 274 Staudenmayer ‘Future Prospects’ (n 272 above) 677–678; see above [5.72]. 275 M Douglan ‘Minimum Harmonisation and the Internal Market’ (2000) 37 CML Rev 853–885, 866; 868; Van Gerven ‘Yes If ’ (n 266 above) 66; Kenny ‘Commission Running Wild?’ (n 267 above) 542; 276 S Weatherill ‘Reflections on EC’s Competence to Develop a European Contract Law’ (2005) 13 ERPL 405–418, 405, 409.
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Contracts
Common Frame of Reference
[8.50] Contract law will be improved by the development under the auspices of the European Commission of a Common Frame of Reference. As well as securing greater coherence of the existing acquis, it will guide future developments and articulate those parts relevant to consumer protection. Elaboration of the Common Frame of Reference and the Commission will look particularly at: 앫 absence or looseness of definitions,277 앫 mismatches between the scope of the directives and the problems addressed, 앫 national variations in the level of protection under minimum harmonisation, and 앫 other inconsistencies in B2C contract law. What will emerge is a tool kit on which European or national legislators could draw when seeking to create new legal instruments in the area of contract law (even in areas unregulated at European level) and to improve or simplify existing legislation,278 as well as providing a base from which to develop standard terms and an optional instrument,279 and forming a source of inspiration for the European Court of Justice. A Gaulish structure is envisaged280 with, first, a set of common fundamental principles of contract law, with exceptions, supported, secondly, by definitions of key concepts, and supplemented, thirdly, by model rules, probably differentiating B2B, B2G (government), B2C and C2C contracts. Since the greatest bulk will fall into this third element the structure is flattened out in the discussion that follows. Principles in chapter I would set out fundamental principles of European contract law and exceptions to them, including for example the scope of contractual freedom when dealing with a weaker party. Definitions in chapter II would seek to encapsulate the crucial abstract legal terms of European contract law, including a contract itself and when it should be said that a contract has been concluded. Contract (chapter III, section I) — conclusion, formality and terms 277 A first topic is what it is to be a ‘consumer’; sub-issues are the restriction to natural persons, whether the consumptive purpose should be stated positively or negatively, mixed transactions, and whether consumption must be known to the professional: First Annual Progress Report on European Contract Law COM (2005) 456 final 9–10; Second Working Document on European Contract Law and the Revision of the Acquis (DT/623512EN.doc, 2006). 278 Contract Communication (n 261 above) [2.1]; Commission Communication on Updating and Simplifying the Community Acquis COM (2003) 71 [2002] OJ C137 2; R Schulze ‘European Private Law and Existing EC Law’ (2005) 13 ERPL 3–19; Second Progress Report on the Common Frame of Reference COM (2007) 447 final; Lord Mance ‘Is Europe Aiming to Civilise the Common Law?’ (Chancery Bar Lecture, March 27th 2006). 279 See below [8.53]. 280 Contract Communication (n 261 above) [3.1.3], Annex I.
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앫 conclusion of a contract (offer, acceptance, counter-offer, revocation of offers, and time of conclusion), 앫 form of a contract (written formalities, oral contracts, electronic contracting and signature), 앫 authority of agents, 앫 validity (impossibility, misrepresentation, fraud, threats), 앫 interpretation, and 앫 contents and effects (statements giving rise to contractual obligation, implied terms, quality of performance, delivery, conformity to contract). Pre-contractual obligations (chapter III, section II) 앫 앫 앫 앫
nature of pre-contractual obligations, pre-contractual information obligations, content of pre-contractual disclosure,281 and information about post-contractual modifications of conditions.
Performance and non-performance (chapter III, section III) 앫 general rules (place and time of performance, performance by a third party, delivery, place of delivery, costs of performance), 앫 non-performance and remedies in general (in particular availability of remedies, cumulation of remedies, and clauses excluding particular remedies), and 앫 remedies for non-performance (enforcing performance, termination (rescission), cancellation, price reduction, repair, replacement, or damages, and interest). Alterations to the contract and prescription (chapter III, sections IV–VII) IV V VI VII
Plurality of parties Assignment of claims and the effect between various parties Substitution of new debtor/transfer of contract Prescription (or, in English terminology, limitation periods)
We may expect something pragmatic along the lines of the Principles of European Contract Law developed by the team led by Professors Ole Lando and Hugh Beale282 rather than a professorial ius commune,283 but no decision has been taken on length beyond the intention to produce something detailed and in depth. Initial drafts are said to be 100 per cent pure civilian. Land law as such is outside the scope because it is not legislative, but it seems that contracts to sell will also be outside the scope; it is less easy at this stage to say quite why. Work, 281 This is perhaps the key division, civil law having a general duty of disclosure, thus scoring heavily over the caveat emptor of the common law, a shameful principle that we properly hide behind a Latin tag. 282 Principles of European Contract Law (n 257 above). 283 T Wilhelmsson ‘Private Law in the EU: Harmonised or Fragmented Europeanisation’ (2002) 10 ERPL 77–94.
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started in 2006 and involving all interested parties, will be continued through funded research284 leading to a first draft available later in 2007 for consultation with stakeholders.285 It will need to tread a difficult line that respects existing diversity of legal traditions and balances properly the interests of a range of businesses and of consumers. Fitness for purpose will be road-tested during legislative drafting and by its use as a tool in international arbitration. The process will culminate in a White Paper, itself open to full consultation, and the preparation of all language drafts with a view to final adoption, as a non-binding instrument,286 during the Barosso Presidency in 2009.287 A mechanism for continuous updating will be provided. Kenny detects behind the new and welcome gradualism a timeframe that remains wholly inadequate for a project he compares to ‘nailing the jellyfish’.288 [8.51] Some hints about the application of the Common Frame of Reference can be gleaned from the provisional structure offered by Von Bar.289 One specific mentioned by him is the inclusion of sale contracts (book IV) and since civilian systems do not treat land contracts as distinct in terms of obligation in the way that the common law systems do — based on the availability of specific performance — this might suggest that contracts for the sale of land may be within the Frame. It is difficult however to believe that land contracts are seriously to be included because of the special national provisions needed to reflect local peculiarities of title. Hence two alternative problems arising from the inclusion of sales of goods but the exclusion of sales of immovables. First there must be innumerable borderline cases which it would become critical to categorise into the land or not-land categories precisely. Secondly the continental systems will be severely distorted, because codes invariably treat the two sale contracts in the same way, so the introduction of a European code will create two types of contract where before there was only one. Von Bar also adds special rules for loans and for the leasing of movables, excluding immovables, and transfers (book VII), and security rights (book IX) are explicitly confined to movables. It is proposed to include a special book (book X) dealing with trusts, which tend to be contractual in nature in systems lacking equity.290 Early drafts are 100% pure civil law291 and there is apparently provision in the drafting teams for the inclusion of property lawyers.292 Responses to Contract Communication (n 261 above) [3.1]. Contract Communication (n 261 above) [3]. 286 Contract Communication (n 261 above) [2.1.3]. 287 M Röttinger ‘Towards a European Code Napoléon/ABGB/BGB?’ (2006) 12 ELJ 807–827, 811. 288 M Kenny ‘Those Magnificent Men in their Unifying Machines’ (2005) 30 EL Rev 724–742, 729, 735, 736. 289 C Von Bar ‘Working Together Toward a Common Frame of Reference’ (2005) X Juridica International 17–26, Annex [7], 24–26. 290 See below [11.36]. 291 T Ridge ‘Eurovision — Consider This’ [2006] NLJ 902–903. 292 Von Bar ‘Working Together’ (n 289 above) 20, 22. A conference on ‘The Common Frame of Reference and Property Law’ took place at Maastricht on June 8th 2007. 284 285
European Contract Law
4
365
Standard contract terms
[8.52] Once it is adopted the Common Frame of Reference can and should be developed, as the European Parliament has suggested, into a body of standard contract terms.293 As facilitator and ‘honest broker’, the Commission will assist market participants to draw up standard terms and conditions for particular types of specialised contracts. Competition problems may arise if their use becomes too predominant but these can be overcome.294 Standard terms might be used in business to business (B2B) and business to government (B2G) transactions and B2EU transactions,295 though efforts will be needed to encourage economic operators to make use of them.
5
Opt-in Contract Instrument
[8.53] The likely outcome is a body of rules to provide the law for a particular contract, additional to national laws, if parties choose to opt into it.296 Its earlier name, the ‘26th regime’ has already been overtaken by new accessions and ignores the EEA-3 and the problem that common law states are among those unlikely to participate. One may expect the Instrument to resemble the Principles of European Contract Law297 which set out general rules of contract law for use in the EU298 by parties who agree to incorporate them299 though it also provides that the mutual duty of good faith between contracting parties and the mandatory rules cannot be excluded.300 Contractual formation follows when there is sufficient intention to be bound and sufficient agreement, with no further requirement.301 The instrument promulgating European contract law will be optional302 in the sense that it will have to be chosen by the parties through an ‘opt in’, a system preserving the greatest measure of contractual freedom to the parties,303 including the facility to opt in to any specific rule according to the 293 Contract Communication (n 261 above) [2.2]; Action Plan (n 267 above) Measure [11]; Röttinger (n 287 above) 811. 294 Guidelines on the Applicability of EC §81 to Horizontal Cooperation Agreements [2001] OJ C3 2, [169]. 295 Obstacles to their adoption need to be identified and eliminated: Contract Communication (n 261 above) [2.2.3.3]. 296 H Heiss & I Downes ‘Non Optional Elements in an Optional EU Contract Law’ (2005) 13 ERPL 693–712. 297 Principles of European Contract Law (n 257 above); MW Hesselink ‘The Structure of the New European Private Law’ in MW Hesselink The New European Private Law (The Hague, Kluwer, 2004, 978-9-04111-962-9) [7]; this is also an inspiration for the Common Frame of Reference. 298 Principles of European Contract Law (n 257 above) §1.101. 299 Principles of European Contract Law (n 257 above) §1.101[2]. 300 Principles of European Contract Law (n 257 above) §§1.102, 1.103. 301 Principles of European Contract Law (n 257 above) §2.101. 302 Contract Communication (n 261 above) [2.3]; Contract Action Plan (n 267 above) Measure [III]; S Grundmann ‘Optional European Code’ (2004) 10 ELJ 698–711. 303 Contract Communication (n 261 above) Annex II [2]; [2005] 13 LSG 6.
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needs of the parties.304 An opt-in instrument would be an EC Regulation, on a legal basis yet to be crystallised,305 with horizontal force.306 It will also have to be integrated into the Rome Convention so as to recognise it as a legitimate ‘law’ to be chosen by the parties.307 Once selected the European standard terms would need to be justiciable308 with proper enforcement procedures.309 Several aspects of the scope of the optional instrument remain up in the air at present. First there is content. Should an optional instrument confine itself to the components of a general contract law? It would seem more logical to bolt on components to cope with specifics such as sale of goods310 and possibly also for exchanges, donations (gifts), leases, cross-border financial transactions, contracts of insurance, and (more remotely) security and unjust enrichment.311 If the scope spills out to embrace this longer list there is the potential for a greater impact on property law.312 Another unsettled issue is the geometry of the contracts to be affected. An optional instrument could be confined to B2B contracts or widened to include B2C contracts.313 Many states divide contract law between a civil code covering ordinary contracts and a commercial code for B2B contracts. This is clearly central to any consideration of European contracts given the schizophrenia314 reflecting the division of responsibility for the internal market and consumer protection between different directorates. Business-driven codification will seek to maximise party autonomy in accordance with classical liberal (that is, conservative) traditions reflected in the common law315 but different rules are needed for consumers which protect the weaker party using mandatory rules that cannot be overridden. Past achievement has cumulated to the point where a greater range is justified316; it must be so because even the ultra-conservative Labour Government agrees.317 [8.54] Given its optional character the widest scope seems appropriate but once it veers into consumer contracts it will need to comprehend the mandatory rules Contract Action Plan (n 267 above) [89ff]. Contract Communication (n 261 above) Annex II [2.3]; Staudenmayer ‘Future Prospects’ (n 272 above) 674. Doubts are expressed by S Weatherill ‘Reflections on the EC’s Competence to Develop a European Contract Law’ (2005) 13 ERPL 405–418 @ 415ff. 306 Kenny ‘Commission Running Wild?’ (n 267 above) 542. 307 Rome Convention on the Law Applicable to Contractual Obligations [2005] OJ C334 1 (consolidated), §§20 or 32 or as an international convention; Contract Communication (n 261 above) Annex II; see below [10.41]. 308 G Wagner ‘The Economics of Harmonisation: the Case of Contract Law’ (2002) 39 CML Rev 995–1023 @ 1022. 309 A Schwartze ‘Enforcement: The Missing Link’ (2000) 8 ERPL 135–146. 310 Staudenmayer ‘Future Prospects’ (n 272 above) 673. 311 Contract Communication (n 261 above) Annex II [4]. 312 See below [8.55]. 313 Van Gerven ‘Yes If ’ (n 266 above) 161, 168–169; Kenny ‘Commission Running Wild?’ (n 267 above); Staudenmayer ‘Action Plan’ (n 267 above). 314 U Mattei ‘Contracts, Schizophrenia and Beyond’ ch 6 in The European Codification Process: Cut and Paste (The Hague, Kluwer, 2003, 978-9-041-12230-8). 315 Hesselink ‘Structure’ (n 297 above) [4]. 316 Kenny ‘Commission Running Wild?’ (n 267 above) 540. 317 UK Response to the Contract Communication 2001 (n 261 above) [5]. 304 305
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on consumer protection and indeed to clarify a conflicts rule left uncertain by the Rome Convention.318 An opt-in model should avoid the primary disadvantage of continental style code, their tendency to become fixed, even set in concrete, precluding as Savigny argued changes needed to adapt to fit the Volksgeist.319 If the terms fall out of date, parties will cease to opt in, but any stasis could be counteracted by the provision for a continuous process of review. In response to these developments the United Kingdom government takes the view that the mere existence of divergences between contract rules in different EU states is quite consistent with the fundamentals of the internal market and thus convergence should be sought only where it is desirable, reasoning which leads the government to oppose comprehensive legislation. In doing so the government is not adhering strictly to the democratic principle since a Clifford Chance survey found that eight of ten Europeans approved the idea of a European contract law, and even among Britons it was seven in ten.320
THE CO N TR ACT/PR O PERTY I N TER FACE
The Contract/Property Interface 1
A limited European Civil Code
[8.55] Gambaro321 considers that in order to elaborate a unified body of property law, the jurists of Europe have before them the whole of the next millennium.
Even the common law has not taken quite that long. Among all the bulk of the official and academic diffusions on the subject of the European Civil Code, there is little overt discussion of property law and here we must try to assess what is signified by this silence. A European contract law is long since established322 and this will now be developed through the Contract Communication323 including a collection of the jurisprudence called the Common Frame of Reference and a Community Instrument encapsulating contract principles to which contracting parties may opt in. 318 Rome Convention (n 307 above) §§5, 7; AR Sinai ‘Inclusion of Mandatory Rules in an Optional EC Contract Law Instrument’ (2004) 15 European Business Law Review 41–71. 319 RC van Caenegem Judges, Legislators and Professors (Cambridge, CUP, 1987) 84–85; W Van Gerven ‘Future Meeting the Past?’ (2001) 9 ERPL 485–503 @ 498; Van Gerven ‘Yes If ’ (n 266 above) 160; C Joerges ‘Reductionist Perceptions, True Conflicts and a New Constitutional Perspective’ (1997) 3 ELJ 378–406 @ 384. 320 UK Contract Communication Response (n 261 above) [3], [14]; Von Bar ‘Working Together’ (n 289 above) 23 fn 19. 321 A Gambaro ‘Perspectives on the Codification of the Law of Property’ (1997) 5 ERPL 497–504, 504; J Basedow ‘A Common Contract Law for the Common Market’ (1996) 33 CML Rev 1169–1195, 1193; J Rogers Prosser ‘Property Abroad’ [1989] 39 LSG 12–14 (25–50 years). 322 E Truilhé-Marengo ‘Towards a European Law of Contract’ (2004) 10 ELJ 463–478. 323 Contract Communication (n 261 above).
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Yet this will not lead on to a European Civil Code harmonising substantive contract law,324 or at least not at this time. Academic discussion had canvassed a large range of options conveniently summarised in the Academic Green Paper325 which contains a wide spectrum of opinion starting with the continental enthusiasts for a complete codification of contract principles across the continent of Europe, through more hesitant civilians,326 to the common lawyers who were almost universally cool327 no doubt because all the proposals have drawn exclusively on civilian doctrine. In truth the Tobacco Advertising ruling328 shows that the EU lacks competence to codify private law.329 This greatly limits the structural damage likely to be done to national systems of property law, which are protected anyway by the property shield.330 It will not be possible to change English property law directly, nor to impose Slovenian-derived rules in France. [8.56] So the issues have now narrowed to three. First, will a code cover aspects of the law of movable property? Secondly, will the opt-in Instrument apply to contracts for the sale of land; are we about to be given a European set of Standard Conditions for the Sale of Land? Thirdly, and much more hypothetically, is there any prospect of unification of national property systems if the competence problems can be overcome? For the sake of simplicity it will be assumed that any proposals will relate to substantive harmonisation and will not be confined purely to cross-border transactions.331 Structural problems arise whatever the scope settled upon and these problems are similar whether there is mandatory legislation on European contract law or merely opt-in conditions.
2
Irrelevancies: epistemology and functionalism
[8.57] These preliminary matters will concern readers with a knowledge of the literature on the Contract Code, but each proves to be irrelevant in relation to Contract Communication (n 261 above) [2.3]. S Grundmann & J Stuyck ‘Scope, Common Ground, Debated Issues’ ch 1, 3–36, in S Grundmann & J Stuyck An Academic Green Paper on European Contract Law (The Hague, Kluwer, 2002, 90-411-1853-5); also chs 8–17; Society European Contract Law (). 326 Academic Green Paper (n 325 above) chs 17–19; O Lando ‘Optional or Mandatory Europeanisation of Contract Law’ (2000) 8 ERPL 59–69; P Legrand ‘Against a European Code’ (1997) 60 MLR 44–63. 327 H Beale ‘Finding the Remaining Traps’ ch 4 in Academic Green Paper (n 325 above) (‘more harmonisation but no more than that’); also ch 18 by Hugh Collins. 328 C-376/98 Germany v Parliament EU (Tobacco Advertising) [2000] I ECR 8419 ECJ, J[84]; the sting is reduced by C-168/00 Leitner [2002] I ECR 2631 ECJ. 329 S Weatherill ‘Reflections’ (n 305 above) 417; S Weatherill ‘Why Object to the Harmonisation of Private Law by the EC?’ (2004) 12 ERPL 633–660; Staudenmayer ‘Future Prospects’ (n 272 above) 674, 681; Van Gerven ‘Future Meeting the Past?’ (n 319 above) 495–497; Van Gerven ‘Yes If ’ (n 266 above) 157; Kenny ‘Commission Running Wild?’ (n 267 above) 547. 330 EC §295 ex §222; see above [3.18]. 331 U Drobnig ‘A European Contract Law from Intra-European Border-Crossing Contracts’ ch 21 in Academic Green Paper (n 325 above); E Hondius ‘Finding the Law in a New Millennium’ 79–103 in M Bussani & U Mattei Common Core of European Private Law (The Hague, Kluwer, 2003, 90-411-2004-1) 86–87. 324 325
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property law. Opponents of the codification project point to the deep-grained differences in legal reasoning between civilians and commoners, who give different answers to the question ‘what is it to have knowledge of the law?’ The epistemology of the two systems is different. Legrand catalogued variant approaches to systematisation, characterisation of rules, the role of facts, the meaning of rights and the relevance of the past.332 For purity of reasoning one would choose the civilian systems, but in practice the common law is far superior because it retains the ability to adapt to changed circumstances333 and business does seem to have concluded that the Anglo-American family of law suits their purposes best. Vogenauer and Weatherill concluded that English law is chosen two and a half times more often than any other with the Italian system top of the list to avoid, but they also found a surprisingly high level of support for a European contract law either as a replacement for existing law or as a supplement to it.334 Whatever the differences in case law technique, it cannot seriously be suggested that the different approaches to legal reasoning are such that it is impossible to operate a European legislative code, and the fact is that the gap is narrowing and techniques of interpretation are converging.335 Various academic players have proposed a soft code336 derived from a comparative337 search for common principles, a professorial codification. It would constitute a treasury of the common European legal heritage, a secondary restatement of the ius commune europaeum.338 Projects realised include the Trento project,339 the Principles of European Contract Law340 and Common Law of Europe Casebooks.341 All well and good in contract and tort, but it is difficult to see how this can deliver functionalist similarities between property laws342; the common law predates rationalism as a foundation for legislation, and the codification of the continent was a deliberate attempt to break away from the old common law and its continental counterpart the ius commune.343 Cohabitation of property systems does not produce
P Legrand ‘Against a European Code’ (1997) 60 MLR 44–63, 62–63. J Smits The Making of European Private Law (Oxford, Intersentia, 2002, 90-5095-191-0) 253. 334 S Vogenauer & S Weatherill ‘EC Competence for Comprehensive Harmonisation of Contract Law’ (2005) 30 EL Rev 821–837, 830; Ridge ‘Eurovision’ (n 291 above). 335 K Kötz & JA Flessner European Contract Law (Oxford, OUP, 1998, 978-0-19-826498-9); KP Berger ‘Harmonisation of European Contract Law’ (2001) 50 ICLQ 877–900. 336 JHH Weiler ‘The Reformation of European Constitutionalism’ (1997) 35 JCMS 97–131; Staudenmayer ‘Future Prospects’ (n 272 above) 677, 681. 337 KP Berger ‘Principles of European Contract Law and the Concept of Creeping Codification’ (2001) 9 ERPL 35–49. 338 Van Gerven ‘Future Meeting the Past?’ (n 319 above) 493–494. 339 ‘Common Core of European Private Law’ (1999) 4 Uniform Law Review 937–941; V Grosswald Cuffan ‘On the Shoulders of Schlesinger’ (2003) 11 ERPL 66–80; S Grundmann ‘The Structure of European Contract Law’ (2001) 9 ERPL 505–528, 508. 340 Principles of European Contract Law (n 257 above). 341 S Van Erp Ius Commune Casebook: Property Law (Oxford, Hart, forthcoming 2007). 342 Van Gerven ‘Future Meeting the Past?’ (n 319 above) 501–502. 343 R Zimmerman Law of Obligations, Roman Foundations of Civilian Tradition (Oxford, OUP, 1996, 978-0-19-876426-7) preface XI. 332 333
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convergence.344 So a comparison of property systems is unlikely to get far beyond the fundamental differences.345
3
Harmonised property rules for movables
[8.58] The most immediate intersection between contract law and property law is where goods are sold with a reservation of title. Most civilian systems provide for title to goods to pass on their delivery to the buyer and once goods are in his possession an action for the price is personal in nature and must be pursued in contract. Common law systems, joined by a few continental codes, allow the seller to reserve title until the goods are paid for, making available a proprietary claim to recover the goods in the event of non-payment. This reservation of title provides strong protection against the insolvency of the buyer because it is a proprietary right, albeit one created by contract, and clearly a European contract code needs to deal with reservation of title. This seems to be the primary focus of responses to the Contract Communication,346 and of the calls from the European Parliament347 and from the Council.348 Professors Drobnig and Von Bar conducted the resulting study, which is largely confined to movables.349 At this level even an opt-in code needs to consider property law, and it may well be that there are similar difficulties created by the variant rules about how title to goods is passed. Several writers hint that property would be included within a civil code, but that its reach would be confined to movables. Writers who exclude property from their ambit often allow back this one property topic of reservation of title.350 This same assumption seems to underlie academic commentaries,351 and
See above [3.47]. See further below [8.63ff]. 346 Interaction between contract and property law causes significant practical problems: Responses to Contract Communication (n 261 above) [17]. 347 European Parliament Resolution B5-0228-0229-0230 (n 264 above) [28]; Committee of the European Parliament on Legal Affairs Report (Contract Law) A5-0384/2001. 348 Laeken Council Report (n 270 above) [9–13]; Staudenmayer ‘Future Prospects’ (n 272 above) 686; G Betlem & E Hondius ‘European Private Law after the Treaty of Amsterdam’ (2001) 9 ERPL 3–20, 9. 349 C Von Bar & U Drobnig ‘Study on Property Law and Non-contractual Liability Law as it Relates to Contract Law’ (Munich, 2004, B5-100/02/000574) [479]; Röttinger (n 287 above) 811; see below [8.64]. 350 Kenny ‘Commission Running Wild?’ (n 267 above) 544; Staudenmayer ‘Action Plan’ (n 267 above) 115–116. 351 C Von Bar ‘Paving the Way Forward with Principles of European Contract Law’ ch 9 in Academic Green Paper (n 325 above) 139–140; H Drobnig ‘Security Rights in Movables’ ch 40 in A Hartkamp et al Towards a European Civil Code (The Hague, Kluwer, 3rd edn, 2004, 90-411-2280-X); H Drobnig ‘Security Rights in a European Context’ ch 21 in Academic Green Paper (n 325 above) 347–351. 344 345
The Contract/Property Interface
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Commission352 proposals to consider security rights in movables as a distinct topic for study.
4
Contracts to sell land
[8.59] An opt-in contract code could conceivably take two approaches to land but each of them carries structural difficulties in their wake. It might exclude land from the possibility of opt-in, and indeed this seems most probable. This would create no structural problems for the common law, which has always treated land contracts as distinct from sales of goods. Partly this is a consequence of special formality regimes and the complexity of title. More, it is to do with the availability of specific performance which enables a buyer to secure the land itself, that is, it confers proprietary force on a contract contrary to the most fundamental tenets of a civilian system and, stranger still, this is applied prospectively before completion so as to pass the risk at the time of the contract.353 An Instrument derived from civilian codes could scarcely cope with this unexpected and incomprehensible proprietary character. Civilian codes will also suffer structural damage, not perhaps from an opt-in code but certainly if the proposal ever hardens into a legislative code. Civilian systems almost always treat a sale of land in the same way as a sale of any other property, so Europeanisation of a code for contracts to sell goods would leave an untidy national remnant applying to land. If the old Civil Code has to be left in force the advantage of simplification is lost, the alternative scheme would need elaboration to cover the complexities of transactions with land,354 and both Europe and the national codes would be weakened by losing an important paradigm.355 Land will have to end up as a special contract outside the main Civil Code.356 [8.60] If pure property sales are excluded there are still many contracts that might be affected within the English subject of land law, including residential contracts and leases. Treatment of these varies on the continent and there will also be awkward questions about mortgages which have a dual character as finance deals and as contracts for real security.357 There must be many other borderline cases. [8.61] The other alternative is almost too difficult to contemplate. It is that an attempt might be made to produce Standard Conditions of Sale applicable to any 352 Contract Action Plan (n 267 above) [41–42]; Staudmayer ‘Future Prospects’ (n 272 above) 674; Kenny ‘Commission Running Wild?’ (n 267 above) 545; A Gkoutzinis ‘Free Movement of Services in the EC Treaty and the Law of Contractual Obligations Relating to Banking and Financial Services’ (2004) 41 CML Rev 119–175, 124ff. 353 Lysaght v Edwards (1876) 2 Ch D 499, 506–510 Jessel MR; Walsh v Lonsdale (1882) 21 Ch D 9 CA; Von Bar & Drobnig ‘Property/Contract Law’ (n 349 above) [571ff]. 354 Gambaro ‘Perspectives’ (n 321 above) 498. 355 Gambaro ‘Perspectives’ (n 321 above) 497. 356 Kötz Flessner (n 335 above) vii. 357 Contract Communication (n 261 above) Annex II [4].
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Contracts
sale of land wherever it is sited in Europe. The utility of such a set of Standard Conditions is self-evident, but how could it be realised? The divergent approaches of common law and civilian systems to land contracts have been noted, but civilian systems diverge widely between systems reliant upon a single notarised transfer document and other systems which are ‘Contract before conveyance’ in the English model.358 In any event it would surely be incredibly dangerous to confer on non-lawyers the power to dive into contracts without either notarisation as on the continent or special formalities as in England. It is also very difficult to see how a single code could ever be drafted to handle adequately all the title issues that might arise in all the EEA-30 states. So in essence an opt-in code for land would have to be subject to all the mandatory rules of the property law of the site of the land.
5
Away from a Property Code?
[8.62] It seems safe to say that the opt-in Contract Code has no immediate implication for land law. Property law has vanished from the Commission’s Contract Communication359 because there exist far too many obstacles to a European Property Code. A short enumeration might include: 앫 앫 앫 앫 앫
the opt-in nature of the proposed code,360 the reservoir of mandatory national rules,361 the property shield in article 295,362 national sentiment, overwhelming opposition by common lawyers363 (given the hostility of the common lawyers it is a paradox indeed that they have most to gain and civilians will in the end prove to be the most obstinate and entrenched opponents), 앫 doubts about the utility of Europeanisation,364 and 앫 lack of any shared epistemology or grammar.365
This next section therefore conducts an academic assessment of the pros and cons of a Europe-wide property harmonisation recognising the political reality that such a code is unattainable.
358 359 360 361 362 363 364 365
See above [7.21ff]. Staudenmayer ‘Future Prospects’ (n 272 above) 673. See above [8.53]. See below [10.05ff]. EC §295 ex §222; Gambaro ‘Perspectives’ (n 321 above); see above [3.18]. See below [8.67]. Gambaro ‘Perspectives’ (n 321 above) 501. Gambaro ‘Perspectives’ (n 321 above) 500.
The Contract/Property Interface
6
373
A civil/common law divide?
[8.63] A code would have had to address the major structural differences between the common law and civilian systems,366 an issue reflected upon by Geoffrey Samuel367 to such effect that it led Van Gerven to conclude that harmonisation would be counter-productive in property law 368 If one looks at static land law, as opposed to transaction land law, the differences are huge. If one takes the Napoleonic system as a fair reflection of the state of affairs on the continent one starts from propriété. Contrast this with the common law system of estates in which the basis is the holding of land for a duration of time, a subtlety of thought which creates the possibility of the division of ownership between successive owners and leads to the process of family settlement so as to benefit successive generations of a family.369 This creates a climate in which property is seen as a bundle of rights and where property relations are seen as one-on-one actions rather than the Roman relationship between an owner and a thing.370 Samuel asserts the importance of these distinctions in a comparative sense and indeed it is obvious that the starting points of the two systems are so far apart as to be unbridgeable. A great deal of epistemological groundwork would be needed to enable the systems to speak to each other, let alone to harmonise them.371 The differences can be overstated, and will be overstated if one starts from the archaic American law as a basis or the mindset that Megarry and Wade372 encapsulated so brilliantly. Modern English land law is, the writer has attempted to show,373 little based on estate theory today, simply because Sir Benjamin Cherry made a massive jump into the future with the 1925 legislation374 which transferred any division by time from the legal estate to equity; the perpetual freehold estate he recognised, the fee simple absolute in possession is indistinguishable in essentials from propriété or Eigentum. [8.64] One can also find many other similarities across Europe. It has already been argued that an important ontological factor in a market is an agreement on commoditisation, on the identification of the things that should be the subject of ownership and barter.375 A study by Von Bar & Drobnig376 found a substantive 366 G Alpa ‘European Commission Resolution and Codification of Private Law’ (2000) 8 ERPL 321–334, 329. 367 G Samuel ‘European Private Law in the Context of Codes’ 47–67 in M Von Höcke & I Ost The Harmonisation of European Private Law (Oxford, Hart, 2000, 978-1-84113-137-5) 52–58. 368 Van Gerven ‘Yes If ’ (n 266 above) 162; W Van Gerven ‘Top Up and Bottom Down’ ch 26 in Academic Green Paper (n 325 above) 412 fn 24. 369 Samuel ‘Context of Codes’ (n 367 above) 54. 370 Gambaro ‘Perspectives’ (n 321 above) 499; Samuel ‘Context of Codes’ (n 367 above) 55. 371 Samuel ‘Context of Codes’ (n 367 above) 53. 372 Sir RE Megarry & Sir HWR Wade The Law of Real Property (London, Stevens, 6th edn by C Harpum, 2000, 978-0-421-47470-3). 373 P Sparkes A New Land Law (Oxford, Hart, 2nd edn, 2003, 1-84113-380-9) [13]. 374 Law of Property Act 1925, c 20, ss 1–2. 375 M Fritsch, T Wein & H-J Ewes Marktversagen und Wirtschaftspolitik (Munich, 6th edn, 2005) 5; Basedow (n 321 above) 1180; see above [1.01]. 376 Von Bar & Drobnig ‘Property/Contract Law’ (n 349 above) [467ff].
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Contracts
agreement across Europe about the nature of property, a broad conception including intangibles as well as tangibles, but different terminology and not all elements of property law the same.377 There is also broad agreement on the stasis of property law. This may be expressed more formally as a numerus clausus in civilian states where the structure of the code entrenches the existing rights and imposes a fixed and finite cap on the number of property rights recognised in a system. English law does not have a formal numerus clausus378 since otherwise it is difficult to account for the case law development of proprietary estoppel; there is also flexibility for the common law to respond to issues such as parking rights.379 One can also find great commonality in the basic proprietary effect of property rights.380 [8.65] However, there are radical differences remaining quite apart from estates. Equity is perhaps the smallest, though it has an important function in retaining flexibility and the potentiality for growth and adaptation. The trust is crucial for management and particularly to separate management and benefit in successions.381 No one could possibly prefer the continental systems of fixed inheritances. Other major differences are the proprietary effect of contracts — which we would perhaps be better without — and the widespread use and proprietary force of leases, the greater flexibility in equitable security,382 and our vastly superior conveyancing system. Overall the common law appears more decrepit but is actually better fitted for purpose. [8.66] A more practical objection to European codification is the severe structural damage that would be caused to the civilian codes. The present institutional structure is taken as axiomatic from the time of Gaius, a didactic age preceding the utilitarian period of legislation and it is difficult to think that civilian structure could be adopted in a new code. One would have to rethink the division between property and other aspects of the code — the most important rules of property are outside the civil codes383 — and perhaps discard the rigid property (real) / obligation (personal) divide in favour of something that recognises the quasi-property of, say, the German lease. More particularly one would be compelled to discard the public/private divide that is so deeply entrenched in the Codes.384 It is not logical to separate transfer of land (private) from planning (public) nor the private landlord and tenant relationship from the security of tenure afforded to a tenant in public law.385 The common law may appear unstructured, but its lack of brittleness and its malleability are here a supreme 377 378 379 380 381 382 383 384 385
Von Bar & Drobnig ‘Property/Contract Law’ (n 349 above) [467–471]. Law of Property Act 1925 (n 374 above) s 4 has been honoured only in the breach. Von Bar & Drobnig ‘Property/Contract Law’ (n 349 above) [472ff]. Von Bar & Drobnig ‘Property/Contract Law’ (n 349 above) [475]. See below [11.25]. See below [9.28]. Gambaro ‘Perspectives’ (n 321 above) 499. Weiler (n 336 above); Joerges (n 319 above) 405. Alpa (n 366 above) 324; D Caruso ‘The Missing View of the Cathedral’ (1997) 3 ELJ 3–32, 6.
The Contract/Property Interface
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advantage, since the common law can mould to create a single subject out of elements that are jurisprudentially different.386 The codes are backward looking,387 so a new codification would call for an ‘ever deeper rearrangement’ of the continental codes.388 [8.67] Codification is not, therefore, a question of the obsolescence of the common law,389 that ‘Napoleon threatens [the] United Kingdom legal system’.390 Nor is it, as Lord Falconer LC has proposed, tongue firmly in cheek, a case of the common law forming the basis of the code.391 Who would seriously want the fee simple? The fact is that all systems of property law are outdated at least in their formulation. A complete rewriting would be socially desirable. The basic ingredients are very similar across Europe — land, ownership, lease, mortgage, transfer, registration and so on. As a report to the Legal Affairs Committee of the European Parliament suggested,392 The great differences are a reason for standardising the law rather than an argument against it.
It should be feasible to create generally agreed structures, fields, that could then be populated to a greater or lesser extent with the concepts of property recognised nationally and end up with a conveyancing structure that works the same way across Europe whilst allowing scope for distinct national property systems. And common law conveyancers have a continent full of business to snap up if only they can stop being so insular in protecting a system based on 1066 and All That.393 The mystery is why such manifestly defective systems attract such deep feelings of national sentiment.
Samuel ‘Context of Codes’ (n 367 above) 56. Samuel ‘Context of Codes’ (n 367 above) 57. 388 M Kenny ‘Unifying Machines’ (n 288 above) 741. 389 P Legrand ‘Against a Code’ (n 332 above) 55–56; Betlem & Hondius (n 348 above) 19. 390 Independent on Sunday December 3rd 2000 391 European Contract Law Conference [2005] 37 LSG 4. 392 Independent on Sunday December 3rd 2000. 393 WC Sellar & RJ Yeatman 1066 and All That… Including 103 Good Things, 5 Bad Things and 2 Genuine Dates (London, Methuen, 1930). 386 387
MO RTG AG ES A N D DEB T
9 Mortgages and Debt Mortgage Credit. European Mortgage Markets. Information Rights. Consumer Protection. Security. Mortgage Procedures. Primary and Secondary Lending. Secured Rights on Cross-border Insolvency. Main (Europe-wide) Insolvency. Secondary (Territorial) Insolvency. Judgment Debts in the Judgment State. Judgment Debts in the Enforcing State.
MO RTG AG E CR EDI T
Mortgage Credit 1
Mortgage credit or home loan?
[9.01] Most consumers need to borrow to fund the purchase of a home, and it may be necessary to borrow again to fund improvements. A loan is secured on the home in most EU countries by a mortgage, although a personal surety is more commonly used as a form of security in France and Belgium,1 a diversity which poses a challenge to the legal lexicographer. Both the purpose of the loan and the existence of the security need to be reflected in any definition. The label ‘home loan’2 captures the retail character of the market and the essential object of buying a home, and fits comfortably with the French practice of avoiding real security. ‘Mortgage credit’ seems too restrictive in capturing only the security aspect and apparently omitting surety-type arrangements, but it is that term, ‘mortgage credit’, that has been adopted by the Commission,3 and is gaining ground across Europe.
1 Around 32% are secured by mortgage, 36% are associated with a covered bond, 13% with other guarantees and 19% unsecured: Mortgage Credit Response () by the French Banking Federation fn 1. 2 A ‘portmanteau’ term preferred by the London Economics Report: The Costs and Benefits of Integration of EU Mortgage Markets (Brussels, London Economics for DG Internal Market, 2005) [1] 3 Green Paper Mortgage Credit in the EU, COM (2005) 327 final, Annex 1[4].
378
2
Mortgages and Debt
Exclusion of consumer credit
[9.02] Lending to consumers is divided into mortgage credit (home loans) and consumer credit (other personal loans). Borrowing secured by a mortgage of a home will be treated as mortgage credit if the intention is to fund the acquisition or repair of a home. Domestic mortgages are exempt from the full rigours of the consumer credit regime and instead a consumer taking out a home loan is entitled only to receive standardised pre-contract information under a voluntary code, a right which applies whether the particular loan is internal or cross-border. This division between the consumer credit regime4 and the Code is not black and white and nor is it set in stone since the exact demarcation line is about to change. At present the Voluntary Code applies to a ‘home loan’, meaning a credit offered to a consumer for the purchase or transformation of the private land (immovable property) he owns or aims to acquire, secured either by a mortgage or commonly used surety. ‘Private land’ may or may not be an exact equivalent of ‘home’, though it should certainly include a second home, while the test of ‘purchase or transformation’ leaves untouched second mortgaging, equity release and refinancing.5 [9.03] Many, but not all, land mortgages are excluded from the scope of the current Consumer Credit Directive. They are excluded completely if the credit is granted primarily for: the purpose of acquiring or retaining property rights in land or in an existing or projected building or intended for the purpose of renovating or improving a building as such.6
The land exclusion could be to pay for a ‘home’ or ‘private land’ or any other land or the renovation of any building, though there is an inherent limitation to consumer transactions of the B2C pattern.7 A consumer would not be protected by either regime when buying land other than a home, the key being the purpose of the loan and not whether it is secured, and an unsecured loan for the purchase of a home would also slip all nooses. Mortgages not otherwise excluded are granted a partial exclusion from the consumer credit regime. The test here is whether the credit agreement is secured by a mortgage on immovable property, focusing on the form of security irrespective of the purpose of the loan. These mortgages are excluded from all the most cutting substantive provisions8 and
Consumer Credit Directive 87/102/EC [1987] OJ L42 48. London Economics (n 2 above) [2]. 6 Consumer Credit Directive (n 4 above) §§2[1], 3[1](a). This applies across EEA-30: EEA Agreement [1992] OJ L12 13 as adjusted [1994] OJ L1 572 and amended [2004] OJ L130 3, Annex XIX. 7 Consumer Credit Directive (n 4 above) §1[2](e). 8 Consumer Credit Directive (n 4 above) §2[3], as amended by Directive 90/88/EEC [1990] OJ L61 14, §3; Evans v Cherry Tree Finance [2007] WL 2186988 Ch D (domestic loan secured on commercial property was a consumer credit agreement). 4 5
Mortgage Credit
379
that minor inconvenience may be avoided by other full exemptions, such as that for mortgages authenticated before a notary or judge9 or for large deals exceeding €20K.10 Since harmonisation is minimalist domestic law often does apply to mortgages of land.11 [9.04] The consumer credit regime is being reworked. An early draft contained a reworded exclusion for land mortgages which would have formed a clearer and better dividing line between consumer credit and housing credit because it proposed to exclude secured credit agreements intended for housing purposes,12 a hybrid of the current law requiring both security and purpose which would have caught British ‘equity release’ schemes and the refinancing of existing credit. Mortgage industry lobbying13 — arguing that it is difficult for a lender to determine the purpose of a loan (!) — led to this first draft being mauled in the European Parliament, democracy in reverse, and a modified draft shows a radical change of scope. It is now proposed that: all loans secured on property by a mortgage or a similar surety, regardless of their purpose, will be excluded from the Commission proposal for a Directive on Consumer Credit.14
The total exclusion of all secured lending whatever its purpose will be backed up by an exception for loans over €50K. The two existing regimes — mortgage credit and consumer credit — are now joined by a third (unnamed) group consisting of B2C credit which is neither home loan (because of its purpose) nor consumer (because security is offered), consisting of equity release, secured guarantees15 and consumer purchase of non-homes. Significant numbers of consumers will disappear into this void unless mortgage credit can be redefined.
3
Emergence of European policy on mortgage credit
[9.05] Since commercial lending has been liberalised,16 attention has now turned to the larger volumes of the retail market where loans are made to
Consumer Credit Directive (n 4 above) §2[4]. Consumer Credit Directive (n 4 above) §2[1]. 11 Consumer Credit Directive (n 4 above) §15; eg Consumer Credit Act 1974, c 39, s 126 (land mortgage enforceable though the courts); P Susman ‘Another fine mess!’ [2005] NLJ 770–771; for controls on unfair lending, see below [9.24]. 12 Consumer Credit Original Proposal, COM (2002) 443, §§1[2], 3[2](a). 13 Council of Mortgage Lenders Press Release December 13th 2004 (CML website, ). 14 Green Paper (n 3 above) Annex 1[4]; Consumer Credit Second Revised Proposal, COM (2005) 483, §2[2](e); EN [5.3]. 15 Evans v Cherry Tree [2007] WL 218699 Ch D (domestic loan secured on commercial property); see below [9.26]. 16 JA Usher The Law of Money and Financial Services in the EC (Oxford, OUP, 2nd edn, 2000, 978-0-198-29877-9) ch 6; see above [1.26ff]. 9
10
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Mortgages and Debt
consumers wishing to buy or renovate a home.17 According to the Single Market Commissioner, Charlie McCreevy: we must not shrink from the challenge of creating a true single market for home loans. An efficient single market could mean cheaper and better loans for all Europeans, whether or not they obtain their mortgage abroad.18
Agreed, but how can this be achieved, as the Commission apparently believes, without further legislation? At present there is no European framework other than a voluntary code on pre-contract information,19 but there is general agreement on the objective of stimulating a genuine European market for home loans transcending national boundaries. Policy on home loans is beginning to take shape. A Forum Group on Mortgage Credit included experts from all stakeholder groups, such as the banks, consumer organisations, and notaries, across the geographical spread of EU-15.20 Its Report is judged by EU sources to be a ‘genuine blueprint on which a new policy can be based’,21 and ‘rich in variety and depth,22 and by the British industry as ‘a powerful list of useful action points’.23 In truth its labours did little to shift the entrenched views of the industry and consumers’ organisations and the 48 recommendations are presented as alternative wish lists. In the summer of 2005 a Green Paper24 was issued as a basis for consultation on the initial formulation of Commission policy. Provision of pre-contract information will remain a key feature, but to this will be added other strands such as stronger consumer protection measures, legal issues such as selection of law, ‘collateral’ issues to do with the grant and registration of the security, distribution issues and the stimulation of a secondary market in mortgage bonds. Responses are available on the internet, mainly industry-led,25 and these, with more ground work, will lead to a White Paper now expected in September 2007 and the key decision about whether to act at all to secure increased competitiveness.26
London Economics (n 2 above) [1]. Mortgage Credit Forum Group Report The Integration of EU Mortgage Credit Markets (DG Internal Market, 2004) Executive Summary; Green Paper (n 3 above) [8]. 19 See below [9.14ff]. 20 Mortgage Credit Forum Group Report (n 18 above). 21 Alexander Schaub, Internal Market Director General. 22 Forum Group Executive Summary (n 18 above) [5]. 23 Council of Mortgage Lenders Press Release (CML (n 13 above), December 13th 2004). 24 Guardian February 14th 2005. 25 Mortgage Credit Responses (n 1 above); J Craig ‘Hitting Home’ (2005) 39 Building 60. 26 Green Paper (n 3 above) [3]; C McCreevy ‘A Vision for European Mortgage Market’ (Brussels, Speech/06/741, 2006). 17 18
European Mortgage Markets
381 EUR O PEA N MO RTG AG E MA R KETS
European Mortgage Markets 1
European home loan market
[9.06] Home loans outstanding in EU-15 amounted to around €4.25 trillion in 2005, that is around 45 per cent of EU Gross Domestic Product.27 Borrowing is concentrated in the five largest states, with relatively low borrowing in Italy28 and untapped markets in the accession states of Eastern Europe29 where statistics have yet to penetrate. Around a fifth of Western Europeans have a mortgage, eliminating the small minority who do not know, but there are wide variations between countries: only a tenth of Greeks are encumbered as against a third of Brits and almost half of Scandinavians. Mortgage borrowing is naturally most prevalent in the 25–54 age group, and mortgage hunger is also affected by economic grouping, educational achievement and income, all of which suggests that borrowing to fund a house purchase is a general aspiration for those who can afford it.30 Second mortgages are rare, with only one in fifty remembering that they had one. Of these, two thirds were used to buy a second home — a particularly popular form of ‘equity release’ for UK borrowers31 — or to pay for renovations to a principal home, with a small rump re-mortgaging their home to fund the purchase of a car.32 European states with excessive public borrowing might benefit economically from households borrowing more, following the lead of Spain over the past decade where a rapid increase in mortgage debt from 10 to 42 per cent of Gross Domestic Product has stimulated rapid economic growth and tax revenue, a contrast to the Italian stagnation fuelled by the national refusal to borrow.33 In the United Kingdom household borrowing amounts to 65 per cent of Gross 27 Mortgage Credit in 2001–2002 (Brussels, European Mortgage Federation, 2002) [1]; Forum Group (n 20 above) [7]; Financial Integration of European Mortgage Markets (Brussels, Mercer Oliver Wyman Study for European Mortgage Federation, 2003) [6.1] fn 22; Green Paper (n 3 above) [6]; London Economics (n 2 above) [4.4]; Housing Statistics in the EU 2004 (National Board of House Building and Planning, Boverkot, 2005, 91-7147-865-5), Table [4.13]; ‘European Mortgage Market Statistics’ (2006) 137 Mortgage Finance Gazette Supplement 35–38. 28 Forum Group (n 20 above) [9]; London Economics (n 2 above) [4.4] (Austria, Belgium, France and Italy). 29 Forum Group (n 20 above) [8]. J Palacin & RC Shelburne ‘Private Housing Market in Eastern Europe and the CIS’ (UNECE, Discussion Paper 6, 2005) Table 2 shows that borrowing as a share of GDP is in the 10–15% band in Croatia, Estonia, Hungary and Latvia but much lower in most of the other accession states. They caution of the significant foreign exchange rate exposure, ie, high levels of borrowing in a foreign currency. 30 Eurobarometer 60.2 [2.11]; Eurobarometer 56 [5]. 31 86% were for a second home. Figures from the 4 less Group, Times May 26th 2006, for the first quarter of 2006 showed inquiries about overseas mortgages divided as follows: France 31%, Spain 19%, Italy 10% and Portugal 9%, with a growing number outside Europe. 32 Eurobarometer 60.2 [2.12] (2%). It is said that Germans are debt averse except when it comes to buying cars: Guardian September 27th 2006. 33 A Kaletsy Times June 13th 2005; F Earley ‘What Explains the Differences in Homeownership Rates in Europe?’ [2004] 09 Housing Finance International 25–30.
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Mortgages and Debt
Domestic Product. Essentially the Commission wishes to drag the rest of Europe in the direction of the United Kingdom, with its 600 lenders, £290 billion a year business, and 7K different products.34 But our borrowing is excessive and out of control, with Brits holding 60 per cent of all European credit cards, and our average debt (excluding mortgages) amounting to £7.5K each.35 Europe must fear that it is being led astray.
2
Cross-border lending
[9.07] It is only realistic for European law to consider cross-border mortgages, purely domestic mortgages being within the domain of the various national laws.36 First then let us define our terms, no easy matter given the complexity of cross-border borrowing and an official reluctance to commit resources.37 Lending involves three objects, the borrower, the lender and the property to be used as security. In an extreme case all three elements may be scattered across national boundaries but it seems to be very rare for three different states to be involved. If two of them are located together only one border is crossed. For example the property and borrower may both be in state A and the lender in state B38 or a borrower in A may borrow from a B lender for a second home in B. Statistics probably do not even detect a third permutation in which lender and borrower share state A whereas the property forming the security is in state B.39 Borrowing within the Eurozone is simpler than borrowing which crosses a Eurozone border, since the latter case adds the possible complexity of exchange rate fluctuations. It may be correct, when choosing a currency in which to borrow, to match asset to liability or alternatively to match the loan to the source of income being used to service it.40 [9.08] Cross-border penetration of financial services is very low. Only five per cent of EU citizens have ever needed a bank account in another country, three per cent have crossed national boundaries for a credit card, and a mere one per cent had ever taken out a mortgage in another EU country; caution is needed about these figures since another one per cent did not know — surely a strange thing not to know? Even the lunatic borrowers of the United Kingdom have the same one per cent rate of cross-border borrowing, and only four per cent of border-rich Luxembourgers have crossed the limits of the Principality for a HM Treasury Response (n 1 above) 5. Independent January 3rd 2006. 36 E Hondius ‘Finding the Law in a New Millennium’ 79–103 in M Bussani & U Mattei Common Core of European Private Law (The Hague, Kluwer, 2003, 90-411-2004-1) 86–87. 37 Forum Group (n 20 above) Recommendation [1]; Green Paper (n 3 above) Annex 1, [1]. 38 This is properly classified as cross-border only if the lender has no presence in country A: London Economics (n 2 above) [2.2]. 39 London Economics (n 2 above) [4]. 40 M Warburton & M Fitzpatrick A Place in the Sun? Trends in the Ownership of UK Foreign Property (London, Grant Thornton with Lombard Street Research, 2006) 8. 34 35
European Mortgage Markets
383
mortgage. Admittedly a larger percentage might be tempted in the next five years, with greater openness professed by more educated and younger Europeans,41 egged-on by wider experience of travel, wider use of credit cards on holiday, the internet and a promised increase in cross-border advertising. We Europeans are all wallflowers, waiting on the side-lines for foreign lenders to make the approach.42 [9.09] All are agreed that the current market one per cent rate for cross-border borrowing for house purchase is tiny and there is scope for a considerable increase,43 though our information relies too heavily on a couple of commercial surveys44 and limited EU-sponsored studies.45 Borrowing for second homes abroad is the main area of cross-border activity, notably the release of equity in English homes to provide cash for the purchase of a foreign home.46 Proximity to a national border presumably increases willingness to shop in another EU state.47 Accession countries with less than two per cent of the total volume may offer the best prospects for cross-border penetration.48 All the evidence suggests that lending markets diverge widely and remain discrete and compartmentalised on national lines. Markets are out of alignment in terms of their size, growth, produce, variety, borrower profiles, distribution structures, loan durations, home ownership rates and funding mechanisms.49 Banks are forced to act independently in each market by legal divergences, a reality irrespective of the amount of European harmonisation. Nevertheless, there is scope to stimulate cross-border lending, increasing the amount of borrowing in some countries, making home loans cheaper everywhere, and increasing the overall activity of the Union, even if the scale of these benefits remains the subject of debate.
3
Domestic borrowing patterns
[9.10] Across Europe there are big variations in the size and duration of loans and the use of variable rates and interest fixes, as well as differential tax treatment. 41 Eurobarometer 60.2 [4.1.1, 4.1.2, 4.1.5]; Eurobarometer 60.2 [4.2.6]; but 85% would not even consider a mortgage in another EU country within 5 years. 42 London Economics (n 2 above) [5.2]. 43 European Economic and Social Committee Response (n 1 above) [3.1.3]. 44 European Mortgages 2003 (London, Datamonitor, 2003). 45 MJ Lea, R Welter & A Dobel ‘Study on the Mortgage Credit in the EEA’ (EEA, Tender No XXIV/96/U6/21, DG XXIV). 46 Around £1 billion of equity release occurred in 2005, more than 23K new loans: Equity Release Market Summary (CML Research (n 13 above)) Table MM7A. 47 Green Paper (n 3 above) [11]; London Economics (n 2 above) [2.2]. 48 Eurohypothec Workshop (Berlin, 2005); A Drewicz-Tułodziecha Basic Guidelines for a Eurohypothec (Warsaw, Polish Mortgage Credit Foundation, 2005, ISSN 1508-5988); Forum Group (n 20 above) [119–121]. 49 Green Paper (n 3 above) [9].
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In terms of size, the amount borrowed has an important impact on the economics of lending, larger loans making for more efficient mortgage processes. British loans average €120K, giving economies of scale unknown in countries such as France, Portugal and Italy where an average consumer borrows just half as much.50 Duration of borrowing varies between domestic markets in a seemingly random way.51 Long mortgages of the type offered in Britain are unusual when mortgages are broken down by length: (1) short mortgages lasting less 10 ten years were held by 7 per cent of Europeans with more in northern Europe, (2) medium length mortgages (10–20 years) led with 10 per cent across the EU-15 — more in Luxembourg, Belgium, Denmark and the United Kingdom (16%) but fewer in southern Europe and Germany — and (3) those lasting more than 20 years were held by fewer than 5%, the greatest concentrations being in Denmark (31%),52 Netherlands and Sweden, but these very long terms are almost non-existent in most states. Most mortgages use variable interest rates meaning in the industry any rate fixed for less than a year, a measure by which three-quarters of British mortgages are variable as against only one-tenth in Germany.53 Tax varies from state to state, creating distortions in the internal market, but this is an area of state competence,54 and European control is imposed only to preclude discrimination on national lines.55 Generous tax concessions on mortgage interest in the Netherlands contrast with the limited incentives in Germany and a correspondingly limited product range.56
4
Cost of borrowing
[9.11] Interest rates in most of Western Europe were around 4.5–5 per cent in 2002, though higher in the most mortgage-laden country, Denmark, and a full percentage point lower on the Iberian Peninsular.57 Eurozone rules impose a convergence, for better or worse, and Union membership by eastern accession states has also fomented a sharp decline in rates there, though United Kingdom rates remain stubbornly high. While central bank rates are free to wander, Mercer Oliver Wyman (n 27 above) [5.3.2]. Eurobarometer 56 [5.1–5.2]. 52 Although the notional length of many Danish loans is 30 years, most are in practice paid off within 3–8 years: London Economics (n 2 above) [6.3.2] and box [3] at 71. 53 London Economics (n 2 above) [4.3.2] using statistics from the European Central Bank; also [A1.5]. 54 London Economics (n 2 above) [2.4.3], [7], Table [7.1]; Mercer Oliver Wyman (n 27 above) [6.3]; Green Paper (n 3 above) [43], Annex 1 [8]. 55 See above [2.40]. 56 Mercer Oliver Wyman (n 27 above) [5.4.6]. 57 Mercer Oliver Wyman (n 27 above) [3.4], Figure [3.1.6]. Spain had negative effective interest rates in 2005, below the rate of inflation. Interests rates have not varied dramatically since these statistics were collected. 50 51
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national rates inevitably differ, so economic surveys have measured price differentiation by mortgage spreads, that is the range of interest rates charged measured as a divergence from the central bank lending rate, by which measure interest charges are stable and show no signs of further convergence.58 Fees are generally less than 0.1 per cent of the loan though rather higher in France and the Netherlands, and high operating costs can be a sign of inefficiency in the mortgage process in low-borrowing states like Italy, France and Portugal. It is not easy for a foreign institution to enter a market and reduce costs by scale because of the need to comply with national rules in each state. Profit margins have fallen over the past ten years so that they are now as low as one per cent in some places.59 Capital moves in an efficient market to where it is most needed and best rewarded. An integrated market should make the same products available in all states at the same price, lenders displaying willingness to lend anywhere on the same terms.60 Several studies are now available on the potential costs and benefits of integration in the European mortgage market, though there are concerns about methodology.61 Studies have tested mortgage spreads, that is the range of interest rates measured against the official lending rates of each central bank, searching for low spreads, spreads that are reducing and low average prices. Price differentials between domestic markets are around ten per cent, a figure so low as to call into question whether a genuine pan-European market would much reduce prices, except, perhaps, in Italy. Differentials reflect product differences. Greater integration might reduce costs to consumers by perhaps 0.15 per cent of EU Gross Domestic Product, increasing volume by around ten per cent and increasing housing stock where the supply of land is elastic.62 Further efficiency gains are unlikely in the United Kingdom market, but ‘competitive and vibrant’ institutions have ‘little to fear and much to gain’ from integration.’63
5
Completeness of domestic markets
[9.12] A European paradigm is a mortgage repayable at a variable interest rate over a medium repayment term. In a mature and efficient market a wide range of mortgage products would be available, tailored to different lending and borrowing conditions. Market ‘completeness’ is high in the United Kingdom, London Economics (n 2 above) [4.3]. Mercer Oliver Wyman (n 27 above) [1.2.2–1.2.4], [3.5.2], [4.6]. 60 Green Paper (n 3 above) [12]. 61 Green Paper (n 3 above) [1]. The methodology of the London Economics report (n 2 above) came in for some sharp criticism in the BEUC Response (n 1 above) 2–4 who call it ‘partial and partisan’ and also the HM Treasury Response (n 1 above) 11–12. 62 London Economics (n 2 above) [2.4–2.5], [3.5], [6.1], [7]; Mercer Oliver Wyman (n 27 above) [1.2], [5.1], [5.3], [6.1.1]. 63 M Coogan ‘Next Steps Towards European Market Integration’ (Council of Mortgage Lenders (n 13 above) Press Release, January 2005). 58 59
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possibly at the point of saturation, and also in the Netherlands.64 Wider product availability is a feature of the developing markets in the accession states of Eastern Europe, but completeness is low in Portugal, Germany and Italy.65 Consumer protection rules distort some markets and other gaps reflect cultural traditions.66 Between one- and two-thirds of borrowers might choose fixed term loans if offered without early repayment penalties. Mortgages that are indexlinked are regulated in many states, and mortgages with flexible repayment schedules might also attract some following, both new business and consumers switching to secure greater flexibility. Equity release67 is a mechanism to turn the cash value of a house into a stream of income and so release the value for consumption purposes, already big business in Britain and accounting for one-fifth of lending activity to the tune of £60 billion a year.68 Another area of possible expansion is so-called ‘sub-prime’ lending, though great care will be needed given the catastrophic effects of problems in the American sub-prime market for the global economy in the summer of 2007.69 Ball70 has demonstrated how innovation in mortgage finance has increased market activity in Denmark; the introduction of a mortgage with an interest rate that is variable each year has greatly increased borrowing over the previous long-term loans, and has led to very rapid rises in prices. Increased product availability might raise consumption across Europe, though with considerable compliance costs, and yield efficiency gains estimated at around 25 per cent.71 [9.13] Islamic finance72 uses investment vehicles aimed at Muslims which to be Shari’ah compliant need to find alternatives to interest73 and secure fair dealing and the avoidance of usury. A transaction must be structured as a capital transaction with a sharing of risk with several possible models for financing land purchase: Murubaha: A financier buys and sells-on with mark-up. Ijari: A lease arrangement under which a financier buys property and rents it out with an option to settle. 64 The latter is unusual in that lenders are willing to lend move than 100% of the value of the house, the consequence of beneficial tax rules. 65 London Economics (n 2 above) Table [8.1]. Slovenia is ranked at 0.6 on a scale which rates the UK as 1: [4.4]. 66 London Economics (n 2 above) [3.3]. 67 Green Paper (n 3 above) Annex III. 68 London Economics (n 2 above) [A1.5.4]. 69 See below [9.34]. 70 M Ball European Housing Review 2006 (London, RICS, 2006) 5. 71 London Economics (n 2 above) [10.4]; Mercer Oliver Wyman (n 27 above) [1.2], [1.3], [2.2], [3.3]. 72 An example of diversity mentioned by Commissioner McCreevy (n 26 above), others being the viager hypothécaire in France, fixed rate deals with factored-in pre-payment in Germany, and equity release for the elderly. 73 L Trevelyan ‘Counting on Faith’ [2005] 15 LSG 28–29; S Stern ‘Shari’ah — a Suitable Model for a Changing Business Environment?’ (2004) 2 Journal of International and Comparative Law 287–313; N Khan & M Paracha ‘No Shortage of Interest’ (2005) 19 Lawyer 19.
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Istisna’a: A finance contract. Musharaha: A partnership with a gradual transfer of ownership. English law has adapted easily to these transactions and Britain’s 1.8 million Muslims create a strong market driven by investment from the Middle East and a socially inclusive governmental agenda. Stamp duty regimes have been altered to create a level playing field for Islamic-compliant mortgages, first between Muraba and Ijara,74 and then for the diminishing Musharaha structure.75 Changes are being made to reporting requirements, taxation of income at source, right to buy arrangements for public housing,76 and regulation regimes,77 though some problems remain with corporate transactions but one suspects that civilian systems will struggle far more to adapt.
I N F O R MATI O N R I G HTS
Information Rights 1
European Code
[9.14] A borrower intending to take out a home loan is entitled to receive full information at the pre-contract stage under a code of conduct agreed by the European lending institutions78 and supported by the European Commission.79 This is supplemented in some states by national legislation.80 Many lending institutions have registered with the Commission, whose review will involve all ‘dialogue participants’ in finding an answer to the key question whether legislation is required.81 Consumers are entitled to transparency of information and comparability of offers, objectives secured by entitling consumers to general information about home loans on offer and then to personalised pre-contractual information.82 These limited rights replace the more extensive consumer credit controls where the lending is to finance the acquisition of a home and in future whenever the lending is secured.83 Finance Act 2003, c 14, s 71–72. Finance Act 2005, c 7, s 94. 76 Times March 16th 2005. 77 Financial Services and Markets Act 2000, c 8, sch 2 para 2A, inserted by Regulation of Financial Services (Land Transactions) Act 2005, c 24, s 1; see the Explanatory Memorandum attached to the draft Bill. 78 Code of Conduct on Pre-contractual Information for Home Loans (CML website (n 13 above) 2005, revised 2006) [I]. 79 Pre-Contractual Information About Home Loans, Commission Recommendation 2001/193/EC [2001] OJ L 69 25; JCT Chual ‘Code of Conduct’ (2001) 6 Finance & Company Lawyer 6–7; EEA Council Decision 84/2003 [2003] OJ L257 41 (application to EEA). 80 Estonia, France, Ireland, Belgium and the Netherlands: Forum Group (n 20 above) [31]. 81 Forum Group (n 20 above) Recommendation [15]; Green Paper (n 3 above) [11]. 82 Code of Conduct (n 78 above) [II]. 83 Consumer Credit Directive (n 4 above) §§2[1], 2[3], 3[1]; compare domestic protection: Consumer Credit (Agreements) (Amendment) Regs 2004, SI 2004/1482; see above [9.03]. 74 75
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[9.15] Initial information about home loans should include or be accompanied by the following information in the same format:84 A1. A2. B1. B2. B3.
The lender and its address. Any intermediary (broker etc). Purposes for which the home loan may be used. Form of security. Description of the types of home loan available with short description of the differences between fixed and variable rate products. B4. Types of interest rate — fixed, variable, and combinations thereof. B5. An indication of the cost of a typical home loan for the consumer. B6. Related fees for administration, insurance, legal work, and intermediaries (brokers). B7. Repayments, their number, frequency and amount. B8. The possibility of early repayment and its conditions. B9. Valuation requirements. B10. Information on tax relief or other public subsidies. B11. Any period of reflection and its duration. B12. Reference to the Code and its availability in each branch. [9.16] Generalised information in this form is available to the whole body of potential consumers. The European Standardised Information Sheet is used to provide personalised information to a particular consumer at the pre-contract stage about:85 1. 2.
The lender. Description of product; including the nature of the security (eg, a mortgage) required, whether it is interest-only or on a repayment basis, the deposit required from the consumer, and any third-party guarantee required. 3. Nominal rate of interest (also the type of rate and duration of any fixed period). 4. Annual percentage rate of charge (APR). 5. Amount of credit advanced and the currency used. 6. Duration of the home loan agreement. 7. Repayment frequency and the number of repayments (variable). 8. Amount of instalments (variable) under repayment mortgages. 9. For interest-only home loans, an illustrative indication of regular interest repayments, regular payments towards the repayment vehicle, and a warning that the repayment vehicle may not cover the amount borrowed, as well as an indication of any tie to the lender. 10. Initial, non- recurring, costs paid on taking out the home loan, for example, for administration, legal fees or property valuation, including costs of an unsuccessful application and an indication of any tie to the lender. 84 85
Code of Conduct (n 78 above) Annex I. Code of Conduct (n 78 above) Annex II.
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11. Additional recurrent costs, for example, insurance premiums covering default on payments (unemployment/death), fire, or building and contents; also any requirement to receive these services through the lender (where permitted in national legislation). 12. Early repayment: the possibility, its terms and any charges. 13. Internal complaint schemes and a contact point. 14. An illustrative amortisation table showing the capital repaid, interest added, outstanding capital, amounts of each instalment and the sum of capital and interest (monthly for the first year and yearly thereafter). 15. Any obligation to domicile a bank account or salary with the lender. 16. Warnings about the variability of interest rates, the absence of a legally binding offer, and potential market fluctuations. Phew!
2
Uptake of the Code
[9.17] Research is needed to determine the utility of pre-contractual information86 on this scale and in this amount of detail. Information needs to be supplied early enough to enable shopping around.87 Consumers’ groups want even more content,88 to include commission charges, handling charges, compounding period, procedures for variation of interest rates, and the cost of bundled products, while the industry wants national laws in all states to be watered down to the European standard89 and consistency between the information requirements of different directives affecting financial services,90 but beyond that the industry was (self-)satisfied with self-regulation.91 A German report92 studied implementation in 2003 at a time when the Code applied to 60 per cent of the EU-15 population, though it has since been applied more fully. Apart from Finland compliance was found to be woeful: with a mere 27 per cent of lenders volunteering the information and another 20 per cent doing so after prompting, which left more than half who failed after prompting, and a mere four per cent of Italian lenders complied. Compulsion is essential. [9.18] Regulation of mortgages in England and Wales was tightened substantially on ‘M day’ in 2004, the day when the Financial Services Authority took over and statutory controls were imposed.93 Lenders must provide an Initial Forum Group (n 20 above) Recommendation [6]. Green Paper (n 3 above) [16]; Forum Group (n 20 above) [26] and Recommendation [3]. 88 Forum Group (n 20 above) Recommendation [9]. 89 Forum Group (n 20 above) Recommendation [14]. 90 Forum Group (n 20 above) Recommendation [44]; Green Paper (n 3 above) Annex 1 [5]. 91 Forum Group (n 20 above) Recommendation [15]. 92 Monitoring the Uptake and Effectiveness of the Voluntary Code of Conduct on Pre-contractual Information for Home Loans (Hamburg, Institut für Finanzdinstieistungen, 2003). 93 Financial Services and Markets Act 2000 (n 77 above) s 19ff; Financial Services (EEA State) Regs 2007, SI 2007/108. 86 87
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Disclosure Document setting out the general terms on which they conduct business, and must follow this up with a Key Facts Indicator when a specific loan is under discussion. Some offers cover a dozen pages, mortgage interviews are prolonged, the overall application process has slowed down, costs have increased by £100 per transaction, and the information provided is said to be bad value for consumers.94 Mystery shopping has revealed a poor rate of compliance.
3
Annual Percentage Rate (APR) for home loans
[9.19] According to the current lexicon, Annual Percentage Rate95 is: a standardised method of calculating the cost of a mortgage stated as a yearly rate, which includes items such as interest, mortgage insurance, and certain points of credit costs.
As well as interest and charges paid by the consumer to the lender, it should also include insurance premiums, costs and charges paid to third parties. These are projected in time and spread over the expected duration of the mortgage to give an annual cost which can be compared with other offers. A lender offering a mortgage to an individual consumer should do so using the European Standardised Information Sheet which must indicate the APR96 along with other information about the interest rate. This European standard measure for comparing the cost of different loans was developed in the context of consumer credit. The First Directive required an APR to be shown in all consumer credit agreements, but no Community decision was taken about how this was to be calculated, and detail was left to national law.97 Amendments implemented in 199298 began the process of harmonisation by specifying a method of calculation using a unified cost base, and hypotheses to be adopted in the calculation and further changes were made to the method of calculation in 1998.99 Current proposals for a reworking of the consumer credit regime will include further tinkering with the method of calculation and components of the cost base.100 It is not necessary to provide information about APR every time there is a tacit renewal of a credit agreement on the same terms.101
S Pritchard Independent October 12th 2005. Green Paper (n 3 above) Annex III. It is usual in English practice to drop the rate ‘of charge’, APR rather than APRC. 96 Forum Group Report (n 20 above) [27–28]; see above [9.16]. 97 Consumer Credit Directive (n 4 above) §5. 98 Directive 90/88/EEC (n 8 above) introducing Consumer Credit Directive (n 4 above) §1a, a provision now spent and repealed by Directive 98/7/EC. 99 Directive 98/7/EC [1998] OJ L101 17, R[6], §1. 100 Consumer Credit Proposal (n 14 above) §18, Annex. 101 C-264/02 Cofinga Merignac v Sachithananthan [2004] I ECR 2157 ECJ; the importance of APR information for consumers is emphasised at J[26]. 94 95
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The idea is to inform a consumer of the total cost of all commitments agreed102 using a single mathematical formula.103 This involves a summation of the credit advances (to be renamed ‘drawdowns’) and costs as against repayments and payments of charges, the APR balancing the two sides by taking into account the dimension of time. Drawdowns and repayments generally follow a prearranged schedule, but if not assumptions are needed — that both are made at the earliest possible moment104 — which can make the resulting figure very artificial. Duration is as agreed and both parties are assumed to fulfil their obligations as agreed,105 but it is also assumed that variable interest rates and charges will remain fixed until the end of the contract.106 Accuracy in mathematical calculations is required to at least one decimal place and using rules about the length of years, weeks and months.107 [9.20] The cost base to be used in calculation of an APR is the main area of controversy. An APR must take into account the ‘total cost of the credit to the consumer’, meaning all costs, interest and other charges, and any compulsory insurance premiums,108 but excluding default charges and optional insurance premiums.109 Current proposals for consumer credit include the basic charge for borrowing joined by all other indemnities, commissions, taxes and charges that the consumer is required to pay for the credit whether to the creditor, an intermediary (broker), a tax authority or to any other third party, and the cost of any compulsory insurance taken out at the time that the credit agreement is concluded, but excluding taxes and notary’s fees.110 So far as home loans are concerned, the Forum Group divided on party lines about the path forward: consumer representatives favoured a broad definition including all associated charges, whereas industry representatives favoured restriction to costs levied by the lender for its benefit at the time of the granting of the loan.111 Cost elements of APRs in mortgages vary and the whole concept needs to be tailored to the context of home loans, applying an EU standard and using consumer credit as an analogy and guide, rather than a precise model,112 though the reworked second 102 Consumer Credit Directive (n 4 above) §1[2](e); also §1a inserted by Directive 90/88/EEC §1[2]; Consumer Credit Proposal (n 14 above) §3[g]; Directive 98/7/EC (n 99 above) §1[a]. 103 Consumer Credit Directive (n 4 above) §1[1], §1[7]; also Annexes I–II as substituted by Directive 98/7/EC §1[e]; Annex III as substituted by Directive 98/7/EC §1[f]; Consumer Credit Proposal (n 14 above) §18, Annex; the illustrative examples — covering, eg, endowment mortgages — will become non-legislative: Proposal EN [5.12]. 104 Consumer Credit Directive (n 4 above) §1a[7]; Consumer Credit Proposal (n 14 above) §18[5](b). 105 Consumer Credit Directive (n 4 above) §1a[4](b); Consumer Credit Proposal (n 14 above) §18[3]. 106 Consumer Credit Directive (n 4 above) §1a[6]; Consumer Credit Proposal (n 14 above) §18[4]. 107 Directive 98/7/EC R[7–8]; Consumer Credit Proposal (n 14 above) Annex [C-d]. 108 Consumer Credit Directive (n 4 above) §1[2](d) as substituted by Directive 90/88/EEC (n 8 above) §1[1]; U Reifner ‘Harmonisation of Cost Elements of the APR of Charge’ (Hamburg, 1998). 109 Consumer Credit Directive (n 4 above) §1a[2]. 110 Consumer Credit Proposal (n 14 above) §§3[f], 18[2]. 111 Forum Group (n 20 above) [44–45], Recommendations [5], [11], [16]. 112 Green Paper (n 3 above) [23–25].
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draft of the proposals have made the revised APR more suitable for use for home loans.
4
Usefulness of APRs for home loans
[9.21] Consumer credit is short-term, and it makes sense to lump together recurrent charges for interest and one-off costs since the consumer really needs to know the total weight of the credit charges. Domestic mortgages involve long-term borrowing over fifteen or twenty years, and on that time scale these two elements are distinct, and a consumer should balance separately the one-off charges for taking out the loan and the recurrent charges, perhaps accepting a higher valuation fee for lower long-term interest rates. Comparison is difficult when interest rates are variable over a long term especially if repayment is flexible and dependent upon consumer behaviour. Valuation fees and legal charges have to be paid, and transaction costs vary widely across Europe reaching 15–20 per cent in France and Belgium as compared to 6 per cent in UK.113 Quotation of one-off costs separately increases transparency and creates greater downward force on prices. Industry and government responses to consultation are broadly supportive of the direct application of consumer credit APRs to mortgage credit114 but there is some acerbic criticism on behalf of consumers115 who point to artificial assumptions and variant approaches to hypotheticals. There seems to be a broad consensus on the use of a broad cost base.116
CO N SUMER PR O TECTI O N
Consumer Protection 1
Consumer confidence
[9.22] Integration in the European mortgage market presupposes consumer confidence, public opinion favouring a general alignment of laws for consumer protection.117 An unregulated market like that in the UK populated by a wide range of wise and unwise buys, all rubbing shoulders, so levels of protection London Economics (n 2 above) [6.3.2], [A1.5.4.]; for the recent EU survey see above [7.04]. HM Treasury Response (n 1 above) 6. 115 BEUC Response (n 1 above) 13–14. The position in the UK may be assisted by a recent change to the advertisement of consumer credit which requires that the quoted APR should be charged in at least 2/3rds of agreements entered into as a result of the advertisement: Consumer Credit (Advertisements) Regs 2004, SI 2004/1484, as amended by SI 2007/827. 116 BEUC Response (n 1 above) 13–17; HM Treasury Response (n 1 above) 6. 117 Forum Group (n 20 above) [19ff] esp [34], [50]; Forum Group Recommendations [2–18]; Green Paper (n 3 above) [I.12]; Eurobarometer 56 [15.2], [16]; Eurobarometer 60.2 [6.26] (45% full, 24% partial). 113 114
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affect product availability.118 A Europe-wide market requires an equivalence of consumer protection principles,119 but responses to consultation divide on party lines about how to achieve this. Industry representatives and governments are generally worried about compliance costs120 and are content to rely on Europe-wide rules for the selection of law.121 Consumers groups, on the other hand, make the interesting points that there are too many products to compare and that consumers can experience a high level of detriment when entering markets at the margins.122 Information overload under the present system needs to be reduced and information needs to highlight abnormal or risky points of a mortgage proposal. Safe mortgages in the core of prime lending could be ‘kite-marked’ — according to safe lending practices and with proper loan-to-income and loan-to-value ratios123 — thus leaving an area of marginal or sub-prime lending including high-risk lending, all equity release, long-term fixes and lending with a high loan-to-value ratio. Information rights and consumer protection could then be targeted at these borderline cases. There should also be a requirement to provide independent advice, though of course the only sound advice to an intending sub-prime borrower is ‘don’t’; if the EU intends to encourage growth in that sector this should be accompanied by strong and effective warnings to its citizens. People in this market are relatively poor, vulnerable and already in debt.
2
Specific consumer protection concerns
[9.23] A major concern is with early redemption fees. Repayment is not generally allowed in Germany, but it is a right in 11 other European countries — often at the price of a redemption penalty fee or interest rate penalty.124 Variant controls and differential penalties are important obstacles to integration and the need for harmonisation is self-evident,125 but there is as disagreement about what form it should take. Consumer groups wanted borrowers to be free to terminate at any time and in any circumstances with no charge after the early years and any charge during those early years known in advance, limited to the true cost incurred by the lender in the wholesale markets and subject to a statutory cap. Industry representatives wanted just the reverse, the removal of existing national caps on early repayment fees, full harmonisation of the conditions on which early repayment of fixed interest rate loans could occur, and the right limited to sale, Mercer Oliver Wyman (n 27 above) [5.4.4]. London Economics (n 2 above) [6.1]. 120 Northern Rock and Council for Mortgage Lenders Responses (n 1 above). 121 See above [3.12], below [10.10], [10.26], [10.30], [10.39]. 122 BEUC Response (n 1 above) 2; Citizens Advice Bureaux Response (n 1 above) 4. 123 See below [9.31], [9.33]. 124 Forum Group (n 20 above) [29]; Mercer Oliver Wyman (n 27 above) [3.4.6]; London Economics (n 2 above) [A1.5.5], Table [A1.9]. 125 London Economics (n 2 above) [A1.6.1]; Forum Group (n 20 above) Recommendation [4]. 118 119
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Mortgages and Debt
unemployment or death, so that lenders receive compensation for losses and costs resulting from the early repayment in full.126 Consultation is currently under way.127 Lending for home loans which is not backed by savers’ deposits must be funded by bonds taken out on the financial markets and if this is fixed over a period of time it is not unreasonable for the consumer to cover any costs of altering the arrangement.128 But lenders can easily overstate what they lose since it is easy in modern financial markets to reinvest money that is repaid129 and a borrower should have the right to discharge his obligations under a home loan as under a credit agreement,130 subject only to a fair early repayment indemnity.131 Responses to consultation naturally divide on party lines, with the relatively impartial Council of Europe accepting the case for repayment fees to reflect actual costs but not so as to impose any penalty.132 English law now requires easier to understand settlement figures.133 [9.24] Controls on interest rates apply in a number of European states. Indexation of rates is practised in Spain and is a measure favoured by consumers’ representatives, whereas Belgium limits the frequency with which rates can be adjusted.134 In Italy and elsewhere135 usury laws are deployed, specifying maximum interest rates for all forms of lending and not mortgage-specific.136 Industry representatives want existing legal caps on the variation of interest rates removed,137 not least because equity release schemes rely on compounding of interest.138 Compound interest can be treacherous for borrowers. In London North Securities v Meadows139 a windscreen salesman and his wife found themselves ‘on a moving staircase going against them at a speed faster than they can run’;140 having Forum Group (n 20 above) Recommendation [10], [18]. Green Paper (n 3 above) [22]. The French Banking Federation Response (n 1 above) 8 suggests that caps are counter-productive in France, and so too in Portugal: Mercer Oliver Wyman Study [5.4.3]. 128 Another reason why common law securitisation involving a trust is much to be preferred to the civilian bond; see below [9.46ff]. 129 Consider for example the traditional common law requirement of 6 months’ notice to redeem to give the lender a chance to reinvest; 6 minutes should suffice with today’s technology. 130 Consumer Credit Directive (n 4 above) §8; Consumer Credit Proposal (n 14 above) §15. 131 Consumer Credit Proposal (n 14 above) §16[2]. Endowments are a case apart: §20. 132 European Economic and Social Committee Response (n 1 above) [3.2.7–3.29]. 133 Consumer Credit (Early Settlement) Regs 2004, SI 2004/1483. 134 Mercer Oliver Wyman (n 27 above) [3.4.6], [5.3.9]. 135 Also in France, the Netherlands, Belgium and parts of Portugal and Spain; this list does not match the perception of usury as a Catholic doctrine met with Protestant indifference; but Europe always confounds easy stereotypes. 136 Report on the Operation of the Directive Concerning Consumer Credit COM (95) 117 final, [273–297]; The Effect of Interest Rate Controls in Other Countries (DTI, 2004); London Economics (n 2 above) [A1.6.1]; Mercer Oliver Wyman (n 27 above) [3.4.6]. The DTI report has been heavily criticised by Prof U Reifner. 137 Forum Group (n 20 above) Recommendation [17]; Green Paper (n 3 above) [26–28]. 138 Financial Services Agency Response (n 1 above) 6; so beware! 139 London North Securities v Meadows [2005] EWCA 956. 140 Guardian October 29th 2004. 126 127
Consumer Protection
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borrowed less than £6K in 1989 their debt had risen to £384K by 2004, fuelled by an interest rate of ‘only’ 35 per cent and the imposition of interest on interest. Fortunately for them the initial documentation inaccurately recorded an insurance premium, which gave the court jurisdiction to set the mortgage aside in favour of more equitable terms, but compound interest at this rate was not inherently objectionable and was not extortionate.141 A more proportionate test is provided by the Consumer Credit Act 2006142 which applies when a credit arrangement is unfair. It will be a good thing if the excesses of fringe lenders in the English market are curbed by having to comply with European standards of lending behaviour.
3
Withdrawal
[9.25] European law grants a withdrawal or reflection period for credit agreements to cover personal loans but there is no reflection allowed before a home loan.143 Different rules in national legislation distort competition in cross-border lending.144 France is notable in the states protecting domestic borrowers in granting a right of reflection, and Germany also allows withdrawal.145 Withdrawal from a mortgage is of limited value unless there is also the right to withdraw from the related property transaction which is being financed, as Heininger shows.146
4
Suretyships (guarantees)
[9.26] Surety agreements and guarantees are not generally affected by European law147 so they are left to the tender mercies of O’Brien and Etridge148 or national rules elsewhere,149 even though these transactions are the ones where consumers are most open to abuse.150 Consumer Credit Act 1974 (n 11 above) ss 137–140, since repealed. Consumer Credit Act 1974 (n 11 above) ss 140A–140B inserted by Consumer Credit Act 2006, c 14, ss 19–22; L Cromar ‘Testing Times’ [2006] NLJ 662–663. 143 This is absent from the Consumer Credit Directive (n 4 above) and also from the Consumer Credit Proposal (n 14 above) §13. 144 Consumer Credit Proposal (n 14 above) PN [2.2]. 145 London Economics (n 2 above) Table [A1.11]; Mercer Oliver Wyman (n 27 above) [3.4.6]; Forum Group (n 20 above) [31]. 146 C-481/99 Heininger v Bayerische Hypo- und Vereinsbank [2001] I ECR 9945 ECJ; see above [5.84ff]. 147 Outside both consumer credit and doorstep selling regimes: C-208/98 Berliner Kindl Brauerei v Siepert [2000] I ECR 1741 ECJ; C-45/96 Bayrische Hypotheken -und Wechselbank v Dietzinger [1998] I ECR 1199 ECJ. 148 Barclays Bank v O’Brien [1994] 1 AC 180 HL; Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44, [2002] 2 AC 773; P Sparkes A New Land Law (Oxford, Hart, 2nd ed, 2003, 1-84113-380-9) [30.42ff]. 149 Consumer Credit Proposal (n 14 above) §2[1], contrast the Consumer Credit Proposal (n 12 above) §3[1]; P Rott ‘Guarantees in the Future Consumer Credit Directive’ (2005) 13 ERPL 383–404. 150 F Colombi Ciacchi ‘Unfair Suretyships’ (2005) 13 ERPL 285–308; M Kenny ‘Standing Surety in Europe’ (2007) 70 MLR 175–196, 190 detects ‘substantial divergence rather than convergence’, ‘fragmentation’ and legal tension’. 141 142
396
Mortgages and Debt SECUR I TY
Security 1
Security or collateral?
[9.27] A glossary attached to the Green Paper on Mortgage Credit151 was provided by the European Mortgage Federation and provides a flimsy base for legal analysis. This creates a vocabulary of homonyms, each pair being a precise common law term and a woolly autonomous European term. Shades of meaning are nothing new but confusion is very likely when a technical word is misapplied, for example the use of ‘foreclosure’ to describe an enforcement procedure involving sale.152 Slack European translation will eventually destroy the precision of English property law. An oddity in the glossary is its central image of a personal debt with the security added as an optional extra and this leads to the home used as a security being described as ‘collateral’, that is ‘the property … secured against a loan to ensure repayment of debt’.153 Fair enough when a person borrows £100 from a pawnbroker and deposits his pearl-encrusted umbrella, since the main contract is for the debt to which the pledge of the umbrella is an afterthought, but ‘collateral’ is properly something additional to and above the main security. In a ‘sub-prime’ loan in risky circumstances the house forms the main security and an insurance policy to guard against the risk of a shortfall occurring on sale is the collateral and again a professional borrowing to finance his business offers a mortgage over his office as security and any additional guarantee secured on his home is a collateral. Neither lender nor borrower sees house purchase as a matter of personal debt and mortgages are treated differently from ordinary consumer credit precisely because of the centrality of the security provided by a house. Hence the confusion of defining a ‘secured loan’ as a loan backed by collateral, and collateral as ‘the property… that [is] being secured against a loan to ensure repayment of debt’. In reality the loan is secured against the home, the reverse direction. European law provides us with no direct definition of that slippery eel, the ‘mortgage’. The first step towards a European mortgage law should be a sound grammar.
2
European security
[9.28] So called ‘collateral issues’ are one of the key areas to emerge from the Forum Group.154 Security rights are determined by the local law where the land is sited, both in terms of their existence and their priority.155 Green Paper (n 3 above) Annex III. See below [9.28]. 153 Green Paper (n 3 above) Annex III. 154 Forum Group (n 20 above) [3]; Green Paper (n 3 above) [IV]. 155 (Second) Banking Directive 89/646/EEC [1989] OJ L386 1; C-222/97 Trümmer’s Application [1999] I ECR 1661 ECJ. 151 152
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Practice varies across Europe about the form of security,156 but a mortgage is normal in most of Europe. A mortgage is a security, whatever its form, which earmarks a particular property for repayment of that debt, giving preference over unsecured creditors on insolvency and priority over later secured creditors. The common law forms of the true mortgage and the legal charge157 are mirrored on the continent by the hypothec, though our system adds the possibility of equitable security which has no civilian equivalent. Hypothecs are being introduced into Poland and other accession states such as Estonia, Hungary and Slovenia. A personal surety is often used in France and Belgium, a response to a defect in the Napoleonic registration system, and personal bills are still used in Bosnia and Poland.158 The Voluntary Code about pre-loan information applies indifferently to mortgages and sureties used for the same purpose.159 Formalities will be governed by national law. European states should be prevented from imposing additional legalisation or validation requirements on formal documents executed elsewhere in Europe.160
3
European hypothec
[9.29] There has been considerable work undertaken on the possible shape of a European hypothec, a form of mortgage to be available on a pan-European basis.161 This was first proposed by the Segré Report162 and first named in a proposal of the Union of Latin Notaries as far back as 1987, their model being the Swiss Schuldbrief (accessory in nature and little used). More substantial work was undertaken by a Spanish-led group convened by Professor Nasarre-Aznar163 including Dr Martin Dixon and Professor Gerwyn Griffiths as ‘English’ representatives, work which has been taken forward by individual academics.164 All this 156 S Nasarre-Aznar ‘The Eurohypothec: a Common Mortgage for Europe’ [2005] Conveyancer 32–52, 39 (tabular summary). 157 A true mortgage (now rare) transferred an estate in land until repayment of a loan, whereas a charge (almost universal and required for a legal mortgage of a registered title) leaves the ownership with the borrower but earmarks the land for repayment of the debt and confers overreaching powers of sale, etc, on the lender: Sparkes (n 148 above) [28.04]. 158 Eurohypothec Workshop (n 48 above) 54. 159 See above [9.14ff]. 160 Forum Group (n 20 above) Recommendation [34]. 161 The most accessible discussion is by S Nasarre-Aznar (n 156 above). 162 C Segré The Development of a European Capital Market (Brussels, EEC Commission, 1966) 177. 163 Grupo De Investigacion Eurohipoteca ‘European Research Project on the Eurohypothec’ (2005) 685 Revista Critica de Derecho Inmobiliario 2467ff; S Nasarre-Aznar ‘A Flexible Model for a Eurohypothec’ (2004) 683 Revista Critica de Derecho Inmobiliario 1285–1311; S Nasarre-Aznar ‘Looking for a Model for a Eurohypothec’ in C Schmid Real Property Law and Procedure in the EU (Florence, European University Institute Florence , 2005). 164 HG Wehrens ‘Real Security Regarding Immovable Objects — Reflection on a Euro-Mortgage’ in A Hartkamp et al Towards a European Civil Code (The Hague, Kluwer, 3rd edn, 2004, 90-6916-494-9) 769–786; J Zevenbergen ‘Registration of Property Rights; a Systems Approach’ (2003) Notarius International 125–137; U Drobnig ‘Present and Future of Real and Personal Security’ (2003) 11 ERPL 623–660; E Shäper ‘Mortgage, Charge and Standard Security’ (2004) 12 ERPL 471–507.
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Mortgages and Debt
has coalesced into a proposal from the Eurohypothec Workshop165 for a new form of mortgage instrument that could be adopted across Europe based on a non-accessory charge. There may be problems in receiving the Eurohypothec into English law.166 Since the aim is to encourage cross-border lending and borrowing167 the Eurohypothec could be used for land anywhere in Europe and it would be permissible to denominate the loan in any European currency. The security could be a single home, a singe commercial property, multiple parcels of land in the same state or transnational parcels spread across two or more states, or a portfolio of properties Europe-wide. Registration would be needed against each piece of land and the law to be applied would also be site-based so that a cross-border Eurohypothec would need severance when, for example, considering enforcement. The charge would create a right in rem which would extend to the capital as registered, including costs but excluding interest. This limit to capital would not find favour with English lenders used to the common law form which inflates or collapses as default or repayment is made, respectively, and is surely more in tune with modern commerce. A further oddity is the possibility of off-register transfer, which can be done using a trust in English law but which might encounter opposition if intended to apply to a legal title in England. It would be possible to create a charge on the land before a loan agreement concluded, which makes disbursement easier.168 Another oddity to English eyes is that it would be possible to empty the charge of content by repaying the loan and then using the empty shell of the hypothec as a security for a second advance, a non-cesser on redemption.169 Formality would be that required for other mortgages in national law and computerised procedures for creation and discharge are anticipated,170 and it would also be possible to create a corresponding agreement by contract.171 Proprietary protection against third parties would depend upon registration. It remains to be seen whether the European consultation process will boost the Euro-mortgage.172
4
Accessoriness
[9.30] An accessory mortgage is one in which the amount charged on the land reflects the amount owed, so one can only determine the quantum of charge
Eurohypothec Workshop (n 48 above). G Watt ‘Eurohypothec and the English Mortgage’ (2006) 13 Maastricht J 173–193. 167 Eurohypothec Workshop (n 48 above) B[1.1]. 168 Eurohypothec Workshop (n 48 above) B[1.3], the gap covered by an undertaking in English practice. 169 Sir Benjamin Cherry’s scheme which imposes cesser is much more elegant and avoids a legal landscape littered with spare legal estates: Law of Property Act 1925, c 20, s 85. 170 Eurohypothec Workshop (n 48 above) B[1.9]. 171 An agreement might create an equitable charge in English law. 172 Forum Group (n 20 above) Recommendations [45–48]. 165 166
Security
399
from the true state of accounts between the parties.173 A proprietary link exists between the debt obligation and an accessory security on the land. Thus if a borrower owes €60K and repays €20K, the amount charged by an accessory mortgage is €40K, whereas a non-accessory charge remains at €60K. English terminology is broadly correct in attributing a positive character to ‘accessoriness’ as a feature of lending, with non-accessoriness corresponding to its negative character. Accessoriness is an essential protection for a domestic borrower who cannot be expected to surrender €20K’s worth of land when he has already repaid €20K to the lender. Discussion of mortgages in English law makes little reference to accessoriness as a principle, though the idea is familiar, in the distinction between a surety and a guarantee; a surety owes what the principal debtor has failed to pay whereas a guarantor owes the original amount of the principal debt.174 The general omission is a consequence of the divergence between the common law and equitable aspects of a mortgage. The common law allowed literal enforcement of the terms of a mortgage, allowing the property to be forfeited as a gage to the lender if no repayment were made on the contractual redemption date. As Lord Eldon LC said in Seton v Slade175: The contract is in [Chancery] considered a mere loan of money, secured by a pledge of the estate… [T]his court acts against what is the prima facie import of the terms of the agreement itself… [O]nce a mortgage always a mortgage.
Equitable intervention secures a fair balance requiring the lender to treat the mortgage as a security for the debt owed by the borrower and by enforcing redemption when the amount secured is offered up; thus the quantum of security floats, expanding or contracting as interest accrues or as repayments are made, and can only ever be pinned down to a fixed value on a particular day. Equity imposes accessoriness. This subtle interplay between law and equity, complex as it is, has created a very flexible and malleable vehicle, which goes to explain the wide product availability in the English market. Crucial is the ability to add interest to the security, which ensures that lenders are more ready to lend to sub-prime borrowers, and which facilitates further advances, secured current accounts and staged lending to pay for a new property as it is constructed (tacking on rules ensuring priority is secured over future lenders), and the fact that the charge contracts as capital is repaid facilitates flexible lending patterns. There is also plenty of scope for equity withdrawal. 173 S Nasarre-Aznar (n 156 above); Wehrens (n 164 above); C von Bar & U Drobnig Study on Property Law and Non-contractual Liability Law as it Relates to Contract Law (DG Health and Consumer Protection, SANCO B5-100/02/000574, 2002) [530ff]; H Wolfsteiner & D Stöcker, ‘A Non-accessory Security Right over Real Property for Central Europe’ (2003) 10 Notarius International 116–124; Grupo De Investigacion Eurohipoteca (n 163 above); S Nasarre-Aznar (n 163 above); S Van Erp ‘A Comparative Analysis of Mortgage Law: Searching for Principles’ in MES Jordán & A Gambaro Land Law in Comparative Perspective (The Hague, Kluwer, 2002, 96-411-1879-9) 70–86. 174 S Van Erp ‘Surety Agreements and Accessority’ (2005) 13 ERPL 309–331. 175 Seton v Slade (1802) 7 Ves 265, 32 ER 108; Sparkes (n 149 above) [29.01ff].
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Mortgages and Debt
A non-accessory mortgage is one in which the obligation secured is not linked in a proprietary sense to the quantum of security on the land. If €60K is lent and €20K is repaid, the security still stands at €60K. This is suitable for a loan which is fixed in amount. Thus, in English practice, there is the interest-only loan, where the amount lent remains static throughout the duration of the mortgage term and repayments are limited to interest throughout that period. Such loans are commonly linked to some other investment vehicle designed to build up a fund of sufficient size to repay the debt at the end of the mortgage term, but have fallen into some disfavour as a result of the problems in the endowment industry. Even this case is at a deep level accessory because the security would be reduced if the lender accepted an early part-payment. Non-accessory mortgages are widely used in continental lending, apparently in preference to accessory forms where, as in Germany, both vehicles are available. The intention is to secure easy transferability of a mortgage because the person buying the mortgage debt can be sure that he is getting a security for the fixed amount stated in the mortgage deed. That advantage is tenuous. It assumes that the buyer is free to insist on payment of the full amount stated in an accessory mortgage, whereas the lender will always in fact be tied down by the loan contract, and it seems likely that this will also affect a person who buys the mortgage debt who will be put on notice of the true state of accounts between borrower and lender.176 The unalloyed terms of the mortgage deed will always be constrained by contractual duties tying the enforcement of the security to the loan agreement and much better then to adopt an accessory form in which this linkage is formalised and placed on a proprietary footing. Inflexibility is inherent in accessoriness and this is a clear disadvantage. It cannot deal as well as a common law mortgage with repayments, missed payments or extra borrowing, nor any irregular patterns of lending and repayment. A particular problem is the need for a formal variation after any change in the loan agreement, which makes a transaction cost unnecessary if the charge is not accessory.177 In practice it is perfectly easy to trade an accessory mortgage of the English type, the buyer of the mortgage securing the borrower’s agreement to the state of accounts between borrower and lender. Admittedly this can be inconvenient if a large portfolio of mortgages is to be traded, but in such a case reliance is placed on the lender’s disclosure of the state of all the mortgage accounts within the portfolio being traded. Non-accessory mortgages are available in Germanic countries and are used in preference to accessory forms, although both are possible,178 and also in accession states in the east such as Poland, Estonia, Hungary and Slovenia. The Eurohypothec proposal adopts a non-accessory form in which the security is independent of the debt. Weakening accessoriness would be an important aid to 176 This point is a matter of dispute between German academics, but if there is a doubt a lender must in practice enquire rather than putting his faith in the register. 177 London Economics (n 2 above) [6.3]. 178 J Smits The Making of European Private Law (Antwerp, Intersentia, 2002, 90-5095-191-0) 248.
Mortgage Procedures
401
integration of the European mortgage market179 and a non-accessory mortgage is thought to secure flexibility for products to be tailored to the needs of particular borrowers.180 A non-accessory charge will be the basis of the proposed European hypothec,181 however odd the name may be since the model is the Swiss Grundschuld, which is non-accessory, rather than the accessory Hypothec of Germanic systems. This proposal is suicidal. Any pan-European mortgage instrument should be accessory and impose a formal linkage between the loan and the security; only in that way are domestic borrowers properly protected.182
5
‘26th’ regime
[9.31] A move towards a Euro mortgage is likely to take the form of a regime additional to the national regimes of the European states. This was commonly described as a ‘26th regime’, but the terminology drawn from EU-25 is already inade uate in a Europe of 27 states, and anyway it ignores the EEA-3 and property-law rich states such as the United Kingdom. Respondents to the consultation on its feasibility and desirability183 are divided between those who think it difficult,184 those who think it premature185 and those who think it wholly misconceived.186
MO RTG AG E PR O CEDUR ES
Mortgage Procedures 1
Assessment of credit risk
[9.32] A borrower from overseas wishing to borrow in the United Kingdom will need a worker’s registration certificate or EEA residence permit, an address here and a credit history. Successful lending requires careful checks on the creditworthiness of a client.187 One important measure of creditworthiness is the ratio of loan to income (LTI),188 currently 3.21 in Britain, the highest level ever.189
London Economics (n 2 above) [7], Table [7.1]. Forum Group (n 20 above) [109ff], Recommendations [36–39]. 181 Eurohypothec Workshop (n 48 above) B[1.2]–B[1.5], B[1.11]; see above [9.29]. 182 M Habersack ‘Die Akzessorität-Strukturprinzip der euopäishen Zivilrechte und eines künftigen europäishen Grundfandrechts’ (1997) Juristenzeitung 857. 183 Green Paper (n 3 above) [29], [47–48]; London Economics (n 2 above) [6.3.2]. 184 BEUC Response (n 1 above) 19. 185 European Economic and Social Committee Response (n 1 above) [3.2.19]. 186 Mortgage Credit Responses (n 1 above) by French Banking Federation 10–11, Austria [11], Estonia [28], and HM Treasury and the Financial Services Agency 7. 187 Forum Group (n 20 above) [68ff]. 188 London Economics (n 2 above) [2.4], [A1.6.3]. 189 Guardian August 12th 2006. 179 180
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Mortgages and Debt
Other danger signs are previous repossessions or bankruptcy. Databases exist in all EU states but data will not be interchangeable until formats are standardised, and information about client indebtedness needs to be collected on a wider and uniform basis in all states.190 The Commission may be expected to address the crucial question of opening access to foreign lenders under non-discriminatory conditions.191 [9.33] Indebtedness is normal behaviour, which enables a consumer to shift expenditure from one period of his life to another. It becomes a problem when an individual’s debt is unsustainable and more particularly when consumers as a group become over-indebted,192 or, to put it another way, when lax lending is so endemic that responsibility in lending to consumers has been lost. Limits on access to debt will harm poor people disproportionately, but borrowers do need to be protected from themselves. No agreed measure of over-indebtedness of a household exists, because there is no ‘correct’ level of debt. Paradoxically, a higher rate of difficulty is found in countries such as Greece where the overall level of debt is low.193 A subjective test is usual194 which depends upon the debtor’s own perception of whether he has difficulties in repaying his debt, but even by that measure there is no decent analysis of the level of over-indebtedness connected with domestic mortgages.195 A few states have legal controls,196 but across most of Europe people are free to borrow as much as they like with few checks and lenders are not required to give advice, a duty sought by consumers’ representatives who also want a record of advice given preserved in a durable medium.197 Borrowers with a poor credit record fall into the sub-prime market, which is considered further below.
2
Property risk
[9.34] The European Mortgage Federation has developed a risk profile for properties offered as security taking account of market, location, construction, tenants, leases, fiscal aspects and legal risk.198 Valuation is the key to an
Forum Group (n 20 above) Recommendation [22–23]. Green Paper (n 3 above) [34–36]; HM Treasury Response (n 1 above) 8; C McCreevy Speech (n 26 above). 192 The Problem of Consumer Indebtedness (London, ORC Marco, 2001). 193 E Kleston ‘Experience in Cross-border Residential Mortgage Lending in the EU, Portugal & Greece’ (2003) Housing Finance International 15. 194 European Economic and Social Committee Opinion on the Consumer Credit Proposal [2003] OJ C234 1, [1.2], [5]; J Ford ‘Unsustainable Home Ownership and Over-indebtedness’ (Coimbra University, Portugal, International Conference on Consumer Over-indebtedness, 1999). 195 Consumer Indebtedness (n 192 above) Table [1.1]. 196 London Economics (n 2 above) Table [A1.11]. 197 Forum Group (n 20 above) [30], Recommendation [9]; Green Paper (n 3 above) [17–18]; BEUC Response (n 1 above) 9; contrast European Economic and Social Committee Response [3.2.5]. 198 Forum Group (n 20 above) Annex III. 190 191
Mortgage Procedures
403
assessment of the risk in lending,199 and must be conducted locally,200 but the key issue is whether to take home state valuation standards on trust or whether as consumers groups would prefer to formulate neutral international valuation standards.201 Loan-to-valuation ratio measures a loan as a percentage of the value of the house that acts as security. In the case of a mortgage loan of €80K secured on a house valued at €100K this is 80%.202 This has universal acceptance as an important indicator of risk, but tolerance of risk varies widely across the domestic markets of Western Europe. Dutch lenders happily advance more than a house’s value, whereas Italian practice is based on a loan-to-value ratio averaging only 55 per cent and even in Britian the average is only 65 per cent. Lending with a high loan-to-value ratio (above 90 per cent) is high risk or, in the argot, ‘sub-prime’ lending.203 A consumer borrower a high proportion of the value of the house he is buying and who pays a correspondingly lower deposit is likely to be charged an interest rate premium and may have to take out additional insurance or provide collateral security. Sub-prime lending accounts for 7 per cent of the UK market, which has a rare ‘completeness’ in the economic sense, but is very small in most other European countries, where acceptance of ‘non-conforming’ borrowers is much lower. Much of the scope for gains from European integration exists in the sector designated ‘sub-prime’, but it is controversial, undesirable and only to be achieved by discarding current national protections for consumers.204 The experience of the American sub-prime market in 2006 is likely to make lenders very cautious. Some US lenders specialise in lending to borrowers considered a credit risk by mainstream lenders, and the availability of funding to this extra pool of buyers has helped to make the American housing market buoyant; however, when interest rates rose in the autumn of 2006 many borrowers defaulted and repossessions have caused an oversupply of housing and a slump in prices. Several large sub-prime lenders were forced into liquidation and, since debts had been securitised and sold around the world, these losses had a major impact on world markets in the summer of 2007. Problems remain as this book goes to press.
3
Mortgage procedures
[9.35] Stages in a mortgage-buying process have been identified by the Financial Services Authority and this model could inform debate across the 199 Forum Group (n 20 above) [80ff]; Forum Group Recommendations [24–27]; London Economics (n 2 above) [A1.6.3]. 200 Forum Group (n 20 above) Recommendation [27], Annex IV. 201 Forum Group (n 20 above) Recommendation [24–26]; Green Paper (n 3 above) [37–38]. 202 Green Paper (n 3 above) [10], Annex III; London Economics (n 2 above) [2.4]; London Economics (n 2 above) [A1.6.1], Table [A1.7]. 203 London Economics (n 2 above) [A1.5.3]. 204 Mercer Oliver Wyman (n 27 above) [4.8], [5.2], [6.3.5]; London Economics (n 2 above) [2].
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Mortgages and Debt
continent.205 Efficient and automated processes can reduce costs for consumers and boost lenders’ profit margins. Processing times vary from a couple of days in Denmark to a month or more in Italy and Portugal,206 but existing analyses do not distinguish stages important for economic efficiency and those such as registration which have no effect on the grant of the mortgage. That priority is secured is the vital point so the key constraints are the speed of searches and the ability to lodge notices to preserve priority. Electronic registration207 gives a spurious impression of efficiency.
4
Registration
[9.36] Charges affecting land need to be registered in a public register in order to be made binding on third parties, and public registration should be decisive of the creation, modification or extinction of a charge on land, and should determine priority, or at least this should turn on the order of applications. The French system of registrations with limited duration and inadequate proprietary effect may come under intense pressure to fall into line with the de facto European standard.208 Artificial restrictions such as the requirement to register a loan denominated in a national currency may fall under internal market principles.209 Lenders also want a system by which, as in England, registration is backed by a state indemnity or private insurance.210 Registers should be available to all European parties,211 and should be open to the public212 and based on the EULIS model.213 One useful innovation suggested by the Forum would be to allow a lender the freedom to appoint a representative (a Mortgage Register Representative), and to register this appointment which would confer rights to establish title, consent to changes in priority, complete registrations, consent to transfers, and effect a discharge.214 This could potentially help a non-native lender to cope with national registration requirements, and is an integral feature of the Eurohypothec proposal.215
Forum Group (n 20 above) [41–43], Annex III. Mercer Oliver Wyman (n 27 above) [3.5.3]. 207 Land Registration Act 2002, c 9, ss 91–95; Land Registration for the Twenty-first Century: A Conveyancing Revolution (Law Commission 271, 2001) part XIII; Sparkes (n 148 above) [7.18ff]. 208 Forum Group (n 20 above) [106]. 209 Trümmer’s Application (n 155 above); see above [1.49]. 210 Forum Group (n 20 above) Recommendations [30–32]. 211 Forum Group (n 20 above) Recommendation [32]. 212 As in England: Sparkes (n 148 above) [8.14]. 213 See above [7.23]. 214 Forum Group (n 20 above) Recommendation [37]. 215 See above [9.29]. 205 206
Mortgage Procedures
5
405
Default and enforcement
[9.37] Foreclosure is defined in the Green Paper on Mortgage Credit216 as a ‘legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property’. This is not foreclosure as we know it. True foreclosure is rare, so disproportionate and outrageous that the invariable practice is to allow the borrower to obtain a sale instead if he has any equity left to save.217 English law ought to abolish foreclosure when the term could be reallocated to a forced sale after a default but at present the European foreclosure is a very misleading part of the legal vocabulary. This is galling when there is a multitude of accurate expressions available — repossession and sale, forced sale, default procedures. English law allows a borrower some protection against the consequence of trivial defaults,218 and is most unusual in allowing the lender to conduct a sale out of court when civilian jurisdictions almost invariably require a sale to be judicial.219 The forum and law for enforcement will be that of the site. Ease of enforcement is central to the assessment of risk, and the current wide differences between repossession regimes must inevitably inhibit cross-border borrowing.220 The average time taken to achieve a sale ranges between two months and five years in Italy,221 by comparison with which the British average of ten months stacks up well, neither too swift nor too slow. An evaluation of forced sales is proposed.222 Respondents to consultation divide on predictable party lines between those wanting to beef-up repossession procedures and those wanting to protect borrowers better.223 [9.38] Enforcement of the Eurohypothec by a voie pavée or forfeiture (that is, a true foreclosure) will be prohibited and reliance is instead placed on sale. Default will be assessed with reference to the loan agreement the terms of which will be a valid defence to a claim where there is in fact no default and any alleged default will need to be adjudicated judicially.
6
Selection of law and forum
[9.39] Cross-border mortgage transactions require clear conflicts rules to determine which national law to apply224 and in which forum. So far as the Green Paper (n 3 above) Annex III, also [39]. Sparkes (n 148 above) [29.30], [29.49]. 218 Administration of Justice Acts 1970, c 31, s 36 and 1973, c 15, s 8; Sparkes (n 148 above) [30.18ff]. 219 Law of Property Act 1925 (n 169 above) s 101. 220 Green Paper (n 3 above) [40]; London Economics (n 2 above) [A1.6.3]. 221 London Economics (n 2 above) [A1.6.3]. 222 Forum Group (n 20 above) [89ff], Recommendations [28–29]; Green Paper (n 3 above) [41–42]. 223 HM Treasury Response (n 1 above) 9 sides with the industry. 224 Forum Group (n 20 above) [55–67], Recommendations [19–21]. 216 217
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Mortgages and Debt
mortgage deed and security are concerned it will be the law of the site of the land mortgaged, but the position is complicated because the loan contract may be treated differently as a personal contract so opening the way for a choice of law imposed by the lender. The common law takes this Janus-like view of the mortgage, separating it into real and personal aspects, and allowing the parties to select the law to apply to their loan arrangement. Civilian practice varies with some states applying the law of the site throughout and some allowing segregation of personal aspects.225 As the Rome Convention is being revised and converted into EU legislation226 the issue has reopened and three possibilities are proffered: (1) application of the site rule to the whole mortgage deal, (2) continuation of the possibility of a choice imposed by the lender, or (3) treatment of home loans as consumer contracts so attaching the law to the consumer.227 Personally the author prefers site-based rules and unification of the applicable law wherever possible, though it must be recognised that multi-state mortgages will require an undesirable severance if option (1) is adopted. [9.40] Just as it is for law so it is for forum. A lender seeking repossession must use the exclusive site-based forum. The question is whether to allow the alternative of pursuing the debt rather than the land as a personal matter when the correct forum will generally be the home court of the borrower as a consumer.228 Lenders have a strong incentive to try to move the forum to their home state, but the choice of forum for personal aspects — even if clearly and properly made229 — will be constricted in a consumer contract.230
PR I MA RY A N D SECO N DA RY LEN DI N G
Primary and Secondary Lending 1
Primary lenders
[9.41] Florence was already a major Lombard banking centre in 1345, the year that King Edward III defaulted on his debts to the Bardi family,231 and since that time banks have become an integral part of western economies. Commercial banks dominate the mortgage market in the United Kingdom and the Netherlands and also in the emerging markets of Hungary, Poland and the Czech 225 See above [4.53]. The earlier common law is discussed in JD Falconbridge Essays on the Conflict of Laws (Toronto, Canada Law Books, 2nd ed, 1954) 556ff, 571ff, 581ff; J Westlake A Treatise on Private International Law (London, Sweet & Maxwell, 7th edn by N Bentwich, 1925) 228ff. 226 Green Paper (n 3 above) [31–33]. 227 Forum Group (n 20 above) Recommendations [19–21]. 228 See below [10.53]. 229 Oberlandesgericht Düsseldorf [2001] RIW 63, [2001] ECLYB [1019] (forum ineffective when contained in standard conditions not handed to the borrower). 230 See above [10.33]. 231 ‘History of Banks’ .
Primary and Secondary Lending
407
Republic. Other countries retain large numbers of mutual building societies in which deposits by savers are used to fund lending while other states are dominated by government banks.232 Lenders offering personal loans must register and face inspection and monitoring,233 and similar controls are needed for banks offering home loans, home state and foreign banks being treated equally.234 Willingness to enter into relations with foreign lenders may vary,235 but even an audience that is potentially receptive has to be approached by the lender. Since the lender must come to the borrower, close proximity is important in the process of closing a deal, so distribution arrangements are national.236 Four recognised channels for distribution will now be discussed.237 [9.42] Cross-border acquisition is the favoured method. Institutions wishing to engage in cross-border lending will generally need to act as a separate bank in each country on account of wide disparities between domestic legal frameworks. A pan-European lender can be constructed by cross-border mergers and acquisitions and indeed cross-border cases account for 10 per cent of market activity. National markets are not at all convergent in terms of their concentration in the five largest lenders. In Denmark a big five take 80 per cent of the market, but the EU-15 average is only a quarter, while Germany displays the greatest fragmentation and greatest potential for consolidation.238 Santander and Unicredit provide two important markers for the future. Spanish outfit Grupo Santander239 paid €9 billion to take over Abbey, the British bank derived from demutualisation of the Abbey National Building Society, a step which has pushed Santander into the top 50 global companies and made it the largest Eurozone bank capitalised at €57 billion. Consumer banking business in Europe is pursued using a ‘multi-local’ strategy, that is with a network of 6K branch outlets spread across 15 countries. Economies are available in cost reduction, streamlining of products and installation of new technology. A second example is Unicredit, an Italian bank with a market-leading presence in Central and Eastern Europe, which has bid for HVB (Germany), the ante rising on this occasion to €15.4 billion. Headquarters are to be retained in both Munich and Milan but an IT merger will generate staggering savings of €1 billion.240 Crédit Agricole were stalking Alliance and Leicester but withdrew.241 Economies of scale are available through cross-border mergers
232 State aid has to be eliminated to create a level playing field across Europe; London Economics (n 2 above) [7], Table [7.1], [A1.3]. 233 Consumer Credit Directive (n 4 above) §12[1]; Consumer Credit Proposal (n 14 above) §§19–20. 234 Forum Group (n 20 above) Recommendation [40]. 235 Forum Group (n 20 above) [134]. 236 HM Treasury Response (n 1 above) 2–3. 237 London Economics (n 2 above) [2.3]; Forum Group (n 20 above) [128ff]. 238 Mercer Oliver Wyman (n 27 above) [3.2.1], [4.1]; a big five control 60% of the UK market. 239 Shareholders Annual Review 2004. 240 Times June 13th 2005. 241 Independent July 6th 2006.
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Mortgages and Debt
despite the need to respond to each domestic market individually which reduces the theoretical savings. [9.43] Personal contact is needed in the mortgage market, so there is a need to maintain a branch network. Branch distribution predominates across Europe, so a pan-European lending bank could be created by establishing a national subsidiary and then buying a branch network in that country, using European establishment rights.242 It is generally cheaper and quicker to buy an existing network243 as Santander did when they acquired Abbey. [9.44] An intermediary is a person who provides a creditor with information to identify a consumer and who assists in the conclusion of a mortgage. Most are brokers, self-employed and submitting applications to a number of different lenders, but the concept also embraces marketing assistants who assist particular lenders, indeed any person who is paid to provide a lender with information to identify a consumer or who directs a consumer to a particular lender. Lawyers and notaries are not credit intermediaries provided they stick to legal or financial advice.244 Brokers hold 40 pert cent of the market in the Netherlands and Spain and also in Britain, which is populated by around 12K brokers,245 and they are also major players in the USA.246 Consumer credit controls will apply to a person who acts habitually and for gain,247 and a comparable and separate supervisory system will be provided for brokers (intermediaries) arranging home loans,248 controls regulating aspects such as registration, tests for professional knowledge and ability, indemnity insurance, and membership of a complaints and redress scheme. Consumer representatives also want compulsory advance declaration of all commission payments and a duty to keep a durable record of any advice given.249 [9.45] Internet marketing and other forms of direct purchase of mortgages, for example by phone, is very low at present, the highest rate currently being around 15 per cent of sales by direct means in the UK.250 There is the potential to transcend national boundaries using distance means of communication, but at present the internet is relatively untested apart from pre-sales facilitation.251 A problem is the need for face-to-face meetings to meet money laundering rules, which is a hurdle to complete reliance on electronic means.252 Green Paper (n 3 above) Annex 1 [6–7]; Forum Group (n 20 above) Recommendation [41]. London Economics (n 2 above) [4.1.4]; Forum Group (n 20 above) [128ff]. 244 Consumer Credit Proposal (n 14 above) §2[e], R[6]. 245 HM Treasury Response (n 1 above) 5. 246 London Economics (n 2 above) [A1.3.2], Annex 3. 247 Consumer Credit Proposal (n 14 above) §§19–20. 248 Forum Group (n 20 above) [138ff], Forum Group Recommendation [42]; Green Paper (n 3 above) [19]; European Economic and Social Committee Response (n 1 above) [3.2.4]. 249 Forum Group (n 20 above) Recommendation [42]. 250 London Economics (n 2 above) [A1.3.2]; Mercer Oliver Wyman (n 27 above) [3.3.4]. 251 Forum Group (n 20 above) [147ff], Recommendations [43–44]. 252 Forum Group (n 20 above) Recommendation [43]; see above [7.56]. 242 243
Primary and Secondary Lending
409
2 Secondary market [9.46] A primary market is the market in which mortgage loans are originated by commercial lenders such as banks or building societies. There is also a secondary market in mortgages, where mortgage originators (banks) sell rights to mortgages, freeing up funds for further primary lending.253 In the USA a strong secondary market has developed as a means of funding mortgage lending, first the Fannie Mae established by the New Deal Democrats in 1938 and the largest lender in the USA, joined in the 1970s by the rival Freddie Mac, though this last has had to face questions about its accounting methods254 and both face huge debts and have a poor record in the low income sector. A first bite at the European market is the partnership of European Mortgage Finance Agents (EMFA) established by Northern Rock (UK), Crédit Agricole (France) and BBVA (Spain).255 It will issue fixed-rate loans backed by a standardised public financial vehicle to buy mortgages and securitise them.256 The market in mortgage capital could be opened across Europe by ensuring that dealings by lenders with existing mortgages are facilitated, treating the security constituted by existing home loans as an asset to be mortgaged.257 This would spread the risk in lending across domestic capital markets258 and free capital for further lending, insulating the lending market from reliance on deposits by investors which are declining. In particular this could stimulate cross-border activity, redistributing mortgage funds from money-rich to money-poor areas. More efficient use must be made of existing funding mechanisms to increase the current very low volumes of asset transactions: the market in mortgage bonds amounts in money terms to €140 billion (a fifth of new loans but decreasing), and that in mortgage-backed securities to €40 billion (10 per cent of new loans but increasing).259 The market is developing nationally, in a fragmentary way, without common standards,260 thus stifling the potential for secondary-level integration of European mortgage markets. A legal structure is in place everywhere except Estonia and Slovenia, but variant laws on the transfer of mortgages remain a potent obstacle to a pan-European market, problems including transferability, the key issue of the effect of insolvency and bars on including foreign loans in bonds and the insoluble problem of distortions caused by national taxation. Harmonisation would facilitate pooling of Green Paper (n 3 above) Annex III. London Economics (n 2 above) Annex 3 [A3.2]; Guardian November 17th 2003. 255 Guardian November 17th 2003. 256 Nasarre-Aznar (n 156 above). 257 G Tumprel-Gugerel, European Central Bank, speech to European Mortgage Federation Conference, , 2004); C McCreevy Speech (n 26 above). 258 Mercer Oliver Wyman (n 27 above) [6.2]; London Economics (n 2 above) [7], Table [7.1]. 259 Mercer Oliver Wyman (n 27 above) [4.7] (figures from 2001); London Economics (n 2 above) [A1.4] (2003). 260 London Economics (n 2 above) [6.2]; this is despite the efforts of the European Securitisation Forum 2002. 253 254
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Mortgages and Debt
mortgages derived from different jurisdictions.261 Transferability of mortgages would be encouraged by a pan-European Security Trust instrument,262 or the Eurohypothec, but it may also be possible to make advances with market-led initiatives in documentation.263
3
Mortgage bonds
[9.47] This is the vehicle mainly used in civilian jurisdictions. A mortgage bond is a corporate debt security generally issued by a specialised bank and secured by a mortgage lien against certain land held by the issuer.264 Denmark requires a lending institution to issue bonds to the entire value of any consumer mortgage, and its use is also common in Sweden and Germany. Strict loan-to-value (LTV) limits are imposed which ensure that any bond is backed up by physical land and this renders this form of lending very safe. Many bonds are ‘covered’, which means that investors are insulated from defaults by the homeowners because the issuing bank has to cover repayments whether or not these are received from the ultimate borrower. According to the leading expert, Professor Nasare-Aznar,265 France has a long tradition of mortgage bonds issued by the Société de Crédit Foncier and German mortgage banks are other important issuers of mortgage bonds, while in Spain the cedula hipotecaria accounts for five per cent of outstanding mortgages. No vehicle exists in England, nor is it needed.
4
Mortgage-backed securities
[9.48] Mortgage-backed securities account for around ten per cent of new loans in Europe, but their use is increasing266 not only in the common law jurisdictions in the United Kingdom and Ireland, but also in the Netherlands, Spain, Italy and Belgium. A trust is imposed on loan capital for the benefit of a collection of lenders, the trustee acting as buffer between borrowers and secondary lenders.267 Collateralisation is unlimited, so that the amount of the secondary loan can exceed the value of the land available as security,268 the risk being correspondingly greater. Trust-based mortgage securitisation is an economic Forum Group (n 20 above) Recommendations [45–48]. Forum Group (n 20 above) Recommendation [39]. 263 Green Paper (n 3 above) [49–52]. 264 Green Paper (n 3 above) Annex III. 265 S Nasarre-Aznar Securitisation & Mortgage Bonds: Legal Aspects and Harmonisation in Europe (Saffron Walden, Gostick Hall, 2004). 266 London Economics (n 2 above) [A1.4]. 267 DJ Hayton ‘Trusts and their Commercial Counterparts in Continental Europe’ (London, Association of Corporate Trustees, 2002), [3.7.9] heads 4–5; ‘Securitisation’ in M Graziadei, U Mattei & L Smith Commercial Trusts in European Private Law (Cambridge, CUP, 2005, 0-521-84919-5) 505ff. 268 Bank of England alarm has been expressed that in the commercial sector the mortgage-backed security market allows too great a leverage and that the underlying asset pool may be deteriorating: Guardian December 16th 2005. 261 262
Primary and Secondary Lending
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success,269 from which the trust-shy civilians are excluded except where a particular state adopts legislation based on the fiducia to replicate the functionality of the common law trust. Securitisation depends upon the common law/equity split and indeed it is general practice to leave a transaction uncompleted to save fees, so that reliance is placed on equitable enforcement of the securitisation agreement. The basis for the transfer is a credit reference from an agency accepted in the market and the interest on the loan is funded by the income paid by the borrowers, usually on a non-recourse basis, that is, the primary lender is not liable for any shortfall. Just this happened in Paragon Finance v Pender.270 The case concerned a loan of £75K that Pender borrowed in order to renovate his home, a former council house. Subsequently Pender’s mortgage was bundled up with others and sold by the primary lender (the ‘mortgage originator’) to a special purpose vehicle, on the basis that the mortgage originator retained legal title to the legal charge271 but the originator agreed to operate the mortgage according to the terms of an administration agreement entered into with the SPV. Pender fell into arrears and his original lender obtained a possession order, but by way of defence to the enforcement procedure he raised questions about the validity of the securitisation process. He suggested that the SPV should have taken the possession proceedings, but the court recognised that the title of the original lender to sue was not divested by an uncompleted agreement to transfer the legal charge to the SPV. The title of the SPV was equitable but possession depended upon the legal title; anyway the administration agreements authorised the original lender to act on behalf of the SPV.272 Pender then complained, with more reason, that the original lenders were obliged not to vary the interest rate capriciously273 and should not have given up to the SPV control of the interest rate policy.274 On the facts changes were not capricious and the charges were not extortionate.275 The original lender had not disclosed the fact that it fettered its powers by the administration agreement with the SPV, but Pender failed in his complaint on the facts276 because it appeared that his mortgage pre-dated the creation of the securitisation arrangement so there was in fact nothing to disclose at the time his loan was made. Securitisation was a factor in the sub-prime mortgage crisis of the summer of 2007 because parcels of American sub-prime debt had been sold to investors
Nasarre-Aznar Securitisation (n 265 above). Paragon Finance v Pender [2005] EWCA Civ 760, [2005] 1 WLR 3412. 271 This is general practice: Pender (n 270 above) [14] Jonathon Parker LJ. 272 Pender (n 270 above) [109–117] Jonathon Parker LJ. 273 Paragon Finance v Nash [2001] EWCA Civ 1466, [2002] 1 WLR 685. 274 Pender (n 270 above) [118–124] Jonathon Parker LJ. 275 Consumer Credit Act 1974 (n 11 above) s 138; Pender (n 270 above) [125–129] Jonathon Parker LJ; but see now Consumer Credit Act 2006 (n 142 above) ss19–22; inserting Consumer Credit Act 1974 ss140Aff; the test is now whether the credit relationship is unfair; see above [9.24]. 276 This is much more arguable now since an unfair credit relationship now takes account of events during the course of the relationship after the creation of the mortgage. At the time only the moment of creation was tested. 269 270
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Mortgages and Debt
around the world, which ensured that problems in the United States housing market were exported globally.
SECUR ED R I G HTS O N CR O SS-B O R DER I N SO LVEN CY
Secured Rights on Cross-border Insolvency [9.49] Cross-border effects of insolvencies are co-ordinated under the Insolvency Proceedings Regulation277 for insolvencies opened after the middle of 2002,278 aided by rule-making powers in Britain279 where the old common law principles for cross-border insolvencies are displaced.280 The Regulation applies if the debtor has a centre of main interests281 located in the EU (other than in Denmark). The first and most important point to note is that existing securities such as mortgages are excluded from the effect of a European insolvency.
1
Location rules
[9.50] Property is located within the territory of a state by obvious rules: tangible property is located where the property is situated, rights of property or ownership recorded in a public register are located in the state authorising the keeping of the register and claims are located at the centre of main interests of the party required to meet the claim.282
2
Security interests
[9.51] Insolvency divests283 all assets of a bankrupt individual or insolvent company and vests them in a ‘liquidator’,284 making them available collectively to the creditors. This transfer is subject to any existing property rights held by third parties so that, for example, title to a mortgaged property transfers only subject to the mortgage. Protection from insolvency greatly strengthens the safety of
Regulation (EC) 1346/2000 on Insolvency Proceedings [2000] OJ L160 1. As from May 31st 2002: Insolvency Regulation (n 277 above) §§43–44. 279 Insolvency Act 2000, c 39, s 14; Insolvency Act 1986, c 45, s 411 as amended by Insolvency Act 1986 (Amendment) Regs 2002, SI 2002/1037. 280 Cambridge Gas Transport Group v Navigator Holdings [2006] UKPC 26, [2006] 3 WLR 689, [18ff] Lord Hoffmann. 281 See below [9.58]. 282 Insolvency Regulation (n 277 above) §§2[g], 3[1]; PJ Omar ‘Land, Security in Land and the Insolvency Proceedings Regulation 2000’ [2006] Conveyancer 353–373, 356ff; G Moss, IF Fletcher & S Isaacs EC Regulation on Insolvency Proceedings (Oxford, OUP, 2002, 0-19-925109-6), [4.14]; P Smart ‘Rights in Rem, §5 and the EC Insolvency Regulation’ (2006) 15 International Insolvency Review 17–55, 27. 283 The site decides whether divesting affects title or only dispositive powers. 284 This European term includes a trustee in bankruptcy; see below [9.62]. 277 278
Secured Rights on Cross-border Insolvency
413
lending and makes it feasible to offer credit on affordable terms,285 at the expense of unsecured creditors. Respect for existing property rights is left to domestic law if the issue is purely internal but comes into the European arena when a state boundary is crossed, measured at the time that proceedings are opened,286 that is, if the site of the land is within a different state from that conducting insolvency proceedings, though the rationale for this restriction is unclear. Respect shown at the opening of proceedings must continue throughout the whole course of proceedings.287 [9.52] Rights in rem, their basis, validity and extent, are determined according to the law of the site of the land,288 irrespective of where the insolvency occurs. A real right must demonstrate a direct or immediate relationship to the asset which it affects, usually land in our context289 so that the property is allocated to the holder in an absolute manner. Rights in rem290 include: 앫 a right to dispose of assets or have them disposed of and to obtain satisfaction from the proceeds of or income from those assets, for example, a lien or a mortgage, 앫 an exclusive right to have a claim met, such as a lien, 앫 a right to demand assets from anyone having unwonted possession or use of them, and 앫 a right in rem to the beneficial use of assets. Clearly the exemplar is mortgages, including fixed charges over specific assets and here the common law and the civil law may not be so far apart. [9.53] Where the two traditions diverge wildly is in relation to equitable security, set-off and in the ranking of claims. Allen and Overy surveyed the continent in 1990 and rated England and Wales the most creditor-friendly jurisdiction with France most pro-debtor.291 One important difference is that the common law creditor is allowed a set-off so that where creditor and debtor owe each other money the creditor need only claim the balance owing to him, effectively creating a lien with priority to the extent of the counter-obligation. However, the main M Virgos & E Schmidt Report on the Convention on Insolvency Proceedings (EC) 6500/96 [97]. Insolvency Regulation (n 277 above) §5[1]; Smart (n 282 above) 21, 23, 31–32 (retroactive effect). This only applies if the site is in an EU state: Virgos Schmidt Report (n 285 above) [94]. A security may obviously be lost by action showing it to be void, voidable or unenforceable: §§4[2](m), 5[4]. 287 Smart (n 282 above) 23. He discusses at 25–27 whether the liquidator can claim the security by paying off the debt. 288 Virgos Schmidt Report (n 285 above) [100]; the location must be non-fraudulent: at [104–105]. 289 Insolvency Regulation (n 277 above) §5; also set-offs and reservations of title: §§6–7. 290 Insolvency Regulation (n 277 above) §5[2]; Virgos Schmidt Report (n 285 above) [103–104], [166]; Schlosser Report [1979] OJ C59 79 [54]; Moss Fletcher & Isaacs (n 282 above) [4.19–4.20] (floating charge), [6] (cross-border security and quasi-security); Smart (n 282 above) 20–21, 30. 291 P Wood ‘Principles of International Insolvency’ (1995) International Insolvency Review 94–103; Smart (n 282 above) 18. 285 286
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Mortgages and Debt
difference on our side of the Channel is the recognition of equitable security including security over future assets and future indebtedness.292 A right to obtain a right in rem — which is the nature of most equitable security — is itself considered to be a right in rem if it is recorded in a public register and enforceable against third parties.293 The most important of the equitable securities recognised in English law is the floating charge. Its essence is that it charges the assets of a going concern and its goodwill in such a way as to leave the business free to trade with the assets.294 A floating charge is defined obliquely in the European legislation as ‘a right in rem over a collection of indefinite assets as a whole which change from time to time’.295 It seems odd to call this equitable security a right in rem, when the technically correct ‘proprietary right’ is available, a case of allying common law subtleties to the crudities of civilian analysis. Certain events will cause the charge to crystallise when it becomes a fixed equitable charge on the assets of the business at the moment of crystallisation. It needs to be drafted so that the opening of foreign proceedings for insolvency of the company will cause the charge to crystallise. Thus if (main) insolvency proceedings are taken in France an English bank does not need to take (secondary) proceedings in England to enforce its claims but may enforce the floating charge here against assets situated in England. The law of the site applies and recognises the security and by shifting the law to England tilts the balance towards the lender. It probably will not be possible to enforce the charge against assets in France because the law of the site applies according to where the assets are sited and a floating charge is not recognised in France296 or most civilian jurisdictions.297 One wonders how tenable these differences are in the long term — English law really is unnecessarily generous. [9.54] Once established, the right in rem must be segregated from the rest of the debtor’s estate to allow settlement of the security, either by exclusion from the insolvent estate or by transfer of the land acting as security to the liquidator.298 Common law systems generally provide for complete segregation of assets which are held as security, and provide overriding and overreaching powers to enable the lender to sell the asset. In states lacking total segregation the secured creditor will be required to make a claim in the insolvency, establishing his claim to the
Omar (n 282 above) 361ff. Insolvency Regulation (n 277 above) §5[3]; Virgos Schmidt Report (n 285 above) [101]. This would include most equitable securities when registered, but not, eg, an unpaid seller’s lien overriding by virtue of occupation. 294 Sparkes (n 148 above) [28.20]. 295 Insolvency Regulation (n 277 above) §5[1]; Virgos Schmidt Report (n 285 above) [104]. 296 F Daka ‘Le Floating Charge: Reconnaissance en France’ (1996) 2 Journal du Droit International 381; Omar (n 282 above) 369; Omar (n 282 above) 369; P Burbidge ‘Cross-border Insolvency within the EU’ (2002) 27 EL Rev 589–609 @ 595. 297 Smart (n 282 above) 44 discusses the problems which arise when the security is not treated as real under the foreign law of the site. 298 Virgos Schmidt Report (n 285 above) [23], [95], [99]. 292 293
Secured Rights on Cross-border Insolvency
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security in rem in an identified asset.299 In such a situation it is likely to be advantageous to the secured creditor to start local (secondary) proceedings, which will be possible if the debtor has an ‘establishment’300 in the state where the asset-forming security is located, and a main liquidator can insist in those same circumstances.301 Any surplus on sale of the asset covered by rights in rem must be paid to the appropriate liquidator.302
3
Priority of transactions after the onset of insolvency
[9.55] Valid security must be created before the onset of the insolvency. A security obtained afterwards will generally be invalid, though it has a chance if the insolvency has not been properly publicised so that the lender secures protection as a buyer without notice of the insolvency.303 Two important European protections apply. Where the rights of the debtor in immovable property are subject to registration in a public register, its effects are determined by the law of the EU state under the authority of which the register is kept; registration procedures are not affected by foreign laws.304 Third-party purchasers are protected by the law of the site of the land, which is chosen in preference to the law applying to subsequent insolvency proceedings. The fact that insolvency proceedings are pending will generally prevent dealings by the debtor with his land, and render ineffective any purported disposal of assets — including any transfer or mortgage305 — but the precise effect depends upon knowledge of and registration of the proceedings and this will be determined where the land is sited. Any transaction concluded after the opening of proceedings is governed by the law of the site or of the register.306 Another case governed by the law of the site is of contracts relating to immovable property: this affects a contract conferring the right to acquire or make use of immovable property.307
299 Insolvency Regulation (n 277 above) §41. Common law courts had a discretion to assist a foreign trustee by vesting the English land of a foreign bankrupt: Cambridge Gas Transport (n 280 above) [19] Lord Hoffmann. 300 Cf above [1.65] and below [9.70]. 301 Virgos Schmidt Report (n 285 above) [98]. 302 Insolvency Regulation (n 277 above) R[25]. 303 Insolvency Regulation (n 277 above) §4, subject to §14 immediately below; Virgos Schmidt Report (n 285 above) [96], [103]. 304 Insolvency Regulation (n 277 above) §11; Virgos Schmidt Report (n 285 above) [23], [131]. 305 Virgos Schmidt Report (n 285 above) [140–141]. 306 Insolvency Regulation (n 277 above) §14; R[24]; Virgos Schmidt Report (n 285 above) [23]. 307 Insolvency Regulation (n 277 above) §8; Virgos Schmidt Report (n 285 above) [23], [116–119]; examples given at [119] are rental, leasing, sale or other transfer.
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Mortgages and Debt MA I N (EUR O PE-WI DE) I N SO LVEN CY
Main (Europe-wide) Insolvency 1
Club rules
[9.56] Cross-border effects of insolvencies are increasing and this creates the case for Community-wide co-ordination.308 The Insolvency Proceedings Regulation leaves many unanswered questions309 and it may well be necessary to refer back to the preparatory report310 for the earlier draft Convention which remains authoritative on some aspects of the legislation ultimately enacted,311 though there are also major changes. Earlier bilateral Conventions are superseded for insolvencies opened after the middle of 2002.312 The Insolvency Regulation applies only if the debtor has a centre of main interests located in the Community313 and then only regulates conflicts arising within the EU314 excluding Denmark. Even the United Kingdom has overcome its reservations and has decided to participate,315 but domestic law is left to decide the question of whether to use the English or Scottish courts and also similar issues in other regionalised states.316
2
Forum for main proceedings
[9.57] Jurisdiction to conduct insolvency proceedings is accorded to the EU country which holds the centre of a debtor’s main interests.317 That state may open insolvency proceedings, called main proceedings,318 which will be universal Insolvency Regulation (n 277 above) R[2–3]. P Omar European Insolvency Law (Aldershot, Ashgate, 2004, 0-754-62333-5); M Virgos & G Garcia Martin The European Insolvency Regulation Law and Practice (The Hague, Kluwer, 2004, 90-411-2089-0); Moss, Fletcher & Isaacs (n 282 above); Burbidge (n 296 above); C MacLachlan ‘International Litigation and the Reworking of Conflicts of Laws’ (2004) 120 LQR 580–616. 310 Virgos Schmidt Report (n 285 above). 311 C-341/04 Eurofoods IFSC [2006] I ECR 3813 ECJ, AG[2] Jacobs; Shierson v Vlieland-Boddy [2005] EWCA Civ 974, [2005] 1 WLR 966, [47] Chadwick LJ; M Balz ‘The EU Convention on Insolvency Proceedings’ (1996) 70 American Bankruptcy Law Journal 485–532. 312 Insolvency Regulation (n 277 above) §§43–44, as from May 31st 2002. 313 Insolvency Regulation (n 277 above) R[14]; for the meaning of this see below [9.58]. 314 Virgos Schmidt Report (n 285 above) [11]. 315 Insolvency Regulation (n 277 above) R[32–33]; incorporation into UK law as above (n 279 above). 316 Insolvency Regulation (n 277 above) R[15], §3. 317 Insolvency Regulation (n 277 above) §3; Insolvency Act 1986 (n 279 above) s 265 as amended by SI 2002/1037 (n 279 above); I Fletcher ‘A Culling of Sacred Cows — the Impact of the EC Insolvency Regulation on English Conflict of Laws’ ch 7 in J Fawcett Reform and Development of Private International Law: Essays in Honour of Sir Peter North (Oxford, OUP, 2002, 0-19-925008-1) 180ff (reinforces UK aspiration to universality if centre of main interests in the UK but not if there is merely an establishment here). 318 The Insolvency Regulation (n 277 above) uses the term ‘main proceedings’ only if secondary proceedings are under way, but it seems easier to treat all proceedings in the debtor’s main centre as main proceedings even if secondary proceedings are not yet open elsewhere. 308 309
Main (Europe-wide) Insolvency
417
in scope and encompass, in principle, all the debtor’s assets. That state will apply its own insolvency law.319 Secondary proceedings may run in parallel with the main proceedings in any state in which there is an ‘establishment’ of the debtor and the assets in any secondary state are excluded from the universality of the main proceedings,320 and hence the applicable law may be changed to that of the secondary state. Main proceedings must be discussed first.
3
Centre of main interests
[9.58] The centre of a debtor’s main interests (COMI) is where he conducts the administration of his interests on a regular basis, and should be readily obvious to a creditor wishing to pursue an insolvent.321 This autonomous test322 is brimful of problems.323 It is the place with which a debtor has very close contacts, where his manifold commercial interests are concentrated and in which the bulk of his assets is situated.324 In the case of an individual bankrupt his centre of main interests is located at his residence. Unified rules are needed to cater for Swiss bankers and the like. One such lived in six countries; but he could be made bankrupt in London since he spent 92 days a year in the United Kingdom, had a licence to use a flat in London whenever he wanted and thus had at least one of his usual residences in England and bankruptcy proceedings in England were proper.325 A sole trader or professional has his centre of business interests where he administers the business. Therefore forum may change according to whether the business is still in operation at the time that the insolvency is pursued.326 [9.59] The centre of main interests of a legal person (each company retaining its distinct legal personality327) is where it conducts the administration of its interests on a regular basis, but there is a rebuttable presumption in favour of the location of its registered office.328 This is the usual place for main proceedings. A company carrying out 90 per cent of all activities in Switzerland clearly had its centre in Switzerland,329 but a rebuttal was found in another case of a group of companies registered in Germany which nevertheless had their main centre in Bradford, West Eurofoods (n 311 above) J[33]; see below [9.67]. Insolvency Regulation (n 277 above) R[12], §3; Virgos Schmidt Report (n 285 above) [14]; see below [9.71]. 321 Insolvency Regulation (n 277 above) R[13]; Shierson (n 310 above) [42] Chadwick LJ; Eurofoods (n 311 above) AG[118] Jacobs, J[33]. 322 Eurofoods (n 311 above) J[31]. 323 G Mitchell & R Brent ‘Establishing Jurisdiction in Insolvency Cases’ [2005] NLJ 1819–1821. 324 European Parliament Committee cited by Burbidge (n 296 above) 592. 325 Skjevesland v Geveran Trading (No 4) (1546 of 2000) [2002] EWHC 2898, [2003] BCC 391. 326 Oberlandesgericht Köln 2W 82/01 [2003] ECLYB [890]. 327 Eurofoods (n 311 above) J[30]. 328 Insolvency Regulation (n 277 above) §3[1]; cf Re Brae Rent-A-Car International [2003] EWHC 128 (Ch), [2003] 2 All ER 201 (registered office outside the EU). 329 Skejeversland (n 325 above). 319 320
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Mortgages and Debt
Yorkshire.330 Eurofoods IFSC331 was an Irish subsidiary of an Italian holding company (Parmalat) which folded owing more than €1 billion. The registered office in Dublin raised a presumption in favour of the main centre of its interests being in Ireland,332 and this was supported by the exercise of head office functions of the company in Dublin.333 No inference in favour of Italy arose simply from that being the location of the Italian parent. Rebuttal of the registered office presumption would require factors that are objective and clear to creditors, perhaps when the registered office was merely a letterbox or if a company conducted no business whatsoever in the state selected for its registration.334
4
Moving the centre of main interests
[9.60] After proceedings are opened, proceedings cannot be evaded by moving to another jurisdiction. In Staubitz-Schreiber335 a sole trader pursued in his home state of Germany scarpered to Spain after the opening of the bankruptcy, but was bound by proceedings already opened in Germany. Transfer of jurisdiction would be contrary to objectives of avoiding incentives to move assets and of securing certainty.336 A debtor may move his centre of main interests before proceedings against him start and this will alter the venue for main proceedings, giving scope for forum skipping. Immutability was rejected at least in England in Shierson v Vlieland-Boddy.337 A Dorset accountant was, so the petitioner said, insolvent as a result of massive claims for the repayment of £2 million obtained fraudulently from a bank. At the time of the transactions he worked from offices in Dorset and lived in Shaftesbury but by the time proceedings commenced in England he had moved to rented accommodation in Malaga in Spain from which he was working. The centre of main interests has to be determined at the opening of proceedings338 and proved by the petitioners,339 but using both present and historical facts.340 It is not immutable, 341 but requires more than transitory 330 Re Daisyteck-ISA [2004] BPIPR 30, Ch D; also Amtsgericht Munich 1501 1E2 1276/04, [2005] ECLYB [283] (German registration overridden by looking at sales, marketing, finance, personnel). 331 Eurofoods (n 311 above); G Mitchell & R Brent ‘Insolvency Issues — Heard Here First’ [2006] NLJ 1014–1015; J Alderton & A Adeline ‘Streamlining Cross-border Insolvency?’ (2006) 3 International Corporate Rescue 257–264. 332 Eurofoods (n 311 above) AG[110] Jacobs. 333 Eurofoods (n 311 above) AG[117] Jacobs. 334 Eurofoods (n 311 above) J[34–36]. 335 C-1/04 Staubitz-Schreiber [2006] I ECR 701 ECJ. 336 Staubitz-Schreiber (n 335 above) J[24–27]. 337 Shierson (n 311 above). This case must now be read subject to Re Staubitz-Schreiber (n 335 above). 338 Shierson (n 311 above) [22], [39] Chadwick LJ. 339 Shierson (n 311 above) [29] Chadwick LJ; on the standard of proof see @ [72] Longmore LJ. 340 Shierson (n 311 above) [40], [55] Chadwick LJ. 341 Shierson (n 311 above) [28], [41–42], [48–50] Chadwick LJ; Re ci4net.com [2004] EWHC 1941 (Ch) not followed.
Main (Europe-wide) Insolvency
419
activities.342 A move could be self-serving,343 in the sense of skipping from a more onerous to a softer bankruptcy jurisdiction, but the court found nothing sinister on the particular facts.
5
Provisional and protective measures
[9.61] A first step is to decide whether to freeze assets until a liquidator is appointed. Domestic law will generally make this possible in relation to local assets, but a court able to open main proceedings may also order the freezing of assets situated in the territory of other European states, and another possibility is to open secondary proceedings where the asset is situated, provided that the debtor has an establishment in that state.344
6
Winding-up proceedings
[9.62] The Regulation applies to corporate and personal insolvency,345 which were excluded from the earlier rules on civil jurisdiction,346 and also lays down Europe-wide principles for the recognition of insolvency judgments and for the selection of insolvency law.347 Proceedings are usually judicial but could be administrative in some states.348 Insolvency proceedings are collective, taken for the benefit of creditors generally, and causing the suspension of the individual pursuit of debts,349 and consist of either winding-up proceedings aimed at realising assets of the debtor350 or rescue jurisdictions designed to turn round ailing businesses.351 The tick list of winding-up proceedings in England and Wales is: 앫 creditors’ voluntary winding-up (with confirmation of a court), 앫 winding-up by or subject to the supervision of the court,352 and 앫 bankruptcy. Shierson (n 311 above) [55] Chadwick LJ. Shierson (n 311 above) [55–56] Chadwick LJ. 344 Insolvency Regulation (n 277 above) R[16], §38; also see below [9.70]. 345 Insolvency Regulation (n 277 above) R[9]; Virgos Schmidt Report (n 285 above) [53]; unitary proceedings under domestic legislation are applied to insurance undertakings, credit institutions, investment undertakings and collective investment undertakings: Insolvency Regulation (n 277 above) R[9], §1[2]. 346 Insolvency Regulation (n 277 above) R[6–7]; Regulation on Civil Jurisdiction (Brussels I) (EC) 46/2001 [2001] OJ L12 1. 347 Insolvency Regulation (n 277 above) R[6]. 348 Insolvency Regulation (n 277 above) §2[d]; R[10]; Virgos Schmidt Report (n 285 above) [48]; see also the definition of ‘judgment’ in §2[e]. 349 Insolvency Regulation (n 277 above) §2[a] Annex A, R[31]; Virgos Schmidt Report (n 285 above) [62]. The has been amended by Insolvency Proceedings Amendment Regulations (EC) 603/2005 [2005] OJ L100 1, and (EC) 694/2006 [2006] OJ L121 1; G Moss ‘Love of Three Annexes’ (2005) 18 Insolvency Intelligence 74–75; 350 Insolvency Regulation (n 277 above) R[31], §2[c], Annex B. 351 See below [9.74]. 352 Confirmation of a voluntary winding-up by the court is unusual: Burbidge (n 296 above) 592. 342 343
420
Mortgages and Debt
The debtor is divested either partially or totally and a ‘liquidator’ is appointed.353 This last expression is used autonomously and much more widely than in legal English to include any person whose function is to administer or liquidate assets of which the debtor has been divested or to supervise the administration of his affairs; in England and Wales the full list is a liquidator (in our domestic sense), a supervisor of voluntary arrangement, an administrator, the Official Receiver, and a trustee in bankruptcy.354 ‘Rescue’ proceedings are collective insolvency procedures intended to keep an ailing business running while a solution is found to operating difficulties, in England: administration355 and voluntary arrangements. Rescue can only be sought in main proceedings and thus only in the place of the debtor’s centre of main interests.356 [9.63] Many individual actions may be pursued by a trustee in bankruptcy or liquidator in the course of the insolvency, but if they are not collective they are matters of Civil Jurisdiction, the two categories being mutually exclusive.357 Actions will be site-based and within the exclusive jurisdiction when they affect land directly, for example where a trustee in bankruptcy wishes to challenge the validity of a gift of a half-share of a Minorcan villa made by the bankrupt358 or where a Scottish trustee in sequestration wishes to prevent the bankrupt from selling land in Spain and to secure the vesting of title in him as trustee.359 When the action impinges on land more indirectly an action pursued by a trustee in bankruptcy or a liquidator may be an ordinary personal action within the civil forum rules, one example being an action by a trustee in bankruptcy for possession and sale of a villa on the Portuguese Algarve, half-owned by the person who has become bankrupt360; here the English courts were an appropriate forum and not the courts of the site, though the case must be very close to the line, if not over it.
7
The first mover
[9.64] Certainty about when proceedings start helps to discourage forum shopping.361 Common lawyers would talk of the commencement of proceedings 353 Insolvency Regulation (n 277 above) R[10], §§1[1], 2[a], Annex A; Virgos Schmidt Report (n 285 above) [9]. 354 Insolvency Regulation (n 277 above) §2[b], Annex C; Virgos Schmidt Report (n 285 above) [63]; Re MG Rover Espana [2006] EWHC 3426 (Ch), [2005] BPIR 1162; Mitchell & Brent 2006 (n 331 above). 355 Administrative receivership is not recognised across Europe and the Insolvency Act 1986 (n 279 above) s 72A inserted by the Enterprise Act 2002, c 40, s 280 prevents the appointment of an administrative receiver by the holder of a floating charge. 356 Shierson (n 311 above) [22] Chadwick LJ. 357 Regulation on Civil Jurisdiction (Brussels I) (n 346 above) §1. 358 Re Hayward [1997] Ch 45 Ch D, 56G–57B Rattee J. 359 Ferguson v Ferguson [1990] SLT Sh Ct 73, 75F JS Mowat QC. 360 Ashurst v Pollard [2001] Ch 595 CA; JM Carruthers Transfer of Property in the Conflict of Laws (Oxford, OUP, 2005, 978-0-19-927147-4) [2.39]; Case 133/78 Gourdain v Nadler [1979] ECR 733 ECJ. 361 Insolvency Regulation (n 277 above) R[4].
Main (Europe-wide) Insolvency
421
when a petition is lodged for a bankruptcy order or action is taken for the appointment of a liquidator but their civilian counterparts think in terms of the ‘opening of insolvency proceedings’, the term adopted for European regulation. It is autonomous, the sense being the moment when a judgment made at the start of insolvency proceedings becomes effective. Appointment of a provisional liquidation in Eurofoods362 opened the insolvency, well before the national court had a chance to determine whether or not grounds for insolvency existed. Irish law363 deemed that proceedings commenced at the time of presentation of the petition, a point not decided,364 but this was presumably not an ‘opening’ in the European/civilian sense. [9.65] When proceedings are opened is the moment when the centre of main interests of the debtor falls to be determined,365 and it also decides the interrelationship of Europe-wide (main) proceedings and local (secondary) proceedings in a manner dependent to some extent upon their timing.366 Most importantly, it determines the priority of insolvency proceedings according to the first mover rule. Courts in two different states may each feel that they are competent to open main insolvency proceedings — because the domestic law of each state would deem the debtor’s main centre of operations to be within their state — in which case forum is decided by the race to proceedings. Once proceedings are open in one state this must be recognised without scrutiny in other European states367 and any challenge has to be made in the state seised.368 Although it was intended to dampen down selection of law problems,369 the Insolvency Proceedings Regulation has caused an explosion of forum shopping.370
8
Recognition of main proceedings
[9.66] Proceedings conducted under the jurisdiction rules of the Insolvency Regulation must be recognised Europe-wide,371 except in a state where secondary proceedings have been opened.372 Recognition includes the decision to open
362 Eurofoods (n 311 above) AG[54], AG[60–61], AG[80] Jacobs, J[45–58]. Presentation of the petition alone is insufficient. 363 Irish Companies Act 1963, No 33/1963, s 220(2). 364 Eurofoods (n 311 above) AG[94] Jacobs. Shierson (n 311 above) was argued on the agreed basis that the relevant time was when the court made a bankruptcy order, but arguably it was when the court allowed service overseas: at [55] Chadwick LJ, [72] Longmore LJ, [77] Sir Martin Nourse. 365 Staubitz-Schreiber (n 335 above) J[29]; Shierson (n 311 above) [22], [39] Chadwick LJ, [77] Sir Martin Nourse; D Petrovich ‘The Correct Time to Determine a Debtor’s COMI’ (2006) 22 Insolvency Law & Practice 76–80. 366 See below [9.71]. 367 Re Daisyteck-ISA (n 330 above) (administration spread across several states). 368 Insolvency Regulation (n 277 above) R[22]; Eurofoods (n 311 above) AG[104] Jacobs. 369 Shierson (n 311 above) [46] Chadwick LJ. 370 For factors to consider, see below [9.67]. 371 Insolvency Regulation (n 277 above) §§16ff; Virgos Schmidt Report (n 285 above) [143ff]. 372 Insolvency Regulation (n 277 above) §§16[2], 17[1]; see below [9.71].
422
Mortgages and Debt
proceedings from the time that it becomes effective, all other judgments,373 preservation measures and compositions.374 Recognition should be automatic, without further formality, on the basis of mutual trust even if ‘some courts warrant more trust than others’.375 Grounds for non-recognition are reduced to a bare minimum, to protect personal freedom, postal secrecy, manifest public policy, basic constitutional liberties376 and due process.377
9
Insolvency law
[9.67] Universality in the conflict of insolvency is only partially achievable. Substantive rules differ widely, quite apart from the security interests and land already considered.378 The general rule is that the law to be applied is that of the forum of the proceedings,379 including the crucial issue of voidness or voidability of transactions detrimental to creditors.380 This is certainly true of main proceedings.381 A creditor in a secondary state makes a tactical choice when deciding whether or not to apply for secondary proceedings, according to which law (the law of the debtor’s centre of main interests or of his local establishment) offers the creditor more favourable treatment. Of course, each creditor is at the whim of each other, since every creditor has the right to open secondary proceedings. Factors to be considered when deciding where to shop include the following382; 앫 앫 앫 앫 앫
what transactions can be overturned, liability for a lender who fails to withdraw funding, the availability of set-off in common law systems, the extent to which trading during insolvency is permitted, and the strictness of controls on irresponsible trading.
A transaction may come to be judged by laws different from that under which it was completed.
Under rules for the recognition of judgments: see below [9.75ff]. Insolvency Regulation (n 277 above) §§16–17; Eurofoods (n 311 above) AG[84] Jacobs, J[38ff]. 375 Mitchell & Brent (n 331 above) 1015. 376 Insolvency Regulation (n 277 above) §§25, 26. 377 Eurofoods (n 311 above) AG[142–145] Jacobs, J[60ff]. 378 See above [9.49]. Other special rules are in Insolvency Regulation (n 277 above) §§9–12. 379 Law, described in this context as lex concursus, is selected for all procedural and substantive matters, including particularly conditions for the opening, conducting and closing of proceedings: Insolvency Regulation (n 277 above) R[23], §4[1]; Eurofoods (n 311 above) J[4]. 380 Insolvency Regulation (n 277 above) §4[2](m). Unless a person who benefited from an act detrimental to all the creditors shows that the law of another EU state applies and no challenge is allowed in the particular circumstances: §13. 381 Insolvency Regulation (n 277 above) §4[1]; Virgos Schmidt Report (n 285 above) [88]. 382 J Westhead Lawyer News [2005] November 9th; Shierson (n 311 above) [46] Chadwick LJ. 373 374
Main (Europe-wide) Insolvency
10
423
Conduct of the main liquidator
[9.68] Appointment of a liquidator has important implications. The commencement of proceedings will freeze the assets of a debtor, invalidate subsequent dispositions and effect a transfer to the liquidator, either of title to the assets or of dispositive powers. The European public might be able to ascertain whether or not a liquidator is in post. Appointment of a liquidator is evidenced by a certified copy of the original appointment which does not require legalisation, though a translation may be needed.383 A liquidator may request publication of a notice of the judgment opening insolvency proceedings, and also registration in the land register in any other EU state, but local law in many European states already makes publication and/or registration mandatory in every territory containing an establishment of the debtor.384 Any creditor from the EU — judged as such according to his habitual residence, domicile or registered office — has standing to lodge a claim in main insolvency proceedings anywhere in the Union, a right extended, of course, to taxation and social security authorities.385 It is necessary to inform creditors from elsewhere in the EU about the opening of insolvency proceedings386 and they must be told when and where to lodge a claim and whether it is necessary for a secured creditor to claim.387 A claim should be in writing388 using the form and language of the forum, though the ‘Invitation to lodge a claim’ and statement that there are ‘Time limits to be observed’ should appear in all official EU languages. The claim itself must be headed ‘Lodgement of claim’ in the language of the forum, but any EU creditor (again judging by habitual residence, domicile or registered office) may use his official language when making his claim, although forum rules may require this to be accompanied by a translation.389 A claim, with any supporting documents, should indicate the nature of the claim, the date on which it arose and its amount, as well as any security in rem claimed and over what asset.390 This claim may be lodged in the main proceedings or in any secondary proceedings391 and respective liquidators should share lodgements of claims where this is in the interests of creditors.392 [9.69] The main liquidator may exercise all the powers available according to the law of the main state in all other EU states, respecting any preservation Insolvency Regulation (n 277 above) §19; Virgos Schmidt Report (n 285 above) [167]. Insolvency Regulation (n 277 above) §§21–22; including any trade or other public register: Virgos Schmidt Report (n 285 above) [182]. 385 Insolvency Regulation (n 277 above) §39; R[21]. 386 Insolvency Regulation (n 277 above) §40. 387 Insolvency Regulation (n 277 above) §40; see above [9.51]. 388 Insolvency Regulation (n 277 above) §39. 389 Insolvency Regulation (n 277 above) §42. 390 Insolvency Regulation (n 277 above) §41. 391 Insolvency Regulation (n 277 above) §32[1]; Virgos Schmidt Report (n 285 above) [27]. 392 Insolvency Regulation (n 277 above) §32[2]. Rights to oppose lodgements or to withdraw claims already lodged depend upon local law. 383 384
424
Mortgages and Debt
measures already taken and excluding any state in which secondary proceedings are open.393 He could, for example, participate in creditors’ meetings and other proceedings on the same basis as a creditor.394 Assets can be moved between EU states for realisation,395 using local rules to determine procedure.396 Distribution of proceeds requires co-ordination to ensure equal treatment of creditors. Every creditor may keep what he has received in the course of insolvency proceedings but his right to participate in the distribution of total assets obtained in other proceedings depends upon other creditors with the same standing having obtained the same proportion of their claims.397 Commencement of collective proceedings is a bar to an individual creditor obtaining a separate satisfaction and anything received must be turned in to the liquidator.398
SECO N DA RY (TER R I TO R I A L) I N SO LVEN CY
Secondary (Territorial) Insolvency 1
Establishment basis
[9.70] Territorial proceedings are insolvency proceedings commenced in a state away from the debtor’s centre of main interests. They are usually secondary to main proceedings opened at the centre of main interests but they might stand alone, but in either case only where the debtor possesses a subsidiary ‘establishment’. This is a place of operations where the debtor carries out a non-transitory economic activity with human means and goods.399 Some stability is captured by the negative requirement to be non-transitory, but this remains a very loose sense of the word ‘establishment’.400 A Dorset accountant faced massive claims in Shierson v Vlieland-Boddy401 under a guarantee for repayment of money allegedly obtained fraudulently from a bank. By the time that proceedings commenced he had moved his main interests to Malaga in Spain, and the claim to open English secondary proceedings turned on involvement in the management of Unit 2A on the Sunrise Business Park in Blandford402 through legal and beneficial ownership Insolvency Regulation (n 277 above) §18; Virgos Schmidt Report (n 285 above) [158–159]. Insolvency Regulation (n 277 above) §32[3]. 395 Insolvency Regulation (n 277 above) §18[1] subject to §§5 and 7. 396 Insolvency Regulation (n 277 above) §18[3]. 397 Insolvency Regulation (n 277 above) R[21], §20[2]. 398 Insolvency Regulation (n 277 above) §20[1] subject to §§5 and 7; Virgos Schmidt Report (n 285 above) [174]. An obligation honoured for the benefit of a debtor is discharged if the person honouring the obligation was unaware of the opening of proceedings, lack of knowledge being rebuttably presumed before local publication but knowledge afterwards: Insolvency Regulation (n 277 above) §24. 399 Insolvency Regulation (n 277 above) §2[h]. 400 Shierson (n 311 above) [65–66] Chadwick LJ; Virgos Schmidt Report (n 285 above) [70]. 401 Shierson (n 311 above). It needs to be read in the light of Staubitz-Schreiber (n 335 above). 402 Unintentional failure to resign an English directorship did not confer jurisdiction: Shierson (n 311 above) [30], [57], Chadwick LJ. 393 394
Secondary (Territorial) Insolvency
425
and receipt of rent from sub-letting.403 This minute connection was sufficient to constitute an establishment. English jurisdiction was not avoided by an attempt to transfer title to the industrial unit to a company which was not registered, but anyway he remained beneficial owner of the company and through that retained an English establishment.404 As things stand those advancing finance to foreign economic operators may be placed at a disadvantage because the presence of assets without an establishment is not sufficient.
2
Secondary proceedings
[9.71] Territorial proceedings are usually secondary to main proceedings405 but, even if they stand in isolation, their effect is limited to assets of the debtor situated in the territory of the state conducting the proceedings.406 Main insolvency proceedings do not hinder the right to seek winding-up proceedings407 in any other EU state where the debtor has an establishment on the initiative of the main liquidator or any other person able to petition under the law of the potential forum,408 who can meet local requirements for security for costs.409 There is no need to re-examine the debtor’s insolvency. Secondary insolvency proceedings are designed to protect local territorial interests and are restricted in their effects to assets situated within the secondary state.410 Creditors from each national establishment may conduct proceedings in isolation from the European-wide proceedings, and large insolvencies can be broken down into manageable chunks and divergences about the treatment of assets may be overcome.411 The law is that of the secondary state.412 Recognition of secondary proceedings is limited to the secondary state, unless a particular creditor has agreed an effect on extra-territorial assets,413 with a bare minimum of grounds for non-recognition.414 Shierson (n 311 above) [68] Chadwick LJ, [73] Longmore LJ. Shierson (n 311 above) [57–64] Chadwick LJ, [73] Longmore LJ, [79–80] Sir Martin Nourse. 405 Insolvency Regulation (n 277 above) §§27ff. There are complex provisions to ensure proper co-ordination. 406 Insolvency Regulation (n 277 above) R[12], §3[2], Burbidge (n 296 above) 593 points out that the primary/secondary scheme is very different from the original convention (n 311 above). 407 Once main proceedings are under way, any rescue procedures need to be taken in the main state: Insolvency Regulation (n 277 above) §3[3]; see above [9.62]. Administrators may be allowed to act so as to discourage secondary proceedings: MG Rover Espana (n 354 above); Mitchell & Brent (n 323 above) [2005]. 408 Insolvency Regulation (n 277 above) R[18], §29; Insolvency Act 1986 (n 279 above) s 265, as amended by SI 2002/1037 (n 279 above). A careful calculation is required since the opening of secondary proceedings will change the law selected to that of the secondary forum. 409 Insolvency Regulation (n 277 above) §30. 410 Insolvency Regulation (n 277 above) §27; Declaration re Portugal [2000] OJ C183 1; Insolvency Regulation (n 277 above) §16[2]; Virgos Schmidt Report (n 285 above) [143ff], [153], [156]. 411 Insolvency Regulation (n 277 above) R[19]. 412 Insolvency Regulation (n 277 above) §28. 413 Insolvency Regulation (n 277 above) §17[1]. 414 Insolvency Regulation (n 277 above) §§25, 26. 403 404
426
Mortgages and Debt
[9.72] Almost all large groups trade across Europe via a parent company in one of the EU states and trading subsidiaries in each national market. The effect is to encourage these groups to be split up on insolvency, whereas more money might be realised by sale as a single unit, and anyway there ought to be a policy of rescuing companies if possible; a centralised approach is needed for multinational corporate groups.415
3
Provisional and protective measures
[9.73] Appointment of a temporary secondary liquidator in a state in which the debtor has an establishment enables a creditor to take advantage of the laws of the secondary state to give remedies for the preservation of local assets.416
4
Territorial (non-secondary) proceedings
[9.74] Territorial proceedings are stand-alone insolvency proceedings opened away from the main centre of the debtor’s operations, at a time when there are no main proceedings to which they could be secondary.417 These are allowed in limited circumstances: where the debtor has an establishment in a state which is also the home state of the creditor (measured by domicile, habitual residence or registered office), or, alternatively, where the claim arises from the operation of the debtor’s establishment.418 Rescue proceedings may be opened but a main liquidator appointed subsequently can insist on a winding-up.419
J UDG MEN T DEB TS I N THE J UDG MEN T STATE
Judgment Debts in the Judgment State 1
Introduction
[9.75] Our subject is the use of land in one European state as a means to secure the payment of a debt incurred and adjudged to be owing elsewhere in Europe. 415 I Ronen-Mevorach ‘Centralising Insolvencies of Pan-European Corporate Groups’ [2006] JBL 468–486, 468. 416 Insolvency Regulation (n 277 above) R[16], §38. If the UK is the secondary state, a world-wide freezing order should not be granted when it would not be available in the main state: Banco Nacional de Comercio Exterior v Empresa de Telecommunications de Cuba [2007] EWCA Civ 662, [2007] 21 LSG 22; on the common law rules see Fourie v Le Roux [2007] UKHL 1, [2007] 1 All ER 1087. 417 Subsequent commencement of main proceedings will cause territorial proceedings to become secondary: Insolvency Regulation (n 277 above) §36. 418 Insolvency Regulation (n 277 above) §3[4](b). 419 Insolvency Regulation (n 277 above) §37[1]; in Portugal see the special Declaration [2000] OJ C183 1.
Judgment Debts in the Judgment State
427
Rules for recognising and enforcing judgments need to be articulated on a continental basis to cope with this new, large-scale and urgent phenomenon. After a personal judgment420 for debt has been obtained in a foreign court such as the home court of the defendant,421 the creditor may decide to enforce it against land owned by the judgment debtor elsewhere in Europe by obtaining a charging order against the land which will lead to its sale. If a Greek claimant obtains judgment in France against a German debtor and then discovers that the debtor’s assets include land in England, a charging order is obtainable in England for the amount of the French judgment. Enforcement of judgments is now considered in these two natural stages with the narrative split between events in the state originating the judgment (the judgment state) and events in the state to which it is transported for enforcement where the land is sited (the enforcement state).
2
European judgments club
[9.76] There are as yet no EU-wide remedies,422 but rather a scheme for judgments to run throughout Europe423 in a common enforcement area424 of mutual recognition and procedures that are simple, inexpensive and uniform.425 These policy objectives are implemented by the Regulation on Civil Jurisdiction426 — sometimes called the Brussels I or the Judgments Regulation — which ensures that judgments given in one EU state should generally be recognised and enforced in the courts of every other EU state. This Regulation will be applied if judgment was given after it came into force,427 but different club rules apply first to Denmark and older EU judgments,428 and second to EEA states.429 English law has implemented the EU rules by amendments to the Civil Jurisdiction and
420 Non-English readers should note the odd convention by which ‘judgment’ is always used for judicial pronouncements and ‘judgement’ for general senses; according to E Gower’s Fowler’s Modern English Usage (Oxford, OUP, 2nd edn, 1965) 319, ‘judgment’ was once orthodox in all cases but the OUP introduced a differentiation, ‘too subtle for popular taste’. The author has at last found a use for his first year school prize. 421 See below [10.53]. On enforcement (positive) and recognition (negative) see Dicey & Morris The Conflict of Laws (London, Sweet & Maxwell, 14th edn by L Collins 978-0-421-88360-4) [14-002], [14-004], [14-224]. 422 Consultation is under way on the Attachment of Bank Accounts SEC (2006) 1341. 423 EC §62 ex §73j; also EC §61[c] ex §73i[c]; EC §295 ex §222. 424 G White ‘Civil Jurisdiction and Judgments Act No II’ [1982] Conveyancer 306–313, 314. 425 C-7/98 Bamberski v Krombach (No 1) [2001] I ECR 1935 ECJ; J[19–20]. 426 Regulation on Civil Jurisdiction (n 346 above); see above [4.04]. 427 Regulation on Civil Jurisdiction (n 346 above) §§32–56, as from March 1st 2002. 428 Brussels Convention [1978] OJ L304 36, §§25–49, which differs significantly from the current Regulation; A Stadler ‘Cornerstones of European Law of Civil Procedure’ (2005) 42 CML Rev 1637–1661, 1643; post-commencement judgments in pre-commencement proceedings are transferred to the Regulation if, when the proceedings were instituted, both states were subject to Brussels or Lugano or equivalent rules in a bilateral agreement: §66. 429 Lugano Convention [1988] OJ L319 9; §§25–49, basically the Brussels Convention (n 428 above) before amendment (and hence article numbers are not repeated); the transfer rules just described (n 428 above) apply.
428
Mortgages and Debt
Judgments Act 1982,430 so that German judgments should be freely enforceable here, at least in theory,431 and a modified version of the same rules is applied as between parts of the UK.432 Judgments can be imported from non-European states only under bilateral agreements which depend upon substantial reciprocity for recognition.433
3
A judgment from an appropriate forum
[9.77] A wide variety of judicial decisions count as a judgment434 including most decisions of courts, tribunals and other judicial bodies, however they are described or named, but certainly including a determination of costs, and also severed parts of a judgment435 and an order to establish a limitation fund.436 A French titre exécutoire issued outside court and lacking any appeal mechanism must nevertheless be recognised and enforced in Germany.437 Maintenance orders and debts are commonly enforced in this way, but the scope is not in any way restricted to money judgments. However, there are some exclusions even from this expansive definition, including particularly consent orders438 and unilateral orders made without the involvement of the defendant, freezing orders made to preserve assets until litigation occurs,439 and other provisional orders. [9.78] Authenticated documents should be enforced across the European conflicts club in the same way as European judgments: a document formally drawn up or registered as an authentic instrument in one club state must be declared to be enforceable in the other club states.440 Examples are maintenance agreements concluded with administrative authorities and a settlement of proceedings approved by a court.441
430 Civil Jurisdiction and Judgments Act 1982, c 27, s 18 (enforcement), 19 (recognition), Civil Procedure Rules, SI 1998/3132 as amended on 42 occasions, 74.2–74.11 (registration order); Practice Direction 74. 431 P Kiesselbach & S Wilske ‘Enforcing German Judgments in England’ (2001) 13 European Lawyer 24–26. 432 CJJA 1982 (n 430 above) sch 4; Civil Procedure Rules (n 430 above) 74.14–74.18. 433 Foreign Judgments (Reciprocal Enforcement) Act 1933, c 13, as amended, eg, by CJJA 1982 s 35. 434 Regulation on Civil Jurisdiction (n 346 above) §32; ex Brussels Convention (n 428 above) §25. 435 Regulation on Civil Jurisdiction (n 346 above) §48; ex Brussels Convention (n 428 above) §42; Case 42/76 De Wolf v Cox [1976] I ECR 1759 ECJ. 436 C-39/02 Maersk Olie & Gas v De Haan & De Boer [2004] I ECR 9657 ECJ. 437 Oberlandesgericht Saarbrucken [2001] Iprax 238, [2001] ECLYB [1036] (Brussels Convention). 438 C-414/92 Solo Kleinmotoren v Boch [1994] I ECR 2237 ECJ. 439 See below [9.81]. 440 Regulation on Civil Jurisdiction (n 346 above) §57. 441 Regulation on Civil Jurisdiction (n 346 above) §58; Annex V (form of certificate); Civil Procedure Rules (n 430 above) 74.11.
Judgment Debts in the Judgment State
4
429
From a proper forum
[9.79] The judgment to be enforced must have been issued by the courts of a country which is the proper forum to decide a case under the Regulation on Civil Jurisdiction. Land disputes can only be resolved where the land is situated but a personal action may be appropriately decided in several different countries, for example either where a debt is owed or where the defendant is domiciled.442 A decision to commence a case in an incorrect forum must be challenged at that initial stage, before the court proceeds to hear the case and issue a judgment, by asking the court to decline jurisdiction and if necessary by forcing a reference to the European Court of Justice, since excess of jurisdiction is no ground for challenging a judgment once made, consumer and insurance contracts excepted.443 The judgment court may or may not stay enforcement pending an appeal against the merits of a judgment delivered. A stay is usual.444 That decision is followed in the enforcement state, so that if no stay is imposed it will be possible to enforce a judgment before the appeal is heard provided the judgment is otherwise final.445
5
Enforceability in the judgment state
[9.80] The law applicable to the judgment is that of the state giving judgment and this determines for example whether the judgment carries interest.446 Many factors affect the enforceability of a judgment after it is given. A judgment debt would cease to be enforceable if the debt was paid, and an order for specific performance of a contract would cease when the contract has been carried out.447 Grounds may exist to argue for a stay of enforcement448 or to adjust the instalments ordered. Any pre-assessment made by a judgment court of the penalty to be paid if any instalment is missed must be reassessed by that same court after a default.449 All of these matters are left exclusively to the courts of the judgment state,450 applying its own rules.451 A German lender who sues a French debtor in Nancy is bound, for better or worse, by the French rules about enforcement, See below [10.53]. See below [10.33]. 444 Regulation on Civil Jurisdiction (n 346 above) §37. 445 SISRO v Ampersand Software [1994] ILP 55 CA (a stay imposed on procedural grounds might be reviewed). 446 CJJA 1982 (n 430 above) s 7; Private International Law (Miscellaneous Provisions) Act 1995, c 42, ss 1–4 (interest on judgments in foreign currencies). 447 The defendant may argue that the judgment has subsequently ceased to be enforceable at the inter partes stage of the internal procedure; see below [9.88]. 448 Case 220/84 Autoteile Service v Mahle [1985] ECR 2267 ECJ. 449 Regulation on Civil Jurisdiction (n 346 above) §49; Brussels Convention (n 428 above) §43. 450 Regulation on Civil Jurisdiction (n 346 above) §22[5]; ex Brussels Convention (n 428 above) §16[5]. Contrast a non-EU state: C-129/92 Owens Bank v Bracco [1994] I ECR 117 ECJ. 451 C-261/90 Reichert v Dresdner Bank (No 2) [1992] I ECR 2149 ECJ; a paulienne order invalidating a transfer to defraud creditors is not an enforcement. 442 443
430
Mortgages and Debt
whether these are more or less stringent than the German rules.452 Law in the judgment state also decides whether a very old judgment remains enforceable.453
J UDG MEN T DEB TS I N THE EN F O R CI N G STATE
Judgment Debts in the Enforcing State 1
Freezing land pending enforcement (provisional measures)
[9.81] A first step towards enforcement of a judgment in another club state is to seek provisional or protective measures in the state where enforcement is to take place,454 possibly when the substance is still pending abroad455 or when forum rights are being disputed.456 Courts local to the property to be frozen are best placed to adjudicate and there is no system for transferring recognition of protective measures.457 If the defendant owns some land sited in the enforcement state this can be frozen so as to prevent the judgment debtor selling or mortgaging the land in an attempt to evade enforcement.458 Power to make such an order is determined by the law of the enforcement state, but most states act in support of a foreign judgment, and European law insists that this should be so once a declaration of enforceability has been made and it also insists that the protective measures should remain in place during any appeal against a declaration of enforceability.459 English law is particularly liberal in dispensing orders to freeze assets in aid of a foreign court,460 even ordering worldwide freezing orders when the judgment court can only make orders affecting its own territory.461 Interim relief should be ordered unless it is inexpedient to grant it,462 where it might interfere with case management in the primary forum or create a potential conflict of jurisdiction,463 and another consideration is impossibility of enforcement.
452 Transport of a judgment from England overseas is covered by Civil Procedure Rules (n 430 above) 74.12–74.13. 453 Sparkasse Tulzer Land v XX [2000] RJ 4382, [2001] ECLYB [1038] (15 years). 454 Regulation on Civil Jurisdiction (n 346 above) §44. 455 Hof Gravenhage [2001] NJ 87, [2001] ECLYB [1056]. 456 Star Gemini Navigation Co v X [2001] J Aran 9419, [2002] ECLYB [401] Spanish Tribunal Supremo. 457 Case 125/79 Denilauler v Couchet Frères [1980] ECR 1553 ECJ, J[16]. 458 An English freezing order will impose a charge: Flightline v Edwards [2003] 3 All ER 1200 CA. 459 Regulation on Civil Jurisdiction (n 346 above) §47. 460 Motorola Credit Corp v Uzan (No 1) [2002] EWCA Civ 989, [2002] 2 All ER (Com) 945. 461 C Inc v L [2001] CLC 1054 Aikens J; Oberlandesgericht Frankfurt [2002] Iprax 523, [2003] ECLYB [878]; Tasarruff Mevduati Sigorta Fonu v Demirel [2007] ILP 8 Lawrence Collins J (freezing order to support Turkish judgment even though no assets in the jurisdiction). 462 CJJA 1982 (n 430 above) s 25; Motorola Credit Corp v Uzan (No 6) [2003] EWCA Civ 752, [2004] 1 WLR 113. 463 Bates v Microstar [2003] EWHC 661 (Ch), [2003] Times April 15th.
Judgment Debts in the Enforcing State
2
431
A declaration of enforceability (exequatur)
[9.82] Any party interested in a judgment given within the European judgments club may apply for it to be recognised and enforced in another club state,464 but when a border is crossed a two-stage procedure is required in the enforcing state. It is first necessary to obtain a certificate (often called an exequatur),465 an extra stage as against a domestic judgment which remains necessary for the time being. The end product of this first stage of the enforcement procedure is a declaration of enforceability unless the judgment is being transferred to the United Kingdom, when it is registered as being enforceable.466 Application is made to the High Court, or an equivalent court of first instance elsewhere,467 and under the current Regulation this first stage of the transfer of the judgment is virtually automatic.468 Reliance is usually placed on two documents469: 앫 a copy of the judgment, and 앫 a certificate from the court making the judgment of certain basic information in a set form. The most likely problem is failure of translation.470 [9.83] Detailed procedure is left to the law of the enforcing state,471 but the outline of the procedure is prescribed so that it is uniform across the EU.472 Localised procedural obstacles473 such as ad valorem fees474 or demands for security from non-nationals475 are overridden. Enforcement of an order for security Regulation on Civil Jurisdiction (n 346 above) §38; ex Brussels Convention (n 428 above) §31. This step should be removed: Brussels I Proposal [1998] OJ C33 22. 466 Regulation on Civil Jurisdiction (n 346 above) §38 ex Brussels Convention (n 428 above) §38; Dicey & Morris (n 421 above) [14-222ff]. 467 Regulation on Civil Jurisdiction (n 346 above) §39; Brussels Convention (n 428 above) §32; Transportes Font v XX [2000] RJ 8058, [2001] ECLYB [1067]. To transfer from abroad to the UK see: CJJA 1982 (n 430 above) s 11; Civil Procedure Rules (n 430 above) 74.2–74.10; the UK court accepts a certified copy of a judgment of a foreign court, appearing to be authenticated by the official seal of a court or certified by a judge. In reverse (UK judgments enforced overseas) CJJA 1982 (n 430 above) s 12; Civil Procedure Rules (n 430 above) 74.2–74.10. 468 Regulation on Civil Jurisdiction (n 346 above) R[16], §45; ex Brussels Convention (n 428 above) §34. 469 Regulation on Civil Jurisdiction (n 346 above) §§53–56, Annex V; Brussels Convention (n 428 above) §§46–48 required additional proofs; both procedures have a dispensing power. 470 Gaspar Peral v Vinalmar [2000] RJ 766, [2000] ECLYB [493] Spanish Tribunal Supremo; Bundesgerichtshof IX ZB 104/00, [2003] ECLYB [874]. 471 Regulation on Civil Jurisdiction (n 346 above) §40[1]; ex Brussels Convention (n 428 above) §33. 472 English procedure CJJA 1982 (n 430 above) s 4; after registration it is enforced with the same effect as if the court had originally given it. 473 Regulation on Civil Jurisdiction (n 346 above) §51; ex Brussels Convention (n 428 above) §39. 474 Regulation on Civil Jurisdiction (n 346 above) § 52. 475 Regulation on Civil Jurisdiction (n 346 above) §51; ex Brussels Convention (n 428 above) §45. Tavoulareas v Tsavliris (No 2) [2005] EWHC 2140, [2006] ILP 14. Contrast where a judgment is imported from a non-judgment club state. 464 465
432
Mortgages and Debt
for costs might legitimately be refused if so disproportionately high as to prevent proper access to justice.476 Consideration of the papers should lead to automatic recognition in most cases, assuming there is no special jurisdictional bar,477 and the certificate or registration should be granted and notified to the applicant without delay.478
3
Appeal against declaration of enforceability
[9.84] An appeal against a preliminary decision to recognise a judgment from another EU state may be made by the defendant or any other interested party.479 Appeal procedures are adversarial in nature, and notice must first be given to all potential parties, though there is often little point in a challenge given the very limited grounds for refusing recognition.480 Courts must not act of their own motion (in contrast to the old way of doing things) but must wait for an appeal from the party facing enforcement, the time limit being one month, extended to two if the defendant is domiciled in another state,481 with enforcement stayed pending the outcome of the appeal process482 but protective measures continuing in force. It is not permissible to review the merits. This is absolutely fundamental. The substance of the original decision is decided in the judgment state and cannot be reopened before it is enforced483 and anti-suit injunctions may not be deployed.484 Even a misapplication of community law must be accepted,485 the defendant being directed back to the judgment state to make an appeal. Grounds for the enforcement state to decline to enforce foreign judgments are now enumerated:
(1)
Jurisdictional excess in special cases
[9.85] Jurisdictional excess is only a ground for refusing to recognise a judgment486 in a few limited cases where a judgment infringes: Pordea v Times Newspapers [2000] ILP 763 French Cour de Cassation. Regulation on Civil Jurisdiction (n 346 above) §§34–35; ex Brussels Convention (n 428 above) §§27–28; §§40–41 provides for an appeal if enforcement is refused; one further appeal lies under §44, Annex III. 478 Regulation on Civil Jurisdiction (n 346 above) §42; ex Brussels Convention (n 428 above) §§34–35. 479 Case 148/84 Deutsche Genossen [1985] ECR 1981 ECJ; Case 145/86 Hoffmann v Kreig [1988] ECR 645 ECJ. 480 Regulation on Civil Jurisdiction (n 346 above) R[16], §§39–40. 481 Regulation on Civil Jurisdiction (n 346 above) §§41–43. 482 Regulation on Civil Jurisdiction (n 346 above) §46[1]; ex Brussels Convention (n 428 above) §§38–39. 483 Regulation on Civil Jurisdiction (n 346 above) §§36, 45[2]; ex Brussels Convention (n 428 above) §§29, 34; Interdesco v Nullfire [1992] 1 Lloyd’s Rep 180 Phillips J. 484 Tavoulareas v Tsavliris (No 4) [2006] EWHC 414, [2006] 1 CLC 466. 485 C-38/98 Usines Renault v Maxicar [2000] I ECR 2973 ECJ (forgery of Renault parts). 486 Brussels Convention (n 428 above) §28. 476 477
Judgment Debts in the Enforcing State 앫 앫 앫 앫 앫
433
sovereign immunity,487 special protection for parties such as consumers, the exclusive forum of the site of land, other exclusive jurisdictions, or the res judicata principle that acts to protect a judgment in state A from a subsequent registration of a later judgment from state B on the same set of facts.488
Bilateral agreements not to recognise judgments given against nationals of non-member countries on grounds of excess of jurisdiction can no longer be made though existing agreements between EU club states and non-club countries are preserved.489 In any event the Lugano Convention is less deferential to the judgments of EEA states.490
(2)
Serious procedural failings
[9.86] Enforcement can be refused of a judgment which is contrary to public policy in the enforcement state,491 at least pending the reconciliation of procedural law.492 Examples are a breach of international law,493 or a manifestly unfair trial494; thus in Krombach495 a German convicted in his absence of the manslaughter of a little French girl was not allowed to contest a compensation order made against him because he was not in court. When this judgment was transported to Germany it could not be enforced on account of the clear breach of his right to due process. The bounds of the concept, a variance from legal order to an unacceptable extent,496 are defined autonomously, though the public policy applied is that of the enforcing state.
487 Dicey & Morris (n 421 above) I [14R.095]; Peer International Corp v Termidor Music Publishers (No 1) [2003] EWCA Civ 1156, [2004] Ch 212; AIC v Federal Government of Nigeria [2003] EWHC 1357 Admin Stanley Burnton J; AIG Capital Partners v Kazakhstan [2005] EWHC 2239 (Comm), [2006] 1 WLR 1420; Sabah Shipyard (Pakistan) v Pakistan [2002] EWCA Civ 1643, [2002] 2 Lloyd’s Rep 57 (government of Pakistan waived immunity by singing up to jurisdiction clause). 488 P Barnett Res Judicata, Estoppel and Foreign Judgments (Oxford, OUP, 2002, 0199243395); CJJA 1982 (n 430 above) s 34; Hoffmann v. Kreig (n 479 above); V v R 784/00 [2003] ECLYB [876] Luxembourg. Seisin rules to determine when proceedings are pending are only relevant until judgment is given: Regulation on Civil Jurisdiction (n 346 above) §27; Tavoulareas v Tsavliris (No 3) [2005] EWHC 2643, [2005] 2 CLC 848; on appeal [2006] EWCA Civ 1772, [2006] 2 CLC 1034. 489 Regulation on Civil Jurisdiction (n 346 above) R[10]; ex Brussels Convention (n 428 above) §59. 490 Lugano Convention (n 429 above) §54B[3]. 491 Regulation on Civil Jurisdiction (n 346 above) §§34ff; Brussels Convention (n 428 above) §§27, 34; Hoffmann (n 488 above); C-78/95 Hendrikman v Magentra Druck [1996] I ECR 4943 ECJ; Adams v Cape Industries [1990] Ch 433 CA. 492 B Hess ‘Integrating Effect of European Civil Procedure Law’ (2002) 4 European Journal of Law Reform 3–17 @ 9. 493 Kuwait Airways Corporation v Iraqi Airways Co (Nos 4 and 5) [2000] Times November 21st CA (seizure of aircraft for tort claim). 494 Usines Renault (n 485 above) (not on the particular facts). 495 C-7/98 Bamberski v Krombach (No 1) [2001] I ECR 1935 ECJ, J[25–26]; (No 2) [2002] ILP 4; C-222/84 Johnston v Chief Constable RUC [1986] ECR 1651 ECJ, J[18]. 496 Krombach (n 495 above) J[37].
434
Mortgages and Debt
(3)
Defendant unaware of proceedings
[9.87] When a default in appearance497 is found, cumulated498 with defective service499 the defendant is not aware of the proceedings,500 or of the reactivation of earlier proceedings that were known.501 Either factor alone is not sufficient to impede enforcement.502 A fair time must be allowed on the facts of each case between service and the issue of a judgment in default503 to allow a proper defence, somewhere between nine days (obviously too short) and five weeks (obviously sufficient).504 Factual issues are determined by the enforcement court505 provided the debtor chooses to use this ground of defence.506
(4)
Judgment no longer enforceable in judgment state
[9.88] A foreign judgment has the same effect when transported to an enforcement state as it does in the judgment state; so it cannot be recognised in the community if it ceases to be enforceable in the state where it was issued.507
4
Charging order
[9.89] A judgment is enforced against land by a charging order, however it is described in different European states, by which a money judgment is charged on land, so the land becomes earmarked for payment of the debt, followed by enforcement of the security by way of sale. The jurisdiction of the site is obviously exclusive: a charging order cannot be made anywhere except at the site of land.508 English law allows a charging order to be denominated in a foreign currency,509 with the rider that the judgment debt might need amendment if currency fluctuations act to disadvantage the creditor. 497 Bundesgerichtshof IX ZB 23/97 [2001] ECLYB [2062]; Mikropolis-Infomedica v Amstrad [2005] ILP 27 Greek Areios Pagos (judgment made in the presence of both parties). 498 Regulation on Civil Jurisdiction (n 346 above) §34[2]; ex Brussels Convention (n 428 above) §27[2]; Case 228/81 Pendy Plastic v Pluspunkt [1982] ECR 2723 ECJ; Case 166/80 Klomps v Michel [1981] ECR 1593 ECJ; Orams v Apostolides [2006] EWHC 2226, [2007] 1 WLR 241, J[37–66] Jack J obiter. 499 Oberlandesgericht Karlsruhe [1999] RIW 538, [2000] ECLYB 494. 500 Mustang Rent a Car v Holiday Autos [1999] RJ 8864, [2000] ECLYB [492]. 501 Maronier v Larmer [2002] EWCA Civ 774, [2002] 3 All ER 848. 502 Allowing one or the other is clearly wrong: Tavoulareas v Tsavliris (n 484 above). 503 Klomps (n 498 above); C-123/91 Minalmet v Brandeis [1992] I ECR 5661 ECJ; C-305/88 Lancray v Peters und Sickert 1990] I ECR 2725 ECJ. 504 Tsn Kunststoffrecycling v Jurgens [2002] EWCA Civ 11, [2002] 1 All ER (Comm) 282. 505 Maersk Olie & Gas v De Haan & De Boer (n 436 above). 506 Oberlandesgericht Düsseldorf 3W 91/03 [2005] ECLYB [236]. 507 Hoffmann (n 488 above). 508 Also a garnishee order against a bank account: Lugano Convention (n 429 above) §16[5]; Kuwait Oil Tanker Co v Qabazard [2003] UKHL 31, [2004] 1 AC 300; Société Eram Shipping Co v Companie Internationale de Navigation [2003] UKHL 30, [2004] 1 AC 260. If you ever need to garnishee the European Commission see C-1/02SA Antippas v Commission EC [2003] I ECR 2893 ECJ. 509 Carnegie v Giessen [2005] EWCA Civ 191, [2005] CP Rep 24.
Judgment Debts in the Enforcing State
435
Carnegie concerned a judgment debt expressed in US dollars which led to a charging order also expressed in dollars. This was upheld despite a practice direction510 on the principle that the conversion to sterling should be made as close as practicable to the date of payment.511 In general the charging order should follow the judgment as it did in this case.512
5
Simplified enforcement
[9.90] A European Enforcement Order (EEO) has been created to allow the enforcement of an order made in an uncontested small claim,513 the procedure being a simpler alternative to use of the judgments regulation.514 The procedure treats in the same way uncontested judgments, a settlement of court proceedings, and authentic instruments recording an agreed outcome of proceedings.515 A claim is uncontested if it is agreed or never objected to, or if the defendant never appeared to challenge the claim provided that service can be substantiated, and also if it was settled by way of authentic instrument.516 It can be obtained and enforced in the United Kingdom,517 and should be enforced as if it were a judgment handed down in the member state of enforcement.518 The registration or declaration of enforceability needed for a contested judgment is omitted. It is necessary to lodge with the enforcement court copies of the judgment, an EEO issued by the judgment court, and a translation into English.519 Grounds to dispute recognition but the only defences will be procedural.520 [9.91] A small claims procedure is also proposed that will be unified across Europe,521 supposedly simplified, non-paper and lawyer-free, ‘small’ in this 510 Practice Direction on Enforcement 1992 (sterling equivalent, but subject to any order given in a particular case). 511 Miliangos v George Frank (Textiles) (No 1) [1976] AC 433 HL. 512 Charging Orders Act 1979, c 53, s 1. 513 European Enforcement Order for Uncontested Claims Regulation (EC) 805/2004 [2004] OJ L143 15, as from October 21st 2005 (EU-27 except Denmark but not EEA-3). 514 L Flannery ‘Getting Even with Euro-defaulting Debtors’ [2005] NLJ 1896–1897; T Anderson ‘Problems of Harmonising European Procedure’ (2006) 17 European Business Law Review 747–752. 515 The form of certificate required for a judgment is in European Enforcement Order Regulation (n 513 above) Annex I. 516 European Enforcement Order Regulation (n 513 above) §3. 517 Civil Jurisdiction and Judgments (Authentic Instruments and Court Settlements) Order 2001, SI 2001/3928; Civil Procedure Rules (n 430 above) 74.27–74.33; Practice Direction 74B (High Court if over £5K and County Court if less than £600, either way in between); M Walker ‘Unlocking the Crown Jewels’ [2005] 47 LSG 30–31. 518 European Enforcement Order Regulation (n 513 above) §20. 519 European Enforcement Order Regulation (n 513 above) §20. Any discrepancy can be rectified. 520 eg, defective service, or application to withdraw or review the enforcement order. 521 Proposed Regulation on Small Claims Procedure COM (2005) 87 final (EU-27 except Denmark but not EEA-3); G Haibank ‘European Small Claims’ (2005) 13 ERPL 593–601; C Crifo ‘First Steps towards Harmonisation’ (2005) 24 CJQ 200–223; A Jack ‘European Small Claims Procedure’ [2005] NLJ 1135. The Council adopted a Common Position on June 13th 2007 to take effect as from the start of 2009: IP/07/821.
436
Mortgages and Debt
context meaning claims up to €2K. Costs will be reduced, appeals limited, evidence rules relaxed and reliance placed on postal service. Prescriptive elements are slimmed down to the extent that there is not even any mention of a translation, and certainly there will be no exequatur procedure: translated or not it will be possible to obtain virtually automatic registration of a European enforcement order, even satisfaction of the judgment will be no defence, and certainly not public policy. [9.92] There is a newly agreed procedure for a European Order for Payment,522 a means of enforcing a civil claim to a specific debt that is due and uncontested, the main feature being that in a cross-border case no exequatur will be required. The judgment court should proceed without delay, when an application is made to it, to issue a European order for payment. 523 The order must then be served, the procedure differentiating carefully cases where there is proof of receipt of service and cases where that is not proved, and any challenge to the order is resolved by the state of origin,524 the essence being that grounds for challenge are limited and do not include any review of the substance.525 That court, the judgment court or court of origin, should then declare the order enforceable in the absence of a valid challenge,526 after which the order can be translated and transferred to the enforcement state.527
European Order for Payment Procedure Regulation (EC) 1896/2006, [2006] OJ L399 1. Order for Payment Regulation (above n 522) §§7, 12, 19; the form of application is in Annex I. Grounds for refusal will be very limited. 524 Order for Payment Regulation (above n 522) §§13, 16. 525 Order for Payment Regulation (above n 522) §22. 526 Order for Payment Regulation (above n 522) §18; the form of order is in Annex VII. 527 Order for Payment Regulation (above n 522) §21; no security for enforcement may be required. 522 523
CO N TR ACT CO N F LI CTS
10 Contract Conflicts Conflicts and Land Contracts. Property Core. Choice of Site-based Law. Site-based Selection. Non-site Contracts. Choice of Law and Forum. Anti-contractual Claims. Home Court Forum.
CO N F LI CTS A N D LA N D CO N TR ACTS
Conflicts and Land Contracts 1
Regimes for land contracts
[10.01] Contract forms a sub-sector of the conflicts rules1 although it is not concerned with a transfer of title but only with the prior contract to sell. It applies where, for example, a German contracts to sell his holiday home in Italy to a Frenchwoman. Italian law will apply a core of site-based mandatory rules but the remainder of the personal obligation in the periphery outside this core may be non-site since it is open to selection by a conflicts principle or to choice by the parties.2 Forum and law are treated separately, though they should if possible march in step. Rules for forum are derived from the Civil Jurisdiction regime either under the current Regulation on Civil Jurisdiction3 or its domestic implementation4 or the predecessor Conventions.5 Choice and selection of law are made under the Rome Convention6 and its domestic implementation.7 Proposals for ‘Rome I’ to be converted into a Regulation have been stalled by British 1 Dicey & Morris The Conflict of Laws (London, Sweet & Maxwell, 14th edn by L Collins 978-0-421-88360-4) I [11R–276ff] (forum), II [32] (law). 2 This book uses the word ‘selection’ to describe a case where a law or forum is chosen by the legal system and confines ‘choice’ to a case where the parties make the selection; both are allowed in the contract sector. 3 Regulation on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (EC) 44/2001 [2001] OJ L12 1, aka the ‘Brussels I Regulation’, §5. 4 Civil Jurisdiction and Judgments Act 1982 (‘CJJA’), c 27 as amended; CJJA 1982 sch 4 applies as between parts of the UK; G White ‘CJJA Act 1982’ [1983] Conveyancer pt I 180–193, pt II 306–314; see above [4.04]. 5 Brussels Convention [1998] OJ C27 1 (final version) §5; Lugano Convention [1988] OJ L319 9 §5; for Denmark, EFTA states and older EU facts see above [4.06ff]. 6 Rome Convention on the Law Applicable to Contractual Obligations [1980] OJ L266 1 (original), [2005] OJ C334 1 (consolidated); Giuliano Lagarde Report [1980] OJ C282 1; see above [4.09]. 7 Contracts (Applicable Law) Act 1990, c 36; see above [4.09] n 63.
438
Contract Conflicts
objections.8 Continental systems differentiate rigidly between obligations that are agreed and those that are imposed by law, so in order to get a complete picture we will also need to consider forum rules9 and proposals for rules for the selection of law covering non-contractual liability.10
2
What is a contract?
[10.02] Contract has an autonomous meaning in the forum rules11 covering all civil liability arising from a failure to perform an obligation that one person owes to another by virtue of an agreement entered into between them.12 It embraces, to give just two examples, the offer of a prize to a consumer13 and a contract made by an agent under his ostensible authority.14 In the land context it comes into play whenever it is agreed to sell or create an interest in land, though contract does not apply to the actual grant or transfer. Much the same scope applies when the search is for a contract law under the Rome Convention, which is limited to consensually accepted obligations,15 but with some specific exclusions including insurance.16 In both contexts the definition is autonomous and by no means corresponds to English preconceptions. One must cast from one’s mind the common law peculiarity of identifying a contract from the presence of consideration (a price) passing in each direction, since quite to the reverse a gift would be seen as a contract and intended to be within the Rome Convention.17 Contracts are based on agreement and so there is a large field of obligation which is not consensual but based (in common law terms) on tort or restitution (or quasi-contract for older readers) and in civilian terms in delict or unjust enrichment. English contract law would tend to bring together all aspects of obligation arising from attempts to contract whereas civilian and European logic keep quite separate contractual and anti-contractual claims.18 Rome I Green Paper, COM (2002) 654 final; Rome I Proposal 2005/0261 (COD). Regulation on Civil Jurisdiction (n 3 above) §5[1](b); CJJA 1982 sch 4 (n 4 above) para 3(a); Brussels Convention (n 5 above) §5; Lugano Convention (n 5 above) §5; see below [10.11], [10.22]. 10 Rome II Proposal COM/2003/0427 final; amended version COM (2006) 83 final; T Petch ‘The Rome II Regulation’ (2006) 21 Journal of International Banking Law & Regulation 449–455; S Turner ‘Rome II — All Change?’[2006] NLJ 1666–12667. Rome II will face British opposition. Current domestic law is the Private International Law (Miscellaneous Provisions) Act 1995, c 42, ss 9–15, from May 1996; Re T & N (No 2) [2005] EWHC 2990 (Ch), [2006] 1 WLR 1792; see above [4.30] n 160, below [10.46]. 11 Case 34/82 Peters v Zuid Nederelandse [1983] ECR 987 ECJ; C-334/00 Fonderie Officine Meccaniche Tacconi v Heinrich Wagner Sinto Maschinenfabrik [2002] I ECR 7357 ECJ. 12 C-28/91 Handte Case [1992] I ECR 3967 ECJ, AG[16] Jacobs. 13 C-27/02 Engler v Janus Versand [2005] I ECR 481 ECJ. 14 C-265/02 Frahuil v Assitalia [2004] I ECR 1543 ECJ. 15 Rome I Green Paper (n 8 above) [1.3]; Giuliano Lagarde Report (n 6 above) Introduction, [3]; Rome II Proposal (n 10 above). 16 Rome Convention (n 6 above) §1 esp §1[3–4]; Rome I Green Paper (n 8 above) [3.2.2]; Giuliano Lagarde Report (n 6 above) §1, [6–7], [10–11]. This lies beyond the scope of the present book. 17 Dicey & Morris (n 1 above) [32–023]; for gifts of family property see below [11.16]. 18 Anti-contractual claims are considered below [10.43ff]. 8 9
Property Core
3
439
What is a land contract?
[10.03] Contracts which might loosely be described as land contracts are as diverse as the colours of light and so it is by no means easy to lay down conflicts principles of universal application. At one extreme is a commercial purchase of commercial property in a foreign state — Tesco buying a supermarket chain in Germany — when contract should be site-based. Things change subtly when the buyer is a consumer so that the pattern of the contract is B2C19 and again when two private individuals are contracting, C2C. Further across the spectrum are sales of holiday homes where it may make more sense to depart from the site-based norm; if a German sells a Tuscan villa to a Frenchwoman Italian law looks best, but if the buyer and seller are both German they may wish to opt for the familiarity of German law. In order for this to happen, the whole deal has to be dismembered because the two Germans cannot contract out of Italian property law which forms a proprietary and site-based core — but they can choose their own law to regulate the obligational aspects of their arrangement. So we need to distinguish this core from a looser periphery for which a choice or selection might be made. Contract forum rules do not apply to transfers of title nor to tenancies.20 Further across the spectrum are contracts only peripherally related to land such as the contract for construction of a new house, where one might debate whether the predominant feature is that the work is being done to land or whether it is just like any other contract for works, indeed any other contract. Site-based rules appear less appropriate when the work is to repair an older property. At the infra-red end are licences in hotels and other non-proprietary arrangements. This chapter attempts to sort these hues into their order in the rainbow.
PR O PERTY CO R E
Property Core 1
Core
[10.04] No choice is available and no selection of rule may be made for that core of obligations in a land contract which are property-related and site-based. This is basic and obvious. English couples hunting a Spanish bolt-hole cannot claim to carry English land law around in their pockets. Germans may have colonised Ischia in the Bay of Naples, but even if they bought up every square metre it would not make the island Germany territory and would not subject it to the Bürgerliches Gesetzbuch (the German Civil Code). This core is set in stone at the site. 19 20
See above [5.05]. See above [4.37ff].
440
Contract Conflicts
In terms of forum the Regulation on Civil Jurisdiction gives the courts of the site exclusive purview of any action to assert a right in rem in immovable property, that is to assert property in land.21 Thus when the parties wish to know whether title has been transferred successfully from seller to a purchaser the issue is real rather than contractual, and solely for the courts of the site.22 No European rules select land law, but it was thought to be so obvious that such matters are not issues of contract law that the Rome Convention relies on an implicit exclusion and there is no explicit provision.23 So it is national conflicts rules that operate to leave property to the site. Site-based selection has two problems explored in detail by Carruthers. First there is the distinction between contract and conveyance, since the transfer of land should be site-based whereas greater scope for personal obligation is possible in relation to a contract. The distinction is largely a matter for the site. This is clouded when the site is common law by the proprietary effect allowed to contracts, an effect created by the dubious prospectivity allowed to contracts, and is also complex with many obligations less clearly categorised such as repairing obligations.24 Secondly, one must consider the conclusion reached by Carruthers that the site-based rule should be relaxed for the transfer of land. Having pointed out all the conventional benefits of the site rule — clarity of title for purchasers, respect for territoriality, simplicity, certainty and uniformity, she makes the important point that rigid adherence to the site rule may not meet the legitimate expectations of the parties. This is clearly so for movable property, where the site rule can produce very arbitrary results; a transfer of an English aircraft might be English even when the plane happens to have landed at an airport in Moscow, but the case is more difficult to accept for land. Yes, when one German transfers his Italian holiday home to another German, they may want to follow their familiar German property law, but they cannot have a legitimate expectation in such a case that they can override the local law of the land. When in Pisa, they will expect to do as the Tuscans do. This author does not accept Carruthers’ case for a more sensitive and malleable rule for land, to replace a site-based rule with a rebuttable presumption in favour of the site, a rule based on closest connection which could be diverted away from the site by considering the parties, their relationship, their course of dealing and the preceding contractual rights.25 If one were to allow a German-form transfer of Italian property it would be necessary to differentiate a core of property which could not be displaced which would include the rights allowed to exist, how landowners were required to interact with See above [4.16ff]; for tenancies see above [4.32ff]. This is important in those states in which there is only one stage, not contract before conveyance but contract = conveyance; the word contract is often used loosely as an English translation of a transfer of the second type, which is not a contractual conflict. 23 Giuliano Lagarde Report (n 6 above) [2]; Dicey & Morris (n 1 above) II [33–226]. 24 JM Carruthers Transfer of Property in the Conflict of Laws (Oxford, OUP, 2005, 978-0-19-927147-4) [4.01ff]; JD Falconbridge Essays on the Conflict of Laws (Toronto, Canada Law Books, 2nd edn, 1954) 118. 25 Carruthers Transfer of Property (n 24 above) [9.47]; Draft Convention §§6, 7A. 21 22
Property Core
441
neighbours and formalities; this last is essential since registrable documents have to be in a registrable form. What is left, that could theoretically be split away, is small in volume, and there seems little to be gained but much complexity to be suffered from fiddling with the site rule. As Carruthers demonstrates the site rule is much less suitable for movables, especially movables that are moved.
2
Mandatory and formality rules
[10.05] A non-site choice or a non-site selection of law is restricted to transactional aspects such as the formation, capacity to contract, completion, consequences of non-disclosure and so forth.26 Law applicable to personal aspects of the contract will be derived from the governing law, notably contract formation, capacity, completion, consequences of non-disclosure and so forth. None of this impinges on property law. The site will determine what ownership is recognised, whether there is a role for equity and so trusts are allowed, whether contracts are proprietary, what forms of lease are allowed, what forms may security take, what are the consequences of a default in payment of what is due under a mortgage and how relations with neighbours are regulated. It will also select public law matters such as security of tenure, planning regimes and building regulations. Moreover the forms of transfer, priority rules and registration systems are all native. [10.06] Formalities are rules which determine the formal validity of a transaction in the sense of what external manifestation is required of the wish to be legally bound, absent which a contract is not fully effective.27 Formalities for a contract affecting land, or a right in land or a right to use land, are imported from the site of the land28 and cannot be overlooked by a non-site forum when they are ‘mandatory’ requirements in the sense that the site-based law imposes them irrespective of the country in which the contract is concluded and irrespective of the governing law.29 There can be little doubt that the requirements for a contract for the sale of land must be made in writing, incorporating all agreed terms, signed and, usually, exchanged, wherever in the world the contract is made.30 Native English speakers will obviously navigate the terse prose of the contract provision easily enough, but it may prove more of a challenge for a French speaker or a Macedonian. Rules which are mandatory in this sense have
Dicey & Morris (n 1 above) II [32R–131], [33–237ff]. Giuliano Lagarde Report (n 6 above) §9, [2]; Falconbridge (n 24 above) 94, 98. 28 Rome Convention (n 6 above) §9[6]; Giuliano Lagarde Report (n 6 above) §9, [6]; Rome I Proposal (n 8 above) §10[4]; PM North & JJ Fawcett Cheshire & North’s Private International Law (London, Butterworths, 1999, 0-406-90596-7) 591ff. Current rules do not work well for e-creation and will be widened: Rome I Proposal (n 8 above) §10; Rome I Green Paper (n 8 above) [3.2.12]. 29 Rome Convention (n 6 above) §9[6]; Giuliano Lagarde Report (n 6 above) §9, [6]; otherwise see below [10.21]. 30 Law of Property (Miscellaneous Provisions) Act 1989, c 34, s 2. 26 27
442
Contract Conflicts
been said to be rather rare,31 but most legal systems will prescribe the form of transfers of land and registration formalities. A Czech investor in a London office block cannot override the transfer form required by HM Land Registry simply by choosing to make a Czech transfer. A law chosen or selected may be altered by subsequent agreement, but obviously an alteration of law cannot affect the formal validity of the contract, nor the rights of third parties.32 [10.07] Mandatory rules come into play when a forum away from the site of the land is enforcing a contract, so that land to them is foreign, and, let us assume, the contract law is foreign and that of a third state. The forum must apply its own mandatory rules so as to override the law otherwise applicable to the contract33 but of more immediate importance they may give effect to mandatory rules of another country, that is the law of the site, with which the contract has a close connection.34 The word ‘may’ here does not imply a wide discretion to overlook inconvenient rules since it caters for and imposes a system of priority where incompatible mandatory rules from different states are sifted, forum first.35 Mandatory rules may be legislative or case-based, but either way are rules deemed to be so crucial to the protection of the political, social or economic order in a state that compliance is required by all persons present on the national territory and all legal relationships are affected within that state.36 This loose test can be made more or less workable by considering the nature and purpose of the rules and consequences either way.37 Solmé drew a distinction between domestic mandatory rules — mandatory when English law governs the contract — and international mandatory rules — whenever English courts are adjudicating, such as the rules against unfair contract terms38 — the latter obviously being more potent. Precedence is also accorded to Community law39 which cannot be avoided by choice of a law from outside the EU.40
Giuliano Lagarde Report (n 6 above) §9, [4]; Dicey & Morris (n 1 above) II [32R–155], [33–240]. Rome Convention (n 6 above) §3[2]. 33 Ordre public is a converse exception by which the courts of the forum can refuse to apply a rule from the law selected by the Convention. 34 Rome Convention (n 6 above) §7[2]; Rome I Proposal (n 8 above) §8; Dicey & Morris (n 1 above) [1–053ff]. 35 C Tillman ‘Relationship of Party Autonomy and Mandatory Rules under Rome’ [2002] JBL 45–77, 71–76. 36 C-369/96 etc Arblade [1999] I ECR 8453 ECJ; Rome I Green Paper (n 8 above) [3.2.8]. 37 Rome Convention (n 6 above) §7[1]; Giuliano Lagarde Report (n 6 above) §7, [1–4]. The opt-out (see immediately below n 41) will be removed by Rome I Proposal (n 8 above) §7[1]; S Dutson ‘A Misguided Proposal’ (2006) 122 LQR 374–379. 38 P Nygh Autonomy in International Contracts (Oxford, Clarendon Press, 1999, 978-0-19-826270-1); J Harris ‘Contractual Freedom in the Conflict of Laws’ (2000) 20 OJLS 247–269; Tillman (n 35 above). 39 Rome Convention (n 6 above) §20; also by §21 other international conventions; Rome I Proposal (n 8 above) §22. 40 C-381/98 Ingmar GB v Eaton Leonard Technologies [2000] I ECR 9305 ECJ; Rome I Green Paper (n 8 above) [3.2.8]. 31 32
Choice of Site-based Law
443
The United Kingdom has implemented the Rome Convention without this provision,41 so if an English court is enforcing a German law contract to sell land in France it seems to suggest that it would not have to give effect to French property law. How peculiar. No doubt English parties would be less keen if the roles were reversed and it was English property law being overlooked in favour of a foreign buyer.
3
Family law
[10.08] Contracts are subject to laws and forums affecting family issues, matrimonial property, succession and trusts as considered in the next chapter42; all different sectors, and sectors where the rules may or often may not be site-based.
4
Contracts to sell land in several states
[10.09] Suppose that one is fortunate enough to have two holiday homes in different European countries to sell. Since property law is site-based and compartmentalised on national lines, a contract to sell land should be split before determining which law to apply; parts should be severed where a single contract is used to sell land in several countries. That contract may be split, that is subjected to a dismemberment, or dépeçage if you will pardon my French. This possibility is recognised by the Rome Convention,43 and will be necessary in all cross-border contracts.44
CHO I CE O F SI TE-B A SED LAW
Choice of Site-based Law [10.10] Fear of dépeçage is only natural for parties buying land, and the best reaction is for the parties to a contract to make a choice of site-based law and forum,45 and indeed it is very desirable that they should find a consensual base,46 41 Rome Convention (n 6 above) §7[1]; Contracts (Applicable Law) Act 1990 (n 7 above) s 2(2); Dicey & Morris (n 1 above) [32–143]. The UK will not participate in the Rome I proposal (n 8 above) as currently formulated. 42 Rome Convention (n 6 above) §1[2](b); Dicey & Morris (n 1 above) [33–227]; R Plender & M Wilderspin European Contracts Convention (London, Sweet & Maxwell, 2nd edn, 2001, 042173860X) 62, 78; see below [11]. 43 Rome Convention (n 6 above) §4[1]; C-106/95 Mainschiffahrts-Genossenschaft v Granières Rhénanes [1997] I ECR 911 ECJ. 44 Giuliano Lagarde Report (n 6 above) §4, [8]; Dicey & Morris (n 1 above) II [33–047ff], [33–230], [33–236]. 45 Because they may choose a non-site law, this is discussed below, see [10.39]. 46 Dicey & Morris (n 1 above) I [12R-068] (forum), II [32-062ff] (law); J Hill ‘Is There a Third Way?’ (2001) 54 CLP 439–476, 457ff; S Lee ‘Title to Foreign Real Property in Transnational Money
444
Contract Conflicts
taking care to make two separate choices and the same choice in each case. Knowing that the core of the contract will be governed by site-based law,47 and knowing that any split may lead to a foreign court applying law that is foreign to them, the parties may well opt to extend that to the whole of their contractual obligation. For them to allow matters to rest on selection principles is unwise because, although the law will probably be site-based, the forum could well be elsewhere in Europe. There will be a forum based on a connecting factor, which is probably what the parties would expect without thinking about matters,48 but as an alternative there will be a home court forum, based on the domicile of the defendant with a priority rule of first served, first heard.49 This may well lead to a foreign court ruling on foreign law, for example the English Court of Appeal deciding a case about a Dutch breach of a Dutch copyright applying the law of the Netherlands,50 a ludicrous outcome51 which would be even worse had it been foreign land law. This nonsense is much better avoided by making express choices of forum and law, and marrying obligational aspects to the site-based core. The common law folly of keeping the two together has been discarded in favour of the European search for simplicity and certainty which often separates law and forum and indeed encourages a diaspora. How then to overcome the fear of dépeçage? The answer is simply to express a choice of law and forum and, crucially, to make it exclusive. This avoids artificial dissection of a contract. Of course a choice could also be used deliberately to split a contract and indeed choice is discussed in more detail in the non-site context.52
SI TE-B A SED SELECTI O N
Site-based Selection 1
Site-based forum
[10.11] Suppose a German agrees to sell his holiday home in France to a couple from London and a dispute arises because one party or the other declines to complete; France cannot claim the case simply because the land is in France, Claims’ (1995) 32 Columbia Journal of Transnational Law 607–672, 633ff; Harris ‘Contractual Freedom’ (n 38 above). Giuliano Lagarde Report (n 6 above) Introduction [3]. AT von Mehren & DT Trautmann ‘Jurisdiction to Adjudicate: A Suggested Analysis’ (1966) 79 Harvard Law Review 1121–1179, 1144; Hill ‘Third Way?’ (n 46 above) 457ff. 49 The option is exercised by the claimant by instituting proceedings considering his own convenience: C-412/98 Group Josi Reinsurance Co v Universal General Insurance Co [2000] I ECR 5925 ECJ; Mahme Trust Reg v Lloyds TSB Bank [2004] EWHC 1931 (Ch), [2004] 2 Lloyd’s Rep 637 Morritt VC (Lugano Convention (n 5 above) §5); see below [10.57]. 50 Pearce v Ove Arup [2000] Ch 403 CA, 444D–H Roch LJ. [1997] Ch 293, 300D Lloyd J (Dutch law even clearer had the property been land). 51 P Rogerson ‘Equity, Rights in Rem, and the Brussels Convention’ [1994] CLJ 462–464, 463, 464. 52 See below [10.34ff]. 47 48
Site-based Selection
445
however odd that seems. A dispute characterised as contractual is non-exclusive and subject to selection of the forum and, separately, the applicable law. Forum is selected for contractual disputes by the Regulation on Civil Jurisdiction and ought to be site-based.53 However, there is no special provision allocating contractual forum when it is land that is being sold. One has to try to make some sense of the three subparagraphs of article 5[1]54 but it would be difficult to achieve deliberately so much obscurity in such a short compass as the European legislator has achieved unconsciously. The essential components are easy enough: 앫 forum follows the place of the obligation in question, 앫 in a contract for the sale of goods and provision of services the place is where the goods should be delivered,55 the parties can agree another place,56 and 앫 apart from goods and services, one falls back on the basic test: the place of the 앫 performance of the obligation in question. How could the legislator possibly have overlooked land? One might speculate that an action to enforce a contract to sell land was supposed to be treated as a proceeding having as its object rights in rem in land and hence exclusive, but if so that avenue has been blocked off by European Court of Justice decision, and given that the matter falls back into the wholly inadequate provisions of the Civil Jurisdiction regime.57 [10.12] If the analogy of goods were taken it seems that the crucial connection is with the place of delivery of the land, the site. However, goods apart, it seems that one needs to consider each contractual obligation separately; because forum is based on the place of performance of the ‘obligation in question’ it matters which party is suing when and there is no single answer for a contract as a whole.58 It matters whether the breach alleged is failure to deliver vacant
53 WA Stoffel ‘Place of Performance’ (2002) 4 European Journal of Law Reform 185–198; Hill ‘Third Way?’ (n 46 above) 443; P Stone ‘Contracts and Torts in Private International Law under EC Legislation’ (2002) 11 Information & Communications Technology Law 121–139; K Takahashi ‘Jurisdiction in Matters Relating to Contract’ (2002) 27 EL Rev 530–550. 54 Regulation on Civil Jurisdiction (n 3 above) §5; these are new and not adopted for internal allocation within the UK: Dicey & Morris (n 1 above) I [11-278]. 55 Regulation on Civil Jurisdiction (n 3 above) §5[1](b); BJ Rodger ‘The Communitarisation of International Private Law’ (2001) Juridical Review 69–80, 70–71; there are innumerable cases; Luxembourg has a special protection which expires in 2008. 56 For services, this must not be totally artificial: Case 56/97 Zelger v Salinitri [1980] ECR 89 ECJ, J[5]; and many later cases. 57 Under what is now Regulation on Civil Jurisdiction (n 3 above) §22[1]; since the test is not the nature of the action but rather the nature of the thing contracted for it seems odd to treat a contract for land as personal; see above [4.16]. 58 Case 266/85 Shenavai v Kreisher [1987] ECR 239 ECJ; Case 14/76 De Bloos v Bouyer [1976] ECR 1497 ECJ; Dicey & Morris (n 1 above) I [11-289ff], [11-296ff]; there is a different rule for employment contracts. Selection rules fail if there is no main obligation: C-256/00 Besix v Wasserneienguurbau Alfred Kretzschmar [2002] 1 ECR 1699 ECJ.
446
Contract Conflicts
possession of land (the site), or failure to complete an acte de vente59 on completion (the place of completion) or failure to make payment (the place where the land was to be paid for) and so on. It is not really workable to split a single contract into a multiplicity of possible cases, and the approach taken to the selection of contract law is much more sensible. Performance of a sale of land is obviously delivery of the land60 — but does this ground it at the site of the land or at the place of completion? The counter-obligation is to pay for the land.61 One might want to distinguish a sale of a tenanted property where the land is essentially an investment in a rental stream and the sale of a house with vacant possession with the intention that it should become the buyer’s principal home and a sale of a maison secondaire might be different again. An obligation not to contact a person is performed at the (non-) contactee’s place of residence, which may give some guidance as to the rule to be applied to a negative injunction to enforce a restriction.62 So the most that can be said is that in all probability the Regulation on Civil Jurisdiction will select as the default forum the courts local to the site of the land which is being sold under the contract. It could, and should, say so more directly. Site-based forum could be displaced by choosing a place of performance away from the land, by rebuttal of the presumption raised by the site of delivery of the land, or by stating an express choice of another forum.63
2
Site-based contract law
[10.13] Contract law is selected under the Rome Convention, in the absence of a choice, by seeking out the country with which a contract is most closely connected.64 Land is subject to a special selection rule for applicable law, so notably absent for forum which governs, more precisely, any contract whose subject matter is a right in immovable property or a right to use immovable property, including a contract to grant a lease or a right of way or a mortgage, and presumably also a contract to sell an existing estate or ownership right in land. Article 4[3] sets out a presumption that: the contract is most closely connected with the country where the immovable property is situated.65 H Dyson French Property and Inheritance Law (Oxford, OUP, 2003, 0-19-925475-3) 59. A choice of place of performance is valid: Zelger (n 56 above); see below [10.22] n 113. 61 Exceptionally the payment of money may be a relevant performance, perhaps in a guarantee, but if so it is only decisive if there is a duty to pay at that place and not merely a discretionary arrangement: Montagu Evans v Young [2000] SLT 683 Ct of Session OH; Kammergericht Berlin 2 U 1947/99 [2001] ECLYB [1071] (payment for building work). 62 Kenburn Waste Management v Bergmann [2002] EWCA Civ 98, [2002] Times February 4th. 63 See below [10.22ff]. 64 Rome Convention (n 6 above) §4[1]; see above [4.09ff]. 65 Rome Convention (n 6 above) §4[3]; PM Hay ‘The Situs Rule’ 109–132 in PM Hay & HE Höflich Essays in Honor of JE Cribbett (Illinois, Illinois UP, 1988, 0-252-01593-2) 109. This does not match well the forum rules: Plender (n 11 above) [6.22]; see above [4.37ff]. It will not apply to construction, etc, contracts: Dicey & Morris (n 1 above) [33–228ff]. 59 60
Site-based Selection
447
Land is central to the social and economic organisation of a country and states want control over the land and buildings on their territory,66 so contract law for a land contract is presumptively site-based. This presumption is strong but is displaced by a clear preponderance of factors pointing in a non-site direction.67 [10.14] If the Rome I Proposal comes to fruition it will solidify the site rule as a starting point for land contracts with the addition of a necessary and desirable formulation of the site rule, integrated to fit with the post-San Sebastian formulation of the forum rules.68 Law to be taken for a contract for a right in rem or for the use of an immovable will be the law of the country where the land is located. However, the grant of a short-term lease giving the right to use immovable property for up to six months will be governed by the law of the owner’s habitual residence if the tenant is a natural person with his habitual residence in the same state.69
3
Consumer law
[10.15] The site rule will apply to determine the law70 for a consumer contract which consists of the provision of a service completely in a country different from that of the consumer’s habitual residence71; so the site rule applies when an English consumer arranges for services to his holiday home overseas or for construction of a new house; contrast a package of travel which starts in the consumer’s home state but includes accommodation overseas when the consumer can insist upon his home law being applied.72 The Rome I Proposal will preserve these examples and add on a site basis for the law to apply to a contract for a right in rem a right to use immovable property (other than timeshare).73
4
Leases forum
[10.16] Some disputes about ownership or the enforcement of a lease must, as we have seen, be brought in the courts where land is sited and using the local law. Rome I Green Paper (n 8 above) [3.2.6.1]. See below [10.27]. 68 Existing limitations on the scope of the selection of law rules will be repeated and amplified: Rome I Proposal (n 8 above) §1[2]. 69 A clear definition of habitual residence will be provided, especially in relation to legal persons: Rome I Proposal (n 8 above) §18. It is proposed in relation to property so that characterisation by performance is only disregarded if the characteristic performance cannot be determined, a proposal criticised by S Dutson ‘A Misguided Proposal’ (2006) 122 LQR 374–379. 70 Forum will generally be the consumer’s home court; see below [10.53]. 71 Rome Convention (n 6 above) §5[4]. 72 Rome Convention (n 6 above) §5[4–5]; Giuliano Lagarde Report (n 6 above) §5, [5]; Dicey & Morris (n 1 above) II [33-225]. 73 Rome I Proposal (n 8 above) §§5[1], 6[2]. 66 67
448
Contract Conflicts
Arguments about security of title or rent arrears in a home in France rented for a year must be litigated in France. In this context the exclusive forum of the site extends to both real and personal aspects, including therefore the existence, duration, repossession, repair, rent and charges for services.74 Holiday lettings are not seen as matters of contract but are either site-based or reserved for the home court of the holiday-maker, the details here varying between the Regulation on Civil Jurisdiction and the predecessor Conventions.75 Some actions may be seen as personal and contractual such as those arising from franchise agreements, licences and hotel accommodation and possibly non-proprietary timeshares.76 Current selection of law principles will generally select site-based law (even if the tenant is a consumer, given that the service is provided at the site) but this may seem inappropriate for very short-term holiday lets which are really contractual in character, and the Rome rules need amendment to mesh better with the forum selection rules of the Brussels I regime and to allow a choice.77
N O N -SI TE CO N TR ACTS
Non-site Contracts 1
Doing the splits
[10.17] Suppose that a house in state A (the site) is being sold by a seller from state B to a buyer from state C (the home state) but their contract remains uncompleted and their dispute is being litigated in state D (the forum state)78 using the law chosen or selected for the contract of state E. Some of the states A to E will usually be coincident in a particular situation, but one might encounter deformed and unnatural monsters in which forum, law and land are all three dispersed. The site rule is fully observed if both forum and law are the same as the location of the land, and necessarily so. A conflicts rule will be non-site if a dispute is fought out in a forum foreign to the land, or if the law applicable to the personal action is foreign to the site of the land. Many issues are allocated according to contingent facts, such as the residence of a defendant, and in such cases it is assumed, because that is possible, that non-site facts will occur. For example, if the land is in France and the ground of jurisdiction is the home court of the defendant, the favourable possibility that the defendant might be French is ignored because of the inconvenient possibility that she might be Latvian or Greek. Non-site assumptions are made. It will almost always be a disaster if the
74 75 76 77 78
See above [4.37ff] esp [4.38]. See above [4.40ff]. Dicey & Morris (n 1 above) [33-231ff]; see above [4.37ff], ][4.46–4.47]. See above [4.45], [10.13] n 65. Procedural aspects are left to the forum.
Non-site Contracts
449
forum is divorced from the applicable law because courts end up applying foreign law which they do not understand. [10.18] Non-site forum for a contractual action may arise because of (1) an express choice of law, (2) an election by the claimant to make use of the home court of the defendant or (3) the existence of a closer connection to a non-site forum. In terms of applicable law we need to do the splits because formalities and the property core are necessarily site-based so a non-site land contract is one where that core is separated from the obligational aspect. It is possible to use a non-site law as a result of (1) a non-site choice by the parties,79 or (2) a selection on the basis of closest connection80 negating the site-based presumption.81 Non-site principles may also apply to holiday lets and consumer contracts.82 The Rome Convention seeks to apply a unified contract law to any given contract. For simplicity’s sake we confine ourselves to a case where there is a two-way split between a site-based property core83 and a non-site personal selection. The contract must be split or dismembered — that is, subjected to a dépeçage — a traditional possibility which survives the discouragement of the Rome I regime.84
2
Aspects capable of selection
[10.19] Forum can be chosen at will, but the choice of law is more restricted and applies only to purely contractual aspects of a contract. First there is material validity, meaning its existence, its validity and the validity of individual terms.85 A party may, however, rely upon the law of his habitual residence to establish lack of consent, in circumstances in which it would not be reasonable to use the selected law to determine the effect of his conduct.86 Secondly, the Rome choice or selection governs87:
See above [4.40], below [10.39]. Rome Convention (n 6 above) §4[1]; Anon ‘Choice of Law in Contractual Claims’ (2001) 72 British Yearbook of International Law 465–470. 81 Rome Convention (n 6 above) §4[3], [5]; Rome I Green Paper (n 8 above) [1.5]. 82 See above [4.41], below [10.30]. 83 See above [10.04]. 84 See above [10.09] n 44. 85 Rome Convention (n 6 above) §8[1]. A Briggs Conflict of Laws (Oxford, Clarendon Press, 2002, 0-19-876333-6) 208 says that ‘only on issues of formality or personal capacity is there any real prospect of applying a law other than the lex situs.’ 86 Rome Convention (n 6 above) §8[2]. This includes a failure to act in relation to rules about the effect of silence in contractual formation: Giuliano Lagarde Report (n 6 above) §8; Mørk v Ejendomsmaalglerfimach Esner Ved Torben Eisner [2000] UfT 631, [2000] ECLYB [1204] (effect of illegality); Rome I Proposal (n 8 above) §9. 87 Rome Convention (n 6 above) §10[1–2]; Giuliano Lagarde Report (n 6 above) §10, [1–2]; §10 is subject to a UK reservation: Contracts (Applicable Law) Act 1990 (n 7 above) s 2(2); Rome I Proposal (n 8 above) §11. 79 80
450 앫 앫 앫 앫 앫 앫
Contract Conflicts
interpretation, performance (considering also the law of the state where it takes place), consequences of breach and assessment of damages, extinction of obligations, prescription and limitation of actions, consequences of nullity, and presumptions of law and the burden of proof.88
Capacity to contract will be determined by each country applying its own system of private international law. If both parties to a concluded contract are in the same country, a natural person with capacity there can only plead an incapacity under another law if the other party to the contract was aware (or ought to have been aware) of this incapacity at the time of the conclusion of the contract.89 Agency rules will be spelt out more fully in future.90 [10.20] Rules for contractual assignment should be noted. Mutual obligations as between an assignor and assignee are governed by the law chosen or selected for the assignment91 whereas the law governing the thing assigned92 governs assignability, the relationship between the assignee and the debtor, and the possibility of invoking the assignment against the debtor and any discharge.93 These must be pretty similar to the analogous property law principles applying to land, allowing a choice or selection of contract law to govern the seller-buyer relationship but imposing the law of the site on the relationship of the seller to holders of adverse interests and neighbours and the same for the buyer’s relationship with those parties. Separate rules apply to contractual subrogation94 — which may in future distinguish voluntary and statutory subrogation95 — and contribution,96 the interrelationship of which will be considered as part of the reform process, along with the need for a rule about setting off counter-claims.97 The proposal will vary again.98
88 Rome Convention (n 6 above) §14[1]; Giuliano Lagarde Report (n 6 above) §14. Mode of proof considers also the law of the forum (§14[2]) and evidence and procedure is left to the forum. 89 Rome Convention (n 6 above) §11; Giuliano Lagarde Report (n 6 above) §11; Rome I Proposal (n 8 above) §12. 90 Rome I Proposal (n 8 above) R[12], §7. 91 Rome Convention (n 6 above) §12[1]; Giuliano Lagarde Report (n 6 above) §12. 92 Much law, happily beyond the scope of this work, exists to identify the site of debt: Dicey & Morris (n 1 above) I [2-028ff], II [22-026ff]. 93 Rome Convention (n 6 above) §12[2]; Raiffeisen Zentralbank Osterreich v Five Star General Trading [2001] EWCA Civ 68, [2001] QB 825; Rogerson (n 51 above). 94 Rome Convention (n 6 above) §13[1]; Giuliano Lagarde Report (n 6 above) §13. 95 Rome I Proposal (n 8 above) §§13–16. 96 Rome Convention (n 6 above) §13[2]. 97 Rome I Green Paper (n 8 above) [3.2.13–3.2.15]. 98 R Verhagen ‘Assignment in the Rome I Proposal’ (2006) LMCLQ 270–277.
Non-site Contracts
3
451
Mandatory rules of the forum
[10.21] Law applied by the forum99 may also be relevant, first for procedural matters and, more importantly, for mandatory rules which must be applied so as to override the law otherwise applicable to the contract. Rules that are mandatory in this sense may be legislative or case-based and are those rules deemed to be so crucial for the protection of the political, social or economic order in a state that compliance is required by all persons present on the national territory and all legal relationships affected within it, consideration being given to the nature and purpose of the particular rule and the consequences either way.100 Precedence is also accorded to Community law101 which cannot be avoided by choice of a law from outside the EU.102 Ordre public is a converse exception by which the courts of the forum can refuse to apply a rule from the selected contract law because of manifest incompatibility with the public policy of the forum.103 Such cases should be rare,104 falling within a ‘precise and restrictively worded’ reservation105 by displaying variance from the European legal order to an unacceptable extent. It can be applied to ensure that a civil litigant’s right to due process has been respected: it would not be right, as Krombach106 shows, to enforce a compensation order following a conviction at a trial at which the defendant was not allowed to put his defence.107
4
Non-site contract forum
[10.22] Forum for contractual actions may be diverted away from the site on account of a closer connection to a non-site forum, the point which falls for consideration here.108 One of the forums available to resolve a contractual dispute is provided by the place agreed for performance of the particular contractual obligation,109 a connection of sorts though loose.110 As far as the Contrast mandatory rules of the site, see above [10.07]. Rome Convention (n 6 above) §7[1]; Giuliano Lagarde Report (n 6 above) §7, [1–4]; Arblade (n 36 above); Rome I Green Paper (n 8 above) [3.2.8]; Rome I Proposal (n 8 above) R[13], §8. However, this particular article (mandatory rules) is not adopted by the UK: reservation under Rome Convention (n 6 above) §22; Contracts (Applicable Law) Act 1990 (n 7 above) s 2(2); see above [10.07] n 41. 101 Rome Convention (n 6 above) §20; also by §21 other international conventions. 102 Ingmar GB v Eaton Leonard (n 40 above); Rome I Green Paper (n 8 above) [3.2.8]. 103 Rome Convention (n 6 above) §16; A Staudinger ‘The Public Policy Proviso’ (2004) 5 European Legal Forum 273–281; HP Meidanis ‘Ordre Public in the Private International Law of the EU’ [2005] 30 EL Rev 95–110. 104 C-7/98 Bamberski v Krombach (No 1) [2001] I ECR 1935 ECJ, J[37]; see also (No 2) [2002] ILP 4. 105 Giuliano Lagarde Report (n 6 above) §16. 106 Krombach (Nos 1 & 2) (n 105 above). 107 Krombach (No 1) (n 105 above) J[45]. 108 See also the general limitation of scope, below [11.02] n 17. 109 Regulation on Civil Jurisdiction (n 3 above) §5; ex Brussels Convention (n 5 above) §5; Lugano Convention (n 5 above) §5; Dicey & Morris (n 1 above) I [11-289ff]. 110 WA Stoffel ‘Place of Performance’ (2002) 4 EJLR 185–198; Hill ‘Third Way?’ (n 46 above) 443. 99
100
452
Contract Conflicts
buyer is concerned this will usually be site-based because that is where the land is delivered, and contracts for services related to land will also be grounded at the site. This connection could, conceivably, lead to a non-site connection being established because of an arrangement to deliver land away from its site,111 or because there is no single place of performance,112 or where the parties agree a place away from the site of the land where, perhaps, the deal is notarised.113 More importantly, the seller’s action for the price will be located where payment is due, which may be problematical, and which may be difficult to determine from the contract.
5
Forum in personal actions
[10.23] Severability and the possibility of a non-site forum for a contract to sell foreign land is clear in both European and English law which are on harmony on this, limited, point. Personal, non-real, character attaches to an action seeking damages for failure to sell land, or for failure to complete a purchase, as perhaps is any action where the end in sight is an award of damages.114 A contractual dispute between two Dutch residents about the sale of land in France was properly heard by a court in Amsterdam,115 but if the claimant won damages in Holland he would still lack possession until be travelled to France to litigate.116 This same possibility exists in EEA-3 states such as Norway.117 An autonomous interpretation ensures uniform treatment of all variant systems. Perhaps even an action to enforce an obligation to restore a building is personal, as a French court has held,118 but this seems difficult to accept. [10.24] English (and other common law) courts were barred from ruling on the possession or ownership of land elsewhere but, at least from the end of the seventeenth century onwards, personal actions to enforce foreign contracts were allowed, any ruling on title being incidental to the contract.119 Service overseas became available from the late nineteenth century.120 Lord Coke observed that a contract made beyond the seas at Bordeaux in France could be sued in England See above [10.12]. Besix (n 58 above). 113 Provided this is not totally artificial: Zelger (n 56 above) J[5]; C-440/97 GIE Groupe Concorde v Sukadiwarno Panjan [1999] I ECR 6307 ECJ, J[28]; Mainschiffahrts-Genossenschaft v Granières Rhénanes (n 43 above) J[30–31]. 114 Schlosser Report [1979] OJ C59 71, [163]; White ‘CJJA 1982 I’ (n 4 above) 190, 191–193. 115 Arrondismentsrechtbank Amsterdam Chamber 1B, November 25th 1975; A McClellan ‘Brussels Convention Case-law’ (1978) 15 CML Rev 228–243, 237; Słresnsen v Pedersen B-581-04 [2005] ECLYB [150] (Denmark decided about sale of French holiday home between Danish couple). 116 Dicey & Morris (n 1 above) II [23.011]. 117 Agder Lagmannsrett (93-830 K) [1994] RG 1258, [1995] ECLYB [2250] (Lugano Convention (n 5 above) §16). 118 Fondation Guggenheim v Helion [1997] ILP 457 French Cour de Cassation. 119 See above [4.29ff]. 120 See now Civil Procedure Rules, SI 1998/3132 as amended, 6.20.5–6.20.7. 111 112
Non-site Contracts
453
‘in what place the plaintiff will’.121 So it was that Westminster Hall, then home to the Court of Chancery, was the venue used in Penn v Lord Baltimore122 to settle the state line between Pennsylvania and Maryland, because at the time the line was the boundary between two English provinces and was the subject of an agreement between two Englishmen in England. Contracts were enforced against the conscience of a person living here whether the subject matter was next door to the court or on the other side of Europe or in America,123 the practical effect being to settle foreign ownership in a domestic contractual dispute. When applying the modern European rules permanent residence, called domicile (European-style), is required and mere presence is no longer sufficient.124 That given, forum both at common law and in Europe is posited on ‘the existence between the parties to the suit of some personal obligation arising out of contract’125 which can give rise to an award of damages or other personal remedy. [10.25] Specific performance is available in equity to compel a party to carry out a contract affecting land, the effect of execution of the order being to transfer the land itself, an outcome that is real in character because the seller is compelled to carry out his promise and to transfer what he has contracted to sell, but treated as personal on the theory that equity was acting in personam on the conscience of the party compelled to perform.126 A case moved out of the personal ambit and into the realm of property — as it did in a reported case involving the Prussian mine of the Maria Anna and Steinbank Colliery — if the seller wrongfully resold the land to a foreign buyer; so that an order for specific performance against this second purchaser was a means of enforcing the proprietary character of the first sale contract; this could only be carried into effect with the intervention of a foreign court and should be left to the forum of the site.127 There is clearly a line to be drawn here but it is by no means clear that European law draws the line in the same, or the correct, place. The same real/personal dichotomy exists in connection with the enforcement of trusts.128
121 Coke on Littleton [261b], [282]; Cookney v Anderson (1863) 1 De Gex Jones & Smith 365, 380 Westbury LC, 46 ER 146. 122 Penn v Lord Baltimore (1750) 1 Ves Sen 444, 27 ER 1132 Hardwicke LC; Falconbridge (n 24 above) 616; Cheshire & North (n 28 above) 377ff; Briggs Conflict of Laws (n 85 above) 207; J Westlake A Treatise on Private International Law (London, Sweet & Maxwell, 7th edn by N Bentwich, 1925) 224ff (older cases on personal jurisdiction) 227ff (older cases, not personal). 123 (Lord) Cranstown v Johnston (1796) 3 Ves 170, 30 ER 952 Arden MR; Jackson v Petrie (1804) 10 Ves 164, 32 ER 807 Eldon LC; White v Hall (1806) 12 Ves 321, 33 ER 122 Erskine LC. 124 Dicey & Morris (n 1 above) [11-273]; see below [10.54]. 125 Deschamps v Miller [1908] 1 Ch 856, 863 Parker J. 126 Dicey & Morris (n 1 above) II [23.012]. There might be significant problems of supervision by the court when the land is overseas: G Jones & W Goodhart Specific Performance (London, Butterworths, 2nd edn, 1996, 0-406-06561-6) 136-141; J McGhee Snell’s Equity London, Sweet & Maxwell, 30th edn, 2000, 0-421-618-906) [40–23ff]; Falconbridge (n 24 above) 607; Cheshire & North (n 28 above) 379. 127 Norris v Chambres (1861) 3 De Gex Fisher & Jones 583, 45 ER 1004, on appeal from (1861) 29 Beav 246, 54 ER 621. 128 Briggs Conflict of Laws (n 85 above) 199ff; Falconbridge (n 24 above) 601; see below [11.37ff].
454
6
Contract Conflicts
Non-site contract law
[10.26] The general presumption will be that a site-based law applies to a contract for the sale of land,129 but it may come to be governed by a non-site law where it proves to be impracticable to sever a contract affecting land in several states or as a result of an express choice,130 or conceptually most importantly where rebuttal occurs of the site-based presumption. It will be remembered that the Rome Convention scores heavily over the forum rules by stating a basic presumption that the law of the site applies to land. Nevertheless this presumption may be disregarded — ‘écartée’ in the French text131 — if it appears from the circumstances as a whole that the contract is more closely connected with another country.132 The presumption for land should be strong and difficult to displace, as for goods which are now discussed. [10.27] Some assistance may be provided from the context of goods. A sale of goods takes its law from the residence of the party required to deliver the goods and this primary presumption is strong and only to be displaced by clear preponderance of factors elsewhere. Unlike the forum rules the obligation to pay for the goods is not considered since it is not feasible to have one law for the seller and another for the buyer.133 This peculiarity, Swiss in origin134 and controversial, is not focused on where the contract is carried out but on the residence135 of the principal performer, though these may often coincide and at least the rule secures a single law. This presumption is not easy to displace and should not be disregarded without a clear preponderance of factors in favour of some other connection,136 contrary to what some English judges have thought.137 Paragraph 3 giving a site-based presumption for land is said to operate ‘notwithstanding paragraph 2’ on goods138 so the factors relevant for goods may echo faintly. Rome Convention (n 6 above) §4[3]; see above [10.13]. See above [10.09], [10.39]. 131 Caledonia Subsea v Micoperi [2002] SLT 1022 Ct of Session IH, [25] Lord Cullen LP. 132 Rome Convention (n 6 above) §4[5]; Dicey & Morris (n 1 above) [33R-223]. 133 Samcrete Egypt Engineers and Contractors v Land Rover Exports [2001] EWCA Civ 2019, [2002] CLC 533, [37–38], [45] Potter LJ; Ophthalmic Innovations International (UK) v Ophthalmic Innovations International [2004] EWHC 2948, [2005] ILP 10 Lawrence Collins J; Rome I Green Paper (n 8 above) [1.5]. 134 Dicey & Morris (n 1 above) II [32-113]; also [32-114] fnn 93–94. 135 Rome Convention (n 6 above) §4[3]; Ark Therapeutics v True North Capital [2005] EWHC 1585, [2006] 1 All ER (Comm) 138. A clear definition will be provided especially in relation to legal persons: Rome I Proposal (n 8 above) §18. 136 Société Nouvelle des Papèteries de l’Aa v Machinefabriek (1992) Nederlandse Jurisprudenti 750; THD Struycken ‘Some Dutch Judicial Reflections on the Rome Convention §4[5]’ [1996] LMLCQ 18–24; Micoperi (n 131 above) [3] Lord Marnoch, [6] Lord Cameron, [41] Lord Cullen LP; J Hill ‘Rome Convention: the Approach of the UK Courts’ (2004) 53 ICLQ 325–350, 334ff; S Atrill ‘Choice of Law of Contract; Missing Pieces of the §4 Jigsaw’ (2004) 53 ICLQ 549–578. This will be made more explicit: Rome I Green Paper (n 8 above) [3.2.5]. 137 Credit Lyonnais v New Hampshire Insurance Co [1997] 2 Lloyd’s Rep 1 CA, 5–7 Hobhouse LJ; Samcrete (n 133 above) [32] Potter LJ; Dicey and Morris (n 1 above) [32-124ff]. 138 Rome Convention (n 6 above) §4[3]; P North Essays in Private International Law (Oxford, Clarendon Press, 1993, 0-19-825826-7) 40; contrast in §4[2] the words ‘subject to paragraph 5’. 129 130
Non-site Contracts
455
Favour to the business of the seller is tempered by special protection for consumers.139 [10.28] How firm is the site rule and how easy is it to displace? In a sale of land some significance may attach to where the seller lives rather than the more normal test of where the land is situated,140 a matter of importance in the sale of a second home. A home in Belgium sold by a Dutch second home-owner would give two different Benelux connections. The relevance of the seller’s residence might be increased considerably if it is a joint state of residence shared by the buyer.141 The site rule should be firmer for a primary home and weaker for a secondary or holiday home. Some importance might also attach to the place where the contract is completed if this is different from the site of the land,142 though performance must be mandatory to register.143 It may be important whether land can or cannot be transferred by document independent of physical possession. It might be thought to be relevant whether the property sold is for use and so sold with vacant possession or whether it is an investment property bought for its rental stream. What we are left with is uncertainty, the worst of all possible rules of property law. If the Rome I Proposal comes to fruition it will solidify the site rule as a starting point for land contracts,144 allowing displacement to some other close connection only in residual cases lacking a characteristic performance. The place where a contract is concluded is often a matter of chance, for example in an exchange of e-mails, and has become almost irrelevant as a consideration.145 Temporally the place is fixed at the time of conclusion of the contract.
7
Leases
[10.29] Forum for disputes about leases will generally be site-based, though the home of the holiday-maker applies for some holiday lettings.146 Law is generally subject to the site-based presumption, but non-site law might arise from rebuttal of the normal presumption or from an express choice.147 See below [10.30]. Giuliano Lagarde Report (n 6 above) §4, [2]; NAP v Christophery [1970] April 1st 1970 CA of Amsterdam; Frederiksvaerk Kommune v Sorensen B-4022-05 [2006] UfR 27940, [2006] 12 ECL [113] (Danish Council sued purchaser for breach of easements relating to land in Denmark; action allowed even though purchaser had moved to Sweden; non-exclusive); Rome I Green Paper (n 8 above) [1.5]. 141 See the holiday homes forum exemption, above [4.40ff]. 142 Many states will insist on completion by a local notaire; but English land could be transferred by parties physically located anywhere in the world. 143 Agnew v Länsforsäkringsbolangens [2001] 1 AC 223 HL, 266 Lord Millett; Samcrete (n 133 above); Micoperi (n 131 above); Ennstone Building Products v Stanger [2002] EWCA Civ 916, [2002] 1 WLR 3059; and many other cases. Hence the place is fixed when the contract is concluded. 144 Rome I Proposal (n 8 above) §4[2]. 145 Amin Rasheed Shipping Corporation v Kuwait Insurance Co [1984] AC 50 HL, 62 Lord Diplock. 146 See above [4.41]. 147 See above [10.26], below [10.39]. 139 140
456
8
Contract Conflicts
Non-site consumers
[10.30] Special protection is conferred on consumers against a hostile choice or selection of conflicts principle in B2C contracts between a consumer and a trader, though targeting is also important. A consumer is an individual acting for purposes outside his trade or profession,148 for example a punter promised a prize in a competition,149 a private investor in foreign exchange to the tune of 57 million drachma,150 or a chartered accountant planning to buy a yacht moored at a berth in Viareggio in Italy.151 There is nothing inherently objectionable in chartered accountants nor in the owners of Italian yachts, but the two in combination forms an odd sort of consumer, a person able, surely, to protect himself. In terms of land purchase an individual buying a home from a trader or making an investment may be a consumer, but not when he is looking to set up a business establishment. The other party must be a trader — though not named as such — who pursues commercial or professional activities and the contract must fall within the scope of those activities.152 So a British ex-pat who buys a house on the Costa del Sol from a Spanish builder is clearly a consumer, as indeed is anyone buying a new-build home. On the other hand, a Brit who buys the home of a French notaire engages in a private transaction, since the sale is not in the course of the notaire’s professional activities. Consumer protection will not of course apply to an individual buying a home from another private individual. [10.31] A consumer can insist on a home state forum as against a trader from elsewhere in the EU if there is a sufficient link between the trader’s activities and the consumer’s home state. That linkage may be the pursuit of a commercial activity by the trader or the trader directing his activity to the state, or the state being one of a group to which the trader directs his commercial activities. This excludes the case of an English consumer seeking out and instructing a foreign trader or professional abroad.153 In internet trading, a consumer who buys from a site elsewhere in Europe is protected only if the consumer inhabits a part of the continent targeted by the trader, so that the
148 Regulation on Civil Jurisdiction (n 3 above) §15; ex Brussels Convention (n 5 above) §13; Lugano Convention (n 5 above) §13; CJJA 1982 sch 4 (n 4 above) paras 7–9; Jenard Report [1979] OJ C59 1, 33; a negative definition must be wider than a positive one: Tillman (n 35 above) 54; Dicey & Morris (n 1 above) [11–363]. 149 C-27/02 Engler v Janus Versand [2005] I ECR 481, ECJ. 150 Standard Bank London v Apostolakis (No 1) [2000] ILP 766, Longmore J; contrast C-269/95 Benincasa v Dentalkit [1997] I ECR 3767, ECJ. 151 Rayner v Davies [2002] EWCA Civ 1880, [2003] ILP 15. 152 Regulation on Civil Jurisdiction (n 3 above) §15[1](c). A sale of land falls within (c) and not (a). 153 Rayner v Davies (n 151 above); Bundesgerichtshof VII ZR 249/04 [2006] 09 ECL [62] (German architect built a house for a German national in France; action in Germany for fees; not a consumer contract since office of architect not in France).
Non-site Contracts
457
internet trader has accepted the problem of dealing with the consumer’s foreign contract law.154 A consumer is treated favourably by being allowed a home forum to protect against a long excursion to a foreign court, home meaning where he is domiciled.155 And may also sue where the branch he is dealing with is located156 — and more importantly this, his domicile, is the only place that he may be sued,157 and these rights are protected against contracting-out in advance.158 French residents who challenged the validity of a mortgage over their house to a German bank could use the French courts to pursue their complaint; they were consumers buying a new house and the loan was a supply of banking services,159 and so too were English consumers who borrowed from an English bank to fund the purchase of a Portuguese timeshare and who could use the English courts to avoid the credit agreement, this case falling outside the exclusive jurisdiction over land since they were challenging their personal liability under the consumer credit agreement.160 [10.32] Traders may try to impose a choice of forum upon a consumer, but this will be open to challenge as an unfair contract term, and successfully so where, for example, an English court is imposed on Greek-speaking investors.161 Even contracts made before the directive dealing with unfair terms are open to challenge, the effect being retrospective.162 [10.33] A consumer can generally insist that his law as buyer (that is, the consumer) will generally prevail, a reversal of the usual preference for a seller. Consumers are defined in such a way as to match the forum rules,163 tightly, so as to leave marginal cases unprotected. The object may be a supply of land or goods or credit to a person acting for a purpose outside his trade or profession.164 Service contracts also qualify but curiously not if the complete service provision 154 Regulation on Civil Jurisdiction (n 3 above) §15[1](c); U Kohl ‘Eggs, Jurisdiction and the Internet’ (2002) 51 ICLQ 555–582; K Vasiljeva ‘Jurisdiction in Consumer Contracts Concluded Online’ (2004) 10 ELJ 123–142. 155 Regulation on Civil Jurisdiction (n 3 above) §16[1]; ex Brussels Convention (n 5 above) §14; Lugano Convention (n 5 above) §14; CJJA 1982 sch 4 (n 4 above) paras 7–9. Special rules for insurance contracts lie beyond the scope of this book. 156 Regulation on Civil Jurisdiction (n 3 above) §15[2]; ex Brussels Convention (n 5 above) §13; Lugano Convention (n 5 above) §13; CJJA 1982 (n 4 above) s 10. 157 Regulation on Civil Jurisdiction (n 3 above) §16[2]; §16[3] restricts counterclaims ex Brussels Convention (n 5 above) §14. 158 Regulation on Civil Jurisdiction (n 3 above) §17; ex Brussels Convention (n 5 above) §15; Lugano Convention (n 5 above) §15; CJJA 1982 sch 4 (n 4 above) para 9. 159 Gilgert v Commerzbank [2001] Rev Crit DIP 135, [2001] ECLYB [1072]. 160 Jarrett v Barclays Bank [1999] QB 1 CA, 16H–17B Morritt LJ. 161 Standard Bank London v Apostolakis (No 1) (n 150 above); Standard Bank London v Apostolakis (No 2) [2001] Lloyd’s Rep Bank 240 Steel J; Benincasa v Dentalkit (n 150 above) distinguished; see above [8.24]. 162 Allianz Subalpina v Contino [2001] Foro it 12, I, col 3587. 163 Giuliano Lagarde Report (n 6 above) §5. Austrian accession to Rome was conditional on a revision of the currently inadequate §5: Rome I Green Paper (n 8 above) [3.2.7]. 164 Rome Convention (n 6 above) §5[1].
458
Contract Conflicts
will take place overseas,165 but a package holiday will attract the protected consumer forum.166 Again there must be an element of targeting since the law of the consumer’s habitual residence requires167: 앫 a specific invitation or advertising addressed to the consumer and all contractual steps were taken by the consumer in the country of his habitual residence, or 앫 an order received by the supplier or his agent in the country of the consumer’s habitual residence, or 앫 an order placed during a trip to another country arranged to induce the consumer to buy. These rules need to be updated to cope happily with e-commerce168 and indeed the Rome I Proposal talks more explicitly about targeting of consumers.169 A choice of law is allowed but will be subject to mandatory provisions of the law of the consumer’s habitual residence.170
CHO I CE O F LAW A N D F O RUM
Choice of Law and Forum 1
Consensual bases
[10.34] Parties may adopt a consensual base,171 the result of an expression of wishes about the law and/or forum, a process described in this book as ‘choice’. By way of contrast the word ‘selection’ is used for the process of finding a forum or law by application of a rule of public international law. Choice of forum is permitted for personal actions,172 though not for real disputes affecting land.173 A settlor might for example choose the Chancery Division and English law for his trust of a flat in the French port of Antibes,174 even if the land which forms the trust asset is overseas, though care is needed to eschew the choice of countries where the trust would not be recognised. Similarly English contractors would be likely to choose English law — through familiarity rather than affection — even if they had to accept to a limited extent the local law of the site.175 Rome Convention (n 6 above) §5[4]; see above [10.15] n 72. Rome Convention (n 6 above) §5[4–5]; Giuliano Lagarde Report (n 6 above) §5, [5]. 167 Giuliano Lagarde Report (n 6 above) §5, [4]; Rome I Green Paper (n 8 above) [3.2.7]. 168 C Riefa ‘Rome Convention §5 and Consumer E-Contracts’ (2004) 13 International Computer and Telecommunications Law 59–73. 169 Rome I Proposal (n 8 above) §§5–6. 170 Rome Convention (n 6 above) §5[1]; Giuliano Lagarde Report (n 6 above) §5, [1]. 171 Dicey & Morris (n 1 above) II [32–004]; Hill ‘Third Way?’ (n 46 above) 457ff; Lee (n 46 above) 633ff; Harris ‘Contractual Freedom’ (n 38 above). 172 Regulation on Civil Jurisdiction (n 3 above) §24; ex Brussels Convention (n 5 above) §18; Lugano Convention (n 5 above) §17; CJJA 1982 sch 4 (n 4 above) para 12. 173 See above [4.12]. 174 See below [11.39ff]. 175 A choice of forum may be limited to a European state: Dicey & Morris (n 1 above) [12–103]. 165 166
Choice of Law and Forum
459
Consensual bases are preferred and have priority. Site-based choices have already been recommended,176 but if it is desired to select familiar local law away from the site a choice is again desirable given how complex are the selection rules that have just been discussed. Again two choices need to be made and so that they match.
2
Choice of contract forum
[10.35] Parties to commercial177 contracts, have full autonomy to make a choice178 for themselves of a forum other than that selected by the European club rules,179 including Lugano180 and also a new Hague Convention.181 This applies within the United Kingdom if the contract has an international element and also if an internal boundary is crossed — from Carlisle to Gretna.182 Service of proceedings taken in the court which has been chosen can take place overseas without permission.183 Europeans can choose the place offering the best solution to their contract proceedings, a respect for prospective autonomy which is desirable to discourage retrospective forum shopping.184 Non-Europeans — whose home state of domicile is outside the EU — may make a choice but the court chosen by such parties has the option of declining to hear the case.185 Identification of what constitutes a jurisdiction clause has generated an enormous case law,186 which it is not necessary to enter into, but as ever wording should be explicit and unambiguous,187 and should state clearly if (as is usual) a choice is to be exclusive188 and mutual. It is wise to use writing or a durable electronic
See above [10.10]. Contrast consumer contracts; see above [10.30]. 178 AS Bell ‘Jurisdiction and Arbitration Agreements in Transnational Contracts’ (1996) 10 Journal of Contract Law 53–72, 97–119; E Peel ‘Exclusive Jurisdiction Agreements: Purity and Pragmatism’ [1998] LMCLQ 182–227; L Merrett ‘Enforcement of Jurisdiction Agreements within the Brussels Regime’ (2006) 55 ICLQ 315–336. 179 Regulation on Civil Jurisdiction (n 3 above) §23; ex Brussels Convention (n 5 above) §17; Case 23/78 Meeth v Glacetal [1978] ECR 2133 ECJ; Dicey & Morris (n 1 above) I [12R-100ff]; Lee (n 46 above) 633ff. 180 Lugano Convention (n 5 above) §17[4]; Bloos v Bouyer (n 58 above); Jordan Grand Prix v Baltic Insurance Group [1999] 2 AC 127 HL. 181 T Kruger ‘A New Choice of Court Convention’ (2006) 55 ICLQ 447–456. 182 CJJA 1982 (n 4 above) s 32; CJJA 1982 sch 4 (n 4 above) para 12. In Snookes v Jami-King (GB) [2006] EWHC 289, [2006] ILP 19 Silber J suggests that a choice can be made in a case lacking any international element. 183 Civil Procedure Rules (n 120 above) 19.1.b(iii), 19.1A.b(iii); provided no proceedings are pending elsewhere in which case permission would be required. 184 Giuliano Lagarde Report (n 6 above) Introduction [2]. 185 Regulation on Civil Jurisdiction (n 3 above) §27[3] 186 Dicey & Morris (n 1 above) [12.104]. This is tested autonomously. 187 C-387/98 Coreck Maritime [2000] I ECR 9337 ECJ. 188 Regulation on Civil Jurisdiction (n 3 above) §23[1]; this amendment confirms Meeth v Glacetal (n 179 above); Royal Bank of Canada v Cooperatieve Centrale Raiffeisen-Boerenleenbank [2004] EWCA Civ 7, [2004] 1 Lloyd’s Rep 471. 176 177
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Contract Conflicts
format, though some lesser formality suffices189 particularly within the United Kingdom.190 A contract that is itself void may nevertheless be effective to create a valid jurisdiction agreement.191 Imposition of a jurisdiction clause may be void as an unfair term.192 [10.36] The possibility of choice of forum following from a choice of law is considered below.193 [10.37] Proceedings in a chosen forum can be delayed by rival and prior proceedings in a state that has not been chosen; the prior court should examine the case and conclude that it has no jurisdiction,194 but the correct forum must wait however long this process takes! In Primacom195 German courts were first seised of an action for a declaration that the loans were contrary to German public policy. It was clear that the English courts had exclusive jurisdiction over loan agreements under an express and exclusive choice of English law and jurisdiction, but even so the English actions had to wait196 until, eventually, the court in Mainz decided it had no jurisdiction. This outrageous rule has generated a substantial market in that species of underwater armaments, commonly known as torpedoes, that is, actions for a negative declaration. [10.38] Parties can opt out of the courts and instead make a choice of arbitration, and if they do so this will exclude the power of the courts of any other European state to rule on the merits of the case.197 Court supervision of an arbitration is not a matter of Civil Jurisdiction, and this means that a correct arbitral forum may proceed without waiting for a first court seised to recuse itself, and an anti-suit injunction can be issued to restrain a claimant from taking proceedings in a conflicts club state in breach of an arbitration clause.198
189 Regulation on Civil Jurisdiction (n 3 above) §23; ex Brussels Convention (n 5 above) §17; Lugano Convention (n 5 above) §17; Case 25/79 Sanicentral v Collin [1979] ECR 3423 ECJ; Mainschiffahrts-Genossenschaft v Granières Rhénanes (n 43 above). 190 CJJA 1982 sch 4 (n 4 above) para 12. 191 Landgericht Berlin 26 0 530/02 [2006] 05 ECL [47]. 192 See above [8.37]. 193 See below [10.42]. 194 C-116/02 Erich Gasser v MISAT [2004] I ECR 14693 ECJ; J Mance ‘Exclusive Jurisdiction Agreements and European Ideals’ (2004) 120 LQR 357–365. 195 JP Morgan Europe v Primacom [2005] EWHC 508 (Comm), [2006] ILP 11 Cooke J; S Schulte-Hillen & MJ Friedl ‘PrimaCom gives Lenders Certainty on Jurisdiction’ (2006) 25 IFL Rev 17. 196 Primacom (n 195 above) J[36]. 197 Regulation on Civil Jurisdiction (n 3 above) §1[2](d); ex Brussels Convention (n 5 above) §1[4]; Lugano Convention (n 5 above) §1[4]; J-P Beraudo ‘The Arbitration Exception of the Brussels and Lugano Conventions’ (2001) 18 Journal of International Arbitration 13–26. Agreements to accept arbitration also fall outside the selection of law principles of Rome Convention (n 6 above) §1[2](d); Dicey & Morris (n 1 above) II [32-036] and more generally [16]. 198 I Nurmela ‘Sanctity of Dispute Resolution Clauses’ (2005) 1 Journal of Private International Law 115–149; K Qureschi ‘The Rise of Anti-suit Injunctions’ [2006] NLJ 976–977. The matter is the subject to a reference to the ECJ in The Front Comor [2007] UKHL 4, [2007] ILP 20.
Choice of Law and Forum
3
461
Choice of contract law
[10.39] Half of all businesses in Western Europe choose a law other than their own,199 and London is a major conflicts destination, a sure sign of how advantageous to sellers and how detrimental to buyers are the literalist and anti-consumer traits of English contract law. [10.40] Contracting parties are free to choose their law under the Rome Convention,200 a decision reached after a debate described, however atypically, as ‘lively’.201 Autonomie de la volonté 202 is more or less the same as the even more ancient but more discretionary common law doctrine.203 A case may be diverted between European club countries (England to France or vice versa) or to America or some other non-European country.204 Express is best, but an implicit choice may be made by opting for a standard form associated with a particular legal system or from wider circumstances.205 Free consent of the parties to the choice is tested under Convention rules.206 Rome is liberal in allowing a choice to affect a part only of an entire contract,207 and allowing subsequent variation,208 saving only the formal validity of a contract once established and the rights of third parties.209 [10.41] Party autonomy is limited in three important respects. A choice must in general fall upon a national law, so the Muslim trading principles ‘of the Glorious Sharia’a’ are not justiciable in England.210 The Rome I Proposal will make explicit the right to select standard international conditions such as Unidroit211 or the Principles of European Contract Law212 or a standard set of 199 [2005] 13 LSG 6; however, a choice does not depend upon the existence of an international element in the contract: Dicey & Morris (n 1 above) [32-027]. 200 Rome Convention (n 6 above) §3; Dicey & Morris (n 1 above) II [32R-061]; S Atrill ‘The Missing Piece of the §4 Jigsaw’ (2004) 53 ICLQ 549–577; A Briggs ‘Choice of Choice of Law’ (2003) LMCLQ 12–38; A Briggs ‘On Drafting Agreements on Choice of Law’ (2003) 3 LMCLQ 389–395; J Harris ‘Does Choice of Law make any Sense?’ [2004] CLP 305–354. 201 Giuliano Lagarde Report (n 6 above) §1, [5] and §3, [1ff]. 202 American Trading Company v Quebec Steamship Co (1911) Rev Crit 395 French Cassation. 203 Gienar v Meyer (1796) 2 Hy Bl 603, 126 ER 728; R v International Trustee for Protection of Bondholders [1937] AC 500 HL, 529 Lord Atkin; Vita Food Products v Unus Shipping Co [1939] AC 277 HL, 290 Lord Wright. 204 Ingmar GB v Eaton Leonard (n 40 above). 205 Language versions vary on tacit choice: Rome I Green Paper (n 8 above) [3.2.4]; Aeolian Shipping v ISS Machinery Services [2001] EWCA Civ 1162, [2002] 2 Lloyd’s Rep 641, [16] Potter LJ. 206 Rome Convention (n 6 above) §3[4]; ie under §§8, 9 and 11. 207 ie dépeçage: Rome Convention (n 6 above) §3[1]; Giuliano Lagarde Report (n 6 above) §3, [4–6]. 208 Aeolian Shipping (n 205 above) [16] Potter LJ; DG Pierce ‘Post-formation Choice of Law’ (1987) 50 MLR 176–201; Harris ‘Contractual Freedom’ (n 38 above) 255. 209 Rome Convention (n 6 above) §3[2]; Rome I Proposal (n 8 above) §3[3]. 210 Shamil Bank of Bahrain EC v Beximco Pharmaceuticals [2004] EWCA Civ 19, [2004] 1 WLR 1784. 211 Rome I Green Paper (n 8 above) [3.2.3]. 212 O Lando & H Beale The Principles of European Contract Law (The Hague, Kluwer, 1999, 9-041-11305-3).
462
Contract Conflicts
conditions available as a ‘26th regime’ under an optional EC instrument, but will not allow the use of a private codification — the so-called contract sans loi.213 Any choice is subject to any mandatory rules as at present, as discussed in the context of the compulsory site-based contract core.214 Thirdly and finally, it is conceivable that a choice of law could be an unfair contract term as with forum.215 [10.42] Choice of law does not determine forum so English law does not impose an English court.216 However, a choice of law may be inferred from a choice of forum,217 and indeed a choice or selection of England as the venue for a court hearing or an arbitration will almost automatically lead to a decision to apply English law,218 and forum is also a relevant consideration under European club rules.219 Rome I rules on the selection of law do not apply to forum or arbitration agreements.220
A N TI -CO N TR ACTUA L CLA I MS
Anti-contractual Claims 1
Failure to contract
[10.43] Common lawyers will generally construct functional groupings such as ‘contract’ which will include within it the various aspects of successful and unsuccessful attempts to reach an agreement. After all, the parties are likely to be unaware whether or not their intention to come to a consensus has been successful. All subtlety of thought needs to be discarded when switching to civilian systems which are posited on a fundamental subdivision of the non-proprietary private law of obligation into a threefold classification of contract, delict (tort) and restitution, with a particular issue rammed into a single home within this structure. European law accepts this fracture between performance, breach of contract and misrepresentation on the one hand and voidness — a negation of civil liability221 — on the other with voidability
Rejected in Amin Rasheed (n 145 above) 65 Lord Diplock. Rome Convention (n 6 above) §7; Rome I Proposal (n 8 above) §3[4]; see above [10.04]. 215 See above [8.37]. 216 Navigators Insurance Co v Atlantic Methanol Production Co [2003] EWHC 1706, [2004] Lloyd’s Rep IR 418 David Steel J. 217 Compagnie d’Armement Maritime v Compagnie Tunisienne de Navigation [1971] AC 572 HL, 584, 587, 596–600, 604–607. 218 Egon Oldendorff v Liberia Corp [1996] 1 Lloyd’s Rep 350 Clarke J; Hill ‘UK Approach’ (n 139 above) 329. 219 Rome I Green Paper (n 8 above) [3.2.1]. 220 Rome Convention (n 6 above) §1[2](d). 221 C-115/88 Reichert v Dresdner Bank (No 1) [1990] I ECR 27 ECJ; Kleinwort Benson v Glasgow CC [1999] 1 AC 153 HL; see below [10.50]. 213 214
Anti-contractual Claims
463
suspended between.222 A declaration that an attempt to contract has been successful will be decided in the courts of the site whereas a declaration that a purported contract is void will be directed to a non-site forum,223 a consensual obligation being completely unlike an obligation imposed by law, even though the parties do not know in advance of litigation on which side of the line they fall. The same division is recognised when selecting law between the law applicable to consensually accepted obligations (the Rome Convention) and obligations imposed in tort (delict) and restitution (the Rome II Proposal).224
2
Contract-like torts
[10.44] Here are considered contract-related torts, notably misrepresentation. Forum cases are allocated to the contract sector, that is ‘matters relating to a contract’, if possible,225 but this sector is limited to liability under an obligation that is freely accepted by the defendant.226 There is a second mutually exclusive category227 of tort/delict228 — matters ‘relating to tort, delict229 or quasi-delict’230 — a grouping which is defined autonomously as civil liability for failure to perform an obligation imposed by law independently of any agreement between the parties. Torts are characterised by the potential forum.231 Common law torts pose particular problems because of the facility with which claims which are basically contractual can be reframed in the tort of conspiracy.232 On the tort side of the line there are misrepresentation,233 failure to act in good faith in negotiations,234 breach of competition laws,235 and preventive action taken by a consumer protection organisation against the use of unfair contract terms.236
222 An action to rescind a voidable contract seems to be treated as a matter relating to a contract; Agnew HL (n 143 above). 223 See below [10.50]. 224 Rome I Green Paper (n 8 above) [1.3]; Giuliano Lagarde Report (n 6 above) Introduction, [3]; Rome II Proposal (n 10 above). 225 Source v TUV Rheinland Holding [1998] QB 54 CA, 64 Staughton LJ; Dicey & Morris (n 1 above) II [11–299]. 226 C-26/91 Jakob Handte v Societe Traitements Mecano-Chimiques des Surfaces [1992] I ECR 3967 ECJ, AG[16] Jacobs. 227 Harris ‘Contractual Freedom’ (n 38 above) 266. 228 Forum: Regulation on Civil Jurisdiction (n 3 above) §5[3]; ex Brussels Convention (n 5 above) §5[3]; Lugano Convention (n 5 above) §5[3] CJJA 1982 sch 4 (n 4 above) para 3(c); law: PIL (Miscellaneous Provisions) Act 1995 (n 10 above) s 9(8); Rome II Proposal (n 10 above). 229 Peters v Zuid Nederelandse (n 11 above) (action by consumer against manufacturer for defective goods). 230 Case 189/87 Kalfelis v Schröder [1988] ECR 5565 ECJ; Reichert (n 221 above). 231 PIL (Miscellaneous Provisions) Act 1995 (n 10 above) s 9(2). 232 Batthyany v Walford (1886) 33 Ch D 624 affirmed (1887) 36 Ch D 269 CA in Ch. 233 Alfred Dunhill v Diffusion Internationale de Maroquinerie de Prestige [2001] CLC 949 QBD. 234 C-73/04 Klein v Rhodos Management [2005] I ECR 8667 ECJ, AG[11] Geelhoed. 235 Provimi v Aventis Animal Nutrition [2003] EWHC 961, [2003] ECLYB [262]. 236 C-167/00 Verein for Konsumenteninformation v Henkel [2002] I ECR 8111 ECJ.
464
Contract Conflicts
[10.45] A connected forum is available to pursue an action in tort/delict (as an alternative to the home court of the defendant237) linked to the place of harm, which may be either the place where the harmful event occurred or where a significant loss is sustained, the latter being most general.238 These alternatives were originally recognised in a case concerning salt pollution of the Rhine,239 and were drawn from the existing rules in many European states.240 Thus, in relation to movable goods, a misrepresentation made in Italy can be sued in France if it causes production delays there,241 a marine survey causes damage where the yacht is moored242 — in one reported case in Viareggio, beware buyer the shade of Percy Bysshe Shelley — and a decision to break off negotiations is made when the letter is received.243 Where a tort affects land the place of harm rule could and should lead back to the site of the land, but it could also lead to the non-site home state of a second-home-owner. [10.46] Tort law for contract-type torts such as misrepresentation,244 and indeed for other torts and delicts, is selected under domestic rules. Liability rules vary widely. English courts must determine whether the conduct is actionable in tort in the forum or in delict in any other country.245 Harm in England is actionable in England when caused by an act overseas which is not delictual where it is carried out, or which is a delict overseas without being tortious here,246 the former requirement of double actionability having been abandoned.247 The law of the forum will still decide procedural matters such as the assessment of damages.248 [10.47] ‘Rome II’ is a proposal for a Regulation to lay down rules for the selection of law to apply to non-contractual obligations,249 though the object of See below [10.53]. Case 21/76 Mines de Potasse d’Alsace [1976] ECR 1735 ECJ; TC Hartley ‘The Place of Commission of a Tort’ [1977] EL Rev 143–145; Fonderie Officine Meccaniche Tacconi v Heinrich Wagner Sinto Maschinenfabrik (n 11 above) (Perugia); London Helicopters v Heliportugal [2006] EWHC 108, [2006] ILP 28. Or where a threatened action may cause harm. 239 An environmental claimant may now impose a flag of inconvenience on the defendant by searching neighbouring states for the most favourable basis of claim: G Betlem & C Bernasconi ‘European PIL, the Environment and Obstacles for Public Authorities’ (2006) 122 LQR 124–151. 240 Mines de Potasse (n 238 above) J[15], J[22]; Civil Procedure Rules (n 120 above) 6.20.8 (service rules). 241 Alfred Dunhill (n 233 above). 242 Rayner v Davies (n 151 above); Ennstone (n 143 above) (wrongful advice where advice given); J Perkins ‘Identifying the Locus of a Tort’ [2003] CLJ 274–277. 243 C-99/245 Bus Berzelius Umwelt Service v Chemconserve Reakt [2004] ILP 9 Hoge Raad. 244 For damage to land, see above [4.51]. 245 PIL (Miscellaneous Provisions) Act 1995 (n 10 above) s 9(4). 246 PIL (Miscellaneous Provisions) Act 1995 (n 10 above) s 11. This may be displaced by another law which is substantially more appropriate (s 12) and is subject to English public policy (s 14). 247 PIL (Miscellaneous Provisions) Act 1995 (n 10 above) s 10(a); Pearce v Ove Arup (n 50 above) 300B Lloyd J at first instance. Previously Boys v Chaplin [1971] AC 356 HL. 248 Harding v Wealands [2006] UKHL 32, [2006] 3 WLR 83 (English damages for negligent driving in New South Wales). 249 Rome II Proposal (n 10 above); JM Carruthers & EB Crawford ‘Variations in Rome II’ (2005) 9 Edinburgh Law Review 65–97, 238–266. 237 238
Anti-contractual Claims
465
uniformity and universality will be frustrated by non-adoption by the United Kingdom, Ireland and Denmark. The contract/tort divide will align with existing sectoral rules.250 Law to be applied to a delict251 should, it is proposed, generally be that of the country in which the damage arises or is likely to arise; this is based on the habitual residence of the injured party or joint habitual residence of both parties and likely to be a non-site selection,252 but this could yield to a manifest closer connection so as, for example, to keep together all contractual and tortious issues arising from a single contract.253 A site-based presumption is needed for land but is missing although there will be special rules for restitution.254 Selection of law will affect most aspects of a claim, such as the conditions for liability, personal liability, limitations of liability, damage and the assessment of damages and assignment of compensation rights.255 Parties will be free to opt out of the law selected for them by agreement after a dispute arises,256 without affecting the rights of third parties, and all will be subject to mandatory rules and community law and the usual public policy exception.257
3
Interference with trusts and fiduciary breaches
[10.48] Delict-based jurisdiction applies to tort-like aspects of equity, notably attacks on money laundering and secret profits and misuse of confidential information which amount to a breach of a fiduciary duty. Such claims are often said, hyperbolically, to create a constructive trust,258 but in fact there is no property to which a trust may attach and in reality the action is to enforce a personal liability against a person involved in equitable misconduct.259 Money laundering is generally tackled, in its civil aspects, by the action for knowing assistance in a breach of trust,260 similar in nature to the tort of inducing a breach of contract. Laundering generally involves the movement of hot money across international borders, giving rise to innumerable potential conflicts, but English jurisdiction is available if the proceeds were passed through a bank account here, irrespective of the residence of the assistor and the location of the original breach of trust.261 Once Rome II Proposal (n 10 above) [2.1], [3], §1. Special rules will apply to product liability, unfair competition, privacy, violation of the environment (where a victim can opt for a higher level of protection from a neighbouring country), and IP: Rome II Proposal (n 10 above) §§4–8. 252 Rome II Proposal (n 10 above) §3[2]. 253 Rome II Proposal (n 10 above) §3[2]. 254 See below [10.50]. 255 Rome II Proposal (n 10 above) §11. 256 Rome II Proposal (n 10 above) §10. 257 Rome II Proposal (n 10 above) §§12–17; 22–23, 26. 258 Ghana Bank v C [1997] Times March 3rd. 259 TM Yeo ‘Choice of Law for Fiduciary Duties’ (1999) 115 LQR 571–576 @ 576, suggests that it also needs to be seen as dishonest where done. 260 Royal Brunei Airlines v Tan [1995] 2 AC 378 PC. 261 Casio Computer Co v Sayo (No 3) [2001] EWCA Civ 661, [2001] ILP 43; Dexter v Harley [2001] Times April 2nd Lloyd J (knowing receipt). 250 251
466
Contract Conflicts
forum is established the law of that forum is used to establish the basis of the in personam liability,262 and it is also possible to pursue other assistors in related claims.263 Much the same is true of a breach of a fiduciary duty, usually an adjunct of a commercial contract involving duties of confidentiality to the other party, notably the duty not to make undisclosed profits. Law follows the forum, and needs to be applied to determine the existence of the duty264 and its scope as well as issues such as limitation,265 even if the use of the forum to determine the law can give insular and ludicrous results.266 Strongest connection would be a better basis for selection.
4
Unauthorised use of land
[10.49] When conflicts principles are applied to restitutionary obligations267 the supposedly ‘unified’ third head of obligation in restitution needs to be deconstructed and, surprise surprise, the Darrida hatchet job on it takes things back, more or less, to the constituent common law parts. Most restitution actions are non-site,268 and much the worse for it. Compensation has to be paid to a landowner when his land is used by another, either as rent if under a contractual arrangement or as restitutionary compensation for the enrichment of the user which would otherwise occur, mesne profits in English terminology. Quantum probably matches the rack rental, though there may be an element of punishment.269 Common law wisdom looks to the site, since restitution is being made for use of the land, and directs the claim to the forum of the site, as in the comparable case of waste to foreign land for which restitution may be obtained under an implied contract.270 European law treats the claim as personal and so allows a non-site forum — the home court of the defendant. Thus in Lieber v Göbel 271 a purported transfer of an apartment in Cannes between two Germans 262 El Ajou v Dollar [1993] 3 All ER 717, 737, Millett J; MacMillan v Bishopsgate Investment Trust (No 3) [1996] 1 WLR 387 CA; C MacLachlan ‘International Litigation and the Reworking of Conflicts of Laws’ (2004) 120 LQR 580–616. 263 Casio Computer v Sayo (No 3) (n 261 above); Sarrio v Kuwait Investment Authority [1999] 1 AC 32 HL. 264 Chase Manhattan Bank v Israel-British Bank (London) [1981] Ch 165 Goulding J. 265 Yeo (n 259 above) discussing Paramasivan v Flynn (1998) 160 ALR 203, Federal Ct. 266 Yeo (n 259 above) 573. 267 G Panagopoulos Restitution in PIL (Oxford, Hart, 2000, 1-84113-142-3); Dicey & Morris (n 1 above) II [34]; Civil Procedure Rules (n 120 above) 6.19.1, 6.19.1A, 6.20.15 (service overseas). 268 This is not necessarily the case where the action is in restitution but related to an existing contract. 269 P Sparkes A New Landlord and Tenant (Oxford, Hart, 2001, 1-84113-023-0) 806–807. 270 Batthyany v Walford CA in Ch (n 232 above) 279, 281 Cotton LJ (who makes interesting observations on the reformulation of claims); Lee (n 46 above) 646–647. But compare Arglasse v Muschamp (1682) 1 Vern 75, 23 ER 322 Lord North LK (unjust enrichment in connection with an Irish rentcharge); Lee (n 46 above) 625. 271 C-292/93 Lieber v Göbel [1994] I ECR 2535 ECJ; A Briggs ‘The Brussels Convention’ (1994) 14 Yearbook of European Law 557–586 @ 572–573; Case 38/81 Effer v Kantner [1982] ECR 825 ECJ; Klein v Rhodos (n 234 above) J[17], J[29], AG[32–39] Geelhoed (reimbursement under void contract).
Anti-contractual Claims
467
was made in circumstances which, as the German courts held, made the transfer void. Compensation was sought from the transferee for the use made of the property in the period between the making of the transfer and the decision to annul it, a personal claim not directly in rem, so the European Court allowed the non-site German court to proceed with it. Germany was also the connected forum. Yet compensation had to be fixed by reference to the market rent, a matter which the local court was best placed to determine, and this seems an ideal case to impose exclusivity of the site.
5
Void and voidable contracts
[10.50] Most restitutionary actions arise where the parties think they are contracting but in fact fail to conclude a valid contract, but it is necessary to treat separately a contract which is void and one which is voidable. If the contract is void the action is not, in civilian think, contractual because there is no agreed obligation. A series of negatives emanating from the European Court of Justice shows that a claim arising after a void contract for the sale of land falls outside the exclusive jurisdiction over land, is not contractual in nature since nothing is agreed, and is not tortious in character. Indeed a claim to establish the invalidity of a transfer272 does not seek to establish the liability of a defendant and so is not within any part of the European conflicts rule book.273 Failure to provide a connected forum makes it necessary to fall back on the home court rule. Ridiculous as it may seem, a restitutionary claim arising on a failure to contract is not brought in the court used to pursue a successful contract. The same applies to an action seeking restitution as a consequence of the voidness of a contract — for example, to undo the consequences of an interest rate swap agreement entered into by a local authority but void on account of an excess of their powers. The Lords in Kleinwort Benson274 felt constrained by European case law to perpetuate an unsatisfactory division of these claims. That such an action was outside the tort/delict head after Reichert was clear to the point of five Lord unanimity, but a very close division of opinion arose about whether restitution under a void contract could be seen as a matter relating to contact. Millett LJ provided a powerful essay in favour of a contractual solution275 but a bare majority of the Lords thought this contrary to European case law and that an anti-contractual claim is not contractual in nature.276
272 Reichert (n 221 above); TC Hartley ‘Immovable Property’ (1995) 16 EL Rev 69–71; C-518/99 Gaillard v Chekili [2001] 1 ECR 2771 ECJ (rescission of a contract to sell land in France). 273 CJJA 1982 (n 4 above) also fails to rule on internal UK allocation. 274 Kleinwort Benson HL (n 221 above); the issue was variant limitation periods. The ECJ had been unable to rule on facts internal to the UK: C-346/93 Kleinwort Benson v Glasgow CC [1995] I ECR 638 ECJ. 275 Kleinwort Benson v Glasgow CC [1996] QB 678 CA, 699ff Millett LJ. 276 Kleinwort Benson HL (n 221 above) 167–169 Lord Goff.
468
Contract Conflicts
[10.51] Europe currently lacks a rule for the selection of the law to be applied to a void contract, but the Rome II proposal includes special provisions for restitution.277 Law will follow that of any contractual relationship previously existing between the parties for obligations arising after the termination of that relationship, subject to a coincidence of joint residence and harmful event, but voidness will lead to a pure claim in unjust enrichment to be governed by the law of the country in which the enrichment takes place, subject in all cases to being overridden in favour of a manifestly closer connection.278 [10.52] A claim to avoid a voidable contract is different because here an agreement has been reached and the aim is to negate the effect of the contract on account of vitiating factors. Rescission of a voidable contract is treated as a contractual matter for the purposes of selecting forum and law,279 a welcome attempt to keep together all aspects of liability arising from a given legal relationship, and to be strengthened by the Rome II proposal.280 Restitutionary claims should be assimilated to the site-based claims on which they are symbiotic. It is possible for an invalid contract to sell land to include a valid choice of forum281 or law.
HO ME CO URT F O RUM
Home Court Forum 1
Non-site and unconnected home court
[10.53] A potential defendant to a personal action may usually expect to be sued in the courts of his domicile, meaning where he has established his permanent residence.282 This home court rule is adopted by the Regulation on Civil Jurisdiction,283 and in cases covered by this book will almost always be an alternative to a connected forum such as the place of performance of a contract, though it cannot displace an exclusive site-based jurisdiction over real actions affecting land but is only in play for personal actions. Any connection between the land being argued about and the home court forum is purely fortuitous.284 Choice of the court is left to the claimant (even a bank!) unfettered and unsupervised285 and is exercised by commencing proceedings in a particular court. For Rome II Proposal (n 10 above) §9. Habitual residence will be defined by §19. Rome II Proposal (n 10 above) §9. 279 Agnew HL (n 143 above). However another view is that contract can be used when the issue is denial of contract: Effer v Kantner (n 271 above); Dicey & Morris (n 1 above) [11–287]. 280 Rome II Proposal (n 10 above) §9; see above [10.50]. 281 Landgericht Berlin 26 0 530/02 (n 191 above). 282 European and UK domicile are quite different; see below [10.54]. 283 Regulation on Civil Jurisdiction (n 3 above) §3[1]; ex Brussels Convention (n 5 above) §3 first para; Lugano Convention (n 5 above) §2 first para; CJJA 1982 sch 4 (n 4 above) para 1(1). 284 For this reason the discussion here is brief; details can be found in Dicey & Morris (n 1 above) II [11R–263]. 285 Mahme Trust (n 49 above) (Lugano Convention §5). 277 278
Home Court Forum
469
example, a contract for the sale of land in London may be litigated in Greece if the buyer happens to live there. Or, if it is the seller who defaults and the buyer who takes action, the case may end up in the Arctic wastes if the seller happens to be a Lapp investing in the City of London. Worse, the home court may be invited to rule on land abroad using an alien law.286 Common law selections were more subtle and the home court rule is a radical departure,287 surprising and exorbitant.288 The common law power to ascertain the most convenient forum has been unwisely discarded.289
2
Domicile
[10.54] A defendant’s home court is determined by his domicile290 according to the law of the potential forum. European club countries differ greatly at the level of detail when determining the domicile of an individual. The Netherlands looks at the place of abode, whereas Belgium relies on entry on the population register, and Germany relies on a complex and multiple rule. United Kingdom law has a special test to be used when applying the European club rules based on the twin tests of permanent (continuous) residence and substantial connection,291 which may be presumed, rebuttably, after residence in a particular place for three months.292 Corporate domicile is determined according to an autonomous, European, definition, applied to a company’s ‘seat’, that is, its central administration or principal place of business,293 though the location of any branch of the company’s undertaking through which business is done provides an alternative.294 [10.55] It is open to a defendant to submit to the jurisdiction of a European state away from his domicile, to agree to play away 295; in Germany it is even Hill ‘Third Way?’ (n 46 above) 443. Jenard Report (n 148 above) 14. 288 White ‘CJJA 1982 I’ (n 4 above) 183. 289 A Briggs ‘Some Points of Friction between England and Brussels Convention Jurisdictions’ in M Adenas and F Jacobs EC Law in the English Courts (Oxford, Clarendon Press, 1998, 0-198-26592-1) 279 290 A defendant who moves afterwards to try to avoid service of the papers is still within the jurisdiction: Canada Trust Co v Stolzenberg (No 2) [1996] 1 WLR 547 CA, 563–565; on appeal [2002] 1 AC 1 HL. 291 CJJA 1982 (n 4 above) ss 41–44; Bank of Dubai v Abbas [1997] ILP 308 CA; Dicey & Morris (n 3 above) I [11R-072ff]. A presumption arises after three months. 292 CJJA 1982 (n 4 above) s 41(6); P Rogerson ‘Habitual Residence: the New Domicile’ (2000) 49 ICLQ 86–107. Contrast succession where there must be a severance of links with the former state under UK law: eg Cyganik v Agulian [2006] EWCA Civ 129, [2006] 1 FCR 406 (Cypriot living in England for 43 years retained Cyprus domicile). 293 Regulation on Civil Jurisdiction (n 3 above) §60; Kalfelis v Schröder (n 230 above); King v Crown Energy Trading [2003] EWHC 163, [2003] ILP 28; Base Metal Trading v Shamurin [2004] EWCA Civ 1316, [2005] 1 WLR 1157; Speed Investments v Formula One Holdings (No 2) [2004] EWCA Civ 152, [2005] 1 WLR 1936; this does not apply to the predecessor Conventions. 294 Regulation on Civil Jurisdiction (n 3 above) §5[5]. 295 Regulation on Civil Jurisdiction (n 3 above) §24; ex Brussels Convention (n 5 above) §18; Lugano Convention (n 5 above) §18; CJJA 1982 sch 4 (n 4 above) para 13. An appearance can be entered to dispute jurisdiction. 286 287
470
Contract Conflicts
prejudicial to ask for more time to dispute jurisdiction in Germany,296 but that’s Germans for you. Submission cannot displace the exclusive site-based jurisdiction over land.297 [10.56] The home court rule is universal in the sense that an EU court may be required to direct a case to the home court of a defendant outside Europe, as recently definitively settled in Owusu v Jackson.298 So universality is simple and certain, inconvenient and unsuitable.
3
Priority of actions
[10.57] Many personal actions affecting land can be heard in several different forums, a possibility which opens up the possibility of multiple actions from the same facts and clashes of priority. The priority rule is simple and obvious, for the first bite at a case is allocated to the court first seised of an action.299 This is so if all are civil actions300 and personal.301 All then hangs on the first step, the tiebreaker,302 since once one case is started it becomes pending, is a lis pendens,303 and subsequent courts must defer. This first step occurs304 either when the document instituting the proceedings is lodged with the court or when it is received by the authority responsible for service if (as in Greece) service must take place before the document can be lodged with the court. A supposedly level tennis court is decidedly skewed in favour of issue states.305 British courts treat proceedings as pending when served306 so that a writ issued in England and served in Italy trumps proceedings issued subsequently
Oberlandesgericht Frankfurt am Main [2000] Iprax 525, [2001] ECLYB [1055]. Regulation on Civil Jurisdiction (n 3 above) §24 (the court must decline of own motion); ex Brussels Convention (n 5 above) §17; Lugano Convention (n 5 above) §19; see above [4.17]. 298 C-281/02 Owusu v Jackson [2005] I ECR 383 ECJ. 299 Regulation on Civil Jurisdiction (n 3 above) §§27–28; ex Brussels Convention (n 5 above) §§21–22; Lugano Convention (n 5 above) §§21–22; Jenard Report (n 148 above). 300 Mazur Media v Mazur Media [2004] EWHC 1566, [2004] 1 WLR 2966 Lawrence Collins J (no European priority between an English civil suit and a German insolvency). 301 Not exclusive claims to land. 302 Dresser UK v Falcongate Freight Management [1992] 1 QB 502 CA, 514 Bingham LJ; Stolzenberg (No 2) (n 290 above) 10 Lord Steyn; Phillips v Symes [2006] EWCA Civ 654, [2006] 1 WLR 2598, [41] Neuberger LJ. 303 After judgment is given the question becomes one of res judicata: Tavoulareas v Tsavliris (No 3) [2006] EWHC 2643, [2006] 2 CLC 848 Andrew Smith J; on appeal [2006] EWCA Civ 1772, [2006] 2 CLC 1034. 304 When the claimant has taken all necessary steps under local procedural rules: Regulation on Civil Jurisdiction (n 3 above) §30[1–2]; this was left to national law under predecessor Conventions. However, defective service by the authorities does not lose the priority secured by first lodgement: WPP Holdings Italy v Benatti [2007] EWCA Civ 263, [2007] ILP 33. 305 P Kaye ‘Date on which an English Court becomes “Seised” of Proceedings’ [1995] JBL 217–242. 306 Pearce CA (n 50 above) 423–445 Roch LJ; Dresser UK v Falcongate (n 302 above); Neste Chemicals v DK Line (‘The Sargasso’) [1994] 3 All ER 180 CA; Scottish Committee on Jurisdiction and Enforcement (Maxwell Report, HMSO, 1980) [5.226]; Stolzenberg (No 2) (n 290 above) 24–26 Lord Hope. 296 297
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in Italy.307 This service rule was reaffirmed by Phillips v Symes308 to the detriment of the English claimant,309 but amendment is needed to an issue basis or a non-personal service basis either adopting the reasoning of Lord Hoffmann in Canada Trust Co v Stolzenberg (No 2)310 or by legislation. The current position is impossible: English claimants do not have priority until they have served proceedings and during the fiddling about needed to effect service abroad they can lose priority to proceedings commenced in an issue state. Service abroad may be allowed or may require permission from the English court311 and must be effected in a way authorised according to the procedural rules of the potential forum.312 The easiest and cheapest way is usually by post.313 There is also a procedure for service overseas using the national service authority314 involving either the EU Regulation on Service,315 or the Hague Convention on Service.316 Service requires receipt by the person being served and not merely lodging the documents for service.317 There is no hierarchy between methods of service.318 [10.58] A court lacking European club jurisdiction should declare as much of its own motion,319 for example because it involves land abroad or an action is pending elsewhere. A stay should be imposed provided the defendant has received the document instituting the proceedings in sufficient time to enable him to compose a defence,320 using EU rules on service.321 A second English court has to wait for prior proceedings in Germany even if there is an express choice of law and the law chosen is English,322 the earlier power to Molins v GD [2000] 1 WLR 1741 CA (Brussels). Phillips v Symes CA (n 302 above). 309 Two states might each hold that they held priority under their own rules. 310 Stolzenberg (No 2) (n 290 above) 15L–21E Lord Hoffmann. It is not open to the CA in view of the lukewarm attitude of the other Lords: Phillips v Symes CA (n 302 above) [51–54] Neuberger LJ. 311 Respectively Civil Procedure Rules (n 120 above) 6.19.1–6.19.1A, 6.20–6.21. 312 Olafsson v Gissurarson [2006] EWHC 3162 (QB), [2006] All ER (D) 345 Mackay J (personal service not effective in Iceland); G Panagopoulos ‘Substance and Procedure in Private International Law’ (2005) 1 Journal of Private International Law 69–92. 313 C-522/03 Scania Finance France v Rockinger Spezialfabrik für Anhangerkupplungen [2005] I ECR 8639 ECJ (direct transmission where state had not objected). 314 There are many slips such as failure to provide a translation: C-443/03 Leffler [2005] I ECR 9611 ECJ. 315 Service Regulation (EC) 1348/2000 [2000] OJ L160 37, as from May 31st 2001 (currently excluding Denmark but this is to be added); Civil Procedure Rules (n 120 above) 6.24; Practice Direction 6. A considerable jurisprudence is building up. 316 Hague Convention XIV (1965); Phillips v Symes (n 302 above). 317 Tavoulareas v Tsavliris (No 1) [2004] EWCA Civ 48, [2004] ILP 29, [37] Mance LJ; Tavoulareas v Tsavliris (No 3) (n 303 above); Tavoulareas v Tsavliris (No 4) [2006] EWHC 414, [2006] 1 CLC 466; on appeal [2007] EWCA Civ 1772, [2006] 2 CLC 1034; C-3/05 Verdoliva v Van de Hoeven [2006] I ECR 1579 ECJ, J[38]. 318 C-473/04 Plumex v Young Sports [2006] ILP 13 ECJ. 319 Regulation on Civil Jurisdiction (n 3 above) §26[1]; this differs from Brussels Convention (n 5 above) §20; Lugano Convention (n 5 above) §20. 320 Regulation on Civil Jurisdiction (n 3 above) §26[2]. 321 Service Regulation (n 315 above) §19. 322 Primacom (n 195 above). 307 308
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Contract Conflicts
grant an anti-suit injunction to prevent unsuitable forums having been discarded.323 [10.59] These rules are very different from and inferior to the former common law rule which allowed English courts to consider which court was the most appropriate to hear the action and to decline a case on the basis of forum non conveniens.324 Convenience is a factor in internal allocation between different parts of the United Kingdom,325 but is superseded in European litigation.326 A reasonable compromise would be to allow proceedings to be commenced as under the current European rules but then have a procedure to secure the transfer of proceedings to the best and most convenient court, establishing the applicable law and then making sure that the case was transferred to the same forum. Rigid application of the first come, first served principle can increase the attractions of forum shopping327 and allow scope for torpedoes.328 Shoppers should consider factors such as remedies, the ability to freeze assets, speed of process, enforcement proceedings against foreign assets, cost, ease and familiarity, and rules of disclosure and evidence329 and are quite entitled to shop in their own best interests.330 All advantage accrues to the early bird, so proceedings should be fired off at the first hint of a dispute.331
4
Addition of parties, parallel and related proceedings
[10.60] Once an action is issued against one defendant on the basis of his home court (possibly before it is pending in a service state) it is possible to make an addition of extra parties.332 Jurisdiction over a case includes power to decide a 323 Erich Gasser (n 194 above) J[72]; C-159/02 Turner v Grovit [2004] I ECR 3565 ECJ, J[24]; C Hare ‘A Lack of Restraint in Europe’ [2004] CLJ 570–574; T Kruger ‘The Anti-Suit Injunction in the European Judicial Space’ (2004) 53 ICLQ 1030–1104; Dicey & Morris (n 1 above) [12-049]. 324 CJJA 1982 ss 22, 49; Spiliades Maritime Corp v Consulex [1987] AC 460 HL; Re Harrods (Buenos Aires) [1992] Ch 72 CA; L Merrett ‘Uncertainties in the First Limb of the Spiliades Test’ (2005) 54 ICLQ 211–220. 325 CJJA 1982 (n 4 above) s 22; Ennstone (n 143 above). 326 Owusu v Jackson (n 298 above) J[36–40]; TC Hartley ‘EU and the Systematic Dismantling of the Common Law of Conflicts of Law’ (2005) 54 ICLQ 813–828; E Peel ‘Forum Non Conveniens and EU Ideals’ [2005] LMCLQ 363–377; A Briggs ‘Forum Non Conveniens and Ideal Europeans’ (2005) LMCLQ 378–382; G Cuniberti ‘Forum Non Conveniens and the Brussels Convention’ (2005) 54 ICLQ 973–982; J Harris ‘Stay of Proceedings and Brussels Convention’ (2005) 54 ICLQ 933–950; A Briggs ‘Death of Harrods’ (2005) 121 LQR 535–539; C Hare ‘Game Over or Time for Reflexion?’ [2006] JBL 157–179. 327 Hill ‘Third Way?’ (n 46 above) 444; N Hanson ‘Shopping Around’ [2004] 09 LSG 24–25. 328 Erich Gasser (n 194 above) J[19]; see above [10.37]. 329 S Robert-Tissot & D Smith ‘The Battle for Forum’ [2005] NLJ 1496–1497. 330 Messier-Dowty v Sabena [2000] 1 WLR 2040 CA; Bristow Helicopters v Sikorsky Aircraft Corporation [2004] 2 Lloyd’s Rep 150. 331 R King & S Colbran ‘Forum Shopping’ [2005] SJ 531–532; D Sandy ‘Importance of Early Forum Shopping’ (2005) 128 In-House Lawyer (Disputes Supplement) 46–49. 332 Regulation on Civil Jurisdiction (n 3 above) §6[1]; these issues are peripheral to this work and readers must look elsewhere for earlier Conventions and the copious case law.
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cross-action (a counter-claim),333 even if foreign and contested.334 Parallel proceedings involve the same cause of action and the same parties and these should all be decided where the issue is first seised.335 Proceedings are related to each other despite different subject matters if the issues are so closely connected that it is expedient for them to be heard and determined together to avoid the risk of irreconcilable judgments,336 likely cases involving different parties caught up in the same factual circumstances.
333 Regulation on Civil Jurisdiction (n 3 above) §6[3]; on adding a personal claim to a land action see above [4.26]. 334 Meeth v Glacetal (n 179 above). 335 Regulation on Civil Jurisdiction (n 3 above) §27. 336 Regulation on Civil Jurisdiction (n 3 above) §28[3]. The test is applied restrictively: Kalfelis v Schröder (n 230 above).
FA MI LY PR O PERTY
11 Family Property Europeanisation of Family Law. Connection to the Family. Family Law. Formality for Testation. Patterns of Testation. Succession. Trust Vehicles. Trust Forum. Trust Law. Interaction of Trust Law and Forum.
EUR O PEA N I SATI O N O F FA MI LY LAW
Europeanisation of Family Law 1
The European family
[11.01] Family law is in the process of Europeanisation. Human rights jurisprudence has transformed our conception of the nature of the family,1 the traditional nuclear group of man, wife and children has been exploded and rearranged into a much wider and more colourful range of permutations.2 Problems presented include legitimation, adoption of children, registration of same sex partners,3 and polygamy4; the writer can only apologise for how staid his own life must appear to the outside world. Another important source of convergence is the internal market rules on the movement of workers which have been expanded to allow family reunion rights to workers, to non-economic migrants, and to workers lacking EU citizenship. In these contexts and for social security the European family has had to be defined with precision and this process has been highly influential in the emergence of a common approach.5 Pressure for a substantive family law is a response to the sheer volume of cross-border relationships arising as a consequence of migration and freedom to settle elsewhere on the continent, every one creating a possible conflict. The EU hosts around 2.2 million marriages each year of which 350K are international.
1 C-122/99 etc D v Council EU [2001] I ECR 4319 ECJ; EC di Torella & E Reid ‘Changing Shape of the European Family and Fundamental Rights’ (2002) 27 EL Rev 80–90. 2 M Bell ‘Holding Back the Tide? Cross-border Recognition of Same-sex Relationships within the EU’ (2004) 12 ERPL 613–632; I Sumner ‘Transformers — Marriages in Disguise’ (2003) International Family Law 15–23. 3 Civil Partnership (Jurisdiction and Recognition of Judgments) Regs 2005, SI 2005/3334. 4 KA Byrne ‘Application of Private International Law Rules to the Construction and Variation of Trusts’ (2004) 11 Journal of International Trust and Corporate Planning 93–105. 5 See above [1.83ff].
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There are also 875K divorces, 10% international,6 but as many as 15% of German divorces involve spouses of different nationalities.7 Many of these own land outside their home state, since 2.5 million properties across Europe are owned by spouses who live in another EU state, one million by Germans alone. Present rules concentrate on the resolution of conflicts,8 but there is mounting pressure for substantive harmonisation.9 No attempt is made to replicate existing accounts.10 Growth in mobility has also increased the volume of cross-border successions which ought to be non-contentious,11 perhaps 100K each year in the EU-15,12 and obviously far more after eastwards expansion. Dying abroad is nothing new since, for example, English courts had to rule on the commorientes of some Germans killed by the Luftwaffe in the London blitz13 but the scale of the problem is new. Full harmonisation of substantive law is inconceivable,14 and the best that can be done is to create clear conflicts rules to determine which law is applicable.15 European succession laws are too complex to discuss in detail here and it would in any event be pointless to try to replicate the superb guides available,16 but some attempt is made to give a flavour of how succession rules affect land.
2
Forum rules
[11.02] Family disputes are not matters of Civil Jurisdiction.17 The gap in respect of divorce petitions and parental responsibility is plugged by a regime, generally called ‘Brussels II bis’,18 the bis referring to a subsequent amendment Independent July 19th 2006. Green Paper on Applicable Law and Jurisdiction in Divorce Matters (‘Rome III’) CP 18/05 [1], [3.5]; Germany has 1.8 million residents from the EU who are non-German. 8 Dicey & Morris The Conflict of Laws (London, Sweet & Maxwell, 14th edn by L Collins 978-0-421-88360-4) II [17], [18], [28]. 9 EE Sutherland ‘From Mutual Recognition to Harmonisation of Substantive Law’ (2006) 69 International Family Law 167–168; K Boele-Woelki ‘The European Agenda’ (2006) 69 International Family Law 149–154. 10 C Hamilton & A Perry Family Law in Europe (London, Butterworths, 2002, 0-406-94150-5); C McGlynn Families and the EU: Law, Politics and Pluralism (Cambridge, CUP, 2006, 978-0-521613354). 11 P North ‘Private International Law Change or Decay’ (2001) 50 ICLQ 477–508, 498. 12 European Parliament Motion for Resolution 2005/214 (INI), [A]. 13 Re Cohn [1945] Ch 5 Uthwatt J; Dicey & Morris (n 8 above) I [2-014ff]. 14 See below [11.33]. 15 Green Paper on Succession and Wills, SEC (2005) 270, [1], 3–4. 16 G Miller International Aspects of Succession (Aldershot, Ashgate, 2000, 1-85521-838-0); DJ Hayton European Succession Laws (Bristol, Jordans, 2nd edn, 2002, 08-5308-816-0). 17 Regulation on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (EC) 44/2001 [2001] OJ L12 1, §1[2](a); P Beaumont ‘ECJ and Jurisdiction in Civil Matters’ (1999) ICLQ 223–229, 227; O Remien ‘The EC Emerging Area of Freedom, Security and Justice’ (2001) 38 CML Rev 53–86 @ 70–74. 18 Matrimonial Jurisdiction Regulation (EC) 2201/2003 [2003] OJ L338 1, in force March 1st 2005 (EU-25 except Denmark); EC (Jurisdicition and Judgment in Matrimonial and Parental Responsibility Matters) Regs 2005, SI 2005/265. 6 7
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which added parental responsibility. Forum in matrimonial cases is based on habitual residence, usually that of joint residence or of the respondent to unilateral proceedings,19 but with a few awkward and exceptional cases where habitual residence by the petitioner may suffice20 and where forum shopping may be valuable.21 A first seised rule applies and that first court becomes the exhaustive forum in which to play out the entire family dispute.22 Brussels II also provides for recognition of matrimonial judgments from within the non-Danish EU on a reciprocal basis23 but although this applies to divorce, separation, annulment and child custody and costs,24 recognition does not extend to the property effects of a judgment which will need to be considered separately under bilateral agreements pending the introduction of a European regime. Matrimonial property is a distinct sector excluded and defined autonomously,25 and different again are succession and bankruptcy.26 There needs to be a rule ensuring that family law is that of the forum since courts struggle to apply foreign law properly.27 Succession disputes are excluded from current forum rules,28 including provisional or interim orders made during administration29 and in any event private international law concentrates on determining the law applicable to a succession and that law is used to decide upon a forum, following the site in the case of land.30 New European proposals are mainly directed towards selection of law but may address the question of forum31 and if they do so should strive mightily to keep forum and law together.32 Enforcement of trusts is a matter of civil jurisdiction, within the Regulation on Civil Jurisdiction, so long as the dispute eschews issues involving matrimonial property rights, succession and insolvency.33
Matrimonial Jurisdiction Regulation (n 18 above) §2[1]. See below [11.13]. 21 Commission Staff WP on Family Law COM (2005) 82 final, [3]; MR Marella ‘Harmonisation of Family Law’ (2006) 12 ECJ 78–105 @ 87ff. 22 See below [11.13]. 23 Matrimonial Jurisdiction Regulation (n 18 above) §14; Green Paper on Applicable Law (n 7 above) [3.5]. 24 Matrimonial Jurisdiction Regulation (n 18 above) §2[4]. 25 Matrimonial Jurisdiction Regulation (n 18 above) §1; Regulation on Civil Jurisdiction (n 17 above) §1[2](a); Case 29/76 LTU v Eurocontrol [1976] ECR 1541 ECJ; Case 143/78 De Cavel (No 1) [1979] ECR 1055 ECJ; Case 120/79 De Cavel (No 2) [1980] ECR 731 ECJ, 741; G White ‘Civil Jurisdiction and Judgments Act 1982 II’ [1983] Conveyancer 306–314, 311–313. 26 See above [9.56ff]. 27 Contributions on the Green Paper on Applicable Law () Law Society [15], [22]. 28 Regulation on Civil Jurisdiction (n 17 above) §1[2](a); [1996] BGE III 213, [1997] ECLYB [1995] II Cour Civile (not applicable to Swiss judgment). 29 Central Bank Of Iraq v OS [2000] Pas Lux 2, [2003] ECLYB [1920] Luxembourg CA (Brussels Convention). 30 Re Hayward [1997] Ch 45 Rattee J. 31 Green Paper on Succession and Wills (n 15 above) [1] at 4; European Parliamentary Motion (n 12 above) Annex, Recommendation [2]. 32 H Labes ‘Willing to Change’ (2005) 149 SJ 761–762. 33 Regulation on Civil Jurisdiction (n 17 above) §1; see below [11.43ff]. 19 20
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3
Family Property
Hague Conventions
[11.03] Another main source of European family law is the various agreements reached at the Hague Conference on Private International Law,34 the way currently being prepared for direct accession to the Hague Conference by the European Community.35 Perhaps the best known in the field is Hague XI, which agrees a basis for the use of foreign will formalities. Hague Convention XXV36 proposed a regime for the international consequences of matrimonial property regimes but it has turned out to be a damp squib with only five European signatories.37 Controversial aspects were the choice allowed to the parties, the mutability of the regime, use of habitual residence as well as the more normal nationality and the possibility of opting for a site-based rule for land.38 The failure has passed the baton to the EU which has published a Green Paper raising the prospect of property reform in the EU.39 Another failure was Hague XXXII40 which attempted to find a unified European succession law41 or more accurately commonly agreed conflicts principles, another area in which the EU has picked up the baton.42 [11.04] Conflicts of trusts give rise to tricky problems with trust law43 which are dealt with by the Hague Convention XXX which also governs the recognition of trusts across borders.44 Uptake on the continent is limited, as explained below,45 but naturally the United Kingdom rushed in primary legislation, the Recognition of Trusts Act 198746 as from August 1987.47 The Act is wider than the Convention (limited to express trusts) in including unwritten trusts such as 34 Hague Conference on Private International Law (); the website has convenient tables of signatures and ratifications. 35 Council Decision 2006/79/EC [2006] OJ L297 1. 36 Hague Convention (n 34 above) XXV. 37 See below [11.10]. 38 Hague Convention (n 34 above) XXV §§3, 6. 39 Green Paper on Applicable Law (n 7 above) [3.2–3.5]; C Bradley ‘European Harmonisation’ (2005) 35 Family Law 645–649; G Steenhoff ‘A Matrimonial Property System for the EU’ (2005) 06 International Family Law 74–77. 40 Hague Convention (n 34 above) XXXII §1[1]. 41 Contribution on the Green Paper on Succession and Wills (EU Commission, Justice and Home Affairs, website) by EB Crawford & JM Carruthers [1]. 42 Green Paper on Succession and Wills (n 15 above); DJ Hayton ‘Wills and Succession in the EU’ (2005) 66 Trusts Estates Law & Tax Journal 11–13; J Fleming & B Eyre ‘Making Family Law Akin’ (2005) 48 European Lawyer 25–28; Labes (n 32 above); ‘EU Probate Law’ [2005] 27 LSG 8. 43 For forum see below [11.43ff]. 44 Hague Convention (n 34 above) XXX §1. 45 See below [11.36]. 46 Recognition of Trusts Act 1987, c 14, s 1(1). 47 Hague Convention (n 34 above) XXX §22; Recognition of Trusts Act 1987 (n 46 above) s 1(5); SI 1987/1177 (prospective only); Re Carapiet [2002] EWHC 1304, [2002] WTLR 989, [1–14] Jacobs J (settlement 1961, death 1999); Chelleram v Chelleram (No 2) [2002] EWHC 632, [2002] 3 All ER 17; DJ Hayton ‘The Hague Convention on the Law Applicable to Trusts and Their Recognition’ (1987) 36 ICLQ 260–282, 281.
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those that are constructive and resulting trusts imposed by judicial decision,48 and it also operates to select law as between parts of the United Kingdom and most overseas territories.49
4 EU family law proposals [11.05] Pressure was applied by the Council which met at Laeken50 for moves towards a harmonisation of family law, including marriage, divorce, financial aspects and property law51 to be called Rome III.52 Family topics fall outside existing legislation, but all need to be settled together and in the same court.53 A titanic clash was in prospect when our discretionary matrimonial pot hit an iceberg in the form of the fixed matrimonial property regimes of civilian Europe, but the British government has now opted out of the proposal.54 A useful summary is provided by Marella, who also rounds up the current position in terms of the property of cohabiting heterosexuals and same-sex partners.55 Law and forum must be kept together, which implies that the forum rules should be tightened to reduce the potential range. Also under discussion in the same project are matrimonial property regimes. Reform must first determine whether there is support for a choice of property law and departure from immutability.56 If not, and if the status quo is scarcely sustainable, there needs to be a harmonised conflicts rule with a connecting factor that commands general support and matches couples’ legitimate expectations, at the same time meshing with the forum rules to the extent of keeping law and forum together. Existing bilateral agreements adopt a wide diversity of governing principles to select law by the closest connection (for example, Germany), the forum (the United Kingdom), nationality (France) or by allowing limited choice (Germany, the Netherlands, Spain and Belgium).57 48 Recognition of Trusts Act 1987 (n 46 above) s 1(2). It excludes by s 1(3) (§§15–16) protection of minors, effects of marriage, succession, transfer of title, security, insolvency, and title of third parties acquiring in good faith. 49 Recognition of Trusts Act 1987 (n 46 above) s 1(4); Hague Convention (n 34 above) XXX §§17, 23–24; Recognition of Trusts Act 1987 (Overseas Territories) Order 1989, SI 1989/673, art 2 and sch 1. 50 Laeken JHA Council Report November 16th 2001 [1–4]. 51 Green Paper on Applicable Law (n 7 above) [3.2–3.5]; EC di Torella & A Masselst ‘Under Construction — EU Family Law’ (2004) 29 EL Rev 32–51; M Antokolskaia ‘Harmonisation of Family Law: Old and New Dilemmas’ (2003) 11 ERPL 28–49; CMV Clarkson ‘Brussels III — Matrimonial Property European Style’ (2002) 32 Family Law 683–686; C Bradley ‘European Harmonisation’ (2005) 35 Family Law 645–649; G Steenhoff ‘A Matrimonial Property System for the EU’ (2005) 06 International Family Law 74–77; Marella ‘Harmonisation’ (n 21 above). 52 For Rome I (contract) and Rome II (non-contractual obligation) see above [10.13], [10.43ff]. 53 Applicable Law Responses (n 27 above) Law Society [20]. 54 ‘Rome III’ [2006] 42 LSG 4; [2006] NLJ 1662; see below [11.15]. 55 Marella ‘Harmonisation’ (n 21 above) 102ff. 56 S Samuel ‘Migrations and Private Law’ (1945) 6 Toronto Law Journal 145–191; Bavarian Court of Appeal, December 12th 1952, I Z 247/1952; ‘Germany — Matrimonial Property Régime’ (1955) 4 ICLQ 68–70. 57 Commission Staff WP (n 21 above) [1], [3.1.4].
480
Family Property CO N N ECTI O N TO THE FA MI LY
Connection to the Family 1
Need for a single connecting factor
[11.06] A crucial first step to a common European family law and law of inheritance is to agree a connecting factor. States at present apply different rules to divorce, matrimonial property regimes, testation formality, and succession, so a single connecting factor would greatly reduce segmentation and fragmentation. In broad terms common law systems use domicile whereas civilian systems mainly use nationality, but there is a move towards habitual residence as a new European standard. Since the adoption of habitual residence as a basis for matrimonial jurisdiction, alignment is now needed of rules for matrimonial property regimes and succession. In particular a unified succession system is needed with a single connecting factor, directed in this context to selection of law, but designed to keep the selection of forum in step. Connecting factors currently vary across the continent to what Hayton calls a ‘ridiculous’ degree.58
2
Nationality and domicile
[11.07] Nationality is the normal connecting factor for succession purposes in civilian countries, including Austria, Finland, Germany, Greece, Italy, the Netherlands, Portugal and Spain.59 This is determined at death but there are problems with dual nationals and also with the many people who change their residence without seeking host state nationality60; application of nationality can be very arbitrary when a person happens to be born in one state but is moved when still in arms. Domicile is adopted throughout the common law world including England and Wales, two Irelands, and the off-shore islands; also Scotland61 and Cyprus and the civilian island of Malta. A baby takes a domicile of origin from his father and this continues unless and until changed to a domicile of choice.62 Domicile is unitary, which is a good thing, and it also reflects closely the testator’s intention to accept a particular system, but it is viewed by civilians, with reason, as too uncertain and tenuous as compared with the more fact-based habitual
Green Paper Response (n 41 above) DJ Hayton 1–2. Hayton European Succession (n 16 above) [12.61] (Italy), [17.87] (Spain), Appendix C (summary). 60 DJ Hayton ‘Determination of the Objectively Governing Successor to Deceased’s Estates’ in Conflict of Succession in the EU (); also published as H Dörner & P Lagarde Comparative Law Study on the Rules governing Conflicts of Jurisdiction and Conflicts of Laws in Wills and Succession in the EU (Berlin, German Notary Institute, 2004, 3-931199-19-3). 61 Hayton European Succession (n 16 above) Appendix C. 62 Dicey & Morris (n 8 above) I [6R-025], [6R-033]; Gaines-Cooper v Revenue & Customs Commissioners [2006] UKSPC 568, (2006) 9 International Trust Law Reports 274. 58 59
Connection to the Family
481
residence.63 It scarcely features as a factor in relation to matrimonial property regimes but it is important in relation to common law succession.
3
Towards habitual residence
[11.08] So the best connecting factor available is habitual residence, to which continental fashion has shifted under the influence of the various Hague Conventions.64
(1)
Matrimonial forum
[11.09] Forum for divorce petitions and similar matrimonial disputes as well as parental responsibility under ‘Brussels II’65 is based on habitual residence. Details are considered below66 because the crucial thing is whose residence; this question is easy enough if the petition is joint or the residence is shared, but generally otherwise it should be that of the respondent to unilateral proceedings.67 Thus a German court is appropriate for a couple married in Yugoslavia but resident in Germany.68 Exceptionally, in a few cases habitual residence by the petitioner may suffice, giving rise to forum shopping and a ‘rush to court’ to secure priority,69 and there may also be residual cases where no residence is habitual and the couple are left without a court.70
(2)
Matrimonial property
[11.10] Matrimonial property regimes are currently left to bilateral agreements on public international law. Conflicts rules are being studied by the Commission,71 which has identified a wide diversity of governing principles: the law taken may be selected by nationality (France), closest connection (for example, Germany) or there may be a limited choice (Germany, the Netherlands, Spain 63 EF Scoles ‘The Hague Convention on Succession’ (1994) 42 American Journal of Comparative Law 85–123, 88, 91, 99. 64 Green Paper on Succession and Wills (n 15 above) Q2; Dicey & Morris (n 8 above) I [6-125]. 65 Matrimonial Jurisdiction Regulation (n 18 above). 66 See below [11.13ff]. 67 Matrimonial Jurisdiction Regulation (n 18 above) §2[1]. Multiple habitual residence is allowed: Ikimi v Ikimi [2001] EWCA Civ 873, [2002] Fam 72; and an overstayer in the UK may have habitual residence: Mark v Mark [2004] EWCA Civ 168, [2005] Fam 267. 68 Oberlandesgericht Frankfurt am Main 5UF 11/99 [2001] ECLYB [1563]. 69 See below [11.13]. 70 Matrimonial Jurisdiction Regulation (n 18 above) §3[1](b), 3[2]; Green Paper on Applicable Law (n 7 above) [2.4], [3.5]; Commission Staff WP (n 21 above) [3.6]. 71 Commission Staff WP (n 21 above) [1]; JD Falconbridge Essays on the Conflict of Laws (Toronto, Canada Law Books, 2nd edn, 1954) 105; A Briggs Conflict of Laws (Oxford, Clarendon Press, 2002, 0-19-876333-6) 217; P North Essays in Private International Law (Oxford, Clarendon Press, 1993, 0-19-825826-7) 191; PM North & JJ Fawcett Cheshire & North’s Private International Law (London, Butterworths, 1999, 0-406-90596-7) 1015ff; TC Hartley ‘Matrimonial Property Rights in the Conflict of Laws: A Reconsideration’ ch 9 in J Fawcett Reform and Development of Private International Law: Essays in Honour of Sir Peter North (Oxford, OUP, 2002, 0-19-925008-1) 225ff.
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Family Property
and Belgium),72 though the United Kingdom looks on indifferently and allows the forum to decide. Most states use nationality, select the regime at the time of marriage, override the law of the site of any home, and do not allow the selection to be affected by subsequent changes.73 However, the failed Hague Convention XXV74 lights the way forward by allowing a choice either before marriage or subsequently,75 the range of choice being from the following laws: 앫 the nationality of either spouse, 앫 the habitual residence of either spouse at the time of designation, or 앫 the first habitual residence established after the marriage.76 Spouses making no effective choice would have a regime selected for them according to their first habitual residence after marriage,77 except in states opting instead to apply the law of their common nationality.78 Also novel is the facility for spouses to opt for site-based treatment of their land (immovables), either for existing land or limited to future acquisitions.79 Limited uptake severely limits the practical utility of this Convention. Property reform in the EU may be on the way when the responses to a Green Paper are analysed to see whether there is support for a choice of property law by couples, or for any of the other of a long list of possibilities.80 If the status quo is scarcely sustainable and a freedom of choice proves too controversial in civilian countries, a harmonised conflicts rule based on habitual residence may best match couples’ legitimate expectations, and if so it should mesh best with the forum rules.
(3)
Succession
[11.11] Were a visitor to die on a fortnight’s holiday in Vilnius, Latvian succession law should not apply to his estate since pure residence is far too flimsy a connection. Residence needs to be habitual, either tested at the time of death or Commission Staff WP (n 21 above) [3.1.4]. See below [11.16]. 74 Hague Convention (n 34 above) XXV signed 1978 but only in force September 1st 1992; current European signatories are Austria, France, Luxembourg, the Netherlands and Portugal. 75 Hague Convention (n 34 above) XXV §§3, 6. A choice might be implied from a marriage contract: §13. 76 The Convention caters for ultra-sophisticates who set up their homes in different countries: Hague Convention (n 34 above) XXV §4[3]. Closest connection is used if the spouses lack both a common habitual residence and common nationality. 77 Hague Convention (n 34 above) XXV §4. This may be changed (prospectively for land) by establishing habitual residence in another state along with nationality or where the couple have endured marriage for ten years: §§7–8. Spouses are able to elect for the whole of their property (§13) except for land. 78 Hague Convention (n 34 above) XXV §5. Common nationality is also the test in a non-Convention state where habitual residence is first established after marriage in a state (Convention or non-Convention) applying nationality. 79 Hague Convention (n 34 above) XXV §§3, 6. 80 Green Paper on Applicable Law (n 7 above) [3.2–3.5]; C Bradley ‘European Harmonisation’ (2005) 35 Family Law 645–649; G Steenhoff ‘A Matrimonial Property System for the EU’ (2005) 06 International Family Law 74–77; Dicey & Morris (n 8 above) II [28-021ff]. 72 73
Family Law
483
perhaps better by being habitual for a fixed period before death.81 Some variant of this connection is adopted by several European succession systems, in Belgium, Denmark, France, Luxembourg, Sweden and Switzerland.82 It is easier to change than nationality and more likely to correspond to a person’s natural expectation. Although it could operate arbitrarily and lack clarity,83 it is the most satisfactory test even when there are forced heirs to protect. It needs a practical presumption to make it workable84 and a common and Europe-wide definition.85 Like any changeable connection it brings with it the need to keep a testator’s will under constant review.86
4
Choice of connection
[11.12] It would be advantageous, and a major innovation, to allow a choice of matrimonial property regime87 as well as a succession regime.88 Total freedom of choice would lead to a massive expansion of English probate and the collapse of civilian succession regimes, since it is the testator who would be given the choice and is bound to favour wider freedom even if they do not intend to use it and the relatives interested in reserved shares would not be invested with any choice. For that reason a total freedom of choice is inconceivable. There does, however, seem to be quite a consensus for a limited choice between the states of habitual residence and nationality, though this would need to be reconciled somehow with reserved shares and overcome opposition in eastern Europe.89 An additional Europe-wide scheme could be created on an opt-in basis.
FA MI LY LAW
Family Law 1
Forum for divorce proceedings
[11.13] Forum rules for divorce petitions are enacted under the ‘Brussels II bis’ Hague Convention (n 34 above) XXXII §3. Hayton European Succession (n 16 above) Appendix C. 83 Hayton ‘Objective Successor’ (n 60 above) [3.3]; also in Dörner & Lagarde (n 60 above) observations by MH ten Wolde, E-M Bajons and H Dörner. 84 German Notary Institute in Dörner & Lagarde (n 60 above); also Hayton ‘Objective Successor’ (n 60 above) [3.5]. 85 It derives from the Hague Conventions and is deliberately left non-technical in that context: Dicey & Morris (n 8 above) I [6-125]. 86 Hayton European Succession (n 16 above) [1.46]. 87 See below [11.16]. 88 Green Paper on Succession and Wills (n 15 above) [2.4], QQ5–9. 89 Hague Convention (n 34 above) XXXII §5; European Parliament Motion (n 12 above) Recommendation [2]; Labes (n 32 above); D Hayton ‘Objective Successor’ (n 60 above) [3.5]; also supported in Dörner & Lagarde (n 60 above) by A Daví and E-M Bajons. 81 82
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Family Property
Regulation.90 Grounds for divorce vary considerably across the continent, and include consent, irretrievable breakdown, fault, factual separation and unilateral request,91 with corresponding differences to the grounds for annulment and separation. Forum in matrimonial cases is based on habitual residence, of either spouse if the petition is joint or the residence is shared, but that of respondent to unilateral proceedings.92 Exceptionally, habitual residence by the petitioner may suffice, that is after residence by the petitioner in a state for one year before the application or even a shorter period of six months in the state of nationality (or common law domicile) or where the spouse is settled on a long-term basis. These exceptions are problematic because a respondent can be forced to travel overseas to court. Residual cases outside the above list will be fed to the state of civilian nationality or common law domicile,93 though this may still leave a European couple without any court at all.94 Internal allocation within split jurisdictions is made according to habitual residence, nationality, or common law domicile.95 A particular court, once it is first seised, becomes the exhaustive forum in which to play out the entire family dispute including cross-petitions, ancillary proceedings, and reruns between the same spouses,96 courts elsewhere being obliged to decline a case of their own motion.97 This first seised rule is odd in the extreme98 in that it creates an incentive to end a marriage quickly and it gives scope for the wealthy and second-home-owners to seek out laxer continental divorce laws.99 An asset-rich man able to afford homes in several different states should avoid England, the most expensive divorce location in Europe,100 but should move to Germany or Sweden before paying off his wife,101 whereas a woman should make a beeline for the welcoming arms of the English Family Division. Residents of Catholic countries may be able to split more quickly by moving to Protestant jurisdictions. There is nothing inherently wrong in shopping around to suit one’s own financial convenience.102 Matrimonial Jurisdiction Regulation (n 18 above); see above [11.02]. Commission Staff WP (n 21 above) [3]; Marella ‘Harmonisation’ (n 21 above) 87ff. 92 Matrimonial Jurisdiction Regulation (n 18 above) §2[1]; Oberlandesgericht Frankfurt am Main 5UF 11/99 (n 68 above). 93 Matrimonial Jurisdiction Regulation (n 18 above) §3[1](b), 3[2]. 94 Green Paper on Applicable Law (n 7 above) [3.5]; Commission Staff WP (n 21 above) [3.6]. 95 Matrimonial Jurisdiction Regulation (n 18 above) §41. 96 Matrimonial Jurisdiction Regulation (n 18 above) §3[3]; Re A [2003] EWHC 2911 (Fam), [2004] 1 All ER 912 Sumner J. 97 Matrimonial Jurisdiction Regulation (n 18 above) §§17–19; M v H B-1024-03 [2003] UfR 18970, [2003] ECLYB [896]; Wermuth v Wermuth [2003] EWHC 3049, [2003] 1 FLR 1022 Bracewell J; XX v XX [2002] J Aran 3286, [2003] ECLYB [261] Spanish Tribunal Supremo. 98 It is under review: Green Paper on Applicable Law (n 7 above) [3.4]; one radical option being considered is to allow spouses a choice. 99 Applicable Law Response (n 27 above) Law Society [7]; Independent March 6th 2001. 100 Miller v Miller [2006] UKHL 24, [2006] 2 AC 618; A Woelke ‘Shopping Around’ (2001) 5 Family Law Journal 2–3. A wealthy husband called Moore is reputed to have spent £1.5 million in costs simply to dispute forum: Guardian April 21st 2007. 101 In the latter there is no maintenance: N Hanson ‘Shopping Around’ [2004] 09 LSG 24–25. 102 R v R [2003] EWHC 2113, [2005] 1 FLR 386. 90 91
Family Law
485
A rule is needed to ensure that the law applied is that of the forum since courts struggle to apply foreign law properly.103 [11.14] Recognition of matrimonial judgments given in the EU is dealt with on a reciprocal basis to reflect the mutual recognition of civil judgments.104 Orders affected are divorce decrees, orders for separation or annulment of marriages, child custody orders in proceedings ancillary to divorce (but not in free-standing proceedings) and matrimonial costs orders.105 A certified judgment must be followed irrespective of arguments about excess of jurisdiction or differences in the applicable law and without succumbing to the temptation to question the decision.106 Refusal of recognition of a matrimonial judgment must usually be based on technicalities such as failure to effect service before securing a default judgment, irreconcilability with an earlier judgment, or the existence of a pending appeal, though there is also a more substantive residual power to refuse recognition to a judgment manifestly contrary to public policy in the recognising state.107 The documents to be produced are set out, including a copy of the judgment,108 proof of service of a default judgment, and a certificate from the state of origin of the judgment setting out prescribed details about the court making the order, the spouses, the marriage and the divorce judgment.109 No specific procedure is provided for updating documents recording the change of the parties’ civil status. Property effects of a judgment will need to be considered under bilateral agreements pending the introduction of European legislation.
2
Rome III proposal: family law and family property
[11.15] Plans are afoot for a harmonisation of family law, include marriage laws, divorce, financial issues and property law.110 All these topics fall outside existing legislation, including Rome I,111 but it is crucial to settle together and in the same court family and financial aspects.112 The British government has opted out.113 Marella provides a useful summary which also rounds up the current Applicable Law Responses (n 27 above) Law Society [15], [22]. Matrimonial Jurisdiction Regulation (n 18 above) §14; Green Paper on Applicable Law (n 7 above) [3.5]; see above [9.75ff]. 105 Matrimonial Jurisdiction Regulation (n 18 above) §2[4]. 106 Matrimonial Jurisdiction Regulation (n 18 above) §§17–22. 107 Matrimonial Jurisdiction Regulation (n 18 above) §§24–27; A v B [2003] JT 55, [2003] ECLYB [1355] (Belgian courts disapplied Moroccan refusal to award maintenance to a woman). 108 Matrimonial Jurisdiction Regulation (n 18 above) §37. 109 Matrimonial Jurisdiction Regulation (n 18 above) §39 and Annex 1. 110 Green Paper on Applicable Law (n 7 above); for literature see n 80 above. 111 Rome Convention (consolidated) [2005] OJ C334 1, §1; R Plender The European Contracts Convention (London, Sweet & Maxwell, 2nd edn, 2001, 0-421-73860-X) [4.09]. 112 Applicable Law Responses (n 27 above) Law Society [20]. 113 [2006] 42 LSG 4; [2006] NLJ 1662. Another opponent is Sweden, worried that socially conservative countries could block divorce. 103 104
486
Family Property
position in terms of the property of cohabiting heterosexuals and same-sex partners.114 A few tasters; Finland allows no-fault divorce after only six months; the Netherlands and Sweden plump for 50/50 division but differentiating in Holland between property brought into the marriage and that acquired during the course of the marriage,115 the latter being obviously more apt for the judgment of Solomon. Recognition of pre-nuptial agreements is common on the continent of Europe116 whereas English law disregards the actual wishes of the parties. Law and forum must be kept together, tightening the forum rules to reduce the potential range of laws. [11.16] Current regimes do not touch matrimonial property at all, which is a distinct sector, and different again are wills, succession and bankruptcy,117 so most family disputes are outside Brussels I (that is, the Regulation on Civil Jurisdiction).118 Of course a decision to divorce will affect the couple’s property, and this can easily have an international dimension where, for example, a couple with a house in London divorce in Paris, so that any order made by the French court might affect the ownership of an English house. Matrimonial property regimes are currently left to bilateral agreements on public international law. The review by the Commission119 will need to determine an EU approach, given the wide diversity of existing principles.120 The key issue is whether to stick with immutability121 or whether to follow the new trend in Europe for a limited choice as was proposed by Hague Convention XXV122 which has failed but which signals issues that need to be faced up to. The most likely range of choices would be the nationality or habitual residence of either spouse123 and habitual residence would also be the selection made in default of a choice.124 The law determined by the Convention may be rejected only if it is manifestly incompatible with public policy (ordre public).125 Land (an immovable) would be in a more complex position than at present. Spouses may choose to apply their matrimonial property regime to their land or to opt for the law of the site of land either for existing holdings or for future acquisitions.126 Whatever Marella ‘Harmonisation’ (n 21 above) 102ff. The Netherlands is also liberal in recognising homosexual marriage. 116 E Ries ‘Pre-marital Agreements and EU Law — Where do we Start?’ [2005] 09 International Family Law 165–167. 117 See above [9.56], [11.26]. 118 Regulation on Civil Jurisdiction (n 17 above) §1[2](a); ex Brussels Convention [1978] OJ L304 36, §1[2]; Lugano Convention [1988] OJ L319 9, §1[2]. 119 Commission Staff WP (n 21 above) [1]. 120 Commission Staff WP (n 21 above) [3.1.4]. 121 See above [11.05] n 56. 122 Hague Convention (n 34 above) XXV; see above [11.10]. By §2 it is universal so a case may be directed to a non-Convention state. 123 Hague Convention (n 34 above) XXV §§3, 6, 13 (choice implied from marriage contract). 124 Hague Convention (n 34 above) XXV §4. A selection may be changed (prospectively for land) by establishing habitual residence in another state along with nationality or where the couple have endured marriage for ten years: §§7–8. 125 Hague Convention (n 34 above) XXV §14. 126 Hague Convention (n 34 above) XXV §§3, 6. 114 115
Formality for Testation
487
law is used will determine the proprietary effect and priority of matrimonial regimes on third parties.127 This may have failed by challenging the existing practice of applying matrimonial property regimes by nationality at the time of marriage and overriding the law of the site of a couple’s home and other land128 and also because of doubts about departing from the principle of immutability.129 An EU Green Paper has raised the prospect of property reform in the EU including the possibility of choice of property law by couples, though to date there is little more than an enumeration of a list of possibilities.130 If the status quo is scarcely sustainable and choice is too controversial there must be a search for a harmonised conflicts rule relying on a connecting factor commanding general support and matching couples’ legitimate expectations, meshing with forum rules so as to keep law and forum in step. It would clearly be desirable for there to be some interrelationship between the matrimonial property regime applying to a family home while a couple are alive and the succession regime imposed on death. Succession needs to be universal (including land in a single estate) and a common connection is the best way to align matrimonial and succession regimes.131
F O R MA LI TY F O R TESTATI O N
Formality for Testation [11.17] The Hague Convention XI on the form required of testamentary dispositions132 is likely to provide a model for future EU rules since its signatories already include most EU-15 states,133 eastern accessors, EEA-3 states and some parts of the Balkans. Form includes written form, signature and attestation but also age limits for testamentary capacity, nationality requirements and personal characteristics of the testator.134 Mutual recognition of wills across Europe is under consideration as part of a wider review of succession, and this is likely to revisit the ‘impossible’ issue of registration of wills.135 When land is devised by a will it is possible136 but by no means necessary for Hague Convention (n 34 above) XXV §9. Commission Staff WP (n 21 above) [3.1.4]. 129 See above [11.05] n 56. 130 Green Paper on Applicable Law (n 7 above) [3.2–3.5]. 131 See above [11.10], below [11.11]. 132 Hague Convention (n 34 above) XI (1960). It applies to post-accession deaths (§8) unless limited to post-accession wills (§13). For domestic UK rules see Dicey & Morris (n 8 above) II [27R-028]. 133 Except Italy and Portugal (though Italy now has similar rules); Dörner & Lagarde (n 60 above) 21. 134 Hague Convention (n 34 above) XI §5. 135 Green Paper on Succession and Wills (n 15 above) [2.2], Q3, [6]; European Parliament Motion (n 12 above) Recommendation [9]; Green Paper Response (n 41 above) EB Crawford and JM Carruthers [8]. 136 Hague Convention (n 34 above) XI §1(e); also joint wills (two wills in one document): §4. 127 128
488
Family Property
the will to be site-based. Hague XI allows a testamentary disposition to be validated137 from a good range of laws and this facility is often used. An English couple with a holiday home in Spain may be well advised to make a Spanish will covering their land in that country, though it is necessary to be scrupulous about the respective scopes of the two wills138 to make sure that they are clearly defined, cover the whole field and do not overlap. Careful consideration is needed to the scope allowed to freedom of testation by the law of the succession and the fact that forced heirship will apply in most civilian states.139 [11.18] Non-site wills are equally permissible. A will made in one state can affect land in another, the object being mutual recognition across Hague XI states, and in future across the EU.140 A testator is not allowed to use just any old law, but is allowed a liberal choice from a range of laws including141: 앫 앫 앫 앫 앫 앫
the place where the will is made, the testator’s nationality, the testator’s domicile,142 the habitual residence of the testator, the site of land, or any extra formality system recognised domestically.
Except in the first category the test may be applied either when the will is made or at the time of the testator’s death. Reservations may limit the choice: a forum can refuse to apply foreign laws which are manifestly contrary to its ordre public143 and may deny recognition to an oral will by one of its nationals,144 and there is also a limited power to refuse a will made abroad affecting property in the forum state.145
137 Including revocation by testamentary disposition (as opposed to destruction): Hague Convention (n 34 above) XI §2; thus a French will may revoke an earlier English one. 138 Re Seegert (2005–2006) 8 ITELR 1 Royal Court of Jersey. 139 See below [11.20]. 140 Green Paper on Succession and Wills (n 15 above) [2.2]. 141 Hague Convention (n 34 above) XI §§1, 3. 142 Domicile is determined by the forum: Hague Convention (n 34 above) XI §9; but a reservation requires English rules to be used to determine domicile in England. 143 Hague Convention (n 34 above) XI §7. 144 Hague Convention (n 34 above) XI §10. Reservations must be made before accession. 145 Hague Convention (n 34 above) XI §11. If (i) validity depends upon the place where the will was made, (ii) the testator had moved elsewhere before his death, and (iii) the testator was a national of the forum state and also domiciled or habitually resident there.
Patterns of Testation
489 PATTER N S O F TESTATI O N
Patterns of Testation 1
Cross-border land holding
[11.19] Suppose an English couple buy a holiday home abroad and one of them — perhaps the husband — dies. They probably already own their main home in England as joint tenants so title will pass automatically to the wife as survivor and anything which is not joint can be left by the husband’s will using the wide freedom of testation he enjoys as an English testator, although he is likely to leave everything to his spouse. If he dies without an effective will English intestacy law will select his next of kin, an eventuality which may result in his property being split between widow and children. A unified succession is applied to all his property in England including freehold land, leasehold land, chattels and intangibles, everything in a single pot, and the whole administered by personal representatives, either executors or administrators as the case may be. This leaves the second home abroad as the subject of an international succession. When the common law applies (by English domicile), the first step is to segregate immovables and movables.146 Movables (including in this category any foreign furniture and fittings) are governed by the law of the succession determined by nationality or habitual residence at death or common law domicile at the time of death.147 Immovables pass under the law of the site which may or may not impose a foreign succession covering the second home and fixtures.148 A civilian succession to part of an estate the bulk of which is subject to a common law succession creates all sorts of mischief. English testators expect the flexibility to do as they want subject only to their duty to provide for dependants but civilians lack this familiar and welcome freedom since the closest relatives have rights in an intestacy and a smaller reserved share which is immune from being reduced by testamentary dispositions. So an English couple owning a foreign second home cannot assume that the survivor will hold it absolutely and it will generally have to be shared with close relatives, the widow with the children.149 Of course it should be said that if the boot was on the other foot, a civilian state national holding a second home in England, this could be just as disruptive of a civilian succession. This problem is more limited because most civilian states apply a unitary succession so that once seised to the succession they will apply it to the land in the same way as all the other property. Forced heirship problems could arise in the minority of civilian states which divide the estate between land and movables.
146 147 148 149
See below [11.27]. See below [11.27]. This depends upon the possibility of renvoi, discussed below [11.29]. For one possible solution see below [11.20].
490
2
Family Property
Reserved share (forced heirship)
[11.20] Civilian systems recognise that family members close to a deceased have an automatic title to a part of the deceased’s estate — a reserved share — which circumscribes the deceased’s freedom of testation to a considerable degree. The same system operates in Scandinavia.150 Matrimonial property never falls into the estate and never becomes subject to heirship.151 Interaction between the site of the home and the matrimonial property regime is complex and might give a surviving spouse a double share or nothing.152 Specific regimes need to be considered carefully and in detail. Any conflict about a reserved share is determined by law of succession153 and this presents real problems for English testators with immovable assets abroad. Possible solutions are dual wills, transfer of assets to a lifetime trust154 or holding a holiday home through a corporate vehicle.155 The gravest danger perhaps is claw-back of lifetime gifts since heirs can invalidate lifetime gifts which reduce their inheritance long after the gift has been made, the period ranging from five years all the way up to thirty years, a procedure quite alien to common law thinking and one which has the potential to upset any subsequent title or trust.156 A succession takes effect on the free property not affected by the matrimonial regime. The major characteristic of a civilian succession is the forced heirship. Property passes automatically to an heir who then has to pay all debts and taxes and legacies. This is much less convenient than having management by personal representatives. Close relatives of the deceased have reserved shares in a carefully prescribed order, but generally surviving children or grandchildren will exclude all later classes. These are generally the same classes as would stand to take on an intestacy. Thus if a deceased leaves one surviving child the child would be entitled to, say, one half of the estate as a reserved share and the whole of the estate on intestacy subject to the right of the surviving spouse to, for example, a life interest in the whole estate.157
Hayton European Succession (n 16 above) [1.34–1.35], Appendix C. Some systems impose limits to protect heirs. 152 Hayton European Succession (n 16 above) [1.39]. 153 Moussard v Ballestrero [2000] Dalloz Jur 539, [2000] ECLYB [2337] French Cassation. 154 DJ Hayton ‘Trusts and their Commercial Counterparts in Continental Europe’ (The Association of Corporate Trustees, TACT, , 2002) [2.2], [3.7.6]. 155 J Goldby & C Fady ‘The International Rules of Succession’ (2005) 157 Legal Business (Trusts and Estates Supplement) 26–28. 156 A Duckworth ‘Forced Heirship’ (1995) 6 Private Client Business 408–417; A Duckworth ‘Where Are We Now?’ (2005) 4 Private Client Business 208–215 (entertaining but one-sided); DJ Hayton believes the problem is covered by the property exclusion in the Hague Convention (n 34 above) XXV §7[2](d): DJ Hayton ‘Trusts and Forced Heirship Problems’ (1993) 2 Journal of International Corporate Practice 3. 157 This example is taken from France: H Dyson French Property and Inheritance Law (Oxford, OUP, 2003, 0-19-925475-3) [27], [28], [30]; but the principle is general. 150 151
Patterns of Testation
491
It seems best to create a unified succession and to align the law applicable to it as closely as possible to the matrimonial property regime, or at least to make that matrimonial law available as a possible choice for a testator.158
3
Corporate vehicles to avoid forced heirship
[11.21] The easiest way to avoid forced heirship is by turning overseas land into personalty, a feat which can be achieved by the simple expedient of vesting title to the holiday home in a company159 and leaving the shares (personalty) by an English will, the succession to personalty being a matter for the law of the domicile,160 though considerable care is needed with jurisdictions which may regard the corporate vehicle as fraudulent.
4
Common law freedom of testation
[11.22] Readers are likely to be familiar with the common law of succession.161 Freedom of testation is allowed at common law162 subject to the requirement to make family provision for a surviving spouse, close relatives and dependants, on the basis of English domicile.163 A foreigner (in terms of domicile) owning land in England is affected by English succession law and so evades both forced heirship and (lacking English domicile) the need to make family provision. Much property is held by joint tenants so that it will pass automatically to the survivor, vesting in the survivor without going to the personal representatives, though it will count as part of the estate for inheritance tax purposes.164 All other property held by a deceased passes on death to his personal representatives, either executors appointed by will or administrators in default. These personal representatives can administer the estate and if necessary sell the property so as to override the interests of beneficiaries. They will have to pay inheritance tax before obtaining an official grant of probate if they are executors or of administration. There is no heir but rather beneficiaries named in the will or next of kin entitled on an intestacy. In the latter case the rules of intestacy will generally divide an
Green Paper Response (n 41 above) P Scott Q9. Hayton European Succession (n 16 above) [1.67ff]; [8.97], [8.114] (France); [9.114] (Spain); [12.91] (Italy). 160 Cookney v Anderson (1863) 1 De Gex Jones & Smith 365, 380, 46 ER 146 Lord Westbury LC; Cyganik v Agulian [2006] EWCA Civ 129, [2006] 1 FCR 406 (domicile in Cyprus retained after many years’ residence in England). 161 R Kerridge Parry & Clark’s The Law of Succession (London, Sweet & Maxwell, 11th edn revised, 2002, 978-0-421-74110-2). 162 Hayton European Succession (n 16 above) Appendix C. 163 Inheritance (Provision for Family and Dependants) Act 1975, c 63. 164 Tax is not payable on a succession to a surviving spouse, and there is also a substantial exempt slice. 158 159
492
Family Property
estate between a surviving spouse and children of the deceased taking in equal shares, the exact division depending upon the shape of the family and the value of the estate. These people have the right to have the administration of the estate conducted properly and, when it is complete and all debts are paid, a beneficial interest in the property left to them or allocated to them by the personal representatives. There is no direct inheritance or ‘heir’ as there used to be long ago for land. [11.23] Fundamental to this scheme is freedom of testation, the principle that a testator can choose freely to whom to leave the whole of his estate and can therefore choose to disinherit his spouse or children. Free testation is circumscribed for a testator dying domiciled in England165 by allowing dependants to make a claim to family provision out of the value of the estate, a claim which might be made, for example, by a surviving spouse, an unmarried partner, or minor children. The overall effect of these two principles is to give much greater freedom to an English testator than the forced heirship allows to a civilian testator. [11.24] An important issue for any European reform is whether to allow testamentary trusts. At present these lie outside European conflicts rules, though Hayton persuasively argues that the possibility of a testamentary trust should be decided by the law of succession and then left to the Hague Trusts Convention.166 Trusts could in theory be used to override any succession law by recognising the effect of the succession on the legal title and yet reversing it in equity.167 The Hague XXXII proposal would have allowed will trusts,168 but despite an enthusiastic endorsement from Chancery lawyers it is difficult to see civilian countries agreeing to something that would circumvent national succession law and destroy probate practices across the continental mainland.169
5
Procedure
[11.25] Europeans can rub along together taking strength from their diversity and therefore agreeing to differ on substantive points so long as procedure is integrated. It is possible to imagine a European probate that unifies procedure but accommodates all the different systems of quantifying beneficial entitlement. A start is the Commission proposal for a European certificate of inheritance which
165 Inheritance (Provision for Family and Dependants) Act 1975 (n 163 above); Dicey & Morris (n 8 above) II [27-053]. This could not be used against a French resident owning a second home in England: Hayton European Succession (n 16 above) [1.75]. 166 See below [11.34]. 167 Green Paper on Succession and Wills (n 15 above) [3.4], Q24. 168 Hague Convention (n 34 above) XXXII §14. 169 Green Paper Response (n 41 above) P Scott [2.6], [3.4].
Succession
493
could be used to prove a person’s status as heir across Europe.170 A certificate would state details of the171: 앫 앫 앫 앫 앫 앫
issuing authority, testator, inheritance law, wills (including copies, as with a probate), powers to deal with property, and matrimonial property regime.
The certificate will only be useful if it creates a presumption in favour of the heir named, legitimating dispositive power and providing proper protection for third parties who rely on it in good faith. However, the way forward is to discard the idea of the heir, as the common law did,172 and to concentrate instead on securing a valid title via an executor or administrator with overarching powers. Imposition of a common law style probate curtain would allow a common administration process to work while concealing details of the underlying beneficial interests under the multifarious European inheritance regimes. A certificate of title should concentrate on making the legal title secure on the model of a probate and assents. Ask not who has inherited but who is administering the inheritance.
SUCCESSI O N
Succession 1
Cross-border successions
[11.26] Dying abroad is nothing new but cross-border elements of a deceased’s estate arise with increasing frequency in an internal market so that an old problem has a new scale.173 Full harmonisation of substantive law is inconceivable given the divergence between free testation countries and those with forced heirship,174 and the best that can be done is to create clear conflicts rules to determine which law is applicable.175 Planning for an international succession is a complex matter. Attention must be paid to the connecting factors of domicile,176 170 Green Paper on Succession and Wills (n 15 above) [5]; European Parliament Motion (n 12 above) Recommendation [4]; Green Paper Response (n 41 above) P Scott Q39, DJ Hayton 6; but compare the hostility of EB Crawford & JM Carruthers [7]. At present a personal representative needs a local grant in order to administer assets locally: Dicey & Morris (n 8 above) [26-026], [26R-036]. 171 MH ten Wolde in Dörner & Lagarde (n 60 above) 510. 172 Administration of Estates Act 1925, c 23, ss 1–3. 173 See above [11.01]. 174 See above [11.20]. 175 Green Paper on Succession and Wills (n 15 above) [1], 3–4. 176 England and Ireland; see above [11.07].
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Family Property
nationality177 and habitual residence178 so far as relevant, and other important considerations are the location of any immovable property and the risk of any of these matters changing.179 It is very important for a landowner to know whether he faces a unitary succession applied to everything he owns (successions in most civilian states) or where land is separated from movables and a special rule applied to the land (common law states and a few aberrant civilian states). The common law position is considered first but the future belongs to the civilians.
2
Common law succession where land abroad
[11.27] A common law succession ensues whenever a person dies domiciled in any of the common law states or, more accurately, there may be several successions because such a death causes differential treatment of the immovables and movables of the deceased. Clarence Smith pinned down the introduction of the movable/immovable dichotomy in the common law of international succession to an error propounded in the first edition of Jarman on Wills180 and its judicial sanction to a pronouncement of Lord Selborne in 1873.181 It is a more recent innovation in Scotland182 and English and Scottish courts treat each other’s system as foreign,183 indeed none more so. This same rule applies throughout the common law world including both Irelands and the offshore islands.184 After segregation of the property and selection of the correct law for each portion of the estate, the rules thus selected are applied to determine intestate succession, the effect of marriage, the validity of a will, bona vacantia and so on.185 The rule requiring this segregation is a ‘taboo’, senseless and ridiculous in its results,186 since modern systems of succession are unified. Indeed English domestic succession rules have been universal since 1925187 and the corresponding change for
Spain, Portugal, Germany, Austria, the Netherlands and Italy; see above [11.07]. France, Belgium and Denmark; see above [11.11]. 179 Hayton European Succession (n 16 above) lxiii. 180 Jarman on Wills (London, 1st edn, 1844) 4 fn; JA Clarence Smith ‘Classification by the Site in the Conflict of Laws’ (1963) 26 MLR 16–33, 17. 181 Freke v Lord Carbery (1873) LR 16 Eq 461 Lord Selborne; in the context of a Thellusson type accumulation, the competing laws being England and Ireland. 182 G Maher ‘Beneficial Interest in Immovable Property as a Ground of Jurisdiction’ [2003] 7 Scottish Law Times 57–62. 183 Macdonald v Macdonald (1932) SC HL 79, 86 Lord Tomlin, 88 Lord Thankerton. 184 Hayton European Succession (n 16 above) Appendix C. 185 Re Maldonado [1954] P 223 CA (Spanish/Portuguese). 186 M Hancock ‘Full Faith and Credit to Foreign Laws and Judgments in Real Property’ (1967) 18 Stanford Law Review 1299–1322; Clarence Smith (n 180 above); RJ Weintraub ‘Inquiry into the Utility of Situs as a Concept in Conflicts Analysis’ (1966) 52 Cornell LQ 1–42; JHC Morris ‘Intestate Succession to Land in the Conflict of Laws’ (1969) 85 LQR 339–371; Scoles ‘Hague Succession’ (n 63 above) 102 (‘needlessly expensive and antique’); Dicey & Morris (n 8 above) [27-016] (‘startling results’). 187 Administration of Estates Act 1925 (n 172 above) ss 1–3. 177 178
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international cases is merely unfinished business.188 A problem arises if a person domiciled in England dies while owning land on the continent.
(1)
Law of site applied
[11.28] The common law applies the law of the site to the succession to foreign land.189 In a simple case the domestic law of the site is applied alone. Lord Nelson was made Duke of Brontë in Sicily and given an estate in the foothills of Etna, as a reward for his ruthless suppression of democratic rumblings against the Bourbon regime in Naples, a single blot on a life of unsurpassed achievement. Towards the end of his life he wanted to do what his country refused to do, that is, to take care of Emma and his daughter Horatia and so, before Trafalgar, he made an English will purportedly leaving his estate on trust for sale.190 The Sicilian law of the site did not allow a will to impose a duty of sale, nor any trust, because land given in fee passed automatically on death to the heir, who had to be male under the Salic law. As Lord Langdale MR said: The course of succession to [real estate] depends entirely on the law of the country where the estate is situated.191
Even Lord Nelson could not vary local rules of succession. English trustees could not sell under Sicilian law as it stood at the time of Trafalgar. By the time the case came on for hearing, 40 years later, Sicilian feudal tenure had been converted to outright absolute ownership which would indeed have been saleable and devisable, but the change was too late to validate the will. This case pre-dates renvoi but it is illustrative of many cases where the doctrine is not considered and an English court applies directly a foreign law of the site because no one is concerned to argue that a different result could be more beneficial to them.
(2)
English law applied by renvoi
[11.29] Renvoi means literally to send back. It is a part of the selection of law rules applied when a forum court considering a case in the field of wills and intestate succession is directed to consider the law of another state. The discussion that follows assumes that it is settled in English law and that full or ‘double’ renvoi will be applied by English courts in relation to succession.192 Using that doctrine the English court, having recognised that it needs to apply foreign law, attempts to act as if it was the foreign court, applying both the domestic law and Macdonald v Macdonald (n 183 above). Birtwhistle v Vardill (1840) 7 Clark & Finnelly 895, 7 ER 1308 (person legitimated in Scotland could not take as heir to English land). 190 Nelson (Earl) v (Lord) Bridport (1846) 8 Beaven 547, 50 ER 215; M Pratt Nelson’s Duchy, A Sicilian Anomaly (Staplehurst, Kent, Spellmount, 2005, 1-86227-326-X). 191 Nelson (n 190 above) 571. This case pre-dates the development of renvoi discussed immediately below; modern Italian law is discussed below [11.31]. 192 Dicey & Morris (n 8 above) I [4.06ff], [4.015], [4.019], [4.033] (problem of circular results); Hayton European Succession (n 16 above) [1.41]; Re Annesley [1926] Ch 692 Russell J. 188 189
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the rules of private international law of that foreign state193 and guided by expert evidence about the applicable foreign law.194 A land issue referred to the law of the site may be returned by that law by a renvoi back to the original system or (at least in theory) on to a third system. For example, the law of the site may apply its succession principles only to its own nationals, and thus succession to the land of a foreign landowner could be referred back to the home state of the landowner. The position is clouded by changes in private international law rules, but at least historically Italy195 led a group of Latin and other countries which did just this, a group which includes or included Spain (old law),196 Belgium,197 Greece198 and the Scandinavian states. In technical language these states were said to ‘reject the renvoi’.199 Thus if an English person by domicile owned land in Italy, the correct forum was an English court which put itself in the position of an Italian court and decided (under the old law only rather more quickly) that the case should be sent back for decision because the deceased lacked Italian nationality. Thus English law was applied by double renvoi.200 [11.30] A Hardyesque coincidence resulted in the demonstration of this principle by another reward granted to another hero of the Napoleonic Wars, this time Wellington who was made Duke of Ciudad Rodrigo as a reward for his success in storming the town in 1812. His Spanish estate passed with his English land to successive Dukes of Wellington until the 6th Duke was killed in action during the Second World War. A will covering the 6th Duke’s Spanish property failed because he had assumed that a single successor would inherit the English and Spanish dukedoms together whereas in fact the Spanish one passed to his sister and the English one to his nearest male relative, an uncle.201 Shame on our sexist property law. Since no will was in play it was necessary to turn to the Spanish law of the time (before it was changed),202 only for it to be discovered This applies in foreign states which ‘accept’ the renvoi: Dicey & Morris (n 8 above) [4-008]. Dicey & Morris (n 8 above) [9]. 195 Re Grassi [1905] 1 Ch 594 Buckley J; Re Ross [1930] 1 Ch 377 Luxmoore J. 196 AF Anderson ‘A Postscript’ (1999) 4 Art Antiquity & Law 257–259 (death of art collector in Spain, with an English family and a bequest to a French museum); see below [11.30] n 203. 197 Collier v Rivaz (1841) 2 Curteis 855, 163 ER 608. Modern Belgian law does not accept a renvoi but the Netherlands does. 198 Areois Pagos Greece [2001] NV 49/230, [2002] ECLYB [1232]. 199 Italy (pre-Law 218/1995), Spain, Denmark and Greece: Hayton European Succession (n 16 above) Appendix C. 200 Grassi (n 195 above) (Italian domiciled in London, so English in conflicts terms, who died unexpectedly on a short visit back to Italy; his will was tested by English standards and failed for want of signature and witnessing); Ross (n 195 above) (English woman living in Italy made an Italian will excluding her son from her Italian land; Italian courts would decide as if it belonged to an English man in England because she was not an Italian national). 201 Re (Duke of) Wellington [1947] Ch 506 Ch D; on appeal [1948] Ch 118 CA. This is a case of renvoi if the mother was entitled to a half-dower under Spanish law but not under English law as otherwise the selection of law would have made no difference: Falconbridge (n 71 above) 229; Dicey & Morris (n 8 above) [4.017]. 202 See immediately below, n 203. 193 194
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that there was no appellate decision and views expressed in lower-tier cases conflicted. More convincing was the view that Spanish law left the position of succession on the death of an English owner of Spanish land to English law. Hence the 6th Duke’s English will was applied and on that basis the English Duke also received the Spanish property. The Spanish Civil Code was subsequently amended in 1974203 and it is now clear that English law applies to the succession to property in Spain if the deceased has English nationality, though for rather different reasons. In the leading case, Re Adams,204 it was decided that a flat in Alicante passed to the surviving spouse of the owner under his English will, without their son having any reserved share, that is, the succession was English not Spanish. Denney v Denney 205 concerned an art collection on loan to Toulouse, but passed under English freedom of testation since the owner was an English national; the decision is notable first because the testator was living in Spain and secondly because it is a decision of the Spanish Supreme Court; freedom of testation and the unity of the English succession were thus upheld. In summary, Spanish immovables of a British national who dies domiciled in England should not be subject to Spanish forced heirship.206
(3)
Renvoi applies foreign law
[11.31] Where a foreign state ‘accepts’ a renvoi from the English courts, an English judge will apply the foreign law of the site to land owned within it. This will be true in France, Germany and (new-law207) Italy.
3
Civilian states with split succession
[11.32] A few civilian states split movables from immovables, the main examples being Belgium and France, but also Luxembourg, Cyprus and Malta.208 Power to handle the succession to movables will generally arise from nationality or habitual residence. There is therefore a major problem if an English resident dies owning a second home in France. This immovable is split from the rest of the estate and French succession laws applied, including the reserve héreditaire. Spanish Civil Code §12[2]. Spain is pluri-jural but the conflicts code applies throughout. Re Adams [1982] July 31st Browne-Wilkinson VC (universality under Spanish Civil Code §9 prevailed over renvoi under §12); Hayton European Succession (n 16 above) [17.109ff]; the Supreme Court has now confirmed the VC’s view. 205 Denney v Denney [1999] May 21st Spanish Tribunal Supremo (an English text is available on the internet ). 206 Hayton European Succession (n 16 above) [17.130]. 207 Italian Law 218/1995. It should be possible to abolish renvoi if common succession rules apply across the EU: Joint Statement by the Society of Trust and Estate Practitioners and the Law Societies of the UK, November 30th 2006 . 208 Hayton European Succession (n 16 above) [3.164] (Belgium), [8.92] (France), Appendix C (summary); also E-M Bajons in Dörner & Lagarde (n 60 above). 203 204
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This can often be avoided by the use of a property holding company.209 A split succession therefore arises if a French resident dies owning land in Italy or Spain. The precise impact will depend on the civilian doctrine of renvoi which is different from the common law principle described above.210 In principle succession to the land may be referred either to the law of the site or (via renvoi) back to the conflicts rules of the site which may in turn select the site, the law of nationality or habitual residence or the law of some third country.
4
Unitary succession; a model for reform?
[11.33] A majority of European states provide for a single estate embracing both land (immovables) and movables. Unitarian states in Europe include Austria, Germany, Greece, Italy, the Netherlands, Portugal, Spain, Scandinavian countries and Switzerland.211 It avoids problems of how to classify particular items of property and matches how succession works in purely domestic situations,212 but it may result in land owned in England by foreign owners being used to quantify forced heirship. It should not affect an English resident who owns land abroad, but care is needed in relation to states which while being basically unitarian nevertheless have special rules to retain control of immovables.213 The failed Hague XXXII proposal would have allowed limited segregation of land where the law of the site created a particular inheritance regime in respect of land for economic, family or social reasons.214 One of the key issues of the recent European consultation215 is whether to perpetuate the current segregation of movables and immovables (to which the law of the site would apply) or to unify. Opinion seems to be divided between respondents who think that site-based law is inevitable to take proper account of civilian reserved shares,216 those who think it more sensible to move to a single estate combining movable and immovable property — including the most influential commentator David Hayton217 — and the Parliamentary visionaries who dream of discovering a balance.218 There needs to be a unitary succession and clear rules ensuring that any decision reached in the succession is respected by and implemented by the law of the site.
See above [11.21]. Hayton European Succession (n 16 above) [1.67ff], [1.72], [8.102] (France), [9.75] (Germany). 211 Hayton European Succession (n 16 above) [9.6] (Germany), [12.63] (Italy), Appendix C (summary). 212 Scoles ‘Hague Succession’ (n 63 above) 88, 91, 100ff; D Hayton ‘Objective Successor’ (n 60 above) [2]. 213 Examples are Italy and Spain: Hayton European Succession (n 16 above) [12.90–12.91], [17.7]. 214 Hague Convention (n 34 above) XXXII §15; P North ‘Hague Succession Convention’ in Private International Law Problems in Common Law Jurisdiction (Dordrecht, Martinus Nojhoff, 1993, 0-7923-1845-5). 215 Green Paper on Succession and Wills (n 15 above) [2.1], Q2. 216 Green Paper Responses (n 41 above) EB Crawford & JM Carruthers [3]; P Scott [3.1] 217 Green Paper Responses (n 41 above) DJ Hayton 4–5, Shepherd & Wedderburn [3.1]. 218 European Parliament Motion (n 12 above) Recommendation [5]. 209 210
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There seems to be general agreement on habitual residence as the connecting factor and a unified succession system which keeps land and movables together, but more controversy about whether to allow a limited choice219 and whether the parties should be free to opt for a site-based law. Forum for succession should be selected to match the selection of law and any new European proposals should strive mightily to keep forum and law together.220
TRUST VEHI CLES
Trust Vehicles [11.34] European trusts will mainly be commercial and will be based on an eclectic mix of common law models, civilian contractual quasi-trusts and cross-border recognition principles.221
1
Common law trusts
[11.35] Usage of trusts in common law countries has migrated from family settlements, a trend hastened by the Revenue attack on domestic trusts by the creation of a tax disincentive to gifts held in trust as opposed to outright gifts.222 Modern practice depends upon large scale commercial uses, especially pension funds, unit trusts, project financing, charities and, largest by value, loan capital trusts.223 This is also the potential utility of the European trust.224 Trusts can be put to bad uses and exploited by bad users,225 though this can be counteracted by the ability to trace property stolen from a trust, and in any event the good far outweigh the bad.226 In essence the object is to segregate a fund which is separate 219 A Daví & E-M Bajons in Dörner & Lagarde (n 60 above); D Hayton ‘Objective Successor’ (n 60 above) [3.5]; Joint Statement (n 207 above). 220 Green Paper on Succession and Wills (n 15 above) [1] at 4; European Parliament Motion (n 12 above) Annex, Recommendation [2]; Labes (n 32 above); Joint Statement (n 207 above). A White Paper is promised for 2008 with a new regime to take effect in 2011, but the British government will opt out: R Frimston ‘Brussels 4U’ [2007] NLJ 571-572; [2007] 26 LSG 8. 221 DJ Hayton, SJ Kortmann & HLE Verhagen Principles of European Trust Law (The Hague, Kluwer, 1999, 9-041-19726-5); M Lupoi Trusts — A Comparative Study (Cambridge, CUP, 2001, 0-521-62329-4); M Graziadei, U Mattei & L Smith Commercial Trusts in European Private Law (Cambridge, CUP, 2005, 978-0-521-84919-7); Cheshire & North (n 71 above) 1030ff; J Harris ‘The Trust in Private International Law’ ch 8 in J Fawcett Reform and Development of Private International Law: Essays in Honour of Sir Peter North (Oxford, OUP, 2002, 0-19-925008-1). 222 Finance Act 2006, c 25, ss 156–157. 223 Graziadei, Mattei & Smith Commercial Trusts (n 221 above) 5; also DW Waters ‘Hague Trusts Convention Twenty Years On’ in Graziadei, Mattei & Smith 94 (Convention inadequately focused). 224 C von Bar & U Drobnig Study on Property Law and Non-Contractual Liability Law as it Related to Contract Law (DG Health & Consumer Protection, SANCO B5-1000/02/00574) [553]. 225 eg hiding assets in Jersey to avoid a divorce pay out: Minwalla v Minwalla [2004] EWHC 2823, [2005] 1 FLR 771; T Hanson & M Renouf ‘Straining the Limits of Comity’ (2005) 35 Family Law 794–799. 226 Hayton TACT Report (n 154 above) [2.2].
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from other property belonging to the trustee, a technique which creates great flexibility. This can be employed in the management of funds providing, for example, pensions, investments in unit trusts, project financing, or charitable purposes, the funds intended for these purposes being segregated into a distinct asset base for ease of administration.227 Collective lending is a second major area, including collectivisation of bond-holders’ security, syndicated loan trusts and securitisation trusts.228 Essentially a trustee acts as a buffer between a floating group of lenders and a borrower who has probably offered a rag-and-bobtail miscellany of security including, perhaps, both land and securities. Numerous minor managerial functions are simplified with a trust vehicle, for example, reserving title to funds until they are applied to a particular intended purpose,229 managing client accounts, building retentions and sinking funds. Custodianship is greatly simplified. Trusts are also a convenient and usual vehicle for timesharing.230
2
Civilian trust-like vehicles
[11.36] Family trusts are barred in most civilian systems, and in most recognition is refused to foreign trusts. The fundamental problem is that trusts could be used to undermine matrimonial property regimes and succession schemes; indeed, that is precisely why British buyers would want to set up a trust of a foreign holiday home. Spain provides an interesting case study because there is a case illustrating the conceptual struggle to cope with the position of a ‘fiduciary’ carrying out a sale on behalf of the real ‘beneficial’ owner of the land.231 The Supreme Court had to consider a sale of land recorded in a public deed and stating a price paid of 5 million pesetas which ultimately was upheld as a valid sale. However, this was only after it had survived a vigorous argument for its nullity based on the proposition that the apparent purchaser of land was in reality a trustee for the seller, and that the apparent sale was a sham with no real intention to transfer the property. The court analysed the nature of fiduciary agreements based on the execution of two agreements, one being valid erga omnes, and the other private and confined in its validity to the immediate parties. The latter document provided for retransfer — to the transferor or some third party, according to stated conditions. Such arrangements could be valid232 provided they were not carried out with the intention to commit fraud, and in any event were valid between the parties. So a transfer of a property to a nominee
Graziadei, Mattei & Smith Commercial Trusts (n 221 above) 24ff. Principles of European Trust Law (n 221 above) 6. 229 ‘Quistclose’ trusts under Barclays Bank v Quistclose Investments [1970] AC 587 HL. 230 Principles of European Trust Law (n 221 above) 8. 231 YV v YV [2002] J Aran 4875, [2003] ECLYB [1935] Spanish Tribunal Supremo. 232 Spanish Civil Code §1255; A Barros & C Gonzalez Beilfuss ‘Spain’ 159ff in Principles of European Trust Law (n 221 above) (but the trust institution is recognised in Latin American countries). 227 228
Trust Vehicles
501
which would be unremarkable in a common law jurisdiction was open to challenge for creating a hidden trusteeship in a civilian non-trust state. One or two civilian states have overcome the prohibition on commercial trusts, the analytic purity of Roman-derived jurisprudence yielding to the wind of financial profit. Its basis is a fiducie 233 or Treuhand,234 but using those vehicles it becomes possible to separate out a patrimony held by a fiduciary. Vehicles used in civilian systems to replicate trusts are clumsy and only partially effective and compare poorly to the elegant common law constructs. Civilian systems, to the limited extent that they recognise trusts at all, treat them as three-party contracts between settlor, trustee and beneficiary, making the obligation between trustee and beneficiary personal and leaving the beneficiary with no claim to a real right in the trust asset.235 An action on a trust is not a dispute about ownership of the trust property but is rather about the personal liability of the trustee. Accordingly the Regulation on Civil Jurisdiction assigns jurisdiction to the courts of the contracting state where the defendant trustee is domiciled, however the trust is created — by operation of statute, written instrument, orally or with evidence in writing.236 Inheritance is excluded from the scope of the Brussels Convention altogether, so that most issues arising from trusts in civilian jurisdiction fall outside the ambit of the EU conflict rules.237 ‘Trusts’ based on the treuhand or salmann are not really trusts at all, are generally used in states which have not signed up to Hague XXX and would anyway fall outside their recognition principles. States without trusts could in any event refuse to recognise rulings in trust-friendly states: law is selected subject to mandatory rules of the forum and possibly mandatory rules of other states with which the trust has a sufficiently close connection.238 There is a reservation for public policy (ordre public).239 Several comparative studies are available, including a very convenient short summary of the devices needed to achieve these same commercial purposes in trust-free civilian states provided in the TACT report by Professor
233 M Grimaldi and F Barrière ‘Trust and Fiducie’ ch 43 in A Hartkamp et al Towards a European Civil Code (The Hague, Kluwer, 3rd edn, 2004, 90-411-2280-X); Plender Contracts Convention (n 111 above) [4.40ff]; J Smits The Making of European Private Law (Antwerp, Intersentia, 2002, 90-5095-191-0) 262ff; W Van Gerven ‘Codifying European Private Law? Yes If ’ (2002) 27 EL Rev 156–176, 162; D Johnston The Roman Law of Trusts (Oxford, OUP, 1988) 1; Lupoi Comparative Study (n 221 above) ch 5. 234 H Kötz National Report for Germany in Principles of European Trust Law (n 221 above) 85–103; Graziadei, Mattei & Smith Commercial Trusts (n 221 above) 89; H Kötz Trust & Treuhand (Göttingen, 1964); S Grundman ‘Trust and Treuhand at the End of the Twentieth Century’ (1999) 47 American Journal of Comparative Law 401–428. 235 Von Bar & Drobnig ‘Property/Contract Law’ (n 224 above) [556–557]; Graziadei, Mattei & Smith Commercial Trusts (n 221 above) 63. 236 Regulation on Civil Jurisdiction (n 17 above) §5[6]; ex Brussels Convention (n 118 above) §5[6]. Domicile is determined according to the rules of the local court: Regulation on Civil Jurisdiction §59[1]; ex Brussels Convention §5[3]. 237 Schlosser Report [1979] OJ C59 71, [52]. 238 Hague Convention (n 34 above) XXX §16; possibly even of another state with a close connection: §17; but a contracting state may remove the last rule by way of reservation. 239 Hague Convention (n 34 above) XXX §18.
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Hayton.240 In essence they revolve around the manipulation of three-party contractual situations, such as contracting to confer a benefit on a third party to the contract, agent and undisclosed principal, or mandate. All this may not be so very different from the concept evolved in Chancery,241 but the civilian vehicles suffer from doubts about the effectiveness of the segregation and lack of proprietary effect on insolvency of the trustee or theft of the trust fund.
TRUST F O RUM
Trust Forum 1
European forum
[11.37] Enforcement of trusts is a matter of civil jurisdiction with forum determined by the EU Regulation242 except for points of matrimonial property, wills, succession and bankruptcy. Common law trusts are proprietary in character in contrast to the contract-like and personal ‘trusts’ of civilian states, but in fact this distinction does not run all that deep in jurisdictional terms because actions to enforce common law trusts are treated as personal, a character more obviously true of their civilian shadows.243 The result is opposite to the assumption made when the European conflicts club was originally constructed,244 and is so counter-intuitive that it needs detailed discussion. [11.38] Because trust actions are personal, two alternative bases are available. The home court rule will allow an action against a defendant trustee in his home court, that is the state of his (Euro-model) domicile and, since parties can be added to a personal action,245 a trust can be enforced in London if England is the home state of any one of the trustees. For formal trusts an alternative connected forum is based on the domicile of the trust: A person… may… be sued… as settlor, trustee or beneficiary of a trust… in the courts of the Member State in which the trust is domiciled.246 240 TACT Report (n 154 above) [4.6ff], App B; Principles of European Trust Law (n 221 above); Lupoi Comparative Study (n 221 above); Graziadei, Mattei & Smith Commercial Trusts (n 221 above). 241 R Helmholz & R Zimmerman Itinera Fiduciae: Trust and Treuhand in Historical Perspective (Berlin, Dunckner & Humblet, 1998). 242 Regulation on Civil Jurisdiction (n 17 above) §1; Re Hayward (n 30 above); Areois Pagos Greece [2001] NV 49/230 (n 198 above) (Greek Civil Code §§29, 40); see above [9.56]. In Denmark the Brussels Convention (n 118 above) and in EEA states the Lugano Convention (n 118 above). 243 See above [11.36]. 244 Schlosser Report (n 237 above) [105–108]; V Latham ‘Creation and Administration of a Trust in the Conflict of Laws’ (1953) 6 CLP 176–195; G White ‘Civil Jurisdiction and Judgments Act 1982 I’ [1983] Conveyancer 180–193, 191; Dicey & Morris (n 8 above) II [29]. 245 See above [10.60]. 246 Regulation on Civil Jurisdiction (n 17 above) §5[6]; ex Brussels Convention (n 118 above) §5[6]; Lugano Convention (n 118 above) §5[6]; Civil Jurisdiction and Judgments Act 1982 (‘CJJA 1982’), c 27, sch 4 para 12.
Trust Forum
503
This connected forum is restricted to formal trusts created by the operation of a statute, or by a written instrument, or created orally and evidenced in writing, a description which precludes the use of a connected forum for a resulting or a constructive trust and which can give very arbitrary results.247 Domicile of a trust is established using the private international code of the state which is a putative forum.248 The United Kingdom has taken the opportunity in its code on Civil Jurisdiction to enact special domestic rules for the domicile of a trust,249 establishing closest connection as the decisive factor. There is little guidance about how to implement this test, but clearly the site of trust assets is an important factor, but it might well be possible to have a trust for a Spanish second home connected most closely to England where the trust was administered and the owners (trustees) lived. As for service, this can be effected overseas on an English-domiciled trustee without permission but permission is required if the trust is English but the trustee is domiciled overseas.250 [11.39] Trusts recognised by common law systems create complex issues resolved — if that is the right word — by the ruling of the European Court of Justice in Webb v Webb.251 In the result, an action to enforce the trust was held to be a personal action by the beneficiary against the trustee, and so within the jurisdiction of the English courts252 if either the trust or the defendant trustee is domiciled in England. That is so even where the trust asset is land situated overseas. In 1971 a father had purchased a flat at Antibes on the French Riviera. Perhaps he liked the English bookshop or the Picasso museum. The purchase was taken in the name of his son, to whom the transfer was made and who became registered as owner, and the son’s name was also used to complete exchange control formalities. Both took holidays in Antibes, but the father paid the majority of the running costs. Twenty years later, in 1991, the father sought a declaration from the English Chancery Division for a declaration that the son held the apartment on a resulting trust and, even more problematically, an additional order requiring the son to transfer the legal title to the father. The son replied that there had been an advancement, a gift, presumed in equity when a father gave money or property to a son253 and precluding the recognition of a resulting trust. The merits had to wait while the forum tangle was unravelled. There were a number of strong arguments (all ultimately rejected) for leaving See below [11.61ff]. Regulation on Civil Jurisdiction (n 17 above) §60[3]; ex Brussels Convention (n 118 above) §53 para 2; Lugano Convention (n 118 above) §53 para 2. 249 CJJA 1982 (n 246 above) ss 10, 45 (‘closest and most real connection’ for domicile). 250 Civil Procedure Rules, SI 1998/3132 as amended, 6.19.1, 6.19.1A, 6.20.11. 251 C-294/92 Webb v Webb [1994] I ECR 1717 ECJ. 252 Within the UK see CJJA 1982 (n 246 above) s 10, sch 4 para 1(f), (England), sch 8 para 2(h)(ii) (Scotland); the Scottish rules are open to criticism for importing alien concepts and inutility: Maher ‘Beneficial Interest’ (n 182 above). 253 A Underhill & DJ Hayton Law Relating to Trusts and Trustees (London, Butterworths, 16th edn, 2003, 0-406-93884-9) [6]. 247 248
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the matter to the courts of the Alpes Maritimes, since the action aimed to establish rights in rem in immovable property sited in France or else, at the very least, was mixed in nature. Negotiation of the European club rules took place on the assumption that a beneficial interest under a trust was an equitable right in rem254 since the underlying claim is for ownership,255 and this reflected the earlier common law understanding of the nature of the action for the declaration of the existence of a trust,256 as well as claims to the proceeds of sale of trust property,257 and breach of trust claims.258 Equitable rights are stronger than purely personal rights, a kind of dual ownership,259 able to pass on death, and capable of binding a purchaser — subject to notice. Remedies sought were a declaration of ownership, an order to effect a transfer and a claim to be registered.260 The decision to reject the arguments just rehearsed remains controversial or, perhaps, it was just plain wrong: Adrian Briggs found the judgment disappointingly brief, ‘unexpected’, a ‘nonsense’ and ‘indefensible’.261 [11.40] Turning to the actual grounds of the decision, the European Court of Justice decided that an action by a beneficiary to enforce a trust against the trustee is a personal claim,262 and as such outside the exclusive jurisdiction of the French courts, so the defendant trustee’s domicile was a proper reason to bring the case in England. The underlying claim for ownership was irrelevant because, as Reichert263 demonstrates, one must look not at the aim of the claimant but rather at the subject matter of the action.264 Exclusive jurisdiction is narrowed to actions bearing directly on the extent and content or ownership of immovable property, and between persons who do not claim inter se to be in any fiduciary relationship. On the other side of the dividing line are: actions concerning a breach of fiduciary duty where if found to have been committed will have effects in rem [where] the personal nature of the relation is… the overriding factor.265
This reasoning might suggest a change in character when enforcement is sought not against the original party but against a successor, when the action feels more
254 Schlosser Report (n 237 above) [167]; J-P Béraudo ‘Les Trusts Anglo-Saxons et le Droit Français’ [1992] 65 LGDJ 38. 255 Webb (n 251 above) AG[27] Dorman. 256 Att-Gen v Drapers Co [1894] 1 IR 185 CA. 257 Official Solicitor v Stype Industries (Jersey) [1983] 1 WLR 214 Whitford J. 258 Kakkar v Szelke [1988] FSR 97 CA. 259 Webb (n 251 above) AG[34] Dorman; Schlosser Report (n 237 above) [167]. 260 Over which the French courts had exclusive jurisdiction: Regulation on Civil Jurisdiction (n 17 above) §22[4]; ex Brussels Convention (n 118 above) §16[4]; see above [4.35]. 261 A Briggs ‘Trusts of Land and the Brussels Convention’ (1994) 110 LQR 526–531; A Briggs ‘The Brussels Convention’ (1994) 14 Yearbook of European Law 557–586, 564, 567; he blamed a lack of Chancery expertise in the court. 262 See above [ch 10]. 263 C-261/90 Reichert (No 2) [1992] I ECR 2149 ECJ. 264 Webb (n 251 above) AG[29–30] Dorman. 265 Webb (n 251 above) AG[48] Dorman; Schlosser Report (n 237 above) [120].
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‘real’.266 An action for a declaration that land is held in trust is personal,267 whether the disputed asset is a flat or a yacht.268 Once a declaration about the existence of the trust has been made, the English court can order the execution of the documents required to pass legal title if made in a personal action,269 or perhaps as an adjunct to a personal action. Ultimately if the son remains recalcitrant an order might be required from a French court.270 Perhaps a beneficial interest under a common law trust can never constitute a right in rem. In favour of the decision it should be said that the English courts are best placed to try to make some sense out of trust law,271 though it is a matter of chance that the home of the person to whom a gift has been made and against which a claim of resulting trust is made happens to be in Britain. [11.41] English courts necessarily follow the European decision in Webb v Webb, one instance of that obedience being Ashurst v Pollard.272 An English trustee in bankruptcy wanted to force the sale of a villa at Loule in the Portuguese Algarve, which was held jointly in the names of a wife and her bankrupt husband. Proceedings for possession and sale were consequential on bankruptcy and hence civil,273 and the substantial question in the action was whether the land in Portugal should be sold; if sale was ordered the order bound the land itself and was effective against the whole world, clear indications that it ought to have been left to the Portuguese courts of the site. The Court of Appeal thought otherwise. English courts were precluded from making any such order over land overseas. The particular action was to enforce an English trust of land held abroad by an English action by which the bankrupt could be compelled to complete the trustee’s title in personam: either the bankrupt could be ordered to concur with the instructions of the trustee in bankruptcy about sale or, better, he could be required to transfer his title to the trustee in bankruptcy in order that the trustee could act himself in the sale. Had the ownership of the bankrupt been in dispute, and hence the passage of beneficial title to the trustee in bankruptcy, there would have been a dispute touching ownership as such that has to be left to the courts local to the land. Just this happened in Re Hayward,274 where the title 266 Compare: (1) TC Hartley ‘Webb v Webb’ (1994) 19 EL Rev 547–548; and (2) Dicey & Morris (n 8 above) II [23.012]; C MacMillan ‘The ECJ agrees with Maitland’ [1996] Conveyancer 125–130, 129. 267 Webb (n 251 above) AG[54] Dorman. 268 Webb (n 251 above) J[18]. 269 This step ought to have been seen as real: see above [4.22]. 270 P Rogerson ‘Equity, Rights in Rem and the Brussels Convention’ [1994] CLJ 462–464, 463. 271 MacMillan (n 266 above) 128 ‘not a bad solution’. Another to approve of the decision but execrate the reasoning is PBH Birks ‘In Rem or In Personam?’ (1994) 8 Trust Law International 99–101; Peter’s views are discussed below at [11.46]. 272 Ashurst v Pollard [2001] Ch 595 CA; JM Carruthers Transfer of Property in the Conflict of Laws (Oxford, OUP, 2005, 978-0-19-927147-4) [2.39ff]; J Harris ‘Ordering the Sale of Land Situated Overseas’ [2001] LMCLQ 205–214. 273 The bankruptcy action itself is not a matter of civil jurisdiction: Regulation on Civil Jurisdiction (n 17 above) §1[2](b); ex Brussels Convention (n 118 above) §1[2]; see above [9.56ff]. 274 Re Hayward (n 30 above) 56–57 Rattee J (villa in Minorca). In Prazic v Prazic [2006] EWCA Civ 497, [2007] ILP 31, a couple who had moved from Essex to France divorced in France and the
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of the trustee to a half-share in a Minorcan villa depended on whether the bankrupt, Hayward, had validly transferred title as payment for maintenance work. Only the courts in the Balearics could decide this issue. Similarly, in Ferguson v Ferguson,275 an order to vest land in Spain in the Scottish trustee in sequestration was an order relating to a right in rem, and hence within the exclusive province of the courts in Spain. [11.42] Personal character is more obvious when a so-called constructive trust turns out not to be a true trust but rather a personal liability to account for profits made, as for example in money laundering cases where there is found to be knowing assistance in a breach of trust; this action is tort-like in character, based on wrong-doing, and not trust-like in being based on an agreement to hold money for another; that money has passed through an English bank account is sufficient to confer jurisdiction on the English courts over a defendant domiciled in Spain.276 [11.43] It is as yet unclear whether the European forum rules allow variation of a trust by a court which does not administer the law governing the trust.277
2
Common law forum rules
[11.44] Webb278 sees the enforcement of a trust as a matter of personal obligation and in this, as Adrian Briggs279 pointed out, European law is at least in harmony with the traditional common law rule in the Moçambique case.280 English courts always assumed jurisdiction over a defendant within the personal jurisdiction of the court if the claim against him was founded on some personal equity,281 so an equitable action was always in theory in personam even if the effects of a judgment were real.282 The site rule is displaced by the existence between the parties to the suit of question was whether the English courts nevertheless had jurisdiction to make orders about the beneficial ownership of property owned by the husband in England. The wife’s application under the trusts of land legislation for a declaration of half beneficial ownership of properties in Notting Hill in London was based on the supposition that the courts for the site of the land had exclusive forum. However, Webb v Webb shows that an application for a declaration of equal ownership of a property held in trust is in fact a personal action, properly left to the French court dealing with the divorce to avoid the risk of irreconcilable judgments. Ferguson v Ferguson [1990] SLT Shire Ct 73, 75F. Casio Computer Co v Sayo (No 3) [2001] EWCA Civ 661, [2001] ILP 43. 277 KA Byrne ‘Private International Law and the Construction and Variation of Trusts’ (2004) 11 Journal of International Trust & Corporate Planning 93–105. 278 Webb v Webb (n 251 above); see above [11.39ff]. 279 Briggs ‘Trusts of Land’ (n 261 above). 280 British South Africa Co v Campanhia de Moçambique [1893] AC 602 HL (trespass to South African mine). 281 Equity was more extensive than old common law: Cookney v Anderson (n 160 above) 381–382 Lord Westbury LC. 282 Bank of Africa v Cohen [1909] 2 Ch 129 CA, 146 Kennedy LJ; (1909) LQR 342. 275 276
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some personal obligation arising out of contract or implied contract, fiduciary relationship or fraud or condition which [it] would be unconscionable to ignore.283
Equitable jurisdiction is posited on the personal power of Chancery over the trustee, the only way in which the common law courts could be made to yield to equitable jurisdiction over land. For example, English Chancery relieved against fraudulent conveyances of land in Ireland in 1682 because the defendant was in England, and: the authority of this court is only to regulate a man’s conscience, and ought not to affect the estate.284
It should not be deduced from this that all equitable rights are personal because the nature of the right in modern law is derived from the combination of common law and equitable rights in play. A trust of foreign land may be enforced by a beneficiary against an English-domiciled trustee. Re Piercy285 concerned will trusts of an English testator affecting land in Italy and invalid under Italian law which were nevertheless enforced in Chancery. A technical sidestep of the locus rule was perhaps assisted by the nature of the particular trusts, since a beneficial interest in a trust for sale applied in strict theory to the proceeds of sale rather than to land.286 An equity defendant in a United States court may also be compelled to execute a conveyance of land in another state,287 but here equity overstepped the real/personal divide to award a real remedy. [11.45] Equitable actions are in personam and affect only the conscience of the defendant. This was asserted memorably by Maitland in his lectures of 1906288 but the blockhead who published his lecture notes failed to point out that he was speaking historically, as a metaphor, of a time already vanished. Since the judicature reforms of 1873–1876 the question is not what Chancery could achieve alone but what equity and the common law could achieve in combination, since the jurisdiction of the Chancery Division is unified. A beneficiary cannot of course obtain possession of the trust land from an intruder, but what he can do is sue the trustee who has neglected to evict the intruder and add the intruder as a co-defendant, thus in effect compelling the trustee to take a legal action which results in a possession order in the name of the trustee obtained at the instigation
Deschamps v Miller [1908] 1 Ch 856, 863 Parker J. Arglasse v Muschamp (1682) 1 Vern 75, 77 Lord North LK, 23 ER 322. 285 Re Piercy [1895] 1 Ch 83 North J; Anon (1895) 11 LQR 105–107; Canterbury v Wyburn [1895] AC 89 PC. 286 Cheshire & North (n 71 above) 934, think this ‘troublesome’ and perhaps dependent on conversion. Conversion could change real to personal but it should not change immovable to movable (see above [3.06]) and is abolished under modern law. 287 Massie v Watts (1810) 10 US (6 Cranch) 148 US Supreme Ct; B Currier ‘Full Faith and Credit to Sovereign Land Decrees’ (1954) 21 University of Chicago Law Review 620–679; M Hancock ‘The Supreme Court and the Land Taboo’ (1965) 13 Stanford Law Review 1299–1322. 288 Maitland’s Equity (Cambridge, CUP, 2nd edn by J Brunyate, 1949) 107, 117. 283 284
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of the beneficiary.289 The individual actions are personal but the net effect is an ‘equitable ejectment’. [11.46] In Webb v Webb 290 a father paid for a flat but had legal title transferred to the name of his son and later sought a declaration of the existence of a purchase money resulting trust (personal) coupled to a second claim for ownership, that the legal owner should be compelled to give effect to the resulting trust by transferring title to the person who had paid for the land (real) (?). The two points — the ‘real’ and the ‘?’ — need to be treated in turn. If the father sues the son for an order to pass title a personal order is made against the son, telling the son to execute a transfer of title and binding only the son in person but its enforcement is real. If a trustee proves to be recalcitrant Chancery would replace the trustee with a court official directed to execute the transfer,291 so the action ends up with a transfer being effected. Personal actions have real effects. ‘Real’ was followed by a ‘?’ above because of the doubt attached by Webb v Webb when the European Court of Justice held that an order against a person holding on a resulting trust to transfer title to the beneficiary is personal; but, as John MacEnroe screamed at the Wimbledon umpire, ‘You cannot be serious!’. The personal character is a half-truth arrived at by considering only the equitable aspect of a pre-1875 action and not the legal and equitable aspects of a modern action. Many sins are committed in Maitland’s name. Birks292 pointed out that this was a Saunders v Vautier293 trust, that is, a bare trust in which there was a single trustee holding on trust for a single adult beneficiary where the beneficiary has a right to call for immediate dissolution of the trust and a transfer and, whatever one might argue for the more normal type of trust, this case is at an extreme of the spectrum and so clearly in rem as to be beyond argument; as Birks says, the opposite is obvious to all except the editors of one text and the counsel arguing the case for the United Kingdom government.294 It should be added that Birks supported the actual decision in Webb on other grounds.
3
Choice of trust forum
[11.47] A settlor may include an express choice of law in a trust instrument to confer jurisdiction on the courts of a particular state or of a constituent part of 289 290 291 292 293
Underhill & Hayton (n 253 above) 704–705. Webb v Webb (n 251 above). Underhill & Hayton (n 253 above) 750. P Birks ‘In Rem or in Personam’ (n 271 above). Saunders v Vautier (1841) 4 Beaven 115, 49 ER 282, affirmed (1841) Craig & Phillips 240, 41 ER
482. 294 RP Meagher, D Heydon & M Leering Meagher Gummow & Lehane’s Equity Doctrines & Remedies (Chatswood NSW, Butterworths LexisNexis, 4th edn, 2002, 0-409-31544-3) [3.220ff]; it is said to be dubious at [3.220] and false at [3.221]. Birks (n 271 above) 101 says ‘nobody nowadays seriously maintains he [Maitland] was right’ and adds that Maitland was ‘wholly incorrect’.
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the United Kingdom,295 and this will be respected provided no attempt is made to displace the exclusive jurisdiction over land.296 A forum should be exclusive, and this is presumed unless otherwise agreed in relation to any proceedings involving a settlor, trustee or beneficiary connected with their rights and obligations under the trust.297 Courts elsewhere are excluded unless and until the chosen court declines a case,298 so the choice is stronger than under earlier common law rules which left a larger area of discretion for a judge to disallow a choice.299 As to form, a choice may be in writing or evidenced in writing, or in a form according to the practices established by the parties between themselves, or in accordance with a trade usage,300 and also by electronic communication creating a durable record.301 It is vitally important that any common law trust should include an express choice of a common law forum and a matching choice of law,302 but choice is not available for resulting and constructive trusts.
TRUST LAW
Trust Law 1
The Hague Trusts Convention
[11.48] Conflicts of trusts give rise to tricky problems, because there is no EU regime governing the selection of trusts law.303 Instead this is left to the Hague Trusts Convention XXX304 which also sets down agreed principles governing the 295 Regulation on Civil Jurisdiction (n 17 above) §23[4–5]; CJJA 1982 sch 4 (n 246 above) para 12(2); these differ from Brussels Convention (n 118 above) §17 and Lugano Convention (n 118 above) §17[2–3] and are subject to consumer protection. It is not permissible to displace the exclusive jurisdiction over land, a provision rendered virtually redundant by Webb v Webb (n 251 above) and another reason why that decision is wrong. 296 Regulation on Civil Jurisdiction (n 17 above) §23[5]. 297 Case 23/78 Meeth v Glacetal [1978] ECR 2133 ECJ. 298 Regulation on Civil Jurisdiction (n 17 above) §23[3]. Choice is subject to §§13, 17 or 21: Regulation on Civil Jurisdiction §23[5]. This, of course, is unlikely given the decision in Webb v Webb (n 251 above). 299 EMM Capricorn Trustees v Compass Trustees [2001] WTLR 997 Royal Ct of Jersey; Green v Jernigan (2003–2004) 6 ITELR 330 Supreme Court British Columbia. 300 Regulation on Civil Jurisdiction (n 17 above) §23[1]. 301 Regulation on Civil Jurisdiction (n 17 above) §23[2]; see above [5.64]. 302 See below [11.59]. 303 Rome Convention (n 111 above) §1[2](a). 304 Hague Convention (n 34 above) XXX §1; Graziadei, Mattei & Smith Commercial Trusts (n 221 above); Principles of European Trust Law (n 221 above); Lupoi Comparative Study (n 221 above); Hayton ‘Hague Trusts Convention’ (n 47 above); Waters ‘Twenty Years On’ (n 223 above); P North Essays in Private International Law (Oxford, Clarendon Press, 1993, 0-19-825826-7) 194–195, 215; J Harris The Hague Trusts Convention: the Private International Law of Trusts (Oxford, Hart, 2002, 1-841-13110-5); J Harris ‘The Trust in Private International Law’ ch 8 in J Fawcett Reform and Development of Private International Law: Essays in Honour of Sir Peter North (Oxford, OUP, 2002, 0-19-925008-1); see above [11.04].
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recognition of trusts across borders, but only within a very select trusts club. Limited uptake on the continent of Europe has reduced the Convention to small moment and causes it to interact very poorly with the European forum rules just described. [11.49] The basic shape of the Convention is very strange. Throughout the basic analogy adopted is of contract, even though most trusts affected by it will be common law trusts that are proprietary in character.305 Throughout there is a distinction between the ‘rocket-launcher’ and ‘rocket’306 in the shape of the procedures needed to create the trust and to vest the property in the trustees, which are outside the Convention and are left to domestic principles of private international law which are themselves scarcely sketched out. The ‘rocket’ thus launched is the trust itself, and once on its way the Convention provides for the choice and selection of trust law.
(1)
Common law states
[11.50] The United Kingdom wanted to secure recognition of its trusts in continental countries and so it rushed to enact primary legislation to implement the Hague Convention in the shape of the Recognition of Trusts Act 1987307 which indeed goes beyond written trusts in the Convention sense to include constructive and resulting trusts imposed by judicial decision,308 and applying as between parts of the United Kingdom and to most overseas territories.309 Elsewhere in the common law world the Convention has been ratified by Australia, Canada and Hong Kong (and also China), but although the United States signed it has not implemented the Convention, preferring to rely on existing and more sophisticated rules to deal with the plethora of inter-state trusts.310 Uptake by civilian states is very limited and this has reduced the Convention to very small consequence in practice. This leaves very significant difference between an English trust where all issues are confined to the United Kingdom and one where the trustees or the trust assets stray abroad; in the latter case there are limits on the appointment of trustees311 and the normal power to reinvest in land will not extend outside the United Kingdom without an express power in the trust 305 Briggs Conflict of Laws (n 71 above) 203; Harris ‘Trust in Private International Law’ (n 221 above) 188. 306 AE von Overbeck Hague Trusts Convention Explanatory Report set out in Harris Hague Trusts Convention (n 304 above) Appendix 3. 307 Recognition of Trusts Act 1987 (n 46 above) s 1(1); see above [11.04]. 308 Recognition of Trusts Act 1987 (n 46 above) s 1(2); Harris Hague Trusts Convention (n 304 above) 94; see below [11.61ff]. It excludes by s 1(3) (§§15–16) protection of minors, effects of marriage, succession, transfer of title, security, insolvency and title of third parties acquired in good faith. 309 Recognition of Trusts Act 1987 (n 46 above) s 1(4); Hague Convention (n 34 above) XXX §§17, 23–24; Recognition of Trusts Act 1987 (Overseas Territories) Order 1989 (n 49 above). 310 Hayton European Succession (n 16 above) [1.61]; Graziadei, Mattei & Smith Commercial Trusts (n 221 above) 70. 311 Von Bar & Drobnig ‘Property/Contract Law’ (n 224 above) [571ff].
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deed.312 Very many English residents will now own land in non-trust states and the lack of recognition of the trust in many of those states may be very inconvenient because when a common law trust crops up in a foreign court there may be either full acceptance of it independently of Hague, or on other occasions, ‘anything can happen’.313
(2)
Civilian states adopting the Convention
[11.51] A few civilian states have implemented the Hague Convention on trusts in order to secure recognition of their own statutory trust vehicles, examples being Malta (1996), Luxembourg (2004), Liechtenstein (2006) and San Marino (2006).314 The longest-standing trust state, and perhaps the most interesting, is Liechtenstein which introduced the Treuhänderschaft in 1926 by the Law of Persons and Companies, based on the Trustee Act 1925, that is, an English trust.315 Like all the ‘international’316 trust platforms it secures separation of the trust fund from the other assets of the trustee, the crucial facility. This was joined in 1983 by the Luxembourg fiduciary contract.317 This list of adoptees conveys better than any words the financial windfall that awaits civilian states that adopt the trust, provided care is taken to negate the tax avoidance possibilities. International trusts have also been adopted over the past twenty years or so by several civil law and off-shore states lacking separate equitable jurisdictions,318 notably in the Caribbean and Pacific Islands.319 [11.52] A few states have implemented the Hague Convention on trusts while lacking their own domestic implementation of the trust vehicle, examples being Italy, the Netherlands320 and, as from July 2007, Switzerland.321 Most of these states have implemented the Convention with a view to future implementation of domestic trusts, though in France tax problems have in fact blocked the enacting legislation.322 Accession to Hague does not itself introduce trusts into the internal Trustee Act 2000, c 29, s 8(2); Von Bar & Drobnig ‘Property/Contract Law’ (n 224 above) [599]. Graziadei, Mattei & Smith Commercial Trusts (n 221 above) 12, 65. 314 Dicey & Morris (n 8 above) II [29-002]; Graziadei, Mattei & Smith Commercial Trusts (n 221 above) 14. 315 Lupoi Comparative Study (n 221 above) 280, 327–329. 316 Lupoi Comparative Study (n 221 above) ch 4. 317 Decree July 19th 1983; Lupoi Comparative Study (n 221 above) 283; Graziadei, Mattei & Smith Commercial Trusts (n 221 above) 91; M Daelemans ‘New Belgian Code on PIL’ (2004) 19 Butterworths Journal of International Banking & Finance Law 461–462. 318 Lupoi Comparative Study (n 221 above) ch 4. 319 Lupoi Comparative Study (n 221 above) 205ff. 320 Graziadei, Mattei & Smith Commercial Trusts (n 221 above) 90–91; Hayton, Kortmann & Verhagen Principles of European Trust Law (n 221 above) 203–204 (trust supported by professions). 321 F Noseda ‘Switzerland and the Hague Trust Convention’ (2005) 19 Trust Law International 37–61; S Pallister ‘In Search of Certainty’ (2006) 80 Trusts Estate Land and Tax Journal 26–28; Principles of European Trust Law (n 221 above) 105–121; Hayton TACT Report (n 154 above) [2.8–2.10], [5.3]. 322 French Law 2007-211 on Fiducies, February 19th 2007; JM Tirard ‘Breath of French Air’ (2007) 5 Private Client Practitioner 19–20; JF Adelle ‘French Law Adopts Fiduciary Arrangements’ (2007) 22 Butterworths Journal of International Business and Finance Law 180–182; T Leavy ‘In France We Trust’ 312 313
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law of a non-trust state323 but merely recognises domestically the separation of the assets of the trust and the trustee created by a foreign trust.324 Italy is the most interesting country within this group because there are up to 80 different trusts holding assets in Italy and their existence is supported by judicial decision,325 though there is some controversy about whether this applies to purely domestic trusts (Lupoi) or only ones with some international relationship (Broggini).326
2
Definition of a trust
[11.53] Hague XXX defines a ‘trust’327 as a legal relationship created by a person (the ‘settlor’) which places assets under the control of a trustee for the benefit of a beneficiary or for a specified purpose. No doubt the usual pattern of a trust is for assets to be vested by a settlor in other people as trustees for the benefit of separate beneficiaries328 but this is not necessarily true of English trusts and certainly the Hague Convention also includes what Lupoi describes as the ‘shapeless trust’ in which the trusteeship is not necessarily separated from the settlor or the trusteeship overlaps with the benefit.329 It is possible for continental institutions quite different from common law trusts to fall within Hague provided only that the funds are separated, and recognition of equity is not a prerequisite for a ‘trust’ to exist in this sense. All trusts have the following characteristics: 앫 constitution of a separate fund apart from the trustee’s personal estate, 앫 vesting of title to the trust assets in the name of the trustee or a nominee,330 앫 imposition of management duties subject to powers of use and disposal, and
(2007) International Finance Law Review 66–67. On the proposals see PH Rémy ‘France’ in Hayton, Kortmann & Verhagen Principles of European Trust Law (n 221 above) 131–158; Graziadei, Mattei & Smith Commercial Trusts (n 221 above) 89. Hayton European Succession (n 16 above) [1.62]. Hayton European Succession (n 16 above) [1.66]. 325 M Lupoi & T Arigo ‘Italy’ in Hayton, Kortmann & Verhagen Principles of European Trust Law (n 221 above) 123ff; Lupoi Comparative Study (n 221 above) ch 7; Graziadei, Mattei & Smith Commercial Trusts (n 221 above) 92; AG Paton & R Grosso ‘The Hague Convention’ (1994) 43 ICLQ 654–661; Von Bar & Drobnig ‘Property/Contract Law’ (n 224 above) [554]. Italy along with the Netherlands has thrown itself into the spirit: Harris ‘Trust in Private International Law’ (n 221 above) 198. 326 Principles of European Trust Law (n 221 above) 9–10. 327 Hague Convention (n 34 above) XXX §2; Hayton ‘Hague Trusts Convention’ (n 47 above) 261ff; Harris Hague Trusts Convention (n 304 above) 103ff. 328 Lupoi Comparative Study (n 221 above) ch 6. 329 Lupoi Comparative Study (n 221 above) 346; Harris Hague Trusts Convention (n 304 above) 111ff. 330 Validity of wills or questions of preliminary constitution of a trust fall outside the Convention: Hague Convention (n 34 above) XXX §4; Hayton ‘Hague Trusts Convention’ (n 47 above) 268ff; Dicey & Morris (n 8 above) II [29-004]. 323 324
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앫 imposition of special (fiduciary) duties on the trustee, that is, the requirement to act only in the interests of the beneficiaries. It is assumed that the trust has no separate corporate identity.331 Lifetime and will trusts are covered, but only trusts created voluntarily and evidenced in writing,332 leaving resulting and constructive trusts to the normal rules of public international law. This is unless — as is the case for the United Kingdom — domestic implementation extends the same rules to these forms of trust.333 Categories of trust are considered below.334
3
Common law site-based selection of law
[11.54] The common law stretched the concept of immovables so as to include a beneficial interest under a trust where the trust asset was land, including presumably now a trust of land; in the past it included a beneficial interest under a trust for sale as well as settled land and capital monies received on the sale of settled land.335 Most of the case law was devoted to the oddities of the old doctrine of conversion in the context of a trust to sell land, which until 1997336 was needed to avoid the imposition of a strict settlement and so was the standard form of trust vehicle for holding land. When a trust was imposed to sell land, equity assumed that this trust would be carried out as soon as the duty to sell took hold, even if sale had been and was intended to be postponed337 and a beneficial interest under a trust for sale was, therefore, treated for domestic succession purposes as an interest in money.338 This domestic conversion was never recognised internationally and when a conflict arose between legal systems the beneficial interest was treated as derived from land. A Hungarian, Count Berchtold,339 died in his Hungarian domicile, intestate, but leaving an interest in the proceeds of sale of freehold land in Birmingham subject to a trust for sale; this was treated as an immovable and
Principles of European Trust Law (n 221 above) 29 §1. Hague Convention (n 34 above) XXX §3; Harris Hague Trusts Convention (n 304 above) 123ff. A state may extend the Convention to trusts declared by judicial decisions: §20; Lupoi Comparative Study (n 221 above) 341. 333 There are three possible approaches: A Chong ‘Common Law Choice of Law Rules for Resulting and Constructive Trusts’ (2005) 54 ICLQ 855–883. 334 See below [11.61ff]. 335 Settled Land Act 1925, c 18, s 75(5) (treated as land); Re Cutcliffe’s WT [1940] Ch 565 Morton J; Falconbridge (n 71 above) 586; Re Midleton’s Settlement [1947] Ch 583 CA (proceeds of Irish land invested in English securities treated as Irish land). It may perhaps be open to question whether this makes the proceeds ‘immovable’ under the European conflict rules. 336 Settled Land Act 1925 (n 335 above) s 1; Trusts of Land and Appointment of Trustees Act 1996, c 47, s 2. 337 P Sparkes A New Land Law (Oxford, Hart, 2nd edn, 2003, 1-84113-380-9) [13-06]. 338 This has been largely superseded domestically by the trusts of land system: Trusts of Land and Appointment of Trustees Act 1996 (n 336 above) s 3. 339 Re Berchtold [1923] 1 Ch 192 Ch D, 199 Russell J. 331 332
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governed by the land law of Birmingham. There are many similar examples.340 A conversion recognised internationally occurs only on an actual sale.341 Law follows not the location of the land but the location of the beneficial interest, which depends upon the domicile of the trust.342 That at any rate is English law but it is not necessarily decisive of the European regime; indeed it would be odd if it were to be. [11.55] The immovable character of a beneficial interest was not extended to the putative beneficial interest in an unadministered estate while the estate remains vested in the executor. During the administration of the estate those named in the will, or entitled on intestacy, have no share and no claim to particular property within the estate,343 but merely a right to enforce the administration of the estate, a chose in action situated where he, as putative beneficiary, is domiciled. Inheritance duties are applied accordingly, with shockingly random results. This did not attract succession duty on the facts of a leading case, Livingston, but in contrast the wife of an English-domiciled testator could be liable for English probate duty on her quarter-share in the value of a mortgage of land in New Zealand; this was personal property and not land.344
4
Selection of trust law by the Hague Convention
[11.56] Selection of law will occur, where no law is chosen, by finding the law with which the trust is most closely connected.345 Any selection of law will only be effective if that law makes provision for trusts in general and those of the category created in particular.346 Particular reference points are: 앫 앫 앫 앫
the place of administration of the trust designated by the settlor, the site of the assets of the trust, the place of residence or business of the trustee(s), and the objects of the trust and where they are to be fulfilled.
The residence of the beneficiaries is not mentioned as a distinct item, though it may be included within the objects of the trust. The site of the assets is the primary factor in the creation of the trust — the rocket launcher function —
Re Cigala’s ST (1877) 7 Ch D 351 Jessel MR (plantation in Jamaica); also many other cases. Philipson-Stow v IRC [1961] AC 727 HL, 762 Lord Denning. 342 Sudeley (Lord) v Att-Gen [1897] AC 11 HL (interest of legatee in England); Att-Gen v Johnson [1907] 2 KB 885 Bray J (beneficial interest in the UK of trust for sale of tea estate in Assam); Favorke v Steinkopff [1922] 1 Ch 174 Russell J (trust in England of Hamburg state loan); Re Berchtold (n 339 above); Philipson-Stow v IRC (n 341 above) 762 Lord Denning; Harris Hague Trusts Convention (n 304 above) 38. 343 Commissioner for Stamp Duties, Queensland v Livingston [1965] AC 694 PC. 344 Sudeley (n 342 above). 345 Hague Convention (n 34 above) XXX §7; Dicey & Morris (n 8 above) [32-040], [33-227]; Harris Hague Trusts Convention (n 304 above) 215ff esp 220–221 (site). 346 Hague Convention (n 34 above) XXX §5; Harris Hague Trusts Convention (n 304 above) 158ff. 340 341
Trust Law
515
which is outside the Convention. So a declaration of trust of land and the vesting of the land in the trustees needs to follow the formality and substantive rules of the site. Once launched the trust assets form part of the fund and the rules applied to it may or may not be determined by the site. The rocket launcher function is fully discussed by Harris who favours site-based rules for capacity, validity and probably matters such as perpetuity, but observes the gaps for assignments of beneficial interests and finds the overall solution to the launch pad ‘unconvincing’.347 Examples of the operation of a Convention selection include the case of a settlor who was anxious to get money out of India and who created a settlement in England of assets held by an English bank as trustee; he clearly had established a much stronger connection with England than with India, quite apart from the express choice of English law.348 A Nobel laureate in chemistry349 died in Texas but nevertheless turned his thoughts to home when he created his will trusts with an express choice of England, and quite apart from that references to English charities and an English location for the trusts assets and the purposes of the trusts. Matters chosen or selected include the validity of the trust, its construction, effects, and administration,350 and in particular: 앫 trustees: appointment, resignation, removal, capacity, and the devolution of office, 앫 trustees’ rights and duties among themselves, 앫 delegation rights, 앫 powers: administration, disposal, creation of security, acquisition and investment, 앫 perpetuities and accumulations, 앫 liability to beneficiaries, 앫 variation and termination,351 and 앫 distribution of assets and the duty to account. It is important to recognise that one is also choosing a taxation regime, and this may impose English tax on foreign property with curious results.352 Severable aspects of a trust, such as administrative acts, may be governed by a different law,
347 Harris Hague Trusts Convention (n 304 above) 3–80, 151ff; see on site-based rules 24–25, 26, 38, 39–40, 77. 348 Re Carapiet (n 47 above) [1–14], Jacobs J. 349 Re Barton decd [2002] EWHC 264, [2002] WTLR 469 Lawrence Collins J. 350 Hague Convention (n 34 above) XXX §8; Hayton ‘Hague Trusts Convention’ (n 47 above) 273; Harris Hague Trusts Convention (n 304 above) 33. 351 For example, the possibility of a termination of the trust when the trust assets have reverted to a single adult beneficiary under Saunders v Vautier (n 293 above); this mode of termination is an odd absentee from Texas: Re Barton dec’d (n 349 above); Harris Hague Trusts Convention (n 304 above) 256ff. 352 Att-Gen v Jewish Colonisation [1901] 1 QB 123 CA; Anon (1901) 17 LQR 117–119. This is so even though, formally, taxation is also excluded: Hague Convention (n 34 above) XXX §19.
516
Family Property
if the law selected so decides.353 The Convention confines its scope to trust law with a large number of exclusions354: it does not affect the protection of minors and incapable parties, marriage laws, succession rights and protected inheritance rights, transfer of title, security interests, insolvency or the protection of third parties acting in good faith. The law selected is subject to mandatory rules of the forum and possibly mandatory rules of other states with which the trust has a sufficiently close connection,355 and there is a reservation for public policy (ordre public).356
5
Recognition (and non-recognition) of trusts
[11.57] Recognition357 must be granted in a Convention state to a trust properly created elsewhere. The state providing recognition must extend it, as a minimum, to disaggregation of the trust property so that it is treated as a separate fund, allowing trustees to sue and be sued and permitting the ability to deal with a notary as trustee.358 Internal law may recognise the separate fund principle, including: 앫 a bar on personal creditors of the trustee seeking recourse against trust assets, 앫 separate treatment of trust assets on insolvency, and 앫 exclusion of trust assets from the trustee’s matrimonial property. A recognising state may also allow its domestic law to be used to allow tracing of trust assets. Rights of third-party holders of trust assets shall be determined by the private international law of the forum.359 Trustees will generally be able to register land as a trustee, unless internal rules prohibit this.360 In general, very little is required of non-trust states. [11.58] The requirement of recognising a trust does not apply to a law chosen where significant elements of which are more closely connected with a trust-less 353 Hague Convention (n 34 above) XXX §9 (dépeçage), §10 (change); Hayton ‘Hague Trusts Convention’ (n 47 above) 272; Dicey & Morris (n 8 above) [29-036]; Harris Hague Trusts Convention (n 304 above) 281ff, 297ff. 354 Hague Convention (n 34 above) XXX §15; Hayton ‘Hague Trusts Convention’ (n 47 above) 280ff; Harris Hague Trusts Convention (n 304 above) 355ff. 355 Hague Convention (n 34 above) XXX §§16 (forum), 17 (no renvoi); Hayton European Succession (n 16 above) [1.65]; Harris Hague Trusts Convention (n 304 above) 380ff. 356 Hague Convention (n 34 above) XXX §18; Harris Hague Trusts Convention (n 304 above) 390ff. 357 Hague Convention (n 34 above) XXX §11ff; Hayton ‘Hague Trusts Convention’ (n 47 above) 260, 274. More favourable recognition rules are allowed by §14. States may reserve the right to recognise only trusts the validity of which is governed by the law of a contracting state (§21) making recognition reciprocal rather than universal: Dicey & Morris (n 8 above) II [29-002] fn 7; Harris 404. 358 Hague Convention (n 34 above) XXX §11; Harris Hague Trusts Convention (n 304 above) 311ff. 359 Tracing enables stolen trust assets to be recovered from third-party recipients and this is the largest divergence from civilian principles, but the ‘level of subversion is acceptable’: Lupoi Comparative Study (n 221 above) 356–360; Harris Hague Trusts Convention (n 304 above) 321ff. 360 Hague Convention (n 34 above) XXX §12; Harris Hague Trusts Convention (n 304 above) 337.
Trust Law
517
state, that is a state which does not have the institution of the trust or the category of trust involved, connection being judged against factors such as the place of administration and the habitual residence of the trustee.361 When setting up a trust it is important to ensure that it will not subsequently be possible to bring this exception into play; English Chancery is the only safe choice.
6
Choice of trust law
[11.59] Consensual selection is vital for trusts because a settlor needs to ensure the forum will understand equity — to the extent that anyone does — and that the applicable law will recognise trusts. So the only practicable choices in Europe are English law in the Chancery Division and Irish equity in the Republic. [11.60] Autonomy is granted to a European settlor, just as the old Court of Chancery allowed,362 to choose the law which is to govern his trust, a facility not limited to ‘international’ trusts. It is obviously best to express the choice in the trust instrument363 but otherwise it might be implied from the terms of the instrument interpreted in the light of surrounding circumstances. Care is needed to choose a law which recognises trusts364 (because of limits to the recognition principle365) and, in particular, recognises trusts of the particular type in issue. Care is also needed to ensure that significant elements of the trust, such as the place of administration and the habitual residence of the trustee, are not more closely connected with non-trust states.366 Mandatory recognition of a choice of law will be much the most satisfactory solution, but a choice of law outside the Convention may still have an effect either because a trust-friendly state recognises the trust under its domestic conflicts rules or because a judgment is obtained which has to be recognised as a civil judgment.367
361 Hague Convention (n 34 above) XXX §13; Lupoi Comparative Study (n 221 above) 362ff; Waters (n 223 above) 78ff (§13 to limit choice common law); Harris Hague Trusts Convention (n 304 above) 341ff. The principle is not in the Recognition of Trusts Act 1987 (n 46 above): Dicey & Morris (n 8 above) [29-016]. Nor is it used in Italy: Harris ‘Trusts in Private International Law’ 197. 362 Anstruther v Adair (1834) 2 Mylne & Keen 513, 39 ER 1041 Lord Brougham LC. 363 Re Barton dec’d (n 349 above). 364 Hague Convention (n 34 above) XXX §6; Hayton ‘Hague Trusts Convention’ (n 47 above) 269ff; Harris Hague Trusts Convention (n 304 above) 169ff. 365 Hague Convention (n 34 above) XXX §11ff. More favourable recognition rules are allowed by §14. States may reserve the right to recognise only trusts the validity of which is governed by the law of a contracting state: §21. 366 Hague Convention (n 34 above) XXX §13; or the particular type of trust in issue; see below [11.57]. 367 See above [9.75].
518
Family Property I N TER ACTI O N O F TRUST LAW A N D F O RUM
Interaction of Trust Law and Forum Three main patterns of trust need to be considered to see how these rules interrelate.368
1
Express trusts of land in Convention states
[11.61] Many English couples own second homes in civilian states and they may be tempted to create a trust in an attempt to evade matrimonial property and succession regimes under the law of the host state. If this were allowed freely it would to a large extent enable owners from common law states to override large parts of the property law in the state in which they were buying, though no doubt there is an irreducible core of property law which must always be site-based.369 Clearly such a trust needs an express choice of English forum and English law; the trust needs to be created in writing and a choice needs to be expressed in writing and it is assumed that a choice could extend to automatic resulting trusts.370 Omission of a choice will leave an awkward position in relation to selection of forum. An English forum may still be available but only as an alternative to a connected forum, which in all probability will be site-based, though it is true that factors such as a choice of English-domiciled trustees and administration of the trust from England might lead to an English connection. Hague XXX will apply to the choice of law in a small number of states that have acceded to the Hague Convention. If so, any choice must be recognised, but if no choice is made the court making a selection of law will be pulled in two directions, between an English law based on connections through English trustees and English feeling and a civilian law derived from the law of the site. However, if a civilian law is selected at least it will be one that recognises the trust.
2
Common law trusts of land in non-trust states
[11.62] If a couple own a second home in a non-Convention state even an express trust is vulnerable. The only safe course is to express a choice of English forum; this is binding and exclusive and should be supplemented by a choice of English law so that the trust can be enforced in England. Choice of an English forum therefore seems to enable foreign property law to be overridden to a large extent and this could be used, for example, to neutralise matrimonial regimes 368 See above [11.47] (choice of forum), [11.37] (selection of forum), [11.59] (choice of law); [11.56] (selection of law); [9.86] (enforcement of judgments). These references are not repeated. 369 For example relations with neighbours; see the corresponding irreducible core for contract law, above [10.04ff]. 370 These arise when an express trust is created but it fails to create valid or at least complete dispositions of the beneficial entitlements and thus benefit is passed back to the settlor.
Interaction of Trust Law and Forum
519
and forced heirships. The fly in this particular ointment is the problem of enforcement against the land itself and the question whether a non-trust state can refuse enforcement of a trust which would operate contrary to local property law. Without a choice the position of the beneficiaries is perilous. English forum will be available if any trustee has English domicile, but only as an alternative to a connected forum, which is in all probability site-based, though care in setting up administrative arrangements could displace the connection to England. Assuming that the courts of the site could find a sufficiently close connection, there is a risk of pre-emptive action in a non-trust state, a torpedo seeking a negative declaration that the trust does not exist. All then turns on the approach to the selection of land and recognition of trusts taken by the law of the site. Civilian forums carry a significant probability of a hostile stance and the failure of the trust. [11.63] It is one thing for English equity to circumvent the more awkward aspects of civilian property law for an English family perhaps buying a villa in Andaluçia who wish to avoid local Spanish succession laws. It is quite another if they are French or German, or even Spanish. Current European rules approach perilously close to creating an equitable tier of obligation overarching and correcting civilian lapses across the continent of Europe since a trust can always be made English by expressing an express choice. This opens the way for personal actions in England to enforce trusts against property elsewhere. Enforcement is personal so an English action is allowed whatever the location of the asserts. However, the law of the site can reassert itself and fight off the alien equity in several distinct ways: 앫 a torpedo action can be taken in a non-trust state for a declaration that no trust exists, 앫 registration can be refused of a judgment obtained in a Chancery state using the public order defence, 앫 recognition of a trust can be refused in a Hague Convention state on the basis of closer connection with the site, 앫 recognition fails automatically in a no-trust state. Any state which signs up to Hague XXX runs the risk of a European super-trust overriding and undermining their domestic property system, a position similar to that of a non-compulsory register in which off-register transfers are so common that the official record of legal title becomes purely nominal. Forum and law for trusts should be site-based.
3
Resulting and constructive trusts
[11.64] It has been suggested above that an automatic resulting trust imposed to fill a gap in beneficial entitlement will operate under an express trust and will
520
Family Property
probably be subject to an express choice of law and forum.371 Beyond that there are serious problems. There will generally be no operative choice of forum or law. Forum selection rules will operate as in the leading case Webb v Webb which concerned a purchase money resulting trust. However, selection of law rules are awkward. First, Hague XXX will only apply in a few states and when the other state is a trust-state the Convention only applies to trusts created voluntarily and evidenced in writing372 and to statutory trusts.373 This seems to leave resulting and constructive trusts to domestic conflict rules unless, as is the case for the United Kingdom, domestic implementation extends the same rules to these forms of trust.374 The exception is for trusts arising under judicial decision. Hayton has a much more limited reading of the exclusion and considers that purchase money resulting trusts and common intention constructive trusts arise from objective facts and although they are recognised by judicial decision it is not the decision which creates the trust.375 So Hayton would only exclude the so-called constructive trusts arising from knowing receipt of trust property and knowing assistance in breaches of trust. One suspects that many foreign courts would take a less technical and more obvious approach, excluding trusts which are not created in writing.376 Many presumed resulting trusts are designed to adjudicate between the possibility of gift to a close family relative or where gift is intended and a purely nominal transfer of legal title reversed in equity when there is no close family relationship between a person transferring title and the recipient of title; these cases ought to be seen as part of the law of gift and so site-based.
See above [11.62] n 370. Hague Convention (n 34 above) XXX §3. A state may extend the Convention to trusts declared by judicial decisions: §20; Lupoi Comparative Study (n 221 above) 341. 373 Hayton ‘Hague Trusts Convention’ (n 47 above) 266. 374 There are three possible approaches: A Chong ‘Common Law Choice of Law Rules for Resulting and Constructive Trusts’ (2005) 54 ICLQ 855–883. 375 Hayton ‘Hague Trusts Convention’ (n 47 above) 262ff; Dicey & Morris (n 8 above) II [29-008]. 376 This is the view of most writers: Harris Hague Trusts Convention (n 304 above) 125ff. It is generally agreed that mutual wills are covered and so too are ‘automatic’ resulting trusts since the consequences of a gift should be the same as the consequences of failure to make a gift: R Stevens ‘Resulting Trusts in the Conflicts of Laws’ in P Birks & F Rose Restitution and Equity I: Resulting Trusts and Equitable Compensation (London, Mansfield Press, 2000) 147, 157. 371 372
O UTR O
12 Outro O UTR O
Property has been brought into the ambit of the European Communities by the simple expedient of subjecting the property exclusion to internal market rules.1 Capital was brought into the internal market by the Maastricht reforms as from the start of 1994 and this dragged in land.2 Before that, European land law could be dismissed in a few sentences or at most an article, but it has since blossomed into a worthy topic for a book. If the property exclusion has been dismantled it retains a ghostly presence rather like the line of the Berlin Wall which continues to divide east from west long after the physical barrier has gone. Even confined to transactional law, internal market rules are part of an explosive mixture. Property was pushed to one side during the pioneer years when development of market rules concentrated on goods and services and the European layer was thin because of the concentration on the small proportion of cross-border transactions. Underpinning it are liberal commercial values governing an unregulated free market in which money alone speaks. This philosophy was not necessarily apposite when, after Maastricht, land came to be governed by the same commercial rules. Large swathes of Europe will be unattractive to foreign buyers, but foreign capital will pour into small geographical pockets. The effect will not be to drive down the price, as has happened with goods, but rather to escalate prices in selected areas by bringing in new buyers and making new areas fashionable. Other elements of the mix are cheap and rapid transport, equity release from overvalued property in England, the possibility of telecommuting and excessively cheap properties in parts of Eastern Europe. Many states have given too much control over their housing markets and the accession states which have surrendered most now face the deepest trauma. Somewhere in St Pancras a second Karl Marx is busy at work on a second Capital more properly known by its sub-title The Free Movement of Capital to Buy Second Homes.3 Fashion has also changed in consumer legislation so that the earlier land exclusions have been omitted from the unfair commercial practices and unfair terms regimes. Marketing rules are currently the largest substantive element of the European Land Law,4 the remainder of which is a random and eclectic selection of particular instances.5 1 2 3 4 5
See above [ch 3]. See above [ch 1]. See above [ch 2]. See above [ch 8]. See above [ch 3].
522
Outro
The line of battle now shifts from land to services affecting land. Earlier harmonisation of services passed conveyancers by, partly because notaries can claim a quasi-governmental status exempting them from Treaty imperatives and also because conveyancing and probate markets are preserved from free and full operation of the free market in lawyers’ services.6 Neither argument is convincing. Purchase costs are scandalously high in many states and notaries should be exposed to full price competition in the same way as conveyancers in Britain and all other professionals. A fall in transaction costs – along with more coherent and reduced stamp duties – would render land a more fluid commodity, as it is in England, and would enhance overall economic activity. Substantial scope exists for changes that would still leave states well short of the lunacies of the English market. A start is being made with the retail mortgage market,7 but there is no reason why conveyancing markets should not be opened to competition from foreign lawyers after limited competence tests. Language barriers will remain, and not every high street firm will be able to justify a Spanish property department, but in the long term young lawyers may profit from following Lord Byron’s lead when in Venice and applying themselves to a concentrated study of Albanian! Transactional property law is becoming Europeanised and the new markets created should be open to all Europeans. Commission-sponsored studies of conveyancing services are supported by the Law Society and the British government which suggests a belief that Anglo-Saxon lawyers are well placed to conquer the continent. If the straws in the wind suggest an existing and increasing pan-European transactional law, what then of substantive law? Internal market development always begins with conflicts principles to assign a particular transaction to a particular legal system with certainty.8 Economic analysis may suggest no need to move to substantive harmonisation, especially if cross-border transactions are a small percentage of the whole, but in transactional law simplicity and certainty are all. Some co-ordination of aspects of national systems of land law is sure to be proposed, as has happened recently with family law and succession,9 starting perhaps with formalities for transfer, modes of contracting and procedures for mortgaging. At some stage therefore, maybe soon, common lawyers will have to respond to the general idea of a pan-European land law. The knee-jerk reaction of outright opposition based on the property exclusion is the wrong response, since it is to turn away business and lose influence for no gain; far better to conduct a proper appraisal of the merits and demerits of particular proposals. Refusal to participate will ensure, as with the Contract ‘Code’ that the eventual European property law is wholly civilian.10 This is to throw away our lead in registers and electronic conveyancing, and to ensure that the continent never See above [ch 7]. See above [ch 9]. 8 See above [ch 4], [ch 10]. 9 See above [ch 11]. 10 See above [ch 10]. 6 7
Outro
523
comes to understand the administrative advantages of the trust in fund management and administration of estates. It is to do to our property law what the Brussels Convention has done to our conflicts rules; to take a first rate system and make it second rate. Property lawyers must participate in the debate in order to include as much as possible of the suppleness and flexibility of the common law system. It is much easier to bring together the English and civilian systems than would have been the case with the pre-1925 common law (that is to say the Irish and American systems). Civilian lawyers most likely to participate in the European project are mainly trained in American law and therefore regard divisible estates, legal life interests, the execution of uses and springing and shifting estates as part of the package, whereas the 1925 scheme for the undivided freehold estate is quite close to the civilian conception of absolute propriété or Eigentum. We need the simplicity of continental codes to be brought across the Channel and transplanted into our property legislation; it is time to excise the lingering law/equity divide which is the main source of unnecessary complexity. Conversely the continentals need to be educated, even force-fed, the message about the trust; if one separates for example the title to administer a deceased’s estate from the beneficial entitlement, it becomes much easier to accommodate different national conceptions about how intestate estates should be divided. Trusts can only be implanted if trust law is codified. Common law took root in America only because the principles all fitted into the single volume of Blackstone which could be carried out into the Wild West and on the same principle trusts can only be recognised elsewhere if stated in short and simple principles. There indeed is the glimmering of the new European land law. It needs to be modelled like a register. A register has fields which have the potential to have content but which need not necessarily contain anything. Thus provision must be made to register security interests but it does not follow that particular land is charged. In the same way property law must have a category of mortgages and sureties and rules about how they are created, recorded and made to bind purchasers — and this could be stated in a uniform way across Europe without dictating that the interests recognised as creating security should be the same in every state. The category of security could limit mortgages to fixed charges in civilian-influenced states and yet allow a floating charge in the common law states of Europe. Agreed common fields could facilitate a single transactional law across Europe, a mix of commonality and subsidiarity. That is a better route forward than for common lawyers to erect barricades in defence of their existing property law. Property law is not like contract law in which a new set of rules can be elaborated in addition to existing sets,11 since property law is mandatory in character and thus the only choices are continuation of multiple national systems or, e pluribus unum, the gradual evolution of a single overarching system. Cross-border sales will become a commonplace and this suggests that pressure 11
See above [ch 8].
524
Outro
will build up for a single higher-level system. It is a fair bet that common lawyers will seek to block this development. Britain has the most sophisticated land market and most effective conveyancing system in the world, primarily because equity bequeathed a flexibility lacking in the codes. Our lead can only be maintained if we participate in and drive the debate. Conveyancing is an area in which we should be forcing our superior system, chains, registers, e-techniques and all, on our civilian friends and having sold them should then continue to profit from them. A single conveyancing market should be one in which common lawyers will have the edge. Why defend an existing property law that is archaic and over-complex? It is also formulated in a way which makes it impossible to export so that, in order to make it saleable, our law needs to be put into a form where it is seen to be superior to its rivals, something akin to a code in simple and modern language. The transactional advantages of our system will then speak for themselves. That is an urgent task.
I N DEX
Index I N DEX
Aberdeenshire, 2.12 absolute ownership, 3.44 abuse of dominant position, 3.28, 3.51 access to social housing, 1.73 accession state arrangements, 1.37, 2.28 Common Agricultural Policy, 3.75 conflicts, 4.04, 4.07 full envelope, 1.08, 3.75 human rights conditionality, 3.33 mortgages, 9.06, 9.09, 9.12 movement, 1.78 second homes, 2.22 self supporters, 1.92 workers, 1.54, 1.82 accessoriness, 9.30 account, 4.48, 11.42, 11.56 accountant, 7.47, 7.48 acknowledgement of orders, 8.23 acquisition as laundering, 7.35, 7.45 acte authentique, 7.06 de vente, 10.12 action addition of parties, 10.60 consumer, 5.15 mixed, 11.39 personam, in, 11.44 recovery of land, Preface, 4.29 rem, in, 4.22ff See forum administration administrative receivership, 9.62 company, 9.62, 11.22 estates, 7.02, 7.08, 7.65, 12 insolvent estates, 4.35 trust, 11.56, 11.58, 11.61 administrative rights, 3.41 insolvency proceedings, 9.62 advance payments, 6.34, 6.55, 8.45 advanced e-signature, 8.01, 8.03, 8.05, 8.06, 8.07, 8.08, 8.09, 8.13 advancement (gift), 11.39 adverse possession, 4.23 advertisement advertorials, 5.53 B2B, 5.55 B2C, 5.01
distance contracts, 5.53 internet, 5.60, 5.62 lawyers, 7.05, 7.09, 7.66 radio, 5.32 timeshare, 6.25 unfair practice, 5.40, 5.51 advice to borrowers, 9.33, 9.44 advocates, 7.05 after-sale service, 5.40, 5.50, 5.72 agent, 10.02 aggressive marketing, 5.45, 5.47, 5.48 agricultural activity, 3.69 land ownership, 1.04, 2.27, 2.29 maintenance, 3.69 parcels, 1.09, 3.70 policy, Preface tenancies, 3.67 See also Common Agricultural Policy, farm air travel, 1.62, 3.07, 3.49 Åland Islands, 1.06, 2.20 Albanian, 12 alienation, 3.13 aliens, 2.02 allonge, 7.06 Alpes Maritimes, 11.39 Alps, 2.15 alternative dispute resolution, 6.61 Annan, Kofi, 4.33 annual percentage rate (APR), 9.16, 9.19, 9.21 annulment of marriages, 11.02, 11.13, 11.14 Antibes, 2.34, 11.39 antianti-competitive agreements, 3.51 anti-contractual claims, 10.43 apostille, 7.06 appearance default, 9.87 appointment liquidator, 9.64, 9.65 trustees, 11.50 APR See annual percentage rate Aquitaine, 1.20 arbitration, 6.61, 8.37, 8.45, 10.38 archaeological areas, 3.24 Archbishop of Canterbury, 7.02 architect, 10.31 Aristotle, 3.30 Armenia, 1.08 arrangement, 7.46
526
Index
Artois, 2.04, 3.04 ascertainment of legal position, 7.47, 7.64 asset recovery, 7.40, 7.41 assignment of beneficial interest, 11.56 associated contracts, 5.82 association, 1.15, 1.63, 1.67 assumpsit, 4.48 assured shortholds, 8.35 asymmetric encryption, 8.06 Aubert, Étienne, Preface Auburn (Deserted Village), 2.11 auction sales, 5.32 auditors, 7.47, 7.48 Austria agricultural land, 2.49 controls on ownership, Preface, 1.06, 2.15, 2.17, 2.18, 2.27 fifth expansion, 1.06 second homes, 1.23, 1.33, 2.15, 2.19 authentication instrument, 5.78, 9.78, 9.90 e-signature, 8.13 notarisation, 6.43 authorisation of land acquisition, 2.16, 2.35, 2.47, 2.48 automatic resulting trust, 11.61, 11.63 autonomy, 10.35, 10.40 available amount confiscation, 7.42 average consumer, 5.43, 5.44, 5.53, 5.54, 5.58, 5.89 avocats, 7.07 Avranches, 4.28 Azerbaijan, 1.08 Azores, 1.05 B2B bad faith, 8.40 Common Frame of Reference, 8.50 contract instrument, 8.52, 8.53 e-commerce, 5.60, 8.21 late payment, 3.58 trade descriptions, 5.58 trading, Preface, 5.09 unfair terms, 8.24 B2C Common Frame of Reference, 8.50 consumer credit, 9.03 contract, conflicts, 10.03 contracts, 8.34, 8.40 e-commerce, 5.60, 8.21 forum clauses, 8.37 late payment, 3.58 lease, 8.35 Opt-in instrument, 8.53 pattern, Preface, 5.01, 5.05, 5.31, 10.30 trade descriptions, 5.58 unfair practices, 5.40, 5.41 unfair terms, 8.24 See also consumers
B2Gov late payment, 3.58 bad faith, 5.15, 8.39 bait advertising, 5.53, 6.06 Balkans, 1.08, 1.12, 1.13 Baltics, 1.08, 2.24, 2.29 bank account, 1.51, 7.63 bankruptcy, 9.32, 9.51, 9.58, 9.62, 9.64, 11.02, 11.16, 11.41 banks, 9.41 bar associations, 7.18, 7.58, 7.59 Barbary apes, 1.05 Barcelona process, 1.16 bare trust, 11.46 bargain, unfair, 8.44, 8.45 Barosso (President EU), 8.50 barrister, 7.14 Beano, 3.33 Beatles, 2.34 beef and sheep, 3.82 Belarus, 1.14 Belgium torpedo state, 4.18 beneficial interest capital movement, 1.47 identification of owner, 7.50, 7.53 immovable, 11.54 purchaser subject to, 11.39 site, 11.54 trust, 9.70, 11.39, 11.40, 11.46, 11.47, 11.53, 11.55 VAT, 3.60 under will, 11.22 Benelux, 1.05 Berlin Wall, 1.05, 12 Berry, 2.05 biennials, 6.22 biens, 5.12, 5.23, 8.27, 8.30 Bilbao, 3.20 Birks, Professor Peter, 11.46 Black Sea, Preface blacklist unfair terms, 8.45 marketing, 5.45, 5.53, 5.58 blaggers, 6.06 boats, timeshare, 6.08, 6.12, 6.66 border regions, 2.05, 2.38 borders, 1.91 borrowers See mortgage, 1.58 Boulogne, 4.28 Bragg, Billy, 5.45 branch, 9.43, 10.31, 10.54 breach contract, 10.19 trust, 4.24, 11.39, 11.42 bridges, sleeping under, 1.92 bridging loans, 5.29 British nationality, 1.55, 1.88 brokers, 7.49 Brönte, Duke of, 2.04, 11.28 Brussels Convention See forum for civil actions
Index building regulations, 5.40, 10.05 retentions, 11.35 societies, 9.41 timeshares, 6.08, 6.11 Bulgaria, Preface, 1.09, 2.26, 2.28, 2.30 property market, 1.01, 1.03, 1.09 recognition of judgments, 1.09 second homes, 1.09 workers, 1.09, 1.82 bundle of rights, 8.63 burden of proof, 10.19 bureaux de change, 7.49 Bürgerliches Gesetzbuch (German Civil Code), 3.43, 10.04 business relationship, 7.51 rights to buy land, Preface, 1.63, 1.68 rights to buy land Switzerland, 2.54 structure, 7.05, 7.09, 7.16 surety, 8.11, 8.12, 8.16 tenancies, 3.13 timeshare purchasers, 6.08 buy to let, 1.57 Byron, Lord, 12 C2 contracts, 5.05, 5.09, 8.24, 8.34, 8.40, 8.50, 10.03 caching, 5.61 cadastre, 3.70, 7.28 Caesar, Preface Cairngorm, 2.12 calling machines, 5.49 Canada, 3.05 canal narrow boats, 6.12 Canary Islands, 1.05, 6.02 cancellation credit/mortgage, 5.81, 5.86 distance, 6.33 doorstep contracts, 5.23, 5.24, 6.33 information, 5.79 overlapping rights, 5.84 timeshare, 6.31ff timeshare credit, 6.37 capacity, 3.12, 3.13, 10.05, 10.19 capital freedom direct effect, 1.07, 1.31 directives, 1.26, 1.27, 1.28 economic freedom, Preface, 1.21, 1.26, 1.29, 1.30, 12 EEA, 1.07 fundamental nature, 3.35 growth as reason for investment, 1.57 income, 1.34 Mediterranean, 1.16 movement, 1.32, 1.35, 1.39, 1.40, 1.41, 1.42, 1.43, 1.44, 1.45 nationality-based discrimination, 1.07 nomenclature, 1.37ff
527
overlap of freedoms, 1.63 property shield, 3.22 purchase price, 1.36 subsidiarity, 3.30 third countries, 1.25, 1.28 transaction basis, 1.38 capital gains tax, 2.08 caravans timeshares, 6.11, 6.12 carbon dioxide emissions, 1.62, 3.50 carer, 1.82 carousel fraud VAT, 7.43 cartel, 3.28, 3.39 Casanova, Preface casinos, 7.49, 7.59 Caucasus, 1.08 causa, 7.22 caveat emptor, 8.50 Celtic fringes, 2.12 Central and Eastern Europe (EU–25, EU–27), 1.02, 1.08, 2.24 centre of main interests, 9.49, 9.50, 9.56, 9.58, 9.59, 9.60, 9.62, 9.65 Centre Point, London, 1.57 centrifuge, 1.61 Cereal See Common Agricultural Policy certification Certification Service Provider, 8.06, 8.08 judgment, 11.14 signature, 8.05, 8.08 Cervantes, Preface cesser on redemption, 9.29 chains of transactions, 1.03, 7.02, 7.21, 12 Chancery/Chancery Division, Preface, 10.24, 11.39, 11.45, 11.58, 11.59, 11.60 Channel Islands, 1.05, 4.08, 4.09, 4.53 Channel Tunnel, 1.76 characterisation of conflicts issue, 3.02 charge See security charges for services, 4.38 charging order, 4.53, 9.75, 9.89 charities, 11.35 Chaucer, Preface Chelsea FC, 5.45 Cherry, Sir Benjamin, 9.29 Cheshire County Palatine, 4.29 Geoffrey, 3.08 child adoption, 11.01 custody, 11.02, 11.14 movement, 1.84, 1.86 choice arbitration, 10.42 consumer law, 5.04 contract forum, 10.10, 10.34, 10.35, 10.37 contract law, 3.12, 4.09, 10.10, 10.19, 10.39, 10.40 contract law linked to forum, 10.34, 10.36, 10.42
528
Index
contract law outside EU, 10.07 exclusivity of choice, 10.10, 11.47 express, 10.18 land law, 3.14 matrimonial regime, 11.05, 11.10, 11.12, 11.16 terminology, 3.07, 4.02, 10.01 trust forum, 11.47, 11.61, 11.62 trust law, 11.47, 11.59, 11.60, 11.61, 11.62 unfair, 8.37 See also forum Churchill, Winston, Iron Curtain, 1.08 circulars, 5.32 civil jurisdiction See forum civil status, 11.14 civilian codes/common law divide?, 8.63, 8.66 property law, 3.43, 3.44 succession, 11.12, 11.19 timeshares, 6.42 trusts, 11.34, 11.36 CLAB database (unfair terms), 8.34, 8.47 claw-back of gifts, 11.20 client account, 11.35 Cliff Richard, 3.28 close connection See connection club, 6.47 coast, 2.08, 3.49 Cockfield, Arthur, Preface code of conduct, 5.59, 5.89, 9.14 codification, 8.48, 8.57, 8.67 cohabitees, 1.83, 11.05, 11.15 cold calling, 5.25, 5.32, 5.49 collateral collateralisation, 9.48 securities, Preface, 8.11, 9.27, 9.28 timeshare agreements, 6.19 collective enforcement, 8.46 insolvency proceedings, 9.62, 9.63 lending, 11.35 COMI See centre of a debtor’s main interests commencement of insolvency proceedings, 9.64 commercial code, 8.53 communication, 5.62, 7.66 practices, 5.40 property VAT, 3.61 trusts, 11.35 commission payments, 9.44 commoditarisation, 1.01, 8.64, 12 Common Agricultural Policy, 1.07, 3.67ff, 3.82 See also agricultural, farm common areas enforcement area, 9.76 service area, 4.28 travel area, 1.91 Common Frame of Reference, 5.90, 6.33, 8.48, 8.50, 8.51, 8.55
common law freedom of testation, 11.22 jurisdictions, 3.43 obsolescence, 8.67 securitisation, 9.23 succession where land abroad, 11.27 trusts, 11.34, 11.35, 11.39, 11.40, 11.50, 11.62 Common Organisations of Markets, 3.82 Common Professional Examination, 7.18 commorientes, 11.01 community charge, 2.08 community law as mandatory law, 10.07, 10.21 commuting, 1.76, 1.77 company insolvency, 9.51 register of members, 4.35 seat, 10.54 comparative advertising, 5.01, 5.54, 5.55 compensation for use of property, 4.16 competition principles, 3.20, 3.24, 3.37, 3.51, 3.53, 3.54, 5.40, 10.44 standard terms, 8.45, 8.52 completeness of mortgage markets, 9.12, 9.34 completion of contract, 10.05, 10.28 compound interest, 9.24 compulsory acquisition, 2.27, 2.39, 3.23 computerisation of registers, 7.26 concealment as laundering, 7.35, 7.45 conduit, 5.61 confidentiality, 7.61, 10.48 confiscation, 7.36, 7.40, 7.42, 7.43, 7.44 conflict, 3.08 clubs, 1.18 See also actions, contracts, family, mortgages, property law connection contract, 3.12, 3.16, 4.09, 5.86, 10.13, 10.18, 10.22 divorce, 11.06 matrimonial regime, 11.05, 11.06, 11.12 substantial, 10.54 succession, 11.10 tort, 10.47 trust, 11.38, 11.56, 11.58, 11.60, 11.62 See also choice, forum Connemara, 2.12 conscience, 10.24, 10.25 consensual/consent choice of law, 10.10, 10.34, 10.40 consent orders, 9.77 divorce petition, 11.13 tradition (transfer), 7.22 conservatories, 5.24 consideration, 10.02 conspiracy, 7.39, 10.44 constitutional traditions, 3.33 construction
Index contract, of, 5.19, 5.22, 5.23, 8.26, 10.03, 10.15, 10.19 services, as, 1.66 trust, of, 11.56 constructive trust, 10.48, 11.04, 11.42, 11.50 consumer borrowers, 9.01, 9.12, 9.22, 9.40 consumers organisations, 8.46, 10.44 contract forum, 10.03, 10.15, 10.18, 10.30, 10.31 contract law, 3.12, 3.16, 4.09, 8.54, 10.33 definition, 5.05, 5.06, 5.07, 6.17, 6.61, 8.45, 10.33, 12 extra-territorial protection, 5.04 habitual residence, 10.33 judgments, 9.79 property shield, 3.24 protection, Preface, 5.01, 5.02, 8.49, 9.85 protection review, 8.49 residence, 5.60, 6.24 timeshares, 6.07 consumer credit APR, 9.19 B2C agreements, 5.01, 5.05 exclusion, 9.02, 9.03, 9.04 German legislation, 5.84 intermediaries, 9.44 contract, Preface, 7.21, 8, 8.05, 8.25, 10.01 assignment, 10.20 away from business premises See doorstep selling B2B, B2C, C2C, 8.34 civil code, 8.59 conflicts, 10 Contract Communication, 8.48, 8.55 contractual actions, 4.24, 4.36, ch 10 contractual obligations, 3.12, 4.09, 7.21, 10.12 conveyance, 8.12, 10.04 correspondence by, 8.15 definition, 10.02 exchange by, 8.04 existence of, 10.19 failure to, 10.43 family law, 8.11 financial service, 5.29, 5.81 foreign, 10.24 formalities, 8.02, 8.04, 8.17, 8.21, 8.61 forum, 4.16, 4.49, ch 10 goods, 10.27 Information, See information insolvency, 9.55 land, 5.20, 5.21, 5.77, 8.11, 8.60, 10.02, 10.03 law, 3.12, 3.16, 4.09, 4.10, 10.01, 10.02, 10.06 lease, 10.13 place of, 10.28 property interface, 8.55 proprietary effect, 8.59, 10.04, 10.05 sale, 5.09
529
severance of, 3.11, 3.16, 10.40 site rule, 3.16, 10.14 succession, 8.11 term, 8.45 third parties, 8.11 /tort divide, 10.47 trusts, 11.36, 11.48 unfair practices, 5.15, 5.40 variation, 10.40 websites, 8.20 contribution, 10.20 control indirect, 2.36 land purchase, 2.01, 2.02, 2.04, 2.32ff, 2.35, 2.37, 2.44 lawfulness, 2.42 transactions affected, 2.32 use of property, 1.19, 3.36 convenience See forum Convention rights See European Convention convergence, 3.42, 3.46, 3.86 conversion as laundering, 7.35 doctrine of, 11.44, 11.54 converts, Preface conveyancing conveyance, 11.44 conveyancers, 7.01, 7.34, 7.47, 8.67, 12 conveyancing, Preface, 7.01, 7.02, 7.08 England and Wales, 7.02, 7.04 establishment, 7.12 markets, 3.46, 12 money laundering, 7.45, 7.47, 7.48, 7.50, 7.58, 7.60 privilege, lack of, 7.64 property exclusion, 3.19, 8.65 services, 7.03, 7.04, 8.20, 12 cooling-off period, 6.07 co-ownership due diligence, 7.53 France, 2.36 timeshare, 6.41 copyrights, 3.27, 3.28 core, site-based, 3.28, 8.42, 8.43, 8.44, 8.45, 11.61 corporate domicile, 10.54 holiday let, 4.44 insolvency, 9.62 management providers, 7.48 trust, 11.53 vehicle for land ownership, 6.46, 11.20, 11.21 corporeal property, 3.12 corruption, 7.36 Corsica, 2.12 costs borrowing, of, 9.11, 9.16, 9.20 matrimonial, 11.02 recognition of judgments, 9.77, 9.83
530
Index
Council Council of Bars and Law Societies of the European Union (CCBE), 7.17 Council of Europe, 1.19, 7.34 council tax, 2.08, 2.09, 2.12 EC, Laeken, 11.05 counterclaim, 10.60 country of origin e-commerce, 5.61 coupled sectors, 3.82 court work, establishment of lawyers, 7.12 covenant, 4.48 covered bonds, 9.47 cows farting, 1.62 credit cancellation, 5.28, 5.80ff, 5.86 consumer See consumer credit distance selling, 5.81 doorstep selling, 5.26, 5.82 history, 9.32 institutions, 7.55 risk, 9.32 secured on land, 5.19 transfer, 7.30 creditors’ winding up, 9.62, 9.69 criminal property, 7.33, 7.34, 7.35, 7.36, 7.64 Croatia, 1.12, 1.56 Cromwell, 2.04 cross-action, 10.60 cross-compliance, 3.80 cross-border actions, 4.01 family, 11.01 financial services, 9.08 insolvencies, 9.49 internal market, 1.22 land holding, 3.11, 11.19 land transactions, 1.20, 1.21, 12 lending/borrowing, 9.07, 9.09, 9.39, 9.42 payments, 7.29, 7.31 rights property shield, 3.25 succession, 11.01, 11.26 trusts, 11.34 crystallisation of floating charge, 9.53 currency exchange offices, 7.49 judgment, 9.89 custodianship, 11.35 customer due diligence, 7.47, 7.48, 7.50, 7.54, 7.56 cyber-notarisation, 7.26, 8.02 Cyprus, 1.08, 1.82, 2.23, 4.31, 4.32 Cyprus Base Areas, 1.05, 4.08, 4.09 Czech Republic, 1.08, 2.19, 2.24, 2.29 dairy, 3.83 damages, 1.53, 4.29, 4.51, 10.19, 10.23, 10.24, 10.46 Dante, Preface Darrida, 10.49
day tripping See doorstep selling, 5.16 dealers in cash, 7.49 death See succession debt, 4.48, 9.06, 9.75, 9.80, 10.20 declaration judgment enforceability, 9.82, 9.84 land holding control, 1.33, 2.16, 2.17, 2.49 negative (torpedo), 11.62 ownership/title, 4.23, 11.39 trust, 11.56 decoupling, 3.71 deed formality, 8.04, 8.05 timeshare, 6.41 declaration of intended use, 2.50 default under mortgage, 9.37, 10.05 defence before courts, 7.66, 8.11 delegation by trustees, 11.56 delict, 10.02, 10.43, 10.44, 10.46 delivery of land, 10.11, 10.22 Delors, Jacques, Preface denial of contract, 10.52 Denmark EU member, 1.05 forum rules, 4.04, 4.06, 4.15, 4.41, 4.52 insolvency, 9.49 law, 3.12 mortgages, 9.10 movement of persons/border controls, 1.85, 1.86, 1.91, 1.94 second homes, 1.05, 2.19 speculation, 2.27 density of settlement, 1.61 deodand, 7.35 deontology, 1.01, 5.40 dépeçage, 10.09, 10.10, 10.18 deposit, unfair terms, 8.45 deposit taking institutions, 7.60 deprivation of possessions, 1.19, 3.36 descendants, 1.83 design rights, 3.27, 3.28 designer handbags, 7.38 development of land, 1.57 diaspora, 1.75 digital See edirect effect of capital freedom, 1.25, 1.31, 1.63 direct investment, 1.44 Director General of Fair Trading, 5.89, 8.46 disclosure duty, 8.50 discrimination human rights, 1.19, 3.36 nationality-based, 2.37, 2.38 property shield, 3.22 dismemberment (dépeçage), 10.09, 10.18 dispositive powers, 3.13 distance selling financial services, 5.74 land exclusion, 5.10, 12 methods, 5.31, 5.32
Index regime, 5.81 rentals, 5.01, 5.30 withdrawal, 5.74 distraint, 4.28 distressed inventory, 6.55 distribution liquidation proceeds, 9.69 mortgages, 9.41 succession, 11.56 divorce, 7.42, 11.01, 11.02, 11.05, 11.09, 11.13, 11.14, 11.15, 11.35 domestic transactions (VAT), 3.61 domicile choice, 11.07 consumer, 10.31 contract, 10.24 creditor, 9.68 family connection, 11.06, 11.07, 11.13 home court forum, 10.53, 10.54 origin, 11.07 succession, 11.22, 11.26, 11.27, 11.38, 11.39 testator, 11.23 trust/trustees/beneficiary, 11.38, 11.40, 11.55, 11.61 doorstep cancellation, 5.77, 5.79, 5.83 land exclusion, 5.10, 5.16ff, 5.18, 5.19, 5.22, 5.23, 5.28, 5.29, 12 land finance, 5.01, 5.26, 5.29 selling, 5.16, 5.17, 5.23, 5.29 double actionability, 4.52, 10.46 glazing, 5.24 renvoi, 11.29 dower, 4.30 drawdowns, 9.19 dries, 1.27 drug trafficking, 7.33, 7.34, 7.36 dual key cryptography, 8.06, 8.07, 8.08, 8.13 nationals, 11.07 wills, 11.20 due diligence, 7.50, 7.52, 7.55 durable form, 5.64, 5.75, 8.22, 9.33, 10.35, 11.47 dwellings, VAT, 3.65 e- See electronic early repayment, 9.12, 9.16, 9.23 earthquakes, 3.03 easements, 3.04, 4.23, 10.28 eastern Europe See accession, 1.08, 1.82, 12 economic activity, 1.55, 1.63 Edward I, hammering Scots, 4.29 EEA (European Economic Area) Austria, Sweden, Finland, 1.06 capital movement, 1.06, 1.07 competition law, 3.51 conflicts, 4.07 consumer protection, 1.07, 5.01
531
EEA–30, 1.04, 1.61, 2.54 enlargement/adjustments, 1.07 e-signatures, 8.01, 8.12 fundamental rights, 3.33 holiday lets, 4.41 internal market, 1.06, 1.07 land exclusion, 8.10 land ownership, 1.07 movement of persons/nationals, 1.17, 1.54, 1.55, 1.78, 1.92 Norway, Iceland, Liechtenstein (EEA–3), Preface, 1.05, 1.07 property exclusion, 3.18 residence permit for borrower, 9.32 second homes, 1.07 Switzerland, 1.07, 1.11, 2.51 timeshare, 6.01 EFTA (European Free Trade Agreement), 1.07, 1.11, 4.07, 4.15 Eigentum, 8.63, 12 ejectment, 4.28, 4.29, 4.30 electronic commerce, 5.60, 8.21, 8.22, 10.33 communications UK, 8.03 contract by e-mail, 5.31, 5.60, 5.61, 8.01, 8.15, 8.16, 8.23, 10.28 conveyancing, 4.36, 8.03, 8.05, 12 form, 8.17 identity, 8.06 land exclusion, 5.13, 8.10 mail, 5.32, 8.14 notarisation, 7.26 registration (See also EULIS), 9.35 rentals, 5.60 signature, 7.26, 8.01, 8.06, 8.08, 8.09, 8.12, 8.13, 8.14, 8.17, 8.18 sureties, 8.14, 8.20 transfer, 7.26, 8.12 eligible hectare, 3.76 emigration, 1.22, 1.52, 1.75, 1.88 enclaves, 3.11 encyclical Rerum Novarum, 3.30 endowment, 9.30 energy saving, 3.50, 3.65 enforcement consumer protection, 5.15, 5.89 judgment, 9.75, 9.80, 9.81, 9.88 mortgage/security, 9.53 trust, 11.62 English domicile, 11.62 law, choice of, 8.57, 10.39 national characteristics, Preface, 3.74 enlargement fatigue, 1.09 environment, Preface, 3.24, 3.49, 10.45, 10.47 epistemology, 1.01, 3.43, 8.57, 8.61, 8.63 equal division, 11.15 equity/equitable, 8.65, 10.25 actions in personam, 3.05, 11.45
532
Index
charge, 9.29 claims, 4.22, 4.30, 4.48 ejectment, 11.45 formality, 8.05 forum, 11.44 law/equity divide, 3.44, 3.47, 12 misconduct, 10.48 mortgages, 3.05, 9.30 securitisation, 9.48 security, 8.65, 9.28, 9.53 title under contract, 7.21 tort-like, 10.48 trust, 11.53 equity of redemption, 4.23 equity release, 9.02, 9.04, 9.06, 9.09, 9.12, 9.13, 9.22, 9.24, 9.30, 12 e-signature See electronic establishment business, of, 1.26, 1.63, 1.65 capital movement, 1.44, 1.45 insolvency, 9.43, 9.54, 9.57, 9.70, 9.71, 9.74 land controls, 2.05, 2.15 lawyers, 7.10, 7.15, 7.16, 7.17 property shield, 3.23 estate (common law ownership right), 8.63, 8.65, 12 estate agent, 1.65, 5.18, 5.27, 7.04, 7.47, 7.48, 7.60 estoppel, 4.23 Etna, 2.04, 11.28 EU acquis, Preface association, 1.12 Charter of Fundamental Rights, 1.19, 3.33 citizens, 1.55 enlargement beyond 27, 1.12 European Commissioner, Preface Hague Conference membership, 11.03 territorial integrity, 1.10 EU–12, 1.05 EU–15, 1.06 EU–25, 1.02 EU–27, Preface, 1.04, 1.05, 1.60 See also substantive topics EULIS, 7.23, 9.36 euro euro currency, 7.29 Eurobonds, 2.35 Euro-sceptics, Preface, 1.27 Eurozone, 7.29, 9.07, 9.11 Europe/European family, 11.01 heart of continent, 1.08 property markets, 1.03, 1.29 systems of law, 3.43 European Convention on Human Rights, Preface, 1.14, 1.19, 3.33 European Court of Justice, 1.07, 1.23, 4.05, 4.07, 4.08, 4.09
European legal regimes Certificate of Inheritance, 11.25 Civil Code, 8.55 Enforcement Order (EEO), 9.90 Eurohypothec, 9.28, 9.29, 9.30, 9.36, 9.46 Order for Payment, 9.91 Property Code, 8.61, 12 Security Trust, 9.46 Standardised Information Sheet, 9.16 European organisations European Central Bank, 3.58 European Coal and Steel Community, 3.20 European Free Trade Association EFTA, 1.07 European Mortgage Finance Agents, 9.46 European Parliament, 6.07 Europol, 7.34 Eurovision Song Contest, 1.13 excess of jurisdiction, 9.79, 11.14 exchange controls, 1.46, 2.34 rate conversion, 7.29 timeshares, 6.54 exclaves, 3.11 exclusive forum chosen forum, 10.35 land, 4.12, 4.13, 4.14, 4.19, 4.20, 9.85, 10.04, 10.50, 10.53, 10.55, 11.40, 11.47 excursion away from business premises See doorstep, 5.16, 5.77 executor, 11.22, 11.55 exequatur, enforceability declaration, 7.06, 9.82, 9.91 exit package, timeshare, 6.19 Exmoor, 2.11 export of currency/financial assets, 1.25, 1.51 extinction of rights, 10.19 extra-terrestrials, 1.01 face of deed, 8.04 Faculty Office, 7.02 fair trial, 1.19 false statements, 5.58 family contracts, 10.08 forum, 11.05 law, 3.43, 11.04, 11.05, 11.13, 11.15 members, 1.83, 1.84, 3.40, 11.01 property, 3.19, 11.15 provision, 11.22 reunification, 1.86, 1.94, 3.34, 11.01 self-supporters, 1.93 settlements, 11.35, 11.36 third-country nationals, 1.85 Fannie Mae, 9.46 farm (See also agricultural, Common Agricultural ), 3.67, 3.68 Austrian farmland Common Agricultural Policy, 3.67ff controls on purchase, 1.08, 1.33, 2.27ff
Index Faroes, 1.05 fault, 11.13 fax (facsimile), 5.32 fealty, 2.04 fee simple, 6.41, 8.63, 8.67, 11.28 fees conveyancing, 7.05 lending, 9.11, 9.83 feudal restrictions, 2.02, 2.04 fiduciary fiduciary duty, 10.48, 11.36, 11.40, 11.44, 11.53 fiducie, 11.36 finance EC, 7.34 Financial Action Task Force (‘FATF’), 1.07, 7.34 financial activity, 7.55 financial institutions, 7.34, 7.49, 7.51 Financial Intelligence Unit, 7.34, 7.52, 7.58 land purchase, 5.29, 5.33 terrorist, 7.35 transactions, 7.47, 7.58 financial services, 1.70, 5.30, 7.09 control, 5.35 distance sales, 5.69 e-commerce, 8.10 Financial Services Authority, 5.35, 9.18, 9.35 unfair practices, 5.11, 5.14 unfair terms, 8.45 Finland, 1.06, 2.07, 2.20 firebombing, 2.12 first seised rules, 9.64, 10.57, 10.59, 11.02, 11.13 fishing expedition, 4.11 fixed term loans, 9.12 fixtures, 3.03, 3.04, 3.61 flag of convenience, 3.14, 5.04, 10.45 flat management company, 4.35 flexible mortgage, 9.12 tenure, 5.35 flight, 1.62 floating charge, 9.53, 9.62 week (timeshare), 6.02, 6.11, 6.13 Florence, 4.29, 9.41 forced heirship, 11.19, 11.33, 11.62 sale, 9.37 foreclosure, Preface, 4.53, 9.37, 9.38 foreign foreign currency exchange, 5.74, 8.45 foreign title rule, 4.48 lawyers, 7.11, 7.13 ownership, 10.24 forfeiture, 2.04, 4.28, 9.38 formality, 3.13, 5.61 land contracts, 8.03, 8.12, 10.05, 10.06, 10.40 mortgages, 9.28, 9.29
533
notarisation, 7.05 Rome exclusion, 3.12 testation, 11.17 transfer, 7.08, 7.22, 12 formation, 10.05 Former Yugoslav Republic of Macedonia, 1.12 Formula One racing, 4.18 forum, 3.09, 4.02, 4.04, 4.14, 4.15 choice, 10.35, 11.47 civil and commercial matters, 4.04 consumer, 5.04, 5.07, 10.32 contract, 10.01ff early bird, 10.59 exclusive (land), 4.13ff family, 11.02 forum non conveniens, 10.5310.59 insolvency, 9.57, 9.67 judgment, enforcement of, 9.77, 9.79 jurisdiction refusal, 10.58 jurisdictional excess, 9.85 land within the UK, 4.08 liquidator, action by, 9.63 matrimonial regime, 11.05 mortgage, 9.40 non-contractual liability, 10.01 personal actions, 10.23 selection, 4.02 shopping, 3.12, 9.64, 9.65, 10.35, 10.59, 11.02, 11.09 site-based (See also exclusive forum), 3.09 succession, 11.33 trust, 11.61, 11.63 unfairness of terms, 8.37 Forum Group on Mortgage Credit, 9.05 fractionals, 6.21 France co-owners, 2.36 EU member, 1.05 holiday destination, 1.62 mortgages, 3.05 trusts, 11.52 franchise, 3.52, 4.37, 4.38, 10.16 fraud equitable relief, 11.44 fraudulent conveyances, 11.44 timeshare resale, 6.52 Freddie Mac, 9.46 freedom of testation, 11.20, 11.23 freehold estate, 4.23, 8.63, 12 freezing assets, 4.11, 7.34, 7.40, 7.41, 9.61, 9.77, 9.81 fruit and vegetables, 3.82 full envelope, 1.08, 3.75 functional test, 8.67 fundamental freedoms See economic, 1.26, 3.35 rights See human rights, 1.19, 3.01, 3.33, 3.35 future assets, security over, 9.53
534
Index
G–8 industrialised nations, 7.34 Gaius, 8.66 Galway, 2.12 gambling, 1.66, 7.59 garnishee order, 9.89 Gaul, Preface general system for recognition of qualifications, 7.18 Genoa, 1.62 geographical data, 7.28 Georgia, 1.08, 1.14 Germany chimney sweeps, 1.70 East, 1.05, 5.18, 5.19 EU member, 1.02 German Democratic Republic/Unification, 1.05 Germanic law, 3.43 mortgages, 3.05 Gibraltar, 1.05, 3.11, 4.08, 4.09 gift advancement, 2.34 capital movement, 1.47 gift, 7.22, 8.25, 10.02, 11.39, 11.63 liquidator challenge to, 9.63 milk quota, 3.85 global price for timeshare, 6.16, 6.66 Glorious Sharia’a’, 10.41 gold plating, 7.34 golden share, 2.35, 2.47, 3.21 Goldsmith’s Deserted Village, 2.11 good faith, 5.41, 5.42, 8.40, 8.45, 8.47, 10.44 goods misc, 5.29, 8.27, 8.29 distance, 5.30 doorstep, 5.23 unfair practices, 5.11 unfair terms, 5.12 goodwill, 9.53 Government, B2, 8.26 Gower Peninsula, 3.04 Grand Tourists, 1.62 grant of probate, 11.22 Great War trenches, 2.04 Greece border regions, 1.73, 1.74, 1.87, 2.05 EU member, 1.05 greenhouses gases, 3.50 Greenland, 1.05 grey list of unfair terms, 8.45 gross domestic product, 9.06 groups of companies, 9.72 Grundig trademark, 3.28 Grundschuld (mortgage), 5.18, 5.27 Grundverkehrsgesetz (GVG), 1.33, 2.15, 2.16, 2.48 guarantee, 2.38, 5.72, 8.14, 9.26, 10.12
habitual residence connecting factor, 11.02, 11.06, 11.08, 11.11, 11.12, 11.13, 11.16, 11.26, 11.33 consent, 10.19 consumer, 10.15 creditor, 9.68 jobseeker, 1.79 landlord tenant, 10.14 petitioner, 11.02, 11.09, 11.13 respondent, 11.02, 11.13 spouses, 11.09, 11.10 testator, 11.18 trustee, 11.58 Hague Convention See Tables, 7.06, 11.03 Trusts, 11.48ff harassment, 5.48 Hardy, Thomas, 3.42 harmful event, place of, 10.45 harmonisation of family law, 11.01, 11.05, 11.15 Harpum, Charles, 8.05 health and safety, 5.40 heir, 11.20, 11.22, 11.25, 11.28 Henry VIII, Preface hereditaments, 3.04 heritable bonds/ property, 3.05, 7.48 High Court, 9.82 high rise, 1.02 hill farming, 3.74 Hobbes, 3.08 holdings, 3.11, 3.67 holiday holiday clubs, 6.15, 6.43, 6.66, 8.35 holiday packs, 6.18, 6.226.66 package holiday, 4.46, 6.02, 6.18, 10.15, 10.33 rental, 8.20 rental forum, 4.07, 4.20, 4.40, 4.41, 4.42, 4.43, 4.44, 10.16, 10.18, 10.29 rental law, 3.13, 4.45 timeshare accommodation, 6.02 holiday home contract to sell holiday home, 10.03, 10.10, 10.23 controls on holiday homes, 1.08, 2.56 Cyprus holiday homes, 4.32 owners of holiday home, 1.91 succession to holiday home, 11.17, 11.20 trust of holiday home, 11.36 home, 1.56, 3.40 doorstep, See doorstep selling guarantees, 8.34 home buying, 1.02 Home Information Pack, 3.50 home loan, 1.58, 8.36, 8.42, 8.44, 9.01, 9.06 home reversion plans, 5.35, 7.48 home visit as unfair practice, 5.47 homeless accommodation, 8.27 ownership, 1.02 supercomplaint improvements, 5.25
Index home state consumer forum, 10.31 forum, 4.21, 9.75, 10.18, 10.31, 10.49, 10.53 movement, 1.54 professional title, 7.07, 7.10, 7.14 homosexual marriage, 11.15 horizontality, 1.31, 1.63, 3.34 horse grazing, 3.69 host state, 1.54 hostel worker, 1.80 hotel accommodation, 10.16 house construction, 8.34 household borrowing, 9.06 housing accommodation, 1.02, 5.36, 6.11, 8.35 associations, 3.57 authority, 8.26 human rights, 1.56, 3.33, 3.34, 3.38 EU candidacy, 1.14 family, 11.01 horizontal, 3.34 Hungary, 1.02, 1.08, 2.24, 2.29 hypothec, 9.28, 9.29 ice cream, 3.24 Iceland (EEA), 1.07 Ijara, 5.35, 9.13 immigration, 1.22, 1.52, 1.75 immovable conflicts, 1.21, 3.01, 3.02 forum See exclusive forum nature, 1.213.02, 3.033.07 property shield, 3.23 timeshare, 6.11 trust, 11.55 immutability of matrimonial property, 11.05, 11.16 implied terms, 8.44 import of financial assets, 1.51 imprisonment, 7.36 incorporeal property, Rome exclusion, 3.12 indebtedness, 9.32, 9.33 independent legal professionals, 7.47, 7.58 indexed-linked mortgages, 9.12 inductive method, 3.43 industrial property, 3.18, 3.20, 3.27 inertia selling, 5.39, 5.14, 5.47 Inferno, Preface inflation of land prices, 7.04 information cancellation, 5.83 distance contractors, 5.64, 5.65ff information society services, 5.61, 8.11 mortgages, 9.14 overload, 9.22 telephone calls, 5.70ff timeshare, 6.01, 6.08, 6.26ff, 6.35 timeshare credit, 6.39 wire transfer, 7.31
535
Infrastructure for Spatial Information in the Community, 7.28 inheritance See succession injunction re consumer protection, 5.15, 5.89 Innocent VI, Preface insolvency bankruptcy/liquidation, 9.32, 9.51, 9.58, 9.62, 9.64, 11.02, 11.16, 11.41 divestment, 9.62 exclusions, 4.23, 11.02, 11.56 petition, 9.65 practitioners, 7.48 proceedings, 9.49, 9.56, 9.57, 9.62, 9.67 sale of land in Spain, 9.63 trust assets, 11.57 INSPIRE, 7.28 instalments, 9.80 institution, 7.47, 7.50, 7.58 instrumentalities, 7.40 insurance contracts, 1.53, 10.02, 10.31 intermediaries, 7.49 judgments, 9.79 lawyers, 7.11 premiums in credit cost, 9.19, 9.20 unfair terms, 8.34 integration, 7.33 intellectual property, 3.27, 5.40 intelligibility of terms, 8.43 interest controls, 9.24 fixes, 9.10 information, 9.15, 9.16 interest, 8.42, 9.11, 9.30 variable, 8.45, 9.10 interim injunction, 5.89 intermediary, 7.49, 9.44 internal market capital, Preface, 1.04, 1.26 certification services, 8.08 conflicts, 3.01, 4.01, 11.01 economic freedoms, 3.35 goods, 1.26 home loans, 9.05, 9.41 land, Preface, 1.01 lawyers/legal services, 7.01, 7.07 movement of persons, 1.56 property shield, Preface, 3.22, 12 registration, 7.27 services, 1.66 Switzerland, 1.11 internality, 1.20, 1.23 International Bank Account Number (IBAN), 7.30, 7.31 internet contracting, 10.31 marketing, 5.31, 5.60, 7.66, 9.45 services, 8.08 transactions, 7.56
536
Index
interval (timeshare), 6.02, 6.20, 6.21, 6.22 intestacy due diligence, 7.53 succession, 11.55 investment advisers, 7.48 East Germany, 5.27 land, 1.56, 1.57, 10.28 timeshare, 6.08, 6.17 invitation to purchase, 5.45, 5.53, 5.57, 5.63, 10.33 Ireland, 1.05, 2.12, 3.12, 4.52, 11.59 iron curtain, 1.08 irretrievable breakdown, 11.13 Ischia, 2.06, 10.04 Islamic finance, 5.35, 9.13 Istisna’a, 9.13 Italy, 1.02, 1.05, 2.06, 4.18, 11.52 Jewish property, 3.04 Jersey, 11.35 jets, 1.62 job-seekers, 1.79, 2.54 joint tenancy, 3.47, 11.22 judgment default, 9.87 law of enforcing state, 9.82 recognition, 4.32, 4.34, 9.66, 9.75, 9.77, 11.60 regime, 9.76 review of merits, 9.84 severance, 9.77 spelling, 9.75 state, 9.75 judicature reform, 4.28, 11.45 judicial decision, trusts recognised by, 11.63 judicial proceedings, 7.64 jurisdiction See forum jury, 4.29 jus See real Justice and Home Affairs (EEA), 1.07 justification controls on land purchase, 2.37ff, 2.43 human rights, 1.19 property shield, 3.25 Justinian’s code, 3.43 juxtaposition, 3.43 Key Facts Indicator, 9.18 key pairs, 8.06 Kiev, 1.14 Know Your Client, 7.50, 7.51 knowing assistance in breach of trust, 10.48, 11.42, 11.63 receipt of trust property, 11.63 Krugerrands, 1.51 Lake District, 2.11 land
Common Frame of Reference, 8.51 consumer product, 5.10 cross-border holding, 10.09 goods, 8.32 market, 1.01, 1.26 purchase cross-border, 1.46 real estate, 1.45 relocation of, 3.11 unfair practices, 5.14 unfair terms, 8.28, 8.29 use, 3.43 See also contract, contract conflicts, exclusive forum, immovables, mortgages, registers, transactions land law, 1.01, 3.01, 3.14, 4.09, 8.56, 10.04, 10.09, 10.41, 11.05 See also site, non-site Land Transfer Commission, 2.17 land exclusion consumer protection, 5.20, 5.30, 5.33 e-commerce, 8.11 EU, Preface, 3.01 VAT, 3.63 landlord See lease language, 6.24, 6.66, 7.16, 12 late payment, 3.58, 8.44 laundering, 7.33, 7.35, 7.37 Law Commission, 5.05, 5.08 Law Society, 5.40, 7.59 Lawson, 1.39 lawyers credit intermediaries, 9.44 establishment, 7.01 law degrees, 7.18 money laundering rules, 7.34 qualified, 7.10 services, 7.01, 12 layering, 7.33 leaf of a table, 7.06 leaflet, 5.17 lease, 2.04, 3.05, 3.11, 3.45, 4.47, 6.45, 8.65, 8.66, 10.05, 10.29 landlord corporate, 4.41 /licence, 8.35 capital nature, 1.36 competition law, 3.52 formality, 5.36, 5.38, 6.45 forum, 4.3710.16 German, 8.66 immovable/land, 3.03, 4.24 milk quota, 3.67, 3.85 opt-in instrument, 8.53 possessions, 3.37 premium, 1.36 Scotland, 3.47 short lease, 4.15, 8.04, 8.05, 8.12, 10.14 single farm payment, 3.77 Spain, 3.14 timeshare, 6.02, 6.45, 6.47
Index VAT, 3.62 Lebensraum, 1.08 legal aid, 4.03 legal estates easements, 4.23 estate, 8.04 fees, 7.05 legal charge, 9.28 mortgage, 3.05 legal practice legal privilege, 7.62, 7.64 legal services, 7.01 Legal Services Board, 7.02 legal training law degrees, 7.18 Legal Practice Course, 7.18 legal qualification, 7.01 legal traineeship, 7.20 legalisation, 7.06, 9.68 legislative union, 3.47 legitim, 3.05 legitimation, 11.01 lenders/lending (See also mortgages) cross-border acquisition, 9.42 irresponsible lending, 9.67 lending risk, 9.34 letting as ‘trade’, 8.26 lex Lex Friedrich, 1.11, 2.51 Lex Koller, 1.11, 2.51, 2.52 lex situs See site licence COMI (Centre of Main Interests), 9.58 licence, 4.37, 6.47, 10.03, 10.16 VAT, 3.62 licensed conveyancers, 7.04 Liechtenstein, 1.07, 1.08, 11.51 life insurance, 7.55 lifestyle offences, 7.42 lifetime trust, 11.20 limitation, 10.19, 10.48 Lincoln, Abraham, Preface liquidation of assets (capital movement), 1.46 liquidator, 9.51, 9.54, 9.61 9.62, 9.63, 9.68 lis pendens, 10.57 litigation, 7.46, 7.47, 7.64 loan capital movement, 1.48 cross-border, 1.22, 1.50 currency denomination, 1.49 discrimination, 2.38 forum, 4.18 law and forum, 9.39, 10.37 loan to income ratio, 9.32 loan to valuation ratio, 9.22, 9.34, 9.47 long-term, 1.44 public policy, 10.37 purpose of, 1.49, 9.01 stamp duty, 2.41
537
trusts, 11.35 lodge document, 10.57 logical association, 8.18 London blitz, 11.01 long-term holiday products, 6.66 residence rights, 1.84, 1.85 loss, where sustained, 10.45 Louisiana, 3.47 lowest common denominator, 5.04 Luxembourg, 1.05, 7.16, 11.51 M day, 9.18 Maastricht capital reforms, Preface, 1.03, 1.04, 1.05, 1.27, 2.03, 12 Macedonia, 1.12 Madeira, 1.05 main home, 10.28 insolvency proceedings, 9.56, 9.62, 9.67, 9.69, 9.71 residence, 2.52 subject matter of contract, 8.44 mainframe computers, 6.02 maintenance matrimonial, 4.37, 9.77, 9.78 timeshare blocks, 6.06, 6.58 maison secondaire, 2.08, 10.12 Maitland, 11.45, 11.46 major interests, VAT, 3.62, 3.66 Malta, 1.08, 1.82, 2.21, 11.51 Man, Isle of, 1.10, 4.08, 4.09, 4.30 management business, 1.65 managing agent, 2.36 timeshare, 6.13, 6.57 Manchester United FC, 5.45 mandatory rules, 8.44, 8.53, 8.61, 10.05, 10.07, 10.21, 10.41, 11.56, 12 manors, 3.04 marine survey, 10.45 Mark Twain, 1.62 marketing, Preface, 5.05, 5.46 Marlborough, 2.04 marriage convenience, of, 1.83 family, 11.05, 11.15, 11.56 settlement, 4.30 statistics, 11.01 Martian, 1.01 Marx Das Kapital, 1.34, 12 Maryland, 10.24 material distortion, 5.41, 5.43 subsidiarity, 3.32 validity, 10.19 matière mixte, 7.22 matrimonial costs, 11.14
538
Index
finance, 11.15 forum, 11.09 law, 11.13 property, 3.12, 4.23, 8.20, 10.08, 11.02, 11.03, 11.05, 11.06, 11.07, 11.10, 11.12, 11.15, 11.16, 11.20, 11.25, 11.36, 11.57, 11.61, 11.62 matter relating to contact, 10.44, 10.51 means of payment as capital movement, 1.51 mechanics of transfer, 7.21 Mediterranean, 1.16, 3.71, 3.82 Megarry, Sir Robert, 3.48 members clubs timeshare, 6.56 mesne profits, 10.49 military regions, 2.04 milk, 3.37, 3.83, 3.84, 3.85 Mill, John Stuart, 3.30 minimalist harmonisation, 5.04, 5.11 minor interest (VAT) minors, 11.56 miscellany, 3.48 misleading actions, 5.45 advertisements, 5.01, 5.09, 5.14, 5.45, 5.52 endorsements, 5.59 omissions, 5.45 practices, 5.45 misrepresentation, 6.33, 10.44, 10.45, 10.46 mobile homes timeshare, 6.08, 6.11 modulation, 3.76 Moldova, 1.08 monetary union, 1.07, 1.29, 7.29 money laundering, 7.32ff, 10.48, 11.42 activity, 7.32 Bulgaria and Romania, 1.09 controls, 7.01 legislative history, 7.34 mortgages, 9.45 reports, 7.58 money transmission services, 7.52 monopoly, Preface, 1.03 Mont St Michel, 3.03 moorland, 3.74 moratorium on transaction, 7.62 mortgage, 7.27, 8.36, 9.01, 9.05, 9.27, 9.28, 9.31 actions, 4.23, 4.53, 10.13 agreement, 5.82 authenticated, 9.03 bonds, 9.47 borrowing patterns, 9.06, 9.10 borrowers capital movement, 1.58 building block, 3.45 capital nature, 1.36 competition, 3.52 conflicts principles, 3.05, 9.39, 9.52 consumer credit exclusion, 9.03 credit, Preface, 9.01, 9.02, 9.37 cross -border, 9.08 duration of loans, 9.10
European, 9.06 forum, 9.39, 10.31 glossary, 9.27 harmonisation, 12 immovables, 3.03 information, 9.02, 9.05, 9.15, 9.17, 9.28 insolvency, 9.49 interest, 8.31 intermediary, 9.44 land share, 11.55 law, 9.39 marketing control, 5.23, 5.29, 5.35 Mortgage Register Representative, 9.36 mortgage-backed securities, 9.48 originator, 9.48 policy, 9.05 procedures, 9.32, 9.35 product availability, 9.11 register, 7.24 regulation regimes, 9.13 spreads, 9.11 terminology, Preface See also consumer, lenders, loan, M Day movables, See also land, 2.04, 3.02, 8.58 movement of persons buyers, 1.59 land owners, 1.54 non-economic migrants, 11.01 persons, Preface, 1.54, 1.55 recipients of services, 1.64 self-employed, 1.64 short-term, 1.78 Switzerland, 1.11 workers, 1.26 multi-disciplinary practice, 7.09, 7.16 Murubaha/Musharaha, 9.13 Muslim trading principles, 10.41 Naples, 2.06, 11.28 Napoleon, 3.43, 8.67, 9.28, 11.30 National Crime Intelligence Service, 7.58 national parks, 2.08, 2.11 national reserve (milk quotas), 3.77, 3.85 nationalisation, 3.20, 3.21, 3.24 nationality, 1.55 connecting factor, 11.05, 11.06, 11.07, 11.10, 11.11, 11.12, 11.13, 11.16, 11.26 cross-border, 1.21 discrimination, 1.21, 1.68, 1.74, 2.16, 2.17, 3.59, 7.02 lawyers, 7.07 negation of right, 3.28, 4.23 negative declaration (torpedo), 10.37 Nelson, 1.05, 2.04, 7.60, 11.28 neo-impressionism, 5.03 Netherlands, 11.52 new buildings, 6.55, 8.34 New Deal Democrats, 9.46 New Forest, 2.11
Index next of kin See succession, 11.22 NHBC Build Mark Arbitration, 8.34 Nice Charter, 1.62, 3.33 Nobel laureate, 11.56 nomenclature of capital movements, 1.28, 1.37 nominee, 11.53 nonnon-accessory mortgage, 9.30 non-advanced e-signature, 8.12 non-conforming borrowers, 9.34 non-contractual obligation, 10.02, 10.47, 10.50 non-disclosure, 10.05 non-discrimination, property shield, 3.23 non-recourse, 9.48 non-residents investment, 1.44, 1.46 non-trust state, 11.57, 11.62 non-site choice of law, 10.18 conflicts, Preface, 3.10, 10.17 contract forum, 10.17, 10.18, 10.22 contract law, 10.17, 10.26 forum, 4.13 wills, 11.18 normative, 1.01 Northern Cyprus, 3.11, 4.32 Northern Ireland (CAP region), 3.74 Norway, 1.05, 1.07 notary notary/notaire, 10.28, 10.30, 12 conveyancing function, 7.02, 7.03, 7.05 credit intermediaries, 9.44 e-commerce, 7.66 money laundering, 7.47, 7.58 monopoly, 7.09 mortgage, 9.05 nationals, 7.02 notarisation of contract, 5.61, 8.11, 8.61, 10.22 notarisation of document, 6.36, 7.02, 7.06, 7.22, 8.02, 8.11, 8.20, 8.21 numerus clausus, 7.05 notice, 4.23 mortgages to redeem, 9.23 trust, 11.39 withdrawal rights UK timeshare, 6.08 nuclear power station, 4.25 nuisance, 4.25, 4.52 nullity, 10.19 numerus clausus notaries, 7.05 property rights, 3.44, 8.64 NUTS, 7.28 object action (objet specifique), 3.28 trust, 11.56 OECD See Organisation offeree/offeror, 6.17
539
official authority, 7.02 Official Receiver, 9.62 omissions as unfair practices, 5.40 once a mortgage always a mortgage, 9.30 ontology, 1.01, 8.64 opening of insolvency proceedings, 9.60, 9.65 Oporto Agreement (EEA), 1.07 opt in instrument, 8.48, 8.53, 8.55, 8.58, 8.61, 10.41 optical mixtures, 5.03 option to tax VAT, 3.64 order, placing of, 8.23, 10.33 ordre public, 10.07, 10.21, 11.16, 11.18 organic produce, 3.79 Organisation Organisation for Economic Co-operation and Development (OECD), 1.07 7.34 Organisation for Timeshare in Europe, 5.59, 6.09 organised crime, 7.34, 7.36 Ossis (East Germans), 1.05 ostensible authority, 10.02 over-indebtedness, 9.33 overreaching, 1.39, 9.54 ownership, 3.03, 3.45, 6.59, 10.24 package holiday, 4.46, 6.02, 6.18, 10.15, 10.33 parallel proceedings, 10.60 parcels of lease, 3.11 parental responsibility, 11.02, 11.09 parking, 8.26 Parsley Island (Isla del Perejil), 3.09 part (Single Farm Payment), 3.77 partial implementation (CAP), 3.82 partition, 4.48 partner of third country national, 1.86 patents, 3.27, 3.28 Pau, 1.62, 2.05 Paulienne order, 9.80 payment contractual performance, 10.12 current payments, 1.35 goods and services, for, 1.29 payment entitlements, 3.72, 3.76 peaceful enjoyment of possessions, 1.19 peerages, 3.04 Pembrokeshire, 2.12 pending action, 10.57 Pennsylvania, 10.24 pension, 7.55, 8.25, 11.35 performance of contract, 10.19, 10.28, 10.54 permanent residence, 1.55, 2.54, 10.53 perpetuities and accumulations, 11.56 personal action, 4.25, 4.26, 4.38, 4.48, 10.01, 10.23, 10.24, 10.25, 10.34, 11.39, 11.40, 11.42, 11.44, 11.46 bills, 9.28 injury, 2.38
540
Index
insolvency, 9.62 jurisdiction, 11.44 loans, 9.02 Personal Identification Number, 8.06 property, 3.05, 3.13 representative, 3.44, 11.22 surety, 9.01 pester power, 5.47 place of performance, 10.12 placement, 7.33 Plaid Cymru, 2.12 plain language, 8.43 planning, 1.68, 2.11, 2.12, 8.66, 10.05 Plockton, 2.12 pointillism, 5.01, 5.02 points clubs, 6.13, 6.14 Poland, 1.08, 2.07, 2.19, 2.24, 2.28, 2.31 politically exposed persons, 7.56 poll tax, 2.08 pollution, 3.49 polygamy, 11.01 Pomier, Louis, 6.02 pool of accommodation, 6.11, 6.13 pooled accounts, 7.55 Pope, Leo XIII, Pius XI, 3.30 Portugal, 1.05, 6.43 possession laundering, as, 7.35 liquidator, by, 9.63 mortgage repossession forum, 9.32, 9.37, 9.40 possession action, 4.16, 4.37, 4.48, 10.23, 10.24 possessions (property), 3.36, 3.37, 8.27 post-socialist markets, 1.03 potential prohibited act, 7.59 pound sterling, 7.29 practice rights, 7.07, 7.11 praemunire, Preface pre-contract unfair practices, 5.39, 5.40 pre-nuptial agreements, 11.15 predicate offence, 7.36 pre-emption by a local authority, 8.34 pre-emptive injunctions, 5.89 premium payments, 1.53 prescription, 10.19 presence, forum based on, 10.24 preservation measures, 9.69 presumed resulting trusts, 11.63 presumptions of law, 10.19 price competition, 7.03, 7.09 escalation, 8.42 indexation, 8.45 See also global price primary lending, 9.41, 9.46 priority, 3.02, 9.65, 10.05 actions, 4.17, 4.30, 10.57 insolvency, 9.55 matrimonial regimes, 11.16
mortgage, 9.35 Rome exclusion, 3.12 private key, 8.06 land, 9.02 life, 3.40 private international law, 3.09 privatisation, 1.02, 1.09, 3.21 prize, 10.02 probate, 7.02, 7.03, 7.12, 7.65, 11.12, 11.25, 12 procedure applicable law, 4.02 enforcement judgment, 9.76, 9.83, 9.86 procedural bad faith, 8.41 procedural subsidiarity, 3.32 withdrawal, 5.74 proceeds crime, 7.34 sale, 11.39, 11.44, 11.54 professional centre of main interests (COMI), 9.58 confidentiality, 7.47 customer due diligence, 7.47, 7.50 diligence in commercial practice, 5.41, 5.42 equivalence, 7.54 office, 7.58 representation of contracting party, 8.32 services, 1.66, 8.38 unfair practices, 5.40 professors, codification by, 8.57 promoters of undertakings, 1.65 promotions, 5.46 proof of service, 11.14 property acquisition for business, 1.73 British market, Preface civil code, 8.55, 8.66 convergence, 8.57, 8.63 core, 10.04, 10.18 criminal, 7.45 EU, 3.17 holding company, 11.32 money laundering, 7.35 property law See land law right to, 3.36 risk, 9.34 shield, 3.01, 3.18, 3.19, 3.21, 3.26, 3.28, 3.29, 8.61, 12 third-party rights, 3.28, 9.29, 9.51, 11.56 proprietary contracts effect, 8.65, 10.25 proprietary clubs, 6.56 transaction effect, 3.02, 8.64, 11.16 propriété, 8.63, 12 proportionality, 2.37, 2.43, 2.45, 7.15 prostitution, 1.66, 2.39 provisional/protective measures, 4.11, 9.61, 9.73, 9.77, 9.81, 11.02 pseudonym 8.08, 8.14 ,
Index public key, 8.06 procurement, 3.57 public authority, 7.55, 8.11 public order /policy, 9.86, 10.21, 11.14, 11.16, 11.36, 11.56, 11.62 public/private law divide, 8.26, 8.66 sale of public land, 3.56 purchase money resulting trust, 11.63 purchase or transformation, 9.02 Pyrenees, 2.05 Quadragesima Anno, 3.30 qualified certificate of e-signature, 8.02, 8.07, 8.08, 8.09, 8.17 quasiquasi-contract, 10.02 quasi-delict, 10.44 quasi-property, 8.66 quiet enjoyment, 3.36 quotas, 3.27, 3.83ff rack rental, 1.36, 10.49 Raine, Craig, 1.01 ranking of claims, 9.53 real action, 4.12, 4.38, 10.34, 11.46 real estate, Preface, 1.45, 3.13, 8.34 real property, Preface, 2.04, 3.01, 7.48, 7.58, 8.27 real/obligation divide, 8.66 right See right in rem security, 8.60 reasonableness, 5.43 receivers, 7.42 Rechtanwalt, 7.19 recognition confiscations, 7.44 insolvencies, 9.62, 9.66, 9.71 judgments, 3.15, 4.01, 4.32, 7.06, 9.75 9.76 lawyers, 7.07 matrimonial judgments, 11.02, 11.14 qualifications, 7.01, 7.18, 7.19, 7.20 signature certificates, 8.08 trusts, 11.04, 11.36 11.48, 11.50, 11.52, 11.57, 11.60 record keeping, 7.50, 7.57 recovery of property, 7.40, 7.42 refinancing, 9.02, 9.04 refund of advance payments, 1.53 refurbishment, 8.34 registered partner, 1.83 registered mail, 6.36 registered office, 9.59, 9.68 social landlords, 3.57 registration discontinuous leasehold, 6.45 documents, 10.04
541
Eurohypothec, 9.29 forum, 4.35 insolvency proceedings, 9.68 judgment, 9.50, 9.55, 9.82 lawyers, 7.11 matrimonial regime, 2.33 mortgage, 1.49, 9.35, 9.36 Register of Education and Training Providers, 1.95 registration systems, 10.05 requirement, 2.33 timeshare, 6.41, 6.43, 6.44 timeshare operators, 6.57 title, 2.06, 4.23, 7.05, 7.21, 7.22, 7.23, 7.24, 7.25, 7.27, 8.04, 8.05, 10.06, 12 trust, 11.39, 11.57, 11.62 wills, 11.17 regulated sector (money laundering), 7.59 regulation of mortgages, 9.18 rei sitae See site, 3.09 related credit agreement, 5.81 proceedings, 10.60 relatives, 1.83 relevant business (Know Your Client), 7.48, 7.51 rem See real remediation, 5.89 remortgaging, 9.02 renovations, 5.34, 9.06 rent, 1.57, 4.37, 4.38, 8.35 rental distance, 5.01, 5.33 formality, 8.11, 8.12, 8.16, 8.20 holiday accommodation, 8.35 marketing/withdrawal rights, 5.36, 5.40, 5.74, 5.81 service provision, 1.66 workers, 1.87 rentcharge, 3.04, 3.11 renvoi, 3.07, 11.29, 11.30, 11.31 repair, 4.38, 10.03, 10.04 marketing, 5.23, 5.24, 5.29 unfairness, 8.34, 8.35 repayment capital movement, 1.46 information, 9.16 reporting duties, 7.47, 7.48, 7.58, 7.62, 7.65, 9.13 repossession See possession res judicata, 9.85 resale timeshare, 6.50ff rescission, 10.52 rescue jurisdictions, 9.62, 9.74 research assessment exercise, Preface reservation of title, 8.58 reserved share (forced heirship), 8.65, 11.12, 11.19, 11.20, 11.33, 11.56 residence controls, 2.39 cross-border element, 1.22
542
Index
direct investment, 1.44 establishment, 1.73 forum based on,, 11.07, 11.11, 11.56 land purchase, 1.46 lawfulness, 1.55 longer-term, 1.55 requirement, 7.15 residence card, 1.84 seller/principal performer, 10.27, 10.28 three months, 1.55, 10.54 residential property VAT, 3.66 tenants 2C, 5.05 resort Resort Condominium International, 5.21 timeshare, 6.02 respect for home/family life, 1.19 restitution Jewish property, 3.04 unjust enrichment, reversal of, 4.16, 10.02, 10.43, 10.47, 10.49, 10.50, 10.51 restoration, 10.23 restrictions capital movements to third countries, 1.25 establishment/capital, 1.68 land purchase, 2.01, 2.02 resulting and constructive trusts, 4.36, 8.04, 11.04, 11.38, 11.39, 11.40, 11.47, 11.53, 11.63 retail lending, 9.05 retail mortgage market, 12 retirement retirees, 1.75, 1.89 workers from accession states, 1.82 reunification of Germany, 1.05 revenue offences, 7.34 reverse discrimination, 1.24 reverter, 6.42 Rhine, 10.45 Riga, 1.03 right buy, to, 9.13 immovables, 3.03, 3.04, 3.08 property, 1.19, 2.16, 2.46, 3.26, 3.33, 3.35, 4.31 relating to immovable property, 5.19 rem, 4.14, 4.20, 4.22, 4.23, 9.52, 10.04, 10.13, 11.39, 11.40, 11.41 trial, 10.21 use of immovable property, 10.13 risk-sensitive basis, 7.50, 7.56 rocket/rocket launcher, 11.49, 11.56 Roman Catholic subsidiarity, 3.30 Romania, Preface, 1.09 Rome Convention See Tables Land exclusion, 3.02, 3.12, 10.04 Rome I (contract law), 3.12, 4.09, 10.01, 10.07ff Rome II (tort law), 4.52 Rome III (matrimonial law), 11.15
Ronda, 7.32 royalties, 1.53 rural development, 3.76, 3.81 Rural Land Register, 3.70 Rural Payments Agency, 3.70 Ruskin, Preface, 1.62 Russia, 1.08, 1.14 Saar, 4.14 sale contracts, 8.51 land, 3.13 lender, 9.37 milk quota part, 3.85 Rome exclusion, 3.12 sale or other disposition of land, 5.23 single farm payment, 3.77 Salic law, 11.28 salmann, 11.36 salt pollution, 10.45 Salzburg, 2.17, 2.49 same-sex partners, 11.01, 11.05, 11.15 San Marino, 11.51 San Sebastian Convention, 4.06, 4.43, 4.44 Sardinia, 3.13 Sark, 4.53 satisfaction, 9.69 scale fees, 7.03, 7.05 Scandinavia, 1.02, 3.43, 7.04 Schumann Declaration, 3.20 Scilly, 2.11 Scotland, 2.12, 3.05, 3.43, 3.47, 3.74, 4.23, 4.35, 5.23 search, 3.39 seasonal workers, 1.82 second home Austrian, 1.06, 1.33, 2.15 Britain and Ireland, 2.09, 2.10, 11.19 buying, 3.01 capital, 1.28, 1.29, 2.08 contract, 10.28 controls, Preface, 2.01, 2.03, 2.08, 2.49 controls transitional, 1.04 European market, 1.91, 2.13, 2.14 Greek border regions, 2.05 mortgage, 9.02, 9.06, 9.09 owners, 1.05, 1.62, 1.91, 10.45, 11.13, 12 succession, 11.19 trust, 11.61, 11.62 secondary insolvency proceedings, 9.57, 9.66, 9.67, 9.70, 9.71, 9.73 secondary lending, 9.41, 9.46 secret profits, 10.48 secure signature creation device, 8.06, 8.07, 8.09 securitisation, 9.46, 9.48, 11.35 security consumer credit exclusion, 9.04 debt, 4.15
Index distance, 5.34 doorstep, 5.28 form of, 9.28 home improvement loan, 8.31 insolvency, 9.49, 9.51 interests, 9.67 land as, 5.29 marketing of loans, 5.26, 5.28, 5.77 milk quota, 3.84 security, Preface, 9.01, 9.27 security conflicts, 3.12, 10.05 trusts, 11.56 variable, 12 security for costs, 1.48, 9.71 enforcement, 9.83 security of tenure, 3.43, 8.66, 10.05 segregation insolvent estate, 9.54 succession, 11.26, 11.27 selection terminology, 3.07, 4.02, 10.01 See also forum/land law/trust self-employment, 1.64, 1.82 self-regulation timeshare, 6.09 self-supporters accession states, 1.82 EEA–30, 1.55, 1.88, 1.92 third-country nationals, 1.85, 1.86, 1.94 permanence, 1.92 seller or supplier, 5.06 separation succession, 11.02, 11.13, 11.14 trust fund, 11.53 sequestration, 4.48 serious crime, 7.36 Serious Organised Crime Agency, 7.41, 7.58 service of proceedings, 4.02, 4.04, 4.11, 4.28, 9.87, 10.24, 10.35, 10.57, 10.58, 11.38 service charge, 6.58 service provision accession states, 1.67 e-commerce, 8.10 establish, 1.66, 1.67 information rights recipients, 1.72 internal market, 1.26 land, affecting, 12 lawyers, 7.07 nature, 1.66 non-financial restrictions, 7.09 non-financial, marketing, 5.11, 5.30 ownership of land, 1.74 prohibited requirements, 1.70 restrictions, 1.69, 1.70 restrictive rules, 7.01 services, 1.63, 1.65, 8.35 single point of contact, 1.70 withdrawal, 5.74 servitude, 3.45
543
set off, 9.53, 9.67, 10.20 set-aside, 3.78 settlement court proceedings, 9.90 settled land, 11.47, 11.53, 11.54, 11.56, 11.59, 11.60 Seurat, 5.03 severability, 10.23 severance leases, 3.11 sexual discrimination, 3.36 shack, 3.04 shapeless trust, 11.53 Shari’ah, 9.13 shell bank, 7.56 Shelley, Percy Byssche, 10.45 shield See property shield ships’ captains, 1.87 shire, 4.29 short lease See lease Sicily, 2.04, 11.28 Signature See electronic significant imbalance, 8.45 Single Area Single Area Payment Scheme (SAPS), 3.75 Single European Sky, 3.49 Single Farm Payment, 3.67, 3.70, 3.71, 3.73, 3.74, 3.76, 3.77 Single Payments Area, 7.31 sinking funds, 11.35 site action by liquidator, 9.63 bases, Preface, 3.07, 3.09, 3.10, 4.14, 10.17, 11.10 charging order, 9.89 contract, 10.03, 10.04, 10.13, 10.26, 10.28 enforcement, 4.32 formalities, 10.06 forum, 4.12, 4.13, 4.15, 10.10 freezing, 9.81 holiday letting, 4.40, 4.45 insolvency, 9.50, 9.55 judgment, 9.85 land law, 3.01, 3.09, 3.13, 11.18, 11.26, 11.33 lex situs, 3.13 mandatory rules, 10.01 matrimonial regime, 11.10 mortgage forum, 9.37, 9.39 parts of UK, 4.08 succession, 11.19 timeshare forum, 6.66 transfer, 10.04 trust, 11.41, 11.54 VAT place of a supply, 3.60 size of loans, 9.10 Skye, 2.12 slander of title, 4.23, 4.48 Slom quotas, 3.84 Slovakia, 1.08, 2.24, 2.29 Slovenia, 1.08, 1.12, 2.25, 2.29
544
Index
small claims, 9.91 smart card, 8.06 Snowdonia, 2.11, 2.12 social housing, 1.70, 7.09 social security, 11.01 Society société civile d’attribution, 6.46 Society of Trust and Estate Practitioners (STEP), 7.53 solicitation, 5.25, 5.47 solicitors, 7.02, 7.04, 7.14, 7.60 Solomon, 11.15 solus agreements, 3.52 Sons of Glyndwr, 2.12 sovereign base areas Cyprus, 1.05 immunity, 9.85 sovereignty, 3.31 Soviet republics, 1.14 Spain British expatriates, 1.88 EU member, 1.05, 1.75, 1.91 holiday destination, 1.62 home buying, 1.02 land registries, 7.02 Spanish Big Brother, 3.33 Spanish practices, 1.91 timeshare, 6.02, 6.28 spamming, 5.32, 5.49 special development areas, 3.74 Specific performance, 7.21, 9.80, 10.25 spezifische Gegenstand, 3.28 split succession, 11.32 splits contracts, 10.17 sponsor of third country national, 1.86 spouse, 1.83, 1.86 St George’s Hill, 7.43 St Thomas Aquinas, 3.30 stamp duty, 2.40, 2.41, 7.05, 9.13, 12 Standard Conditions of Sale, 8.32, 8.61 Standard Contract Terms, 8.45, 8.52 standards of conduct, 7.11 standing to bring proceedings, 5.89 state aid, 3.20, 3.55, 3.56 statutory statutory duty, 5.15, 5.40, 6.08 statutory trusts, 11.63 stay, 9.79, 9.80, 10.58 stock market index, 5.74, 8.45 stock turnover, 1.03 stop now orders, 5.89 strict settlement, 11.54 students, 1.82, 1.95, 8.35 subject matter of action, 11.40 sub-letting, 9.70 submission to jurisdiction, 10.55 sub-prime crisis, 9.34, 9.48 lending, 9.12, 9.22, 9.27, 9.34
subrogation, 10.20 subsidiarity, 3.01, 3.30, 3.31, 3.32, 12 succession arrangements, 8.20 beneficial interest, 11.39 common law/civil law, 3.43, 3.44 death duties, 1.53 domicile, 10.54 forum, 11.02 inheritance tax, 2.41, 11.22, 11.55 international, 3.02 land, 11.01 land segregated, 11.28 law Hague, 11.03 milk quota inheritance, 3.85 next of kin, 11.22 property exclusion, 3.19 regimes, 11.36, 11.61 Rome exclusion, 3.12 selection of law, 11.02 succession, Preface, 10.08, 11.02, 11.07, 11.11, 11.16, 11.56 trust, 11.40 sufficiency of resources, 1.92 SuperDevoluy (timeshare resort), 6.02 supermarket chain, 10.03 superstructure, 3.45 supervisor of voluntary arrangement, 9.62 supplier, 5.05 surcharges on council tax, 2.13 surety, 1.48, 8.11, 8.20, 9.26 surveys, 7.02, 7.04, 8.20 suspicion, 7.39, 7.45, 7.59, 7.60, 7.61 sustainable development, 3.49 Switzerland land purchase, 2.54, 2.57 movement of persons, 2.51ff, 2.53, 2.54, 2.55 property market, 1.11 Schuldbrief, 9.29 Switzerland, 1.11, 11.52 syndicated loan trusts, 11.35 tainted gifts, 7.42 take-down notices, 5.61 targeting, 10.30, 10.31, 10.33 taxation advice, 7.47, 7.65 discrimination, 2.40 evasion, 2.40, 7.64 holiday homes, 1.91 income at source, 9.13 mortgage, 9.10 residence controls, 2.41 site-based, 3.13 taxation, Preface, 3.59 territoriality, 3.01 telecommuting, 12 teleology, 3.20, 8.29 telephone selling, 5.17, 5.32, 9.45
Index television advertising, 5.56 tenancy, 10.03 autonomous definition, 4.37, 4.38 B2C pattern, 10.16 forum, 4.16, 4.37 immovable property, 4.14, 4.20 tenancy in common, 6.41 tenanted property, 10.12 unfair terms, 8.35 Tenerife, 6.02, 6.06 term, 4.37 termination of trustees, 11.56 terminology, Preface territorial insolvency proceedings, 9.70, 9.74 territoriality, 3.01, 3.18, 3.19, 4.32, 10.04 terrorism, 7.33, 7.34, 7.36, 7.38, 7.45 Tesco, 10.03 testation, 3.43, 11.06, 11.17, 11.18, 11.19 testamentary trusts, 2.04, 11.24 Texas, 11.56 Thatcher, Mrs, Preface, 1.27 Thellusson accumulation, 11.27 Third Country Nationals, 1.25, 1.54, 1.85, 1.86, 1.94 third party rights, 4.23, 10.40 three year duration, 6.18 tie-breaker, 10.57 tied house clauses, 3.52 timeshare, 10.31 accommodation/apartment, 5.20, 6.13 B2C pattern, 5.056.66 blaggers, 6.07 Britain and Ireland, 6.03 complex, 5.16 construction, 6.27 credit, 6.37, 6.386.66 cross-border/conflicts, 4.37, 6.62, 8.35, 11.35 definition, 6.01, 6.086.66 development manager, 4.38, 4.47 dispute resolution, 6.60 distance, 5.38 exchange club, 5.216.66 forum, 4.47, 6.66, 10.16 France, 6.57 frauds, 6.02 geographical reach, 5.04 information, 6.24, 6.29, 6.30, 6.66 land, 5.10 leasehold, 6.45 legislation, 6.07, 6.08 long-term holiday products, 6.66 management, 6.56 market, 6.02, 6.04, 6.05 marketing, 6.01ff, 6.06, 6.10 marketing controls, 5.01, 5.19, 5.23, 5.53, 5.59, 5.81 occupancy, 6.05 Portugal, 6.07 property shield, 3.24
545
redefinition, 6.23 reform, 6.66 resale, 6.66 scheme, 5.21 site-based law, 6.64, 6.65 thin air (unbuilt blocks), 6.55 timeshare-like, 6.01, 6.09, 6.10, 6.12, 6.14, 6.23, 6.31 true timeshare, 6.10, 6.18 use rights, 6.02 vehicles, 6.40 withdrawal, 5.78, 6.66 tipping off client, 7.62 Titanic, 3.42 title, 7.22, 7.35, 10.24 titre exécutoire, 9.77 tobacco, 3.29 torpedo, 4.18, 10.37, 10.59, 11.62 tort, 4.51, 4.52, 10.02, 10.44, 10.45, 10.46, 10.47, 10.50 tourism, 1.64, 1.67, 2.15, 2.39 tracing, 7.40, 11.35, 11.57 trade descriptions, 5.58 trademarks, 3.27, 3.28 trader, 3.60, 5.05, 9.58, 10.30 trades register, 1.66, 1.69 trading during insolvency, 9.67 tradition and delivery, 7.22 Trafalgar, 1.05 training contract, 7.10, 7.18 transaction costs/taxes, 3.14, 7.03, 7.05, 12 land law, 1.97, 3.86, 7.47, 8.63, 10.05, 12 not face-to-face, 7.56 overturned, 9.67 transfer contract distinct, 10.02, 10.05 formality, 7.21, 7.22 interests in land, 7.02 invalidity, 10.50 land, 7.03, 8.05 laundering, 7.35, 7.45 monies, 1.53 mortgages, 9.30, 9.46 order to, 11.39 proceedings, 10.59 registration, 4.36 title, 10.01, 10.03, 10.04 transfer rules, 3.82 translation, Preface, 9.82, 9.91 trans-national holdings, 3.11 transport, 12 transposition See substantive topic travel, 1.62, 5.74 Treaty See Tables tree felling, Preface trespass, 4.22, 4.28, 4.29, 4.30, 4.52 Treuhand, 11.36, 11.51 trial by battle, 4.29
546
Index
trial rights, 3.41, 4.03 tribunal, 9.77 trover, 4.48 trust(ee) 25% rule, 7.53 actions personal, 11.38 asset, 11.39, 11.40, 11.53, 11.56 building block, 3.45 choice of law, 10.34, 11.59 civilian trust states, 11.51 close connection, 11.62 commercial uses, 11.36 Common Frame of Reference, 8.51 common law, 11.50 conflicts, 11.04 contract, 8.25 creation, 11.49 definition, 11.53 enforcement, 11.02 express, 11.61, 11.62 foreign land, 11.38, 11.44 forum, 4.50, 11.37, 11.44 fund management, 12 immovable, 3.06 instrument, 11.47, 11.60 interference with, 10.48 key element lack of, 3.44, 3.45 land, 11.54 law, 11.40, 11.49, 11.60, 12 management vehicle, 11.35 overreaching, 1.39 quota, 3.84 real/personal, 10.25 recognising, 11.58 residence, 11.56 Rome exclusion, 3.12 sale, for, 11.28, 11.54 securitisation, 9.23, 9.48 separate fund, 11.51, 11.57 taxation, 11.56 timeshare, 6.47 trust, Preface, 4.23, 8.65, 10.08, 11.39, 11.40, 11.44, 11.46, 11.60, 12 trust and company service providers, 7.49, 7.59 trustee, 6.47, 7.15, 7.47, 11.39, 11.40, 11.47, 11.53, 11.56 trustee duties/powers, 11.56 trustee in bankruptcy/sequestration, 9.54, 9.62, 9.63, 11.41 United Kingdom, 11.04 vehicles, 11.34 work, 7.65 writing, 11.38, 11.63 tScheme, 8.08 26th regime contract, 8.53 mortgage, 9.31 Turkey, 1.15, 2.07, 4.31
turnover of property, 7.02 Tyrol, 1.33, 2.15, 2.16, 2.48 UK See United Kingdom Ukraine, 1.14 UN, 4.33 unadministered estate, 11.55 unconscionability, 5.15, 11.44 uncontested judgments, 9.90 undue influence, Preface, 5.15, 5.48 unfair commercial practice action by consumer, 5.40 advertising to consumers, 5.53 B2C pattern, 5.05 comparative advertising, 5.54 directive, 5.14 implementation, 5.14 land, 5.11, 12 materiality, 5.43 regime, Preface, 5.01, 5.14, 5.40, 5.41, 5.45, 6.50, 8.49 unfair contract term acquaintance with terms, 8.41 B2C pattern etc, 5.06, 5.08, 5.09 consumer, 5.08 effect of unfair term, 8.46 forum, 5.07 forum clause, 10.32 land, 8.24, 12 land contracts, 5.12 particular contracts, 8.33 regime, 3.24, 5.01, 5.58, 8.24, 10.41, 10.44 transposition, 8.24 unfairness of terms, 8.39 unfair trial, 9.86 unilateral order, 9.77 request, 11.13 Union of Latin Notaries, 9.29 unit trusts, 11.35 unitarian succession, 11.19, 11.20, 11.26, 11.33 United Cyprus Republic, 4.33 United Kingdom accession, 1.05 asset recovery, 7.41 civil forum, 4.04 contract law, 4.09 lending market, 9.06 money laundering, 7.34 offshore islands, 1.10 overseas territories trusts, 11.04 parts of, conflicts between, 4.09, 4.15, 4.41, 4.52 property market, 1.03 Rome I Proposal, 3.12, 4.10 sovereign base areas, 1.05 third country nationals, 1.85, 1.86, 1.94 timeshare reach, 6.63 United Nations (UN), 4.33
Index United States of America, 1.29, 12 universality, 4.27, 9.57, 9.67, 10.40, 10.56 unjust enrichment, 5.76, 10.02, 10.51 unregistered land, 4.23 unsecured creditors, 9.51 unsolicited visits, 5.17, 5.18, 5.25, 5.27, 5.77 urban environment strategy, 3.49 use action for, 10.49 laundering, as, 7.35 use right, 6.49 use value, 1.56 usury, 9.24 utilities, 3.21, 3.57 vacant possession, 10.12 validity, 10.19 contract, 10.19 trust, 11.56 wills, 11.53 valuation standards, 9.34 value added tax (VAT), Preface, 3.60 variation of trusts, 11.43, 11.56 Venusian, 1.01 vesting in trustee, 11.56 viager hypothécaire, 9.13 Viareggio, 10.45 Victorian travellers, 1.62 Vilnius, 1.08 vines, 3.37 voidness/voidability, 4.16, 9.67, 10.43, 10.50, 10.51, 10.52 voie pavée, 9.38 voluntary arrangements, 9.62 Voluntary Code on pre-contract information, 9.02, 9.05 Wales, 2.12, 3.74 Wallis, Diana, MEP, 3.01 Warsaw Pact, 1.08 waste to land, 10.49 Watergate conspirators, 7.32 Watney’s red barrel, 6.02 wealthy individuals, 1.90 web, 8.13, 8.20, 8.22 Wellington, 11.30 Welsh Assembly, 2.12 Wessis (West Germans), 1.05
547
Westminster College speech (Churchill), 1.08 Westminster Hall, 10.24 wets, 1.27 whistleblowers, 7.61 wholly internal rule, 1.20 Wife of Bath, Preface wills, 3.13, 7.65, 8.05 formalities, 11.03, 11.16, 11.17 Rome exclusion, 3.12 will trusts, 4.20, 11.53 winding up, 9.62, 9.74 wine, 3.82 wire transfer, 7.31 withdrawal, 9.25 doorstop, 5.78 effects, 5.74, 5.76 information, 5.68, 5.71, 5.77 period, 5.74, 5.77 procedure, 5.75, 5.77, 5.78 rights, 5.39, 5.73ff timeshare, 5.78 witness, 8.08 Wolsey, Cardinal, Preface worker definition, 1.80 movement, 1.75, 1.77, 1.78, 1.80, 1.81, 1.82, 11.01 non-EEA, 1.85 property law rights, 1.87 registration certificate, 9.32 retired workers, 1.81 Switzerland, 2.54 TCN, 1.85, 11.01 unemployed, 1.80 writing cancellation, 5.78, 6.36 choice forum, 10.35, 11.47 timeshare contracts, 6.24 transfer Italy, 7.22 trusts, 8.04, 11.53, 11.61 Yates, Dornford, 2.05 York, Duke of, 2.04 Yorkshire Dales, 2.11 zero rating, 3.66 ZERP, Bremen, 7.01, 7.04
