Yearbook of Private International Law: Volume IX, 2007

YEARBOOK OF PRIVATE INTERNATIONAL LAW YEARBOOK OF PRIVATE INTERNATIONAL LAW VOLUME IX – 2007 FOUNDING EDITOR PETAR Š...

Author: Andrea Bonomi | Paul Volken

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YEARBOOK OF PRIVATE INTERNATIONAL LAW

YEARBOOK OF PRIVATE INTERNATIONAL LAW VOLUME IX – 2007

FOUNDING EDITOR PETAR ŠARČEVIĆ † EDITORS ANDREA BONOMI

PAUL VOLKEN

Professor at the University of Lausanne

Professor at the University of Fribourg

PUBLISHED IN ASSOCIATION WITH SWISS INSTITUTE OF COMPARATIVE LAW LAUSANNE, SWITZERLAND

Stæmpfli Publishers Ltd. Berne

sellier. european law publishers ISBN 978-3-86653-071-3

Stæmpfli Publishers Ltd. Berne ISBN 978-3-7272-2748-6

The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available in the Internet at http://dnb.d-nb.de.

© 2008 by sellier. european law publishers GmbH, Munich, Stæmpfli Publishers Ltd., Berne, and Swiss Institute of Comparative Law. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior permission of the publisher.

Production: Karina Hack, Munich. Printing and binding: Friedrich Pustet KG, Regensburg. Printed on acid-free, non-ageing paper. Printed in Germany.

ADVISORY BOARD TITO BALLARINO Milan

HANS VAN LOON The Hague

JÜRGEN BASEDOW Hamburg

FERENC MÁDL Budapest

GENEVIÈVE BASTID-BURDEAU Paris

RUI MANUEL GENS DE MOURA RAMOS Lisbon/Coimbra

MICHAEL BOGDAN Lund

YASUHIRO OKUDA Tokyo

ELEANOR CASHIN RITAINE Lausanne

GONZALO E. PARRA-ARANGUREN The Hague/Caracas

SIR LAWRENCE COLLINS London DIEGO P. FERNÁNDEZ ARROYO Madrid/Buenos Aires

SYMEON C. SYMEONIDES Salem (Oregon) PIERRE WIDMER Lausanne

HUANG JIN Wuhan

ASSISTANT EDITORS GIAN PAOLO ROMANO Legal adviser, Swiss Institute of Comparative Law EVA LEIN Legal adviser, Swiss Institute of Comparative Law

BART VOLDERS Attorney at Law Brussels

ADDRESS FOR MANUSCRIPTS AND CORRESPONDENCE Swiss Institute of Comparative Law Dorigny, CH – 1015 Lausanne

ENGLISH REVISION KAREN JEANNERET-DRUCKMAN Legal adviser, Swiss Institute of Comparative Law

SHAHEEZA LALANI Legal adviser, Swiss Institute of Comparative Law

CHARLES TABOR lur. doct. Candidate, Louisiana State University

MARC R. MERRILL Attorney at Law, Baton Rouge

TABLE OF CONTENTS ________________ Foreword ........................................................................................................ xi Abbreviations ................................................................................................ xv The Rome II Regulation – An Overview Gerhard HOHLOCH Place of Injury, Habitual Residence, Closer Connections and Substantive Scope – the Basic Principles..................................................... 1 Th.M. DE BOER Party Autonomy and its Limitations in the Rome II Regulation. ............... 19 Peter HUBER / Martin ILLMER International Product Liability A Commentary on Article 5 of the Rome II Regulation. ........................... 31 Michael HELLNER Unfair Competition and Acts Restricting Free Competition A Commentary on Article 6 of the Rome II Regulation ............................ 49 Thomas KADNER GRAZIANO The Law Applicable to Cross-Border Damage to the Environment A Commentary on Article 7 of the Rome II Regulation ............................ 71 Nerina BOSCHIERO Infringement of Intellectual Property Rights A Commentary on Article 8 of the Rome II Regulation ............................ 87 Guillermo PALAO MORENO The Law Applicable to a Non-Contractual Obligation with Respect to an Industrial Action A Commentary on Article 9 of the Rome II Regulation .......................... 115 Bart VOLDERS Culpa in Contrahendo in the Conflict of Laws A Commentary on Article 12 of the Rome II Regulation ........................ 127 Georgina GARRIGA Relationships between Rome II and Other International Instruments A Commentary on Article 28 of the Rome II Regulation ....................... 137 Symeon C. SYMEONIDES Rome II: A Centrist Critique .................................................................... 149 Yuko NISHITANI The Rome II Regulation from a Japanese Point of View ......................... 175 Cecilia FRESNEDO DE AGUIRRE / Diego P. FERNANDEZ ARROYO A Quick Latin American Look at the Rome II Regulation ...................... 193 Reid MORTENSEN A Common Law Cocoon: Australia and the Rome II Regulation ............ 203

National Reports Richard Frimpong OPPONG A Decade of Private International Law in African Courts 1997-2007 (Part I) ...................................................................................................... 223 Dário MOURA VICENTE Sources and General Principles of Portuguese Private International Law: An Outline ................................................................. 257 Dan Andrei POPESCU Some Remarks on the Applicable Law to International Successions in Romania ............................................................................................... 277 Gülören TEKINALP The 2007 Turkish Code concerning Private International Law and International Civil Procedure ............................................................ 313 Claude EMANUELLI Recognition and Enforcement of Foreign Judgments in Quebec ............. 343 Christa ROODT A Wider Vision in Choice of Prescription Law ....................................... 357 Christa JESSEL-HOLST The Bulgarian Private International Law Code of 2005 .......................... 375 Mónica HERRANZ BALLESTEROS New Perspectives in Spanish Legal Practice on the Exercise of Rights of Access Across International Borders ................................... 387 News from Brussels Kieran St Clair BRADLEY Activities of the European Community in the Field of Private International Law in 2007 ............................................................ 399 Court Decisions Christian A. HEINZE / Anatol DUTTA Enforcement of Arbitration Agreements by Anti-Suit Injunctions in Europe – From Turner to West Tankers ............................ 415 Anna GARDELLA European Union – The ECJ in Search of Legal Certainty for Jurisdiction in Contract: The Color Drack Decision................................ 439 Gilles CUNIBERTI England – Enforcement of Arbitration Agreements: The End of the English Exception ........................................................... 449

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Tiong Min YEO Singapore – The Effect of Contract on the Law Governing Claims in Torts and Equity ...................................................................... 459 Elena JÚDOVÁ Slovak Republic – The Habitual Residence in Slovakian Private International Law: Decision of the District Court in Martin of 21 December 2007 ................................................................................... 471 Carolina SAF Sweden – The Validity of a Collective Labour Agreement Resulting from a Swedish Blacking – The Rickmers Tianjin 2007 AD Nr. 2 .......... 481 Monika PAUKNEROVÁ Czech Republic – Jurisdiction over Consumer Contracts under Article 15(1) (B) of the Brussels I Regulation, and the Definition of the Concept of ‘Consumer’s’ Domicile ............................................... 495

Forum Andrea CARLEVARIS The Recognition of Enforcement of Interim Measures Ordered by International Arbitrators........................................................................... 503 Laurence USUNIER Regulating the Jurisdiction of Courts in International Litigation towards a Global Answer in Civil and Commercial Matters.................... 541 Texts, Materials and Recent Developments The 2007 Turkish Code on Private International Law and International Civil Procedure (translated by N. Ayşe ODMAN BOZTOSUN) ............................................ 583 Books Reviews............................................................................................. 605 Index ............................................................................................................ 613

ix

FOREWORD ________________

The year 2007 was arguably the most extraordinary year in recent memory for the development of Private International Law on both a regional and universal level. Within the European Union, the process of unification of Private International Law culminated in 2007 with some very fundamental achievements. Following many years of extensive negotiation, the Community institutions finally reached the political consensus necessary to adopt two very important – and much debated – conflicts of law regulations. In July, the ‘Rome II’ Regulation on the law applicable to non-contractual obligations was enacted. Shortly thereafter, the European Parliament and the Council agreed on the final text of the ‘Rome I’ Regulation on the law applicable to contractual obligations; as currently slated, this instrument is expected to be adopted (and to replace the Rome Convention) in the spring of 2008. Thus, over thirty years after a 1972 draft on the law applicable to contractual and non-contractual obligations, which was soon condemned to oblivion, two parallel sets of conflicts rules concerning the entire area of the law applicable to obligations will soon come into operation in the Member States of the European Union, the only exceptions being Denmark and, possibly, the United Kingdom (whose attitude towards ‘Rome I’ is still uncertain). As remarkable as these developments have been, they were not the only events that took place on the European front in 2007. Two additional actions stand to have a lasting effect on Private International Law in the EU. First, two regulations have been adopted that – even though less celebrated than Rome I and Rome II – will soon play a key role in conflicts’ practice: the instrument revising the 2000 Regulation on service of documents, and a Regulation creating uniform European civil procedure rules for small claims. Secondly, the European Community exercised its broad external competences under ECJ opinion 1/03 and signed in October, with Denmark, Iceland, Norway and Switzerland, the revised version of the Lugano Convention. As far as uniformity on a global level is concerned, the Hague Conference on Private International Law proved also very successful. A couple of years after the Convention on choice of court agreements, two ambitious instruments were adopted in the area of maintenance obligations. First, the Hague Convention of 23 November 2007 on the International Recovery of Child Support and Other Forms of Family Maintenance creates an extremely broad and detailed cooperation scheme. This scheme is rounded out with innovative rules guaranteeing free legal assistance to certain categories of foreign maintenance creditors, notably children. This treaty also creates uniform grounds and procedures for recognising and enforcing foreign support orders. Second, the Hague Protocol on the Law Applicable to Maintenance Obligations of 23 November 2007 modernizes the existing Hague Conventions of 1956 and 1973 by enhancing the role of party autonomy and of the lex fori.

It is important to note that this achievement has been attained through the active participation of the European Community, which was awarded membership status to the Hague Conference in April. This major institutional development and the positive outcome of the maintenance project indicate that the creation of a unified Private International Law system inside the European Union is not necessarily bound to adversely affect the elaboration of global instruments. Developments on a European and global level are not the only events that took place in 2007. On the national scale, the process of reforming existing Private International Law codifications continued at a steady pace. After Japan in 2006, Turkey reviewed its own rules on conflicts-of-law and jurisdiction. Volume IX of the Yearbook of Private International Law is again a very rich and multi-faceted book reflecting the vitality and fluidity of a subject that is in constant motion. The Yearbook was once again able to provide an overview of the current issues in Private International Law, even if all of the developments described above could not be dealt with in detail. Instead of blindly following the agenda reviewed above, we have decided to focus on the ‘Rome II’ Regulation, by devoting to it an entire thematic section of this volume. It is our belief that this text opens up a new era in the process of creating a European PIL system. Indeed, it represents the Community institutions’ first attempt to directly regulate pure applicable law issues based on Articles 61 and 65 of the EC Treaty, whose potential is likely to prove far-reaching in the future. At the same time, the Regulation extends the reach of the European rules to the area of non-contractual obligations that, until now, were the sole prerogative of Member States. Moreover, being the first regulation that openly and frankly opts for an erga omnes approach, ‘Rome II’ will have a clear impact on relationships with third States. For all of these reasons, we believed that the new regulation deserved a detailed commentary and analysis of its main provisions, including those on torts and other non-contractual obligations, such as pre-contractual liability. Because of the interest that this European text presents for third States, we also asked some distinguished scholars from non-European areas (the U.S., Japan, Latin America and Australia) to express their views on this important piece of Community legislation and the possible influence it may have on conflict developments in their respective countries and regions. Further progress in the EC system is more generally illustrated by the section ‘News from Brussels,’ which we brought back this year with the intent of continuing it in future volumes. Two notes on the first ECJ cases concerning the ‘Brussels I’ Regulation – Color Drack and West Tankers – also touch upon further progressions in the broader EC system. Other important achievements, in particular the ‘Rome I’ Regulation, will be discussed in the 2008 volume. The additional reason for which all of the 2007 developments are not analytically covered in this volume is that we did not want to sacrifice our traditional sections, which we regard as a valuable source of hard-to-access information.

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Yearbook of Private International Law, Volume 9 (2007)

In the section ‘National Reports,’ a very detailed and, indeed, unique study on the PIL decisions of African courts over the last decade deserves special attention. This section includes a comprehensive report on the above mentioned reform of the Turkish PIL and various contributions on Bulgarian, Canadian, Portuguese, Romanian, Spanish, and South African law. The section on ‘Court Decisions’ includes the comments on Czech, Slovakian, Singaporean, English and Swedish decisions. Lastly, the ‘Forum’ section boasts the synthesis of two brilliant comparative PhD theses on issues of arbitration and adjudicatory jurisdiction. We would like to express our gratitude to all authors who contributed to this impressively rich and varied volume – indeed the richest ever. Once again, our Assistant Editor, Gian Paolo Romano, has played a key role in choosing and revising the contributions, with helpful assistance by his two new ‘Co-Assistants’, Bart Volders and Eva Lein. This dynamic trio of young scholars who have been moulded by the Swiss Institute of Comparative Law will prove to be an important added value for the Yearbook’s development in the years to come. In this same perspective, a very important role will also be played by the members of our Advisory Board. Many thanks are owed to all of them for their precious support, particularly Profs. Michael Bogdan and Diego Fernández Arroyo, who have joined in 2007. Finally, we would like to acknowledge the invaluable assistance of our dedicated English revisers – Mr. Charles Tabor, Mr. Marc Merrill, Mrs. Karen Jeanneret-Druckman and Mrs. Shaheeza Lalani – as well as of Mrs. Monique Bassin, for her immense secretarial support.

Andrea Bonomi

Paul Volken

Yearbook of Private International Law, Volume 9 (2007)

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ABBREVIATIONS ________________

Am. J. Comp. L. Am. J. Int. L. Clunet ECR I.C.L.Q. I.L.M. id. IPRax OJ PIL RabelsZ Recueil des Cours

Rev. crit. dr. int. pr. REDI Riv. dir. int. priv. proc. Riv. dir. int. RIW RSDIE

American Journal of Comparative Law American Journal of International Law Journal de droit international European Court Reports International and Comparative Law Quarterly International Legal Materials idem Praxis des internationalen Privat- und Verfahrensrechts Official Journal Private International Law Rabels Zeitschrift für ausländisches und internationales Privatrecht Recueil des Cours de l'Académie de la Haye de droit international = Collected Courses of The Hague Academy of International Law Revue critique de droit international privé Revista española de derecho internacional Rivista di diritto internazionale privato e processuale Rivista di diritto internazionale Recht internationaler Wirtschaft Revue suisse de droit international et européen = Schweizerische Zeitschrift für internationales und europäisches Recht

THE ROME II REGULATION: AN OVERVIEW ________________

PLACE OF INJURY, HABITUAL RESIDENCE, CLOSER CONNECTION AND SUBSTANTIVE SCOPE: THE BASIC PRINCIPLES Gerhard HOHLOCH∗

I. II.

III.

Introduction Art. 4 of Rome II: The Regulation’s General Conflicts Rules for International Tort Law A. Structure of the Regulation B. The Rome II Place of Injury Connecting Factor (Art. 4 (1)) C. The Connecting Factor of Common Habitual Residence (Art. 4(2)) D. The ‘Escape’ Clause (Art. 4(3)) Scope and Qualification A. Material Scope and Qualification B. Non-Application of Art. 4 in Regards to Certain Exceptions and Specific Delicts C. Art. 4’s Range of Application D. Territorial Scope

I.

Introduction

When the Rome II Regulation comes into force on 11 January 2009,1 it will be the first time in history that Europe will have a unified conflict of laws system for a ∗

Professor at the University of Freiburg i.B. This contribution has been translated from German into English by Marc Merrill, attorney-at-law. 1 Regulation (EC) No 864/2007 of the European Parliament and the Council of 11 July 2007 on the law applicable to non-contractual relations (Rome II), Official Journal of the European Union Nr. L199/40 from 31 July 2007. A copy of the German text with the first comments from the German legal literature can be found in HOHLOCH G., in: ERMAN (Hrsg.), Handkommentar zum BGB Bd. II, 12. Aufl. 2008, Vor Art. 38 EGBGB no. 8 et seq., for first German commentaries to Art. 1 et seq. ‘Rome II’ see ibidem, Art. 40 – 42 EGBGB Yearbook of Private International Law, Volume 9 (2007), pp. 1-18 © sellier. european law publishers & Swiss Institute of Comparative Law

Printed in Germany

Gerhard Hohloch portion of Private International Law (‘PIL’). These will be conflicts rules that have both direct effect and which have a uniform statutory source.2 These uniform rules relating to non-contractual obligations will without doubt have a high practical significance within the field of PIL. This is especially true for PIL related to tort law, less so for the conflicts rules related to unjust enrichment and negotiorum gestio. International tort law must predominantly resolve unplanned, damage causing events where the actors are randomly confronted with each other, and thus, requires a legally certain and good and practical system of connecting factors. This is possibly more important than those rules relating to contractual relationships where the possibility of choice of law by the contracting parties is always of first priority. It is because of this that the Rome II Regulation, in its some 40 years of legislative history, has been the subject of a diverse and multifaceted discussion in not only German legal literature, but also the legal literature of other Member States.3 (Introductory Law to the German Civil Code [= German Act of Private International Law] no. 1 ss. 2 For a perspective on the coming ‘Europeanization’ of Private International Law (PIL), see HOHLOCH G. (note 1), Art. 3 EGBGB, no. 60, and – generally – HOHLOCH G., in: Festschrift H. Stoll, Tübingen 2001, 533 et seq. 3 See, from the new German legal literature on the subject, the following articles and/or essays: VON BAR CH./SCHULTE-NÖLKE H., ‘Gemeinsamer Referenzrahmen für europäisches Schuld- und Sachenrecht’, in: ZRP 2005, 165-168; DEINERT O., ‘Das Herkunftslandprinzip und seine Bedeutung für das Internationale Deliktsrecht’, in: EWS 2006, 445454; HEIDERHOFF B., ‘Eine europäische Kollisionsnorm für die Produkthaftung: Gedanken zur Rom II-Verordnung’, in: GPR 2005, 92-97; VON HEIN J., ‘Die Kodifikation des europäischen Internationalen Deliktsrechts’, in: ZvglRWiss. 2003, 528-562; ID., ‘Die Kodifikation des europäischen IPR der außervertraglichen Schuldverhältnisse vor dem Abschluß?’, in: VersR 2007, 440-452; HEISS H., ‘Das Kollisionsrecht der Versicherungsverträge nach Rom I und II’, in: VersR 2006, 185-188; HUBER P./BACH I., ‘Die Rom II-VO – Kommissionsentwurf und aktuelle Entwicklungen’, in: IPRax 2005, 73-84; JAYME E./KOHLER CH., ‘Europäisches Kollisionsrecht 2007: Windstille im Erntefeld der Integration’, in: IPRax 2007, 493506; ID., ‘Europäisches Kollisionsrecht 2005: Hegemonialgesten auf dem Weg zu einer Gesamtvereinheitlichung’, in: IPRax 2005, 481-493; KOZIOL H./THIEDE TH., ‘Kritische Bemerkungen zum derzeitigen Stand des Entwurfs einer Rom II-Verordnung’, in: ZVglRWiss 2007, 235-247; LEIBLE S./LEHMANN M., ‘Die neue EG-Verordnung über das auf außervertragliche Schuldverhältnisse anzuwendende Recht (‘Rom II’)’, in: RIW 2007, 721-735; MANKOWSKI P., ‘Entwicklungen im Internationalen Privat- und Prozessrecht 2004/2005 (Teil 1)’, in: RIW 2005, 481-499; MÖRSDORF-SCHULTE J., ‘Spezielle Vorbehaltsklausel im Europäischen Internationalen Deliktsrecht?’, in: ZVglRWiss 2005, 192-256; SONNENTAG M., ‘Zur Europäisierung des Internationalen außervertraglichen Schuldrechts durch die geplante Rom II-Verordnung’, in: ZvglRWiss 2006, 256-312; PHILIPP O., ‘Rechtswahl auch bei außervertraglichen Schuldverhältnissen’, in: EuZW 2005, 516; STAUDINGER A., ‘Internationale Verkehrsunfälle und die geplante Rom II-Verordnung’, in: SVR 2005, 441-450; STEMPFLE CH., ‘EU-Einigung bei Rechtswahl außervertraglicher Haftung (Rom II)’, in: PHI 2006, 90-91; THIEDE TH./LUDWICHOWSKA K., ‘Die Haftung bei grenzüberschreitenden unerlaubten Handlungen’, in: ZVglRWiss 2007, 92-103; WAGNER G., ‘Internationales Deliktsrecht, die Arbeiten an der Rom II-Verordnung und der Europäische Deliktsgerichtsstand’, in: IPRax 2006, 372-390. Wohl zuletzt WAGNER G., ‘Die neue Rom II-Verordnung’, in: IPRax 2008, 1 et seq. From the Austrian literature, see HEISS H./LOACKER L., ‘Die Verge-

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Yearbook of Private International Law, Volume 9 (2007)

Basic Principles of Rome II Rome II seeks to satisfy these needs and requirements of international tort law with a system of rules, the foundation of which are set forth in Art. 4, that have in the past proven their worthiness. The first basic rule is the applicability of the law of the place of injury. Of course this is nothing new, as it is ‘the’ basis of international tort law that has a particular tradition in all EU Member States; a tradition which can be traced back to the establishment of the Statutentheorie (‘theory of statutes’).4 The initial approaches relating to the ‘Europeanization’ of the law of non-contractual obligations, approaches which can be found in the ‘preliminary draft’ of 1973, also sought the implementation of the place of injury rule.5 The establishment of this unified law for 26 countries certainly produced a uniform place of injury rule. This means both the adoption of a unitary place of injury rule on the one hand, and the renunciation of national idiosyncrasies on the other. 11 January 2009 will mark the end of the particular German view of place of injury, just as it will mark the end of, for example, the Austrian or English one.6 In their place will be, as far as the material, temporal and spatial personal scope of meinschaftung des Kollisionsrechts der außervertraglichen Schuldverhältnisse durch Rom II’, in: JBl 2007, 613 et seq. For a Swiss perspective on the historical development, see VON OVERBECK A.E./VOLKEN P., ‘Das internationale Deliktsrecht im Vorentwurf der EWG’, in: RabelsZ 1974, 211 et seq. From the French literature, GUERCHOUN F. / PIEDELIÈVRE S., ‘Le règlement sur la loi applicable aux obligations non contractuelles (‘Rome II’)’, in: Gaz. Pal. 2007, Doctrine 3186 et seq.; NOURISSAT C. / TREPPOZ E., ‘Quelques observations sur l’avant-projet de proposition de règlement du Conseil sur la loi applicable aux obligations non contractuelles ‘Rome II’, in: Clunet 2003, 7 et seq. For the Italian literature, see BARIATTI S., ‘La futura disciplina delle obbligazioni non contrattuali nel quadro della comunitarizzazione del diritto internationale private’, in: Riv. dir. int. priv. e proc. 2005, 5 et seq.; WEINTRAUB R., ‘Rome II and the Tension Between Predictability and Flexibility’, in: Riv. dir. int. priv. proc. 2005, 561 et seq.; MUNARI F. / SCHIANO DI PEPE G., ‘Liability for Environmental Torts in Europe: Choice of Forum, Choice of Law and the Case for Pursuing Effective Legal Uniformity’, in: Riv. dir. int. priv. proc. 2005, 607 et seq.; SIEHR K., ‘European Private International Law of Torts. Violations of Privacy and Rights Relating to the Personality’, in: Riv. dir. int. priv. proc. 2004, 1201 et seq. 4 See HOHLOCH G., Das Deliktsstatut, Frankfurt a.M. 1984, p. 15 et seq. (containing an account of the development of the place of injury rule in Europe and USA since the Kommentatoren). A modern perspective on the basic function of German international tort law, see BGHZ 86, 57 et seq. and established jurisprudence; in addition HOHLOCH G., ‘Auflockerung als Lippenbekenntnis?’, in: JuS 1980, 81 et seq., covering the contemporary sources to the creation of the preliminary draft of 1973. 5 Compare, VON OVERBECK A.E. / VOLKEN P. (note 3), 56 et seq.; LANDO O., ‘The EC-Draft Convention on the Law Applicable to Contractual and Non-Contractual Obligations’, in: RabelsZ 1974, 6 et seq. 6 Compare instead Art. 40 Abs. 1 EGBGB (as amended since 1999); for this, as well as the developments in German PIL, HOHLOCH G. (note 1), Art. 40 EGBGB no. 1 et seq.; for a fuller account see 11. Aufl. 2004, Art. 40 EGBGB no. 1 et seq.; for Austrian law, see § 48 Austrian Act Relating to Private International Law (Connection on the place of conduct with the ‘escape clause’ - ‘Ausweichklausel’) in § 48 Abs. 1 p. 2 IPRG, for a range see HEISS H. / LOACKER L. (note 3), 625; for the particular embodiment of the place of injury rule from the English perspective, see HOHLOCH G. (note 4), p. 85 ss.

Yearbook of Private International Law, Volume 9 (2007)

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Gerhard Hohloch Rome II reaches, only the new place of injury rule of Art. 4 (1) of Rome II. The break from the up until now ‘national’ PIL will be enormous. Less dramatic, but just as significant, will be the coming into force of Art. 4 (2) of Rome II. Common habitual residence as a meaningful ‘result-oriented’ connection for damage rules,7 in the event that both tortfeasor and victim habitually reside in the same jurisdiction, and after the damaging event return to this jurisdiction, is today not new. It has, however, in the Member States of the EU at different times, for different motives and in many cases after some effort, replaced the ‘common nationality’ connection which was first recommended or practiced.8 This common residence connection represents nowadays a stable foundation after some 40-50 years of practice in a turbulent system whose purpose was to make the conflict analysis for tort more flexible. It was (and sometimes still is) a system which sought to determine the controlling law, in extreme cases, through the use of connecting factors such as the ‘better law,’ the law of the predominant interest, or the law of the ‘most significant relationship’ (‘engste Verbindung’).9 For those particularly unique cases in which the specific connecting factors of paragraphs 1 and 2 can’t find the ‘correct’ law, the ‘manifestly closer connection’ has been reduced to the ‘escape’ clause of Art. 4 (3).10 The practical significance of this clause, however, will continue to be rather small. Those basic rules set forth in Art. 4 evidence their significance for the future of European PIL when they are examined together with three other components of the Rome II Regulation. On the one hand, the reach of Rome II is provided in Art. 1 and 2, where provisions are laid down for the field of application and the definition of torts under the Regulation. These provisions set forth rules, which do not appear in the PIL laws of the continental EU Member States, but have the style For more on the term, HOHLOCH G. (note 4), in: JuS 1977, 81 et seq. For the German development that goes back some time and which, as of 1920, was influenced by the Swiss PIL, see HOHLOCH G., Deliktsstatut (note 4) p. 57 et seq. The ‘RechtsanwendungsVO’ (Applicable Law Regulation) of 1941, a unilateral conflicts norm that tied to German citizenship, was soon overcome in the German practice and was no longer an obstacle for the gradual change leading to common habitual residence, see from the case-law of the Bundesgerichtshof (BGH), in: BGHZ 34, 22 et seq.; BGH: in: NJW 1976, 477 et seq., BGHZ 86, 57 et seq. And then the following different opinions (for this HOHLOCH G. (note 1), 11. Aufl. 2004, Art. 40 no. 1 et seq. The respective legal connecting factor is found in basically all of the PIL norms of European countries, norms which were completed during the ‘Codification Epoch’ of the second half of the 20th Century; see a copy of the text in its original language with a German translation in RIERING W. (Hrsg.), IPR-Gesetze in Europa, München (etc.) 1998. 9 The excessive discussion of the questions and ‘approaches’ in the European countries, especially the discussion with suggestions (and angry extortions!) through the thoughts and teachings of the US American Law of Conflicts, is today predominantly interesting only from a historical perspective; for a compilation of those materials, HOHLOCH G., Das Deliktsstatut (note 4), 85 et seq.; more concisely, HOHLOCH G. (note 4), in: JuS 1980, 81 et seq. 10 For the function of the ‘escape clause’ in the contemporary PIL legislation, see for example SIEHR K., Das internationale Privatrecht der Schweiz, Zürich 2002, p. 495, 497 et seq. 7 8

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Basic Principles of Rome II that all uniform EU regulations have; a style it must have for the purpose of a more effective harmonization of the 26 Member States (without Denmark).11 Then again, Art. 4 loses some of its significance through Art. 5 et seq., where individual types of delicts have been listed, each with its independent conflicts rules. This represents, at least from a formal perspective, a difference of Rome II with respect to many present national conflicts systems, in which special rules based on the special type of delict are rarely found.12 On 11 January 2009 Rome II will in most cases, through overlap and primacy, practically abolish national conflicts rules. National PIL will remain applicable only in exempted areas. It is then the job of the national legislative authorities to either highlight or harmonize the differences. This exigency exists less so in regards questions surrounding international application. Art. 3 of Rome II sets forth universal application, i.e. application as to third countries, and thus also, for example, Switzerland as a third country. Thus, on 11 January 2009 the Swiss legal practice will be confronted with 26 countries that will have this fundamentally uniform conflicts system. This would be directly relevant for the Swiss to the extent that they practice the so-called ‘remission’ (‘Rückverweisung’, ‘renvoi au premier degré’) or the ‘transmission’ (‘Weiterverweisung’, ‘renvoi au nième degré’) with respect to Art. 132 et seq. IPRG, which however, pursuant to Art. 14 IPRG, is not the case. Therefore, the new PIL for torts in the EU is for the Swiss practice significant, if jurisdiction for a tort case lies in a Member State – be it pursuant to general jurisdiction per Art. 2(1) of the Lugano Convention or pursuant to the special rule of Art. 5 Nr. 3 of this Convention.13 The court sitting in a particular Member State will apply the conflicts law of his lex fori, i.e. Rome II, also in relationship to Switzerland. This particular feature can play a very practical role in litigaSee the comparable construction of the Rome Convention on the law in relation to contractual relationships of 9.6.1980 – ‘Rome 1980’ (Art. 1 and 2) and the Brussels I Regulation, as also both of the matrimonial regulations. 12 For a textbook example of a ‘unified solution’, see Art. 40 – 42 EGBGB; With the enactment of the German PIL norms related to non-contractual obligations on 1 June 1999, German PIL, being fully cognizant of and as a renunciation of many different proposals during the legislative history, chose to turn away from a construction which would have incorporated individual rules for specific types of delicts (for example protection of personality, products liability, competition law...). Divergent from this is, for example, the Swiss PIL. In Art. 132 of the Swiss PIL Act is found a limited catalog of conflicts laws for particular types of delicts (for example products liability, liability stemming from traffic accidents). 13 ‘Location of the damaging event’ in terms of Art. 5 Nr. 3 still applies –different than Art. 4 (1) of Rome II (see in addition section II.2.) ‘Ubiquitätsprinzip’ (‘Ubiquity Principle’), i.e. location of conduct and location(s) of direct damage are the same; see in addition the ECJ-Jurisprudence since ‘Mines Potasse’ ECJ 30.11.1976, in: ECR 1976, 1735 = NJW 1977, 495 and ECJ 19.9.1995 (‘Martinari’), in: ECR 1995, 2719 = IPRax 1997, 331 with a note by HOHLOCH G., at 312 et seq. To the limits of the location of direct damage compared with the location of a subsequent property loss, ECJ 10.6.2004 (‘Kronhofer’), in: NJW 2004, 2441 = IPRax 2005, 32 with note by HEIN J., at 17, OLG Stuttgart 6.7.1998, NJW-RR 1999, 138 = IPRspr. 1998 Nr. 147. 11

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Gerhard Hohloch tion, whether it be at the point of developing a general litigation strategy, or when seeking the recognition and execution of foreign judgments in Switzerland pursuant to Art. 31 et seq. of the Lugano Convention (at least by the ordre public examination of Art. 27 Nr. 1).

II.

Art. 4 of Rome II: the Regulation’s General Conflicts Rules for International Tort Law

A.

Structure of the Regulation

The Rome II Regulation presents the model of how European PIL rules would look if they had to regulate a single area of private law, as the case may be international private law. The rules regarding the scope of application (here Art. 1-3) are followed by individual areas. More specifically, rules for non-contractual obligations, the first being the rules of international tort law (PIL of torts, Art. 4-9), are followed by the general provisions, in particular those dealing with the scope of the applicable law, prohibition of renvoi, ordre public, as well as the transitional and final provisions. Due to this ‘statutory structure,’ Rome II is certainly not an example of elegant and properly constructed codification; rather it has a piecemeal structure that seeks to place ‘legal island’ (‘Rechtsinsel’) next to another ‘legal island’ until – maybe – a European code of Private International Law will exist.14 Art. 4 is the article within this system of Rome II that covers the general conflict laws for tort, i.e. the basic rules of place of injury (paragraph 1), the rule for common habitual residence, and the rule covering those rare factual constellations where the escape clause of paragraph 3 may be applicable (‘Auffangklausel’). The European construction style is evidenced by the repetition of this same structure in Art. 5 et seq. Reference to ‘common legal environment’ (gemeinsames Umweltrecht) or to the close connections repeatedly surface as preferred connections, a feature which could possibly lead to regulatory ‘hypertrophy’, but also at the same time to simpler application. The style of construction has just the opposite appearance and tradition of the classic national PIL statutory structure. This classic structure is one which, because of its conciseness, lends itself to circumvention. 14 For more on the emerging PIL created through successive single pieces of European legislation, i.e. ‘legal islands’(‘Rechtsinseln’)(‘Rome I,’ ‘Rome II,’ ‘Rome III’ ...) see HELDRICH A. in: Palandt Kommentar zum BGB, 67. Aufl. 2008 Art. 3 EGBGB no. 13, 14 and the citations found therein; just as appropriate HOHLOCH G. (note 1), Einl. Art. 3 EGBGB no. 60, 63, 64; for a critical view on this method of legislating, see for example HOHLOCH G. (note 2), 533 et seq. The planned European Frame of Reference will probably have rather minor effect for the future creation of general European PIL codification. The requirements for a more compact PIL do not overlap in this respect with the requirements of the material law.

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Basic Principles of Rome II The new style is likely to simplify application. When one is faced with the application of Art. 4 of Rome II, one can confine oneself to Art. 4. This is almost just as true if one has to apply Art. 5 or 6 or 7. More often than not, the individual articles include the hierarchy system of connecting factors and indicate whether the basic rule of the first paragraph is applicable or whether a particular rule from the following paragraphs is the controlling. Resort, then, to an ‘escape clause’ for all delict and conflict cases in separate articles of the statute is not needed. This is different, for example, than German PIL, where the escape clause applicable to unjust enrichment, negotiorum gestio and torts is included in Art. 41 EGBGB rather than in the single provisions of Art. 38 (unjust enrichment), 39 (negotiorum gestio) and 40 (tort).

B.

The Rome II Place of Injury Connecting Factor (Art. 4 (1))

1.

Narrowing of ‘Place of Injury’ to ‘Place of Direct Damage’

In relation to a non-contractual obligation arising out of a tort, Art. 4 (1) states that, ‘[u]nless otherwise provided for in this Regulation’, the applicable law shall be the law of the country in which the damage occurs, irrespective of both the country in which the event giving rise to the damage occurred and the country(s) where indirect damage occurs. The new uniform European conflicts law related to torts therefore designates the place of direct damage (lex loci damni or ‘Erfolgsort’). This is the result of a long process whereby a number of other variations of the place of injury rule found in national PIL systems were rejected. The country in which the damage occurs is the country where the legally protected interest is injured (‘Rechtsgutverletzung’).15 The particular language used (‘country in which the damage occurs’) evidences the affinity of the new rule to the Brussels Convention, as also to the ‘Brussels I’ Regulation of 200116 (Art. 5 Nr. 3) and the necessity of an autonomous definition in terms of Art. 4 (1) of Rome II (i.e. a place of injury term that is independent from the law of the Member States). Place of injury in terms of Rome II means the ‘location of direct damage’ (‘Erfolgsort’) as it has been hereto used in language of international tort law.17 15 Compare the explanatory statement of the draft proposal of the Commission from 22 July 2003 for the Regulation of the European Parliament and the Council on the law applicable to non-contractual relations (‘Rome II’), COM (2003) 427 final version, page 13. For the general concept see HOHLOCH G. (note 1), Art. 40 EGBGB no. 10 a. See also the compilation of the assessments in the – already considerable – German legal literature in HEISS H. / LOACKER L. (note 3), 624, a number of useful sources in N. 133 et seq. 16 Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. 17 The Regulation’s word choice is satisfactory. The formulation ‘… in which the damage occurs...,’ is an acceptable European compromise (see practiced similar terminology in Art. 5 Nr. 3 Brussels I Regulation), that is especially desired because it leads to a ‘European conflicts of law nomenclature’ that will assist in a future general conflict of laws codification.

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Gerhard Hohloch The establishment of the place of injury rule as the place of direct damage, described as the ‘country in which the damage occurs’, is consistent and leads to certain outcomes which are worthy of note. As regards its consistency, a European standardized and simplified general connecting factor for place of injury requires, as a European legal concept and as a universally applicable connecting factor, objectivity and neutrality. Place of injury as a connecting factor generally lends itself to objectivity. An aspect adding to the objectivity of the location of damage in the European arena may be that the law of the place where the damage occurs is best suited for the central tort sanction, i.e. the compensation of the damage. The actions of the tortfeasor have insomuch limited weight in the evaluation.18

2.

The Displacement of the Place of Injury Characteristics of National PIL

The Rome II connecting factor related to place of injury is the current connecting factor found in the majority of Member States. For these countries (for example France), the coming into force of Art. 4 (1) will change nothing.19 To the limited extent that the difference between place of conduct and place of direct damage can have significance,20 this new rule will represent an innovation for those countries that until now have preferred the ‘place of conduct’ rule.21 Falling victim to the trend towards simplicity and unambiguity of connecting factors is Art. 40 (1) EGBGB, along with the rest of the ‘Ubiquitätstheorie’ (‘Ubiquity Theory’) that it represents. This rule has been in effect since 1 June 1999 in Germany.22 This means that, once Rome II comes into force, German international tort law will have undergone two successive amendments within a span of ten years, although practical consequences may not be that far-reaching. In force for some 100 years, up until 1999, was the so-called ‘ubiquity principle’ (‘Ubiquitätsprinzip’). Here, the place of conduct and place of direct damage were alternatively applicable and choice between them would be effected by the court on an ex officio basis, based on a comparative better-law approach (‘Günstigkeitsvergleich’). This In this context see recital 16 of the Rome II preamble for a clear and accurate explanation of the reasons behind the selection of the ‘place of direct damage’ connection; see also the European Commission proposal from the 22nd of July 2003 on the regulation of the European Parliament and the Council on the law applicable to non-contractual obligations (‘Rome II’) COM (2003) 427 final version, p. 13. 19 See an evaluation by KADNER GRAZIANO TH., Gemeineuropäisches Internationales Privatrecht, Tübingen 2002, p. 196 et. seq.; see also the reasons for the European Commission proposal from the 22nd of July 2003 on the regulation of the European Parliament and the Council on the law applicable to non contractual obligations (‘Rome II’) COM (2003) 427 final version, p. 12. 20 In this respect see section c). 21 For example Austria, see § 48 Abs. 1 öst. IPRGesetz (Austrian PIL Act). 22 Generally applicable is the law of the country where the act occurred, but such law can be displaced at the aggrieved party’s unilateral choice by the law of the country where the harmful event took place, subject to time and procedural limitations. 18

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Basic Principles of Rome II analysis should ultimately result in the application of the law which would benefit the aggrieved party.23 Art. 40 (1) EGBGB, which is still partly based on the Ubiquitätsprinzip, has been law in Germany since 1 June 1999.24 As of 11 January 2009 only the place of direct damage will matter.25

3.

Reach of the Connecting Factor

Art. 4 (1) of Rome II is the basic conflicts rule of international tort law that, again, with its implementation on 11 January 2009, will be the applicable PIL norm for Europe. The ‘place of injury’ connecting factor, or more accurately the ‘place of direct damage’, means a legal change for a number of Member States (that is from other ‘place of injury’ variations to that of ‘place of direct damage’). Admittedly, the practical implications that Art. 4 (1) of Rome II could possibly have in this respect are, as set forth in the comments below, limited. To determine the significance of Art. 4(1), one should consider the material scope of application of this provision. Art. 4, along with its paragraph 1, does not have direct significance for the delicts listed in Art. 5-9 of Rome II, as they have their own special conflicts rules. Due to the precedence of Art. 5-9 of Rome II, Art. 4 is fundamentally reduced to those delicts that are not covered by those provisions. By cutting out those delicts related to products liability (Art. 5), competition law (Art. 6), environmental damage (Art. 7), infringements related to intellectual property (Art. 8), and industrial actions (Art. 9), there only remain the miscellaneous traffic accidents, as well as other general delicts that do not fall under Art. 5-9. These delicts will predominantly be committed as ‘Punkt- oder Platzdelikte’ (‘point or location delicts’). This means that these torts will be completely realised within a single jurisdiction and, therefore, will normally not involve a border crossing during their perpetration. The typical ‘distance torts’ (‘Distanzdelikte’), i.e. those torts which involve a crossing of a legal border at some point between the conduct and the result, are, in the system of Art. 4-9 of Rome II, no longer covered by the general conflicts norm (Art. 4). The protection of the private sphere, marriage and personality (‘right of privacy’), including defamation related to one’s commercial reputation, are not covered by Rome II, due to the exceptions found in Art. 1 (2) letters (a)-(g).26 As to cross-border emissions damage cases (environmental damage cases), the second large delict type and one for which the determination of place of perpetration is often difficult, they are handled in Art. 7 and, once For details see for example HOHLOCH G. (note 1), 9. Aufl. 1993, Art. 38 EGBG No. 15 et seq. 24 For a treatment of the ‘Bestimmungsrechts’ in Art. 40 (1) EGBGB, see HOHLOCH G. (note 1), 10. Aufl. 2000, 11. Aufl. 2004, Art. 40 EGBGB no. 22 et seq. 25 On the future implementation into the German PIL, HOHLOCH G. (note 1), 12.. Aufl. 2008, Art. 40 EGBGB no. 21 et seq., 31 a. 26 There may be, however, special cases which fall under the competition conflict norm of Art. 6, which has its own place of injury term. 23

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Gerhard Hohloch again, not Art. 4. This is true both for environmental damages which do not arise out of the violation of individual legal interests and for those which consist in the damage caused to individual interests by means of natural elements (water, air and soil).27 As to point or location delicts, the typical example being an accident with tortious consequences, it is not difficult to determine the location where the damage occurred. Regularly coming into question is the place of the accident (‘Unfallort’), i.e. a single location, where the entire delict was consummated. The example evidences that in the clearly limited material scope of application of Art. 4, the adoption of the place of damage is appropriate, and lastly without alternative. Everything regarding causality which occurred elsewhere, that is not in the location of the damaging occurrence, i.e. where the damage to the legal interest of the aggrieved party occurs, remains in the conflicts law related to tort out of consideration.This applies to preparatory acts as well as omissions. An example would be the failure to examine a technical aspect of an automobile in the home garage of the car’s owner or driver, this failure leading to the occurrence of damage at the location of the accident. In the case of strict liability, the ‘home’ of the risk is irrelevant for the occurring of the damage. Accordingly, the law regarding liability of the place of damage will be applied.28 Rome II, again, in this respect sets forth nothing new. Nothing different applies to what occurs after the ‘act’. Again, not only in German PIL, but also in the conflicts laws of other Member States, ‘secondary’ or ‘consequential damage’ (‘Folgeschäden’) and other damage arising out of the injury to the protected legal interest (i.e. consequential costs, immaterial damage, indirect damage to third parties) are not regarded as deserving separate connecting factors. It is certainly not a new approach not to adopt a different connecting factor with respect to ‘indirect damage’ in cases where the injury to the legal interest and the resulting primary damage occur in the same place. However, Art. 4 (1) of Rome II directly puts up with one of the ever connected problems with place of direct damage as a connecting factor: If the delict is a ‘Streudelikt’ (‘scattered tort’), i.e. a tort where the victim suffers legal injury and damage in multiple, different jurisdictions, then the solution lies with the ‘mosaic’ accumulation of the individual injuries found in the different places of direct damage.29 The problem, nevertheless, has little consequence for Art. 4 (1) of Rome II. ‘Streudelikte,’ which can be found (and be very problematic) in torts causing prejudice to personality

Finally, see WAGNER G. (note 3), 1, 9. Earlier attempts to differentiate between connecting factors applicable to strict liability and fault liability (see e.g. RABEL E., The Conflict of Laws, volume II, (2nd ed. 1960) 334, are for a long time out of date: see e.g. STOLL H., in: Festschrift M. Ferid, München 1978, 397-416. 29 See HOHLOCH G. (note 1), Art. 40 EGBGB no. 31 and cites found therein. 27 28

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Basic Principles of Rome II rights,30 do not regularly fall within the scope of Art. 4 (1) of Rome II, and thus the problem normally does not arise in this area.

C.

The Connecting Factor of Common Habitual Residence (Art. 4(2))

1.

Development

Taking precedence over the general connecting factor related to place of injury is Art. 4 (2) of Rome II, which adopts, where available, the common habitual residence of the parties (‘gemeinsamer gewöhnlicher Aufenthalt’, ‘résidence habituelle’). As the preferred connecting factor, Art. 4 (2) was already present in all relevant Member State legal systems, albeit based on different legal foundations. The 1971 Hague Convention on the Law Applicable to Traffic Accidents makes use of this connecting factor, at least indirectly. The legal reforms, which since 1960 have been introduced in the ‘newer’ Member States, also adhere to this principle. Elsewhere, for example Germany, it was the courts, encouraged by the literature, which had been increasingly using a result-oriented connecting factor, notably the law of nationality (‘Heimatrecht’) or the law of ‘common legal environment’ (‘gemeinsame Rechtsumwelt’). It was clear for many legal systems long before the passage of Rome II that habitual residence was an uncomplicated and practicable connection that belonged to the legal instrumentarium of international tort law. Art. 133 (1) of the Swiss IPRG is an excellent and clear example.31 Germany needed a little more time to simplify its tentative and extremely varied case law into the 1999 enacted rules of Art. 40 (2) EGBGB.32

2.

Content

‘Common habitual residence’ means that the parties involved in the tortious situation have the factual center of gravity of their lives (‘faktische Lebensmittelpunkte’) in the same country. Rome II itself does not contain – and rightly so – a definition of ‘habitual residence’, even when one searches in Art. 23 where certain individual terms are defined: place of central administration for juridical persons, associations, corporations (Art. 23(1) of Rome II),33 habitual residence for natural

See as a typical example the case ‘Shevill’ of the ECJ (ECJ 7.3.1995, in: ECR 1995 I 415, = IPRax 1997, 111 with note by KREUZER K. / KLÖTZEN, 90 = Rev. crit. 1996, 487, note by LAGARDE P. = Riv. dir. int. priv. proc. 1995, 763). 31 See HEINI A., in: Zürcher IPRG-Kommentar, 2. Aufl., Zürich 2004, Art. 133 no. 3 and cites found therein. 32 Compare HOHLOCH G. (note 1), Art. 40 (11th ed. 2004) no. 32 et seq. and Art. 40 (12th ed. 2008) nos. 32 et seq., 40. 33 Correctly is ‘domicile’ applicable, and not the ‘law of incorporation’; this provision is purpose-oriented and thus is not contradictory to the development of the European 30

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Gerhard Hohloch persons when injuries occur during their business activity, Art. 23(2) of Rome II). The question of whether the term ‘residence’ should be autonomously construed or whether its meaning should be inferred from the conflicts law of the forum state is ultimately pointless. ‘Autonomous’ interpretation of Rome II, historical background reasons, as well as the pursued European goals of Art. 61, 65 of the Treaty of Rome, make clear that Art. 4 (2) of Rome II refers under ‘habitual residence’ to the factual center of life activities, supported by the relevant will of the concerned person. It is therefore sufficient that Art. 23 of Rome II contains rules for the residence of juridical persons and for special cases. They are helpful tools that are also available in the ‘Brussels I’ Regulation.34 More is not needed. Legal definitions only have, in PIL norms as in other areas of law, an assisting function. In the case of such self-explanatory terms as ‘habitual residence’, statutory definitions are not necessary.

D.

The Escape Clause (Art. 4 (3))

Connecting factors such as place of injury and common habitual residence are not adequate for the multitude of possible tort constellations. This was evidenced by the national conflicts laws when certain specific delicts, which are now separately dealt with in Art. 5 et seq., were not so handled. Occasionally the facts in a given case are such that the general PIL rules related to connecting factors are ‘manifestly’ not appropriate. Practical cases which arose in the prior German practice are situations which bear a strong relationship to a contract or cases presenting other more significant connections.35 The German experience, however, has also shown that those exceptions where there really existed a ‘closer connection’, thus prompting a deviation from general connecting factors, are small in number.36 So should it continue in the future with the application of Art. 4 (3) of Rome II. Art. 4 (3) demands a ‘manifestly closer connection.’ As a result, it must be evident that the rules of paragraphs 1 and 2 would not fit. Foreseeable is a situation where the tort in question is closely linked to a complex contractual relationship and where the governing law should be that of the contract. Mechanical solutions are however to be avoided. The proper approach requires first an analysis of paragraphs 1 and 2. If the result is so to say ‘lopsided’, then the obvious and imperative correction remedy can be made with the help of the escape clause. By no means, however, does Art. 4(3) necessitate a constant correction analysis.. Instead, international corporation law based on the ECJ jurisprudence.; for the latter see HOHLOCH G. (note 1), Annex II on Art. 37 EGBGB (12th ed. 2008), nos. 22 et. seq. 34 Art. 59 – 61 ‘Brussels I’ Regulation. 35 See for the particulars HOHLOCH G. (note 1), Art. 41 EGBGB (12th ed. 2008) no. 10. 36 The German jurisprudence has so far been most conservative, compare with what is at most obiter dicta in the case law of the BGH (BGH in: VersR 1961, 518; in: BGHZ 87, 95, 103 = IPRax 1984, 30 with remarks by HOHLOCH G., p. 14; further citations by HOHLOCH G. (note 1), Art. 41 EGBGB (12th ed. 2008) no. 11.

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Basic Principles of Rome II Art. 4(3) of Rome II is just as small a piece of the Regulation as Art. 41 EGBGB is in relation to Art. 40 et seq. EGBGB.37

III. Scope and Qualification A.

Material Scope and Qualification

Commensurate with the construction principles of European legal drafting (‘Normsetzung’) in international private conflict of laws and international procedural law (besides Rome II also Brussels I, the matrimonial regulations, as well as the upcoming Rome I), Rome II sets forth its material and territorial scope of application in Articles 1 through 3. Those articles apply to the entire material scope of the Regulation, i.e. torts, unjust enrichment, negotiorum gestio and culpa in contrahendo. Art. 2 seeks to establish for the entire field a common foundation for the term damage, and thus also impending damage. The attempt is not necessarily successful since under the conventional understanding of the German and other Member States’ PIL, enrichment claims, just as much as negotiorum gestio claims, are not construed as cases seeking reparation of damage. Notwithstanding these terminology issues, claims for damages, claims based on restitutionary obligations, and reimbursment of expenses stemming from negotiorum gestio, all fall within the scope of the Regulation. This is just as true relating to pre-emptive claims, which seek to guard against and hinder potential damage, or claims which seek to abate prospective causes of damage but which do not yet have the ‘dimensions’ of a damage claim. If unjust enrichment and negotiorum gestio, which in Art. 10 and 11 have their own conflicts norms, fall outside the scope of a contribution on Art. 4, which is limited to ‘torts’, Art. 4 covers claims for damage prevention (‘Schadensvorbeugung’), loss avoidance (‘Schadensverhütung’), damage compensation (‘Schadensvergütung’) and restitution (‘Schadensrestitution’). As far as the legal basis for such claims is concerned, Rome II only governs ‘non-contractual’ claims. Because Rome II Regulation does not seek to bring about a revolution in international tort law, falling into the arena of ‘non-contractual liabilities’ should be classic torts as they are uniquely embodied in all European legal systems, whether codified or whether developed through the case law of a particular Member State.. As for classification, Rome II seeks through the concept of ‘non-contractual delicts’ to generally cover all that which is encompassed within non-contractual liability and the prevention of liability. As a rule of Community law, the Regulation embodies a European standard whose definition shall draw on the procedural The application of Art. 4 (3) of Rome II should hardly differ from the implementation of Art. 133 (3) Swiss PIL Act; see for the latter HEINI A. in: Zürcher Kommentar (note 31) Art. 133 nos. 13 et seq. 37

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Gerhard Hohloch law classification of claims that can be brought within the forum delicti under Art. 5(3) of the ‘Brussels I’ Regulation.38 Captured will be all damage claims stemming from non-contractual fault liability, regardless of its characterization as liability for proven or presumed fault. Covered also are forms of strict liability, i.e. liability independent from fault, regardless of how it is designated in different national systems (‘strict liability,’ ‘responsabilité pour risque,’ ‘Gefährdungshaftung’) and irrespective of its legal foundation in codification, special laws, or jurisprudence. The ‘European’ classification also provides guidance as to the classification of the claims for damage prevention and avoidance (‘Schadensvorbeugungund –verhütung’). Such claims do not necessarily require a traditional tort law foundation. Examples belonging in this category are the French tort claims based on neighborhood nuisances (‘troubles de voisinage’) and ‘negative’ claims pursuant to German law actio negatoria (‘Eigentumsfreiheitsklage’, § 1004 BGB).39 It is important here to look past the dogmatic ‘rim’ of national developments so as to reach, for the purposes of a ‘functional qualification’, the harmony sought from Art. 2 in regards indemnification and damage prevention. An excellent example for this is Art. 44 EGBGB, where the claim for the protection against property damage is not subject to the lex rei sitae, but rather subordinate to Art. 40 I EGBGB (‘concurrent conflicts rules approach’).40 This is also the approach with Art. 4 and Art. 2 of Rome II. To summarize: Art. 1, 2, and 4 of Rome II seek to shape the material scope through an autonomous qualification that considers non-contractual obligations certain injunction claims, abatement claims and general damage claims. Proper guidance for this European qualification is the framework created through Art. 5(3) of the ‘Brussels I’ Regulation. On this basis today, simple fault, strict liability and preventative claims can all be classified under Art. 4. In cases of doubt, notably in case where claims are based on third country law, some sort of ‘comparative qualification’ must be used. Art. 1, 2, and 4 of Rome II are European norms whose primary foundation is existing European law. Thus, for interpretation purposes, other regulations which were established pursuant to Art. 61, 65 Treaty of Rome should be considered. Private law directives, for example the products liability directive, which has been the subject of commentary and case law, could also be helpful.41 If this pool of rules and terms is not 38 Keeping in mind that the classification of claims and suits can be predetermined under the ‘tort jurisdiction’ of Art. 5, Nr. 3 Brussels I Regulation. 39 Compare in the Art. 5 Nr. 3 Brussels I Regulation (‘or may occur’) the inserted additional formulation. For the inclusion of the negative actions (actio negatoria) KROPHOLLER J., Europäisches Zivilprozeßrecht, 8. Aufl., Heidelberg 2005, Art. 5 nos. 74, 76. 40 For more detail HOHLOCH G. (note 1), Art. 44 EGBGB (12th ed. 2008) nos. 1 et seq. 41 Compare the rules of the Art. 5 of Rome II to the European Union directive related to products liability (examples within HOHLOCH G. (note 1), [12nd ed. 2008] Art. 40 EGBGB no. 52; JUNKER A., in: Münchener Kommentar, BGB [4th ed. 2006] Art. 42 annex no. 40 et seq., 42).

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Basic Principles of Rome II sufficient to classify a ‘new’ claim under Art. 2 and 4 of Rome II, then one should not stick to the lex fori of the particular Member State in whose court or agency the case has been brought. The controlling law, or lex fori, for the purpose of characterization under Art. 2 and 4 of Rome II, is the law of all the Member States which make up the EU’s territorial area. Their laws must then be consulted – obviously within a comparative approach – if in a doubtful case the solution to the problem revolves around the applicability of Art. 4.

B.

Non-Application of Art. 4 in Regards to Certain Exceptions and Specific Delicts

1.

Specific Groups of Delicts Found in Art. 5-9 of Rome II

Art. 4 of the Rome II Regulation is, however, negatively limited by the special rules for specific torts found in Art. 5-9 of Rome II. Art. 5-9 do not include ‘special connecting factors’ (‘Sonderanknüpfungen’) which would regulate particular aspects of the tort additional to, or in derogation of, Art. 4. for specific tort groups falling within the scope of Art. 5-9.42 Rather the Regulation sets forth independent conflict of laws rules, which allow, basically without referral to Art. 4, for the implementation of the conflicts of law treatment of specific ‘delicts’ (or the ‘prevention of delicts’), to which, respectively, Art. 5, 6, 7 or 9 Rome II apply. As was previously set forth, the conflict of laws practice should proceed in such a manner so as to first examine the particular facts of the case in order to determine whether the delict falls under Art. 5 et seq. If that question is answered in the affirmative, then a return to Art. 4 is only required in as far as language within Art. 5 et seq. mandates such a return or when a segment of a particular provision uses the same language as Art. 4. Otherwise, the specific conflict of laws rules of Art. 5-9 of Rome II are ‘exclusively’ applicable, meaning that a conflict of laws solution for the respective tort is to be found according to Art. 5-9 of the Rome II, as well as the general and final provisions of Art. 13 et seq. As for the specific and detailed application of Art. 5-9, reference should be made to the additional articles in this volume which are dedicated to those provisions.

2.

Non-Application of Rome II in Regards the Exceptions Listed in Art. 1

The Rome II Regulation is meant to regulate the conflict of laws in regards to noncontractual liability. Non-contractual liability belongs in the European system to ‘civil and commercial matters,’ which, based on European understanding, does not include governmental liability for damages stemming from acta iure imperi, liability questions arising from revenue, customs or administrative law matters. Art. 1(1) of Rome II shows in this respect congruence with Art. 1 of Brussels I. Such congruence is desirable and should be continued in order to reach a true European 42

See for a misunderstanding WAGNER G. (note 3), 6.

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Gerhard Hohloch system of conflict of laws and international civil procedure. Breaches of an official duty (for example, § 839 BGB), which are of a private law nature, admittedly fall within the scope of application of Art. 1(1), as well as Art. 4 of the Rome II Regulation.43 Art. 4 is, just like the whole regulation, not applicable when the exceptions of Art. 1(2) apply. The catalogue, starting with letter (a) and continuing until letter (g), is based on Art. 1(2) of the Rome Convention on the Law Applicable to Contractual Obligations and applies predominantly to non-contractual obligations which belong to a specific area of law (outside of tort law) which has its own – up to this point not European – conflict of laws rules. Defining the scope of application of Art. 4 is actually once again a problem of qualification, which can be accomplished with a methodology based more or less on the same system mentioned above.44 Art. 1 (2) creates an exception for claims arising in the areas of matrimonial, family and inheritance law (letters (a) and (b)). This includes maintenance claims (even if according to substantial national law they are, under some circumstances, regarded as tort claims but still have a maintenance function45), community property claims, and legacy or forced portion claims. Paragraph 2, letters (a) and (b) are not, however, meant to exclude from the scope of Art 4 et seq. tort claims which are real tort claims, although they emerged ‘within the family’ or within the community of heirs. Such claims are still to be qualified as tort claims and consequently, in regard to conflict of laws, dealt with by means of Art. 4 or 5 et seq. Their ‘embedding’ in a ‘inner family context’ may for example lead to the application of Art. 4(3) of Rome II and, for example, result in an application of a connecting factor relating to the effects of marriage. Qualification as a tort is nevertheless appropriate.46 The same applies to claims arising from negotiable instruments (paragraph 2, letter (c)), and (mostly) internal disputes regarding trusts and corporations. Delicts in the areas of securities administration, trust administration or liability of organs or bodies of legal persons or other associations can be still qualified as torts to which Art. 4 or 5 et seq. can apply. This result may be reached only after carefully examining that the facts of the case do not require application of a controlling securities, trust or corporate law.47 43 This is similar to how such cases apply under Brussels I; see decisions of the ECJ reached under art. 5 Nr. 3 of Brussels I concerning breach of official duty, ECJ 21.4.1993 (‘Sunday’), in: CJR 1993 I, 1963; in: IPRax 1994, 37; additionally the decision in BGHZ 123, 268, in: IPRax 1994, 118. 44 See above, III. A. 45 On the differentiation, see an overview by HOCHLOH G. (note 1), 12th ed. 2008, Art. 18 EGBGB no. 26 (for example on French and Turkish law provisions). 46 Not different as for example Art. 41 EGBGB in current German PIL, however not before carefully examining if sufficient ‘accessoriness’ exists, above II. D, as also N. 33. 47 A problem of significant importance is the question of liability arising with regard to a foreign incorporated but domestically domiciled juridical person; this fully practical question, arising due the liberal case law of the ECJ with regard to international company

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Basic Principles of Rome II Art. 4 is further not applicable in cases where the personality rights exception is applicable. Here it is about genuine tort law and the prevention of torts. Rome II’s lack of applicability in this area is simply due to the drafters and legislators could not find a common solution. Until a subsequent solution for the Regulation, or new national regulation, is introduced, the current law of the Member States remains.48 Courts can, however, use Rome II’s Art. 4 et seq. as a fruitful source with regards to their jurisprudence

3.

Priority of special conflicts rules

Finally, the scope of application of Art. 4 is limited by the priority of EU Law and paramount international conventions (Rome II Regulation, Art. 27-28). Examples can be found in the ‘Herkunftslandsprinzip’ (‘country of origin principle’) of the Ecommerce directive and in particular, with regard to Switzerland’s relations to the single EU Member States, the Hague Convention on the Law Applicable to Traffic Accidents. The Hague Convention takes precedence to the extent that it is applicable.

C.

Art. 4’s Range of Applicability

Some short remaining comments concern the substantial scope of application of Art. 4 of Rome II. Rome II does not bring about a revolution in the area of international tort law of the EU Member States. Noteworthy changes are evidenced through the general exclusion of renvoi (Art. 24) and the possible taking into account of special ‘connecting factors’ for ‘local data’ (Art. 17), which are already well-known in most legal systems of the Member States.49 Art. 15 provides, in a continental style, for the general applicability of the controlling law to all issues in tort (i.e. refusal of the issue-by-issue approach), yet due to lack of regulatory provisions allows for further general application of independent connecting factors for law, should be decided as follows: tort liability which qualifies as tort liability should be governed by the tort law, which inasmuch is concurrently applicable along with liability rules applicable according to the (foreign) controlling law of the corporation. Details in HOHLOCH G. (note 1), Art 37 EGBGB (12th ed. 2008) Appendix II nos. 44, 45 (at the end). 48 The legal status, as well as its development, is unsettled. In EU Member State Germany a group of experts for the German Government (Deutscher Rat für IPR = German Council of PIL), to which the author belongs, is discussing the creation of an ‘accompanying act’ according to which the provisions of Art. 38 – 42 EGBGB would be aligned to the provisions of the Rome II Regulation, so as to achieve a harmonization of connecting factors. Results are not yet available; see HOHLOCH G (note 1), Einl. art. 38 EGBG (12th ed. 2008) no 8. On the wider German legal position on personal rights, see an overview by i.c. Art. 40 EGBGB no. 53. 49 For the established German legal practice compare remarks by HOHLOCH G. (note 1), Art. 40 EGBGB (12th ed. 2008) no. 43.

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Gerhard Hohloch preliminary questions. The regulation’s own public policy clause will displace such ‘plafond’ provisions as Art. 40(3) EGBGB, but will have to deal carefully with such unloved institutions as American ‘punitive damages’ (Art. 26).50

D.

Territorial Applicability

Art. 4 is not, like the whole regulation, applicable in Denmark. It is, however, applicable in all other EU Member States, even when the place of injury lies in Denmark. In such cases a German court is to apply Art. 4 and not Art. 40 I EGBGB. Only Danish courts are not bound by Art. 4 et seq. Art. 4 has after all, according to Art. 3, ‘universal applicability’. This leads to the substantial practical importance of Rome II for Switzerland as a third country.51

For details see HOHLOCH G. (note 1), Art. 40 EGBGB (12th ed. 2008), nos. 76-77a. 51 See also above at I. C. 50

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PARTY AUTONOMY AND ITS LIMITATIONS IN THE ROME II REGULATION Th.M. de BOER∗

I. II. III.

V. VI.

Choice-of-Law Principles Party Autonomy as Defined in the Rome II Regulation Article 6: No Freedom of Choice in Cases Relating to Unfair Competition or Restriction of Trade Article 8: No Freedom of Choice in Cases Relating to Infringement of Intellectual Property Rights Freedom of Choice before or after the Event Conclusion

I.

Choice-of-Law Principles

IV.

Party autonomy is one of the leading principles of contemporary choice of law. Long gone are the days when conflicts scholars still argued that the applicable law could not be displaced by party agreement, as private individuals, by their own volition, cannot rise above the applicable law.1 Not until the 1960’s did it dawn on them that this levitation trick might be supported by the adoption of a conflicts rule allowing the parties to choose the applicable law.2 Since then, party autonomy has gradually gained ground in national and international conflicts legislation, and its scope has been extended from contracts to torts, succession,3 matrimonial prop∗

Professor of private international law and comparative law at the University of Amsterdam. The text of this article was concluded in December 2007. 1 In this vein, e.g.: NIBOYET J.P., ‘La théorie de l’autonomie de la volonté’, Recueil des Cours de l'Académie de Droit International de la Haye, 16 (1927-I), The Hague, p. 53 et seq.; CALEB M., Essai sur le principe de l’autonomie de la volonté en droit international privé, Paris 1927, p. 167 et seq; HIJMANS I. H., Algemeene Problemen van Internationaal Privaatrecht, Zwolle 1937, p. 169 et seq; SCHOLTEN P., C. Asser’s Handleiding tot de beoefening van het Nederlandsch Burgerlijk Recht, Algemeen Deel, Zwolle 1954, p. 211. 2 VISCHER F., Internationales Vertragsrecht, Die kollisonsrechtlichen Regeln der Anknüpfung bei internationalen Verträgen, Verlag Stämpfli & Cie, Bern, 1962, p. 23, citing NIEDERER W., Einführung in die allgemeinen Lehren des internationalen Privatrechts, Zürich 1954, p. 193, and a decision of the Swiss Bundesgericht, BGE 79 II 299. 3 Cf. Article 5 Hague Convention of 1 August 1989 on the Law Applicable to Succession to the Estates of Deceased Persons; Articles 90(2) and 91(2) Swiss Bundesgesetz über das Internationale Privatrecht (IPRG); Article 79 Belgian Wetboek van Internationaal Privaatrecht. Yearbook of Private International Law, Volume 9 (2007), pp. 19-29 © sellier. european law publishers & Swiss Institute of Comparative Law

Printed in Germany

Th.M. de Boer erty,4 and, in some jurisdictions, even divorce and maintenance.5 Given the acceptance of party autonomy in such a wide range of choice-of-law categories, one is bound to assume that it is supported by a common denominator. It has been argued that the parties’ freedom of choice is justified by the need for legal certainty and predictability,6 by a ‘subjective theory of the proper law,’7 or ‘for want of a better solution’.8 That does not explain, however, why there are areas of conflicts law in which the parties’ freedom of choice is either limited or non-existent, while there are other areas in which the need for predictable solutions is met by clear-cut uniform conflicts rules. To me, therefore, freedom of choice in conflicts law can only be explained by linking it to freedom of disposition in substantive law. Where party autonomy is given free reign in the forum’s domestic law, its national conflicts law is likely to allow a choice of law by the parties. Conversely, freedom of choice is likely to be denied in areas in which the corresponding substantive law is meant to protect third parties or public interests and therefore is couched in mandatory language. That is why the law governing marriage, parentage, adoption, parental responsibility, or rights in rem can generally not be chosen by the parties. On the other hand, where a dispute does not concern anyone but the litigants – which usually implies that they are free to resort to alternative means of dispute resolution – there is no reason to curb their freedom to choose the applicable law. That is why party autonomy is now generally accepted as a leading principle in contracts choice of law. As a tenet of the choice-of-law method adopted in most legal systems in the world today, party autonomy is an anomaly. At any rate, a method that is supposed 4 Cf. Articles 3 and 6 Hague Convention of 14 March 1978 on the Law Applicable to Matrimonial Property Regimes; Article 52 Swiss IPRG; Article 15 German Einführungsgesetz zum Bürgerlichen Gesetzbuche (EGBGB); Article 49 Belgian Wetboek van Internationaal Privaatrecht. 5 A limited freedom of choice already exists in several EC Member States and is also endorsed in the various drafts of the so-called ‘Rome III Regulation’ (more properly: the ‘Brussels II-ter Regulation’) and in the drafts of a Regulation on international maintenance obligations. 6 This used to be a popular proposition in the 1960’s and 1970’s. Surprisingly, it is still the main argument supporting party autonomy in the Rome II Regulation; see infra under II. 7 MANN F.A., ‘The Proper Law of a Contract’, in: ICLQ 3 (1950), p. 60 et seq.: ‘subjective theory of the proper law: that legal system which, by their express or implied intention, the parties intended to apply’. Contra: MORRIS J.H.C., ‘The Proper Law of a Contract: A Reply’, in: ICLQ 3 (1950), p. 197 et seq., at p. 207: ‘the subjective theory of the proper law is no more than a fiction ...’. 8 In a rather pedantic article – my first attempt at academic writing – I took the view that, in a choice-of-law method which is geared to the designation of the law most closely connected, party autonomy is an anomaly to be tolerated only – for want of a better solution – if objective choice-of-law rules prove to be inconclusive: DE BOER TH.M., ‘Subjectieve verwijzing: anomalie of grondbeginsel?’, in: JESSURUN D’OLIVEIRA H.U. (et.al.), Partijinvloed in het internationaal privaatrecht, Deventer 1974, p. 47-72, at p. 68. My contribution to this collection of essays is best forgotten.

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Party Autonomy and its Limitations in the Rome II Regulation to designate the law of the country with which the legal relationship at issue is most closely connected should not leave room for the parties to choose a law that does not qualify as such. Yet, we have come to accept that the closest connection is not the only criterion by which the applicable law may be selected. Apart from conflicts rules based on the principle of the closest connection and the principle of party autonomy, there are at least two different kinds of rules that are not meant to determine the ‘center of gravity’ or the geographical ‘seat’ of the legal relationship. Instead, they give expression to a social policy underlying the forum’s substantive law, which is either translated into a connecting factor that focuses on the party in need of protection, or into a number of alternative references, with a preference for the one by which a specific goal can be achieved.9 Choice-of-law rules focusing on consumers, employees, children, maintenance creditors, etc. could be said to reflect the function of the corresponding substantive law, which is protection of the weaker party. They are based, therefore, on a choice-of-law principle that is known as the ‘principle of functional allocation,’ or the ‘protection principle’.10 Alternative reference rules are based on the so-called ‘favor principle,’ as they allow a choice of the one law among several alternatives that achieves a favored result, such as the formal validity of a legal transaction,11 the legitimation of a child born out of wedlock,12 or the obligation to pay maintenance.13

9 A more extensive treatment of the principles underlying choice of law can be found in my dissertation, Beyond Lex Loci Delicti, Conflicts Methodology and Multistate Torts in American Case Law, Deventer/New York 1987, p. 42 et seq., and in my Hague lectures, ‘Facultative Choice of Law, The Procedural Status of Choice-of-Law Rules and Foreign Law’, Rec. cours 257 (1996), The Hague, p. 277 et seq. 10 It should be noted that protection is only afforded at the choice-of-law level. A rule referring to the law of the consumer’s habitual residence (cf. Article 5(3) Rome Convention 1980) may leave the consumer empty-handed at the level of substantive law. Conflicts rules that are based on the principle of functional allocation do achieve equal treatment of the weaker party, regardless of whether they have entered into a domestic or international legal relationship. 11 Article 1 Hague Convention of 5 October 1961 on the Conflicts of Law Relating to the Form of Testamentary Disposition; Article 9(1) Rome Convention of 1980 on the Law Applicable to Contractual Obligations. 12 Article 4 Dutch International Parentage Act (Wet conflictenrecht afstamming); Articles 72-74 Swiss IPRG; Articles 20-21 German EGBGB. 13 Articles 5 and 6 Hague Convention of 2 October 1973 on the Law Applicable to Maintenance Obligations.

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II.

Party Autonomy as Defined in the Rome II Regulation

According to the preamble of the Rome II Regulation, a rule allowing the parties to choose the law applicable to a non-contractual obligation is based on two objectives: ‘to respect the principle of party autonomy and to enhance legal certainty’. This rationale is not very convincing, as it does not answer the questions of why party autonomy should be respected, or why a choice by the parties would lead to greater certainty than the one to be achieved by the Regulation’s uniform conflicts rules. At any rate, the preamble does not explain why the parties should be allowed to choose the law of a country that is not in any way connected with the non-contractual obligation at issue. Such freedom of choice can only be understood if it is viewed as a transposition of the parties’ power to dispose of their rights under substantive law to the level of conflicts law. It would seem that the main provision on party autonomy in Rome II, Article 14 in its final version, has not given rise to much debate, as all the elements of the Commission’s original proposal have remained basically intact. The parties’ freedom to choose the applicable law is still subject to a number of restrictions: (1) the choice-of-law agreement must be entered into after the event giving rise to the damage occurred; (2) the choice must be express, or demonstrated with reasonable certainty by the circumstances of the case; (3) it may not affect the rights of third parties; (4) in domestic cases, a choice of foreign law cannot displace the mandatory provisions of the law that would apply without the choice; (5) in intra-community cases, the choice of the law of a non-member state cannot displace mandatory provisions of Community law; (6) the choice of a foreign law cannot displace overriding mandatory rules of the forum, and (8) a choice-of-law agreement does not affect the law applicable to non-contractual obligations arising from an infringement of intellectual property rights, as designated by Article 8. In the final text of the Regulation, a similar restriction has been included with respect to unfair competition and restrictive trade practices, both covered by Article 6. Another novelty is the exception to the first restriction if all parties concerned are engaged in commerce. For the rest, Article 14 is essentially the same as Article 10 in the Commission’s first proposal.14

14 There are some minor differences in wording (‘shall’ instead of ‘must’, ‘where’ instead of ‘if’, etc.), as well as some legal differences. In the Commission’s proposal, the agreement would only be valid if the parties entered into it ‘after their dispute arose.’ Article 14 now provides: ‘after the event giving rise to the damage occurred.’ The time factor in Article 10(2) and 10(3) – all elements located in one state or in one or more Member States – has been changed from ‘at the time when the loss was sustained’ into ‘when the event giving rise to the damage occurs.’

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Party Autonomy and its Limitations in the Rome II Regulation The restrictions on the parties’ freedom of choice in domestic15 and intracommunity cases16 can also be found in the Rome I Regulation.17 The same can be said about the priority of the forum’s overriding mandatory provisions,18 the criteria for a valid choice,19 and the rights of third parties.20 That leaves us with three limitations that are specific to Rome II and, therefore, deserve separate treatment. I will first deal with the bar on party autonomy in the fields of unfair competition (III) and intellectual property (IV), and then with the requirement that a choice-oflaw agreement between private parties can only be made post factum (V). As I am fully aware of the fact that in the area of non-contractual obligations parties seldom exercise their freedom of choice, the following remarks are primarily meant to stir up academic debate, not to illuminate the limits of Article 14 in actual practice.

15 Article 14(2) referring to situations in which a choice of foreign law is the only foreign element. The occurrence, the resulting loss, the habitual residence of the parties, etc. are all located in one and the same country, but not the country whose law was chosen. 16 Article 14(3), now referring to ‘elements ... located in one or more Member States.’ In the Commission’s first proposal, Article 10(3) referred to ‘elements ... located in one of the Member States.’ Strictly speaking, this phrasing would make Article 10(3) redundant next to Article 10(2), while it would not have the effect of turning the EU Member States into one ‘territoire juridique.’ 17 In the Rome Convention of 1980, there was a restriction on party autonomy only in domestic cases: Article 3(3). At the time of this writing (December 2007), a political agreement was reached on the text of the Rome I Regulation. Article 3(3) and Article 3(4) now address the same issues as those covered by Article 14(2) and 14(3) Rome II. 18 Article 16 Rome II, only referring to overriding mandatory provisions of the law of the forum; cf. Article 9(2) Rome I. There is no reference to overriding mandatory provisions of the law of other countries – cf. Article 9(3) Rome I, however limited in scope – probably because it is difficult to imagine what interests other countries could have, in the field of non-contractual obligations, in the application of their law. Even if the parties have chosen a different law, under Article 17 rules of safety and conduct in force in the country where the harmful event occurred must be taken into account anyhow. 19 Under Rome II, ‘the choice shall be expressed or demonstrated with reasonable certainty by the circumstances of the case.’ Article 3(1) Rome I is phrased differently: ‘The choice shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case.’ Hopefully, both provisions have the same meaning. Curiously, the issue of whether the parties actually reached a choice-of-law agreement is not subjected – as in Rome I – to the law that would apply if the agreement were valid, but should be resolved by ‘respect[ing] the intentions of the parties’ (preamble, recital 31). 20 In Rome I, Article 3(2) only refers to a change in the law chosen by the parties: such a change ‘shall not .... adversely affect the rights of third parties.’ In Rome II, there is no provision on the possibility of changing the chosen law: ‘The choice shall not prejudice the rights of third parties.’ I assume that Rome I does not allow the rights of third parties to be prejudiced by any choice-of-law agreement, and that under Rome II the parties are free to change their choice-of-law agreement, without prejudice to the rights of third parties, of course.

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III. Article 6: No Freedom of Choice in Cases Relating to Unfair Competition or Restriction of Trade Under Article 6, non-contractual obligations arising out of an act of unfair competition are subject to the law of the country where competitive relations or the collective interests of consumers are (or are likely to be) affected. If the damage results from a restriction of competition, the law to be applied is the law of the country where the market is (or is likely to be) affected. In either situation, the applicable law cannot be displaced by a choice-of-law agreement: Article 6(4). This restriction is explained, more or less, in recital 21, where it says that ‘the conflict-of-law rule should protect competitors, consumers and the general public and ensure that the market economy functions properly.’ Read in conjunction with the reference to ‘competitive relations and collective interests of consumers’ in Article 6(1), this statement suggests that unfair competition and restrictive trade practices affect public rather than private interests. Or, to put it differently, in the area of unfair competition and restrictive trade practices, interests of a higher order than those of individual competitors are at stake. On the level of substantive law, those interests are generally protected by mandatory provisions,21 which may range from standards of conduct to rules on the determination of the burden of proof, or on the nature and measure of damages, etc. As explained under I, the less room there is for party agreement on this level the less freedom the parties should be allowed on the choice-of-law level. In this respect, the ban on choice-of-law agreements in Article 6(4) is quite justified. Unfortunately, there are several provisions in Rome II that are difficult to square with this line of reasoning. If the parties’ freedom of choice corresponds with their freedom of disposition under substantive law, it is hard to see why the drafters of Rome II have chosen to prohibit choice-of-law agreements in all unfair competition cases, even those in which the defendant’s conduct does not affect collective interests – the situation covered by Article 6(2) – while the parties’ freedom of choice is not curbed in any way by Article 7, the provision on environmental damage, or Article 9 covering industrial actions. ‘Where an act of unfair competition affects exclusively the interests of a specific competitor,’ Article 6(2) calls for the application of the general conflict-of-law rules laid down in Article 4. Yet, a choice-of-law agreement is still blocked by Article 6(4). If the law of the market may be displaced in this situation by the law of the parties’ common habitual residence or the law of another more closely connected country, it is hard to Laws that are meant to protect trade and commerce from restraints, monopolies, price-fixing, price discrimination, etc. (antitrust laws) qualify as ‘overriding mandatory rules’ within the meaning of Article 9(1) of the latest draft of the Rome I Regulation, as they are crucial to the ‘political, social, or economic organisation’ of the country in which they are in force. However, Rome II only gives precedence to overriding mandatory provisions of the forum state (Article 16). If choice-of-law agreements were allowed under Article 6, the parties could evade the rules of foreign competition law, whether or not they would qualify as overriding mandatory provisions. 21

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Party Autonomy and its Limitations in the Rome II Regulation see why it cannot be displaced by the law designated by the parties in accordance with Article 14.22 In my view, this is a mistake that should be corrected in the next version of Rome II. On that occasion, the relation between party autonomy and environmental law should be reconsidered as well. Article 7, the provision on the law applicable to environmental damage, calls for the application of the law of the place of injury, or – at the victim’s option – the (probably more favorable) law of the place of conduct. Since protection of the environment would seem to be no less a public interest of the state concerned than protection against unfair competition or restrictive trade practices, I fail to see why Article 7 does not also contain a restriction on a choice by both parties similar to the one laid down in Article 6(4). The same could be said with regard to the provision covering industrial actions: Article 9 refers to the lex loci delicti, subject to the common habitual residence exception of Article 4(2), but it does not rule out choice-of-law agreements. Still, it would seem that industrial actions affect social and economic interests of a higher order than those of the parties concerned, justifying a restriction on party autonomy similar to the one included in Article 6(4).

IV. Article 8: No Freedom of Choice in Cases Relating to Infringement of Intellectual Property Rights It is generally assumed that the territorial nature of intellectual property rights does not support application of any other law but the law of the country for which protection is claimed (lex loci protectionis).23 Hence, the Rome II Regulation neither leaves room for the law of the parties’ common habitual residence, nor provides for a proper law exception. Choice-of-law agreements are expressly prohibited in Article 8(3). The exclusive reign of lex loci protectionis is justified in recital 23 by 22 Cf. KREUZER K., ‘Tort Liability in General’, in: MALATESTA A. (ed.), The Unification of Choice of Law Rules on Torts and Other Non Contractual Obligations in Europe, The ‘Rome II’ Proposal, Padova 2006, p. 45-58, at p. 55: ‘Where an act of unfair competition exclusively affects the interests of an individual competitor, there is no reason why the parties should not be allowed to select, by agreement, the law applicable to their relations.’ 23 Cf. VAN EECHOUD M.M., Choice of Law in Copyright and Related Rights, Alternatives to the Lex Protectionis, The Hague/London/New York, 2003, p. 95 (with numerous citations in footnote 263): ‘There is however quite widespread agreement that the general conflict rule for copyright (and other intellectual property) is the one referring to the law of the country for which protection is claimed (Schutzland principle; lex protectionis). Some infer this conflict rule from the territorial nature of copyright. Others derive it from the national treatment principle as enshrined in the Berne Convention and other treaties, or see the lex protectionis expressed directly in Article 5(2) BC and similar clauses.’ See also: FAWCETT J. J. & TORREMANS P., Intellectual Property and Private International Law, Oxford 1998, p. 462 et seq.

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Th.M. de Boer the invocation of a ‘universally acknowledged principle’ that ‘should be preserved’. A more compelling explanation is given by Kreuzer: ‘The exclusion of an agreement on the law applicable to infringements of intellectual property rights is due to the fact that in these cases the rights are existing only on a territorial basis so that the parties possibly could select a legal system under which no intellectual property right may exist.’24 However, if infringements of intellectual property rights are compared to other ways of causing damage to another’s property, it can hardly be maintained that the law governing the tort should also be applicable to incidental questions such as the existence or extent of property rights. Those issues belong to a different choice-of-law category and should be treated accordingly. A similar approach could be taken with regard to intellectual property rights. I agree with Kreuzer that the existence and extent of such rights should be measured against the lex loci protectionis. The question of whether a particular act constitutes an infringement – in other words, the unlawfulness issue – cannot be separated from questions pertaining to the existence, scope, and duration of the intellectual property right at issue.25 I see no reason, however, why other issues – such as: who can be held liable, the limitation or division of liability, or the nature and measure of damages – could not be subjected to a different law. In the Swiss statute on private international law, Article 110(2) does allow the parties to choose Swiss law with regard to ‘claims resulting from an infringement of intellectual property rights,’ a phrase which is meant to exclude the unlawfulness issue from the scope of choice-of-law agreements.26 While I would not limit the parties’ options to a choice of lex fori, there is much to be said for an approach in which the legal consequences of infringement could be subjected either to the law of the country with which they are most closely connected (lex domicilii communis, proper law, or accessory choice of law), rather than the lex loci protectionis, or to the law chosen by the parties.

KREUZER K. (note 22), p. 55/56. Cf. VAN EECHOUD M.M. (note 23), p. 206 et seq., p. 229; id., Overleefde teritorialiteit: grensoverschrijdende auteursrechtinbreuken onder de ‘Rome II’-ontwerpverordening, AMI/Informatierecht 2005, p. 45-56. 26 VISCHER F., in: HEINI A. ET AL. (eds.), IPRG Kommentar, Kommentar zum Bundesgesetz über das Internationale Privatrrecht (IPRG) vom 1. Januar 1989, Zürich, 1993, p. 865: ‘Nach dem Wortlaut von Art. 110 Abs. 2 ist die Rechtswahl nur für Ansprüche aus der Verletzung, nicht für die Frage der Verletzung selbst, zugelassen.’ The German text of Article 110(2) refers to ‘Ansprüche aus Verletzung von Immaterialgüterrechten’, the French text to ‘les prétentions consécutives à un acte illicite’, the Italian text to ‘pretese derivanti dalla violazione di diritti immateriali’, all of them suggesting that unlawfulness as such is a separate issue. 24 25

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Party Autonomy and its Limitations in the Rome II Regulation

V.

Freedom of Choice before or after the Event

The last restriction on party autonomy I should like to discuss is the one laid down in Article 14(1), requiring that choice-of-law agreements between non-professional parties are entered into after the event giving rise to the damage occurred. Similar restrictions can be found in, e.g., the German, Belgian, and Swiss statutes on private international law.27 It would seem that they all rest on the same rationale, which is: preventing abuse of choice-of-law agreements where the parties do not have equal bargaining power.28 Whether or not such fear of abuse is justified, it should be borne in mind that most choice-of-law agreements covering an anticipated tort are made in connection with a contractual relationship between the parties. They – or at least one of them – want to make sure that the law of their choice will be applied to any dispute that may arise as a result of their relationship, regardless of whether the action sounds in contract or in tort. Even if their agreement would be invalid under Article 14(1), an action sounding in tort would still be governed by the law of their choice, as there is likely to be a close connection between their contractual relationship and the tort at issue,29 the situation expressly mentioned in Article 4(3). In other words, even if a choice-of-law agreement would be invalid because it was entered into before the event giving rise to the damage occurred, it would be replaced by an accessory choice of the (chosen) lex contractus.30 The remaining cases – those in which the parties have entered into an agreement on the law applicable to a future tort while they are not bound by a pre-existing relationship – will be so rare that they hardly warrant the elaborate distinction between anterior and posterior agreements formulated in Article 14(1)(a) and (b). Still, this concern for the plight of the weaker party reveals another flaw in the methodological underpinnings of the regulation. If an imbalance in the parties’ 27 Germany: Article 42 EGBGB; Belgium: Article 101 Wetboek van Internationaal Privaatrecht; Switzerland: Article 132 IPRG. In the Netherlands, on the other hand, the parties are free to choose the applicable law both before and after the tortious event: Article 6 Wet conflictenrecht onrechtmatige daad. 28 Cf. the reason given in the Swiss Message concernant une loi fédérale sur le droit international privé (loi de DIP) du 10 novembre 1982/Botschaft des Bundesrats zum Bundesgesetz über das Internationale Privatrecht (IPR-Gesetz) vom 10. November 1982, BBl. 1983 I p. 263-519, at no. 284.222: ‘Dans le droit délictuel international, on a affaire de plus en plus à des parties qui ne bénéficient pas d’une capacité de négocier égale. Adopter une réglementation trop libérale reviendrait à exposer la partie la plus faible au danger d’être exploitée.’ 29 Cf. KROPHOLLER J., Internationales Privatrecht einschließlich der Grundbegriffe des Internationalen Zivilverfahrensrechts, 6. Aufl., Tübingen 2006, 53 IV 5 at p. 531/532; SIEHR K., Internationales Privatrecht, Deutsches und europäisches Kollisionsrecht für Studium und Praxis, Heidelberg 2001, p. 241. 30 With regard to their contractual relationship, the parties’ freedom of choice could be restricted as well. The protection of the weaker party then no longer depends on Article 14(1) Rome II, but on, e.g., Article 6(2) or Article 8(1) Rome I in its version of 29 November 2007 (Article 5(2) and Article 6(1) of the Rome Convention of 1980).

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Th.M. de Boer bargaining power should be remedied by a provision like Article 14(1) – which would seem to be based on the same rationale as the one underlying the validity of forum selection clauses in insurance contracts, consumer contracts, and contracts of employment under the Brussels I Regulation31 – it is hard to see why ‘non-commercial parties’ should not be given the opportunity to rely on an anterior choiceof-law agreement if that would benefit their case, just like the Brussels I Regulation allows the weaker party to rely on an anterior choice-of-forum agreement. On a more fundamental level, it could be asked whether the desire to protect the weaker party, as expressed in Article 14(1), should not be mirrored in the rules that apply in the absence of a choice-of-law agreement, notably the main rule of Article 4. In an Explanatory Memorandum accompanying the Commission’s original proposal, the lex loci damni rule is said to reflect ‘the modern concept of the law of civil liability, which is no longer ... oriented towards punishing for faultbased conduct: nowadays, it is the compensation function that dominates.’32 This view is upheld in recital 16 of the preamble: ‘A connection with the country where the direct damage occurred strikes a fair balance between the interests of the person claimed to be liable and the person sustaining the damage, and also reflects the modern approach to civil liability and the development of systems of strict liability.’ These statements suggest that Article 4(1) is based on the principle of functional allocation, translating the compensatory function of modern tort law into a connecting factor that is focused on the tort victim as the party to be protected. This suggestion is reinforced by the assumption that the place of injury coincides with the victim’s habitual residence ‘in most cases.’33 Yet, it can hardly be maintained that the lex loci damni rule reflects the compensatory function of modern tort law. Statistically, I would say, the place of injury might as well coincide with the tortfeasor’s place of residence, if there is any coincidence at all. A functional approach would assure that victims are afforded compensation in accordance with their own law, possibly subject to a foreseeability exception.34 In my view, the lex loci damni rule is based on the principle of the closest connection, reflecting no other choice-of-law objective than the achievement of predictable and uniform results. There is a methodological discrepancy, therefore, between provisions in Rome II that are meant to further substantive policies – such as the protection of public interests in Article 6, or the protection of the weaker party in Article 14(1) – and those that remain totally blind to the result Articles 13(1), 17(1), and 21(1), respectively, all of them referring to choice-of-forum agreements entered into after the dispute arose. 32 Explanatory Memorandum, COM(2003) 427 final, at p. 12. 33 Ibid., at p. 11: ‘In most cases [the lex loci damni] corresponds to the law of the injured party’s country of residence.’ 34 Cf. the provision on product liability, allowing for an exception if the person claimed to be liable could not foresee that his product would be marketed in one of the countries listed in Article 5(1). In its original version, Article 5 only referred to the law of the victim’s habitual residence, a clear example of functional allocation. The current version is based on a ‘cascade system of connecting factors, together with a foreseeability clause’ (recital 20). 31

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Party Autonomy and its Limitations in the Rome II Regulation they achieve, despite the token remarks on the function of modern tort law in the Explanatory Memorandum and the preamble.

VI. Conclusion The practical import of a provision on choice-of-law agreements in the area of noncontractual obligations is undoubtedly limited. Where disputes arise between parties that are not bound by a pre-existing relationship, they have little cause to agree on a law that could put one of them at a disadvantage. Still, the Rome II Regulation would be incomplete without a provision on party autonomy and its limitations. Article 14 allows the parties to choose any law they want – not necessarily the lex fori or the law of one of the countries with which the case is in some way connected. Unless both parties are engaged in commercial activities, a valid agreement can only be made after the event giving rise to the damage occurred, a restriction meant to protect the interests of the weaker party. Collective interests are deemed to be affected by infringements of national or Community competition law, hence the ban on choice-of-law agreements in Article 6(4). A similar prohibition can be found in Article 8(3). The latter restriction does not seem to be warranted by a concern for public interests but – more likely – by an outdated choice-of-law approach to disputes over the infringement of intellectual property rights. Studying the various drafts and the final version of the Rome II Regulation, one can hardly escape the impression that it has come to be based on rather disparate choice-of-law considerations, ranging from the need for uniformity, predictability, and legal certainty to ‘the function of modern tort law, the protection of ‘public interests,’ and a concern for ‘weaker parties’. But even if methodological eclecticism is a characteristic of contemporary choice of law, consistency is required in assessing the choice-of-law objective to be achieved in a particular area, and in choosing the choice-of-law technique best suited to achieve it. Thus, if collective interests call for a ban on choice-of-law agreements, party autonomy should be ruled out in all areas in which such interests are at stake. If the exclusion of ex ante agreements is deemed to be justified by the interests of the weaker party, an exception should be made for cases in which the weaker party wants to rely on such an agreement. And, generally, if the main rule in Rome II is said to be supported by ‘the compensatory function of modern tort law’, it should not ‘strike a fair balance between the interests of the person claimed to be liable and the person sustaining damage,’ as it says in recital 16; rather, it should focus on the person to be compensated. To me, these inconsistencies are illustrative of a general lack of awareness of the bedrock of modern European conflicts law among those involved in drafting EU conflict-of-law instruments. Ever optimistic, I trust that their understanding of choice-of-law methodology will have improved before the Rome II Regulation is up for revision.

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INTERNATIONAL PRODUCT LIABILITY A COMMENTARY ON ARTICLE 5 OF THE ROME II REGULATION Peter HUBER* / Martin ILLMER** I.

II.

III.

IV. V. VI.

Legislative History A. (Re-)Entering the Stage of the European Community B. The First Draft of the Commission C. The Initial Proposal by the Commission D. The Position of the European Parliament E. The Amended Proposal by the Commission F. The Common Position of the European Council G. The Final Round General Outline A. Scope 1. Strict and Fault-Based Liability 2. Definition of Product 3. The Injured Person 4. Person Claimed to Be Liable B. The General System of Determining the Applicable Law The Cascade System of Art. 5(1) A. The Cascade Connections 1. Habitual Residence 2. Place of Acquisition 3. Place Where Damaged 4. The Marketing Requirement a) Purpose b) Person Marketing the Product c) Product or Product of the Same Type? d) Lack of Marketing B. The Foreseeability Qualification Common Habitual Residence, Art. 4(2) Escape Clause, Art. 5(2) Interrelation with the 1973 Hague Convention

On 11 July 2007, the European Parliament and the Council of the European Union adopted Regulation (EC) No 864/2007 on the law applicable to non-contractual obligations (Rome II).1 It will become effective on 11 January 2009 and marks a ∗

Professor, Johannes-Gutenberg-University Mainz, Germany. Senior Research Fellow, Max-Planck-Institute, Hamburg, Germany.

**

Yearbook of Private International Law, Volume 9 (2007), pp. 31-47 © sellier. european law publishers & Swiss Institute of Comparative Law

Printed in Germany

Peter Huber / Martin Illmer cornerstone in the process of harmonising private international law in the Member States of the European Union.2 During the legislative process leading to Rome II, the conflicts rule on product liability has been the subject of intense controversy and debate. The rule finally adopted in Art. 5 is a compromise based on a common position adopted by the Council on 25 September 2006.3 It reads: Article 5 Product Liability 1. Without prejudice to Article 4(2), the law applicable to a noncontractual obligation arising out of damage caused by a product shall be: (a) the law of the country in which the person sustaining the damage had his or her habitual residence when the damage occurred, if the product was marketed in that country; or, failing that, (b) the law of the country in which the product was acquired, if the product was marketed in that country; or, failing that, (c) the law of the country in which the damage occurred, if the product was marketed in that country. However, the law applicable shall be the law of the country in which the person claimed to be liable is habitually resident if he or she could not reasonably foresee the marketing of the product, or a product of the same type, in the country the law of which is applicable under (a), (b) or (c). 2. Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraph 1, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question. OJ L 199, 31.7.2007, at p. 40. Apart from Denmark, to which Title IV of the EC Treaty which is the legal basis for the Rome II Regulation does not apply according to the Protocol on the Position of Denmark to the Treaty of Amsterdam. 3 Common Position (EC) No 22/2006 adopted by the Council on 25 September 2006 with a view to adopting Regulation (EC) No .../... of the European Parliament and of the Council of ... on the law applicable to non-contractual obligations (Rome II), OJ C 289E, 28.11.2006, at p. 68. 1 2

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International Product Liability under Rome II The present article will discuss the legislative history of the provision (I) and give a short general outline (II), before turning to the most important rules (III-V). It will conclude with some short remarks on the provision’s relationship to the 1973 Hague Product Liability Convention (VI).

I.

Legislative History

A.

(Re-)Entering the Stage of the European Community

After a failed attempt in the 1970s to include rules on the private international law of tort and delict into the 1980 Rome Convention, the issue re-entered the stage of the European Community in the late 1990s. The crucial impetus was the Treaty of Amsterdam entering into force on 1 May 1999.4 It empowered the European Community under Art. 65 lit. b to legislate, inter alia, in the field of conflict of laws by way of Regulation, in order to promote uniformity of the rules throughout the Member States. In the light of the forthcoming amendments to the EC Treaty, the unification of the law applicable to non-contractual obligations was already put on the agenda in late 1996, followed by a first draft Convention under the auspices of the Austrian Council Presidency in late 1998. At the same time, the Groupe Européen de droit international privé (GEDIP) adopted a proposal for a European convention on the law applicable to non-contractual obligations that it submitted to the European Commission.5 The proposal does not, however, contain a separate rule or presumption regarding the law applicable to a product liability issue, although it operates with special presumptions for specific areas of tort and delict, such as privacy and personality rights, defamation, unfair competition, restrictive trade practices, and environmental damage.

B.

The First Draft of the Commission

Following the amendments by the Amsterdam Treaty, it was time for the Commission to take over the initiative. This resulted in a first draft of a Regulation on the law applicable to non-contractual obligations in May 2002.6 The draft already contained a special rule on the law applicable to product liability in Art. 5. It provided for a combination of cumulative and alternative factors leading to the applicable OJ C 340, 10. 11. 1997, at p. 173. The proposal is accessible at . 6 The first draft is accessible at . 4 5

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Peter Huber / Martin Illmer law. In doing so, it bore a considerable degree of similarity to Arts. 5 and 6 of the 1973 Hague Convention.7 The law of the injured person’s habitual residence or main establishment applied if either that state was also the main establishment of the person claimed to be liable or the product was acquired in that same state. If there was no single state where both elements were present, the law of the state where the damage occurred applied. During the consultation period, the Commission received about eighty contributions from a wide variety of stakeholders.8 Most of them welcomed a separate rule for product liability, taking account of the special circumstances compared to usual tort and delict cases. Three issues were stressed repeatedly throughout the contributions: (1) the high number of settlements between the involved insurers; (2) the necessity or desirability of an escape clause9 (often this was combined with a plea for a parallel determination of the applicable law to tort/delict and contract10); and finally (3) the more general question whether the European Union should adopt the same rules as those of the 1973 Hague Convention.11

C.

The Initial Proposal by the Commission

The Commission presented a first proposal of the Regulation on 22 July 2003, accompanied by an Explanatory Memorandum.12 The rule on product liability adopted in Art. 4 differed considerably from the one in the first draft. First, by way of reference it incorporated Art. 3(2) (common habitual residence) and Art. 3(3) (escape clause) of the general rule on delict and tort into the rule on product liability. Thus, when there is a common habitual residence, the law of the state of common residence applies. In the absence of a common habitual residence, the law of the habitual residence of the injured person applies, unless the person claimed to be liable can show that marketing in that country took place without his consent; in the latter case the law of the country of habitual residence of the person claimed to be liable applies. Nevertheless, none of those three laws As to the 1973 Hague Convention see below VI. Most of them are accessible at . 9 See e.g. Hamburg Group for Private International Law, in: RabelsZ 67 (2003), p. 1 et seq., at p. 18 et seq.; Response of the Government of the United Kingdom, Annex, para. 11 and 12; Réponse de Professor C. Nourissat, at p. 16. 10 See in particular the Comments by the Hamburg Group for Private International Law, in: RabelsZ 67 (2003), p. 1 et seq., at p. 18 et seq.; Position Paper by the Bar Council of England and Wales, para. 17 et seq. 11 In favour of that e.g. the Deutscher Rat für Internationales Privatrecht in its comments (Stellungnahme der 2. Kommission), at p. 21 et seq.; also considering it the German Bundesministerium der Justiz, Anhörung, at p. 3. 12 COM(2003) 427 final, accessible at http://europa.eu.int/eur-lex/lex/LexUriServ/ site/en/com/2003/com2003_0427en01.pdf. 7 8

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International Product Liability under Rome II applies if there is a manifestly closer connection to another country, in which case the law of that country applies. Secondly, it contained amendments of the relevant connecting factors for identifying the applicable law. The combination of cumulative and alternative factors was abandoned and replaced by a system of just two cumulative factors: the habitual residence of the injured person and the place of marketing of the product. The cumulative nature was still somewhat disguised by the fact that the place of marketing was introduced as a defence for the person claimed to be liable. If the person claimed to be liable could show that the product was marketed without his consent in the state of the habitual residence of the injured person, the law applicable was that of the country of the habitual residence of the person claimed to be liable. However, in substance the rule already came close to the connection in Art. 5(1) lit. a of the finally adopted Regulation. By introducing the requirement that the product be marketed in the country indicated by the other connecting factor – at this stage only the habitual residence of the person sustaining damage – the Commission chose a solution that had long been discussed and favoured by many scholars.13 The Commission’s proposal was endorsed by the European Economic and Social Committee as a balanced approach to the conflicting interests.14

D.

The Position of the European Parliament

Rome II had to be adopted under the codecision procedure according to Arts. 61 lit. c., 65, 67, and 251. The position taken by the European Parliament on 6 June 200515 was largely based on the Report by the Committee on Legal Affairs.16 It provided for the deletion of the special rule on product liability and argued in favour of resolving cases of international product liability under the general rule of tort and delict. In turn, the escape clause in the general rule was extended by several criteria. Those included the aspects of certainty, predictability, uniformity of result, protection of legitimate interests, and the policies underlying the law applicable absent the escape clause. The position of the European Parliament, in particular regarding the amendments of the escape clause, was strongly criticised. It 13 See in particular Hamburg Group for Private International Law, in: RabelsZ 67 (2003), p. 1 et seq., at p. 15 et seq.; KADNER GRAZIANO T., ‘The Law Applicable to Product Liability – The present state of the law in Europe and current proposals for reform’, in: I.C.L.Q. 54 (2005), p. 475 et seq., at p. 481 et seq.; SONNENTAG M., ‘Zur Europäisierung des Internationalen außervertraglichen Schuldrechts durch die geplante Rom II-Verordnung’, in: ZVglRWiss 105 (2006), p. 256 et seq., at p. 282 et seq.; WANDT M., Internationale Produkthaftung, Heidelberg 1995, para. 1059 et seq. 14 OJ C 241, 28.9.2004, p. 1 et seq., at p. 4. 15 P6_TA(2005)0284. 16 COM(2003)0427 – C5-0038/2003 – 2003/0168(COD); Diana Wallis from the United Kingdom was rapporteur.

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Peter Huber / Martin Illmer was regarded as substantially changing the systematic approach to conflict rules in tort law and trying to import the U.S. conflicts resolution into the European system of private international law, despite the legal uncertainty it had produced.17

E.

The Amended Proposal by the Commission

The amended proposal by the Commission in response to the European Parliament’s position restated the special rule set out in the Commission’s initial proposal, with minor clarifications.18 The Commission insisted on the necessity of a separate rule providing for a different solution from the general rule for reasons of predictability of the applicable law.19 It pointed specifically at the need for certainty and predictability with regard to insurers often involved in product liability cases, aiming for amicable settlements of those disputes.

F.

The Common Position of the European Council

The Common Position of the Council followed to a large extent the initial proposal by the Commission, as slightly modified by the amended proposal.20 With regard to the rule on product liability, the Council rejected the approach of the European Parliament dealing with product liability cases by applying the general rule.21 Returning to a system of lex specialis and lex generalis, the Council followed the Commission’s systematic approach. Regarding the content of this special rule, however, the Council amended the Commission’s proposal substantially. While it accepted the incorporation of Art. 4(2) (common habitual residence) into Art. 5 and added a second section to Art. 5 restating the escape clause of Art. 4(3), the Council introduced a new cascade system of connections with a foreseeability qualificaVON HEIN J., ‘Die Kodifikation des europäischen IPR der außervertraglichen Schuldverhältnisse vor dem Abschluss?’, in: VersR 2007, p. 440 et seq., at p. 441; WAGNER G., ‘Internationales Deliktsrecht, die Arbeiten an der Rom II-Verordnung und der Europäische Deliktsgerichtsstand’, in: IPRax 2006, p. 372 et seq., at p. 386; POSCH W., ‘The ‘Draft Regulation Rome II’ in 2004: Its past and future perspectives’, in: YbPIL 6 (2004), p. 129 et seq., at p.146 et seq.; in contrast arguing for a more flexible approach, SYMEONIDES S., ‘Tort Conflicts and Rome II: A View from Across’, in: MANSEL/PFEIFFER/ KRONKE/KOHLER/HAUSMANN, Festschrift für Erik Jayme, Band 1, München 2004, at p. 935 et seq.; WEINTRAUB R., ‘Rome II and the Tension between Predictability and Flexibility’, in: RASMUSSEN-BONNE/FREER/LÜKE/WEITNAUER, Balancing of Interests, Liber Amicorum Peter Hay zum 70. Geburtstag, Frankfurt 2005, at p. 451 et seq. 18 COM(2006) 83 final, accessible at . 19 Explanatory Memorandum, p. 5, accessible at . 20 Statement of the Council’s Reasons, OJ C 289E, 28.11.2006, at p. 76. 21 Statement of the Council’s Reasons, OJ C 289E, 28.11.2006, at p. 79. 17

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International Product Liability under Rome II tion in Art. 5(1). Thus, the special connecting factors of the rule on product liability were amended. The rule as shaped by the Council was finally adopted by Parliament and the Council on 11 July 2007.

G.

The Final Round

While proposing several amendments to the Common Position in its second reading that were highly controversial, Parliament accepted the rule on product liability. In the parliamentary debate the issue was not even raised,22 and the Position of Parliament contains no amendments to the rule.23 Consequently, it was not further addressed in the subsequent conciliation process.

II.

General Outline

A.

Scope

1.

Strict and Fault-Based Liability

The rule in Art. 5 covers all forms of liability arising from damage caused by a product, whether the liability is strict or fault-based.24

2.

Definition of Product

The term ‘product’ is not defined in the Regulation: however, in its Explanatory Memorandum,25 the Commission refers to the definition of product in Art. 2 of the Directive on the harmonization of product liability laws in the member states.26 In the subsequent legislative process, the issue was not discussed any further and the

The parliamentary debate is accessible at . P6_TC2-COD(2003)0168, accessible at . 24 COM(2003) 427 final, at p. 15. 25 COM(2003) 427 final, at p. 13. 26 Council Directive 85/374/EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the Members States concerning liability for defective products, OJ L 210, 7.8.1985, at p. 29 as amended by Directive 1999/34/EC of the European Parliament and of the Council of 10 May 1999 amending Council Directive 85/374/EEC on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products, OJ L 141, 4.6.1999, at p. 20 (which explicitly amends Art. 2 of the 1985 Directive). 22 23

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Peter Huber / Martin Illmer use of the term ‘product’ was not challenged. Most commentators on the proposals and the common position do not even address the issue.27 It seems to be generally accepted that the reference to the definition in the Product Liability Directive provides a satisfactory solution. Encompassing all movables even if incorporated into another movable or immovable, including electricity, it is a very wide term covering the vast majority of product liability cases. In the remaining cases – if there are indeed any – one may apply the general rule on tort and delict in Art. 4 and, depending on the circumstances, find an appropriate solution by applying the escape clause of Art. 4(3). Application of the marketing requirement in Art. 5(1) raises a specific issue concerning its scope with regard to products of the same type that will be discussed below.28

3.

The Injured Person

The rule in Art. 5 is not restricted to consumers. Rather, it applies to any person sustaining any damage caused by a product. It is submitted that this is the case regardless of the fact that Recital (20) refers to the protection of consumers’ health.29

4.

Person Claimed to Be Liable

The concept of the ‘person claimed to be liable’ is not limited to only the manufacturer of the final product. In its Explanatory Memorandum, the Commission refers to the various persons who are potentially liable under Art. 3(2) of the Product Liability Directive.30 However, this does not imply that the rule is limited to those persons. Rather, a distinction should be made: For the purpose of determining the applicable law pursuant to Art. 5, the person claimed to be liable can be any person.31 Whether this person is then actually liable is a matter of the applicable substantive law.

For an explicit approval of the Commission’s approach see STONE P., ‘Der Vorschlag für die Rom II-Verordnung über das auf außervertragliche Schuldverhältnisse anzuwendende Recht’, in: EuLF (German issue) 2004, p. 213 et seq., at p. 225. 28 See at III. A. 4. c). 29 See the Commission in the Explanatory Memorandum, COM(2003) 427 final, at p. 15, and recital 20 of the Regulation itself. 30 COM(2003) 427 final, at p. 15. 31 But see also STONE P. (note 27), at p. 225. 27

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International Product Liability under Rome II B.

The General System of Determining the Applicable Law

The law applicable to international product liability is not exclusively determined by the rule in Art. 5 of the Regulation. Other provisions have to be taken into account. Thus, a choice of law under Art. 14 takes precedence over any of the objective connections under Art. 5, just as it does over the objective connections under Art. 4. In addition, the provisions of Art. 4(2) and Art. 4(3) apply to cases of product liability: Art. 4(2) is incorporated by reference, Art. 4(3) is plainly repeated in Art. 5(2) – in terms of drafting, a reference as set forth in the Commission’s proposal probably would have been more elegant.32 The only special feature of the lex specialis in Art. 5 is the cascade system of connecting factors, which is supplemented by a foreseeability defence in favour of the person claimed to be liable in Art. 5(1). Accordingly, these two elements are explicitly stated in Recital (20) of the Regulation as forming the essential core of the rule on product liability. The resulting structure of the system of the law applicable to cases of product liability may be illustrated by projecting the cascade created by the interplay of Arts. 4, 5, and 14 as they stand: 1.

Choice of law (Art. 14), or, failing that,

2.

Common habitual residence (Art. 5(1)1 in connection with Art. 4(2)), or, failing that,

3.

Habitual residence of the person sustaining damage if the product was marketed in that country (Art. 5(1)1 lit. a) and if this marketing was reasonably foreseeable for the producer (Art. 5(1)2) or, failing that,

4.

Place of acquisition of the product if the product was marketed in that country (Art. 5(1)1 lit. b) and if this marketing was reasonably foreseeable for the producer (Art. 5(1)2) or, failing that,

5.

Place of occurrence of damage if the product was marketed in that country (Art. 5(1)1 lit. c) and if this marketing was reasonably foreseeable for the producer (Art. 5(1)2), with connections 2. to 5. being subject to a

6.

Manifestly closer connection to another country (Art. 5(2) – which is identical with Art. 4(3)).

Regardless, Art. 17 of the Regulation states that as far as it appears appropriate, account shall be taken of the rules of safety and conduct at the time and place of the event giving rise to liability.

Concurring WAGNER G., ‘Die neue Rom II-Verordnung’, in: IPRax 2008, p. 1 et seq., at p. 7; VON HEIN J. (note 17), at p. 447. 32

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Peter Huber / Martin Illmer

III. The Cascade System of Art. 5(1) A.

The Cascade Connections

The cascade provided for in Art. 5(1) has three levels, each level consisting of two cumulative elements. One of these elements, the marketing of the product in the relevant country, is common to all three levels. The other element, the connecting factor, varies as between the levels: habitual residence of the injured person, place of acquisition of the product, place where damage occurred.

1.

Habitual Residence

Art. 23 provides a non-comprehensive definition of the habitual residence connecting factor. It governs the problematic cases of companies and other bodies as well as natural persons acting in the course of their business activity. However, it does not define habitual residence for a natural person who is not pursuing a business activity. In that respect, unless and until the European Court of Justice ultimately provides guidelines on the relevant criteria, it seems reasonable to apply a comparative approach, taking account of the need to apply the Regulation uniformly in the Member States.33 Since the concept of habitual residence emerges in most systems of private international law,34 including several Hague Conventions,35 A similar problem occurs with regard to the Rome Convention, which in a similar way provides in Art. 18 for a uniform interpretation and application of the Convention in all member states; this comes close to an understanding based on a comparison of the concepts under the various national laws; see in so far also the Resolution (72) 1 of the Committee of Ministers of the Council of Europe of 18 January 1972 on the standardisation of the legal concepts of ‘domicile’ and ‘residence’, accessible at https://wcd.coe.int/com.instranet. InstraServlet?Command=com.instranet.CmdBlobGet&DocId=642794&SecMode=1&Admi n=0&Usage=4&InstranetImage=48966. 34 Civil law jurisdictions traditionally rely on the concept of nationality, common law jurisdictions traditionally rely on the concept of domicile. For a use of the concept of habitual residence, see e.g. Art. 4(2) of the Rome Convention; Art. 14(2) No.2, 15, 40(2), 41(2) of the German EGBGB; see for further details on German law KEGEL G./SCHURIG K., Internationales Privatrecht, 9th ed., Munich 2004, § 13 III. 3.; KEGEL G., ‘Was ist gewöhnlicher Aufenthalt?’, in: BECKER (ed.), Festschrift für Rehbinder, Munich 2002, at p. 699.; section 46 of the English Family Law Act 1986; section 1 of the English Wills Act 1963; see for further details on English law, DICEY, MORRIS AND COLLINS, The Conflict of Laws, 14th ed., London 2006, para. 6-125 et seq. and ROGERSON P., ‘Habitual Residence: The New Domicile?’, in: I.C.L.Q. 49 (2000), at p. 86; for an American standpoint see CAVERS D., ‘Habitual Residence: A useful concept?’, in: Am.Univ.L.R. 21 (1972), at p. 475; for a detailed comparative analysis see BAETGE D., Der gewöhnliche Aufenthalt im IPR, Tübingen 1994. 35 E.g. the Hague Convention on the law applicable to traffic accidents (1971); Hague Convention on the law applicable to product liability (1973); Hague Convention on the law applicable to maintenance obligations (1973); Hague Convention on the law 33

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International Product Liability under Rome II the courts of the Member States are in a position to apply it, even though it forms part of a European Regulation requiring a uniform interpretation throughout the Member States. 2.

Place of Acquisition

The place of acquisition is a straightforward connecting factor that is easy to determine. For the connection to apply, it does not matter, in principle, whether the injured person bought the product directly from the person claimed to be liable (first purchaser) or from another person who acquired the product as first purchaser elsewhere (second purchaser). In the latter case, however, the circumstances may turn out to be such that it is appropriate to invoke the escape clause of Art. 5(2). 3.

Place Where Damage Occurred

The place where the damage occurred is the fall-back position of the cascade. Although this basically corresponds with the general rule for tort and delict in Art. 4(1), it differs from that provision in that it is qualified by the marketing requirement. 4.

The Marketing Requirement

The common denominator throughout all levels of the cascade is the requirement that the product must have been marketed in the country to which the relevant connecting factor points. a)

Purpose

The marketing requirement was introduced to strike a fair balance between the interests of the injured person and the person who is potentially liable. Whereas the varying factors are intended to operate in favour of the injured person, the marketing requirement was introduced to increase predictability of the applicable law for the person potentially liable. It is complemented by the foreseeability qualification in Art. 5(1)2. b)

Person Marketing the Product

For the purposes of the marketing requirement, it is irrelevant who marketed the product as long as that marketing was foreseeable for the person claimed to be applicable to agency (1978); (note that the term is not defined in any of the Hague Conventions.

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Peter Huber / Martin Illmer liable.36 Thus, a producer may not avoid liability by pointing only to the fact that the product was not marketed by himself but by a distributor or retailer. c)

Product or Product of the Same Type?

The question has been raised whether marketing of the one single product that caused the damage is required or whether the marketing element in Art. 5(1)1 lit. a to c is also satisfied if a product of the same type was marketed in the relevant country?37 For example: Is it necessary that the car roof rack with the production no. 43E698, which caused the damage, was marketed in the country of the relevant varying factor of lit. a to c, or is it sufficient that the type of car roof rack was marketed in the respective country, while the specific rack (no. 43E698) that caused the damage was marketed in another country? The problem is particularly relevant in case of lit. a and lit. c, since the habitual residence or the place of occurrence of the damage may easily differ from the place of marketing of the specific product. Despite the limited wording that relates only to marketing of the product on all three levels of the cascade in Art. 5(1)1 lit. a to c, one should consider extending the marketing requirement so that it is equally satisfied if products of the same kind were marketed in the respective country for the following reasons. First, one may infer from Art. 5(1)2 that the marketing requirement encompasses products of the same type since marketing and foreseeability have to refer to the same thing.38 The argument has considerable systematic appeal since the foreseeability qualification builds upon the cascade of Art. 5(1)1. Foreseeability of products of the same type would not be required as a defence if such products of the same type did not even satisfy the marketing requirement in the first place. The argument is convincing while not yet compelling. It is not inconceivable that the foreseeability defence raises the bar higher than the marketing requirement. Secondly, if marketing in Art. 5(1)1 lit. a to c required marketing of the one single product in the respective country of the connecting factor, this would conflict with the systematic structure of the cascade connections of Art. 5(1)1. The country of marketing would eventually determine the applicable law since the individual product is marketed only in one single country which may or may not coincide with one of the connecting factors of lit. a to c. The cascade structure would be replaced by a single connecting factor: the country of marketing which would regularly coincide with the country of acquisition under lit. b. This would conflict with the inner structure of the cascade: The varying connecting factors are the decisive criteria for determining the applicable law under Art. 5(1)1 whereas the marketing requirement is subordinated as a purely additional element. LEIBLE S./LEHMANN M., ‘Die neue EG-Verordnung über das auf außervertragliche Schuldverhältnisse anzuwendende Recht («Rom II»)’, in: RIW 2007, p. 721 et seq., at p. 728. 37 WAGNER G. (note 32), at p. 7; LEIBLE S./LEHMANN M. (note 36), at p. 728; VON HEIN J. (note 17), at p. 447; STONE P. (note 27), at p. 225. 38 LEIBLE S./LEHMANN M. (note 36), at p. 728; similar WAGNER G. (note 32), at p. 7. 36

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International Product Liability under Rome II The criterion to distinguish products of the same type from products of a different type is the safety features of the product.39 Different safety features result in a different type of product. The wording, product of the same type, supports such an understanding, but the decisive argument relates to the purpose of the marketing element. The aim of the marketing element in Art. 5(1) is predictability of the applicable law for the person potentially liable. By referring to the safety features of the product the person claimed to be liable is put into a position where he can adapt those features of the product that are relevant for incurring liability to the standard required by the laws which may potentially apply and thus avoid incurring liability. This restrictive approach may conflict with the interrelation of price and product liability risk since diversified pricing may correlate with the regime of product liability the producer is facing in different countries and since the purchaser pays part of the purchase price for his remedies against the manufacturer or any other person that is liable. There seems, however, de lege lata no room to limit the marketing requirement to the one single product. It would jeopardise the new cascade structure substantially and disturb the operation of the new differentiated rule in Art. 5. d)

Lack of Marketing

The cascade system in Art. 5(1) does not provide for the law applicable if the product is not marketed in any of the countries indicated by the varying factors of lit. a to c. From a purely systematic standpoint, one could argue at first sight that the lex generalis on delict and tort in Art. 4 should apply in all situations where the lex specialis in Art. 5 does not provide for a law to apply. This is, however, unpersuasive for several reasons. First, one has to distinguish between Art. 5’s scope of application, on the one hand, and the connecting factors in Art. 5 determining the applicable law, on the other. The relationship of lex generalis and lex specialis exists in relation to the scope of application, but not with regard to the connecting factors determining the applicable law. Consequently, once a non-contractual obligation is within the scope of application of the special rule, the application of the general rule is barred. A non-contractual obligation arising out of damage caused by a product is within the scope of application of Art. 5. Secondly, applying the rule in Art. 4(1) would undermine the special rule in Art. 5(1) lit. c: In case of liability for damage caused by a product, the marketing requirement protects the person claimed to be liable from the application of the law of the place where the damage occurred if it differs from the place of marketing. Thus, a solution has to be found within the system of Art. 5 through the analogous application of one of its subsections. Art. 5(1)2 seems particularly suitable in this regard. If the law of the habitual residence of the person claimed to be liable applies whenever that person could not reasonably have foreseen marketing 39

To the same extent WAGNER G. (note 32), at p. 7.

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Peter Huber / Martin Illmer in the relevant country identified by lit. a to c, this must hold true, a fortiori, in a case where the product was not even marketed in the relevant country at all.40

B.

The Foreseeability Qualification

Once the applicable law has been determined pursuant to Art. 5(1)1 lit. a to c, the person claimed to be liable may raise the foreseeability defence. If he could not reasonably foresee the marketing of the product,41 or a product of the same type, then the law of his habitual residence applies instead of the law determined pursuant to Art. 5(1)1 lit. a to c.42 A similar defence is contained in Art. 7 of the Hague Convention.43 Extending foreseeability to a product of the same type noticeably raises the bar for successfully invoking the defence. The person claimed to be liable not only has to establish that the marketing of the specific product causing the damage was not reasonably foreseeable, he also has to establish that marketing products of the same type was not reasonably foreseeable. With regard to the consent element in the Commission’s proposal, which emerged as the foreseeability qualification in the Common Position, it has been argued that in the days of globalised trade and commerce, a producer is deemed to have consented to marketing in many countries, if not globally.44 However, it is submitted that such a wide concept of foreseeability is unconvincing for three reasons. First, it would undermine the defence substantially. Secondly, it would turn the defence into an irrebuttable presumption. Thirdly, the factual basis for such a presumption is doubtful even in a globalised world.45 40 Proposing the same solution WAGNER G. (note 32), at p. 7; LEIBLE S./LEHMANN M. (note 36), at p. 728; VON HEIN J. (note 17), at p. 447 (regarding the Common Position which does not differ in that respect); BENECKE M., ‘Auf dem Weg zu «Rom II» – Der Vorschlag für eine Verordnung zur Angleichung des IPR der außervertraglichen Schuldverhältnisse’, in: RIW 2003, p. 829 et seq., at p. 834 (as regards the Commission Proposal which equally does not differ in that respect). 41 The issue of whether the term ‘product’ in Art. 5(1)1 lit. a to c relates only to the one single product causing the damage or has to be interpreted extensively as covering products of the same type, is discussed below at III. C. 42 The application of the law of the habitual residence of the person claimed to be liable was criticised during the legislative process by many commentators, see e.g. Comment of HUBER P./BACH I., ‘Die Rom II-VO’, in: IPRax 2005, p. 73 et seq., at p. 77; VON HEIN J., ‘Die Kodifikation des europäischen Internationalen Deliktsrechts’, in: ZVglRWiss 102 (2003), p. 528 et seq., at p. 554; KADNER GRAZIANO T. (note 13), at p. 485; concurring, however, WAGNER G. (note 17), at p. 377 and (note 32), at p. 7. 43 As to the 1973 Hague Convention see below VI. 44 KADNER GRAZIANO T. (note 13), at p. 485; similar LORENZ W., ‘Der Haager Konventionsentwurf über das auf die Produktenhaftpflicht anwendbare Recht’, in: RabelsZ 37 (1973), p. 317 et seq., at p. 348. 45 HUBER P./BACH I. (note 39), at p. 77.

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International Product Liability under Rome II It is submitted that the foreseeability qualification is a defence solely designed to protect the producer against the application of a law he either failed to or did not have to envision. If he does not invoke the defence, there is no injustice done to the injured person since the connecting factors in Art. 5(1)1 lit. a to c are designed in his favour. Consequently, the producer must have the right to abstain from invoking the foreseeability qualification.46

IV. Common Habitual Residence, Art. 4(2) Art. 5(1) explicitly refers to Art. 4(2) of the Regulation, which provides that where the person claimed to be liable and the injured person both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply. The rule in Art. 4(2) prevails over the connecting factors of the cascade system in Art. 5(1). It is not subject to either the marketing requirement or the foreseeability qualification. This indicates the great importance that the Regulation attaches to the common habitual residence as a connecting factor.

V.

Escape Clause, Art. 5(2)

The escape clause in Art. 5(2) provides: ‘Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in Art. 5(1), the law of that other country shall apply.’ A manifestly closer connection with another country might be based on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question. It does not, however, supersede a choice of law pursuant to Art. 14. From a drafting perspective, one may pose the question of whether it is an elegant approach to point to the common habitual residence connection of Art. 4(2) by way of reference, while incorporating the escape rule of Art. 4(3) by repetition. This is, however, a rather aesthetic issue.47 The escape clause may be invoked particularly in situations where there is a direct contractual relationship between the person claimed to be liable and the in46 The language of the Commission’s initial proposal in its Art. 4 (Art. 6 of the amended proposal) was in that respect clearer than the current language of Art. 5 of the Regulation. It stated ‘…, unless the person claimed to be liable can show …,’ as opposed to the current version of ‘… if he or she could not reasonably foresee…’ 47 WAGNER G. (note 32), at p. 7, leaves it at that.

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Peter Huber / Martin Illmer jured person. This scenario is explicitly mentioned in the escape clause as an example of a manifestly closer connection. In such a case, it is a reasonable solution to provide for the same law to govern liability in both tort and contract.48 Another area of application could be the liability towards ‘bystanders,’ i.e. persons hurt without having any contractual link to either the seller or producer and while not using the product. Regarding these bystanders, the law of the country where the damage occurred is commonly regarded as the most appropriate one.49 This result can be achieved by relying on the escape clause in Art. 5(2).

VI. Interrelation with the 1973 Hague Convention The Hague Convention on the law applicable to products liability of 1973 in its Arts. 4 to 7 provides for a rather complex system of cumulative connecting factors, two of which have to be present in one state for that state’s internal law to apply. The connecting factors are (1) the place of injury; (2) the place of the habitual residence of the person directly suffering damage; (3) the principal place of business of the person claimed to be liable; and (4) the place where the product was acquired by the person directly suffering damage. The applicable law is determined along a ladder of those connecting factors: First, the law of the place of injury applies if any of the other three criteria is also present in that state (Art. 4). Secondly, the law of the habitual residence of the person directly suffering damage applies if any of the remaining two criteria is also present in that state (Art. 5). Finally, the law of the principal place of business applies if none of the laws designated by Arts. 4 or 5 apply. This three-step-rule is accompanied by a defence of the person claimed to be liable pursuant to Art. 7: If he or she could not have foreseen the marketing of the product causing the damage in the relevant state, the law of that state does not apply. During the legislative process, it was suggested repeatedly50 that achieving a parallelism with the rules of the Hague Convention on the law applicable to products liability, which is in force in several EC Member States, was desirable. This could have been achieved either by adopting a rule identical to the one in Arts. 4 to 7 of the Hague Convention or by the European Union or all its Member States signing the Convention – neither happened. Despite the first draft of the CommisTo the same extent the Hamburg Group for Private International Law in its Comments in RabelsZ 67 (2003), p. 1 et seq., at p. 18. 49 See HUBER P./BACH I. (note 39), at p. 77; LEIBLE S./LEHMANN M. (note 36), at p. 728; SONNENTAG M. (note 13), at p. 283; WANDT M. (note 13), para. 1099 et seq.; HEIDERHOFF B. ‘Eine europäische Kollisionsnorm für die Produkthaftung: Gedanken zur Rom II-Verordnung’, in: GPR 2005, p. 92 et seq., at p. 94. 50 E.g. Stellungnahme der 2. Kommission des Deutschen Rates für internationales Privatrecht, at p. 20 et seq., accessible at . 48

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International Product Liability under Rome II sion of May 2002 being very close to the rule of the Hague Convention, the Commission’s initial proposal deviated substantially from it, aiming for a less complex rule.51 This approach was taken over by the Council in its common position and in the rule finally adopted as Art. 5. As a consequence of the non-synchronisation of the two rules, there are two different regimes within the European Union.52 Pursuant to Art. 28 of the Rome II Regulation, it does not prejudice the application of or prevail over the Hague Convention. As a result, there will be two regimes of conflict rules on product liability within the European Union: The Hague Convention will be applied by courts in Finland, France, Luxembourg, the Netherlands, Slovenia, and Spain, whereas the conflicts rule in Art. 5 of the Rome II Regulation will be applied in the remaining 21 Member States.

51 An aspect the Commission stressed again in its Communication to the European Parliament, COM(2006) 566 final, at p. 3. 52 This is strongly criticised by Stoll in his submission to the Commission upon the initial draft (‘untragbar’), accessible at ; with similar critique the Stellungnahme des Instituts für ausländisches und internationales Privat- und Wirtschaftsrecht der Universität Heidelberg, at p. 8 et seq., accessible at .

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UNFAIR COMPETITION AND ACTS RESTRICTING FREE COMPETITION A COMMENTARY ON ARTICLE 6 OF THE ROME II REGULATION Michael HELLNER∗

I. II. III.

IV.

V.

I.

Genesis and Contents of Article 6 The Relationship to the General Rule in Article 4 Unfair Competition A. Where Competition Relations or the Collective Interests of Consumers are Affected B. Only the Interests of one Specific Competitor are Affected Restrictions of Competition (Antitrust) A. The Country where the Market is Affected 1. The Definition of the Market 2. Directly, Substantially and Foreseeably Affected B. Effect on the Market in Several Countries Unfair Competition, Restriction of Competition – Issues of Characterisation A. Unfair Competition B. Restrictions of Competition C. Unfair Competition or Restriction of Competition or Both?

Genesis and Contents of Article 6

Article 6 of the Rome II Regulation1 concerns the law applicable to unfair competition and acts restricting free competition. It is an Article which has undergone quite substantial change over the course of negotiations. In the Commission’s original proposal from July 2003 the Article dealt only with unfair competition and there

∗ Associate Professor of Private International Law, Uppsala University. The author was a member of the Swedish delegation to the Committee on Civil Law Matters, the Council working party in which the common position of the JHA Council of the EU on the Rome II Regulation was prepared. The views expressed in this article are those of the author and do not necessarily reflect those of the Swedish government. 1 Regulation (EC) 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations ‘(‘Rome II’), OJ L 199, 31.7.2007, p. 40.

Yearbook of Private International Law, Volume 9 (2007), pp. 49-69 © sellier. european law publishers & Swiss Institute of Comparative Law

Printed in Germany

Michael Hellner was no special rule for acts restricting free competition (or antitrust or restrictive trade practices; the three terms are used synonymously).2 In the first reading opinion of the European Parliament from July 2005, the Article had been deleted – together with special rules for products liability and environmental damage.3 The reason given by the rapporteur Diana Wallis was that the flexibility of a general rule would be preferable to rigid rules for each class of non-contractual obligation. Moreover, the difficulty to characterise torts such as violations of rules on unfair competition and environmental protection spoke in favour of the deletion of these special rules.4 In the Commission’s revised proposal from February 20065 the proposal to delete the special rule was rejected and a special rule remained. In reply, however, to the expressed difficulties of characterisation the term ‘unfair competition’ had been changed to ‘unfair commercial practices’, thus aligning the terminology to the Unfair Commercial Practices Directive.6 What is more, the Commission declared that it might support a special rule on restrictive trade practices depending on the replies (that were then still to come) to the Green Paper on damages actions for breach of the EC antitrust rules.7 In the Common Position of the Council from September 2006 Article 6 had been changed to include a special rule for acts restricting free competition, designating the law of the country on whose market the restriction has, or is likely to have, effect as applicable.8 The Article thus contained rules on both unfair competition and antitrust. The provision survived the co-decision procedure and was, after some important modifications in order to mitigate the consequences of multi-state 2 See COM(2003) 427 final, Brussels 22.7.2003. It should, however, be noted that a preliminary draft proposal by the Commission presented in May 2002 contained an Article 6 on unfair competition and other unfair practices. This author has always presumed that ‘other unfair practices’ meant antitrust. The preliminary draft is available at . 3 P6_TA(2005)0284, 6 July 2005, OJ C 157 E, 6.7.2006, p. 371. 4 See the rapporteur’s explanatory statement to the report for the EP Committee on Legal Affairs (JURI), PE 349.977, p. 38 et seq. 5 COM(2006) 83 final, Brussels 21.2.2006. 6 Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) 2006/2004 of the European Parliament and of the Council (‘Unfair Commercial Practices Directive’), OJ L 149, 11.6.2005, p. 22. 7 Supra (note 5), at p. 6. Green Paper on damages actions for breach of the EC antitrust rules, COM(2005) 672 final, Brussels 19.12.2005. 8 Common Position adopted by the Council on 25 September 2006 with a view to the adoption of a Regulation of the European Parliament and of the Council on the law applicable to non-contractual obligations (‘Rome II’), Council doc. 9751/7/06, OJ C 289E, 28.11.2006, p. 68.

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Unfair Competition and Acts Restricting Free Competition torts, included in the final text that was adopted by the European Parliament and the Council in July 2007:9 Article 6 – Unfair competition and acts restricting free competition 1. The law applicable to a non-contractual obligation arising out of an act of unfair competition shall be the law of the country where competitive relations or the collective interests of consumers are, or are likely to be, affected. 2. Where an act of unfair competition affects exclusively the interests of a specific competitor, Article 4 shall apply. 3. (a) The law applicable to a non-contractual obligation arising out of a restriction of competition shall be the law of the country where the market is, or is likely to be, affected. (b) When the market is, or is likely to be, affected in more than one country, the person seeking compensation for damage who sues in the court of the domicile of the defendant, may instead choose to base his claim on the law of the court seised, provided that the market in that Member State is amongst those directly and substantially affected by the restriction of competition out of which the non-contractual obligation arises on which the claim is based; where the claimant sues, in accordance with the applicable rules on jurisdiction, more than one defendant in that court, he can only choose to base his claim on the law of that court if the restriction of competition, on which the claim against each of these defendants relies, directly and substantially affects also the market in the Member State of that court. 4. The law applicable under this Article may not be derogated from by an agreement pursuant to Article 14. According to recital 21 ‘[t]he special rule in Article 6 is not an exception to the general rule in Article 4(1) but rather a clarification of it’. What the recital says is that the two connecting factors used for unfair competition – the country where competitive relations or the collective interests of consumers are affected – and for antitrust – the law of the country where the market is affected – lead to the same result as the connecting factor used in the general rule, viz. the country in which the damage occurs. The sole purpose for including a special rule is that of clarity. It is difficult to say whether there is a trend in favour of general rules or rules specific to each particular tort in this area of private international law. In recent codifications on private international law it is possible to find the position 9

See supra (note 1).

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Michael Hellner that no special rule for unfair competition and antitrust is needed. Then again, it is also possible to find examples which provide a special rule. By way of example, in the 1995 UK Private International Law (Miscellaneous Provisions) Act 1995 (c. 42), the Italian PIL statute from the same year and the 2002 rules on noncontractual obligations in the German PIL Code there are no special rules for unfair competition and antitrust (these statutes do not contain any special rules for particular types of torts).10 On the other hand, in Article 48 of the 1978 Austrian PIL Code, Article 52 of the (almost identical) 1996 PIL Code of Liechtenstein, Article 117 of the 1992 Romanian PIL Code, Article 4 of the 2001 Dutch Act on the law applicable to delicts and in Article 1222 of the Russian Civil Code (part III from 2002) there are specific rules regarding unfair competition. Swiss and Bulgarian law appear to be unique in that they contain both provisions on unfair competition and restrictions of competition – Articles 136 and 137 of the 1987 Swiss PIL Code and Article 107 of the 2005 Bulgarian PIL Code. The connecting factor common to all of these statutes containing special rules is that of the country whose market is affected (with modalities in the way of expressing this). Even though Article 6 is intended as a clarification, the clarification might be in need of some clarifications. Such is the purpose of this article. Moreover, the question of whether there is actually any difference between the connecting factor used in the general rule and those connecting factors used in Article 6 begs an answer. Recitals are not normative as such, and if Articles 4 and 6 use different language with different meaning then that is not going to be changed by a recital saying otherwise.

II.

The Relationship to the General Rule in Article 4

The general rule in Article 4 of the Rome II Regulation uses the place of damage as the main connecting factor. 1. Unless otherwise provided for in this Regulation, the law applicable to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur [emphasis added]. In most tort cases the application of this rule does not cause any problems whatsoever. It is those cases where the act giving rise to the damage and the effects thereof occur in different states that have caused quite some concern in private international law. Article 4(1) differentiates between three elements of such so10 The rules on the law applicable to non-contractual obligations in Arts. 38-42 EGBGB were added in 2002.

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Unfair Competition and Acts Restricting Free Competition called distance delicts: 1) the act or event giving rise to liability; 2) the injury suffered by the victim; and 3) the consequential loss following from that injury. It is the second element, the place of injury, or as expressed in the Regulation – the place in which the damage occurs11 – that is determinative in the Rome II Regulation. In choosing the place of injury the Regulation is well in line with the law of many Member States, although a majority seem to prefer the country of the act/ event and a significant minority give the person sustaining damage a choice between the two laws. Of the three places, the place of the act is the easiest to locate but not always self-evident. Particularly in cases where the harmful act consists of an omission can the place of action be difficult to determine; a relevant example would be in the case of a refusal to supply. From where should a particular good be delivered if the tortfeasor has several possible places from which to deliver? The country in which the damage occurred (the place of injury) is relatively easy to determine in those cases where the damage is sustained by a person or property. The relevant location is the country in which the person or property is situated when the damage occurs.12 It becomes more difficult in those cases where the injury is abstract. Examples would be defamation or infringement of intellectual property – or for that matter unfair competition and restrictive trade practices. The greatest difficulty lies in separating the place of injury from the third element, viz. the place of consequential loss (the country in which the indirect consequences of the injury occur). The Commission’s Explanatory Memorandum to the Rome II proposal refers to the Marinari case,13 in which the European Court of Justice held that ‘the place where the damage occurred’ under Article 5(3) of the Brussels Convention does not include the place where the victim suffered financial damage arising from the initial damage and suffered by him in another Contracting State.14 The interpretation is less clear when the victim suffers only financial damage as the result of a certain act. For such cases there is a tendency in the law of some states to determine the place of injury to be the location where the diminished assets are located.15

Injury is a better term than damage since the latter tends to lead the reader in the direction of indirect damage that is a consequence of the initial injury. Admittedly, this is mainly of relevance to the English language version. 12 See e.g. Section 11(2)(a) and (b) of the UK Private International Law (Miscellaneous Provisions) Act 1995 (c. 42). 13 ECJ, C-364/93, Marinari v Lloyds Bank, [1995] ECR I-2719. 14 Supra (note 2), at p. 11. 15 See for German law JUNKER A., ‘Art. 40, Unerlaubte Handlung’, in: SONNENBERGER H. J. (ed.), Münchener Kommentar zum Bürgerlichen Gesetzbuch, Band 10 Einführungsgesetz zum Bürgerlichen Gesetzbuche (Art. 1-46) Internationales Privatrecht, 4. Aufl., München 2006, p. 2355-2458, at p. 2370 (para. 32). See in this direction ECJ, C-18/02, DFDS Torline v LO, [2004] ECR I-1417. 11

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Michael Hellner A determination of the place of injury under the general rule in Article 4 could very well be identical with the country where competitive relations or the collective interests of consumers are affected in the case of unfair competition and the country where the market is affected in the case of acts restricting competition as specified in Article 6. In Germany and Switzerland legal writing and court practice have determined that the place where the damage occurs is the place where the object or interest that is protected by the rule giving rise to liability (geschütztes Rechtsgut) is located at the time of the injury.16 Italian legal writing has come to the conclusion that the relevant injury for unfair competition is the damage suffered by the competition itself; hence the relevant place is the place where the market is located.17 The statement in recital 21 that ‘[t]he special rule in Article 6 is not an exception to the general rule in Article 4(1) but rather a clarification of it’ would be correct if the objects of protection of those rules are those mentioned above. According to the Explanatory Memorandum to the Rome II Proposal, the purpose of rules against unfair competition is to protect not only competitors (horizontal dimension) but also consumers and the public in general (vertical relations). The Commission provides the illustration of two firms from State A both operating in market B as an example of where there might be a difference in the localisation of the place of injury between the general rule and the special rule for unfair competition.18 This author fails to see why the injury would not be located in market B unless the act of unfair competition is targeted specifically at the competitor from State A. What the Commission could possibly mean by this example is the widespread perception that the place of injury in cases of pure economic loss is located where the assets that are diminished are located.19 However, as has been pointed out, this is contradicted by the ruling of the European Court of Justice in Marinari20 concerning the location of damage under Article 5(3) of the Brussels Convention. It is submitted that, even if Article 6 is only a clarification, it is a welcome one. The theory of the object of protection is not universally accepted, and even so, the object of protection of unfair competition and antitrust is probably not selfevident and known to courts and practitioners all over the European Union.21 The 16 See HEINI A., ‘Art. 133’, in: GIRSBERGER D. ET AL. (eds.), Zürcher Kommentar zum IPRG, 2. Aufl., Zürich 2004, p. 1476-1483, at p. 1479 (para. 10); JUNKER A. (note 15), ibid. 17 HONORATI C., ‘The Law Applicable to Unfair Competition’, in: MALATESTA, A. (ed.), The Unification of Choice of Law Rules on Torts and Other Non-Contractual Obligations in Europe, Padova 2006, p. 127-158, at p. 151. 18 Supra (note 2), at p. 15. 19 JUNKER A. (note 15), at p. 2370 (para. 32). 20 Supra (note 13). 21 In agreement as to the need for a special rule for unfair competition see HONORATI C. (note 17), p. 153 et seq. and for antitrust ADOLPHSEN J., ‘Conflict of Laws in Cartel Matters in a Globalised World: Alternatives to the Effects Doctrine’, in: J. Priv. Int. L. 1 (2005), p. 151-183, at p. 177; BASEDOW J., ‘Jurisdiction and Choice of Law in the Private Enforcement of EC Competition Law’, in: BASEDOW J. (ed.), Private Enforcement of EC Competition Law, Alphen aan den Rijn 2007, p. 229-253, at p. 249 et seq.

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Unfair Competition and Acts Restricting Free Competition risk that courts will locate the injury at the place where the plaintiff has suffered individual injury as a result of unfair competition or restrictive trade practices is imminent. It is also highly likely that many courts will locate this individual injury at the seat of the victim. Moreover, when legislating on the European level there is a need for extra clarity since legal theories, concepts and ideas differ from country to country. We should also add that because Article 6(3)(b) contains a special rule for multi-state torts in antitrust litigation, it would fit very poorly in Article 4 (although a special rule for all multi-state torts could be envisaged).

III. Unfair Competition A.

Where Competitive Relations or the Collective Interests of Consumers are Affected

Instead of using the affected market as the relevant connecting factor for unfair competition, Article 6(1) focuses on ‘the country where competitive relations or the collective interests of consumers are […] affected’. According to the Explanatory Memorandum22 this connecting factor has its origins in a number of consumerprotection directives, in particular Directive 98/27 on injunctions for the protection of consumers' interests.23 In that Directive the expression ‘collective interests of consumers’ is used, but not as a connecting factor in a choice-of-law rule. The expression is used to describe the purpose of a number of Directives on consumer protection for which Directive 98/27 grants an enforcement mechanism in the form of injunctions. Recital 2 informs us that ‘collective interests mean interests which do not include the cumulation of interests of individuals who have been harmed by an infringement’. The expression is also used in the Regulation on consumer protection cooperation24 but the definition given in Article 3(k) is quite uninteresting: ‘the interests of a number of consumers that have been harmed or are likely to be harmed by an infringement’. From Article 3(b) we learn that collective interests of consumers are not located in the same place as where the act or omission originated or took place, where the responsible seller or supplier is established, or where evidence or assets pertaining to the act or omission are to be found. Supra (note 2), at p. 15. Directive 98/27/EC of the European Parliament and of the Council of 19 May 1998 on injunctions for the protection of consumers' interests, OJ L 166, 11.6.1998, p. 51. The Commission has proposed amendments to this Directive, see COM(2003) 241 final of 12.5.2003 and COM(2006) 692 final of 16.11.2006. 24 Regulation (EC) 2006/2004 of the European Parliament and of the Council of 27 October 2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws (the Regulation on consumer protection cooperation), OJ L 364, 9.12.2004, p. 1. 22 23

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Michael Hellner The problem with using this particular expression for unfair competition is that it differs from the expression used in Article 6(3) for antitrust, viz. the country where the market is affected. It would indicate that there is a purpose behind using two different connecting factors. However, the Explanatory Memorandum equates the effect on competitors’ and consumers’ interests with effect on the market.25 Moreover, being familiar with the legislative history, we know that antitrust was added in the Council negotiations. The first Presidency drafts spoke of ‘unfair competition, including an act restricting free competition’ and then used the connecting factor ‘country where competitive relations or the collective interests of consumers are […] affected’ for both.26 The different connecting factor for antitrust was added later when the present structure of separate paragraphs was introduced.27 No difference was intended, but rather it was just pointed out that the affected market was the traditional connecting factor for antitrust. Against this background it is submitted that, although unfair competition and antitrust use different connecting factors, no real difference is intended and the connecting factor used for unfair competition is also to be understood as designating the law of the affected market (more on the meaning of this concept infra).28

B.

Only the Interests of one Specific Competitor are Affected

Paragraph 2 makes an exception for cases when an act of unfair competition affects exclusively the interests of only one competitor. Relevant examples would include: improper interference with a competitor's business, as, for example, by enticing his employees to leave his employ; inducing breach of a competitor's contract; interference with a competitor's supplier and customer relations; industrial espionage; or unauthorised dissemination of business secrets. Admittedly, such actions indirectly also affect the market as such but consumers are neither induced nor are they mislead.29 There is a similar exception in Article 136(2) of the Swiss PIL code. That provision, however, designates the law of the habitual residence of the affected competitor. Instead, Article 6(2) of the Rome II Regulation refers back to the general rule in Article 4. This entails three differences in relation to acts of unfair competition that have a more general effect: 1) the law of the place of injury is applied rather than the law of the country where competitive relations or the colSupra (note 2), at p. 15. See Council document 10173/04 of 14.6.2004, JUSTCIV 81. 27 See Council document 7432/06 of 16.3.2006, JUSTCIV 62. 28 See, however, DREXL J., ‘Internationales Recht gegen den unlauteren Wettbewerb’, in: SONNENBERGER H. J. (ed.), Münchener Kommentar zum Bürgerlichen Gesetzbuch, Band 11 Internationales Wirtschaftsrecht (Art. 50-245 EGBGB), 4. Aufl., München 2006, p. 746-811, at p. 799 (para. 111). 29 VISCHER F., ‘Art. 136’, in: GIRSBERGER D. ET AL. (eds.), Zürcher Kommentar zum IPRG, 2. Aufl., Zürich 2004, p. 1536-1547, at p. 1543 (para. 18). 25 26

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Unfair Competition and Acts Restricting Free Competition lective interests of consumers are affected; 2) if the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply; 3) if there is a manifestly closer connection to the law of another country the law of that country shall apply. As indicated above, the first question is whether the country in which the damage occurs and the country where competitive relations or the collective interests of consumers are affected coincide. On the one hand the statement in recital 21 that ‘[t]he special rule in Article 6 is not an exception to the general rule in Article 4(1) but rather a clarification of it’ would indicate that no difference is intended. On the other hand it is quite possible to imagine differences if one takes into consideration that the object of protection of rules against unfair competition can also be the individual competitor.30 Let us return to the example given in the Explanatory Memorandum where two firms from State A both mainly operate in market B. Assume that firm X illicitly entices the employees of firm Y to leave their employment in State A. The immediate effect of the act of unfair competition is in State A, but it has effect on competitive relations in State B due to that being the State in which both firms mainly operate. If we acknowledge that rules on unfair competition have a triple objective, viz. to protect individual competitors, competition in general and the interests of consumers in general, then we can also acknowledge that there is a difference in connecting factors. What is more, if no difference had been intended, Article 6(2) ought only to have referred back to Article 4(2) and (3), and not the entire Article. Such a partial reference was made in the Commission’s original proposal but disappeared in the Council negotiations.31 It is therefore submitted that, in spite of the recital to the contrary, there is a difference between Articles 6 and 4 when an act of unfair competition affects only the interests of a specific competitor. The place of injury for such cases should be interpreted as meaning the place where the individual competitor suffered the injury. In the example of illicitly enticing the employees of a firm to leave their employment in a particular state, the place of injury would coincide with the place of employment. The difference between applying Article 6 and Article 4 is obvious in those cases where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs. For such cases, according to Article 4, the law of their common habitual residence is applicable regardless of where the damage occurs or in which market the act of unfair competition takes effect. The third difference between applying Article 6 or Article 4 is that Article 4(3) provides for a rule of displacement: Section 1 of the German Law Against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb) gives as the objects of protection competitors, consumers and the general interest in undistorted competition. 31 And this author, although having taken part in the negotiations, cannot recall that the matter was ever discussed. 30

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Michael Hellner 3. Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question. The example given in the text itself of when a manifestly closer connection might be at hand is when there is a pre-existing relationship between the parties, such as a contract, and that pre-existing relationship is closely connected with the tort/delict in question. An example of when there might be a pre-existing relationship between the parties is in the case of improper appropriation or disclosure of trade secrets obtained through, for instance, a joint research and development agreement. The text of Article 4(3) itself does not say if the fact that there is a pre-existing relationship between the parties, and there is a manifestly closer connection to another country based on this relationship, also means that the tort/delict in question should be governed by the law applicable to this pre-existing relationship. However, it is clear from the Commission’s Explanatory Memorandum that that was intended.32 Such an interpretation would also help bridge the gap between those States that would characterise such relationships as contractual and those that would characterise them as non-contractual. Nevertheless, it is submitted that, in particular when the parties have chosen the law applicable to a contract with which the act of unfair competition is closely connected, and that law is not closely connected to the act of unfair competition, it should not be applied. In such cases the requirement that there must also be a manifestly closer connection with another country is not fulfilled. The following example could serve as illustration of how the exception in paragraph 3 could work. A, with habitual residence in country X, is a mobile phone operator that delivers mobile phone services to B (who is a company, not a consumer), habitually residing in country Y. A contacts B and offers it a continuation of the mobile phone services for an additional 12 months but misleads the representative of B as to the conditions for receiving free cell phones for all employees of B included in the price. B asks for the cancellation of the contract and also for damages equaling the cost of buying the cell phones that he never received for free. If B sues in tort, under Articles 6(2) and 4(1) the law of B’s habitual residence would most likely apply. However, under Article 4(3) the law applicable to the sales contract could also be applied to the tort. Under Article 4(1) of the new Rome I Regulation this would most likely be the law of the seller.33 This makes sense since B’s request in many jurisdictions would be characterised as contractual.

Supra (note 2), at p. 12. At the time of writing (December 2007), the new Rome I Regulation on the law applicable to contractual obligations has been politically adopted by the European Parliament and the Council but is still subject to scrutiny by the jurist linguists. Thus, we make no 32 33

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IV. Restrictions of Competition (Antitrust) A.

The Country where the Market is Affected

Contrary to unfair competition, the connecting factor for non-contractual obligations arising out of acts restricting competition is the country where the market is affected. It has already been submitted that the country where competitive relations or the collective interests of consumers are affected, and the country where the market is affected, are essentially identical. Particularly in the area of antitrust law, however, the concept of a market is a complex one and merits further analysis.

1.

The Definition of a Market

The difficulty in using a concept such as the affected market as a connecting factor is that a market is something abstract; it is not a car, a house or a person that can be said to have been physically present at a particular place at a particular time when an injury is suffered. However, this is not unique to antitrust damages, as an intellectual property right or a person’s reputation are also abstract concepts.34 In most commentary on similar provisions in private international law statutes the concept of a market is defined as a jurisdiction in which the person sustaining the damage is (negatively)35 affected in his provision of products. This is normally the country in which the potential customers are located.36 However, as we well know from the study of EC substantive antitrust law, the question of market definition is also relevant in that context and can at times be quite difficult. The definition of the relevant market is decisive in the determination of whether there is a dominant position under Article 82 EC and is also relevant for determining dominance in the application of the Merger Regulation.37 Markets may additionally need to be defined when applying Article 81 EC, in particular when determining whether an appreciable restriction of competition exists or when establishing if the condition under Article 81(3)(b) for an exemption is met.38 formal reference to the Regulation. The text is available as EP document P6_TA-PROV (2007)0560 of 29 November 2007. 34 Note, however, the exception from scope for ‘non-contractual obligations arising out of violations of privacy and rights relating to personality, including defamation’ in Article 1(2)(g). 35 Under EC competition law the effect need not be negative. Cf. ECJ, C-56/64 & C59/64, Consten and Grundig, [1966] ECR 299. 36 See e.g. VISCHER F., ‘Art. 137’, in: GIRSBERGER D. ET AL. (eds.), Zürcher Kommentar zum IPRG, 2. Aufl., Zürich 2004, p. 1548-1559, at p. 1551 et seq. (para. 10). 37 Council Regulation (EC) 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation), OJ L 24, 29.1.2004, p. 1. 38 See Commission Notice on the definition of the relevant market for the purposes of Community competition law, OJ C 72, 9.12.1997, p. 13.

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Michael Hellner The definition of the relevant market in EC antitrust law consists of a relevant product market and a relevant geographic market. In the case law of the European Court of Justice the latter has been defined as an ‘area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those areas’.39 The question is whether the concept of the relevant geographic market from substantive Community antitrust law can also be used in determining the affected market for Community choice-of-law purposes. The definition could be useful in determining whether a particular country is included in the affected market or not (markets can be local, regional, national or covering territories of two or more countries). This is particularly so in the case of follow-on damages actions; that is cases where private litigation follows in the wake of an action by a national or Community competition authority. Moreover, procedural rules in some countries provide that decisions taken by competition authorities or courts trying cases brought by such authorities are either binding40 or have prima facie value as evidence41. The question of whether the definition of geographic market used in substantive EC antitrust law could also function as a connecting factor in a choice-oflaw rule would indeed merit further analysis for which this article is not the right venue.42 An obvious argument in favour is one of simplicity. Although market analysis at times can be quite difficult, most private antitrust cases are expected to be follow-on actions and the work of defining a geographic market will already have been completed – and perhaps even be binding to the court in the context of substantive law. It would also be quite complicated to work with two different market definitions – one for substantive law and one for choice-of-law – and, it might be added, a third one for determining jurisdiction under Article 5(3) of the Brussels I Regulation; but that is a whole other story.

See ECJ, C-27/76, United Brands, [1978] ECR 207, para. 44; C-322/81, Michelin, [1983] ECR 3461, para. 26; C-247/86, Alsatel, [1988] ECR 5987, para. 15 and from the Court of First Instance T-504/93, Tiercé Ladbroke, [1997] ECR II-923, para. 102. 40 Cf. Section 33(4) German Act Against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen). It is not the decision as such that is binding but the ‘Feststellung des Verstoßes’, i.e. the establishment of a violation of the law. 41 Cf. Section 5(a) of the United States’ Clayton Act, 15 U.S.C. §16(a) (2000). 42 This author has received a most generous grant from the Swedish Competition Authority to spend the next three years studying private international law aspects of damages actions for breach of EC antitrust rules. The question of the definition of the affected market is one of those that will be dealt with more extensively. 39

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Unfair Competition and Acts Restricting Free Competition 2.

Directly, Substantially and Foreseeably Affected

Article 137(1) of the Swiss PIL code contains a provision that ‘claims founded on restraint of competition shall be governed by the law of the State in whose market the direct effects of the restraint on the injured party occur [emphasis added]’.43 It is also a requirement for the application of U.S. competition law that there be ‘direct, substantial, and reasonably foreseeable effect’ on the U.S. market.44 Similarly, in German competition law there is a requirement that the effect on the German market be direct and substantial for the applicability of German competition law.45 In the Council there was agreement that there should be a recital recalling that the effect on the market has to be direct and substantial. Recital 20 of the Council’s common position of 25 September 2006 also makes clear that the effect on the market of a state must be direct and substantial.46 The European Parliament in its second reading on 18 January 2007 maintained its position from its first reading47 and was opposed to the Article. Thus, the Parliament was logically opposed to any related recital.48 The result of the negotiations in conciliation was to keep a specific rule on antitrust with some important additions concerning multistate damage in paragraph 3(b) that were initiated by the Commission. For reasons not clear to this author, the requirement that an effect on a market be direct and substantial was lost at this point.49 The disappearance from the text could be interpreted a contrario and its deletion would mean that a direct and substantial effect is not needed. Another argument in favour of this interpretation is that paragraph 3(b) allows a plaintiff, in the case of multi-state damage, to base his claim on the law of the forum if the effect of the restriction of competition in that country was direct and substantial. Since this is the only mention of direct and substantial in the text, one could, again ‘Ansprüche aus Wettbewerbsbehinderung unterstehen dem Recht des Staates, auf dessen Markt der Geschädigte von der Behinderung unmittelbar betroffen ist.’; ‘Les prétentions fondées sur une entrave à la concurrence sont régies par le droit de l’Etat sur le marché duquel l’entrave produit directement ses effets sur le lesé.’; ‘Le pretese derivanti da ostacoli alla concorrenza sono regolate dal diritto dello Stato sul cui mercato il danneggiato è direttamente colpito.’ 44 Cf. Restatement (Third) of the Foreign Relations Law of the United States § 403 (a). 45 See REHBINDER E., ‘§ 98 Abs. 2’, in: IMMENGA U./MESTMÄCKER E.-J., GWB Kommentar zum Kartellgesetz, 2. Aufl., München 1992, p. 2217–2297, at p. 2237 et seq. (para. 73 et seq.). 46 Common Position (EC) 22/2006 adopted by the Council on 25 September 2006, OJ C 289 E, 28.11.2006, p. 68. 47 Supra (note 3). 48 P6_TA(2007)0006, 18.1.2007. 49 But we strongly suspect that it was simply overlooked when the recital was redrafted to reflect the changes made in relation to restrictions of competition with multi-state effects. 43

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Michael Hellner a contrario, draw the conclusion that in all remaining cases there is no such requirement. It is submitted that this would not be a very useful interpretation even though there is certain logical and textual merit to it. Firstly, the requirement that the effect be direct and substantial is one of public international law and deals with the rights of states to apply their competition laws to restrictive acts. It would be a violation of public international law to assume prescriptive jurisdiction over anticompetitive acts with only very remote effects on the market of the legislating state.50 The reader should also bear in mind that the so called extraterritorial application of competition law was quite controversial some decades ago and there was strong resistance to the so called effects doctrine.51 Generally speaking then, if the choice-of-law rule would lead to the application of the law of a country even when the effect on its market is indirect and/or insubstantial it would lead to the application of a rule that normally would (should!) not be territorially applicable. That would either just be a bad idea or this would have to be taken into consideration and the rule would not be applied anyway.52 The second more down to earth question is what ‘direct and substantial effect’ actually means in a concrete case. Sometimes a requirement that the effect be foreseeable or even intended is built into the concept of directness.53 This author would oppose that interpretation since there is no support for it in any text on Article 6 that was discussed in negotiations leading up to the adoption of the Regulation, and furthermore, the requirement of intent is more relevant to substantive law than to private international law. Foreseeability is used in Article 5(1) on product liability but not elsewhere. One could a contrario deduce that it is not a requirement under Article 6. Having said this, it is not entirely easy to determine what constitutes a ‘direct and substantial effect’ in a concrete case. If one follows the previously disSee Art. 5 of the Resolution adopted at the 55th Conference of the International Law Association in New York on Rules on State Jurisdication in connection with Restrictive Trade Practices; MEESEN K. M., ‘Antitrust Jurisdiction under Customary International Law’, in: Am.J.Int.Law 78 (1984), p. 783-810, at p. 800. For a very lucid background of the effects principle and early attempts at jurisdictional restraint see GERBER D. J., ‘Beyond Balancing: International Law Restraints on the Reach of National Laws’, in: YJIL 10 (1984-85), p. 185221. 51 See in general NEREP E., Extraterritorial Control of Competition under International Law, Norstedts, Stockholm 1983; MENG W., Extraterritoriale Jurisdiktion im öffentlichen Wirtschaftsrecht, Springer-Verlag, Berlin/Heidelberg/New York 1994 and SCHWARTZ I./BASEDOW J., ‘Chapter 35, Restrictions on Competition’, in: LIPSTEIN K. (ed.), International Encyclopedia of Comparative Law, Volume III, Private International Law, Tübingen 1995. 52 On the importance of the territorial applicability of ‘self-limiting’ rules in the lex causae see i.a., HELLNER M., ‘Private International Enforcement of Competition Law: The Application of Foreign Competition Law’, in: this Yearbook 4 (2002), p. 257-301, at p. 284 et seq. 53 See e.g. Art. 5 of the ILA New York Resolution (note 50). 50

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Unfair Competition and Acts Restricting Free Competition cussed theory of an object of protection the following example could serve as illustration. An export cartel entered into between companies located in state A and aimed at the market of state B would only have direct effect on the market of state B even though this cartel could influence the amount of trade that goes from state A to state B. It is the competition in the market that is protected, not trade flows as such.54 However, this does not correspond to, for instance, the applicability of U.S. antitrust law, which focuses on ‘effects on commerce’ and not on ‘competition’ for its applicability,55 and also not for EC competition law which is applicable if there is an effect on ‘trade between Member States’.56 Nevertheless, it is submitted that, because the text of Article 6 uses the expression ‘market’ and not ‘trade’, this interpretation is to be preferred. Another example, if one chooses to focus on the effect on competition as such and not on the flow of trade, would be a refusal to supply by company A in state X to company B in state Y. The direct effect would be on the market of state Y and the effects on the markets of states Z, Zbis and Zter, to which company B would have sold the product, would be indirect. The requirement that an effect on competition also be substantial is one that is found in the substantive antitrust laws of many jurisdictions. By way of example, the European Court of Justice has several times established that EC antitrust law is not applicable to agreements of minor importance.57 There is also a Commission notice more concretely defining this de minimis principle in terms of annual turnover and market share.58 For several reasons the definition of de minimis in EC competition law cannot simply be transplanted into Article 6 of the Rome II Regulation. First of all, the requirement in Article 6 that a particular restriction of competition be substantial follows from restrictions on prescriptive jurisdiction in public international law. Public international law does not define in detail what the applicability of the antitrust law of a particular state should be. It only sets certain outer limits against abuse of prescriptive jurisdiction. The concept of de minimis in EC law, although attractively concrete, can also not be used since it is a rule that serves to determine, inter alia, when a particular restriction of competition is left to the national law of the Member States. It is submitted that both meanings of substantive effect should be followed. The concept of substantive effect from public international law sets a first thre54 See BÄR R., ‘Internationales Kartellrecht und unlauterer Wettbewerb’, in: SCHWANDER I. (ed.), Beiträge zum neuen IPR des Sachen-, Schuld- und Gesellschaftsrechts. Festschrift für Prof. Rudolf Moser, Zürich 1987, p. 143-178, at p. 166 note 63. 55 See NEREP E. (note 51), at p. 172 et seq. 56 See Article 81(1) EC. 57 See for instance ECJ, C-5/69, Völk v. Verwaecke, [1969] ECR 295 and C-215/96 & C-216/96, Bagnasco (Carlos) v Banca Popolare di Novara and Casa di Risparmio di Genova e Imperia, [1999] ECR I-135. 58 Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 81(1) of the Treaty establishing the European Community (de minimis), OJ C 368, 22.12.2001, p. 13.

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Michael Hellner shold and is embedded in Article 6 itself. The meaning of the concept in the applicable national law is entrenched in Article 15 on the scope of the applicable law, in particular lit. a. As stated earlier, it does not make sense to apply a law, which according to its own scope of application, is not applicable. Although we have dealt with the concept of direct effect in the context of defining the market for antitrust law infringements, it is also arguably relevant in the area of unfair competition.59 However, it is doubtful whether a particular act of unfair competition also has to be substantial.60 It was never discussed in negotiations and is particularly questionable in cases where the act of unfair competition affects the interests of a specific competitor and not the market as such. In the 1983 Cambridge Resolution of the Institut de droit International on the Conflict-of-Laws Rules on Unfair Competition there is in Article II a requirement of foreseeability. However, according to this author, such a requirement cannot be upheld in the application of any rule under the Rome II Regulation with the exception of Article 5.

B.

Effect on the Market in Several Countries

At the end of negotiations, in conciliation between the Council and the European Parliament, an additional rule was included at the initiative of the Commission. Article 6(3)(b) now stipulates that if the markets of several countries are affected by a restriction of competition a plaintiff may select to base his claim on the law of the forum if: a) he brings suit in the defendant’s domicile; and b) the market of the forum is among those states directly and substantially affected by the restriction of competition. If a plaintiff sues several defendants in that court, he may chose to base his claim on the law of the forum if the claim against each of the defendants includes a claim based on a direct and substantial restriction of competition on the market of the forum. The expression ‘that court’ would have to be understood as meaning the court of one of the defendants’ domicile and not all of them. Otherwise the rule would make no sense. This corresponds to the rule in Article 6(1) of the Brussels I Regulation,61 according to which several defendants may be sued in the domicile of a single defendant if there are sufficient grounds to hear and determine the claims together. Even if several of the defendants are domiciled outside the Member States, and jurisdiction is assumed not according to the Brussels I Regulation but according to national law, it is still necessary that at least one of the defendants be 59 For the same opinion concerning Swiss law, where there is an explicit requirement of direct effect in Article 137 IPRG on restrictions of competition but not in Article 136 IPRG on unfair competition see BÄR R. (note 54), at p. 152. 60 See DREXL J. (note 28), at p. 800 (para 111). 61 Council Regulation (EC) 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ L 12, 16.1.2001, p. 1.

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Unfair Competition and Acts Restricting Free Competition domiciled in the country of the forum (a Member State) for the rule to be applicable. Claims for damages for violations of antitrust rules will very often involve damage arising out of restrictions of competition on several markets. This is particularly true when the damage arises from a violation of EC antitrust law, which is only applicable if it may affect trade between Member States. In cases where the Brussels I Regulation is applicable, the claimant has several options. One option is to sue at defendant’s domicile according to Article 2. That court will have jurisdiction to determine the entire case regardless of whether the restriction of competition has had effect on the markets of several countries. In this case the rule in Article 6(1)(b) serves to facilitate proceedings by allowing for the application of one single law to all restrictions of competition. Not only is the parallel application of several laws in one single case very complicated, but it can also be quite difficult to ascertain what damage has been suffered on each individual market. If there are several defendants, the claimant will most likely want to join the claims into one single action. Article 6(1) of the Brussels I Regulation allows for this ‘provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings’. This will be the case if for instance the claim is based on a cartel to which the defendants where parties and the cartel involved the markets of several countries. Another option that the claimant has is to sue at the place where the harmful event occurred according to Article 5(3) of the Brussels I Regulation. Following the case law of the European Court of Justice he can choose to sue in either: 1) the jurisdiction where the act giving rise to the damage occurred; or 2) the place where the damage occurred.62 Suing at the place of the act will, particularly in economic torts such as antitrust, very often coincide with the place of habitual residence of the defendant. If there are several defendants that have all acted on one and the same place with effect in several countries it would allow for proceedings against them to be joined.63 For such cases Article 6(3)(b) of the Rome II Regulation does not allow for the application of one single law. In our opinion there would have been some merit in allowing for this also in these cases. Admittedly, however, the number of cases will probably be so low that it does not justify a particular rule since the place of acting mostly will coincide with the place of habitual residence of the defendant (unless there are several places of business of a particular company). ECJ, C-21/76, Bier, [1976] ECR 1735. An interesting question is where the act giving rise to damage occurred in the case of a cartel agreement entered into in a particular country between several companies from different countries – in the country in which they entered into the cartel agreement or in their respective home countries in which they applied the agreement, or in both? For a general critique of the place of the commission of the tort as a basis for jurisdiction in competition law claims see FITCHEN, J., ‘Allocating Jurisdiction in Private Competition Law Claims within the EU’, in: Maastricht Journal of European and Comparative Law 13 (2006), p. 381-401, at p. 393 et seq. 62 63

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Michael Hellner If the claimant chooses to sue where the damage occurred the jurisdiction of that court will be limited to the damage that occurred to the market in its jurisdiction.64 For this reason it is unlikely that a claimant will want to use this ground for jurisdiction in other cases than when all, or practically, all damage has arisen in one single country and that country coincides with the domicile of the claimant. Unless the rules on jurisdiction were changed, it would make little sense to introduce the possibility for the application of one single law for such cases. Finally, in quite a few cases there will be a contractual relationship between the claimant and the defendant.65 The Courage case,66 in which the European Court of Justice determined that there is a duty for Member States to provide the remedy of damages for violations of Community competition law, was a case of an exclusive beer purchase agreement. In such cases there will frequently be a choice of court clause that extends to all claims related to the performance of the contract. If the clause is not held unenforceable or void, it will fix jurisdiction even if the plaintiff sues in tort. Since such clauses frequently will award jurisdiction to the courts of the domicile of the tortfeasor, the situation in respect of Article 6(3)(b) of the Rome II Regulation is the same as if Article 2 is the basis for jurisdiction. Originally, the Commission’s DG Competition asked for the application of the law of the forum in all cases giving rise to a non-contractual obligation stemming from an act contrary to Articles 81(1) and 82 EC (but they acknowledged that this would be inappropriate for national antitrust law).67 The main difference between that proposal and the final adopted text lies in cases where the claimant brings suit in the forum where the act giving rise to damage occurred. He would, if the law of the forum were always applied, have had the possibility of applying this law to all claims and not be limited to cases where the country of the forum was also the domicile of one of the defendants. Another difference is that in the adopted text the possibility to ask for the application of the law of the forum is open also when the restriction of competition affects the market of a third country, or when the act or omission is contrary to national antitrust law but not to EC competition law.68

ECJ, C-68/93, Shevill, ECR [1995] I-415. BASEDOW J. (note 21), at p. 212 refers to such situations as ‘transactional’. 66 ECJ, C-453/99, Courage, ECR [2001] I-6297. 67 In a note from the DG Competition dated 16 December 2004. See BASEDOW, J., supra (note 21), at p. 239 et seq. for a plaidoyer against different choice-of-law rules for national and EC antitrust law. 68 This latter situation is foreseen in Article 3(2) of Council Regulation (EC) 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ L 1, 4.1.2003, p. 1, but has to the knowledge of this author found little or no practical use. 64 65

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Unfair Competition and Acts Restricting Free Competition

V.

Unfair Competition, Restriction of Competition Issues of Characterisation

A general problem with the Rome II Regulation is that there are several types of non-contractual obligations that either can mean different things in different legal systems or are virtually unknown to some. For example, whereas the concept of unjust enrichment is widely used in German law, it is virtually non-existent in Swedish law (with the most notable exception of condictio indebiti).69 This problem of characterisation is to some extent also present when determining the delimitation between the Rome I Regulation and the Rome II Regulation. Pre-contractual liability would probably be the clearest example. Does culpa in contrahendo lead to a contractual or a non-contractual obligation?70 It is most likely that the European Court of Justice will adopt an autonomous method of characterisation, just as has been the case with the Brussels I Regulation. Concepts such as product liability, environmental damage, unjust enrichment, unfair competition and restrictions of competition will have a particular meaning for the purposes of the Rome II Regulation that will draw inspiration from, but be formally independent of, their meaning in the laws of the Member States.71 That this is intended is evident from the attempts to outline the meanings of certain non-contractual obligations in the recitals of the Regulation. A.

Unfair Competition

The first problem in connexion with Article 6 in particular is that unfair competition is an area of law that is virtually non-existent as a general tort in several jurisdictions, such as for instance in English law.72 And even for those Member States that do know unfair competition as a field of their domestic law, the concepts differ quite substantially. Secondly, there is a certain overlap between the law of unfair competition, at least as known in several Member States, and the law against restrictions on competition. Both can be simultaneously applicable to one and the same activity.

See case NJA 1999, p. 575 in which the Swedish Supreme Court declared that the basis for condictio indebiti was unjust enrichment. 70 The solution has been to follow the case law of the ECJ in case C-334/00, Tacconi, [2002] ECR I-7357, concerning the delimitation between Article 5(1) and (3) of the Brussels I Regulation, viz. that pre-contractual liability is non-contractual. See Article 12 of the Rome II Regulation and Article 1(2)(j) of the Rome I Regulation. 71 It is this author’s belief that the work of the Study Group on a European Civil Code on Principles of European Law will be very influential in this aspect. 72 See the position of the House of Lords that was for reasons of characterisation opposed to the rule. HOUSE OF LORDS, European Union Committee, 8th Report of Session 2003-04, The Rome II Regulation, Report with Evidence, HL Paper 66, p. 34 et seq. 69

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Michael Hellner We know very little of what meaning the ECJ in the end will attach to a concept such as unfair competition. That a relatively wide meaning is intended can be assumed by reading recital 21, which speaks of a conflict-of-law rule that ‘should protect competitors, consumers and the general public and ensure that the market economy functions properly’. Article 10bis of the 1883 Paris Convention for the Protection of Intellectual Property, to which all EU Member States are parties, could serve as a point of departure. According to paragraph 2 of that provision ‘[a]ny act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition’, which is illustrated by examples in paragraph 3: (i) all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor; (ii) false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor; (iii) indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods. These examples are by no means exhaustive and further inspiration can be sought in, for example, Article 1 of the 1983 Cambridge Resolution of the Institut de droit International on the Conflict-of-Laws Rules on Unfair Competition that seeks to illustrate Article 10bis. The main additions in relation to the Paris Convention are improper appropriation of a competitor’s efforts, unfair price competition and improper interference with a competitor’s business. In the Explanatory Memorandum to its proposal the Commission lists as examples ‘acts calculated to influence demand (misleading advertising, forced sales, etc.), acts that impede competing supplies (disruption of deliveries by competitors, enticing away a competitor's staff, boycotts), and acts that exploit a competitor's value (passing off and the like)’.73 These examples all lie within the scope of the 1983 Cambridge Resolution. Here, however, we are leaving the area of consensus and it will be very interesting to see how the Court of Justice will interpret the rule in the future. For instance, unfair price competition does not exist in Swedish law (so long as it does not constitute predatory pricing and is contrary to the law against restrictions of competition) and improper interference with a competitor’s business, to the extent that it gives rise to any non-contractual obligation at all, would largely be characterised as a general tort and not as unfair competition. The problems of characterisation of unfair competition arise mainly in determining the relationship to: a) the general rule in Article 4; b) defamation and its exclusion from scope in Article 1(2)(g); c) intellectual property and Article 8; and d) restrictions of competition in Article 6(3). We will come back in particular to 73

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Unfair Competition and Acts Restricting Free Competition the relationship between Article 6(1) and (2) on unfair competition and Article 6(3) on restrictions of competition. B.

Restrictions of Competition

There is a definition of what constitutes a restriction of competition in recital 23, which refers to ‘prohibitions on agreements between undertakings, decisions by associations of undertakings and concerted practices’ and ‘the abuse of a dominant position’ and explicitly to Articles 81 and 82 EC and the law of the Member States. The definition is wide and its main purpose is to include actions for damages for violations of EC antitrust law within its scope. A question that begs an answer is whether actions for damages by aggrieved competitors against the recipient of unlawful state aid would fall under Article 6(3) or under the general rule in Article 4. Both antitrust and state aid are under the same chapter, viz. ‘rules on competition’ in the EC Treaty and serve the same purpose. It would, therefore, make sense to apply the same choice-of-law rule. C.

Unfair Competition or Restriction of Competition or Both?

There are a number of situations in which a particular behaviour could violate rules against unfair competition as well as rules against restrictions of competition.74 Examples would include various kinds of unfair price competition or a concerted boycott. It is clear from recital 9 to Regulation 1/2003 that a parallel application of national rules against unfair competition and Community antitrust law is foreseen.75 Against this background it is not likely that the European Court of Justice would give the two concepts an interpretation that would exclude a certain amount of overlapping. If and when there is an overlap, and when this overlap would lead to a difference in the applicable law, this will have to be accepted as an unfortunate consequence of the drafting of the rule.76 The applicant will have the possibility to base his claim on either rules against unfair competition or restrictions of competition (or both) according to what is most favourable to him. This will largely depend on the standpoint of the applicable law on issues such as standing, calculation of damages etc. The case in which an applicant in one and the same action will base his claim on both unfair competition and antitrust, and this would lead to the application of different laws for the two torts, will most likely be rare, but is conceivable.77 74 See GERBER D. J., Law and Competition in Twentieth Century Europe: Protecting Prometheus, Oxford 1998, at p. 34 et seq. for the roots of European laws against restrictions of competition in concepts of unfair competition. 75 Supra (note 68). 76 Hoping that this would not become the case BASEDOW J. (note 21), at p. 240. 77 See for Swiss law VISCHER F. (note 29), at p. 1540 et seq. (para. 10) and for German law DREXL J. (note 30), at p. 800 (para. 111).

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THE LAW APPLICABLE TO CROSS-BORDER DAMAGE TO THE ENVIRONMENT A COMMENTARY ON ARTICLE 7 OF THE ROME II REGULATION Thomas KADNER GRAZIANO∗

I. II. III. IV. V. VI.

VII.

Freedom of Choice (Art. 14) Law of the Country in which the Damage Occurs (Art. 7, First Part) Option to Choose the Law of the Country in which the Event Giving Rise to the Damage Occurred (Art. 7, Second Part) Injunctions Effects of Administrative Authorisations Abroad The Qualification of Claims by Public Authorities A. The Problem: Clean-Up Costs Incurred by Public Authorities B. ‘Civil Matters’ in the Sense of the Brussels I and Rome II Regulations 1. Preliminary Observations 2. Proposal for a Solution Conclusion

Under the Rome II Regulation, several connecting factors come into play for determining the law applicable to cases of cross-border damage to the environment.1 The following contribution presents these connecting factors and undertakes to provide some guidelines for their interpretation and application (I-IV). The contribution further addresses some highly topical issues, such as the effects that administrative authorisations permitting polluting activities under foreign administrative law may have on claims for cross-border environmental damage (V), and the question of whether claims for the recovery of clean-up costs incurred by public authorities fall under the Brussels I and Rome II Regulations (VI). Under many domestic liability systems, cases of environmental liability are governed by strict liability. Recital 11 of the Rome II Regulation makes sure that ∗ Professor of Law, University of Geneva; Visiting Professor at the University of Exeter, School of Law (2007-2008). 1 For the solutions in force in Europe prior to the entry into force of the Rome IIRegulation, see KADNER GRAZIANO TH., Gemeineuropäisches Internationales Privatrecht, Tübingen 2002, p. 236 et seq. and 194 et seq.; KADNER GRAZIANO TH., Europäisches Internationales Deliktsrecht, Tübingen 2003, p. 62 et seq. and p. 50 et seq.; KADNER GRAZIANO TH., La responsabilité délictuelle en droit international privé européen, Bâle 2004, p. 60 et seq. and p. 50 et seq.

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Printed in Germany

Thomas Kadner Graziano ‘for the purposes of this Regulation non-contractual obligations’ are to be ‘understood as an autonomous concept’ and that the ‘conflict-of-law rules set out in this Regulation […] also cover non-contractual obligations arising out of strict liability’.

I.

Freedom of Choice (Art. 14)

According to Art. 14 of the Rome II Regulation, the parties may agree to submit their non-contractual obligations to the law of their choice. Parties in cross-border environmental disputes may therefore firstly consider reaching an agreement as to the law applicable to their relationship. The first task for the Courts will therefore be to examine if a choice of law has been made under Art. 14. In what is probably the most famous precedent in cross-border environmental case-law in Europe, the case Bier v. Mines de Potasse d´Alsace, the Dutch claimant and the French defendant chose Dutch law to govern their relationship before the courts in the Netherlands.2 They hereby made sure that the Dutch court of appeal and the Dutch supreme court (Hoge Raad) would have the capacity to review the application of the law, which under Dutch law is possible where Dutch law is applied but not where a case is governed by foreign law (i.e. French law).3

II.

Law of the Country in which the Damage Occurs (Art. 7, First Part)

If the parties do not reach an agreement on the applicable law, the objective connecting factors of the Rome II Regulation apply. Under the first part of Art. 7, which refers to the general rule for complex torts in Art. 4(1), a claim ‘arising out of environmental damage or damage sustained by persons or property as a result of such damage’ is governed by ‘the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur’. There are many arguments in favour of applying the law of the country in which the damage occurs. Victims will usually expect to be compensated according to the standards of the law of the place where their rights and interests are damaged and consider this solution to be just and equitable. Under this solution, all 2 3

ECJ Case 21/76 Bier v. Mines de Potasse d'Alsace [1976] ECR 1735. See Rechtbank Rotterdam 8. 1. 1979, Nederlandse Jurisprudentie 1979, n° 113

at 15.

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Law Applicable to Cross-Border Damage to the Environment victims that suffer damage in the same country are treated equally. Persons who cause damage in the same country are also treated equally, regardless of the place from which they are acting4. Under this rule, if, for example, an Italian company spills poisonous chemicals into the Mediterranean that later cause damage to the natural environment and, e.g., to the fishing and the tourism industries in Corsica5, damage claims will be governed by the law of the place where the damage occurred, i.e. by French law. If a British ferry, a Swedish vessel or a Romanian oil-tanker lose containers with toxic chemicals or other polluting substances and hereby cause damage to the beaches in the Netherlands, or if a ship sinks in a storm in the North Sea and blocks Dutch waterways, the claims for clean-up or removal costs will be governed by Dutch law.6 Under the Rome II Regulation, the application of the law of the country in which the damage occurred does not depend on whether the damaging effect in this country was foreseeable for the defendant, and rightly so. Even though obligations arising out of nuclear damage are not covered by the Rome II Regulation7, the accident in Chernobyl in 1986 has made it perfectly clear that emissions can have very far-reaching damaging effects on the environment; effects can cross numerous national boundaries. In a period in which we are becoming increasingly aware of the effects of global warming, foreseeability is no longer an issue in environmental damage claims.8

See, with further references, KADNER GRAZIANO TH., Europäisches Internationales Privatrecht (note 1), p. 255 and 213 et seq.; LEIBLE S./ENGEL A., 'Der Vorschlag der EGKommission für eine Rom II-Verordnung', in: Europäische Zeitschrift für Wirtschaftsrecht 2004 7-17, p. 10. 5 See the case scenario in Tribunal de grande instance de Bastia 8. 12. 1976 (Montedison), Recueil Dalloz Sirey 1977, Jur. 427; Cour d'appel de Bastia 28. 2. 1977, Riv. dir. int. priv. proc. 1978, 189; Cour de Cassation 3. 4. 1978, Rev. crit. dr. int. pr. 1979, 858. 6 See the case scenarios in Hof 's-Gravenhage 25. 6. 1996 (Atlantic Steam Navigation t. Staat, or: Gaelic Ferry), Nederlands Internationaal Privaatrecht (NIPR) 1997, n° 211; Rechtbank’s-Gravenhage 7. 3. 1990, NIPR 1991, 163 (Staat t. Gorthon Lines); Rechtbank Rotterdam 15. 3. 1991, Nederlandse Jurisprudentie 1992, n° 91. 7 Art. 1(2)(f) of the Rome II-Regulation. 8 For a critical view on the element of foreseeability, see also VON HOFFMANN B., in: STAUDINGER J., Kommentar zum BGB, Art. 38-42 EGBGB, Neubearbeitung 2001 by VON HOFFMANN B., Berlin 2001, Art. 40 n° 7. For more details and arguments, see KADNER GRAZIANO TH., Europäisches Internationales Privatrecht (note 1), p. 255 et seq. 4

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III. Option to Choose the Law of the Country in which the Event Giving Rise to the Damage Occurred (Art. 7, Second Part) According to the first part of Art. 7 of the Rome II Regulation together with Art. 4(1) to which it refers, the law of the country in which the damage occurred applies. The second part of Art. 7, however, offers the person seeking compensation a unilateral option ‘to base his or her claim on the law of the country in which the event giving rise to the damage occurred’. The European legislator has thus, in derogation from the general rule of Art. 4(1) of the Rome II Regulation, and contrary to the rules governing all other complex torts, provided to apply a rule of ubiquity for cross-border environmental damage. According to the second part of Art. 7, the harmful event is supposed to occur both at the place where it originated from (the place of acting of the tortfeasor) and the place where the protected interest was damaged. The person seeking compensation can opt for the application of the law of the place of acting. This law will then apply instead of the law of the place where the damaging result occurred. In Bier v. Mines de Potasse d´Alsace, the ECJ adopted the rule of ubiquity for the purpose of international jurisdiction under Art. 5.3 of the Brussels I Convention9 and in order to determine the ‘place where the harmful event occurred’. Since the court’s decision in Bier, the rule of ubiquity has been well known throughout Europe. Insofar as it is used to determine the applicable law, the rule is, however, a novelty for many European States.10 The rule of ubiquity has the effect of discriminating against actors who cause damage across borders. Actors who have their place of business in the country in which the damage occurs are submitted to the tort law of this country and this country alone. However, under the rule of ubiquity in the second part of Art. 7, actors causing exactly the same damage in exactly the same place but acting from abroad, can be submitted to the liability standards of either of the two countries, at the choice of the person seeking compensation. In the years preceding the adoption of the Rome II Regulation, numerous authors in different European countries argued in favour of the rule of ubiquity for environmental damage despite the fact that they (sometimes fervently) rejected

The Brussels I Convention is no longer in force except in Denmark. Article 5.3 is now included in the Brussels I Regulation (Regulation 44/2001). 10 The rule of ubiquity was first introduced by German courts in the late 19th century and was later adopted by the German legislator (Art. 40 sect. 1 of the EGBGB) as well as in Italy (Art. 62 sect. 1 of the Italian PIL Act), in the Czech and Slovakian Republics (§ 15 of the respective PIL Acts), in Hungary (§ 32 sect. 1 and 2 of the law-decree on PIL), in Estonia (§ 164 sect. 3 of the Law on the Principles of the Civil Code), in Slovenia (Art. 30 sect. 1 of the PIL Act), in Russia (Art. 1219 sect. 1 of part III of the Civil Code). For environmental torts it was also adopted in Switzerland (Art. 138 of the PIL Act). 9

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Law Applicable to Cross-Border Damage to the Environment rules of ubiquity for other complex torts.11 The European legislator followed these opinions. However, it is clear that the legislator was well aware that the second part of Art. 7 establishes an exception to the general principle governing complex torts under the Rome II Regulation. This explains why, in Recital 25 of the Rome II Regulation, the European legislator expressly provides several arguments for having chosen a rule of ubiquity in Art. 7 including making a reference to Art. 174 of the EC Treaty.12 In order to justify the rule of ubiquity in Art. 7 of the Rome II Regulation, three different arguments are presented. Firstly, the legislator refers to the importance of the environment as confirmed by the EC Treaty. Secondly, it highlights the precautionary principle and the preventive function of liability laws in cross-border situations which, according to the legislator, is at its most effective if the most severe of the possible liability regimes in a given case is applied. Finally, the legislator invokes the ‘polluter pays’ principle. According to the European legislator these arguments ‘fully justify the use of the principle of discriminating in favour of the person sustaining the damage’ in the second part of Art. 7. In doing this, the legislator has openly and transparently balanced these reasons against the principle of equal treatment of potential polluters and has given priority to the former. Before Rome II, in countries in which rules of ubiquity were in force, the courts more often than not applied the law of the country in which the damage occurred. In claims for environmental damage however, the courts repeatedly applied the law of a country in which the event giving rise to the damage occurred (i.e. the law of the place where the tortfeasor had acted) which was more beneficial for the person seeking compensation. For example, in Germany, the courts have repeatedly decided claims for environmental damage caused in Germany but originating from sources in France, not under German law but under French law which 11 See, e.g., BEAUMONT P., ‘Private International Law of the Environment’, in: Judicial Law Review 1995, p. 35 et seq.; BETLEM G./ BERNASCONI CH., ‘European Private International Law, The Environment And Obstacles for Public Authorities’, in: Law Quarterly Review 2006, 124 at p. 138 et seq.: ‘race to the top’ and ‘levelling up’; DROZ G., ‘Regards sur le droit international privé comparé’, Recueil des Cours, Vol. 229 (1991) 9 at 300; JESSERUN D'OLIVEIRA H.U., ‘Le Bassin du Rhin, sa pollution et le droit international privé’, in: La réparation des dommages catastrophiques - les risques technologiques majeurs en droit international et en droit communautaire, Travaux des XIIIes Journées d'études juridiques, Brussels 1990, p. 165 et seq., 167 et seq.; VON BAR CH., Internationales Privatrecht, Vol. II, München 1991, n° 668 f.; KROPHOLLER J., Internationales Privatrecht, 6th ed., Tübingen 2006, § 53 IV 2. a); WANDT M., ‘Deliktsstatut und internationales Umwelthaftungsrecht’, in: RSDIE 1997, 147 at 174; VON HEIN J., Das Günstigkeitsprinzip im Internationalen Deliktsrecht, Tübingen 1999, p. 121 et seq. – Contrast with, e.g., KADNER GRAZIANO TH., Gemeineuropäisches IPR (note 1), p. 252 et seq.; LEIBLE S/ENGEL A. (note 4) p. 10: in favour of the application of the law of the country in which the damage occurred. 12 Title XIX of the EC Treaty, Environment, Art. 174(2) provides: ‘Community policy on the environment shall aim at a high level of protection taking into account the diversity of situations in the various regions of the Community. It shall be based on the precautionary principle and on the principles that preventive action should be taken, that environmental damage should as a priority be rectified at source and that the polluter should pay’.

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Thomas Kadner Graziano was more favourable to the victim.13 The second part of Art. 7 of the Rome II Regulation introduces this option, offering this possibility from January 2009 on at a European-wide level. The ‘question of when the person seeking compensation can make the choice of the law applicable’ should, according to Recital 25 of the Rome II Regulation, ‘be determined in accordance with the law of the Member State in which the court is seized’. So, for the time being, the Regulation does not give the ECJ the power to develop common, autonomous criteria relating to the deadline by which a choice must be made when using the option under the second part of Art. 7 but rather refers this issue to the lex fori. This choice is understandable given that, except for Art. 40 sect. 1(3) of the German EGBGB14, no national legislator had explicitly dealt with this issue in any PIL Act prior to the adoption of the Rome II Regulation. Common European standards were therefore difficult to detect. This referral to the lex fori may, however, lead to some uncertainty as to when the option must be used. Arguably, it could have been left to the courts and ultimately to the ECJ to develop common European standards as for when the choice of law under the second part of Art. 7 has to be made.15

IV. Injunctions Art. 7 of the Rome II Regulation does not make a distinction between claims for damages and claims for other remedies, such as prohibitory or mandatory injunctions. According to Art. 2(2) and Art. 2(3)(a) and (b), the rules of the Rome II Regulation, however, also apply to ‘non-contractual obligations that are likely to arise’, Art. 2(2), and to damage that is likely to occur, Art. 2(3)(a) and (b). In principle, the Regulation therefore governs both compensation and injunctions. In the past, in the field of environmental damage originating from immovable property, injunctive relief was, in some countries, qualified as an issue of property law rather than as an issue of the law of tort or delict.16 Should this also be 13 OLG Saarbrücken 22. 10. 1957, Neue Juristische Wochenschrift 1958, 752; LG Saarbrücken 4. 6. 1961, IPRspr. 1960/61 Nr. 38, confirmed in OLG Saarbrücken 5. 3. 1963, IPRspr. 1962/63 Nr. 38; OLG Karlsruhe 4. 8. 1977, IPRspr. 1977 Nr. 27. 14 The provision reads: ‘Das Bestimmungsrecht kann nur im ersten Rechtszug bis zum Ende des frühen ersten Termins oder dem Ende des schriftlichen Vorverfahrens ausgeübt werden’ (according to this rule, the choice has to be made at an early stage of the procedure before the court of first instance). 15 However, in the end, this was not done. Under the current rule, one can well imagine a situation in which the time period in which this choice must be made has expired under one of the legal systems and not under the other. This may, once again, give incentives for forum shopping. 16 References in KADNER GRAZIANO TH., Europäisches Internationales Deliktsrecht (note 1), p. 60 and fn. 308.

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Law Applicable to Cross-Border Damage to the Environment the case under the Rome II Regulation, these remedies would not qualify as ‘noncontractual obligations’ and would therefore not fall within the scope of the Rome II Regulation. Several reasons can however be put forward for qualifying injunctions in environmental issues as non-contractual obligations (as opposed to obligations under property law) and thus bringing them within the scope of the Rome II Regulation and in particular within the scope of Art. 7. Firstly, in the national legal orders of the Member States of the European Union, the right to compensation and the right to injunctive relief are often closely linked and dependent upon each other. This is why in cross-border situations the two issues should not be treated separately and under different laws but rather be governed by the same law.17 Secondly, taking a comparative look at the existing laws also seems to favour treating both issues under the same law. In those countries in which the issue has been dealt with explicitly, damage claims and injunctions have (finally) been subjected to the laws of the same country. This is true for Germany, where Art. 44 of the EGBGB explicitly submits emissions originating from immovable property to the conflict-of-law rules governing tortious liability18, and it is also the case in Switzerland, where the dominant opinion in legal writing qualifies such issues as belonging to the law of obligations.19 Given the close link between rights for compensation and injunctive relief, the option under the second part of Art. 7 of the Rome II Regulation should not be interpreted as allowing the two remedies to be treated separately, i.e. breaking that link. In principle, it should therefore not be possible to opt for different laws to apply for damages and injunctions.

17 See, e.g., HAGER G., ‘Zur Berücksichtigung öffentlich-rechtlicher Genehmigungen bei Streitigkeiten wegen grenzüberschreitender Immissionen’, in: RabelsZ 1989/53, 293 at 297 et seq.; KERSCHNER F., ‘Zur Haftung nach § 26 Wasserrechtsgesetz und zum Deliktsstatut im IPR’, Juristische Blätter 1983, 337 at 349; WANDT M., in: SZIER 1997, 147 at 174; WOLF U., Deliktsstatut und internationales Umwelthaftungsrecht, Berlin 1995, p. 175 et seq. 18 Art. 44 of the EGBGB refers for ‘Ansprüche aus Beeinträchtigungen, die von einem Grundstück ausgehen’ (emissions that emanate from real property) to Art. 40 sect. 1 of the EGBGB, i.e. the general rule governing torts. 19 BUCHER A./BONOMI A., Droit international privé, 2nd ed., Bâle/Frankfurt a. Main 2004, n° 1113; DASSER F., in: HONSELL H./VOGT N. P./SCHNYDER A., Internationales Privatrecht (Basler Kommentar), 2nd ed., Basel 2007, Art. 138, n° 1; HEINI A., in: GIRSBERGER D./HEINI A./KELLER M./KREN KOSTKIEWICZ J./SIEHR K./VISCHER F./VOLKEN P. (eds.), Zürcher Kommentar zum IPRG, Kommentar zum Bundesgesetz über das internationale Privatrecht (IPRG) vom 18. Dezember 1987, 2nd ed., Zürich 2004, Art. 138 n° 4; DUTOIT B., Commentaire de la loi fédérale du 18 décembre 1987, 4th ed., Bâle/Frankfurt a. Main 2005, Art. 138 n° 4.

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V.

Effects of Administrative Authorisations Abroad

In some countries, in cases in which an administrative authorisation was granted permitting the polluting activity, compliance with the authorisation and with regulatory standards excludes the application of civil law actions altogether. More frequently however, administrative authorisations exclude the possibility to obtain injunctions but do not lead to immunity from damage claims. Under a third type of regime, administrative licences do not affect claims under private law at all.20 The effects of an administrative licence depend on the specific administrative regime in question and the effects of licences do not only differ from one country to another but also within one given legal system.21 Where pollution affects parties across national borders, the polluting activity may be covered by a foreign administrative authorisation or licence. The question then is whether and to what extent the licence should be recognised in other countries and whether it excludes the possibility of obtaining civil law remedies for damages or injunctions in neighbouring countries. Examples in which this issue was raised include the claims brought by German landowners before the German courts against the operator of Zurich airport22 and claims brought before the Austrian courts by Austrian farmers against the construction of a nuclear reprocessing plant in Wackersdorf in Germany.23 The effect of foreign administrative authorisations has proved to be a very delicate issue24 and the Rome II Regulation does not provide an explicit answer to this question either. Under the Rome II Regulation, different situations need to be distinguished. If according to Art. 14 of the Rome II Regulation, the parties agree to their relationship being governed by the law of the country in which the event giving rise to the damage occurred (the country of the place of acting), or if the person seeking compensation opts for the law of this country under the second part of Art. 7 of the Rome II Regulation, this law will govern all issues, i.e. damage claims, injunctions and the effect of administrative licences, without any major problems of coordination. If, however, the parties do not reach such an agreement and if the person seeking compensation does not unilaterally opt for the law of the country in which the event giving rise to the damage occurred, the obligations arising out of damage This was the case, e.g., for the French licence in Bier v. Mines de Potasse d'Alsace, see supra (note 3). 21 See, e.g., STALLWORTHY M., ‘Environmental Liability and the Impact of Statutory Authority’, in: Journal of Environmental Law 2003/15, 3 at 16 et seq.; DASSER F., in: HONSELL H./VOGT N. P./SCHNYDER A. (note 19), Art. 138, n° 19 with further references. 22 LG Waldshut/Tiengen, 11. 2. 1982, Umwelt- und Planungsrecht 1983, 14 (Zürich Kloten airport). 23 OLG Linz 15. 6. 1987, Juristische Blätter 1987, 577, and OGH 20. 12. 1988, Juristische Blätter 1989, 239 (nuclear reprocessing plant Wackersdorf). 24 See with further references KADNER GRAZIANO TH., Gemeineuropäisches IPR (note 1), p. 250 et seq., 256 et seq. 20

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Law Applicable to Cross-Border Damage to the Environment to the environment will be governed by the law of the country in which the damage occurred and the effects of the foreign licence on these actions will need to be determined. In such situations, certain courts in Europe adopted the position that, according to the principle of territoriality, administrative licences deploy their effect only within the territory of the state in which they were issued. These courts have consequently completely ignored foreign licences.25 Completely ignoring foreign licences may, however, lead to the judgment not being recognised or enforced in the country in which the licence was issued as such disregard for the licence may be seen as a violation of this country’s public order.26 It is true that tort cases in which foreign judgements were held to violate the public order are very rare in Europe.27 However, even under the Brussels I Regulation such a refusal remains an option (see Art. 27.1 of the Brussels I Regulation).28 Courts in the Netherlands and Austria have adopted a different position as to the effect of foreign licences.29 According to these decisions, foreign administrative authorisations are to be taken into consideration if a) the emissions are in accordance with public international law, if b) the conditions of foreign law to issue such licences are similar to the conditions existing for such licences under the lex fori, and if c) the party seeking compensation or an injunction has had the chance to participate, to be heard and to raise objections in the administrative procedure that led to the issuing of the licence.30 These decisions of Dutch and Austrian courts should be regarded as sources of inspiration for the solution of the problem under the Rome II Regulation. On the level of the substantive law applicable under the Rome II Regulation, licences granted under foreign law should be taken into consideration as local data and a matter of fact if they fulfil the requirements established by the case-law mentioned

25 BGH 10. 3. 1978, IPRspr. 1978, n° 40; OLG Saarbrücken 22. 10. 1957, Neue Juristische Wochenschrift 1958, 752 at 754. 26 OGH 13. 1. 1988, Juristische Blätter 1988, 323 (Chernobyl): ‘Die aufwendige Schöpfung von Urteilen, die nicht mehr sind, als ein wertloses Stück Papier, gehört nicht in den Aufgabenbereich der inländischen Gerichtsbarkeit’ (Translation: It is not the task of the domestic courts to produce judgements that aren't worth more than the paper they are written on.) See for a critical analysis also HAGER G., RabelsZ 1989/53, 293 at 302 et seq.; WANDT M., RSDIE 1997, 147 at 168 et seq. 27 For references, see KADNER GRAZIANO TH, Gemeineuropäisches IPR (note 1), p. 406 et seq. 28 In the case-law of European courts, it seems that no case has ever been reported in which a claim for an injunction against a polluting activity in a foreign country has been successful. On the contrary, there are several cases in which damage claims have been successful. 29 Rechtbank Rotterdam 16. 12. 1983, Nederlandse Jurisprudentie 1984, n° 341 at 8.7; OLG Linz 15.6.1987, Juristische Blätter 1987, 577, and OGH 20. 12. 1988, Juristische Blätter 1989, 239. 30 OLG Linz, Juristische Blätter 1987, 577 at 579.

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Thomas Kadner Graziano above.31 If necessary, the applicable national liability laws would need to be adapted accordingly.

VI. The Qualification of Claims for Compensation by Public Authorities Another question concerns the qualification of claims for compensation for cleanup costs or the costs of preventive measures incurred by public authorities. This issue has become even more important since the 2004 ‘Directive on environmental liability with regard to the prevention and remedying of environmental damage’32 gave the right to recover clean-up costs exclusively to public authorities without providing for specific procedures to bring such claims against parties that have caused such damage from abroad.

A.

The Problem: Clean-Up Costs Incurred by Public Authorities

If a person sustains damage to his health or property as a result of environmental damage, he or she will, under the tort law systems of practically all Member States of the European Union, be entitled to claim compensation under certain circumstances. For situations in which there has been no damage to private property as such, most Member States of the EU grant public authorities the right to take preventive action and, under certain circumstances, grant the right to claim the cost of the clean-up operation from the person who caused the damage. The 2004 European Directive on environmental liability also grants public authorities the right to recover such costs from the person who caused them. The Commission first considered giving similar rights to private parties, in particular to environmental associations which would have been particularly competent and apt 31 See the groundbreaking ideas put forward by: STOLL H., ‘Internationales Sachenrecht’, in: STAUDINGER J., Kommentar zum BGB, Internationales Sachenrecht, Bearbeitung 1996 von Hans Stoll, Berlin 1996, at n° 231 et seq., 237, 240; STOLL H., ‘Diskussionsvotum’, Berichte der Deutschen Gesellschaft für Völkerrecht 32, 1992, p. 372; see also VON BAR CH., IPR (note 11), at n° 717; KREUZER K., Berichte der Deutschen Gesellschaft für Völkerrecht 32, 1992, p. 290 et seq. (an issue of the substantive law of tort, i.e. of the lex causae); the dominant opinion in Switzerland is also in favour of taking foreign licences into consideration at the lex causae level (Datums-Theorie), DASSER F., in: HONSELL H./VOGT N P./SCHNYDER A. (eds.), Kommentar zum schweizerischen Privatrecht, Internationales Privatrecht, 2nd ed., Basel/Frankfurt a. Main 2007, Art. 138 n° 15; BUCHER A./BONOMI A. (note 19), n° 1115; for the Netherlands, see BETLEM G., Civil Liability for Transfrontier Pollution, London/Dordrecht/Boston 1993, p. 178 et seq. 32 Directive 2004/35/CE of the European Parliament and of the Council of 21 April 2004 on environmental liability with regard to the prevention and remedying of environmental damage, OJ L 143/56 of 30. 4. 2004.

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Law Applicable to Cross-Border Damage to the Environment to enforce these rights. The Commission finally decided, however, to rely exclusively on public authorities. If a person has caused damage to the environment across a national border and if a public authority in the country in which the damage occurred intervenes to remedy the damage and claims compensation for such costs, the question then is whether the international jurisdiction and the applicable law are to be determined according to the Brussels I and Rome II Regulations, or whether the issue is a matter of public law and consequently does not fall within the scope of either Regulation. The fact that the Directive on environmental damage gives recovery rights exclusively to public authorities makes the issue of the applicable rules to cross-border actions for the recovery of such costs highly topical today.

B.

‘Civil Matters’ in the Sense of the Brussels I and Rome II Regulations

Whether the Brussels I and Rome II Regulations apply to actions brought by a public authority depends on whether the issue is a ‘civil’ or ‘commercial’ matter in the sense of Art. 1(1) of the Brussels I Regulation and of Art. 1(1) of the Rome II Regulation.

1.

Preliminary Observations

In dealing with this question, several preliminary observations must be made. First of all, the fact that a claim is brought by a public authority does not in itself exclude it from falling into the scope of application of the Brussels I and Rome II Regulations.33 Secondly, the ECJ has, in a well-established line of precedents, ruled that the concept of ‘civil and commercial matters’ in Art. 1(1) of the Brussels I Regulation ‘must be regarded as an independent concept which must be construed with reference first to the objectives and scheme of the [Regulation] and secondly to the general principles which stem from the corpus of the national legal systems’.34 Cases in which ‘the public authority acts in the exercise of its powers’ are excluded from the scope of the Regulation(s).35 Thirdly, according to Recital 7 of the Rome II Regulation, the ‘substantive scope and the provisions of this Regulation should be consistent with Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I) and the instruments dealing with the law applicable to contractual obligations.’ The Brussels I, Rome I, and Rome II Regulations should therefore be construed in accordance with one another. What is more, in environmental liability issues the See, e.g., ECJ Case 29/76 LTU v. Eurocontrol, ECR 1976 p. 01541, at n° 4. Since ECJ Case 29/76 LTU v. Eurocontrol, ECR 1976 p. 01541, at n° 3, 5; quote from: ECJ Case 814/79, Netherlands v. Rüffer, ECR 1980 p. 03807, Summary at n° 1. 35 ECJ Case 29/76 LTU v. Eurocontrol, ECR 1976 p. 01541, at n° 4, 5. 33 34

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Thomas Kadner Graziano interpretation of these regulations should also be in accordance with the 2004 Directive on environmental liability. A fourth aspect to be taken into consideration is that Art. 2 of the EC Treaty counts the protection of the environment among the fundamental principles of the EU36 and Art. 174(2) of the EC Treaty expressly adopts the ‘polluter pays’ principle.37

2.

Proposal for a Solution

According to a well-established line of precedents of the ECJ, cases ‘where the public authority acts in the exercise of its powers’ are excluded from the scope of the Regulation(s).38 In several decisions, the ECJ has given guidelines as to when a public authority is to be regarded as acting in the exercise of its powers. In the case Netherlands v. Rüffer39 a German boat had collided with a Dutch motor vessel and had sunk in a public waterway. An international treaty between Germany and the Netherlands provided that the Netherlands were to be responsible for the ‘removal of wrecks’ in the waterway. The Dutch authorities had the wreck removed by a Dutch company and claimed compensation for the removal costs from the German owner of the sunken vessel. The Dutch Hoge Raad (Supreme Court) referred the issue to the ECJ in order to clarify whether the claim for redress was a ‘civil and commercial matter’ under Art. 1 of the Brussels I Convention (now: the Brussels I Regulation). The ECJ held that if a State removes ‘a wreck in a public waterway, administered by the State responsible in performance of an international obligation and on the basis of provisions of the national law which, in the administration of that waterway, confer [the State] the status of public authority in regard to private persons’, the State claiming recovery of such costs acts ‘in the exercise of its public authority powers’.40 The fact that the State brought a claim for Part One, Principles, Art. 2 of the EC Treaty reads: ‘The Community shall have as its task […] to promote throughout the Community […] a high level of protection and improvement of the quality of the Environment […]’. 37 Title XIX, Environment, Article 174(2) reads: ‘Community policy on the environment shall aim at a high level of protection taking into account the diversity of situations in the various regions of the Community. It shall be based on the precautionary principle and on the principles that preventive action should be taken, that environmental damage should as a priority be rectified at source and that the polluter should pay.’ In the arguments for the rule of ubiquity in of Art. 7 of the Rome II Regulation, the European legislator expressly refers to Art. 174 of the EC Treaty, see Recital 25 of the Rome II Regulation and the text supra. See also BETLEM G./ BERNASCONI CH., ‘European Private International Law, the Environment and Obstacles for Public Authorities’, in: Law Quarterly Review 2006, 124 at 136. 38 See supra (notes 34 and 35). 39 ECJ Case 814/79, ECR 1980 p. 03807. 40 Supra (note 39), n° 8, 9. For a critical analysis of this case-law, see BETLEM G./ BERNASCONI CH. (note 37), at 132 et seq. 36

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Law Applicable to Cross-Border Damage to the Environment damages once the removal had been effected did not, according to the ECJ, change the character of the measure taken and did not have the effect that it was to be qualified as a civil matter. In later cases, the ECJ took a broader view as to the notion of ‘civil or commercial’ matters in the sense of Art. 1(1) of the Brussels I Regulation. In 1993, the ECJ had to decide on a damage claim brought by the parents of a pupil against a German state-school teacher for having caused the death of their son on a school trip to Italy. The teacher was supposed to have been supervising the pupils, had breached this duty and as a result caused the death of the claimants’ son. In this case, the ECJ held that the claim was a ‘civil matter’ even though the teacher was acting in the capacity of civil servant and even though the case was covered by a scheme of social insurance under public law that, according to German law, excluded a direct damage claim against a teacher.41 The court argued that ‘a teacher in a State school assumes the same functions vis-à-vis his pupils […] as those assumed by a teacher in a private school’ and held that ‘the right to obtain compensation for injury suffered as a result of conduct regarded as culpable in criminal law is generally recognized as being a civil law right’.42 In recent judgements the ECJ held that actions against individuals for the recovery of expenses made by public authorities may well fall within the scope of the Brussels I Convention/Regulation.43 In the Baten case, a community in the Netherlands had paid monthly contributions to a woman under Dutch social assistance laws. These laws provided a right to recovery for the amounts paid ‘from persons who do not, or do not fully, meet their maintenance obligations following a divorce’ and, accordingly, the Dutch community claimed recovery from the woman's ex-husband, living in Belgium. The ECJ held that such an action for recovery of sums paid by public authorities, as long as exercised in accordance with the rules and principles governing actions for recovery between private parties, is well within the scope of application of the Brussels I Regulation.44 If this principle is applied to the field of environmental law, an action for recovery of expenses incurred for cleaning up the environment or for preventing harm should be regarded as a ‘civil matter’ as long as the recovery is in accordance with the principles governing the right of recovery between private parties. Moreover, in the field of environmental law, the European legislator has created important new landmarks that today have to be taken into consideration when constructing the concept of ‘civil and commercial matters’ in the European conflict of laws. A first landmark is the 2004 Directive on environmental liability. On the one hand, Art. 3(3) of the Directive provides that ‘[w]ithout prejudice to relevant ECJ Case C-172/91 Volker Sonntag, ECR 1993 I-01963 at n° 20-22. Supra (note 41), at n° 19. 43 ECJ Case C-271/00 Baten, ECR 2002 I-10489. 44 Supra (note 43), at n° 34-37. See also BETLEM G./BERNASCONI CH. (note 37), at 134: ‘The parallel with the Rüffer scenario where a right of recourse for cost recovery of removal of a wreck was at issue is striking’. 41 42

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Thomas Kadner Graziano national legislation, this Directive shall not give private parties a right of compensation as a consequence of environmental damage or of an imminent threat of such damage.’ On the other hand, Art. 15(3) of the Directive is based on the idea that a State can also recover costs incurred under the Directive against parties having caused the damage from abroad and being domiciled in a foreign country. Art. 15(3) provides that ‘[w]here a Member State identifies damage within its borders which has not been caused within them […] it may seek, in accordance with this Directive, to recover the costs it has incurred in relation to the adoption of preventive or remedial measures’.45 The Directive does not establish a specific procedure for the recovery of such costs but states in its Recital 10(2) that ‘[t]his Directive, which does not provide for additional rules of conflict of laws when it specifies the powers of the competent authorities, is without prejudice to the rules on international jurisdiction of courts as provided, inter alia, in Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters’, i.e. the Brussels I Regulation. Consequently, according to the European legislator, the right to claim for the recovery of clean-up costs or the cost of preventive measures granted to public authorities under the 2004 Directive on environmental liability need, as far as cross-border claims are concerned, to be constructed as matters falling within the scope of the Brussels I Regulation. Since there is no special regime to enforce cross-border compensation of public authorities, such rights under the Directive would otherwise simply not be enforceable and would risk being a dead letter.46 There are further arguments in support of this view: In certain cases, preventive measures and damage claims following harm to the environment can be brought by individuals or, in some countries, by environmental associations. Such claims are, without any doubt, civil claims in the sense of the Brussels I and Rome II Regulations. The European legislator could very well have extended such remedies when drafting the 2004 Directive on environmental liability. The European legislator considered this option but finally decided to rely exclusively on public authorities. In the 2004 Directive however, the legislator, combined elements of public law with those of private law which has led to the Directive having a somewhat hybrid character.47 The fact that the rights for compensation and to recovery 45 Art. 15(3) of the Directive reads: ‘Where a Member State identifies damage within its borders which has not been caused within them it may report the issue to the Commission and any other Member State concerned; it may make recommendations for the adoption of preventive or remedial measures and it may seek, in accordance with this Directive, to recover the costs it has incurred in relation to the adoption of preventive or remedial measures’. 46 See BETLEM G./BERNASCONI CH. (note 37), at 128. 47 See, e.g., DE SADELEER N., ‘La directive 2004/35/CE relative à la responsabilité environnementale: avance ou recul pour le droit de l’environnement des Etats Membres?, in: VINEY G./DUBUISSON B. (eds.), Les responsabilités environnementales dans l’espace européen, Bruxelles/Zürich/Paris 2006, n° 59: ‘Il ressort de notre analyse que la directive 2004/35/CE s’inscrit davantage dans la perspective d’une redéfinition des mesures de police

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Law Applicable to Cross-Border Damage to the Environment of clean-up costs could very well have also been granted to individuals and to environmental associations but were not shows that such measures and claims do not necessarily belong to the sphere where the public authority acts ‘in the exercise of its public powers’ vis-à-vis the polluter and that they are well beyond the sphere of ‘acta iure imperii’. The task of cleaning up the environment (and claiming compensation for the clean-up costs) can be handed over to private parties, just as teaching pupils can be left to private schools.48 Moreover, since the adoption of the Rome II Regulation, several arguments following from this Regulation support this view. Recital 9 as well as Art. 1(1) of the Rome II Regulation exclude ‘administrative matters or […] the liability of the State for acts and omissions in the exercise of State authority (acta iure imperii)’ from the scope of the Regulation. As we have just seen, compensation for environmental harm in cross-border cases is neither an administrative matter nor does it follow from acta iure imperii. Probably the strongest argument in favour of applying the Brussels I and Rome II Regulations to claims brought by public authorities in the field of environmental damage follows from Recital 24 and the first part of Art. 7 of the Rome II Regulation. Recital 24 defines ‘environmental damage’ as an ‘adverse change in a natural resource, such as water, land or air, impairment of a function performed by that resource for the benefit of another natural resource or the public, or impairment of the variability among living organisms’. The Rome II Regulation thus defines ‘environmental damage’ independently of any damage to rights of the individual such as life, health or, in particular, of property. The first part of Art. 7 of the Rome II Regulation confirms that the Regulation applies independent of any damage to property rights of the individual: Art. 7 clearly draws a distinction between ‘a non-contractual obligation arising out of environmental damage’ and a non-contractual obligation arising out of ‘damage sustained by persons or property as a result of such damage’ – and it expressly covers both scenarios. Consequently, the Rome II Regulation covers not only damage to private property rights sustained via the environment, but covers also damage to the environment itself. Currently, individuals can bring claims for pure environmental damage only in certain cases and, on a European-wide level, only to a limited extent.49 The recovery of compensation for damage to the environment through remedies available to private parties is currently only patchy at best. As we have seen, the 2004 Directive on environmental liability in its Art. 11 grants the right to recover damages for pure administrative et, plus particulièrement, de la prise en charge de leur coût par les exploitants. Pour arriver à cette fin, le législateur communautaire a manifestement emprunté largement aux concepts de la responsabilité civile, ce qui a parfois conduit à un étonnant mélange des genres’. 48 See the ECJ’s argument in the Case C-172/91 Volker Sonntag, supra (note 41). 49 For details and different proposal for solutions, see GODT CH., Haftung für ökologische Schäden, Berlin 1997; LEONHARD M., Der ökologische Schaden. Eine rechtsvergleichende Untersuchung, Baden-Baden 1996; KADNER TH., Der Ersatz ökologischer Schäden – Ansprüche von Umweltverbänden, Berlin 1995; SEIBT CH., Zivilrechtlicher Ausgleich ökologischer Schäden, Tübingen 1994.

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Thomas Kadner Graziano environmental harm exclusively to public authorities. As the Rome II Regulation will also cover pure environmental harm, the intention of the legislator of the Rome II Regulation must clearly have been that these claims shall be regarded as ‘civil matters’ that fall within the scope of application of both the Rome II and Brussels I Regulations. Therefore, damage claims brought by public authorities against private parties for cross-border damage to the environment are to be regarded as ‘civil matters’ under both the Rome II Regulation and the Brussels I Regulation. The ECJ will have to take these recent groundbreaking legislative decisions into account when interpreting the notion of ‘civil matters’ in the Brussels I and Rome II Regulations in future cases.50

VII. Conclusion Prior to the entry into force of the Rome II Regulation, several fundamentally different rules were applied to determine the law applicable to cross-border environmental torts. Art. 7 of the Rome II Regulation achieves legal certainty as to the applicable law in cases of damage to the environment for actions for damages and actions for injunctive relief on a European-wide level. Given the fact that the Brussels I and Rome II Regulations have to be constructed in accordance with one another and with the Directive on environmental liability, Rome II does not only contribute to legal certainty as to the applicable law but also leads to important clarifications in matters of international jurisdiction and the recognition and enforcement of judgements in Europe.

50 See also BETLEM G./BERNASCONI CH. (note 37), at 150: ‘we call upon courts to interpret the notion of ‘civil and commercial matters’ so as to include civil law claims by public authorities for the protection of the environment’.

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INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS A COMMENTARY ON ARTICLE 8 OF THE ROME II REGULATION Nerina BOSCHIERO∗

I. II. III. IV. V. VI. VII.

Introduction The Reasons Advocated for Adopting a Uniform Choice-of-Law Rule The Absence of a Real ‘Public’ Private International Law for IPRs The ‘Need’ for an Uniform Conflict-of-Law Rule at the Community Level The Rationale of the Norm in Absence of a Real Risk of Forum Shopping General Features of the Special Rule Conclusion

I.

Introduction

Article 8 of Regulation (EC) No 864/2007 on the Law Applicable to Non-Contractual Obligations – universally known as the Rome II Regulation1 – which lays down a special Community rule for non-contractual obligations arising out of an infringement of intellectual property rights,2 represents the most recent expression

∗

Professor of Private International Law, University of Milan. In O.J. 2007 L. 199, 31 July 2007, p. 40 et seq. The Regulation shall apply from 11 January 2009 (except for article 29, which shall apply from 11 July 2008) in all the Member States (except Denmark, which did not take part in its adoption and, therefore, is not subject to its application (Recital No. 40). 2 The norm follows a unitary ‘holistic’ approach to the issue, only distinguishing between intellectual property rights granted under national law and ‘unitary’ Community intellectual property rights. The applicable law for the former is the universally acknowledged principle of the lex loci protectionis, meaning the law of the country for which protection is claimed. As to the latter, Article 8 paragraph 2 introduces a special choice-of-law rule to fill the gaps left by Community legislation, referring to the law of the country in which the act of infringement of the unitary Community rights was committed (lex loci delicti commissi). Paragraph 3 does not allow the parties to agree on which law will govern their rights and obligations resulting from an intellectual property right infringement, either before or after the infringement. 1

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Nerina Boschiero of a truly regional level ‘public private international law’ for intellectual property.3 The new Regulation has in fact been enacted by the European Community, a unique example of Regional Organization that according to the ECJ constitutes a ‘new legal order’ in international law,4 pursuant to a long series of political and institutional decisions taken by the European Council5 and further endorsed by the Community Institutions (Commission, Council and Parliament).6 The Community’s competence to adopt measures in matters of private international law is 3 For this expression see DINWOODIE G.B., ‘Developing a Private International Intellectual Property Law,’ Draft prepared for Northwestern Colloquium, October 12, 2007, pp. 2, 5 available at . 4 See ECJ, Van Gend & Loos v. Administratie der Belastingen, of 5 February 1963, in: Rec. 1963, p. 3, and Costa v. Enel, Order of 3 June 1964, in: Rec. 1964, p. 1194. 5 See the Presidential conclusion of 16 October 1999 during the Tampere European Council, points 28 to 39, endorsing the principle of mutual recognition of judgments and other decisions of judicial authorities as the ‘cornerstone’ of judicial cooperation in the Union, as well as the ‘Hague Programme’ (adopted by the European Council on 5 November 2004), which expressly required the Community to actively pursue the ‘harmonization’ of the Member States’ conflict-of-law rules regarding non-contractual obligations, in O. J. C 53, 3 March 2005, p. 1 et seq. 6 See the ‘Action Plan’ of the Council and the Commission on how best implement the provisions of the Treaty of Amsterdam on an area of freedom, security, and justice, in: O. J. C 19, 23 November 1999, p. 1 et seq.; see also the ‘Joint Commission and Council programme of measures to implement the principle of mutual recognition of decisions in civil and commercial matters,’ in: O. J., C 12, 15 November 2001, p. 1 et seq. On the historical background of the Regulation and the reconstruction of the efforts at the European level to codify conflict-of-law provisions applicable to non-contractual obligations, see the Explanatory Memorandum to the Proposal for a Regulation of the European Parliament and Council on the Law Applicable to Non-Contractual Obligations (‘Rome II’), COM (2003) 427 final, 22 July 2003, pp. 2-4. See also the following comments on the Proposal: DE VAREILLES-SOMMIÈRES P., ‘Quelques observations sur l’avant-projet de proposition de règlement du Conseil sul la loi applicable aux obligations non contratuelles ‘Rome II’, in: FUCHS A., MUIR WATT H., PATAUT E. (sous la dir. de), Les conflits de lois et le système juridique communautaire, Paris 2004, p. 185 seqq.; KREUZER K., ‘La Comunitarizzazione del diritto internazionale privato in materia di obbligazioni extracontrattuali (‘Roma II’)’, in: PICONE P. (ed.), Diritto internationale privato e diritto comunitario, Padova 2004, p. 421 seqq.; DREXL J., ‘The Proposed Rome II Regulation: European Choice of Law in the Field of Intellectual Property’, in: DREXL J., KUR A. (eds.), Intellectual Property and Private International Law, Heading for the Future, Oxford and Portland, Oregon 2005, p. 151 seqq.; BARIATTI S., ‘La futura disciplina delle obbligazioni non contrattuali nel quadro della comunitarizzazione del diritto internazionale privato’, in: Riv. dir. int. priv. proc. 2005, p. 5 seqq.; CARELLA G., ‘La disciplina internazionalprivatistica delle obbligazioni da fatto lecito nella proposta di regolamento ‘Roma II’, ibidem, p. 25 seqq.; BASEDOW J., DREXL J., KUR A. & METZGER A. (eds.), Intellectual Property in the Conflicts of Laws, Tübingen 2005; MALATESTA A. (ed.), The Unification of Choice of law Rules on Torts and Others NonContractual Obligations in Europe, The Rome II Proposal, Padova 2006; SYMEONIDES S. C., ‘Rome II and Tort Conflicts: A Missed Opportunity’, in: 56 Am. J. Comp. L. 2008, pp. 146; EDITORIAL COMMENTS, ‘Sometimes it takes thirty years and even more…’, in: CML. Rev. 2007, pp. 1567-1569.

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Infringement of Intellectual Property Rights based on an international agreement: the Treaty establishing the European Community, as amended by the Treaty of Amsterdam and the Nice Treaty.7 Article 65 (which is referred to in Article 61 (c)) expressly allows for the adoption of measures ‘promoting the compatibility of the rules applicable in the Member States concerning the conflict of laws and of jurisdiction’ (lett. b) ‘insofar as necessary for the proper functioning of the internal market’ (first part of Article 65).8 The new European conflict-of-law rule on non-contractual obligations arising out of an infringement of intellectual property rights has been enacted for a ‘public purpose’: to meet the ‘need’ created by the proper functioning of the internal market. According to the Community Institutions, this need demands that ‘the conflict-of-law rules in the Member State (…) designate the same national law irrespective of the country of the court in which an action is brought’ (Recital No 6).9 The ratio behind this latest effort to unify the tort based conflict-of-law rules of the Member States is, therefore, the same that inspired all previous Community initiatives in the field of private international law: to enhance the mutual trust among the Member States on which the mutual recognition principle of the Union is based. Given the fact that the ‘Brussels I’ Regulation – which superseded the Brussels Convention – still contains a number of options enabling claimants to bring their proceedings in one Member State rather than another, the absence of any unification of the private international governing non-contractual obligations in civil and commercial matters in the Community has been perceived as favouring forum shopping.10 Therefore, in light of the relevant differences in the substantive scope of the Brussels I Regulation and the current Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Contractual Obligations (Rome I)11 that will supersede the Rome Convention, the In O.J. C 325, 24 December 2002, p. 1 et seq., particularly p. 57 et seq. In general see BOSCHIERO N., ‘La cooperazione giudiziaria comunitaria in materia civile e commerciale’, in: Enciclopedia del diritto, aggiornamento 1, Milano 2007, p. 349 seqq. 8 The second limitation, posed by Article 65, which requires that those measures have ‘cross-border implications’, seems superfluous, since conflict of laws is by definition devoted to cases containing foreign elements. 9 It must be recalled that in its Owusu judgment (case C-281/02, 1 March 2005, in: Rec. 2005, p. I-1383) the Court of Justice had already expressed itself in favor of a Community competence, related to the proper functioning of the internal market, to enact ‘common rules of jurisdiction’ with regard to third countries. For the doubt that erga omnes conflictof-law rules, as those enacted in the Rome II Regulation aren’t really ‘necessary’ for the ‘proper functioning of the internal market,’ and the suggestion that ‘problems and policies involved in jurisdiction and conflicts rules are not necessarily identical; so Owusu is not the end of the story’, see EDITORIAL COMMENTS (note 6) p. 1575. 10 See Explanatory Memorandum (note 6), p. 3. 11 Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Contractual Obligations (Rome I), 15 December 2005, COM (2005), 650 final. The final version of the Rome I Regulation on the law applicable to contractual obligations is now available (in all languages of the EU) in the Register of the Council (doc. PECONS 3691/07 JUSTCIV 334 CODEC 1401of 31 March 2008). According to current sche7

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Nerina Boschiero new common rule on intellectual property rights inserted into the Rome II Regulation should serve the purpose of completing the existing European rules on private international law and international civil procedure. Thus, disputes before the courts of the Member States should be adjudicated according to the same applicable substantive law, irrespective of the country in which the action is brought. This will boost both the foreseeability of solutions and certainty as to the law applicable for settling cross-border disputes within the ‘European area of justice.’12 This essay evaluates whether the Rome II Regulation’s special conflict-oflaw rule for intellectual property right infringement actually fulfils the goal of ‘improv[ing] the predictability of the outcome of litigation, certainty as to the law applicable and the free movement of judgments’ (Recital No. 6) in intellectual property cases. It also assesses the extent to which Article 8 fits ‘into the current mosaic of international and national conflict of laws’ rules’ and ascertains whether or not it solves – or ignores – the difficulties in intellectual property law recently and extensively discussed in doctrine, particularly with regard to (1) the uncertain implications of existing international conventions and (2) the necessity of updating the ‘territorial principle’ to meet the realities of a networked world. Overall, this essay assesses whether it is really possible to speak of an ‘added value’ in Article 8 of the Rome II Regulation.13 The importance of the new rule cannot be underestimated in a panorama characterized by ‘almost’ no ‘public’ private international law for intellectual property. In fact, it represents the most recent expression of a ‘fresh’ awareness of the importance of both closely examining the private international law problems raised by the exercise of intellectual property rights on an international level and developing a truly ‘private international law’ of intellectual property, better adapted than the traditional schemes to the increasingly supranational character of intellectual property rights exploitation.14 The difficulty of formulating appropriate dule the text should be definitely approved by the JHA Council in its meeting of 17/18 April 2008. 12 The complementarity and the need of consistency between this Regulation and the Brussels I Regulation, as well as with the future Community instruments dealing with the law applicable to contractual obligations, is being referred to expressly in Recital No 7. 13 For this expression see PERTEGÁS M., ‘Intellectual Property and Choice of Law Rules’, in: MALATESTA A. (note 6), p. 247 et seq. 14 Private international law and intellectual property law have a long history of neglected relationships. For an historical explanation it is frequently stated that as far back as the late nineteenth century, the vast majority of intellectual property disputes were wholly domestic in nature: ownership or infringement issues did not have the potential of reaching the whole world, concerning mostly parties established within a single national territory and rights conferred by the law of that territory and infringements that took place there. Crossborder or transnational IP disputes involving foreign elements were rare and were resolved by the courts through the standard principles embodied into the multinational treaties establishing an international protection system for intellectual property. Since 1990’s, things have dramatically changed. The international intellectual property law, firmly rooted on the notion of territoriality, started to face new challenges. The digital networked environment

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Infringement of Intellectual Property Rights substantive solutions to be adopted by the international community at large, combined with the persistent diversity of laws in different countries on many issues of intellectual property and the pressing necessity to master the growing problems on a global level,15 have produced as a fundamental consequence the awareness that where harmonization or unification of substantive law cannot be reached, the best approach (or technique) to be followed to avoid contradictory decisions is favouring uniform results in the area of conflict of laws.

II.

The Reasons Advocated for Adopting a Uniform Choice-of-Law Rule

Article 8, which was absent in the preliminary draft prepared in 2002, has been inserted in the Commission’s Proposal published in 2003, after an intense debate that set (in the course of preparatory work) academic contributors against many other commentators (some governments, industry groups, stakeholders). The latter almost unanimously demanded to exclude any IP-issues from the scope of the Regulation in order to preserve the ‘principle of territoriality’ embodied into the nineteenth century international intellectual property system, e.g. the historic multilateral treaties assuring protection for, inter alia, copyright and industrial property, like the Berne Convention for Protection of Literary and Artistic Works of 1886 and the Paris Convention for the Protection of Industrial Property of 1883.16 In the end, the opposite (academic) view prevailed, and a specific article on infringement of IPRs was included in the 2003 Proposal to confirm the ‘territorial principle’ as ‘an exception’ to the basic solutions for non-contractual obligations, which are generally acknowledged (according to the Commission’s opinion, but

(after the satellites) has had the merit to enlighten the ‘international’ aspects of IPRs that have been neglected for too long, by transcending and sweeping the territorialism inherited from the historical roots of intellectual property. It often recognized that the internet has changed the nature of intellectual property litigation by creating the ability for multi-territorial ‘simultaneous’ communication of protected works and trade symbols, resulting in the increased risk of ‘ubiquitous infringements’ of intellectual property rights and, thereby, transnational cases that require courts to adjudicate the effect of foreign activities or to interpret foreign laws. The exponential increase (in the last thirty years) in conflicts involving trans-border elements in the contemporary world characterized by global trade and a global medium, have therefore forced the two areas (private international law and intellectual property law) to confront one another. 15 DESSEMONTET F., ‘International Private Law of Intellectual Property’, in: this Yearbook 2004, p. 70. 16 See the various submissions on the consultations launched by the Commission on the preliminary draft Proposal at .

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Nerina Boschiero without any further ‘explanation’) as incompatible with the specific requirements required in the field of intellectual property rights.17 It is quite impressive that the purpose, the ‘politics,’18 and the effect of the new codified community conflict-of-law rule – resulting from earlier steps that date back almost 30 years (when the E.C. commissioned to Eugen Ulmer an authoritative study on the law applicable to intellectual property rights)19 – has been confined by the Community legislator to a few Recitals and other ‘poor’ materials produced during the Community legislative process, such as an Explanatory Memorandum to an earlier Draft Proposal of the Rome II Regulation.20 This conclusion is especially disconcerting in light of the complexities of the ‘traditional’ territoriality principle21 and the still highly controversial question (in legal doctrine) of how to interpret (from a conflict-of-law’s perspective) the country-of-protection principle, which is universally recognized as underlying the ‘public international law’ of intellectual property. 22 Some explanations of the reasons underlying the choice-of-law approach chosen by the European Institutions for the specific issue of IPR infringement can be found in the Hamburg Group for Private International Law’s Comment of 23 September 2002 on the European Commission’s Draft Proposal, which proved to

See Explanatory Memorandum (note 6), p. 20. On the many facets of the ‘politics’ of intellectual property that dominate any kind of initiatives, including the elaboration and shape of conflict of laws rules and principles in domestic and international contexts, see the exact observations of AUSTIN G. W., ‘Substantive Harmonization and Other Approaches: Intellectual Property Politics and the Private International Law of Copyright Ownership’, in: Brooklyn J. Int’L. 2005, p. 900 seqq. 19 ULMER E., Intellectual Property Rights and the Conflict of Laws, Deventer 1978; ID., La proprietà intellettuale nel diritto internazionale privato, Commissione delle Comunità europee, Bruxelles-Lussemburgo 1980. 20 These materials have been rightly defined as ‘extremely unlikely to prove as helpful’ by DICKINSON A., ‘Cross-Border Torts in EC Court – A Response to the Proposed ‘Rome II’ Regulation’, in: EBLR 2002, p. 370, who also criticized the ‘omission’ of an official Green Paper on the project and/or an Official Report by the experts involved in preparation of this Regulation, explaining in detail the rational of the new Regulation’s rules, like those provided for the Rome, Brussels, and Lugano Conventions, which expanded considerably ‘upon the bare bones of the text’. 21 In general see BOUCHE N., Le principe de territorialité de la propriété intellectuelle, Paris, Budapest, Torino 2002. On the different approaches of scholars, courts, and policymakers to the ‘dominant legal principle’ of territoriality in the choice of law context of copyright infringement see DINWOODIE G. B., ‘Commitments to Territoriality in International Copyright Scholarship,’ Report of the Neuchâtel Study Session of ALAI, 2002, p. 74 seqq. (characterizing these approaches as ‘regressive or nationalistic,’ ‘reformed,’ and ‘internationalist’). 22 For a recent discussion of this point see BOSCHIERO N., ‘Il principio di territorialità in materia di proprietà intellettuale: conflitti di legge e giurisdizione’, in: AIDA 2007, pp. 34-104, particularly p. 42 seqq. 17 18

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Infringement of Intellectual Property Rights be most influential in the negotiation process.23 In suggesting that new Art. 6(a) be inserted into the Draft Regulation on ‘Infringement of Industrial and Intellectual Property Rights,’ the Hamburg Group reminded the European Commission of the wide consensus (at least, among most Member States) for the lex loci protectionis rule (and not the lex loci delicti) as the ‘special’ conflicts rule governing the infringement of national industrial and intellectual property rights, as confirmed by their private international laws. The Group also suggested that no choice-of-rule should have been adopted in contradiction to this principle, which represents the foundation of the substantive public international law on intellectual property, even if not stated ‘in explicit words’ in the international conventions on industrial property rights and still much in dispute regarding other international instruments, in particular for the Berne Convention on copyright law. It is precisely this reason – the persisting uncertainty over the private international law implications of these conventions – that urged the Hamburg Group to support the inclusion of a specific Community choice-of-law rule in favour of the law of the country for which the protection is claimed. The provision governing the relationship of the Rome II Regulation with the existing international conventions (now Article 28), which states that the Regulation ‘shall not prejudice the application of international conventions to which one or more Member States are parties at the time of its adoption and which lay down conflict-of-law rules relating to non-contractual obligations,’ was considered ‘insufficient’ to either ensure the acceptance of a ‘world-wide system of national industrial property rights’ or ‘provide for the non-application of the general rules of the EC Draft proposal.’ 24 The fact that the European Commission simply accepted the Hamburg Group’s reasoning25 does not eliminate the ‘preliminary’ problem that the European

23 HAMBURG GROUP for Private and International Law, ‘Comment of 23 September 2002 on the European Commission’s Draft Proposal for a Council regulation on the Law Applicable to Non-Contractual Obligations,’ in: RabelsZ 2003, p. 1 seqq; also available at: p. 22 et seq., p. 24 et seq. 24 Ibidem, p. 23, p. 25. According to the Hamburg Group, the international conventions in the field of registered rights (the Paris Union Convention for Industrial Property of 1883 in particular) have affirmed without any doubt ‘the authority of the principle of territoriality’, with the private international law consequence that ‘ownership and infringement are a matter for legislation in the country where protection is claimed’. The same argument has been made by the same Group to the Berne Convention, considered analogously built on ‘the principle of territorial protection’, which is mentioned in ‘explicit words’ in its arts. 5. 2 and 14.2 (a). In its comments on art. 8. 1 of the 2003 Draft Proposal, the European Commission adopted this point of view and recalled that both the Paris and Berne conventions are built on the ‘universally recognized principle’ of the lex loci protectionis, and that the rational of the new Community rule is ‘to enshrine’ the same principle. 25 Contra PERTEGÁS M. (note 13), p. 228, in note 14, according to which, by ‘making an explicit choice for a conflict of laws rule for IPR, the European Commission seemed to adhere to the view that no conflict of laws rule may be inferred’ from the existing instruments of substantive public international intellectual property law; ID., ‘Choice of Law and

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Nerina Boschiero Institutions should have investigated more closely: whether or not the international conventions on intellectual property lay down any ‘public’ private international law prescribing rules that compel the choice of a law applicable to the infringement of rights in the field. The answer to this question is obviously necessary to assess the ‘wisdom’ of inserting a new conflict-of-law rule on IPR infringement into the new Community Regulation, as all Member States (bound by or subject to its application) are also parties to these intellectual property international instruments. If the reasoning developed by the Hamburg Group and accepted by the European Institutions is deemed correct, then Article 8.1 – providing for the application of the same rule – could be considered ‘superfluous.’26 Community Regulations do ‘not tak[e] place in a vacuum’:27 if the existing multilateral conventions already solve the private international law issue concerning intellectual property rights infringement by providing for a coherent conflict-of-laws principle, it is rather difficult to see the ‘need’ for a specific Community rule that is in any case destined to be superseded by international norms. Vice versa, if the Hamburg Group and European Commission’s reasoning is wrong, and the international conventions on intellectual property, or at least the Berne convention, provide for a different rule, Articles 8.1 and 8.2 should be considered in flagrant violation of international law. In conclusion, a specific Community choice-of-law rule prescribing the lex loci protectionis principle is justified only if no conflict-of-law rules could be found in the existing instruments of public international law on intellectual property. In any case, regardless of the language of the new Community rules, the new Community specific rule for IPR infringement must comply with the conventional requirements, even if they do not speak to the issue of choice of law.28

III. The Absence of a Real ‘Public’ Private International Law for IPRs Whether and to what extent the substantive principles embodied in these international instruments ordain or imply any particular choice-of-law rules has always been a matter of much debate among academics and national courts, particularly in the field of copyright and related rights, as correctly recognized even by the Ham-

the Forthcoming Rome II Regulation’, in: BASEDOW J., DREXL J., KUR A., METZGER A. (eds.), (note 6), p. 159 seqq. 26 DREXL J. (note 6), p. 157 et seq. 27 EUROPEAN MAX-PLANCK GROUP FOR CONFLICT OF LAWS IN INTELLECTUAL PROPERTY (CLIP), ‘Intellectual Property and the Reform of Private International Law. Sparks from a Difficult Relationship’, in: IPRax 2007, p. 284. 28 FENTIMAN R., ‘Choice of Law and Intellectual Property’, in: DREXL J., KUR A. (eds.), (note 6), p. 133.

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Infringement of Intellectual Property Rights burg Group itself.29 All the international conventions forming the ‘public international law’ of intellectual property are built around three pillars: (1) national treatment (or principle of assimilation), (2) minimum substantive standards of protection, operating in tandem;30 and (3) the principle of independence of national rights.31 Everybody agrees that the core international conventional obligations affirm a notion of territoriality, but views diverge on whether the ‘territoriality principle’ also has a choice-of-law meaning. According to one interpretation, the national treatment clause simply implies a duty of non-discrimination: it only requires the application of the same substantive law to foreigners and nationals, thus coming into play after the applicable law has been defined through use of the national conflict of laws rules.32 According to another interpretation, the national treatment principle operates ‘in advance,’ in the sense that it has to be applied by the competent courts ‘before’ investigating the applicable law; this interpretation requires the national treatment principle to imply a duty of non-discrimination in applying choice-of-rules.33 For the most part, commentators agree on a choice-of-law understanding of the national treatment principle, but they adopt diverging views over which law the principle requires to be applied. According to some distinguished scholars, it should be interpreted as demanding the application of the law of the country of origin.34 On the contrary, some other scholars and courts have read the national treatment prinHAMBURG GROUP (note 23), p. 25. The reason is simple: the former principle without the latter could imply that an inadequate level of protection afforded by a member country to its own rightholders could be extended (for example) to foreign authors, in a way fully consistent with the principle of national treatment; an undesirable result that the international conventions avoid, precisely by imposing a minimum level of protection for foreigners. 31 This principle (independence of national rights) requires that an intellectual property right granted in a Member State, for example a trademark, is not affected by the status of any registration for the same mark in relation to the same goods that may exist in other Member States. See DINWOODIE G. B., ‘Private International Aspects of Protection of Trademarks’ in: World Intellectual Property Organization, 2001,WIPO/PIL/01/4, Geneva, available at: , p. 32. 32 Itar-Tass Russian News Agency v. Russian Kurier Inc., 886 F. Supp. 1120, 1131 (S.D.N.Y. 1995); 153 F 3d. at 91, stating: ‘We agree with the view of Amicus that the Convention’s principle of national treatment simply assures that if the law of the country of infringement applies to the scope of substantive copyrights protection, that law will be applied uniformly to foreign and domestic authors’. On the implications at the private international law level of the ‘Itar-Tass approach’, see TYDNIOUK A., ‘From Itar-Tass To Films By Jove: The Conflict of Laws Revolution in International Copyright’, in: Brook. J. Int’l L. 2004, p. 899 seqq. 33 KOUMANTOS G., ‘Sur le droit international privé du droit d’auteur’, in: Il diritto di autore 1979, p. 636; ID., ‘Le droit international privé et la Convention de Berne’, in: Le droit d’auteur 1988, p. 426 et seq. 34 BARTIN E., ‘Localisation territoriale des monopoles intellectuelles’, in: Clunet 1934, p. 793 seqq. 29 30

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Nerina Boschiero ciple (embodied in Article 5.1 of the Berne Convention, Article 2 of the Paris Convention, and Article 3.1 of the TRIPs Agreement (‘TRIPs’)) as implicating an opposite choice-of-law principle, directing courts to apply the law of the country of protection (lex loci protections).35 The idea that Article 3.1 of TRIPs mandates a particular choice-of-law rule is also defended by a leading academic treatise, according to which the WTO Member States have lost their autonomy to choose the choice of law rules they prefer as a consequence of the national treatment principle: ‘all convention provisions must be interpreted as adhering to the general rule that the law of the protecting country is the applicable law… Any alternative interpretation favouring the application of the country of origin or the law of the forum as a general rule is no longer acceptable.’36 Such an approach is in conflict with that adopted by another part of the doctrine,37 according to which the national treatment principle fails to provide any guidelines on the issue of choice of law in international intellectual property rights In favour of the interpretation that the existing international regime on IPRs actually foresees a conflict of laws pointing to the lex loci protectionis see: ULMER E. (note 19) p. 12, 19; DESBOIS H., FRANÇON A., KEREVER A., Les conventions du droit d’auteur et des droits voisins, Paris 1976, n. 135 (‘…la solution de conflit de lois qui est conservée et consacrée par l’art. 5, al. 1’); GINSBURG J. C., ‘Private International Law Aspects of the Protection of Works and Objects of Related Rights Transmitted through Global Digital Networks’ (WIPO document GCPIC/2), November 30, 1998, Geneva, at: , p. 35, ‘l’article 5.2 exprime à la fois un principe de nondiscrimination et un règle de choix de la loi’; GOLDSTEIN P., International Copyright: Principles, Law and Practice, New York 2001, p. 103 et seq. ; BOUCHE N. (note 21) p. 358 seqq., p. 363 seqq., p. 521 ss.; UBERTAZZI L. C., Voce ‘Diritto d’autore, III, Diritto d’autore internazionale e comunitario’, in: Dig. Comm. vol. IV, p. 452 seqq. 36 FAWCETT J., TORREMANS P., Intellectual Property and Private International Law, Oxford 1998, p. 481. This conclusion has been inferred (1) from the wording Article 3.1, stating that the aim of national treatment is the ‘protection’ of intellectual property, and (2) from the significance of the term ‘protection’ as explained in footnote 3 to Arts. 3 and 4, according to which this expression shall include ‘matters affecting the availability, acquisition, scope, maintenance, and enforcement of intellectual property rights as well as those matters affecting the use of intellectual property rights specifically addressed in this Agreement’. For an updated opinion, according to which Article 3.1 of TRIPS precludes ‘the application of a lex originis based approach to choice of law across-the board’, see TORREMANS P., ‘Which Law Applies? A Reply from Professor Torremans to Phillip Johnson’s Reply to His Earlier Work’, in: J. Intell. Prop. L. & Prac. 2005, p. 76. In the same sense, on the ‘negative nature’ of the national treatment principle, to be interpreted as denying a role to the lex loci originis, see also FENTIMAN R. (note 28), p. 135 et seq. 37 LUCAS A., ‘Private International Law Aspects of the protection of Works and Objects of Related Rights Transmitted through Global Digital Networks’, (WIPO document GCPIC/1), November 15, 1998, Geneva, at: ., p. 3. LUCAS A., LUCAS H.-J., Traité de la propriété littéraire et artistique, Paris 1994, n. 956, speaking of ‘an ancient temptation to lump together the status of foreigners and the conflict of laws’ that has for a long time heavily weighed, and still does, on the interpretation to be given to the principle of national treatment contained in all these international instruments. 35

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Infringement of Intellectual Property Rights disputes.38 If one ‘constraint’ on the choice-of-law rules that a Member State may adopt should be inferred from Article 3.1 of TRIPs and similar provisions contained in other international conventions, it is a very limited one: the impossibility of relying on ‘nationality’ as a proper connecting factor, because this could lead to different degrees of protection being granted to national and foreign rights owners.39 The central question of ‘which law applies’ in infringement proceedings still deserves an answer. This conclusion has also recently been expressed by the European Court of Justice, which in the Tod’s case stated: ‘[A]s is apparent from article 5.1 of the Berne Convention, the purpose of that convention is not to determine the applicable law.’40 The same idea is also shared by the WIPO, the International Organization that administers the intellectual property conventions, according to which, ‘neither does the national treatment principle reflect a private international law approach, as it does not purport to designate the law of any particular country that is to govern an intellectual property issue involving a foreigner, but merely states that foreigners should not be treated differently than nationals with respect to intellectual property issues.’41 The same discussion had taken place regarding the interpretation of art. 5.2 of the Berne Convention as a true choice-of-law provision.42 Again, many authors have directly inferred from this norm a conflict of laws rule pointing to the lex loci protectionis (helped in their conviction by the fact that the norm is, undoubtedly, cast in language that could resemble a conflicts rule).43 Others have argued that it implies the application of the lex loci delicti. Others, again, have interpreted it as an invocation of the law of the forum.44 According to the WIPO Guide to the Convention, the rationale of Article 5.2 of Berne Convention is to regulate the enjoyment of the ‘rights that are claimed by virtue of the Convention,’ i.e. the convention minima. In this respect, art. 5.2 concerns itself with only two areas: (1) the 38 PATRY W., ‘Choice of Law and International Copyright’, in: Am. J. Comp. L., 2000, p. 405 et seq.; DINWOODIE G. B. ‘Conflicts and International Copyright Litigation: the Role of International Norms’, in: BASEDOW J., DREXL J., KUR A. & METZGER A. (eds.) (note 6), p. 201; ID., ‘Trademarks and Territory: Detaching Trademark From the Nation State’, in: Hous. L. Rev. 2004, p. 891 et seq., JOHNSON P., ‘Which Law Applies? A Reply to Professor Torremans’, in: J. Intell. Prop. L. & Prac., 2005, p. 71 et seq. 39 PERTEGÁS M. (note 13), p. 228. 40 See the European Court of Justice, 30 June 2005, Tod’s and Tod’s France v. Heyraud, Case C-28/04, in: Rec. 2005, p. I- 5781 seqq., point 32. 41 WIPO, ‘Intellectual Property on the Internet: A Survey of Issues’, Geneva WIPO 2002, p. 118. 42 Art. 5.2 of the Berne Convention reads as follow: ‘Consequently, apart from the provisions of this Convention, the extent of the protection, as well as the means of redress afforded to the author to protect his right, shall be governed exclusively by the law of the country where protection is claimed’. 43 See supra, note 35. 44 References in BOSCHIERO N. (note 22), p. 43 seqq.

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Nerina Boschiero extent of protection, and (2) the means of redress. The Guide indicates that in those two areas ‘the law of the country where protection is claimed’ shall govern exclusively, unless the parties have agreed that another law should apply by the way of a forum selection clause. As regards an action of infringement, the Guide notes that ‘an author suffering infringement usually picks a court in the country in which his rights where infringed.’45 The logical consequence is that the plaintiff need not choose such a court, since he is permitted to choose another court, particularly in another country where no infringing acts occurred but where (for example) the defendant has his assets. In such cases, the Guide indicates that ‘it would be a matter for the courts to apply the appropriate private international law to resolve any conflict that arises.’46 This authoritative explanation strongly supports the conclusion that the provisions resembling conflict principles found in all the international instruments of substantive public international law on intellectual property do not address – purposefully – the private international law question of which law to apply to IPR infringement, and thus have no impact (or a very limited one) on choice-of-law questions. The provisions of these conventions were adopted without any general and coherent international private law principle.47 The drafters simply had not thought of the possibility of bringing an action to protect intellectual property rights in a State distinct from that in which the act of violation occurred. The normal situation was that of a perfect coincidence between the lex loci commissi delicti, the lex loci protectionis (the law of the country for which protection was claimed), and the law of the forum. This coincidence could also explain the ‘imprecision’ of the wording of art. 5.2 of the Berne convention, which refers to the ‘country where protection is claimed’ and for long time was read as claiming the application of the lex fori.48 Such a reading amounts to a negation of any conflict of laws reasoning for intellectual property issues, due to the perfect inutility of prospecting (in this field) the existence or need for a ‘unilateral’ and ‘negative’ choiceof-law rule that does not direct the application of the law of any country other than that of the forum. The factual coincidence between the forum and the country of protection could also explain the ambiguous ‘characterization’ suggested by Eugen Ulmer of Article 5.2 of the Berne Convention, referring to the country where proGuide to the Berne Convention for the Protection of Literary and Artistic Works (Paris Act, 1971), Geneva WIPO, 1978, hereinafter WIPO Guide, p. 34. 46 Ibidem. 47 DINWOODIE G. B. (note 2), p. 3. In favour of the interpretation of Article 5.2 of the Berne Convention as another illustration of the efforts to abolish discrimination against foreign authors see PERTEGÁS M., Cross-Border Enforcement of Patent Rights. An Analysis of the Interface Between Intellectual Property and Private International Law, Oxford 2002, p. 223 seqq; VAN EECHOUD M., Choice of Law in Copyright and Related Rights, The Hague, 2003, p. 107 seqq.; BERGÉ J.-S., La protection internationale et communautaire du droit d’auteur. Essai d’une analyse conflictuelle, Paris 1996, p. 204 seqq.; ID., « Droit d’auteur, conflit de lois et réseaux numériques: rétrospective et prospective », in: Rev. crit. dr. int. pr. 2000, p. 366; LUCAS A. (note 37), p. 3 ss. 48 LUCAS A., LUCAS H.-J. (note 37), n. 1072. 45

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Infringement of Intellectual Property Rights tection is claimed, who defined it as ‘not a complete rule of conflict.’49 Its incompleteness derives precisely from the fact that ‘although it adequately describes which law is to be applied in the event that an infringement occurs in the country whose courts are seized of a matter, it says nothing regarding infringements elsewhere.’50 If, as it seems, the ECJ, the WIPO, and most commentators are right in stating that the current international conventions simply fail to address the problematic issues of the private international law of intellectual property, then the Hamburg Group and the Commission were wrong in assuming (1) that the intellectual property law conventions mandate a particular conflicts rule, and (2) that the rationale of including an IPR specific choice-of-law rule based on the country-of-protection principle was deemed to preserve the current international instruments. Paradoxically, the exact opposite conclusion, i.e. the fact that there is almost no ‘public private international law’ of intellectual property, only supports and justifies such an inclusion.

IV. The ‘Need’ for an Uniform Conflict-of-Law Rule at the Community Level However, the question remains as to whether the absence of a uniform set of conflict of laws rules at the international level also entails a Community level lack of uniformity and legal certainty regarding the law applicable to IPR infringement which would make it advisable for the Community to lay down a uniform rule for this subject matter. Again, if all the Member States’ private international law systems provide the same country-of-protection principle, it would not have been necessary (under art. 65 (b) EC) to insert into the Regulation the exact same choice-of-law rule. In any case, even if national conflict rules on IPR infringement present differences, there is the need to analyze them in the context of the rules governing international jurisdiction of the courts, so as to ascertain if there are enough forums available to the claimant to generate a risk of forum shopping to escape the law normally applicable.51 As correctly pointed out, ‘diverging choiceof-law rules alone do not create a danger of forum shopping.’52 As to the very first question, a recent comparative study of a number of European States’ private international law systems has identified two major tendencies pointing both to the lex loci protectionis and lex loci commissi delicti. 53 Examples of specific choice-of-law rules for IPRs applying the lex loci protectionis ULMER E. (note 19), p. 19. FENTIMAN R. (note 28), p. 136; BOSCHIERO N. (note 22), p. 46. 51 See Explanatory Memorandum (note 6), p. 6. 52 DREXL J. (note 6), p. 161. 53 PERTEGÁS M. (note 47), Chapter 5; ID. (note 13), p. 229 seqq. 49 50

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Nerina Boschiero are Article 110 (1) of the 1987 Swiss Private International Law Act,54 Article 93 of the 2004 Belgian Private International Law Act,55 and Article 54 of the 1995 Italian Private International Law Act.56 A different case seems to be that of the 1974 Spanish Private International Law; its Article 10 is redacted in a negative and unilateral way, simply stating that intellectual and industrial property rights shall be granted protection on the Spanish territory by application of the Spanish law. Such a rule could easily be ‘bilateralized’ by applying the lex loci protectionis to all questions not covered by the article.57 In other systems, the law applicable to IPR infringement is to be inferred from the more general choice of law rule for torts: according to Article 34 (1) of the 1978 Austrian Private International Law Act, Article 38 of the 1996 Liechtenstein Private International Law Act, and Article 3(1) of the 2001 Dutch Private International Statute on Torts, the governing law is the lex loci delicti. It has also been suggested that due to the particularities of the enforcement of IPRs, the doctrine and the national courts of these latter Member States have also interpreted their respective tort choice-of-law rules as referring to the law of the State for which the protection is claimed, at least with respect to trademark and copyright infringement.58 Notwithstanding this conclusion, the situation in the field of private international law for copyright is commonly recognized to be far more complex.59 Article 67 of the 1993 Greek Copyright Act sets out the principle that ‘copyright in published works shall be governed by the law of the State in which the work has DUTOIT B., Commentaire de la loi fédérale du 18 décembre 1987, 3e ed., Bâle, Genève, Munich 2001, p. 319 seqq. 55 CARLIER J.-Y., « Le code belge de droit international privé », in: Rev. crit. dr. int. pr. 2005, p. 11 seqq.; FALLON M., « Le droit international privé belge dans les traces de la loi italienne dix ans après », in: Riv. dir. int. priv. proc. 2005, p. 318 seqq. 56 UBERTAZZI L. C., ‘La territorialità dei diritti del produttore fonografico, dell’artista e dell’IMAIE’, in: AIDA 1992, p. 100 seqq.; ADAM R., ‘Diritti reali (artt. 51-55)’, in: CAPOTORTI F. (a cura di), ‘Il nuovo sistema italiano di diritto internazionale privato’, in: Corr. giur. 1995, p. 1251 seqq.; SALVATORE V., ‘Sub Art. 54 (diritti sui beni immateriali)’, in: Le nuove leggi civili e commentate, 1996, p. 1337 seqq.; BALLARINO T., Diritto internazionale privato, 3 ed., Padova 1999, p. 592 seqq.; MASTROIANNI R., Diritto internazionale e diritto d’autore, Milano 1997, p. 365 ss.; CORTESE B., Il trasferimento di tecnologia nel diritto internazionale privato. Licenza e cessione di privative industriali e know-how, Padova 2002, p. 55 ss.; BALLARINO T., MILAN D., Corso di diritto internazionale privato, Padova 2005, p. 186 seqq.; UBERTAZZI L. C., Commentario breve alle leggi su proprietà intellettuale e concorrenza, 4a ed., Padova 2007, pp. 1405, 1418, 1454, 1465; BOSCHIERO N. (note 22), p. 48 seqq. 57 According to CARRASCOSA GONZÁLEZ J., ‘Conflict of laws in a centenary convention: Berne convention 9th September 1886 for the protection of literary and artistic works’, in: Festchrift E. Jame, I, München 2004, p. 113, the Spanish private international law (art. 10.4 Cc) uses the ‘same connecting factors as article 5.2 of the Berne Convention (the lex loci protectionis)’. 58 PERTEGÁS M. (note 13), p. 233 et seq.; BOSCHIERO N. (note 22), p. 47. 59 DREXL J. (note 6), p. 166. 54

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Infringement of Intellectual Property Rights been lawfully made accessible to the public for the first time.’60 The Portuguese Private International Law Act refers to the law of the country of origin for the acquisition of rights, but applies the lex loci commissi delicti to infringements.61 The French Law is silent on the point, but a leading judgment of the French Supreme Court – the ‘Rideau de fer’62 case – has been considered by the majority of French doctrine to have fixed ‘the state of art,’ consisting (precisely) in applying the law of the country of origin for the issues of existence, originality, and initial ownership of works, and the lex loci protectionis to the content of the rights and the scope of protection.63 An exception to the country of origin principle (as well as to the lex protectionis principle for those countries resorting to this choice-of-law rule) has been envisaged for the author’s moral rights. From a choice of law point of view, moral rights could be seen as personality rights linked to the person of the author of the work, thus forming part of the personal law of the author.64 Alternatively, some authors have argued that moral rights should be seen as fundamental human rights that protect the author against the abuse of his work. It has been suggested that – from the point of view of the UK’s approach – moral rights should form part of the ‘public policy’ principles.65 France, for instance, considers the author’s moral rights of such particular importance that the national provisions on this issue are considered ‘internationally mandatory,’ with the consequence that French courts apply the forum’s rules even if the author has no moral rights or has assigned all rights on the work under the law of the work’s country of origin.66 60 61

LUCAS A. (note 37), p. 10. SIEHR K., ‘Das Urheberrecht in neureren IPR-Kodifikationen’, in: UFITA 1988, p.

17 et seq. Civ. 1re, 22 December 1959, in: D. 1960, p. 93 seqq., note HOLLEAUX G. 63 This solution has been approved by the Conseil supérieur de la propriété littéraire et artistique, ‘Avis n° 2003-2 relatif à la loi applicable et à la juridiction compétente en matière de propriété littéraire et artistique’, 11 décembre 2003 at: , p. 7, reaffirming the opportunity to submit to the country of origin ‘l’existence d’un œuvre protégeable et la détermination du titulaire initial du droit’, and to the lex loci protectionis ‘le contenu des droits et le régime de la protection’; the report, however, recognizes that this interpretation has been contested by certain commentators. On March 5, 2002, the same French Supreme Court, dealing with a classic copyright infringement case, expressly rejected the application of the law of the country of origin and that of the forum and applied the law of the country(ies) where the infringement occurred, on a distributive bases, stating also that ‘the French law, as the law of the prejudice, is not applicable to the entire dispute absent a closer connection to France.’ Civ. 1re, 5 March 2002, Sisro c. Sté de droit néerlandais en liquidation Apersand Software Bv, in: D. 2003, p. 8 seqq, note JOSSELIN-GALL M. 64 This solution seems to be the prevailing one among the Italian commentators (note 56). 65 TORREMANS P., ‘The Law Applicable of Copyright: Which Rights are Created and Who Owns Them?’, in: RIDA 2001, pp. 37 seqq., 53 seqq. 66 We are referring to the well known decision of the French Supreme Court in Turner Entertainment v. John Huston, May 28, 1991, in: Rev. crit. dr. int. pr. 2001, p. 752 62

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Nerina Boschiero Such a scenario reveals not only a current mosaic of private international law Member States’ systems, among which the two possible alternative choice-oflaw solutions (lex loci protectionis and lex loci delicti commissi) still coexist, but also a persistent disagreement on the ‘scope’ of the law of the country for which protection is sought. In some countries, courts apply the lex loci protectionis only to the issue of infringement itself, its proof, and its sanctions. These countries consider that as far as copyright law is concerned, before analyzing the infringement itself it is necessary to solve the ‘preliminary’ questions of whether the work is protected by a copyright and who owns the work. All these issues are envisaged in light of the country where the work has first been published, as defined under art. 5(4) of the Berne convention, i.e. the so-called law of the country of origin. This conclusion is also supported by some prominent American authors, such as professors Ginsburg and Ricketson, who believe that the Berne Convention neither covers issues of ownership nor supplies a choice of law rule for determining authorship, except for Article 14ter, which deals (very incompletely) with rights in cinematographic works. The consequence of their position is that there can be no automatic claim to the law of the country where protection is claimed. 67 Other European countries, on the contrary, believe that all of these issues should be governed by the law of the country where the protection is sought and reject application of the country of origin. The German Supreme Court, for example, affirmed the principle that if protection under German copyright law is sought, the lex loci protectionis (i.e. the German Law) applies to questions of ownership, origin, scope, and content of copyright, as well as to exhaustion of rights, transfer, rights of use, and consequences of copyright infringement.68 This is also the case under Italian and Swiss law. The problem with the Rome II Regulation is that neither Article 8 nor Article 15, which define in a general way the scope of the law applicable by giving only an indicative and non-exhaustive list of issues at stake, clearly and explicitly deal with the problem of which law is applicable to the diverging national conflictof-laws solutions concerning the law applicable to initial ownership and authorship of unregistered IPRs. It is not yet clear if the new Community conflict rule should be considered a ‘general’ choice-of-law solution for all issues arising in infringement cases (existence, scope, duration, ownership, transfer, and infringement) and, seqq., note GAUTIER P.-Y.; further references in JOHNSON P., ‘Which law applies? A Reply to Professor Torremans’, in: J. Intell. Prop. L. & Prac. 2005, p. 75; TORREMANS P. (note 36), p. 76 et seq.; VAN EECHOUD M., ‘Alternatives to the Lex Protectionis as the Choice-ofLaw Rule for Initial Ownership of Copyrights’ , in: DREXL J., KUR A. (eds.) (note 6), p. 291, note 3. 67 GINSBURG J.C., ‘Ownership of Electronic Rights and the Private International Law of Copyright’, in: Colum.-Vla. J. L & Arts, 1998, p. 167 et seq.; RICKETSON S., The Berne Convention for the Protection of Literary and Artistic Works 1886-1986, London 1987, p. 209. In the same sense see also the American jurisprudence cited above (note 32). 68 See BGH in: GRUR 1986, p. 454 seqq.; GRUR 1987, p. 814 seqq.; GRUR 1992, p. 687; GRUR 1999, p. 152 seqq.; GRUR 2003, p. 328 seqq.

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Infringement of Intellectual Property Rights thus, excluding any recourse to the law of the country of origin (apart from the cases explicitly provided for by the international conventions), or if the controversial issues must be considered to fall outside the scope of the Rome II Regulation. This last (probable) interpretation of Article 8’s scope would leave untouched the existing situation and the diverging national conflict rules that will continue to govern such issues. The lack of a general consensus on a single law applicable to all issues – specifically the diverging characterization of the issues of ownership of copyrights (also for works created by employees) or transfer of copyrights (under contract or copyright law) – could explain why the Regulation does not address these issues in a conclusive manner. The main consequence is, nevertheless, the persisting legal insecurity about the proper understanding of the scope of the law of the country of protection and the part it has to play.

V.

The Rationale of the Norm in Absence of a Real Risk of Forum Shopping

Even if the comparative analysis of the rules of conflict of laws and the jurisprudence of the Member States highlights the opportunity to promote more compatibility between conflict-of-laws rules on IPR infringement in the Union, the issue of the applicable law still deserves further analysis, specifically in light of the preliminary question regarding jurisdiction. There is, in fact, a diffuse and correct belief among European commentators (also shared by the European Legislator) that choice-of-law issues cannot be dealt in isolation, and that mere differences between national laws on the choice-of-law solution for IPR infringement are not sufficient to justify the need of a ‘uniform’ Community choice-of-law rule in the Rome II Regulation. Diverging choice-of-law rules must also cope with a danger of forum shopping.69 Within the European Union, conflicts of jurisdiction in civil cases, including IP disputes, are now dealt under the Brussels I Regulation. Since the adoption of the Brussels Convention in 1968, superseded in 2002 by the Brussels I Regulation, the European rules on international jurisdiction have ‘shaken and, in significant respects, destroyed’ what has been described as the ‘parochial approach to intellectual property litigation,’70 serving as a basis for the courts of many Member States to assert jurisdiction in matters concerning foreign intellectual property rights. The rules of the ‘Brussels system’ (in the sense that the Brussels’ rules have been extended to EFTA States via the Lugano Convention of September 16, 1988, currently under revision)71 have dramatically changed the way these rights are liti-

DREXL J. (note 6), p 161. See Justice H. LADDIE, in his decision of October 14, 1997, in case Forte Dodge Animal Health et al. v. AKZO Nobel, in: F.S.R. 1998, p. 222. 69 70

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Nerina Boschiero gated, in primis by reducing considerably the ‘traditional’ scope of exclusive jurisdiction in IPR matters. Courts in the contracting States are in fact required to exercise jurisdiction over foreign IPRs whenever a basis for jurisdiction is provided under the Convention/Regulation system under the general title of jurisdiction (the domicile of defendant) or under special titles of jurisdiction (arts. 6.1 and 5.3). There is only one rule of exclusive jurisdiction in IPR matters – set out in Article 22.4 of the Regulation, which refers to proceedings having their object, or being mainly concerned with, the registration or validity of registered intellectual property rights – according to which only the courts of the Member State in which the deposit or registration has been applied for or completed have jurisdiction in those proceedings. Although this provision was initially interpreted narrowly by the ECJ,72 it has been recently reinterpreted in a way that significantly alters the functioning of the intellectual property litigation machinery as it has worked for many years in Europe. By two judgments handed down on July 17, 2006, 73 the ECJ took the view that Article 16.4 (22.4 of the Regulation) should apply regardless of the form of proceedings in which the patent’s validity issue is raised, be it by way of an ‘action’ or by a ‘plea in objection’. In addition, irrespective of the presence of the so-called ‘spider-inthe-web’ criteria elaborated by the Dutch courts, it is not longer possible for European courts to assert jurisdiction over claims against affiliated companies for coordinated infringement of European bundle patents.74 Both practices have been judged by the ECJ as ‘irreconcilable’ with the old Brussels Convention and, obviously, with the Brussels I Regulation.75 As a consequence, in proceedings concerning the registration and validity of registered rights, the exclusive jurisdiction provided by the Brussels I Regulation excludes the possibility of forum shopping. The same solution is provided, since July 2006, for infringement proceedings involving the validity of registered rights as an incidental matter, i.e. even if invalidity is brought forth (as usually happens) as a defence. The ability to choose the competent court according to the most favourable applicable law is left in only ‘pure’ infringement proceedings regarding registered intellectual property rights, i.e. when the issue of invalidity is not raised at all, or in the case of infringement proceedings for copyright and related rights, which by definition do not raise any question of ‘validity.’ In those cases, the plaintiff still has the ability to sue the defendant in either a court of his domicile or Lugano Convention of 30 October 2007, at . 72 ECJ, November 15, 1983, case 288/82, Duijnsteee v. Goderbauer, in: Rec., 1983, p. 3663 seqq. 73 ECJ, July 13, 2006, case C-4/03, GAT v. LuK, in: Rec. 2006, p. I-6509 seqq.; ECJ, July 13, 2006, case C-539/03, Roche Nederland BV et al. v. Frederick Primus and Milton Goldenberg, ibidem, p. I- 06535 seqq. 74 EUROPEAN MAX-PLANCK GROUP FOR CONFLICT OF LAWS IN INTELLECTUAL PROPERTY (CLIP) (note 27), p. 285. 75 In general on this point see BOSCHIERO N. (note 22), p. 92 seqq. 71

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Infringement of Intellectual Property Rights before a court in the place where the harmful event occurred or may have occurred. But, again, when a registered right is in question, the exclusive jurisdiction rule stipulated in Article 22.4 of the Brussels I Regulation ‘absorbs’ the special forum provided in Article 5.3 for matters relating to torts; this is because the locus delicti can be located in no place or country other than that of registration or deposit of the patent/trademark/design or other similar rights required to be deposited or registered, due to the territorial limitation of industrial (registered) rights. The only remaining choice given to the rightholder is to sue in the defendant’s domicile, in accordance with the general title governing jurisdiction. Whether or not it is really possible to speak of forum shopping in such cases is open to question, being that this choice is ‘immanent’ in the structure of the Regulation. This eventuality is in any case very remote, as the reality is that national courts and parties very rarely separate the adjudication of industrial registered right infringement from the assessment of their validity. The result is that these infringement proceedings would be invariably confined to the courts of the States in which registration has taken place, thus barring any recourse to the general rule of article 2 or the possibility of consolidating claims against infringers of parallel industrial property rights existing in several Member States (art. 6.1).76 In addition, in intellectual property matters the interpretation given by the ECJ to the special head of jurisdiction provided in Article 5.3 of the Brussels Convention/Regulation, which confers onto the plaintiff the right to sue in either the place of the event giving rise to the injury or the place where the damages occurred, does not provide any ‘real’ alternative. The well known distinction in ‘complex’ torts between the place of conduct and place of injury does not work in IPR infringement cases. Preparatory acts of infringement do not matter in terms of jurisdiction for intellectual property rights, as the principle of territoriality imposes that a IPR cannot be infringed where it does not exist; therefore, in infringement proceedings Article 5.3 can allow only courts in the State for which a right is granted to exercise jurisdiction over the action, on the premise that this is where both a) the event giving rise to the damage and b) the damage itself, occurred. 77 76 The real impact of the GAT-Roche twin decisions on European litigation over copyright cases is still an unresolved question. It has been affirmed that the GAT decision’s impact should be rather limited, as the exclusive jurisdiction of article 16.4/22.4 of the Brussels Convention/Regulation is definitely irrelevant in the case of copyright. The impact of the Roche decision could be different – where the application of exclusive jurisdiction does not come into play – as litigation concerning IPRs should follow the same rules, whether these rights are registered or not. It is possible, therefore, that the Roche ruling will have a significant impact on cross-border infringement cases involving multiple defendants. See NUYTS A., SZYCHOWSKA K., HATZIMIHAIL N., ‘Cross-Border Litigation in Intellectual Property Matters in Europe’, available at: , p. 29 et seq. 77 BOSCHIERO N. (note 22), p. 81 seqq.; contra WILDERSPIN M., ‘La compétence juridictionnelle en matière de litiges concernant la violation des droits de proprieté intellectuelle. Les arrêts de la Cour de justice dans les affaires C-4/03, GAT c. LUK et C-539/03, Roche Nederland c. Primus et Goldberg’, in: Rev. crit. dr. int. pr. 2006, p. 794. For the idea that a definite answer to this question cannot be given, see KUR A., ’A Farewell to Cross-

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Nerina Boschiero In conclusion, according to this analysis the possibility of forum shopping within the Union is very limited, being confined to copyright infringements and hypothetical ‘pure’ industrial registered rights infringements. Regarding the former, all Member States’ conflict-of-law rules (with the only exception of Greek law) demand the application of the law the country for which protection is claimed. As to the latter, the plaintiff’s ability to choose the competent court according to the ‘most favourable’ applicable law is practically nonexistent in light of the recent ECJ rulings. Consequently, it is quite difficult to state, as the Commission did, that the diverging choice-of-law rules in the Member States ‘create a legal imbalance between plaintiffs and defendants to the disadvantage of the latter,’ such as creating a problem that can be addressed by only a uniform European choice-of-law rule on intellectual property in the light of art. 65(b) EC. 78

VI. General Features of the Special Rule The general structure of the norm on IPR infringement strikes for what can be easily characterized as an excessively rigid and oversimplifying generalization, not only in comparison with the most recent body of choice-of-law rules concerning specific international rules on jurisdiction, choice of law and judgments in transnational IPR-related disputes of soft (non-binding) character proposed by the American Law Institute79 and by the Max Planck European Group on Conflicts of Law/Intellectual Property (CL-IP),80 but also in relation to the general approach taken by the Rome II Regulation for all other non-contractual obligations, claims, and legal consequences that may arise out of tort/delict, unjust enrichment, negotiorum gestio, or culpa in contrahendo. Those norms are, in fact, construed in a Border Injunctions? The ECJ Decisions GAT v. Luk and Roche Nederland v. Primus and Goldenberg’, in: IIC 2006, p. 851. 78 Contra DREXL J. (note 6), p. 163. 79 See ‘Intellectual Property: Principles Governing Jurisdiction, Choice of Law, and Judgments in Transnational Disputes, Proposed Final Draft (March 30, 2007) at: . See: DREYFUSS R., ‘The ALI Principles on Transnational Intellectual Property Disputes: Why invite Conflicts?’, in: Brook. J. Int’l L., 2005, p. 820 seqq.; DESSEMONTET F., ‘A European Point of View on the ALI Principles Intellectual Property: Principles Governing Jurisdiction, Choice of Law and Judgments in Transnational Dispute’, ibidem, p. 850 seqq.; ID. (note 15), p. 71 seqq. 80 KUR A., ‘Applicable Law: An Alternative Proposal for International Regulation – The Max Plank Project on International Jurisdiction and Choice of Law’, in: Brook. J. Int’l L., 2005, p. 953 seqq.; ID., ‘Jurisdiction and Enforcement of Foreign Judgments – The General Structure of the MPI Proposal’, in: DREXL J., KUR A. (eds.) (note 6), p. 21 seqq.; NORRGARD M., ‘Provisional Measures and Multiple Defendants in the MPI Proposal’, ibidem, p. 35 seqq. In general on both the ALI e MPI projects see HELLSTADIUS Å., MEIEREWERT W., ‘Jurisdiction and Choice of Law in Intellectual Property Matters – Perspectives for the Future (EU and World-Wide)’, in: IIC, 2005, p. 313 seqq.

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Infringement of Intellectual Property Rights way that reaches an adequate balance between the exigencies of legal certainty, on the one hand, and the demands of justice in the individual case, on the other: first, because the Regulation provides considerable leeway for party autonomy, and second, in so far as these rules are supplemented by an open-ended escape clause that allows a departure from those rules when ‘it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with another country.’ As an example of a manifestly closer connection with a country other than the one governing tort under the general rules, the second sentence of paragraph 3 of Article 4 suggests ‘a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question.’81 As far as infringement of IPRs is concerned, the Rome II Regulation seems to have failed to take full advantage of the ‘progressive’ principle of party autonomy, as neither pre-tort nor post-tort choice of law agreements are permitted (Article 8.3); similarly, the parties and the courts cannot seek recourse through the escape clause embodied in the general rule, as Article 482 only covers obligations for which the Regulation itself does not lay down any ‘special rules.’ The European institutions have once again accepted the point of view of the Hamburg Group: party autonomy should not be allowed ‘where public interests are or may be involved.’83 As a side note, this opinion was shared by nearly all of the comments on intellectual property right aspects of the draft Proposal, according to which party autonomy was not ‘suitable’ for the ‘hard core’ claims relating to IPR infringement. Even though there are good reasons to partially exclude party autonomy in this field, 84 and being that it is absolutely true that intellectual property law has a substantial public-regarding component and that states’ sovereign decisions regarding the content and scope of protection granted for IPRs existing on their territories must be respected,85 it seems that there are no real cogent reasons why the 81 Even if redacted in a very strict and tight way, in order to avoid a risk of unforeseeability as to the applicable law, this escape clause proves to be definitely useful to attain the ‘proper equilibrium between the two perpetually competing goals of certainty and flexibility’, as correctly recognized also in Recital 14, according to which ‘this set of rules thus creates a flexible framework of conflict-of-law rules’, equally enabling ‘the court seized to treat individual cases in an appropriate manner’. See SYMEONIDES S.C. (note 6), p. 31. 82 Rome II’s central provision for cases in which the parties have not agreed or cannot agree on the applicable law. 83 HAMBURG GROUP (note 23), p. 38. 84 It is, in fact, correct to assert that the determination of the ‘unlawful character’ of the alleged infringing acts cannot be left to the law chosen by the parties, being inherently related to the existence of the intellectual property right itself (see PERTEGÁS M., note 13, p. 237), and to assert that the parties cannot be allowed to choose the law of a country in which the litigious right is not protected by the law of that country (HAHN C., TELL O., ‘The European Commission’s Agenda: The Future ‘R̀̀́ome I and II’ Regulations’, in: BASEDOW J., DREXL J., KUR A. & METZGER A. (eds.) (note 6), p. 12). 85 DINWOODIE G. B. (note 2), p. 100 et seq.; KUR A. ( note 80), p. 975.

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Nerina Boschiero owners of IPRs should not at least be allowed to chose the law applicable for determining the legal consequences of an infringement. In particular parties should be allowed to waive their rights to specific remedies in favor of the application of foreign law, provided that the interests of third parties are not adversely affected and that such a choice of law respects superior policy reasons embodied in public policy exception or in overriding mandatory provisions. Considering that in a number of Member States (like Belgium and the Netherlands) a party choice is possible,86 a certain flexibility to the parties of a conflict should (better) have been granted to make an ex-post choice of law for determining the remedies and the computation of damages. This would be consistent with the Swiss PIL law (Article 110.3), which allows party autonomy in IPR disputes for only patrimonial claims arising out of the infringement ‘after’ it has been assessed on the basis of the lex protectionis.87 The Ali principles, for example, allow parties to choose the law applicable to an infringement action at any time, including after the dispute arises. The reason given is that ‘efficiency interests are better served by allowing the parties to agree among themselves on the law that will determine what will usually be the monetary consequences of their conduct.’88 As to the very crucial questions of whether or not the parties should be granted freedom of choice in cases of intellectual property right violations, committed either outside any contractual relationship between the parties or within a licensing agreement, and whether or not is it convenient to treat contract and tort aspects in IPR disputes ‘in isolation,’ one might consider that, at least with respect to the exploitation of rights, the fundamental question regarding ‘who’ may bring a claim for the alleged infringement cannot be solved without looking at the contract entered into by the owner of the right. An ‘actionable’ copyright infringement, as well as the identification of the ‘person’ entitled to bring the claim, strongly depends on the scope of the rights granted under the specific license, contract, or assignment. To establish a copyright infringement, the claimant must show that the defendant carried out acts restricted by copyright without the license or consent of the copyright owner. It is in fact the copyright license that permits the licensee to carry out acts that would otherwise constitute infringement: it is usually a ‘breach of contract’ that takes the licensee’s activity outside the license, bringing it into the sphere of infringement. The same situation can be applied to a patent owner, who could be the inventor or his successor in title, as regards the protection of his industrial property: this succession has to be agreed upon in a contract governed by national law. If the inventor is an employee, under art. 60 of the European Patent Convention (EPC) his rights to the invention ‘shall be determined in accordance VAN EECHOUD M. (note 66), p. 5. PERTEGÁS M. (note 13), p. 237; LÓPEZ-TARRUELLA MARTÍNEZ A., ‘The law applicable to intellectual property right infringements under the Proposal for a Regulation Rome II’, available at: , No.15-June/July 2004. 88 ALI PRINCIPLES (note 79), § 302, Reporters’ Note p. 216. according to paragraph 2 of § 302, party autonomy is nevertheless excluded in relation to validity, existence, attributes, transferability, and duration of rights – whether registered or not – and formal requirements. 86 87

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Infringement of Intellectual Property Rights with the law of the State in which the employee is mainly employed; if the State in which the employee is mainly employed cannot be determined, the law to be applied shall be that of the State in which the employer has his place of business to which the employee is attached.’89 This solution establishes a close link between the contract of employment and the issue of employee ownership of intellectual property rights. Professor Torremans is undoubtedly right in asserting that this link provides a strong argument for applying the same law to both issues.90 Obviously, there will always be issues that should be ‘appropriately’ dealt with by one body of rules rather than the other. The problem, therefore, is that of ‘drawing the line’ between contract and tort law. It is generally submitted that non-contractual issues are for the law of the protecting country, and what is left to the lex contractus is the determination of the rights and obligations of the parties.91 Contractual freedom in relation to IPRs is generally admitted because the parties can only transfer or assign only whatever is assignable or transferable according to the protecting law.92 Convention on the Grant of European Patents, October 5, 1973 in O. J of the European Patent Organization 1973, p. 3, (hereinafter ‘EPC’). On new developments in European Patent Litigation, see BLUMER F., ‘Patent Law and International Private Law on Both Sides of the Atlantic’, WIPO Forum on Private International Law and Intellectual Property, Geneva, January 30 and 31, 2001, WIPO/PIL/01/3 available at: . 90 TORREMANS P., ‘Authorship, Ownership of Right and Works Created by Employees: Which Law Applies?’ in: E.I.P.R. 2005, p. 223 s., referring to authorship of a copyright work and first (initial) ownership of copyright in such a work. Obliviously, it very much depends on the solution given to the scope of application of lex loci protectionis. In any case, it seems possible for a different way of thinking in the line of what is suggested by the Author: that of characterization. If courts characterize initial employee ownership as a contractual matter, it will be possible to suck it into the contractual relationship and subject it to the law of the contract. The Ali Principles also designate a single law to determine initial ownership for registered and unregistered rights, such as copyright in the presence of a contractual relationship. See Chapter two (Title to and Transfer of Rights) which addresses the law applicable to ownership of rights. 91 DREXL J. (note 6) p. 172 et seq. 92 FAWCETT J.J. / TORREMANS P. (note 36), p. 548. It has been argued that freedom of choice of the applicable law should also be permitted in the case of a multi-State infringement of a unitary Community intellectual property right occurring in different member States. It has been submitted that the main arguments against party autonomy for national rights loose all their importance in this regard, as, by definition, all Member States provide for this protection. For the same reason, the escape clause should be applicable for Community rights in order to allow a deviation from the general rule (Article 8.2). See SHAPER E., ‘Choice-of-Law Rules in the EU –Special Issues with Respect to Community Rights-Infringements of Community Trade Marks and Applicable Law’, in: DREXL J. / KUR A. (note 6), p. 212. Another academic has suggested that the general rules on non-contractual obligations (freedom of choice, application of the law of the common domicile, and accessory choice of law relating to a pre-existing relationship) shall be applied to unitary Community industrial property rights, provided that the law of a Member State is applicable. As a possible solution for avoiding the disadvantages of the ‘mosaic approach’, i.e. the application of the laws of all Member States in which the acts of infringement were 89

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Nerina Boschiero Secondly, the choice made by the European Institutions to completely forbid party autonomy in relation to intellectual property, including pre-tort agreements between parties sharing the same bargaining position, has another shortcoming: it precludes without any doubt the possibility of ‘synchroniz[ing]’ the law applicable to contractual and non-contractual obligations arising out of the same fact-pattern. This solution has been retained even if (abstractly) the European Institutions recognized that is desirable to have a single, coordinated system to provide both regard to the conditions and extent of liability as well as remedies granted, by the way of the escape clause, which allow to apply the law chosen by the parties for their contractual relationship also to non-contractual obligation. In concrete, this possibility would amount to an admission of a choice-of-law agreement made before the harmful event regarding non-contractual obligations, which is not permitted for IPRs even if all the parties are ‘pursuing a commercial activity.’93 This solution in the Rome-II Regulation, not to deal with the interface problem of an intellectual property rights violation committed within a contractual relationship, inevitably increases the risk of fragmentation of the law applicable,94 inconsistencies, complexity, uncertainty, and cost in resolving disputes on IPR issues (subject to the law of the protecting country), very closed related to those regarding the obligations of the parties under the license contract or the contract of assignment (to which the law of the contract should be applicable). It also precludes the courts from adapting the rigid general rule provided in article 8 ‘to an individual case, so to apply the law that reflects the centre of gravity of the situation.’ Denying any role to party autonomy and any possibility for the courts to adapt the rigid rule to an individual case so as to have as the applicable law the one that best reflects the centre of gravity of the situation simply ends up in the European legislator’s ‘presumption’ to have dictated the ‘perfect rule’. But, as perfection ‘is not for this world’, each legislature has to provide a certain degree of flexibility in order to be able to overcome its intrinsic fallibility. Furthermore, the unconditional application of lex protections conflicts with the several departures from strict territoriality proposed by the most recent soft law initiatives. For example, both the Ali Principles and the Principles established by CLIP envision the application of a single set of rules – or a small set of rules for a specific state – when the alleged infringement cannot be located in one of several specific territories (ubiquitous infringements). This set of rules comes from the committed, it has been suggested to follow the jurisdiction rule developed by the European Court of Justice for multi-state injuries of personality rights the Fiona Shevill decision): the law of the country of domicile of the defendant for the whole damage, provided it is the law of a Member State and the various laws of the countries where the injuring acts were committed for claims restricted to the damages occurring in the states of the courts seized. See METZGER A., ‘Community IP Rights & Conflict of Laws- Community Trademark, Community Design, Community Patent- Applicable law for Claim for Damages’, in: DREXL J., KUR A. (eds.) (note 6), p. 222 seqq. 93 DREXL J. (note 6), p. 173. 94 METZGER A., (note 91), p. 219 seqq.

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Infringement of Intellectual Property Rights state with the closest connection to the dispute (supplemented by a market impact assessment) and applies to the issues of existence, validity, duration, attributes, and infringement of IPRs, as well as to the remedies for such infringements. This approach, which takes into consideration common situations arising from internet based (copyright) infringement, is pursued in parallel to the consolidation of territorial claims before one court, even in absence of an agreement between the parties. The drafter’s objective is to simplify the task for both parties and courts in the interest of efficiency. Both sets of rules seek to obtain two benefits: (1) the simplification benefits garnered by applying one law – instead of the laws of each affected State – to the portion of infringement occurring within each State’s borders, and (2) assuring, to the extent possible, compliance with the sovereignty interests underlying the territoriality approach. Thus, both set of rules emphasize the ‘exceptional circumstances’ in which a court could override the general principle of the lex protectionis. And, to do so they provide that whenever a court applies a single or reduced number of applicable law(s), the alleged infringer retains the right to demonstrate that his or her conduct is admissible in another Member State, even if the same activity is unlawful in all other States concerned; if such a showing is made, it must be taken into account by the court when fashioning remedies.95 This approach seems to be de facto able to overcome the largest objection to applying a single law approach to ‘global’ disputes, which by definition involves the interest of more than one State. The rigidity of Article 8, by contrast, impedes any possibility of relaxing the rigour of the principle of territoriality in any respect.96

VII. Conclusion As a result of the views expressed in this essay, it seems appropriate to conclude that the special community rule for intellectual property right infringement does not really increase legal certainty for either owners or users of intellectual property. First, it does not resolve the only problem that still needs a uniform solution – particularly in cross-border copyright disputes: the lex protectionis’ scope of application. Second, this ‘hard and fast’ norm does not strive for a reasonable compromise between the exigencies of legal certainty, on the one hand, and flexibility, on the other. Third, it does not even attempt to avoid the tension between the territoriality of IPRs and the globality of the new digital environment. Overall, there has been no serious attempt to justify the need for such a rigid uniform rule in this area, particularly in the light of reasons advocated for its inclusion in the Rome II Regulation, which do not seem at all conclusive.

95

ALI PRINCIPLES (note 79), Reporters’ Note, p. 248, § 321. 2; KUR A. (note 80), p.

978. 96 OHLY A., ‘Choice of Law in the Digital Environment – Problems and Possible Solutions’, in: DREXL J., KUR A. (eds), (note 6), p. 251 seqq.

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Nerina Boschiero This conclusion does not mean (of course) that there is no interest in establishing a new real ‘public’ private international law rule in this field, or that a specific choice-of-law rule based on the territoriality principle could not have been presented as the most suitable European rule for IPR infringement. Simply, a more in-depth investigation of the conflict problems relating to IPRs in the European Union should have been made, and the Commission should have presented evidence of the difficulties currently arising in this context that create an obstacle to cross-border trade and the movement of persons.97 Absent any real risk of forum shopping in infringement proceedings or a merely-hypothetical risk that the co-existence of diverging conflict rules in the Member States distorts the internal market’s functioning, the rationale of Art. 65 (b) should have been better justified by the European Institutions.98 For example, the recourse to Art. 65 (b) could have been justified with a truly public-private international law reasoning: (1) the opportunity of superseding – at a European level – the classic approach to international protection of intellectual property embodied in the current conventional instruments, which were adopted without any real effort to articulate any coherent and general principle of private international law, and (2) the opportunity of trying to garner a consensus that the lex protectionis principle is the basic choice-of-law principle regarding intellectual property infringement and is a true and genuine rule of private international law to be applied in intellectual property conflicts, at least in Europe. This principle should not have been merely invoked, but explained and defended as the proper conflict of law rule for most issues (creation, scope, validity, duration, and termination). It is simply a consequence of the ‘logic and the function of the choice-of-law process’, i.e not to apply another law that cannot in ‘its own terms’ be applied, thus rendering the choice-of-law process ‘incoherent’.99 Regarding the ‘protection’ of intellectual property, assuming that the new European rule should be interpreted as limiting itself to regulating only the issues of infringement, proof, and sanctions, the fact that the country of protection and the country of infringement do not necessarily coincide could have been better clarified. By and large, the main arguments for inserting a specific choice-of-law rule in the Rome II Regulation was to (1) fill the gap left by the current international conventions by dictating a uniform choice-of-law solution for cases where the domestic law of the forum does not apply, and (2) to put an end to the dispute over the correct meaning of Article 5.2 of the Berne convention, which refers to the law of the country ‘where’ protection is claimed, by clarifying that it should be understood as ‘for which’. The aim should have been to prevent application of the fo97 Response of the Government of the United Kingdom to the Consultation on a Preliminary Draft Proposal for a Council Regulation on the Law Applicable to Non-contractual Obligations, (note 16) p. 1. 98 Unless one considers that the objective of Article 65 EC simply consists in creating uniform Community law as such, and that a need for a European choice-of-law rule in the field of intellectual property is only mandating by diverging national conflict rules. 99 FENTIMAN R. (note 28), p. 142 et seq.

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Infringement of Intellectual Property Rights rum’s law when the sole basis for its application derives from the forum court’s competence to hear the claim. It is worth noting that notwithstanding the clear wording finally adopted in Article 8, referring to the law of the country for which protection is sought, i.e. the country for the territory of which protection is claimed, the Commission interpreted this expression in its 2003 commentary in a slightly ambiguous way: ‘the law of the country in which protection is claimed.’ According to the Commission, the territorial principle, as used in the Berne and Paris Conventions, should be understood in copyright cases as ‘the law of the country where the violation was committed’; however, when there has been a counterfeit of an industrial property right, the applicable law is that ‘of the country in which the patent was issued or the trademark or model was registered.’ In the words of the Commission, this solution would enable ‘each country to apply its own law to an infringement of an intellectual property right which is in force in its territory,’ thus confirming ‘that the rights held in each country are independent.’100 This interpretation of Article 8’s special rule for intellectual property seems to suggest that the law applicable to a non-contractual obligation resulting from an infringement of intellectual property rights should always be interpreted as the law of the country before the courts of which the claim is brought, the protection is sought, and the act of infringement was committed. In other words, as a consequence of the view expressed by the European Commission, the universally recognized principle of the lex loci protectionis could still be interpreted by the national courts in Member States in a very ‘strict’ way, inevitably pointing to the law of the seized court (the lex fori). This suggestion is certainly misleading. Apart from patents and other registered rights that are often within the exclusive jurisdiction of the courts of the State granting the right, particularly when registration and invalidity are involved, the protecting State for all other infringements is not necessarily the State where the proceeding is pending under Community civil procedure law.101

Explanatory Memorandum (note 6), p. 20. See CLIP, EUROPEAN MAX-PLANCK GROUP FOR CONFLICT OF LAWS IN INTELLECTUAL PROPERTY, ‘Exclusive Jurisdiction and Cross Border IP (Patent) Infringement Suggestion for Amendment of the Brussels I Regulation’, in: E.I.P.R., 2007, p. 143 seqq.; ID., ‘Intellectual Property and the Reform of Private International Law- Sparks from a Difficult Relationship’, in: IPRax 2007 p. 284 et seq; VAN EECHOUD M., ‘The Position of Broadcasters and Other Media under ‘Rome II’ Proposed Regulation on the Law Applicable to NonContractual Obligations’, in: Iris plus, 2006, p. 5. 100 101

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THE LAW APPLICABLE TO A NON-CONTRACTUAL OBLIGATION WITH RESPECT TO AN INDUSTRIAL ACTION A COMMENTARY ON ARTICLE 9 OF THE ROME II REGULATION Guillermo PALAO MORENO∗

I. II. III.

IV.

Origin and Aim of Article 9 Scope of Article 9 Connecting Factors A. Freedom of Choice B. Common Habitual Residence C. Lex Loci Acti 1. Rationale of the Rule 2. Determining the Loci Acti Concluding Remarks

I.

Origin and Aim of the Article

In order to find the purpose of article 9 of Regulation (EC) Nº 864/2007 (hereinafter, Rome II Regulation), we must trace it back to the Report issued by the European Parliament on 27 June 2005,1 when this provision has for the fist time been proposed as article 6 (‘Industrial action’) of the future Rome II Regulation..2 It is interesting to highlight that such a special conflict of law rule was not included in the previous proposals adopted by the Commission of the European ∗ Professor Dr. Guillermo Palao Moreno, Professor of Private International Law, Universitat de València (Spain). 1 Report on the proposal for a Regulation of the European Parliament and of the Council on the law applicable to non-contractual obligations (‘Rome II’), prepared by the Committee on Legal Affairs of the European Parliament, whose Rapporteur was Diana Wallis (A6-0211/2005). A proposal also assumed by the U.K. Presidency (as article 8 a) in its Proposal of 22 December 2005 (JUSTCIV 245, CODEC 1218), and also supported by the Swedish delegation of 23 February 2006 (JUSTCIV 39, CODEC 182). 2 ‘The law applicable to a non-contractual obligation arising out of industrial action pending or carried out, shall be the law of the country in which the action is to be taken or has been taken’.

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Guillermo Palao Moreno Union.3 In fact, its incorporation in the Rome II Regulation comes from an exclusive initiative of the European Parliament, so that ‘[t]he rights of workers to take collective action, including strike action, guaranteed under national law’, would not be undermined.4 The definitive wording and numbering of article 9 can be found in the Common Position of 25 September 2006, drafted in view of adopting the Rome II Regulation.5 From that moment on there have been no changes in relation to the title, number, or content of that provision. Furthermore, underlying this provision we can also find the purpose of countering the effects (from a conflictual perspective) of the Judgement of the European Court of Justice (hereinafter, ECJ), of 5 February 2004, in Case C-18/02, Torline.6 Let me remind the reader that in the mentioned case the Court decided, inter alia, to apply article 5.3 of the Brussels Convention of 1968 as well as to interpret its connecting factor (‘place where the harmful event occurred’), in relation to the legality of a notice of industrial action given by a Swedish trade union (followed by a sympathy action from another trade union in the same country), affecting a Danish ship-owner, with the purpose of securing a collective agreement for a Polish crew. Among other conclusions (mainly related to the material scope of article 5.3), the ECJ concluded that the harmful event could take place either in Sweden (as the place where the action took place) or in the country where the damage occurred. And, under the circumstances of the case, Denmark could be considered the flag State. Of course, the ECJ affirmed that it would also be acceptable to consider other States as places of the direct harmful effect, and the flag State should not always necessarily be regarded as that place. However, the jurisdiction of the flag State was an accepted possibility. Therefore, this Judgement allowed some room for forum actoris. With this precedent in mind, the European Parliament declared that the extension of this jurisprudence to determine the law applicable to a non-contractual 3 An institution which, from the very beginning, was very critical about the adoption of that provision (even though it was sensitive to the underlying political arguments), as it considered that the proposed rule was too rigid. In this respect, see Amendment 31 of the amended proposal of 21 February 2006 (COM (2006) 83 final). 4 Report issued by the European Parliament on 27 June 2005. Nevertheless, PATAUT had previously suggested the possibility of a specific rule for those situations for a future Rome II Regulation, PATAUT E., Note Torline, in: Rev. crit. dr. int. pr. 2004/4, p. 800-808, at p. 808. 5 O.J. C 289E/68, 28 November 2006. However, in order to appreciate the several modifications of the provision from its original version, we must bear in mind article 8 a of the overall compromise package of the Presidency issued on 10 April 2006 (JUSTCIV 85, CODEC 293) and, more definite, in article 8 a of the overall compromise package of the Presidency issued on 21 April 2006 (JUSTCIV 104, CODEC 350). 6 Judgement of the Court (Sixth Chamber), of 5 February 2004, C-18/02, Danmarks Rederiforening (acting on behalf of DFDS Torline A/S) v. LO Lansorganisationen i Sverige, (acting on behalf of SEKO Sjöfolk Facket för Service och Kommunikation), O.J. C 71/3, 20 March 2004. See PALAO MORENO G., Note Torline in: REDI 2004/2, p. 848-853.

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Rome II and Industrial Actions obligation derived from an industrial action (taking into consideration the solution envisaged by article 4.1 of the Rome II Regulation, in cases of Distanzdelikte7) could have reached the conclusion of considering as applicable a law other than the country where the industrial action was carried out.8 This effect required to be avoided, as long as the European Parliament considered that this conclusion could harm the rights of workers9. Regardless, as we will see, this protection has also been extended to employers in the final version of article 9.10 With this protective philosophy in mind and directly influenced by the precedent of Case C-18/02, Torline, article 9 appears to be a provision enacting a specific conflict of law rule, completely novel not only from a comparative perspective (as it is impossible to find a similar provision, either in national law or in International Conventions) but also in the context of Community Law (where the regulation of collective labour relations and the conflicts which may arise in connection to them has been very limited).

II. Scope of Article 9 Article 9 refers ‘to a non contractual obligation in respect of the liability of a person in the capacity of a worker or an employer or the organisations representing their professional interest for damages caused by an industrial action.’ To determine the article’s scope, three important elements must be considered: First, it must be determined which subjects could have carried out the industrial action; second, it must be determined whether the event causing the damages should be characterised as an industrial action; and third, it must be determined whether there is the existence of a tortious consequence (liability) in relation to that industrial action. First, from a subjective perspective, an industrial action could be carried out not only by workers (‘or the organisations representing their professional interests’)11 but also by employers (‘or the organisations representing their professional

See the commentary on article 4. See GARCIMARTÍN ALFÉREZ F.J., ‘La unificación del derecho conflictual en Europa: el Reglamento sobre ley aplicable a las obligaciones extracontractuales («Roma II»)’, in: La Ley 2007/6798, p. 1 et seq., par. 59. 9 Also supported by the Swedish delegation, on 23 February 2006 (JUSTCIV 39, CODEC 182). 10 Recital 27. 11 See, however, article 6 as proposed by the European Parliament in 2005 and the proposal of the French delegation for the wording of recital 14a of 4 May 2006 (JUSTCIV 113, CODEC 428). 7 8

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Guillermo Palao Moreno interests’).12 Therefore, article 9 would cover measures adopted by the first group of people (such as a strike action) as well as the second group (such as a lock out).13 In this respect, the scope of the original proposal of the European Parliament of 2005 has been significantly widened by the final version of article 9, as long as that previous text only covered industrial actions carried out by a trade union (not even mentioning those situations where such actions were conducted by workers individually), parallel to the factual circumstances of Case C-18/02, Torline. This extension could have had an influence in the Commission’s change of attitude, as that institution always considered the proposal of the European Parliament to be very rigid.14 Moreover, and in relation to the organisations representing the professional interests of workers, we must bear in mind that ‘the legal status of trade unions or of representative organisations of workers’ will be determined in accordance with the law of the Member States.15 As a result, this approach excludes an autonomous characterization of that concept16 - disturbing but completely logical option, if we consider the existing differences in national legislations within the European Union and the lack of a common European legal framework. Besides, this is a question related to the legitimacy of adopting such actions and is closely linked to the existence of the right to exercise a collective action, elements which traditionally enjoy a territorial character.17 Second, and in respect to the objective element, article 9 refers to an ‘industrial action.’18 The terminology used in that provision could have allowed us to conclude, at a first glance, that we were dealing with an autonomous concept in the Rome II Regulation. However, Recital 27 states that ‘[t]he exact concept of industrial action, such as strike action or lock-out, varies from one Member State to another and is governed by each Member State’s internal rules.’ Moreover, it is important to note that Recital 27 mentions some of those actions, and article 9 also includes those ‘pending or carried out’ actions. Again, the European institutions prefer not to develop an autonomous concept but to refer to national laws in order to define the terms used in article 9.19 A choice which, even though understandable under the circumstances of the negotia-

An extension included in article 8 a of the overall compromise package of the Presidency issued on 21 April 2006 (JUSTCIV 104, CODEC 350). 13 Recital 27. 14 See Amendment 31 of the amended proposal of 21 February 2006 (COM (2006) 83 final). 15 Recital 28. 16 Cf. Recital 11. 17 Also, PATAUT E. (note 4), at p. 804. 18 The wording ‘industrial action’ was first used in article 8 a of the overall compromise package of the Presidency issued on 10 April 2006 (JUSTCIV 85, CODEC 293). 19 Cf. Recital 12. 12

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Rome II and Industrial Actions tion, is not only unusual in a Regulation aimed at providing uniform solutions20 but also could be subjected to criticism (as it deals with the important question of the material scope of the article and therefore the Regulation itself). Specially, when the definition and regulation of such actions are not only very different from one Member State to the other, but also if we take into consideration the lack of a uniform legal framework from a European and International perspective when those actions frequently cross borders.21 In that respect I consider that this approach would be contrary to the objective expressed in Recital 11 to establish an autonomous concept of a non-contractual obligation. Besides, it would undermine the final unifying value of this European instrument. Third, also from an objective perspective, article 9 only deals with the tortious consequences of the industrial action.22 Therefore, the provision refers exclusively to liability directly derived from the industrial action.23 Consequently, it excludes other damages which may not arise directly from the exercise of that fundamental right24 as well as other non-contractual obligations which may result from that action.25 Regardless, article 9 does not offer a clear answer in respect to its application to relationships vis-à-vis third parties.26 Moreover, article 9 does not cover the ‘conditions relating to the exercise of such action:’27 a decisive question directly linked to the exercise of fundamental LEIBLE S./LEHMANN M., ‘Die neue EG-Verordnung über das auf außervertragliche Schuldverhältnisse anzuwendende Recht («Rom II»)’, in: RIW 2007/10, p. 721-735, at p. 731. 21 See LYON-CAEN G./ LYON-CAEN, A., Droit social international et européen, Paris 1991, p. 53-57; CHAUMETTE P., ‘Fragment d’un droit des conflits internationaux du travail?’, in: Droit Social 2005/3, p. 295-301; REITHMANN CH./MARTINY D. (eds.), Internationales Vertragsrecht, Köln 2004, at p. 1400-1413; PATAUT E. (note 4), at p. 804-805. 22 A specification not included in article 8 a of the overall compromise package of the Presidency issued on 21 April 2006 (JUSTCIV 104, CODEC 350). See VON BAR CH., The Common European Law of Torts, Oxford 1998, Vol. I, p. 286, 332-334. 23 Note the proposal of the French delegation for the wording of recital 14c of 4 May 2006 (JUSTCIV 113, CODEC 428): ‘(…) the law applicable to industrial action must govern only remedy and compensation for direct economic damage caused or likely to be caused by such action’. 24 See the joint declaration of the delegations of the Republic of Latvia and the Republic of Estonia of 30 May 2006 (JUSTCIV 118, CODEC 455). 25 A limit which is consistent with the criticisms raised by the Commission of the European Union. See the Communication pursuant the second subparagraph of article 251 (2) of the EC Treaty concerning the common position (COM (2006) 566 final). Cf. article 6 of the proposal issued by the European Parliament in 2005, referring more generally to a non-contractual obligation. 26 In this sense, the Communication pursuant the second subparagraph of article 251 (2) of the EC Treaty concerning the common position (COM (2006) 566 final). Also, LEIBLE S./LEHMANN M. (note 20), at p. 731. However, GARCIMARTÍN ALFÉREZ F.J. (note 8), par. 60. 27 Recital 28. 20

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Guillermo Palao Moreno rights, which will also be determined by national legislation. We must bear in mind that, according to the ECJ Judgement in Case C-18/02, Torline, the legality of the industrial action is covered by article 5.3 of the Brussels Convention.28 In this context and notwithstanding the above mentioned clarifications, I believe that it would also be a desirable objective of the present provision to pursue a consistent interpretation of both article 9 of the Rome II Regulation and article 5.3 of Regulation (EC) Nº 44/2001 (hereinafter, Brussels I Regulation).29

III. Connecting Factors Article 9 establishes a hierarchy of three connecting factors to determine the law applicable to a liability which may arise from the analysed situations. First, the non-express derogation of article 14 allows us to consider freedom of choice as the first connecting factor.30 Second, the reference to article 4.2 of the regulation turns the common habitual residence into the second factor.31 Third, when the previous solutions are not available, ‘the law of the country where the action is to be, or has been, taken’ will be the third and final connecting factor. Comparing those connecting factors with the solutions provided by the Brussels I Regulation (from a jurisdictional perspective) shows their differences. Therefore, in cases of damages derived from an industrial action, forum and ius will not always concur. Not only because of the role played by the general fora present in the Brussels I Regulation (articles 2, 23, and 24) but also because of the interpretation of the special rule in matters relating to tort (article 5.3 of the Brussels I Regulation) in Case C-18/02, Torline. However, we must take into account that European institutions did not intend to enable the complete coincidence of forum and ius.32

28 See the Judgement of the ECJ, C-18/02, Torline, par. 1 (a). The conflictual consequences of this characterization have been criticised by PATAUT E. (note 4), at p. 805. 29 Recital 7. 30 See the commentary on article 14. 31 See the commentary on article 4. This connecting factor was incorporated in article 8 a of the overall compromise package of the Presidency issued on 10 April 2006 (JUSTCIV 85, CODEC 293). However, it was previously suggested by the Swedish, Finnish, and Netherlands delegations on 10 March 2006 (JUSTCIV 56, CODEC 234) and afterwards adopted by the Presidency on 16 March 2006 (JUSTCIV 62, CODEC 247). 32 Recital 7 only refers to the necessity to be consistent with the substantive scope of the Brussels I Regulation.

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Rome II and Industrial Actions A.

Freedom of Choice

As the first alternative, article 14 of the Rome II Regulation provides the possibility for parties to agree on the applicable law in some cases and under some circumstances. This solution may have positive effects, from the perspective of predictability and legal certainty, in relation to the analysed situations. As regards the application of article 14, we must bear in mind that a distinction should be drawn between commercial and non-commercial activities. In this respect, a tort derived from an industrial action can not be considered as a ‘commercial activity.’ Therefore, such an agreement should only be entered into after the industrial action giving rise to the damage occurred. Hence, previous agreements included in an individual contract of employment or in a collective agreement will be inadmissible. Moreover, a choice of law conforming with article 14 paragraph 2 ‘shall not prejudice the application of provisions of that other country which cannot be derogated from by agreement.’ This could often happen in cases of industrial actions due to their close connection to the exercise of fundamental rights (as the right to strike is considered in some countries). Therefore, the application of mandatory rules of Labour Law (normally of a territorial character) is likely to be considered in those situations.33 According to this provision, as an example, if parties agree to the application of the law of the country where the damage occurred, the effect of this selection could be severely limited by the mandatory rules of Labour Law of the State where the harmful action took (or is to be taken) place. In that respect, we must also bear in mind the close connection between the legality of an industrial action and the tortious consequences which may derive from it, as stated in Case C-18/02, Torline. In any case, we must be aware of the scarce probabilities that in practice parties will make use of article 14 of the Rome II Regulation in those cases; even though freedom of choice is available with all of its beneficial effects, parties prefer legal certainty. B.

Common Habitual Residence

In the very likely event where the parties have not chosen an applicable law, the law of the country of the common habitual residence will apply. This connecting factor may allow some conflictual predictability for the parties,34 as well as some See LYON-CAEN G./ LYON-CAEN, A. (note 21), at p. 55-56; LIUKKUNEN U., The Role of Mandatory Rules in International Labour Law, Helsinki 2004. 34 However, in principle it does not affect third parties. This possibility was suggested by the German delegation on 30 March 2006 (JUSTCIV 84, CODEC 295) by adding a paragraph 2 to article 8 a: ‘However, where an enterprise sends workers to another country where the action takes place the law of the common habitual residence is applicable not only in relationship between the enterprise and its workers but also in relation to third parties.’ 33

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Guillermo Palao Moreno room for proximity. In this respect, we must take into account that the mentioned element (habitual residence) will be determined in accordance with article 23.35 As an example, if the industrial action took place on a ship or an airplane started by its crew or workers (‘or the organisations representing their professional interests’) and their habitual residence would coincide with the flag state, this common law should be applied regardless of the place where the action was carried out.36 Other connecting factors present in article 4 of the Rome II Regulation would be excluded, as only paragraph 3 is expressly mentioned. This limitation may have important practical consequences, as neither will there be any escape from the solutions present in article 9 nor will there be room for any flexibility in their application. Thus, it is doubtful not only whether the objectives of article 9 could have been accomplished by application of the general rule (adding some precise clarifications in the Recitals) but also (as we will see below) whether the result of applying this article will prove to be beneficial to the rights of the workers. C.

Lex Loci Acti

Finally, in those situations where there is neither a pactum de lege utenda nor a common habitual residence, the applicable law will be that of ‘the country where the action is to be, or has been, taken.’ In fact, this was the sole connecting factor that the European Parliament considered when it suggested this special and protective rule,37 as well as the major contribution of article 9. Thus, it deserves much closer attention because of those reasons. Two questions are the most important when we approach this factor. First, what were the objectives of the European institutions when this provision was proposed? Second, does the application of this connecting factor achieve adequate results? 1.

Rationale of the Rule

As mentioned above, this rule was primary intended to protect the interests of workers, although this intent was afterwards extended to employers as well.38 In one way, article 9 aims at avoiding the possible negative effects which could be derived from the application of article 4 to the personal liability derived from an industrial action. Thus, in my opinion, this rule does not primarily seek to specify See the commentary on article 23. See LEIBLE S./LEHMANN M. (note 20), p. 731-732. 37 As for the initiative of the European Parliament of 2005, it was considered as the sole available connecting factor. Therefore, the possibility of it being derogated was excluded - maybe another reason for the critical approach by the Commission of the European Union in respect to its rigid character. 38 In favour of this solution, even before the Proposal of the European Parliament was published, PATAUT E. (note 4), at p. 805-806. 35 36

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Rome II and Industrial Actions the territorial solution present in article 4 (the lex loci delicti rule), an objective which may be found more clearly in other articles (e.g., article 8), but to exclude its application in those cases covered by article 939 through the development of a special conflict of law rule. In this respect, when article 9 makes a clear option in favour of lex loci actus we can conclude that the main objective of the provision is to eliminate the consequences which may occur from the application of article 4.1 to industrial actions (especially in situations of a Distanzdelikt). Therefore, by this rule both the place of conduct and the place of the damage are considered to be concentrated in the place where the industrial action is carried out, as long as the consequences which may arise in other places are considered indirect and not taken into account.40 Thus, through this reasoning the law of the country where both elements are considered to coincide is estimated to be the most appropriate solution to asses the liability derived from those actions. In other words, by this option article 9 shows a clear preference for the law of the national ‘labour market’ where the industrial action was carried out.41 That is, with this connecting factor this provision favours the application of the law of the country where the labour conflict took place.42 Accordingly, this place will usually be the same as the place of work.43 For illustrative purposes, when the work, as well as the industrial action, were carried out on board a ship, the law of the flag of that ship should be applicable to determine any liability arising from that action. However, if damages did not occur on board or it was a flag of convenience, that law should not be considered closely connected to the situation.44 In spite of the mentioned advantages of the rule, the final wording of article 9 raises some doubts which have not been clarified by European institutions. On the one hand, the damage caused by an industrial action is mainly a financial loss,

However, GARCIMARTÍN ALFÉREZ F.J. (note 8), par. 60. In this respect, GARCIMARTÍN ALFÉREZ F.J. (note 8), par. 60. 41 In this sense, LEIBLE S./LEHMANN M. (note 21), at p. 731. Even more, if we consider the current impossibility of declaring the existence of a ‘European labour market’. See PALAO MORENO G., ‘Las normas de Derecho internacional privado de origen comunitario en materia de contrato individual de trabajo, ante los retos de la integración europea y de la globalización’, in: AEDIPr 2005, p. 309-334, at p. 314-315. 42 See FRANZEN M., ‘Internationale Zuständigkeit beim Aufruf zum Boykott eines Seeschiffes’, in: IPRax 2006/2, p. 127-129, at p. 128; REITHMANN CH./MARTINY D. (eds.) (note 21), at p. 1411. 43 See GAMILLSCHEG F., ‘Labour Contracts’, in: I.E.C.L., Vol. III, Ch. 28, p. 7-28, at p. 20. 44 In this sense, HERGENRÖDER C.W., Note to Torline, in: GPR 2005, p. 33-36, at p. 36; REITHMANN CH./MARTINY D. (eds.) (note 21), at p. 1412. See the concerns of the Greek delegation in respect to this question in its statement of 31 May 2006 (JUSTCIV 118, CODEC 455). 39 40

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Guillermo Palao Moreno and it is normally caused where the affected enterprise is established.45 Therefore, in the case of a Distanzdelikt where a strike took place in one country regarding a company established in a different country, it is very much doubtful to consider that the place of establishment has no interest from a conflictual perspective as only indirect damages could occur there. On the other hand, we can also wonder whether the creation of this special conflict of law rule, and consequential derogation from the solutions envisaged in paragraphs 1 and 3 of article 4, is adequate to fulfil the protective objective pursued by article 9. In this sense, when the ECJ interpreted article 5.3 of the Brussels I Regulation in Case C-18/02, Torline, the Court reasoned in terms of proximity (close connection) to determine both the place of conduct and the place of direct result - an approach which could have also been used to interpret the escape clause present in article 4.3 of the Rome II Regulation and maybe reaching the same solution as the one envisaged in article 9. Hence, I do not find strong reasons for a complete abandonment of the ubiquity rule, corrected by the closest connection test, in the case of an industrial action.46 In addition, the same criticism which may arise from the choice stated in article 4.1 in favour of the loci damni when facing a Distanzdelikt could also be raised in relation to the loci actus rule present in article 9. Again, I am of the opinion that the flexible approach provided by article 4.3 could have proven useful for industrial actions, under the circumstances of a given case. 2.

Determining the Loci Acti

In most of the cases, this connecting factor will not create major problems in practice. An industrial action will usually be carried out in one country. Thus the determination of that place will rarely be challenged and the application of article 9 will provide a predictable result for the parties in many situations. However, currently collective labour conflicts usually enjoy an international as well as a multilocalised character. In this respect, an industrial action could not only be carried out in different countries but it could also have cross-border effects. We can consider, as an example, an action carried out by temporary posted workers, or pilots of an airline company, as well as a sympathy action, which could be carried out in several countries by different national trade unions. Those complex situations would create difficulties when trying to ascertain the law applicable to determine any possible liability which may arise in such contexts; difficulties which do not find a straight forward solution in article 9 and create negative effects on the legal certainty intended by the Rome II Regulation.47 From a jurisdictional perspective, MANKOWSKI P., ‘Article 5’, in: MAGNUS U./ MANKOWSKI P. (eds.), Brussels I Regulation, München 2007, p. 77-236, at p. 208-209; KREIL L., Note to Torline, in: ZESAR 2005, p. 138-140, at p. 139. 46 Similarly, SYMEONIDES S.C., ‘Tort Conflicts and Rome II: Impromptu Notes on the Rapporteur’s Draft’, p. 1-7, at p. 5 (available at: ). 47 Also, LEIBLE S./LEHMANN M. (note 20), at p. 731. 45

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Rome II and Industrial Actions This lack of legal certainty, however, could not be solved through the application of paragraph 3 of article 4. Thus we can wonder which would be the most suitable solution for such cases. The express inclusion of the place where the action was carried out in article 9 makes it difficult to find an easy answer to that problem. In this respect, in those situations where the decision to adopt such action was centralized in one country, the law of the country where that initiative started could be considered the applicable law. However, in cases of a complete coordination of national trade unions adopting such a position, that answer would not be that obvious and, as a consequence, it could be ascertained that there were different places of acting and several applicable laws.48 That conclusion would have the negative result of multiplying the determination of the place where the action was carried out and, as a consequence, fragmenting the law applicable to a liability arising from an industrial action (the so called, ‘mosaic effect’).

IV. Concluding Remarks The major contribution of article 9 of the Rome II Regulation is the creation of a specific conflict of law rule completely novel from a comparative perspective. The obvious objective of that rule is to undermine the effects of the Judgement of the ECJ in Case C-18/02, Torline, from a conflictual perspective. However, some legitimate doubts arise not only in relation to the development of a special provision in the Rome II Regulation for those cases but also whether article 9 is adequate for the protective objectives underlying its proposal. In that respect, and particularly in relation to the second question, in this study I have stressed the problems generated by this provision in terms of interpretation and application. Not only when we face the problem of determining its scope (a solution left to national laws) but also when we examine the role played by the connecting factors chosen for article 9 (specifically, the determination of the lex loci when the action was carried out in several countries), as well as the application of this article in relation to third parties. But even more important is that neither the preparatory works nor the Recitals of the Rome II Regulation make a satisfactory showing of two aspects: First, through the application of article 4 it would be impossible to reach an adequate and protective result in any case, and second, article 9 offers a more appropriate answer in cases of liability derived of an industrial action. Therefore we can wonder whether we are faced with a useful provision.49 Only the future application of article 9 will clear these shadows. LYON-CAEN G./ LYON-CAEN, A. (note 21), at p. 56 Cf. NOURISSAT C./TREPPOZ E., ‘Quelques observations sur l’avant-projet de proposition de règlement du Conseil sur la loi applicable aux obligations non contractuelles (Rome II)’, in: Clunet 2003, p. 7-32, at p. 29-32. 48 49

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CULPA IN CONTRAHENDO IN THE CONFLICT OF LAWS A COMMENTARY ON ARTICLE 12 OF THE ROME II REGULATION Bart VOLDERS∗

I. II. III. IV.

Introduction Qualification Connecting Factors Conclusion

I.

Introduction

The Regulation (EC) No 864/2007 of 11 July 2007 of the European Parliament and of the Council on the law applicable to non-contractual obligations (commonly referred to as the ‘Rome II Regulation’)1 lays down uniform rules to determine which substantive law should apply to issues in international cases where the claim is brought to enforce a non-contractual obligation.2 There already existed within the European Union, prior to the entry into force of the Rome II Regulation, an established body of choice of law rules for contractual obligations.3 Common conflict rules for non-contractual obligations were however missing, although the idea of having a single choice of law regime for non-contractual obligations at the European Union level is no novelty.4 ∗

Dr. iur.; Attorney-at-Law at the Brussels Bar. O.J. L 199 of 31 July 2007, pp. 40-49. 2 Pursuant to Article 31 Rome II, the Rome II Regulation shall apply to events giving rise to damage which occur after its entry into force. Article 32 Rome II states that the Regulation shall apply from 11 January 2009, except for Article 29 Rome II, which shall apply from 11 July 2008. 3 Convention on the law applicable to contractual obligations (hereinafter: ‘1980 Rome Convention’), O.J. C 027 of 26 January 1998, pp. 34-46 (consolidated version). 4 The initial idea of the Member States was to come up with a convention covering both contractual and non-contractual obligations. Despite the Member States succeeded in producing a first draft convention covering both types of obligations in 1972, a number of disagreements eventually prevented them to finalise and to adopt this first draft proposal. For some commentaries on the 1972 draft convention, refer to JESSURUN D’OLIVEIRA H., ‘Observations concerning the preliminary draft EEC Convention on the law applicable to contractual and non-contractual obligations’, in: N.I.L.R. 1975, pp. 194-201; LAGARDE P., 1

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Bart Volders The objective of the Rome II Regulation is to ensure that courts in each of the Member States apply identical choice of law rules to disputes involving noncontractual obligations. According to the Community legislator, uniform conflict rules avert the risk of distortions of competition between Community litigants.5 The substantive scope of the Rome II Regulation, whilst some particular matters have been expressly excluded from its scope6, is otherwise intended to cover comprehensively all non-contractual obligations. Its substantive scope and (most of) its provisions, furthermore pursue consistency with Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the ‘Brussels I Regulation’) and the (draft) instruments dealing with the law applicable to contractual obligations.7 While it is true that the Rome II Regulation and the 1980 Rome Convention, soon to be replaced by a Rome I Regulation,8 deal with choice of law and not with jurisdiction, the proposal to interpret common provisions congruently, subject of course to certain exceptions,9 is clearly to be applauded.10 Streamlining the interpretation of common notions contained in jurisdictional or choice of law ‘Examen de l’avant projet de Convention CEE sur la loi applicable aux obligations contractuelles et non-contractuelles’, in: T.C.F.D.I.P. 1971-1972, pp. 147-203 ; VANDER ELST R., ‘L’unification des règles de conflits de lois dans la CEE’, in: J.T. 1973, pp. 249-253 ; VANDER ELST R., ‘Projet de Convention CEE sur la loi applicable aux obligations noncontractuelles’, in: R.T.D.E. 1975, pp. 185-195. 5 Preamble of the Rome II Regulation, consid. 13. 6 Article 1, par. 2 Rome II. 7 Preamble of the Rome II Regulation, consid. 7. 8 On the conversion of the 1980 Rome Convention into a Community Regulation, refer to BONOMI A., ‘Conversion of the Rome Convention into an EC instrument’, in: this Yearbook 2003, pp. 53 et seq.; LEIN E., ‘Proposal for a Regulation on the Law Applicable to Contractual Obligations (Rome I) COM(2005) 650 Final, 15.12.2005: A Short Commentary’, in: this Yearbook 2005, pp. 391 et seq.; MANKOWSKI P., ‘Der Vorschlag für die Rom I-Verordnung’, in: IPRax 2006, pp. 99 et seq. 9 PERTEGÁS SENDER M., ‘The notion of contractual obligation in Brussels I and Rome I’, in: MEEUSEN J./PERTEGÁS SENDER M./STRAETMANS G. (eds.), Enforcement of International Contracts in the European Union. Convergence and divergence between Brussels I and Rome I, Antwerp/Oxford/New York 2004, pp. 176 et seq., nrs. 5.4 et seq. 10 BRIGGS A./REESE P., Civil Jurisdiction and Judgements, 4th edition, London 2005, pp. 147-148, nr. 2.124 (according to these authors, it seems fairly unlikely that ‘those who drafted these instruments intended the central definitional terms to have divergent meanings: they were all drafted in Brussels, and comprise the jigsaw part of what will one day soon be a private international legal code for the Member States’); GAUDEMET-TALLON H., Compétence et execution des jugements en Europe. Règlement n° 44/2001, Conventions de Bruxelles et de Lugano, 3th edition, Paris 2002, p. 139, nr. 183; SCHULTZ J., case note under ECJ 8 March 1988 (Arcado c./ Haviland), in: N.J., 1990, No. 424, p. 1627 (this author refers of a ‘verticale begrippenunificatie’). Contra: MAX PLANCK INSTITUTE FOR FOREIGN PRIVATE AND PRIVATE INTERNATIONAL LAW (BASEDOW J. [et al.]), ‘Comments on the European Commission’s Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations’, in: RabelsZ. 2007, pp. 237-238.

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Culpa in Contrahendo in the Rome II Regulation Community law instruments is unarguably the easiest solution, which, for this mere reason, serves best legal certainty.11 The approach taken in the Rome II Regulation is to divide non-contractual obligations into two groups: a first group of non-contractual obligations arising out of a tort or delict12 and a second group that does not.13 Whereas civil wrongs are, in general, readily identifiable and, while it is acknowledged that substantial grey areas continue to exist between contractual and tortuous liability throughout the various jurisdictions, the notion of tortuous and delictual liability is commonly understood across the European Union. It proves far more complex, however, to classify and to define the second category of non-contractual obligations, which comprises claims arising out of unjust enrichment, negotiorum gestio and, what is of interest here, culpa in contrahendo covering non-contractual obligations arising out of dealings prior to the conclusion of the contract. The idea to provide in a common, European Union conflicts rule for claims arising out of a culpa in contrahendo – or, in general, claims arising out of precontractual dealings – was initially propounded by the European Group of Private International Law (‘EGPIL’) in the explanatory documents to its Proposal for a European Convention on the law applicable to non-contractual obligations adopted at the meeting of the Group in Luxembourg of 25 through 27 September 1998.14 But also the Max Planck Institute for Foreign Private and Private International Law (‘MPI’) argued in its comments on the European Commission’s Green Paper on the conversion of the 1980 Rome Convention, albeit in different terms, in favour of an express provision dealing with claims arising out of a culpa in contrahendo.15 The approach taken by the European Union legislator in the new Rome II Regulation does, however, differ on a number of important terms from both proposals. The structure of our analysis is twofold. A first subsection will analyse more thoroughly what actually constitutes a claim arising out of a culpa in contrahendo within the meaning of Article 12 Rome II. A second subsection will asses, once the claim has been qualified as a claim arising out of a culpa in contrahendo, the practical operation of this provision. At the outset, we should admit to be slightly disappointed with Article 12 Rome II. The provision seems on occasion relatively complex to handle and is furthermore inconsistent with other provisions VOLDERS B., Afgebroken contractonderhandelingen in het international privaatrecht, thèse dactyl. 2007, p. 336, nr. 539 (to be published by Larcier, Brussels). 12 Articles 4 through 9 Rome II. 13 Articles 10 through 12 Rome II. 14 The Draft Proposal is available at the website of the Group at: (last consulted on 15 February 2008). 15 Refer to MAX PLANCK INSTITUTE FOR FOREIGN PRIVATE AND PRIVATE INTERNATIONAL LAW (BASEDOW J. [et al.]), ‘Comments on the European Commission’s Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernization’, in: RabelsZ. 2004, p. 112. 11

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Bart Volders of the Rome II Regulation. I will revert to this critique after having commented on Article 12 Rome II.

II.

Qualification

The qualification or characterisation of a claim is the first hurdle conflict lawyers should tackle. Pursuant to the new (draft) Rome I and Rome II Regulations, all liability claims arising out of a pre-contractual relationship between the parties, albeit a claim arising out of a culpa in contrahendo within the meaning of Article 12 Rome II or not, are to be characterised as non-contractual.16 This global submission of all claims arising of dealings prior to the conclusion of contract departs from the Tacconi judgement of 17 September 2002 of the European Court of Justice,17 despite the Community legislator expressly arguing to pursue consistency with the Brussels I Regulation. In the latter case, the Court of Luxemburg held that a claim based on the alleged breach of a party’s duty to comply with the standard of good faith and fair dealing prior to the conclusion of the contract falls outside the substantive scope of Article 5, par. 1 Brussels I. The European Court of Justice did, however, expressly reiterate in its judgement that the existence of a contract was not a prerequisite for Article 5, par. 1 Brussels I to apply. A number of authors accordingly conclude that the characterisation of claims arising out of a breakdown of contract negotiations as non-contractual in the Tacconi judgement does not amount to a categorical exclusion of pre-contractual obligations outside the substantive realm of Article 5, par. 1 Brussels I.18 Hence, an exchange of precontractual documents (such as a letter of intent, a memorandum of understanding or a heads of agreement) between the contracting parties prior to the conclusion of the contemplated agreement, may cause in particular circumstances the characterisation of pre-contractual liability claims to shift from the realm of noncontractual obligations to a contractual matter. The proposed global submission in the (draft) Rome I and Rome II Regulations of all claims arising of dealings prior to the conclusion of contract to the realm of non-contractual obligations 16 Refer to Article 1, par. 2 lit. i of the Draft Proposal for a Rome I Regulation (COM(2005) 650 Final of 15 December 2005). 17 ECR 2002, I-7357. 18 STRIKWERDA L., De overeenkomst in het IPR, 2nd edition, Deventer p. 39, nr. 78 ; PERTEGÁS SENDER M. (note 9), p. 186, nr. 5-32; HUET A., case note under ECJ 17 September 2002 (Tacconi c./HWS), in: Clunet 2003, p. 671 (the author refers to a decision of the Court of Appeal of Chambéry of 23 February 1998, reported in: Clunet 1999, p. 188, commentary by HUET A.); MANKOWSKI P., ‘Die Qualifikation der culpa in contrahendo – Nagelprobe für den Vertragsbegriff des europäischen IZPR und IPR’, in: IPRax 2003, pp. 133-135; VEENSTRA K.J., ‘Artikel 5 EEX en afgebroken onderhandelingen’, in: N.T.B.R. 2003, p. 140; VLAS P., case note under ECJ 17 September 2002 (Tacconi c./HWS), in: N.J., 2003, p. 249.

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Culpa in Contrahendo in the Rome II Regulation accordingly seems at square with the principle of party autonomy, pursuant to which the parties can not only freely structure and organise their contractual relationship, but also their pre-contractual dealings. Not all claims arising out of pre-contractual dealings do, however, qualify as claims arising out of a culpa in contrahendo within the meaning of Article 12 Rome II. Within the framework of the Rome II Regulation, claims arising out of dealings prior to the conclusion of the contract are to be split over various choice of law rules, whereby only a particular kind of pre-contractual liability claims enters into the substantive realm of Article 12 Rome II. The notion of culpa in contrahendo of Article 12 Rome II, despite this provision having a certain German flavour to it,19 should furthermore not be confused with its equivalent in German substantive law. Pursuant to the Preamble of the Rome II Regulation, culpa in contrahendo for the purposes of Article 12 Rome II is considered an autonomous concept which is not necessarily to be interpreted within the meaning of national law.20 According to the text of Article 12, par. 1 Rome II, culpa in contrahendo minimally includes the violation of the duty of disclosure and the breakdown of contractual negotiations. Culpa in contrahendo equally covers other non-contractual obligations providing these obligations to present a direct link with the dealings prior to the conclusion of the contract. The direct link which triggers the application of Article 12 Rome II is not defined, nor otherwise clarified in the text or the preparatory documents to the Rome II Regulation. It seems, however, that merely claims which are functionally connected with the contemplated agreement enter into the substantive realm of Article 12 Rome II.21 Absent such direct link, the pre-contractual liability claim does not qualify as a claim arising out of a culpa in contrahendo, but instead is subject to Article 4 Rome II or other relevant provisions of the Rome II Regulation. If, for instance, a person suffers personal injury while a contract is being negotiated, the applicable The notion of culpa in contrahendo was first used by the German scholar R. VON IHERING who published on the subject in 1861 (VON IHERING R., ‘Culpa in contrahendo oder Schadenersatz bei nichtigen oder nicht zur Perfection gelangten Verträgen’, in: Jahrbücher für die Dogmatik des heutigen römischen und deutschen Privatrechts 1861, IV, pp. 1 et seq.). It was, however, an Italian scholar, G. FAGELLA, who first argued that the contracting parties can incur a liability even if the prospective contract would eventually not have been entered into (FAGELLA G., ‘Dei periodi precontrattuali e della loro vera ed esatta construzione significa’, in: Studi Giuridico di Carlo Faddo, Napoli 1906, pp. 298 et seq. and the thorough analysis of G. FAGELLA’s theory by SALEILLES R., ‘De la responsabilité précontractuelle ; à propos d’une étude nouvelle de la matière’, in: RTDCiv. 1907, pp. 705 et seq.). 20 In order to clearly illustrate that the notion of culpa in contrahendo for the purposes of Article 12 Rome II is not to be mistaken with its equivalent in German substantive law, the Community legislator thought it wise to refer in the German authentic text of Article 12 Rome II to ‘Verschulden bei Vertragsverhandlungen’. 21 Compare with MOURA VICENTE D., ‘Precontractual liability in Private International Law. A Portuguese Perspective’, in: RabelsZ. 2003, p. 710; MANKOWSKI P., (note 18), p. 133; MAX PLANCK INSTITUTE FOR FOREIGN PRIVATE AND PRIVATE INTERNATIONAL LAW (BASEDOW J. [et al.]), (note 15), pp. 88-90; LEIN E. (note 8), p. 397. 19

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Bart Volders law is to be determined pursuant to the general choice of law rule for tortuous or delictual obligations of Article 4 Rome II.22

III. Connecting Factors Article 12 Rome II is structured in two limbs. The first limb contains the general rule. Pursuant to Article 12, par. 1 Rome II, the law applicable to a non-contractual obligation arising out of dealings prior to the conclusion of a contract, regardless of whether the contract was actually concluded or not, shall be the law that applies to the contract or that would have been applicable to it had it been entered into. Claims arising out of a breakdown of contract negotiations are accordingly to be assessed pursuant to the law applicable to the contemplated agreement.23 The proposed first limb, which submits claims arising out of pre-contractual dealings to the law applicable to the contemplated agreement, recalls of an idea initially suggested by the French author P. Bourel who argued, back in 1961, to link obligations arising out of pre contractual dealings, albeit non contractual, with the upcoming agreement.24 Such manoeuvre is lenient to the technique of an accessory attachment (rattachement accessoire) of non-contractual obligations. This technique, which has currently been codified, albeit on different terms, in a number of national choice of law rules,25 circumvents the stringent lex loci delicti commissi conflict rule by replacing it with a ‘soziologische Einbettung’26 of the non-contractual obligation. But also the EGPIL suggested in its Draft European Convention on the law applicable to non-contractual obligations, an application of the technique of an accessory attachment of obligations arising out of dealings prior to the conclusion of the contract. The Draft Proposal expressly acknowledges that in determining the country which has the closest connection, the court shall have regard to any 22 This exception recalls of the ‘Bananenschale’ case of the German Supreme Court. Refer to BGH, 26 September 1961, in: N.J.W., 1962, p. 31 et seq. While under German substantive law, the theory of culpa in contrahendo extends to the situation where a person suffers personal injury while a contract is being negotiated, in the majority of other jurisdictions, such liability claims are generally not brought under the umbrella of pre-contractual liability. 23 We will not elaborate in this contribution on a choice of the applicable law prior to the conclusion of the agreement. Refer for further particulars on this issue to VOLDERS B., (note 11), pp. 429 et seq., nrs. 677 et seq. 24 BOUREL P., Les conflits de lois en matière d’obligations extracontractuelles, Paris 1961, p. 149. 25 For a comparative overview, refer to VOLDERS B. (note 11), pp. 380 et seq., nrs. 596 et seq. 26 BINDER H., ‘Zur Auflöckerung des Deliktstatuts’, in: RabelsZ. 1955, p. 48. A fairly similar idea had already been suggested in earlier Dutch scholarly writings. Refer to HIJMANS I.H., Algemeene problemen van het international privaatrecht, Zwolle 1937, p. 61.

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Culpa in Contrahendo in the Rome II Regulation pre-existing or contemplated relationship between the parties,27 such as a prospective contract. Such accessory attachment to the putative law of contract does evidently not amount to a ‘re-qualification’ of the pre-contractual liability claim.28 Apart from this accessory attachment of culpa in contrahendo claims being clear-cut, easy to operate and, therefore, beneficial for legal certainty, there is yet another advantage of submitting claims arising out of a culpa in contrahendo to the law applicable to the contemplated agreement. Since the putative law of contract is to be determined pursuant to the choice of law rules of the 1980 Rome Convention (or, in the near future, pursuant to the choice of law rules of the Rome I Regulation), the particular protection this instrument provides for certain consumer and individual employment contracts similarly extends to the pre-contractual bargaining period of contract.29 The presumed economic weaker contracting parties are accordingly granted legal protection also prior they’re entering into a final agreement. Submitting claims arising out of a culpa in contrahendo to the lex contractus that would have been applicable to the contemplated agreement, does, however, imply that the applicable law will most probably be the law of the state where the party that would have been required to effect the characteristic performance has his habitual residence or its central administration.30 A Dutch party claiming relief for an allegedly illegal breakdown of contract negotiations may accordingly rely upon the stringent standard of good faith and fair dealing of Dutch civil law if this party were to perform the characteristic performance of the prospective agreement, irrespectively the perpetrator being English and English substantive law does not impose any such stringent pre-contractual good faith obligation to the parties prior to the conclusion of the contract. In order to protect a perpetrator unaware of such stringent pre-contractual standard that would be imposed on him by virtue of the law applicable to the contemplated agreement, certain academic writings correctly argue in favour of an extension of the protection of Article 8, par. 2 of the 1980 Rome Convention.31 In certain exceptional circumstances, the English perpetrator which has withdrawn from the pre-contractual negotiations allegedly in infringement of the requirements imposed under Dutch civil law, may accordingly rely upon English substantive law in order to escape from a pre-contractual liability. These exceptional circumstances are to be assessed on a case-by-case basis. In other words: the mere fact English substantive law does not restrict the bargaining parties’ freedom from contract through a general and abstract standard of good Article 3, par. 5 of the Draft Proposal. FRICK J., Culpa in contrahendo. Eine rechtsvergleichende und kollissionsrechtliche Studie, Zurich 1992, p. 223. 29 VOLDERS B., (note 11), p. 403, nr. 637. 30 Article 4, par. 1 juncto par. 2 of the 1980 Rome Convention. 31 Refer to DÖRNER H., case note under BGH 9 October 1986, in: Juristische Rundschau 1987, p. 203; GAUTIER P.Y., ‘Les aspects internationaux de la négociation’, in: RTDCom. 1998, p. 496 ; MAX PLANCK INSTITUTE FOR FOREIGN PRIVATE AND PRIVATE INTERNATIONAL LAW (BASEDOW J. [et al.]), (note 15), p. 90. 27 28

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Bart Volders faith but instead adopts an aleatory view of contract negotiations is, in itself, insufficient to trigger the escape clause of Article 8, par. 2 of the 1980 Rome Convention. Far less convincing, however, is the second limb of Article 12 Rome II. This second limb provides in a fall-back rule that can only to be operated if the law applicable to the claim arising out of a culpa in contrahendo cannot be determined pursuant to the general rule. One may, at the outset, argue this provision most probably will prove superfluous in practice. Considering the very flexible conflict rules of the 1980 Rome Convention (and, although slightly less flexible,32 the choice of law rules of the upcoming Rome I Regulation) which equally determine, via Article 12, par. 1 Rome II, the law applicable to dealings prior to the conclusion of the contract, it seems indeed fairly unlikely that the lex contractus of the upcoming agreement cannot be assessed. A breakdown of contract negotiations at the very beginning may, arguably, hinder the determination of the applicable law to the projected agreement, especially if the contemplated agreement were to be very complex. Breaking off contract negotiations at the outset will not, however, give rise, as a matter of substantive law, to any pre-contractual liability of the perpetrator.33 But also the laddered structure and detailed drafting of Article 12, par. 2 Rome II face criticism. At first sight, the threefold structure of Article 12, par. 2 Rome II is seemingly simply rephrasing the general conflicts rule for torts and delicts of Article 4 Rome II: where the applicable law to the pre-contractual liability claim cannot be determined on the basis of article 12, par. 1 Rome II, it shall be either the law of the country in which the damage occurs, irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occurred34 or, where the parties have their habitual residence in the same country at the time when the event giving rise to the damage occurs, the law of that country.35 Where it is, however, clear from all the circumstances of the case that the non-contractual obligation arising out of dealings prior to the conclusion of a contract is manifestly more closely connected with another country, then the law of this country will apply.36 There is, however, a peculiar difference between both provisions, for which the preparatory documents contain no express explanation. Article 12, par. 2 lit. b Rome II takes indeed as a relevant date for there being a habitual residence the time when the event giving rise to the damage occurs. Article 4, par. 2 Rome II 32 Refer to LAGARDE P., ‘Remarques sur la proposition de Règlement de la Commission européenne sur la loi applicable aux obligations contractuelles (Rome I)’, in: Rev. crit. DIP 2006, p. 103. 33 This is implied by the freedom from contract. Refer to COHEN N., ‘Pre-contractual duties: two freedoms and the contract to negotiate’, in: BEATSON J./FRIEDMANN D. (eds.), Good faith and fault in contract law, Oxford 1994, p. 25. 34 Article 12, par. 2 lit. a Rome II. 35 Article 12, par. 2 lit. b Rome II. 36 Article 12, par. 2 lit. c Rome II.

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Culpa in Contrahendo in the Rome II Regulation on the other hand, requires that all parties have their habitual residence in the same country at the time when the damage occurs. Why the Community legislator prefers in Article 12, par. 2 Rome II the event over the damage is unclear. One may argue that it is difficult to assess, for instance in cases where one party seeks compensation for a breakdown of contract negotiations, the exact time when the damage occurs. The grieved party merely seeks compensation for a pure economic loss. It is, however, wrong to assume that the exact time of the event giving rise to the damage might be more easily to determine. What actually constitutes the event giving rise to a claim arising out of a culpa in contrahendo is indeed interpreted differently in case law,37 which similarly hinders an exact timing of this event.

IV. Conclusion One may argue that the Community legislator made in Article 12 Rome II a valiant attempt of legislating in the area of pre-contractual liability. The referral to the technique of the accessory attachment, allowing for claims arising out of a culpa in contrahendo to be submitted to the law applicable to the contemplated agreement, unarguable provides in a clear-cut and straightforward solution, which can only be applauded. Apart from this, there is, however, very little one should be enthusiastic about. A closer look to Article 12 Rome II reveals indeed a number of shortcomings which, arguably, may hinder the provisions’ practical operation. The usage of a concept such as culpa in contrahendo in a Community law instrument which, although it originates in German substantive law, should in any effect not be mistaken with its German counterpart, may give rise to some salient interpretational difficulties before its substantive scope being well-defined and clear. But also the second limb of Article 12 Rome II, apart from it being illustrative of a particularly poor legislative drafting technique, clearly risks ending up every courts’ ‘Bananenschale’.38

37 For some examples drawn from case law, refer to VOLDERS B. (note 11), pp. 172 et seq., nrs. 285 et seq. 38 Refer to BGH, 26 September 1961, in: N.J.W. 1962, p. 31 et seq.

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RELATIONSHIPS BETWEEN ‘ROME II’ AND OTHER INTERNATIONAL INSTRUMENTS A COMMENTARY ON ARTICLE 28 OF THE ROME II REGULATION Georgina GARRIGA∗

I. II. III.

IV.

Introduction Background of the Article 28 of the Rome II Regulation Content of the Article 28 of the Rome II Regulation A. What is Expressly Provided by Article 28 of the Rome II Regulation B. What is Implicitly Provided by Article 28 of the Rome II Regulation Conclusion

I.

Introduction

Although the phenomenon of interaction between international conventions has been traditionally studied from the public international law perspective and limited to international conventions, since the beginning in the 1950’s, the private international law perspective has also played an important role. In this sense, B. Dutoit and F. Majoros underlined that ‘A l’évidence, les cas des conflits de conventions en droit privé ne cessent d’augmenter. En effet, les conventions bilatérales ou multilatérales ayant, au moins partiellement, le même objet continuent d’éclore à un rythme accéléré’.1 This phenomenon has been expanded even more due to the socalled communitarization of private international law, which added the conflicts between international conventions and community legislation to the traditional interaction.2 Indeed, certain measures adopted by European institutions in the recent past are clashing with international conventions to which Member States became parties before the above-mentioned communitarization. As a consequence, the aforementioned phenomenon occurs with much greater frequency than in the past when B. Dutoit foresaw that ‘L’épée de Damoclès des conflits de conventions ∗

Lecturer in Private International Law, University of Barcelona. ‘Les lacis des conflits de conventions en droit privé et leurs solutions possibles’, in: Rev. crit. dr. int. pr. 1984, p. 22. 2 With respect to the communitarization of private international law, as the bibliography dealing with this topic is so vast, see BORRAS A., ‘Le droit international privé communautaire: réalités, problèmes et perspectives d’avenir’, in: Recueil des Cours 2005, tome 317, pp. 313-536 and the bibliography at 527-536. 1

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Georgina Garriga est décidément trop bien suspendue sur nos têtes (…)’.3 The legislative power of the European Community has therefore increased the conflicts between international measures. Article 28 of the Regulation (EC) nº 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II Regulation) reflects this.4 This provision, as set forth below, deals with the interaction between the Rome II Regulation and the international conventions to which Member States became parties before its adoption. Thus, Article 28 of the Rome II Regulation continues, to some extent, the trend initiated by Article 21 of the Convention on the law applicable to contractual obligations, opened for signature on 19 June 19805 (Rome Convention) regulating the relationship among international instruments that set forth conflict-of-law rules. This provision deals with the Convention’s relationship with other international conventions to which contracting States became or can become parties in the future.6 In this respect, Article 21 of the Rome Convention focuses mainly on the Convention’s relationship with The Hague Convention of 15 June 1955 on the law applicable to international sales of goods7 and the Hague Convention of 14 March 1978 on the law applicable to agency,8 giving them precedence. B. DUTOIT’s preface to F. MAJOROS’s book, Les conventions internationales en matière de droit international privé. Abrégé théorique et traité pratique, Paris 1976, p. XVIII. 4 OJ L 199, 31 July 2007. For comments on the Rome II Regulation, see, among others, GARCIMARTÍN ALFÉREZ F.J., ‘The Rome II Regulation: On the way towards a European Private International Law Code’, in: The European Legal Forum 3-2007, pp. I-77-I-91; GARCIMARTÍN ALFÉREZ F.J., ‘La unificación del derecho conflictual en Europa: el Reglamento sobre ley aplicable a las obligaciones extracontractuales («Roma II»)’, in: Diario La Ley 2007, nº 6798, 18 pp.; HAY P., ‘Contemporary Approaches to Non-Contractual Obligations in Private International Law (Conflict of Laws) and the European Community’s ‘Rome II’ Regulation’, in: The European Legal Forum 4-2007, pp. I-137-I-151. 5 OJ C 27, 26 June 1998. On 31 March 2008 the Council presented the final version of the Regulation of the European Parliament and of the Council on the law applicable to contractual obligations (Rome I) aimed to replace the Rome Convention. See 2005/0261 (COD); PE-CONS 3691/07; JUSTCIV 334; CODEC 1401. 6 On the contrary, Article 25 of the Regulation of the European Parliament and of the Council on the law applicable to contractual obligations (Rome I), as it was adopted on 31 March 2008, shall not prejudice the application of international conventions to which Member States already were parties. Thus, Member States are no longer allowed to conclude future international conventions with third States with respect to the same matter. 7 See the text of both conventions at: <www.hcch.net>. As far as this relationship is concerned, see, among others, SERENA ROSSI L., ‘Il problema dei conflitti fra le convenzioni promosse dalla CEE e dalla Conferenza Permanente dell'Aja sulla disciplina internazionalprivatistica delle vendite internazionali’, in: Diritto Comunitario e degli Scambi Internazionali 1986, p. 377; DROZ G.A.L., ‘Regards sur le Droit international privé comparé, Cours général de Droit international privé’, in: Recueil des Cours 1991-IV, p. 392; LAGARDE P., ‘Les limites objectives de la Convention de Rome (Conflits de lois, primauté du Droit communautaire, rapports avec les autres conventions)’, in: Riv. dir. int. priv. proc. 1993, pp. 39-41; BRIERE C., Les conflits de conventions internationales en droit privé, Paris 2001, 3

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II.

Background of the Article 28 of the Rome II Regulation

The origin of Article 28 of the Rome II Regulation dates back to the European Commission Preliminary Draft Proposal adopted on 3 May 2002 and opened to the contributors who were interested in it.9 According to its Article 24, Member States were allowed to apply conflict-of-law rules laid down in preexisting international conventions as long as they dealt with specific matters in respect of those of the Rome II Regulation.10 Thereafter, on 22 July 2003 the European Commission adopted the Proposal for a Regulation of the European Parliament and the Council on the law applicable to non-contractual obligations.11 Its Article 25 embraces the same text previously contained in Article 24 of the Rome II Preliminary Draft Proposal. pp. 197-198; MALAN A., La concurrence des conventions internationales dans le droit des conflits de lois, Aix-Marseille 2002, pp. 278-284. 8 Concerning this relationship, see FERRY C.J., ‘Convention de Rome du 19 juin 1980 sur la loi applicable aux obligations contractuelles, Convention de La Haye du 14 mars 1978 sur la loi applicable aux contrats d’intermédiaires et à la représentation et la loi n. 91593 du 25 juin 1991 relative aux rapports entre les agents commerciaux et leurs mandants’, in: La Semaine Juridique, Édition Entreprise 1993, Vol. 67, p. 154; LAGARDE P. (note 7), pp. 37-38. 9 A list of the contributions to the Preliminary Draft Proposal is available at: For comments on the Rome II Preliminary Draft Proposal of 2002, see, among others, NOURISSAT C./TREPPOZ E., ‘Quelques observations sur l’avant-projet de proposition de règlement du Conseil sur la loi applicable aux obligations non contractuelles «Rome II»’, in: Clunet 2003, pp. 7-38; DICKINSON A., ‘Cross-Border Torts in EC Courts- A Response to the Proposed «Rome II» Regulation’, in: European Business Law Review 2002, pp. 369-388; HAMBURG GROUP FOR PRIVATE INTERNATIONAL LAW, ‘Comments on the European Commission’s Draft Proposal for a Council Regulation on the Law Applicable to Non-Contractual Obligations’, in: RabelsZ 2003, pp. 1-56; FERNÁNDEZ MASIÁ E., ‘Primeras consideraciones sobre el Anteproyecto de Reglamento sobre ley aplicable a las obligaciones extracontractuales (Roma II)’, in: Actualidad Civil, septiembre 2003, 24 pp.; PALAO MORENO G., ‘Hacia la unificación de las normas de conflicto en materia de obligaciones extracontractuales en Europa (Una visión crítica del Anteproyecto de Propuesta de Reglamento «Roma II»)’, in: Derecho Patrimonial Europeo 2003, N. 10, pp. 271-299. 10 Article 24 of the Preliminary Draft Proposal for a Council Regulation on the law applicable to non-contractual obligations of 2002 establishes that: ‘This Regulation shall not prejudice the application of international conventions to which the Member States are party when this Regulation is adopted and which, in relation to particular matters, lay down conflict of law rules relating to non-contractual obligations’. 11 COM(2003) 427 final. For general comments on the Rome II Proposal of 2003 see, inter alia, KREUZER K., ‘La comunitarizzazione del Diritto internazionale privato in materia di obbligazioni extracontrattuali («Roma II»)’, in: Diritto internazionale privato e Diritto comunitario, Milano 2004, pp. 421-447; AMORES CONRADI M.A./TORRALBA MENDIOLA E., ‘XI Tesis sobre el estatuto delictual’, in: Revista Electrónica de Estudios

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Georgina Garriga An amended Proposal was adopted by the European Commission on 21 February 200612 which modified the previous Article 25 giving precedence to the Rome II Regulation over international conventions in cases where all the material aspects of the particular case were located in one or more Member States. Thus, Article 24 meant that in those circumstances the application of The Hague Convention of 4 May 1971 on the law applicable to traffic accidents and of The Hague Convention of 2 October 1973 on the law applicable to products liability would be rejected in favour of the application of the Rome II Regulation.13 However, the difficulty faced in distinguishing the intra-community from the extracommunity situations was the main reason for defeating this text in favour of the previous text embodied in Article 25 of the Rome II Proposal of 2003. Therefore, the current Article 28 of the Rome II Regulation has finally embraced the initial proposal, albeit with some amendments.

Internacionales (www.reei.org) 2004; SYMEONIDES S.C., ‘Tort Conflicts and Rome II. A view from Across’, in: Festschrift E. Jayme, München 2004, pp. 935-954; STONE P., ‘The Rome II Proposal on the Law Applicable to Non-Contractual Obligations’, in: The European Legal Forum 4-2004, pp. 213-229; VAREILLES-SOMMIÈRES P., ‘La responsabilité civile dans la proposition de règlement communautaire sur la loi applicable aux obligations non contractuelles («Rome II»)’, in: Les conflits de lois et le système communautaire, Paris 2004, pp. 185-203; FACH GÓMEZ K., ‘Propuesta de Reglamento del Parlamento Europeo y del Consejo, relativo a la ley aplicable a las obligaciones extracontractuales («Roma II»)’, in: Cuestiones actuales del Derecho mercantil internacional, Madrid 2005, pp. 519-534. For comments on the Article 25 of the Rome II Proposal of 2003 see, among others, BRIÈRE C., ‘Réflexions sur les interactions entre la proposition de règlement «Rome II» et les conventions internationales’, in: Clunet 2005, pp. 677-694; MALATESTA A., ‘The Law Applicable to Traffic Accidents’, in: The Unification of Choice of Law Rules on Torts and Other Non-Contractual Obligations in Europe, Padova 2006, pp. 85-106; MALATESTA A., ‘La legge applicabile agli incidenti stradali nella Proposta di Regolamento (CE) Roma II’, in: Riv. dir. int. priv. proc. 2006, pp. 47-66; STAUDINGER A., ‘Rome II and traffic accidents’, in: The European Legal Forum 2-2005, pp. I-61-I-66; GRAZIANO KADNER Th., ‘La coordination des règlements européens et des conventions internationales en matière de droit international privé: l’exemple des futurs règlements «Rome I» et «Rome II»: appréciation des différents options, critique et proposition’, in: RSDIE 2006/3, pp. 279-293. 12 COM(2006) 83 final. 13 In conformity with article 24 of the Rome II Amended Proposal of 2006: ‘1. This Regulation shall not prejudice the application of multilateral international conventions to which the Member States are parties when this Regulation is adopted and which, in relation to particular matters, lay down conflict-of-law rules relating to non-contractual obligations and of which the Commission has been notified in accordance with Article 26. 2. However, where, at the time of conclusion of the contract, all the material aspects of the situation are located in one or more Member States, this Regulation shall take precedence over the following Conventions: – the Hague Convention of 4 May 1971 on the Law Applicable to Traffic Accidents; – the Hague Convention of 2 October 1973 on the Law Applicable to Products Liability’.

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III. Content of the Article 28 of the Rome II Regulation Pursuant to the language of Article 28 of the Rome II Regulation, the Regulation shall not prejudice the application of international conventions to which one or more Member States were parties at the time the Regulation was adopted and which contain conflict-of-law rules relating to non-contractual obligations. Thus, this provision enables Member States to apply conflict-of-law rules established in international conventions existing at the adoption of the Rome II Regulation irrespective of whether or not they deal with particular matters in relation to the Rome II Regulation. However, its second paragraph provides that the Rome II Regulation will take precedence over those international conventions previously concluded among Member States exclusively. The above-mentioned provision deserves two preliminary comments. The first relates to the different treatment applied to the conventions concluded by one or more Member States (1st paragraph) from that applied to the conventions concluded exclusively among Member States (2nd paragraph). This variation clears up the confusion that arose from Article 24 of the Rome II Preliminary Draft Proposal of 2002 and the articles that have been subsequently adopted. According to one interpretation of this provision, existing international conventions should only take priority over the Rome II Regulation provided that all Member States were parties to them. A second interpretation was that existing international conventions would prevail over the Rome II Regulation as long as at least one or more Member States had become party to them without it being necessary that all Member States were parties. In this respect, those Member States would be entitled to apply the particular international convention instead of the Rome II Regulation.14 As pointed out above, the second interpretation has been embraced by Article 28 of the Rome II Regulation. As far as the second comment is concerned, in both paragraphs, Article 28 of the Rome II Regulation only takes into account the existing international conventions. This means that it leaves aside all future international conventions. This exclusion is based on the delicate topic of the division of competences between the European Community and the Member States. The following two paragraphs deal with two separate, but related, matters. The first covers the priority application of international conventions over the Rome II Regulation, taking into account the advantages and disadvantages of such treatment. The second paragraph discusses the priority application of the Rome II Regulation over future international conventions as a consequence of the universal or erga omnes scope of the Rome II Regulation, which attributes to the European Community exclusive external competence with respect to the substantive scope of the Rome II Regulation. 14 Both interpretations were highlighted by KREUZER K. (note 11), pp. 444-445; NOURISSAT C./TREPPOZ E. (note 9), p. 20.

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Georgina Garriga A.

What is Expressly Provided by Article 28 of the Rome II Regulation

To begin, as noted initially, the first paragraph of Article 28 of the Rome II Regulation gives precedence to the international conventions to which one or more Member States were parties on the date the Rome II Regulation was adopted, 11 July 2007, and which laid down conflict-of-law rules relating to non-contractual obligations. Before analyzing the advantages and disadvantages of such a treatment, attention should be paid to the type of international conventions covered by this paragraph. There is no doubt that the above-mentioned Hague Conventions (The Hague Convention of 4 May 1971 on the law applicable to traffic accidents15 and The Hague Convention of 2 October 1973 on the law applicable to products liability16) are embraced by it. In fact, both conventions were quoted expressly from the very beginning of the legislative process. For instance, quotes can be found in the Explanatory Memorandum presented by the Commission of the Rome II Proposal of 200317 and even in the text of Article 24 of the Rome II Amended Proposal of 2006. Furthermore, leaving The Hague Conventions aside, other international conventions establishing conflict-of-law rules in the field covered by the Rome II Regulation should be taken into consideration. Once it is determined which conventions are included within Article 28 of the Rome II Regulation, in order to study its advantages and disadvantages, attention should be paid to the purported goals of the Rome II Regulation. According to its Memorandum, the Rome II Regulation seeks to achieve, among other objectives, certainty as to the applicable law in order to improve the predictability of the outcome of litigation. To sum up, the Rome II Regulation endeavors to unify conflict-of-law rules throughout the European Union in order to designate the same law irrespective of the country under whose courts an action is brought (Recital 6). In other words, the Rome II Regulation seeks to eliminate the forum shopping permitted by the Council Regulation (EC) nº 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I Regulation).18 It should be recalled that the Rome II Regulation is meant to complement the Brussels I Regulation. In this context, the Brussels I Regulation enables the claimant to choose the most suitable jurisdiction for his or her interests on the basis of an extra-contractual claim. Then, the law The following Member States are parties to the Hague Convention of 4 May 1971 on the law applicable to traffic accidents: Austria, Belgium, the Czech Republic, France, Latvia, Lithuania, Luxembourg, Netherlands, Poland, Slovakia, Slovenia and Spain. 16 The Member States which are parties to the Hague Convention of 2 October 1973 on the law applicable to products liability are: Finland, France, Luxembourg, Netherlands, Slovenia and Spain. 17 In accordance with the Explanatory Memorandum: ‘Article 25 allows Member States to go on applying choice of law rules laid down in international conventions to which they are party when this Regulation is adopted. These conventions include the Hague Conventions on traffic accidents (4 May 1971) and product liability (2 October 1973)’. 18 OJ L 12, 16 January 2001. 15

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Relationships between Rome II and Other International Instruments finally applied depends on the previous claimant’s election. From such an outcome, it follows that Rome II Regulation tries to avoid the forum shopping tolerated by the Brussels I Regulation by means of the unification of the conflict-of-law rules. Therefore, rules set out in the Rome II Regulation will be applied by every European court irrespective of whether or not the situation presents connections with Member States and the applicable law is that of one of the Member States. Nevertheless, what could be criticized19 is that the above-mentioned unification has been jeopardized to the extent that the application of international conventions has been allowed in place of the application of the Rome II Regulation. Consequently, three different systems will be applied in the European Union: firstly, the conflict-of-law rules laid down in the Rome II Regulation; secondly, the conflict-of-law rules set out in the aforementioned Hague Conventions; and lastly, the conflict-of-law rules contained in the Danish legislation unless Denmark at some time in the future accepts the conflict-of-law rules laid down in the Rome II Regulation20 because Denmark was neither a party to The Hague Convention of 4 May 1971 on the law applicable to traffic accidents nor to The Hague Convention of 2 October 1973 on the law applicable to products liability. Thus, forum shopping remains in the European Union despite the efforts of the European Union to unify the conflict-of-law rules on the law applicable to noncontractual obligations. Unfortunately, the Rome II Regulation has not, therefore, reached the expected unification proposed for the first time in 1972 by the failed Preliminary Draft Convention on the law applicable to contractual and non-contractual obligations.21 Some authors have criticized the incomplete unification of the conflict-of-law rules laid down in the Rome II Regulation. See, for instance, STAUDINGER A. (note 11), p. I63; PATAUT E., ‘De Bruxelles à La Haye, Droit international privé communautaire et Droit international conventionnel’, in: Mélanges P. Lagarde, Paris 2005, p. 675; MALATESTA A. (note 11), p. 64; MALATESTA A. (note 11), p. 104; NOURISSAT C./TREPPOZ E. (note 9), pp. 24-25; HAMBURG GROUP FOR PRIVATE INTERNATIONAL LAW (note 9), p. 60. 20 According to the Recital 40 of the Rome II Regulation: ‘In accordance with Articles 1 and 2 of the Protocol on the position of Denmark, annexed to the Treaty on European Union and to the Treaty establishing the European Community, Denmark does not take part in the adoption of this Regulation, and is not bound by it or subject to its application’. 21 See ‘Rapport GIULIANO, LAGARDE and VAN SASSE VAN YSSELT’, in: Riv. dir. int. priv. proc. 1973, pp. 198-260. The Rapport has been also published in the European Private International Law of Obligations, Acts and Documents of an International Colloquium on the European Preliminary Draft Convention on the Law Applicable to Contractual and NonContractual Obligations, held in Copenhagen on April 29 and 30, 1974, Tübingen 1975, pp. 230-241. Concerning the Preliminary Draft Convention, see, among others, VANDER ELST R., ‘L’unification des règles de conflit de lois dans la CEE’, in: Journal des Tribunaux 1973, pp. 249-254; VANDER ELST R., ‘Projet de Convention CEE sur la loi applicable aux obligations non-contractuelles’, in: Revue Trimestrielle de Droit Européen 1975, Vol. 11, pp. 187-195; BATIFFOL H., ‘Projet de Convention CEE sur la loi applicable aux obligations contractuelles’, in: Revue Trimestrielle de Droit Européen 1975, Vol. 11, pp. 181-186; 19

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Georgina Garriga On the contrary, the international unification has been safeguarded by the Rome II Regulation insofar as Article 28(1) gives precedence to the existing international conventions. Indeed, this provision entitles Member States to fulfill their previous international obligations without being forced to denounce the aforementioned conventions for breaching the Community law. In this respect, European institutions preferred to maintain international harmony rather than achieve an isolated regional unification. Indeed, D. Opertti Badán stated that ‘No habrá universalismo prestigioso si éste prescinde o enfrenta al regionalismo. Regionalismo y universalismo no son términos contradictorios, pueden llegar a serlo si en cada uno de ellos domina, a su turno, en el regionalismo una visión aislacionista, y en el universalismo una soberbia impositiva’.22 The prevalence of the existing international conventions has permitted Member States to avoid denouncing the international conventions. Thus, European unification of the conflict-of-law rules on non-contractual obligations has been to some extent sacrificed in favour of an international harmony. Lastly, the priority of existing international conventions fulfills the provision set forth in the first paragraph of Article 307 of the European Community Treaty.23 According to the Article: ‘The rights and obligations arising from agreements concluded before 1 January 1958 or, for acceding States, before the date of their accession, between one or more Member States on the one hand, and one or more third countries on the other, shall not be affected by the provisions of this FOYER J., ‘L’avant-projet de Convention CEE sur la loi applicable aux obligations contractuelles et non-contractuelles’, in: Clunet 1976, pp. 555-658; LAGARDE P., ‘Examen de l’avant-projet de Convention CEE sur la loi applicable aux obligations contractuelles et noncontractuelles’, in: Travaux du Comité Français de Droit International Privé 1971-1975, pp. 147-201; NADELMANN K.H., ‘Impressionism and Unification of law: The EEC Draft Convention on the law applicable to contractual and noncontractual obligations’, in: Am. J. Comp. L. 1976, pp. 1-24; IGLESIAS BUHIGUES J.L., ‘Las obligaciones extracontractuales en el Anteproyecto de Convenio CEE y en el Derecho conflictual español’, in: Estudios de Derecho Internacional. Homenaje al Prof. Miaja de la Muela, Madrid 1979, Vol. II, pp. 11231145. 22 ‘There won’t be prestigious universalism if this disregards or conflicts with regionalism. Regionalism and universalism are not contradictory but can be so if an isolationist perspective dominates within regionalism, and imposing sovereignty dominates within universalism’: OPERTTI BADAN D., ‘Compatibilidad e interacción de la Codificación Regional interamericana con los ámbitos de producción jurídica universal y subregional. Balance de los veinte primeros años de la CIDIP’, in: El Derecho internacional privado interamericano ante el umbral del siglo XXI, Madrid 1997, p. 237. See also BONOMI A., ‘Le droit international privé entre régionalisme et universalisme – quelques considerations sur les compétences européennes en matière de droit international privé et leurs effets pour les Etats tiers’, in: RSDIE 2006/3, pp. 295-309. 23 It should kept in mind that the European Community Treaty will be replaced by the Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community, signed at Lisbon, 13 December 2007 once it enters into force (OJ C 306, 17 December 2007). In accordance with the new numbering, the current Article 307 of the ECT will be the Article 351 of the Treaty on the Functioning of the European Union.

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Relationships between Rome II and Other International Instruments Treaty’. Regarding this provision, some authors have highlighted that this paragraph is also applied with respect to the interaction between existing international conventions and the subsequent enlargements of the community competence.24 Notwithstanding, Article 29 of the Rome II Regulation forces Member States to inform the European Commission about the international conventions to which they are parties, as well as their denunciation if this takes place. The denunciation of the Hague Conventions has been put forward as the solution to reach a complete unification of the conflict-of-law rules in the field of non-contractual obligations in the European Union.25 Indeed, the denunciation has been specially recommended due to the complex conflict-of-law systems encompassed in both Hague Conventions.26 Whereas Member States are obliged to inform the European Commission, the Commission is obliged to publish a list of the above-mentioned international conventions and a list of the denunciations, if any occur, in the Official Journal. Finally, as noted previously, Article 28(2) of the Rome II Regulation attributes to the Rome II Regulation priority over existing international conventions concluded exclusively among Member States. On the one hand, this solution proclaims the primacy of Community law. On the other hand, the aforementioned solution sets forth the traditional rule lex posterior derogat priori27 used to work out conflict of international conventions together with the other traditional rules: Lex specialis derogat generali and lex favorabilior.

See, for instance, MEESSEN K.M., ‘The application of rules of Public international law within Community law’, in: Common Market Law Review 1976, pp. 490-491; BOULOUIS J., ‘Le Droit des Communautés européennes dans ses rapports avec le Droit international général’, in: Recueil des Cours 1992-IV, p. 68; WILDERSPIN M./LEWIS X., ‘Les relations entre le Droit communautaire et les règles de conflits de lois des États membres (suite et fin)’, in: Rev. crit. dr. int. pr. 2002, N. 2, pp. 289-313. 25 See PATAUT E. (note 19), pp. 675-676; BRIÈRE C. (note 7), p. 68 and p. 76. 26 The complex conflict-of-law systems embedded in both Hague Conventions has been pointed out by HOFFMANN B. VON, ‘International Law of Non-Contractual Obligations in Europe (European International Tort Law)’, in: European Private International Law, Nijmegen 1998, p. 88 and p. 102. In relation to The Hague Convention of 2 October 1973 on the law applicable to products liability, see von OVERBECK A.E., ‘Les règles de la Loi Fédérale Suisse sur le Droit international privé (LDIP) en matière d'actes illicites’, in: La responsabilidad internacional, Aspectos de Derecho internacional público y de Derecho internacional privado, XIII Jornadas de profesores de derecho internacional y relaciones internacionales, 1989, Alicante 1990, p. 492. With respect to The Hague Convention of 4 May 1971 on the law applicable to traffic accidents see STAUDINGER A. (note 11), p. I-63. 27 On this rule see, among others, MAJOROS F. (note 3), p. 421; SCISO E., Gli accordi internazionali confliggenti, Bari 1986, pp. 163-175; BRIÈRE C. (note 7), footnote 1, pp. 142143. 24

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What is Implicitly Provided by Article 28 of the Rome II Regulation

As already mentioned, Article 28 of the Rome II Regulation only takes into account existing international conventions without mentioning future ones. This can be explained clearly if we connect this omission to the division of competences between the European Community and the Member States. In fact, Article 28 of the Rome II Regulation continues the trend initiated by Article 71 of the Brussels I Regulation when this provision was interpreted as prohibiting Member States from concluding new conventions on the same subject matter with third countries or international organizations. Thus, that provision implies the exclusion of the treaty-making power of the Member States to enter into international agreements with third States or international organizations due to the exclusive competence of the European Community acquired thanks to the adoption of the community measure. Indeed, as noted initially, the communitarization of private international law not only created an enlargement of the scope of the conflict of international instruments but also conferred shared competence on the European Community over the field of private international law. From that, it followed that Member States could only continue to conclude international conventions with third States or international organizations as long as the European Community did not acquire exclusive competence over a determined subject matter. The problem then arises as to how to ascertain whether the European Community has acquired the exclusive competence that would prohibit Member States from exercising their respective treaty-making power. As far as the Rome II Regulation is concerned, the ERTA doctrine, which was established by one of the most far-reaching judgments of the European Court of Justice (ECJ),28 should be applied. In a nutshell, according to the ERTA doctrine the European Community acquires exclusive competence over a determined matter every time the European institutions legislate in a specific field, depending on the nature of the adopted measure. This means that not only the substantive scope, but also the nature of the Community measure, must be taken into account to deterJudgment of 31 March 1971, Case 22-70, European Commission v. European Conseil, in: ECR 1971, pp. 263-284. For comments on this judgment see, among others, RIDEAU J., ‘Note sur l’arrêt de la Cour du 31.3.1971’, in: Recueil Dalloz-Sirey 1972, Jurisprudence, p. 458; WAELBROECK J.V.L., Le droit de la Communauté européenne, Vol. 12, Relations extérieures, Editions de la Université de Bruxelles 1981, pp. 94-126; KOVAR R., ‘La contribution de la Cour de Justice au développement de la condition internationale de la Communauté européenne’, in: Cahiers de Droit Européen 1978, N. 5-6, pp. 527-573; KOVAR R., ‘L’affaire de l’AETR devant la Cour de Justice des Communautés européennes et la compétence internationale de la CEE’, in: Annuaire Français de Droit International 1971, pp. 386-418; GROUX J., ‘Le parallelisme des competences internes et externes de la Communauté Economique Européenne’, in: Cahiers de Droit Européen 1978, N. 1, pp. 3-32; PESCATORE P., ‘External relations in the case-law of the Court of Justice of the European Communities’, in: Common Market Law Review 1979, pp. 618-619; TEMPLE LANG J., ‘The ERTA judgement and the Court’s case-law on competence and conflict’, in: Yearbook of European Law 1986, pp. 183-218. 28

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Relationships between Rome II and Other International Instruments mine if the European Community has acquired exclusive competence. Thus, it is on a case-by-case analysis that the exclusive competence of the European Community must be studied.29 In this respect, the universal character of a community rule grants the European Community exclusive competence over its substantive scope. Nevertheless, the reciprocal nature of the rule leaves Member States room to conclude international conventions provided that they do not affect Community law (Article 10 of the European Community Treaty).30 As a consequence, as far as the Rome II Regulation is concerned, its adoption conferred exclusive competence on the European Community over its subject matter because of its universal application. Member States can, therefore, only enter into international agreements with third states or international organizations as long as the European Community authorizes it. In this sense, Recital 37 of the Memorandum of the Rome II Regulation provides that: ‘The Commission will make a proposal to the European Parliament and the Council concerning the procedures and conditions according to which Member States would be entitled to negotiate and conclude on their own behalf agreements with third countries in individual and exceptional cases, concerning sectorial matters, containing provisions on the law applicable to non-contractual obligations’. As F.J. GARCIMARTÍN ALFÉREZ pointed out, the reason for this recital was an answer to the Member States’ requests for ‘maintaining the possibility of concluding bilateral agreements with third countries, for example, in order to regulate activities in border areas, that may contain conflict-of-law rules’.31

Opinion 1/03, 7 February 2006, of the European Court of Justice summarizes the evolution of the ERTA doctrine as well as its application in the field of private international law. For comments on this Opinion see BORRÁS A., ‘Competence of the Community to conclude the revised Lugano Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, Opinion C-1/03 of 7 February 2006: comments and immediate consequences’, in: Yearbook of Private International Law 2006, pp. 37-52; BORRÁS A., ‘Competencia exclusiva de la Comunidad Europea para la revisión del Convenio de Lugano de 1988 sobre competencia judicial, reconocimiento y ejecución de sentencias en materia civil y mercantil. Comentario al Dictamen C-1/03, de 7 de febrero de 2006’, in: iustel.com, Revista General de Derecho Europeo 2006; BORRÁS A., ‘Cooperación judicial en materia civil: competencia exclusiva de la Comunidad Europea para la revisión del Convenio de Lugano de 1988’, in: Revista Jurídica de Catalunya 2006, pp. 879-889; BORRÁS A. (note 2), pp. 482-490. 30 The current Article 10 of the European Community Treaty will be derogated by the Lisbon Treaty. Its content will be set out in the new Article 3 bis of the European Union Treaty. 31 GARCIMARTÍN ALFÉREZ F.J. (note 4), footnote 18, p. I-81; GARCIMARTÍN ALFÉREZ F.J. (note 4), recital 22. 29

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IV. Conclusion Article 28 of the Rome II Regulation has achieved a balance between community law on non-contractual obligations and the existing international conventions dealing with the same subject matter. Indeed, insofar as Article 28 gives precedence to the existing international conventions over the above-mentioned Rome II Regulation, Member States are entitled to continue applying the aforementioned international conventions. Nevertheless, the adoption of the Rome II Regulation has precluded the ability of Member States to enter into international agreements with third States or international organizations regarding issues covered by the Regulation. From this, it follows that the expected unification of the conflict-of-law rules relating to non-contractual obligations in the European Union has not been reached. In this sense, this unification could only be reached if Member States at some time in the future denounce the international conventions.

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ROME II: A CENTRIST CRITIQUE Symeon C. SYMEONIDES∗

I. II. III. IV.

V. VI. VII. VIII.

Introduction General Features The General Rule The Exceptions A. Introduction B. The Common Habitual-Residence Rule C. The General Escape 1. The Closer Connection Exception 2. The Pre-Existing Relationship Exception D. Rules of ‘Safety and Conduct’ Environmental Torts Products Liability Party Autonomy Conclusing Thoughts

I.

Introduction

This essay is an abbreviated and centrist critique of the European Union’s new Regulation on tort conflicts known as ‘Rome II’.1 This critique is abbreviated due to the space limitations of this volume;2 and it is centrist because its author’s vantage point happens to fall in the middle of the methodological, philosophical, and even geographical spectrum.3 For example, the author believes that: a choice-oflaw codification is both feasible and desirable,4 even at the multinational level; ∗ Dean and Professor of Law, Willamette University College of Law; LL.B. (Private Law); LL.B. (Public Law) University of Thessaloniki; LL.M., S.J.D. Harvard Law School. 1 See Regulation (EC) No 864/2007 on the Law Applicable to Non-Contractual Obligations, O.J. 2007, L 199, p. 40. 2 For a more extensive critique, from which this essay draws extensively, see SYMEONIDES S., ‘Rome II and Tort Conflicts: A Missed Opportunity’, 56 Am. J. Comp. L. 173 (2008), hereafter referred to as ‘Missed Opportunity’. 3 The author is a dual citizen of a European Union country (Cyprus) and the United States. 4 The author has drafted two choice-of-law codifications and is currently involved in a third. See SYMEONIDES S., ‘Private International Law Codification in a Mixed Jurisdiction: The Louisiana Experience’, 57 RabelsZ 460 (1993); SYMEONIDES S., ‘Les grands problèmes

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Symeon C. Symeonides such a codification should be built around rules,5 rather than open-ended ‘approaches’; and that the main rule for tort conflicts must be some iteration of the lex loci delicti, subject to appropriate escapes. The fact that - as one can safely infer - the drafters of Rome II subscribed to the same or similar premises suggests that this essay should be more supporting than critical of this codification. Indeed, there is much to be praised about Rome II. However, scholarly discourse is enriched, not by praising points of agreement but rather, by identifying and explaining points of disagreement. For this reason, this essay focuses on the latter points. It accepts the drafters’ pragmatic choice of the lex loci delicti as the basic rule, rather than American-style ‘approaches’ and examines whether Rome II provides enough and sufficiently flexible exceptions as to make the lex loci rule less arbitrary and the whole system more workable.

II.

General Features

From the perspective of general choice-of-law methodology, Rome II can be characterized as a traditional system, primarily because of the following three general features: (1) it is primarily a ‘jurisdiction-selecting’ system because the majority of its rules select the state of the applicable law on the basis of that state’s contacts rather than because of the content of its law;6 (2) it does not, consciously or officially, subscribe to the notion that conflicts of laws implicate the policies or interests of the involved states, as opposed to the interests of the litigants involved in the conflict;7 and (3) it takes a negative position toward issue-by-issue analysis because of the drafters’ strong, but in some respects futile, goal of avoiding dépeçage, namely, the application of the laws of different states to different issues in the same case.8

de droit international privé et la nouvelle codification de Louisiane’, 81 Revue critique de droit international privé 223 (1992); SYMEONIDES S., ‘Revising Puerto Rico’s Conflicts Law: A Preview’, 28 Colum. J. Transnat’l L. 601 (1990); SYMEONIDES S., ‘Codifying Choice of Law for Contracts: The Oregon Experience’, 67 RabelsZ 726 (2003). 5 For the content and style of these rules, see SYMEONIDES S., The American Choiceof-Law Revolution: Past, Present and Future (2006), hereafter referred to as ‘The Choice-ofLaw Revolution’. 6 However, Rome II also contains several provisions – such as articles 6(3)(b), 7, 14(2)-(3), 18, and 26 - which, directly or indirectly, permit consideration of the substantive law of the involved state. For discussion, see SYMEONIDES S., ‘Missed Opportunity’ (note 2), at p. 181-183. 7 Yet, in several situations, Rome II indirectly considers or presupposes state interests. See SYMEONIDES S., id., at 183-184. 8 See SYMEONIDES S., id., at 184-185. Nevertheless, several of Rome II’s provisions contain the possibility of dépeçage. See the examples cited at p. 185-186.

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Rome II: A Centrist Critique Although these features cannot be discussed in any detail here,9 they define the methodological identity of Rome II setting it apart from the approaches that have emerged from the American choice-of-law revolution.10 This difference alone is not a good reason to criticize Rome II. Instead Rome II should be judged within the parameters set by, or imposed on, its drafters. This essay aspires to remain within these parameters, but also reserves the right to point out the problems created by them in specific situations.

III. The General Rule Rome II’s central provision is Article 4, which contains the general and residual rules. Paragraph 1 of Article 4 provides that the applicable law shall be the law of the country in which ‘the damage occurs’11 (lex loci damni). This law governs ‘irrespective of the country in which the event giving rise to the damage occurred’ and ‘irrespective of the country or countries in which the indirect consequences of that event occur’.12 Thus, the general rule of Rome II is nothing but a restatement of the traditional lex loci delicti rule, with its ‘last event’ sub-rule. It purports to be as categorical as the corresponding rule of the American First Restatement. However, the key difference is that, Rome II’s version is subject to several exceptions which should have the effect of reducing its arbitrariness in several situations. A proper evaluation of this rule should consist of two steps: (1) examining the results the rule produces in several typical fact-law patterns formed by the alignment of the pertinent contacts (conduct, injury, and parties’ domiciles13) and the content of the laws of each contact state; and then, (2) for cases in which these results are objectionable, examining whether any of the exceptions are applicable. For reasons documented in detail elsewhere,14 as well as later when discussing the exceptions to the lex loci damni rule, the view of this author is that this rule produces functionally defensible results in the following patterns of cases: (1) intrastate torts (namely cases in which the conduct and the injury occurred in the same state) involving conflicting ‘conduct-regu-

9 For full discussion of these features, see SYMEONIDES S., ‘Missed Opportunity’ (note 2), at p. 179-186 10 See SYMEONIDES S., The Choice-of-Law Revolution (note 5), p. 9-121, p. 365-421. 11 Rome II, art. 4(1). 12 Ibid. 13 Hereafter, the term ‘domicile’ is used interchangeably with the term ‘habitual residence’ as used in Rome II. 14 See SYMEONIDES S., The Choice-of-Law Revolution (note 5), at p. 141-263.

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Symeon C. Symeonides lation’ rules (as opposed to ‘loss-distributing’ rules15), regardless of where the parties are domiciled; (2) intrastate torts in which the issue is one of loss distribution and either the tortfeasor or the victim is domiciled in the state of the conduct and injury; and (3) cross-border torts involving either conduct-regulation or loss distribution conflicts, in which: (a) the state of injury prescribes a higher standard of conduct for the tortfeasor or of financial protection for the victim than the state of conduct; and (b) in which the occurrence of the injury in the former state was objectively foreseeable. In the first pattern, the state of both the conduct and injury clearly has a stronger claim than any other state to apply its law to conduct within its borders.16 By adopting the lex loci rule in Article 4(1), Rome II correctly honors this claim. However, as explained later, in one sub-pattern of cases, those in which the parties are domiciled in the same state other than that of the conduct and injury, Rome II takes a backward step. By phrasing the common-domicile exception of Article 4(2) so broadly as to trump the lex loci rule in these cases, Rome II creates a different problem, which may or may not be corrected through the back door of Article 17.17 The second pattern consists of four different sub-patterns, two of which present the direct or true conflict paradigm and the other two the inverse or ‘no interest’ paradigm. Although each sub-pattern presents different dilemmas, the majority of American cases of all methodological persuasions have applied the law of the state that has the two territorial contacts (conduct and injury) and one personal contact (the domicile of one party), regardless of whether that law favors the tortfeasor or the victim. On balance, and for reasons that would take too long to explain here, this result is appropriate in some cases and acceptable in others.18 Under the lex loci damni rule, a court reaches the same result without having to ponder these dilemmas. In summary, in both of the above patterns of intrastate torts, the application of the law of the state of conduct and injury passes the scrutiny of a functional choice-of-law analysis, regardless of whether that law favors the tortfeasor or the victim. Consequently, a jurisdiction-selecting rule like that of Article 4(1) which is

For the origin, meaning, and defense of this distinction, see SYMEONIDES S., The Choice-of-Law Revolution (note 5), at p. 123-140. 16 For documentation and defense of this thesis, see SYMEONIDES S., id., at p. 213220. 17 See infra IV.B. 18 For documentation and defense of this thesis, see SYMEONIDES S., id., p. 162-191. 15

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Rome II: A Centrist Critique indifferent on its surface to the content of the involved substantive laws is acceptable, besides being relatively easy to apply in the majority of cases. However, in cross-border torts, the same rule produces acceptable results only in those cases that fall within the third pattern, namely cases in which the state of injury has a higher standard than that of the state of conduct. This pattern presents the true conflict paradigm: the state of injury has an interest in protecting victims injured (and often domiciled19) there, while the state of conduct has an interest in protecting tortfeasors acting (and often domiciled) there. On balance, the application of the law of the state of injury is justified (especially when the victim is domiciled there), provided that the occurrence of the injury in that state was objectively foreseeable.20 The lex loci damni rule of Rome II would produce this result, but its failure to include a foreseeability defense may make it unfair to the defendant, depending on the other circumstances of a given case.21 The lex loci damni rule does not produce good results in cases of the converse pattern, namely cross-border torts in which the state of conduct prescribes higher standards of conduct for the tortfeasor than the state of injury.22 Suppose, for example, that blasting operations by a Swiss mining company in the Swiss Alps cause a snow avalanche in the French Alps injuring a group of English tourists. Suppose further that Switzerland imposes a negligence per se rule on mining operators who engage in blasting activities in certain areas or time periods, while France, in order to protect its mining industry, follows an ordinary negligence standard. In such a case, Article 4(1) calls for the application of French law and specifically excludes Swiss law.23 In contrast, if this were an environmental tort, Article 7 would allow the victim to opt for Swiss law.24 The drafters decided not to extend this option (which the Explanatory Report characterizes as ‘the principle of favouring the victim’)25 to other torts, because ‘this solution would go beyond the victim’s legitimate expectations’.26 19 A more refined analysis might conclude that, in loss-distribution (as opposed to conduct-regulation) conflicts, that state’s interest is weaker if the victim is not domiciled there. 20 For documentation and defense of this thesis, see SYMEONIDES S., The Choice-ofLaw Revolution (note 5), at p. 192-200, p. 228-236. 21 See infra V. 22 For documentation and defense of this thesis, see SYMEONIDES S., id., p. 200-202, p. 223-228. 23 Article 17 allows the court to ‘take account’, but not necessarily to apply, the Swiss negligence per se rule on the assumption that it qualifies as a rule of ‘safety and conduct’. See infra IV.D. 24 Art. 7 is discussed infra at V. 25 See Explanatory Report, art. 3 at p. 11, in: Commission of the European Communities, ‘Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Non-Contractual Obligations,’ COM 427 (2003) final, 2003/0168 (COD), Brussels, (Jul. 22, 2003), hereafter referred to as ‘Report’. 26 Report, at p. 11-12.

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Symeon C. Symeonides This, however, is the wrong dilemma. The dilemma is not whether one should favor victims over defendants, but rather whether - in a subject called ‘conflict of laws’ - one should seek to first determine whether the involved laws actually conflict. As in the case of environmental torts, the reason for giving victims a choice is not to benefit victims as such, but rather out of deference to the policies of the state of conduct, which is the only state that has something to lose from the non-application of its law. In this case, Switzerland’s negligence per se rule is intended to deter people from engaging in inherently dangerous operations such as blasting. Because the defendant acted within Swiss territory, Switzerland has every reason to insist in determining the legal consequences of that activity, even if in this case, the injury occurred across the border. The effectiveness of this policy of deterrence would be seriously impaired if exceptions to it were made for out-ofstate injuries. Moreover, in terms of fairness and party expectations, there is nothing unfair in subjecting a tortfeasor to the law of the state in which he acted. Having violated the standards of that state, the tortfeasor should bear the consequences of that violation and not be allowed to invoke the lower standards of another state. Conversely, there is little reason to apply French law. France’s ordinary negligence standard was intended to protect mining defendants who operate within French territory, not foreign operators operating elsewhere.27 In conclusion, there is wisdom in the rules that allow the victim or the court to choose between the laws of the state of conduct and the laws of the state of injury in cases of cross-border torts.28 It is regrettable that the drafters of Rome II have chosen not to adopt a similar rule as they did with regard to environmental torts.

IV. The Exceptions A.

Introduction

As noted earlier, one cannot properly evaluate Rome II without also analyzing the exceptions to its basic rule of lex loci damni. A careful perusal of the whole document reveals that this rule is subject to many more exceptions than are readily apparent. This section discusses four of the ‘general’ exceptions or escapes,

Similar arguments could be made if France, but not Switzerland, limited the amount of damages that could be recovered from mining operators. Again, art. 4(1) would mandate the application of French law, albeit subject to the ‘closer-connection’ escape of art. 4(3). However, for reasons explained later, this escape will not necessarily lead to Swiss law. 28 See e.g.: EGBGB, arts. 40.1, 41; Swiss PIL Act, arts. 133(2), 136-139; Italian PIL Act, art. 62; Venezuelan PIL Act, art. 32(2); Hungarian PIL Act, art. 32(2). 27

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Rome II: A Centrist Critique namely those that apply to all torts, as opposed to those applicable to only specific torts,29 namely: (1) The application of the law of the parties’ common habitual residence, under Article 4(2); (2) The application of the law of a state that has a ‘manifestly closer connection’, under the escape clause of Article 4(3); (4) The ‘taking into account’ (and possible application) of the ‘safety and conduct’ rules of the state of conduct, under Article 17; and (5) The application of the law chosen by the parties before or after the occurrence of the tort, under Article 14.30

B.

The Common Habitual-Residence Rule

Paragraph 2 of Article 4 provides that, if at the time of the injury, the tortfeasor and the victim have their habitual residence in the same country (hereafter ‘common domicile’), then the law of that country applies to the exclusion of the lex loci.31 In adopting the common-domicile exception, Rome II joins the majority of recent private international law codifications and international conventions.32 It also mirrors parallel developments in the United States, but with one important difference: the American cases apply the law of the common domicile only in conflicts between ‘loss-distribution’ rules.33 In contrast, the common-domicile rule of Rome II is much broader because it encompasses not only loss-distribution, but also conduct-regulation issues. This is a serious defect because, contrary to common assumptions, conductregulating rules are not confined to rules of public law or other ‘inconsequential’ rules such as traffic rules, speed limits and red lights; they also extend to rules that impose civil liability to violations of traffic rules or attach presumptions and infe-

For a list of all and discussion of some of the specific exceptions, see SYMEONIDES S., ‘A Missed Opportunity’ (note 2), at p. 192 et seq. 30 Additional general exceptions are the application of the mandatory rules of the forum qua forum, under Article 16, and the non-application of the lex loci (or any other law) when it is manifestly incompatible with the ordre public of the forum, under Article 26. 31 This exception is repeated in several articles applicable to particular torts, but not in Article 7 on environmental torts, or Article 8 on infringement of intellectual property rights. One can infer that the reason for this exclusion is an implicit recognition that cases involving the latter categories of torts implicate broader societal interests that go beyond the interests of the litigants. 32 For citations, see SYMEONIDES S., ‘Missed Opportunity’ (note 2), at p. 194. 33 See SYMEONIDES S., The Choice-of-Law Revolution (note 5), at p. 141-210, 384389. 29

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Symeon C. Symeonides rences of fault that arise from such violations;34 rules that prescribe safety standards for work sites, buildings, and other premises; rules that impose punitive damages; and rules declaring tortious conduct such as ‘interference with contract’ and granting an action against the actor. As a general proposition, a state has an interest in enforcing its conduct-regulating rules even if neither the violator nor the victim is domiciled in that state, and even if both parties are domiciled in the same foreign state. For example, an Austrian motorist involved in an accident in France may not claim exemption from French traffic rules, and if injured by conduct that violates these rules, France may not deny the motorist the benefit of their protection. Even if both parties are domiciled in Austria, France has the exclusive claim in applying its law to the conduct-regulating aspects of the case. To be sure, any argument based on state interests will not find sympathetic ears among the drafters of Rome II or, for that matter, many European commentators. From their perspective, the principal question is whether the application of Austrian law is consistent with the parties’ expectations. This author’s view is that, whatever their actual or presumed expectations about loss-distribution rules, the parties should not expect to carry with them the Austrian conduct-regulating rules when traveling outside of Austria. Yet, because of the broad and unqualified phrasing of Article 4(2) and Rome II’s general hostility toward issue-by-issue analysis and dépeçage, Rome II mandates the application of Austrian law to all, including the conduct regulation, aspects of the case. This result can be avoided only by invoking the ‘closer connection’ clause of Article 4(3) or by ‘tak[ing] account’ of the ‘safety and conduct’ rules of France under Article 17. Unfortunately, as explained below, these escapes are not easily deployable. From a different perspective, the common-domicile rule of Rome II is too narrow in that it applies only when the parties are domiciled in the same state but not when they are domiciled in different countries that have the same laws. The better view is that the latter cases are functionally analogous to common-domicile cases and should be treated accordingly.35 Suppose, for example, that while hunting in Kenya, a French hunter injures a Belgian hunter with whom he has no preexisting relationship. Suppose that French and Belgian law provide the same amount of compensation, which is much higher than that provided by Kenya. This is the classic false conflict in which Kenya has no interest in applying its low Examples include rules providing that a person involved in a collision while driving in excess of the speed limit, or while being intoxicated, is presumed to be negligent, and rules providing that, in a rear-end vehicular collision, the driver of the rear car is presumed to be at fault. 35 The Louisiana codification provides that ‘[p]ersons domiciled in states whose law on the particular issue is substantially identical shall be treated as if domiciled in the same state’. La. Civ. Code Ann., art. 3544(1). This legal fiction, which is particularly useful in cases with multiple victims or defendants, enables a court to resolve these false conflicts by applying the law of the domicile of either party, unless the general escape clause of the codification dictates a different result. For pertinent discussion, see SYMEONIDES S., ‘Louisiana’s New Law of Choice of Law for Tort Conflicts: An Exegesis’, 66 Tul. L. Rev. 677, 759-763 (1992). 34

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Rome II: A Centrist Critique recovery law. In such a case, there is no reason to apply Kenyan law and every reason to apply either Belgian or French law. Yet, Article 4(1) of Rome II mandates the application of Kenyan law, and, unfortunately, none of Rome II’s exceptions to the lex loci rule would be operable in such a case.

C.

The General Escape

Paragraph 3 of Article 4 provides an escape from both the lex loci rule of paragraph 1 and the common-domicile rule of paragraph 2. Echoing similar escapes found in recent European codifications and international conventions,36 this escape authorizes the court to apply the law of another country if ‘it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with [that other] country’.37 Paragraph 3 provides an example by stating that a manifestly closer connection ‘might’ be based on ‘a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question’.38 Despite serious reservations about the scope and wording of this particular escape, this author applauds the drafters for including an escape in the final version of Rome II. Indeed, escapes clause are necessary in any less than perfect statutory scheme. Because perfection is not for this world, and modern legislatures have increasingly begun to recognize their fallibility, escapes have become a common feature of almost all recent codifications.39 As Aristotle recognized many centuries ago, any pre-formulated rule, no matter how carefully or wisely drafted, may, ‘due to its generality’,40 or because of its specificity, produce results that are contrary to the purpose for which it was designed. This ‘is a natural consequence of the difference between law making and law application’.41 The question here is to what extent this escape will help cure the deficiencies of the general rules of Rome II.

36 For a comparative discussion, see SYMEONIDES S., Private International Law at the End of the 20th Century: Progress or Regress?, 1999, at p. 31-35, hereafter referred to as ‘Progress or Regress’. 37 Rome II, art. 4(3). 38 Id. 39 For comparative discussion, see SYMEONIDES S., Progress or Regress? (note 36), at p. 21-35. 40 ARISTOTLE, Nicomachean Ethics, V. x 7. 41 HAY P., ‘Flexibility Versus Predictability and Uniformity in Choice of Law’, 226 Recueil des cours 281, 291 (1991-I).

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The Closer Connection Exception

Unfortunately, the phrasing of the escape is problematic because, like those in other European codifications:42 (1) it is phrased in exclusively geographical or quantitative terms that are not correlated to an overarching principle; and (2) it does not permit an issue-by-issue evaluation. In one sense, it is logical that a system of geographically-based rules also relies on geography when formulating escapes from those rules. Rome II is such a system because most of its dispositive rules depend on the place in which a single critical event occurred, or in which one or both parties reside. Very few nongeographical factors affect the choice, and the content of the conflicting laws is a factor that appears only in some narrow exceptions. Having relied on geography in erecting this system, the drafters may have felt bound to also rely on geography to handle the exceptional cases and overcome the inevitable impasses. Thus, if the geographically chosen place of injury or of the parties’ common domicile turn out to not have a significant connection, one must search for a place that has a ‘closer’ connection. This logic, however, will rarely overcome the inevitable impasses. Escapes are designed to cure the rule’s deficiencies, not reproduce them. To intelligently employ the escape, one must know the reasons for which the drafter made the choices embodied in the rule and the values and goals the rule seeks to promote. To simply say that one should look for a ‘closer’ connection gives courts little meaningful guidance and entails the risk of degenerating into a mechanical counting of physical contacts. This risk is reduced when the escape is correlated to the overarching principles that permeate the rules,43 and/or when the escape allows an issue-by-issue evaluation.44 Without these features, the escape is bound to be employed in a largely quantitative fashion, which will resolve only the easiest of conflicts. For example, a quantitative employment of the escape will not resolve the aforementioned Kenyan hunting accident case involving a French and a Belgian hunter. The second major problem with the escape is its failure to allow an issueby-issue deployment and evaluation. As it is, the escape contemplates situations in which the entire ‘tort/delict’ is ‘manifestly’ more closely connected with another country. Paragraph 3 of Article 4 not only avoids using the dirty word ‘issue’ but See SYMEONIDES S., ‘Missed Opportunity’ (note 2), at p. 197-198. A statement in Recital 14, which speaks of the need to ‘treat individual cases in an appropriate manner’ and to ‘do justice in individual cases’, could serve as such an overarching principle. However, this is an uphill argument, which – besides the subordinate placement of this statement in a recital rather than in the text of Rome II – is made even more difficult by the fact that the statement does not seem to accurately describe the philosophy embodied in the rules of Rome II. 44 For examples of how this can be done, see the escapes contained in Section 146 of the Restatement (Second) of Conflict of Laws, and Article 3547 of the Louisiana codification, both of which are discussed in SYMEONIDES S., ‘Missed Opportunity’(note 2), at p. 198-199. 42 43

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Rome II: A Centrist Critique also avoids (perhaps unintentionally) the phrase used in paragraph 1, which speaks of the law applicable to ‘a non-contractual obligation arising out of a tort/delict’.45 Thus, the escape does not even permit the court to look separately into the possibly multiple obligations that may arise from the same facts, such as (but not only) when the case involves multiple tortfeasors or victims. Instead, the phrasing of the escape forces the court to only look at the tort as a whole. If the court finds that the tort as a whole has a closer connection with another country, then the court is authorized to displace the otherwise applicable law in its entirety and replace it with the law of that other country. Thus, the escape is an ‘all or nothing’ proposition; and therein lies its most serious flaw. This flaw will make the escape unavailable in all but the extreme cases. For example, in the above snow avalanche hypothetical, it would be difficult to convince a court that ‘the tort/delict’ (as opposed to the specific issues of negligence per se or damages limitations) is ‘manifestly’ more closely connected with Switzerland. Even if the victims’ domicile, England, also allowed unlimited damages, the court could not avoid the application of French law because the connection with England (which Article 4(1) a priori condemns to a state of insignificance) will probably not qualify as ‘manifestly’ closer than the connection with France. The same would be true with other issues affecting the victim’s recovery. Suppose, for example, that the avalanche caused the death of one of the English tourists, and one of the issues in the case is who is entitled to compensation for his wrongful death. Suppose that French law provides that compensation is due to the victim’s surviving spouse and children together, whereas English law provides that compensation is due to the surviving spouse to the exclusion of the children. Under Article 4(1), the applicable law shall be the law of the country in which ‘the damage occurs’ (France) ‘irrespective of the country or countries in which the indirect consequences of that event occur’ (England). Article 15 reiterates that in such a case, French law will apply to virtually all issues likely to arise in tort litigation, including ‘[which] persons [are] entitled to compensation’ and ‘whether a right to claim damages or a remedy may be transferred, including by inheritance’.46 Yet England is the country most intimately involved and has the strongest claim to apply its law to this issue. Rules designating the beneficiaries of a wrongful death action reflect a society’s assumptions regarding how a person’s death impacts his survivors and which of his survivors are likely to have the greatest need for compensation. These assumptions and value judgments belong to the society in which the victim lived, not to the society in whose territory the injury occurred. In Rome II’s terminology, England is ‘manifestly more closely connected’ with regard to the issue of wrongful death beneficiaries, even if its connections with regard to other issues may not be the closest. Yet, the phrasing of the escape clause does not permit this focus on the specific issue, and therefore it does not allow a court to cure the rule’s deficiency.

45 46

Rome II, art. 4(1) (emphasis added). Rome II, art. 15 (f) & (e).

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Symeon C. Symeonides Similar problems are encountered in employing the ‘manifestly closer connection’ escape to cases falling within the scope of the common-domicile rule, especially those in which, as noted earlier, that rule is either too broad or too narrow. In the case of the French traffic accident involving two Austrians, one could argue that, with regard to issues of conduct and safety, France has a ‘manifestly closer connection’ than Austria, and thus, French law should govern. The problem with this otherwise sound argument is that it runs against the restrictive and holistic wording of the escape, which does not allow an issue-by-issue analysis and instead speaks of the whole ‘tort/delict’, as opposed to certain aspects of it, as being more closely connected with another country. This wording makes it difficult to argue that the entire tort is more closely connected with France, while also being governed by the law of Austria. The same problem exists in the case of the Kenyan hunting accident involving the French and Belgian hunters. Because the escape is worded in geographical terms, and the hunters are not domiciled in the same country, geography would work in favor of, not against, the lex loci. One provision that can help in the French, but not the Kenyan, accident case is Article 17, which allows a court to ‘take account’ of the ‘safety and conduct’ rules of the state of conduct. However, as discussed later, this provision offers only limited relief. A more nuanced escape clause would soften the common-domicile rule and produce more rational results, not only in the above cases, but also in other exceptional cases, or in cases in which that rule adversely affects the rights of third parties. The latter problem is illustrated by two hypotheticals. The first involves a single-car accident in Portugal caused in part by faulty road conditions and resulting in injury to the car’s Spanish passenger. The passenger sues the local Portuguese authority responsible for maintaining the road, and that authority then impleads the car’s Spanish driver for contribution and indemnification for his fault in the accident. The driver and passenger are married to each other and Spanish, but not Portuguese, law prohibits interspousal suits. In such a case, one could argue that the local authority’s claim for contribution falls outside the scope of the common-domicile rule,47 but if the argument fails, the only way to avoid Spanish law would be by stretching the wording of the ‘closer connection’ escape. In the second hypothetical the local authority is not involved, the car was rented in Portugal, and the laws are reversed so that Portuguese, but not Spanish, law prohibits interspousal lawsuits. The injured passenger sues the driver and the car’s insurer invoking Spanish law, while the insurer denies coverage invoking Portuguese law. Again, if the insurer’s obligation for coverage falls within the scope of the common-domicile rule,48 then the only way to avoid Spanish law The argument would be based in part on art. 20 of Rome II, which provides that, if a creditor has a claim against several debtors who are ‘liable for the same claim,’ the question of that debtor’s right to demand compensation from the other debtors ‘shall be governed by the law applicable to that debtor’s non-contractual obligation towards the creditor’. 48 The pertinent Rome II articles for answering this question are articles 18 & 19. Art. 18 is not particularly helpful, except perhaps indirectly, because it only applies to the victim’s right to ‘directly’ sue the tortfeasor’s insurer (i.e., without joining the tortfeasor) and not to the merits of the suit. The article allows the victim to chose between the law 47

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Rome II: A Centrist Critique would be through the difficult road of employing the ‘closer connection’ escape. In conclusion, while both the adoption of the common-domicile rule and the inclusion of an escape clause in Article 4 are significant steps in the right direction, both the rule and the escape would have benefitted from more nuanced drafting. In the final analysis, a good escape clause can bring substantive improvements to even a poor rule system, in addition to helping attain the proper equilibrium between the two perpetually competing goals of certainty and flexibility. However, to perform this role the escape must possess some degree of built-in flexibility. The drafters’ preference for a tight escape that does not swallow the rules is understandable. However, an escape that is so tight as to be rarely utilized, or one that is phrased in broad all-or-nothing terms, is only slightly better than no escape at all.

2.

The Pre-Existing Relationship Exception

As noted earlier, the second sentence of Paragraph 3 of Article 4, attempts to provide an example of a manifestly closer connection by stating that such a connection might be based on a ‘pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question’.49 As with the general escape, this exception is also conceived of in all-or-nothing terms rather than in terms of specific issues. Once again, the drafters’ excessive concern with avoiding the possibility of dépeçage renders this exception far less useful than it might have been. In fact, rather than allowing a splitting of the various tort issues, this exception contemplates grouping them together with the issues arising from the pre-existing relationship. However, this is only one of the problems with this provision. The major problem is determining which of the two equally plausible objectives the drafters intended, namely: (a) to apply the same law as that which governs the pre-existing relationship, or (b) to apply the law of the same state in which the pre-existing relationship is primarily centered. The Explanatory Report suggests that the drafters intended the first objective.50 However, unlike some European codifications which expressly provide to that effect,51 Article 4(3) of Rome II does not do so. This makes the other possibility viable, namely, applying the law of the state in which the pre-existing relationship is centered.52 governing the insurance contract and the law governing the tort. Art.19 provides that, when a creditor has a non-contractual claim against a debtor, and a third person has a duty to satisfy the creditor, ‘the law which governs the third person’s duty to satisfy the creditor shall determine whether [...] the third person is entitled to exercise against the debtor the rights which the creditor had against the debtor under the law governing their relationship’. 49 Rome II, art. 4(3). 50 See Report, at p. 13. 51 See, e.g., Swiss PIL Act, art. 133(3); Belgian PIL Code, art. 100. 52 This possibility is consistent not only with the previous sentence of paragraph 3 of Article 4, but also with the whole geographical orientation of Rome II.

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Symeon C. Symeonides To be sure, in some cases, the two objectives will lead to the same law. For example, if the pre-existing relationship is a family relationship centered in state X, then the law of that state will govern that relationship and, under the above quoted provision, the court may apply the same law to a related delictual obligation.53 If, however, the relationship is contractual,54 then there is no guarantee that the state in which the relationship is centered will also be the state whose law will govern the contract. For example, the contract may contain a choice-of-law clause stipulating for the law of state Z, even if that state has a relatively tenuous but otherwise sufficient connection with the relationship.55 In such a case, the question is which, if any, of the two states, X or Z, will be the candidate for the closer connection exception? State Z cannot be because, in this scenario, it does not have a close enough factual connection. On the other hand, state X has the factual connection, but the application of its law will defeat the apparent purpose of this exception, which is to apply the same law to both the tort and contract aspects of the case. Finally, the main advantages of applying the same law to both the tort and contract aspects of a dispute are practicality and simplicity. Obviously, these advantages are not present when the particular dispute involves only tort issues. In such a case, the rationale for this exception must be sought elsewhere, such as in the ostensible expectations of the parties.

D.

Rules of ‘Safety and Conduct’

Buried towards the end of Rome II is the familiar yet somewhat enigmatic provision of Article 17. Article 17 provides that, regardless of which law governs the non-contractual obligation under the other articles of Rome II, in ‘assessing the conduct of the person claimed to be liable, account shall be taken, as a matter of fact and in so far as is appropriate, of the rules of safety and conduct which were in force at the place and time of the event giving rise to the liability’.56 The Preamble states that the term ‘rules of safety and conduct’ should be interpreted as referring to ‘all regulations having any relation to safety and conduct, including, for exam53 The same result can be obtained more directly through the common-domicile rule of Paragraph 2. This illustrates that the above quoted sentence of Paragraph 3 is superfluous in most cases in which the parties to the relationship are domiciled in the same state. 54 If the relationship is merely social rather than legal, it makes little sense to say that the tort will be governed by the same law that governs the relationship because the social relationship may not, as such, be governed by any law. However, it does make sense to say that the tort will be governed by the law of the state in which the relationship was centered. 55 Under the Rome Convention, the choice of state Z law will be upheld unless ‘all the other elements relevant to the situation at the time of the choice are connected with [another] country.’ Even then, the choice will be disregarded only to the extent it ‘prejudices the application of rules of the law of that [other] country which cannot be derogated from by contract.’ Rome Convention, art. 3(3) (emphasis added). 56 Rome II, art. 17. For similar provisions in other codifications and conventions, see SYMEONIDES S., ‘Missed Opportunity’ (note 2), at p. 211-212.

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Rome II: A Centrist Critique ple, road safety rules in the case of an accident’.57 The very fact that Rome II contains a separate article dealing with these rules, is an oblique and grudging recognition of the distinction noted earlier between conduct-regulating rules and loss distributing tort rules. However, it is unclear whether this article is a true rule of choice of law rather than a mere evidentiary instruction about which facts are relevant in determining the degree of the defendant’s culpability. Although the article’s wording clearly suggests the latter possibility, it is worth exploring whether the article is capable of being used as a choice-of-law rule, which can lead to applying, rather than merely ‘taking account’ of the law of the conduct state in appropriate cases. If the answer is affirmative, then Article 17 can provide a flexible exception to all of Rome II’s articles that lead to a law other than that of the state of conduct, particularly: (1) the lex loci damni rule of Article 4(1), in conflicts arising from crossborder torts; and (2) the common-domicile rule of Article 4(2), in conflicts arising from intrastate torts. Unfortunately, there are several obstacles to transforming Article 17 into a true rule of choice-of-law. The first obstacle, which is not insurmountable, is that, despite using the imperative ‘shall’, the article is entirely discretionary,58 as it should be. The second obstacle is that, under the article, the court need not apply the rules of safety and conduct, but may simply ‘take them into account’. Although the article itself does not preclude the application of these rules, the Explanatory Report suggests that this is precisely what was intended. It states that ‘[t]aking account of foreign law is not the same thing as applying it: the court will apply only the law that is applicable under the conflict rule, but it must take account of another law as a point of fact, for example when assessing the seriousness of the fault or the author’s good or bad faith for the purposes of the measure of damages’.59 This statement, especially the italicized word ‘only’, seems to preclude the application of the safety and conduct rules of the conduct state.60 The third obstacle is that these rules are to be taken into account ‘as a matter of fact’ in ‘assessing the conduct’ of the tortfeasor, a notion that echoes Ehrenzweig’s concept of foreign law as a datum.61 This phraseology is considerably narrower than the CommisRome II, recital 34 (emphasis added). This is clear from both the legislative history and the phrase ‘in so far as appropriate’ in art. 17, although that phrase also has a quantitative component. 59 Report, art. 13, at p. 25 (emphasis added). 60 The Report acknowledges the origin of Article 17 in, among others, Article 9 of the Hague Products Liability Convention, which does ‘not preclude consideration being given’ to the rules of conduct and safety of the state of the product’s marketing. Despite this equivocal wording, however, the Explanatory Report of the Hague Convention states that a court could well apply the conduct rules of that state. See REESE W., ‘Explanatory Report to the Hague Products Liability Convention’, Acts and Documents of the Twelfth Session, v. III, 1972, p. 251, 268. 61 See JAYME E., ‘Ausländische Rechtsregeln und Tatbestand inländischer Sachnormen– Betrachtungen zu Ehrenzweigs Datum-Theorie’, in: Gedächtnisschrift für Ehrenzweig 35 (1976). 57 58

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Symeon C. Symeonides sion’s proposal, which provided that these rules were to be taken into account ‘in determining liability’.62 This restrictive formulation reduces Article 17 to a mere evidentiary instruction of how to assess the tortfeasor’s culpability. Unfortunately, this minimalist conception prevents Article 17 from becoming the useful corrective tool that Rome II sorely needs. Moreover, the Rome II drafters seem to envision an even narrower, onesided role for Article 17. They describe it as tool for helping the tortfeasor, but not necessarily the victim. Rome II’s preamble states that Article 17 is necessary ‘[i]n order to strike a reasonable balance between the parties’,63 while the Report seems to be preoccupied with the plight of ‘the perpetrator [who] must abide by the rules of safety and conduct in force in the country in which he operates’.64 In rejecting Parliament’s attempt at first reading to make Article 17 inapplicable to cases of defamation and unfair competition, the Commission saw ‘no reason for depriving the perpetrators of these two categories of liability of the protection which this rule gives them’.65 Elsewhere, the Report describes a situation falling within Article 7 in which the perpetrator complied with the lower environmental standards of the state of conduct but not with the higher standards of the state of injury. The Report concludes that, in such a situation, ‘[u]nder Article 17, the court must then be able to have regard to the fact that the perpetrator has complied with the rules in force in the country in which he is in business’.66 The view of this author is that, in cases such as the one described above, the concern for the perpetrator is excessive, if not misplaced. The key question in such cases should be whether, under these facts, a reasonable person should have foreseen that his conduct in the one state would produce injury in the other state. For example, one who operates a chemical factory in close proximity to the border in state A should have foreseen that the wind will likely carry the factory’s emissions across the border into state B. Under these circumstances, the operator should not be allowed to seek refuge in the lower standards of state A. Using Article 17 as such a refuge would be contrary to the spirit of Article 7 and the ‘polluter pays’ principle that article embodies.67 Likewise, returning to the snow avalanche hypothetical, the Swiss operator who engaged in blasting operations near the SwissFrench border in the Alps should have anticipated that his operations may cause avalanches, some of which would occur across the border in France. If French law imposes higher standards of conduct than Swiss law, why should the operator be allowed to seek refuge in Swiss law when the impact of his actions in France was foreseeable? 62 Commission Proposal (2003), art. 13. Also, the phrase ‘as a matter of fact and in so far as is appropriate’ was not part of the Commission’s proposal. 63 Rome II, recital 34. 64 Report, art. 13, at p. 25. 65 Modified Commission Proposal, COD/2003/0168 (Feb. 21, 2006), (emphasis added). 66 Report, under art. 7. 67 See infra V.

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Rome II: A Centrist Critique In any event, if one is to use Article 17 to protect the tortfeasor in this scenario, there is little justification for not using the same article in the converse scenario in which Swiss law imposes higher standards of conduct for blasting operations than French law. Whether one thinks in terms of state interest or simply in terms of evenhandedness toward litigants, there is good reason to ‘take account’ and indeed to apply Swiss law in this case. The fact that the operator violated the standards of Swiss law implicates Switzerland’s policies in policing conduct within its borders, even though the consequences of that conduct in this case materialized in France. Conversely, this case does not implicate the policies underlying the French lower-standard rule because that rule is designed to protect or encourage conduct within, and not beyond, French borders. In other words, this is what is known in the American conflicts lexicon as a classic ‘false conflict’ in which only Switzerland has an interest in applying its law, or at least to have it ‘taken into account’. To be sure, the term ‘false conflict’ may be anathema to Rome II given its limited recognition of the role of state interests, despite, for example, embracing the concept of mandatory rules (Art. 16). Instead, Rome II places a premium on the need to ‘ensure a reasonable balance between the interests of the person claimed to be liable and the person who has sustained damage’,68 and the Explanatory Report purports to explain most of Rome II’s rules in terms of the parties’ expectations. As noted earlier, the drafters’ rationale for rejecting a general rule of allowing the victim to choose between the laws of the places of conduct and injury in crossborder torts other than environmental torts is because such a solution ‘would go beyond the victim’s legitimate expectations’.69 However, one can also turn that question around. Does the application of the law of the state of conduct violate the legitimate expectations of the tortfeasor who violated the conduct standards of that state, just because the injury occurred across the border? The only Rome II provision that can provide a negative and, in this author’s view, justified answer to this question is Article 17. If the drafters’ intent was to use this article only when it helps the tortfeasor but not when it helps the victim, then it would have been preferable to suppress the article from the final text.

V.

Environmental Torts

Article 7 of Rome II deals with environmental torts. Through a cross reference to the general rule of Article 4(1), Article 7 provides that the applicable law is the law of the place of injury, unless the victim of the tort opts for the law of the place of conduct.70 Because this victim’s choice is meaningful only in cases of cross-border Rome II, recital 16, et passim. Report, art. 3, at p. 11-12. 70 As noted earlier, Article 7 is not subject to either the common-domicile or the closer connection exceptions. 68 69

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Symeon C. Symeonides torts in which the country of conduct and the country of injury prescribe different standards of conduct for the tortfeasor or of financial protection for the victim, the discussion below is limited to these cases. It is worth noting that, although at some point the Explanatory Report speaks of ‘a victim in a low-protection country ... enjoy[ing] the higher level of protection available in neighbouring countries’,71 the best reason for giving the victim the right to choose the applicable law is not to benefit the victim as such. Rather, the reason is to promote the interests of the respective countries and of the European Union as a whole in deterring pollution. Applying whichever of the two laws subjects the polluter to a higher standard promotes this interest. Giving the victim a choice is simply the vehicle for ensuring this result. When the law of the state of conduct has a higher standard of conduct for the tortfeasor or of financial protection for the victim than the state of injury, the victim will opt for the law of the conduct state, thus producing the deterring effect the drafters intended.72 Indeed, the application of the higher standards of the conduct state in this scenario is fully justified, whether one thinks in terms of party reliance or expectations or, more aptly, state interests. After all, the operator should not complain for being subjected to the standards of the state in which he acted. Having violated those standards, he should bear the consequences of the violation and he should not be allowed to invoke the lower standards of another state. In terms of state interests, the application of the higher standards of the conduct state promotes that state’s policy in policing conduct within its borders, without subordinating the policies of the state of injury because the latter state does not have an interest in applying its lower-standards to protect conduct occurring, or tortfeasors acting, beyond its borders. In other words, this is a case that is described in the American conflicts lexicon as a classic ‘false conflict’. As noted earlier, Rome II would have been a better system if the drafters had adopted the same logic when drafting the general rule of Article 4(1). When the law of the state of injury prescribes a higher standard than the state of conduct, the victim will not opt for the law of the conduct state, thus again producing the deterrent effect the drafters intended. As the Report points out, this solution is ‘conducive to a policy of prevention, obliging operators established in countries with a low level of protection to abide by the higher levels of protection in neighbouring countries, which removes the incentive for an operator to opt for low-protection countries’.73 Thus, by giving the victim the choice of the applicable law, this rule ‘contributes to raising the general level of environmental protection’.74 71 As the Report notes, if the victim did not have this choice, the operator would have ‘an incentive to establish his facilities at the border so as to discharge toxic substances into a river and enjoy the benefit of the neighbouring country’s laxer rules. This solution would be contrary to the underlying philosophy of the European substantive law of the environment and the ‘polluter pays’ principle’. Report, art. 7, at p. 19. 72 See Report, art. 7, at p. 19-20. 73 Report, art. 7, at p. 19. 74 Report, art. 7, at p. 20.

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Rome II: A Centrist Critique Significantly, because Article 7 is not subject to any exceptions, the polluter cannot avoid the application of the law of the state of injury by arguing, for example, that the occurrence of the injury in that state was not foreseeable. Apparently the article assumes that, regardless of distance, foreseeability is always present, or alternatively, that it should make no difference. One avenue for providing some protection for the polluter in this case is Article 17, and the Report alludes to this possibility.75 This author’s view is that an objective foreseeability proviso is a better vehicle for ensuring fairness. If the polluter should have foreseen that his conduct in one state would cause injury in another state with higher standards, the polluter should not be able to seek refuge behind the lower standards of the state of conduct. Conversely, when foreseeability is lacking, the court should be allowed to take account of this factor, without necessarily exonerating the actor. For, although the application of the law of the state of injury would be unfair to the polluter, this result would be defensible because the non-application of that law would be equally unfair to the victim who has no control over the situation.

VI. Products Liability Article 5 provides a special rule for non-contractual obligations arising from an injury caused by a product. Paragraph 1 of the article designates, in successive order, three countries whose law may govern: (a) the country of the victim’s habitual residence; (b) the country in which the product was acquired;76 and (c) the country in which the injury occurred.77 The application of each country’s law depends on whether the product was ‘marketed in that country’.78 For example, if a German plaintiff is injured in India by a product acquired in Egypt, the applicable law will be that of Germany, if the product was marketed there; or, if not, Egypt, if the product was marketed there; or, if not, India, if the product was marketed there. It appears that the burden of proving that the product was marketed in the particular country would rest with the plaintiff, although the defendant may also have an incentive, and should be allowed, to either disprove or prove that fact. Moreover, the last sentence of paragraph 1 expressly gives defendants a defense they can avoid the application of the law of each of the above three countries by 75

Id. Article 5 makes no distinction between situations in which the product was acquired by the victim and situations in which the product was acquired by a third party, such as a previous purchaser or a transportation carrier. For the significance of this distinction, see SYMEONIDES S., The Choice-of-Law Revolution (note 5), at p. 268-270, 351-352. 77 Article 5, and Rome II in general, offer little guidance for cases involving peripatetic injuries, such as cases involving pharmaceutical products used by their eventual victims over long periods of time while residing in different countries. For the American experience on this matter, see SYMEONIDES S., The Choice-of-Law Revolution (note 5), at p. 268-269. 78 Rome II, art. 5(1). 76

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Symeon C. Symeonides demonstrating that they ‘could not reasonably foresee the marketing of the product, or a product of the same type’ in that country.79 If taken literally, this could mean that, even if the plaintiff proves (and the defendant does not disprove) that the product was actually marketed in the particular country, the defendant can still get a second line of defense by showing that, despite the actual marketing, ‘he or she could not reasonably foresee the marketing’. This provision is unduly generous to the defendant. Fortunately, as noted below, contemporary marketing patterns suggest that in most cases this defense is unlikely to succeed. In any event, if the defense does succeed, the applicable law will not be that of the country next in line under paragraph 1 (e.g., Egypt after Germany, or India after Egypt), but rather the law of the defendant’s habitual residence.80 Thus, if the product was manufactured by a Japanese defendant, Japanese law will govern the case, unless of course Japanese law is more favorable to the plaintiff than say Egyptian or Indian law, in which case the defendant will not invoke this defense to begin with. Paragraph 1 of Article 5 applies ‘[w]ithout prejudice to Article 4(2)’, which contains the common-domicile rule. This means that, if the parties are domiciled in the same country, its law applies to the exclusion of all others, even if the product was not marketed in that country. Thus, if in the above scenario the product was manufactured by a German defendant, German law would govern, even if the product was not marketed in Germany. Finally, all of paragraph 1 (including the cross-reference to the commondomicile rule) is subject to the ‘manifestly closer connection’ escape contained in paragraph 2 of Article 5.81 This escape authorizes a court to either: (a) deviate from the order established in paragraph 1 and apply the law of one of the countries listed there; or (b) apply the law of a country not listed in paragraph 1, such as the country of the product’s manufacture,82 upon showing that the country has a manifestly closer connection than the country whose law would normally govern under paragraph 1.

79

Id. If the defendant is a juridical person, the place of its central administration is deemed to be its habitual residence. See Rome II, art. 23(1). Even so, the defendant’s ‘residence’ (at least when the defendant is the manufacturer rather than the local importer or distributor) would seem to be the least relevant contact in today’s world of corporate mobility. In most cases, the manufacturer is likely to be a corporate entity whose ‘residence’ or central administration may be located in a country that has little relationship with the case, the product, or its manufacture. In today’s world of corporate mobility, this connecting factor would seem to be the least important. 81 Rome II, art. 5(2). The escape also repeats the ‘pre-existing relationship’ exception with all the problems described earlier. In addition, in all cases in which the victim was also the acquirer of the product, either side can claim a ‘pre-existing relationship’ between the victim and the defendant manufacturer, distributor, or retail seller. 82 It is somewhat surprising that art. 5 does not consider the place of manufacture as a pertinent connecting factor. For the role of this factor in American product liability conflicts, see SYMEONIDES S., The Choice-of-Law Revolution (note 5), at p. 270, 327, 351. 80

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Rome II: A Centrist Critique Although Article 5 appears complex in its wording, its actual operation in practice may be much simpler, depending on how easy it will be to satisfy the basic condition of a product’s marketing in a particular country. One could surmise that, in today’s global market, this condition will be more and more easily satisfied in the great majority of cases without much further inquiry or counter-proof. At least this is what the American experience suggests. A recent study of products liability cases decided in the United States between 1990 and 2005 shows that, in none of these cases did the foreign defendant invoke a similar defense.83 Thus, unless marketing patterns are much different in Europe, the marketing defense will probably be unsuccessful in all but the rarest instances. In turn, this suggests that Article 5 will lead to the application of the law of: (a) the parties’ common domicile, in the few cases when such common domicile exists; and (b) the victim’s domicile in most of the remaining instances. Few cases would trickle down to the law of the country of acquisition, and even fewer, if any, to the law of the country of injury. If these assumptions are correct, the next question is whether these results are acceptable. In answering that question, it helps to remember that actual cases are often far less complex than classroom hypotheticals. For example, although in the abstract there may be good reasons to criticize the application of the law of the country of the victim’s domicile as such, it is helpful to know that, in the majority of cases that country is likely to have at least one or more additional pertinent contacts. This was so in seventy-two percent of the disputes in the aforementioned American study.84 Nevertheless, although the presence of these additional contacts make the application of the law of the victim’s domicile more defensible in practice, Article 5 itself must also be defensible in those cases in which these other contacts are lacking. Moreover, the fact that Article 5 does not differentiate between cases in which the law of the victim’s domicile favors and those in which it disfavors the victim raises additional questions. One such question is whether Article 5 favors residents of developed countries and disfavors residents of lesser developed countries. In the above hypothetical, the German plaintiff who was injured in India by a Japanese product acquired in Egypt will get the benefit of German law. However, an Indian plaintiff who is injured in Austria by a German product acquired in Germany will be confined to the remedies provided by Indian law. Was this deliberate? If yes, it is one more example of a territorialist choice-oflaw rule which, though seemingly value-neutral, disguises specific policy choices. If the only objective of products liability law is to ensure the ‘right’ amount of compensation for victims, then the application of German law to the German plaintiff and Indian law to the Indian plaintiff may be defensible. However, to the extent that product liability law is also designed to serve other objectives, such as 83 See id. at p. 337. Although most of these cases involved American manufacturers, several cases involved foreign manufacturers. 84 See SYMEONIDES S., The Choice-of-Law Revolution (note 5), at p. 320-322. American courts applied the law of the victim’s domicile in sixty-five percent of all cases, but in all but twelve percent of those cases that state had one or two additional contacts and in more than half of them, that state had a pro-defendant law. See id., at p. 325.

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Symeon C. Symeonides deterring the manufacture and proliferation of unsafe products,85 there are good reasons to disagree with the application of Indian law in the Indian plaintiff’s case. One can only hope that courts would avoid such a result by invoking the closer connection escape of Article 5(2).

VII. Party Autonomy Under the heading ‘freedom of choice’, Article 14 of Rome II introduces the notion that the parties to a tort may agree on which law will govern their rights and obligations resulting from the tort.86 The article properly distinguishes between choiceof-law agreements made before and after the tort. It allows post-tort agreements between all parties and allows pre-tort agreements only if all the parties are ‘pursuing a commercial activity’.87 In the latter case, the agreement must be ‘freely negotiated’.88 For the remainder, Article 14 treats both pre-tort and post-tort agreements alike: (1) both must be ‘expressed or demonstrated with reasonable certainty by the circumstances of the case;’89 and (2) neither may prejudice the rights of third parties,90 or derogate from the mandatory rules of a state in which ‘all the elements relevant to the situation ... are located’,91 or, in certain cases, from the mandatory rules of Community law.92 In most cases, post-tort agreements are far less problematic because, after the occurrence of the tort, the parties are in a position to know of their rights and obligations and have the opportunity to weigh the pros and cons of a choice-of-law agreement. For this reason, these agreements need little policing by the legal system. In fact, the system benefits from these agreements insofar as they promote judicial economy. Precisely the opposite is true of pre-tort agreements. The parties 85 Rome II, recital (2), states that ‘[t]he conflict-of-law rule in matters of product liability should meet the objectives of fairly spreading the risks inherent in a modern hightechnology society, protecting consumers’ health, stimulating innovation, securing undistorted competition and facilitating trade’. 86 In cases of unfair competition, restriction to competition, and infringement of intellectual property rights, Rome II does not allow choice-of-law agreements, either before or after the tort. See Rome II, arts. 6(4), 8(3). 87 Rome II, art. 14(1)(b). 88 Id. The fact that Article 14 does not expressly impose the same requirement in the case of post-tort agreements may give rise to an a contrario argument that free negotiation is not necessary in such cases. Of course, the argument should be rejected. Apparently, the drafters intended to ensure higher scrutiny of pre-tort agreements and not to free post-tort agreements from any scrutiny. 89 Rome II, art. 14(1). 90 Id. 91 Rome II, art. 14(2). 92 See Rome II, art.14(3).

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Rome II: A Centrist Critique do not (and should not) contemplate a future tort, they do not know who will injure whom, or what will be the nature or severity of the injury. Moreover, a weak or unsophisticated party may uncritically sign such an agreement, even when the odds of him being the victim are much higher than the odds of him being the tortfeasor. For these and other reasons, pre-tort agreements should either be prohibited93 or, if permitted, they should be closely policed. Regrettably, Article 14 requires only minimal scrutiny. The only restrictions it imposes on pre-tort agreements (that it does not impose on post-tort agreements) is that it must be ‘freely negotiated’ and that the parties must be ‘pursuing a commercial activity’. This is neither sufficient nor free of problems. Even if the term ‘commercial activity’ was clearly defined or uniformly understood throughout the EU, it would still include within its scope, relationships that are one-sided, such as those arising from franchise, licensing, or insurance contracts. For example, a franchise contract is clearly commercial, yet the franchisee is typically in a very weak bargaining position (which is why so many states have enacted consumerprotection type statutes to protect franchisees).94 By allowing pre-tort choice-of-law agreements in these contracts, Article 14 does not live up to the statement in recital 32 that ‘[p]rotection should be given to weaker parties by imposing certain conditions on the choice’.95 As with some other freedom-laden ideas, Article 14 may well become the vehicle for taking advantage of weak parties, many of whom are parties to ‘commercial’ relationships. The argument that the ‘mandatory rules’ of paragraphs 2 and 3 of Article 14, or the ordre public exception of Article 26, will protect the weak parties is overly optimistic because of the high threshold these provisions require before they become operable.

VIII. Concluding Thoughts Considering its starting point - the Commission’s preliminary draft - Rome II could have been much worse. Considering the rapporteur’s valiant efforts and Parliament’s amendments, Rome II could also have been much better. The amendments would have injected more flexibility, introduced issue-by-issue analysis, and differentiated between issues of conduct regulation and loss distribution. Had any of these amendments survived, they would have considerably improved Rome II. Unfortunately, the Council and Commission rejected these and other 93 See, e.g., EGBGB, art. 42 (‘After the event giving rise to a non-contractual obligation has occurred, the parties may choose the law that shall apply to the obligation’.) (emphasis added); Belgian PIL code, accord. But see Dutch PIL Act, art. 6 (‘Where the parties have chosen the law applicable to any matter relating to tort, [...] that law shall apply between them’). For the position of American cases law on this issue, see SYMEONIDES S., American Private International Law, §§ 459-463 (forthcoming 2008). 94 See SYMEONIDES S., American Private International Law (note 93), at §§ 446-447. 95 Rome II, recital 31.

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Symeon C. Symeonides amendments, and generally they have failed to take advantage of the rich codification experience and sophistication of modern European private international law.96 In the end, Rome II is what it is. Although the adoption of the lex loci as the basic rule was politically inevitable and in many respects prudent, the exceptions from the rule leave much to be desired. For example, the common-domicile exception is too broad in some respects and too narrow in other respects. Likewise, the ‘manifestly closer connection’ escape is phrased in exclusively geographical terms unrelated to any overarching principle and is worded in an all-or-nothing way that precludes issue-by-issue deployment and prevents it from being useful in all but the easiest of cases. More generally, although attaining a proper equilibrium between legal certainty and flexibility is always difficult, Rome II errs too much on the side of certainty, which ultimately may prove elusive. Be that as it may, the final text of Rome II illustrates the difficulties of the process of lawmaking in a multinational democratic society. More often than not, the need to obtain a consensus, which is so important and healthy, necessitates compromises that disturb the coherence and consistency of the final scheme. The objective political difficulties in obtaining consensus explain, at least partially, the differences between Rome II and, for example, the GEDIP proposal.97 The reason the GEDIP proposal was in many respects superior to Rome II had more to do with the homogeneity of that academic group than with the fact that it encompasses la crème de la crème of European conflicts thought. The proposal was a sophisticated document drafted for sophisticated judges capable of, and entrusted with the discretion necessary for making the fine balancing the proposal envisioned. In contrast, Rome II is a pragmatic document that aims for simplicity and uniformity and primarily seeks to preserve the status quo rather than to dramatically alter it. Whether this was the right choice in the long run is a matter of opinion, and this author’s opinion deserves no more deference than that of the erudite men and women who drafted Rome II, or the many commentators who applaud it. In any event, although European private international law would have been better off with a ‘better’ Rome II, the more realistic question is whether it would have been better off without Rome II at all? On balance, this author answers this question in the negative. If nothing else, and despite its flaws, Rome II will unify and thus equalize, the private international law of the member-states of the European Union. Although for some of these states this equalization will amount to regress, for many more states it will be clear progress. From a transatlantic perspective, whatever its flaws, this unification or Europeanization cannot be worse than the complete lack of common direction, much less unity, that characterizes modern American conflicts law. Moreover, one hopes that the present text of Rome II is not the last step in the arduous process of modernizing European private inter96 Recent national codifications are a solemn testimony of that experience and wisdom, as is the GEDIP proposal which was drafted specifically for the pan-European level. See Proposal for a European Convention on the Law Applicable to Non-contractual Obligations adopted at the Luxembourg meeting of 25-28 September 1998, available at . 97 See supra (note 96).

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Rome II: A Centrist Critique national law in tort conflicts. Indeed a review clause in Rome II leaves the door open for future changes and ‘adaptations’.98 If this step is followed by subsequent improvements, Europe would have achieved, in a relatively short time, much more than American conflicts law could ever hope for.

98

See Rome II, art. 30.

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THE ROME II REGULATION FROM A JAPANESE POINT OF VIEW Yuko NISHITANI∗

I.

II.

III.

General Categories of Torts A. Objective Connecting Factors 1. Principle 2. Exceptions B. The Principle of Party Autonomy Special Categories of Torts A. Individual Interests B. General Interests Conclusion

One year before the promulgation of the Regulation on the law applicable to noncontractual obligations (hereinafter ‘Rome II’) of 11 July 2007,1 Japanese private international law had been entirely reformed by the Act on General Rules for Application of Laws of 21 June 2006 (hereinafter ‘Japanese Act’).2 This statute ∗

Visiting Scholar of the University of Paris II (Panthéon-Assas) ; former Professor of Tohoku University School of Law, Japan. ∗∗ Information on Japanese legislation and case law can be downloaded from <www.tomeika.jur.kyushu-u.ac.jp>. 1 Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the Law Applicable to Non-Contractual Obligations (‘Rome II’), OJ 2007, L 199/40 (entering into force on 11 January 2009, except for Article 29). 2 Hô no Tekiyô ni kansuru Tsûsoku-hô, Law No. 78 of 21 June 2006 (entered into force on 1 January 2007). For translations into Western languages, see ANDERSON K./ OKUDA Y., ‘Translation of Japan’s Private International Law: Act on the General Rules of Application of Laws [Hô no Tekiyô ni Kansuru Tsûsokuhô], Law No. 10 of 1898 (as newly titled and amended 21 June 2001)’, in: Yearbook of Private International Law (hereinafter ‘Yearbook’) 8 (2006), pp. 427-441 (reproduced in: Zeitschrift für Japanisches Recht/Journal of Japanese Law (hereinafter ‘ZJapanR/J. Jap. L.’) 23 (2007), pp. 227-240; Asian-Pacific Law & Policy Journal (hereinafter ‘APLPJ’) 8-1 (2006), pp. 138-160); DOGAUCHI M. [et al.], ‘Act on General Rules on Application of Laws’, in: Japanese Annual of International Law (hereinafter ‘JAIL’) 50 (2007), pp. 87-98; OKUDA Y./TOUBKIN N., ‘Loi sur les règles générales d’application des lois (Hô no tekiyô ni kansuru tsûsokuhô) - Loi no 78 du 21 juin 2006 reformant la loi no 10 de 1898’, in: Clunet 2007, pp. 921-931; SAKURADA Y./NISHITANI Y./SCHWITTEK E., ‘Allgemein regelndes Gesetz betreffend die Anwendung von Gesetzen (Rechtsanwendungsgesetz) [Hô no tekiyô ni kansuru tsûsoku-hô, Gesetz Nr. 78 vom 21. Juni 2006]’, in: ZJapanR/J. Jap. L. 22 (2006), pp. 269-282 (reproduced in: Zeitschrift für Rechtsvergleichung 2006/34, pp. 227-233; IPRax 2007, pp. 560-564).

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Yuko Nishitani replaced the Hôrei of 21 June 1898,3 which was a modern legislation at that time4 but had remained almost unchanged for more than one hundred years, except for the reform of 1989.5 Hôrei needed an integral reform of its rules on contractual and extra-contractual obligations to make them more responsive to the needs of international business transactions in today’s globalised world. As a result, Article 11, § 1 of Hôrei, which pointed to the lex loci delicti as the law governing torts, has been transformed into more detailed and flexible conflict of laws rules that guarantee foreseeability and legal certainty.6 The preparatory work of the Japanese Act was largely based on wide-ranging comparative studies, especially on German, French, Swiss, and Anglo-American legal systems, as well as European Community legislations.7 The SubcommisHôrei, Law No. 10 of 21 June 1898 (entered into force on 16 July 1898). For translations into Western languages, see, inter alia, ANDERSON K./OKUDA Y., ‘Horei, Act on the Application of Laws, Law No. 10 of 1898 (as amended 2001)’, in: APLPJ 3-1 (2002), pp. 230-242; MAKAROV A., Quellen des internationalen Privatrechts, 3rd ed., Berlin/Tübingen 1978, pp. 148-151; MÜNZEL F., ‘Hôrei (IPR-Gesetz) i.d.F. vom 28.6.1989 (Auszug)’, in: RabelsZ 54 (1990), pp. 579-582. 4 Hôrei had adopted bilateral conflict of laws rules, especially party autonomy in contractual matters, in 1898. See e.g., NISHITANI Y., ‘Party Autonomy and Its Restrictions by Mandatory Rules in Japanese Private International Law - Contractual Conflicts Rules’, in: BASEDOW J./BAUM H./NISHITANI Y. (eds.) (note 6), pp. 77 et seq. 5 Law No 27 of 28 June 1989 (entered into force on 1 January 1990). The 1989 reform in the field of family law envisaged sexual equality in conflict of laws. See NAKANO S., ‘Zur Reform des japanischen Internationalen Familienrechts’, in: Kobe University Law Review 24 (1990), pp. 63-78; SCHMIDT M., Die Reform des japanischen Internationalen Privatrechts, Köln/Berlin etc., 1992, pp. 11 et seq.; TORII J., ‘Revision of Private International Law in Japan’, in: JAIL 33 (1990), pp. 54-67. Other marginal reforms of Hôrei took place in 1942, 1947, 1964, 1986, and 1999. 6 For the 2006 reform, see, inter alia, BASEDOW J./BAUM H./NISHITANI Y. (eds.), Japanese and European Private International Law in Comparative Perspective, Tübingen 2008; DOGAUCHI M. [et al.], ‘New Private International Law of Japan’, in: JAIL 50 (2007), pp. 3-86; DOGAUCHI M., ‘Four-Step Analysis of Private International Law’, in: Recueil des Cours 315 (2006), pp. 21 et seq.; NISHITANI Y., ‘Die Reform des Horei’, in: ZJapanR/J. Jap. L. 15 (2003), pp. 263-264; idem, ‘Die Reform des Horei (2) - Der Vorentwurf vom 22. März 2005’, in: ZJapanR/J. Jap. L. 19 (2005), pp. 251-263; idem, ‘Die Reform des Horei (3) Das Gesetz ‘Hô no Tekiyô ni kansuru Tsûsoku Hô’ vom 15. Juni 2006’, in: ZJapanR/J. Jap. L. 21 (2006), pp. 229-230; idem, ‘Die Reform des internationalen Privatrechts in Japan’, in: IPRax 2007, pp. 552-557; OKUDA Y., ‘Reform of Japan’s Private International Law : Act on the General Rules of the Application of Laws’, in: Yearbook 8 (2006), pp. 145-167; idem, ‘Aspects de la réforme du droit international privé au Japon’, in: Clunet 2007, pp. 899-920; TAKAHASHI K., ‘A Major Reform of Japanese Private International Law’, in: Journal of Private International Law 2 (2006), pp. 311-338; KADNER GRAZIANO T., ‘Das Internationale Schuldrecht im japanischen IPR-Gesetz von 2007’, in: Anwaltsrevue 2007, pp. 210-214. 7 See ‘Kokusaishihô no Gendaika ni kansuru Yôkô Chûkan Shian Hosoku Setsumei’ [Supplementary Explanation of the Interim Proposal for the Modernization of Japanese Private International Law] (hereinafter ‘Hosoku Setsumei’), in: Hô no Tekiyô ni kansuru Tsûsokuhô Kankeishiryô to Kaisetsu, Tokyo 2006, pp. 105-243. 3

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The Rome II Regulation from a Japanese Point of View sion on Private International Law established under the Legislative Commission of the Japanese Ministry of Justice (hereinafter ‘Subcommission’), which was in charge of consultations, has therefore also followed alongside the lengthy, laborious march of the European Community towards the promulgation of Rome II. However, because the consultations of the Subcommission ended on 12 July 2005,8 only the Preliminary Draft Proposal of 3 May 20029 and the Proposal of 22 July 200310 by the European Commission could be taken into consideration. From a methodological point of view, both Rome II and the Japanese Act are embedded in the tradition of neutral and bilateral conflict of laws rules stemming from F.C. von Savigny.11 Hence, the ‘revolutionary’ theories of the United States launched by Brainerd Currie,12 which are directed by substantive policies or governmental interests, did not directly influence legislation over the Atlantic and the Pacific. Only the approach of the ‘most significant relationship’ in the 1971 Restatement (Second) of Conflict of Laws has been adopted in the attenuated form of the closest connection test (principe de proximité).13 Nevertheless, it should be 8 For the English translation of the conclusion of the consultations, see ‘Summary Proposal for the Modernization of Japanese Private International Law’, in: Hô no Tekiyô ni kansuru Tsûsokuhô Kankeishiryô to Kaisetsu, Tokyo 2006, pp. 74-83. 9 Preliminary Draft Proposal for a Council Regulation on the Law Applicable to Non-contractual Obligations (Green Paper) of 3 May 2002 prepared by the Commission. 10 Proposal for a Regulation of the European Parliament and of the Council on the law applicable to non-contractual obligations (‘Rome II’) of 22 July 2003, COM (2003) 427 final (hereinafter ‘2003 Proposal’). 11 SAVIGNY himself qualified the rules on tort as ‘statutes of strictly positive and mandatory nature’ (Gesetze von streng positiver, zwingender Natur) and held the lex fori applicable. VON SAVIGNY F.K., System des heutigen römischen Rechts, vol. 8, Berlin 1849, pp. 278 et seq. 12 CURRIE B., Selected Essays on the Conflict of Laws, Durham (N.C.) 1963, pp. 180 et seq.; for a criticism against the ‘interests analysis’ of CURRIE, see BRILMAYER L., Conflict of Laws - Foundations and Future Directions, Boston [et al.] 1991, pp. 43 et seq.; for recent developments in the U.S., see, inter alia, SYMEONIDES S.C., The American Choice-of-Law Revolution in the Courts: Past, Present and Future, Leiden 2006. 13 See BUREAU D./MUIR WATT H., Droit international privé, t. 2 - Partie spéciale, Paris 2007, pp. 378 et seq.; also MUIR WATT H., ‘L’expérience américaine’, in: FUCKS A., MUIR WATT H./PATAUT E. (eds.), Les conflits de lois et le système juridique communautaire, Paris 2004, pp. 145 et seq.; VAREILLES-SOMMIÈRES (DE) P., ‘La responsabilité civile dans la proposition de règlement communautaire sur la loi applicable aux obligations non contractuelles («Rome II»)’, in: ibid., pp. 191 et seq.; VON HEIN J., ‘Die Kodifikation des europäischen IPR der außervertraglichen Schuldverhältnisse vor dem Abschluss? - Zum gegenwärtigen Stand der Arbeiten an der Rom-II-Verordnung -’, in: Versicherungsrecht 2007, pp. 441 et seq.; for the ‘principe de proximité’ in Europe, see LAGARDE P., ‘Le principe de proximité dans le droit international privé contemporain’, in: Recueil des Cours 196 (1986 I), pp. 35 et seq. However, one should bear in mind that § 6 of the Second Restatement is guided by substantive policies, in contrast to Rome II and the Japanese Act. SYMEONIDES S.C., ‘Tort Conflicts and Rome II: A View from Across’, in: Festschrift für Erik Jayme, vol. 1, Berlin 2004, p. 948. For the detailed criticism against Rome II, see

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Yuko Nishitani recalled that the European legislator was also well aware of the public and economic regulatory function of certain conflicts rules (especially Article 7 of Rome II; see infra II-B). In addition, the Japanese legislator, concerned with the interests of Japanese companies doing business abroad, has retained the principle of ‘double actionability’, provided for in Article 11, §§ 2 and 3 of Hôrei, for all types of torts, despite unanimous criticism by academics (Article 22 of the Japanese Act).14 The following paper examines Rome II’s conflict of laws rules from a Japanese perspective. The scope of analysis is limited to principal norms on tort liability and their characteristics, leaving aside the other types of non-contractual obligations (Articles 10-12). The general conflicts rules and party autonomy adopted in Rome II (Articles 4 and 14) are comparable to those of the Japanese Act (Articles 17, 20, and 21) (I). On the other hand, the Rome II conflicts rules governing specific categories of torts (Articles 5-9) vary significantly from those of the Japanese Act (Articles 18 and 19) (II). In this context, it should be noted that the Hague Convention of 4 May 1971 on the Law Applicable to Traffic Accidents15 and the Hague Convention of 2 October 1973 on the Law Applicable to Products Liability16 require priority to Rome II concerning the Member States that are parties to one or both of these conventions (Article 28, § 1). Japan has not ratified any of them to date.

I.

General Categories of Torts

The conflict of laws rules governing torts in general can be classified into the rules based on objective connecting factors (A) and those based on party autonomy (B). A.

Objective Connecting Factors

1.

Principle

Both Article 4, § 1 of Rome II and Article 17 of the Japanese Act provide for primary reference to be made to the lex loci delicti for general categories of torts. SYMEONIDES S.C., ‘Rome II and Tort Conflicts: A Missed Opportunity’ (hereinafter ‘Rome II’), in: Am. J. Comp. L. 56 (2008), pp. 173 et seq. 14 See NISHITANI Y., ‘Fuhôkôi no junkyo-hô’, in: Kokusai Business to Hô, vol. 4 (forthcoming 2008). 15 There are 19 Contracting States to this convention: Austria, Beralus, Belgium, Bosnia and Herzegovina, Croatia, Czech Republic, France, Latvia, Lithuania, Luxembourg, Montenegro, Netherlands, Poland, Serbia, Slovakia, Slovenia, Spain, Switzerland, and the former Yugoslav Republic of Macedonia (see ). 16 There are 11 Contracting States to this convention: Croatia, Finland, France, Luxemburg, Montenegro, Netherlands, Norway, Serbia, Slovenia, Spain, and the former Yugoslav Republic of Macedonia (see ).

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The Rome II Regulation from a Japanese Point of View Cross-border torts are, as a general principle, governed by the law of the place where the harmful event occurred. This legislative policy, which is followed by a majority of countries, is justified by the fact that tort liability primarily concerns the public and social interests of the locus delicti, focusing on compensating the victim for the damage sustained. In addition, the lex loci delicti serves to balance the interests of the parties by being a neutral law.17 The concept of locus delicti requires precision when complex torts (Distanzdelikt) are involved. The community legislator chose a simple and clear-cut solution, referring to the place where the damage occurs (locus damni), without any regard to the place where the event giving rise to the damage occurred or the places where the indirect consequences of that event are felt (Article 4, § 1 of Rome II). When Rome II enters into force, this rule will replace, in principle,18 the national legislation of Member States that point to the locus damni under the condition of foreseeability19 or that are based on the ‘principle of ubiquity’ and allow the victim to choose between the lex loci commissi and the lex loci damni.20 The reference to the locus damni will presumably lead to the application of the victim’s habitual residence in the majority of cases.21 This rule, which is primarily focused on the loss allocation, arguably reflects the ‘modern approach to civil liability and the development of systems of strict liability.’22 As a result, it guarantees the equality of victims residing in the same country, regardless of whether the same type of wrongful act is committed within or outside that jurisdiction. It also accomplishes equal conditions for competition among business operators doing business in the same market.23

For Japanese authors, see EGAWA H., Kokusaishihô, 17th ed., Tokyo 1988, p. 229; ORIMO Y., Kokusaishihô – Kakuron, 2nd ed., Tokyo 1972, pp. 168 et seq.; SAKURADA Y., Kokusaishihô, 5th ed., Tokyo 2006, p. 229; TAMEIKE Y., Kokusaishihô Kôgi, 3rd ed., Tokyo 2005, pp. 388 et seq.; YAMADA R., Kokusaishihô, 3rd ed., Tokyo 2005, p. 358. 18 For the categories of torts excluded from the scope of application of Rome II, especially defamation (Article 1, § 2), the national conflict of laws rules of Member States continue to apply (see infra II-A). 19 Article 3, §§ 1 and 2 of the ‘Wet van 11 april 2001, houdende regeling can het conflictenrecht met betrekking tot verbintenissen uit onrechtmatige daad (Wet conflictenrecht onrechtmatige daad)’ of the Netherlands (hereinafter ‘Dutch Act’); Article 45, § 2 of the Portuguese Civil Code; cf. Article 133, § 2 of the ‘Loi fédérale sur le droit international privé’ of Switzerland of 18 December 1987 (hereinafter ‘Swiss Code’). 20 Article 40, § 1 of the ‘Einführungsgesetz zum Bürgerlichen Gesetzbuch’ of Germany (hereinafter ‘EGBGB’); Article 62, § 1 of the ‘Legge 31 maggio 1995, n. 218 Riforma del sistema italiano di diritto internazionale privato’ of Italy (hereinafter ‘Italian Code’). In the absence of a choice by the victim, the former applies the lex loci commissi, the latter the lex loci damni. 21 See 2003 Proposal (note 10), p. 11. 22 Recital No 15-17 of Rome II. 23 KADNER GRAZIANO T., Gemeineuropäisches Internationales Privatrecht, Tübingen 2002, pp. 216 et seq.; WAGNER G., ‘Die neue Rom II-Verordnung’, in: IPRax 2008, p. 5. 17

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Yuko Nishitani As to Japan, the majority of authors advocated under Hôrei that intentional torts and negligence are subject to the lex loci commissi because the misconduct of the tortfeasor is decisive (‘conduct-regulating’), while strict liability categories are subject to the lex loci damni since they target the compensation for damage (‘lossallocating’).24 Nevertheless, such a classification, which has scarce support among European authors and legislation,25 lacks clear-cut criteria to distinguish between the two categories of torts in conflict of laws, independently of any substantive rules.26 Because of this drawback, the traditional view was not any more taken into account during the consultation of the Subcommission.27 According to Article 17 of the Japanese Act, the judge applies the lex loci damni if it was foreseeable that the damage would occur at that place; otherwise the lex loci commissi applies. The objective of this rule is to balance the interests of the parties.28 However, ‘foreseeability’ is derived from circumstances over which the victim has no influence. On the other hand, the person engaged in an act causing consequences beyond State borders should, except for specific categories of torts (e.g., product liability), generally be able to foresee being possibly held liable for that act pursuant to the law of another country. Furthermore, the foreseeability under Article 17 of the Japanese Act cannot always be discerned categorically, even if it is interpreted as an objective and normative notion on the level of conflict of laws.29 In a court proceeding, the defendant tortfeasor may well have a de facto choice of whether or not to rebut the presump-

24 ORIMO Y. (note 17), p. 180; IKEHARA S., ‘Kokusaishihô’, in: ISHII T. [et al.] (ed.), Kokusai Torihiki-hô, Tokyo 1967, p. 377; YAMADA R. (note 17), p. 366. This opinion was inspired by, inter alia, EHRENZWEIG and RABEL. See EHRENZWEIG A.A., ‘Der Tatort im amerikanischen Kollisionsrecht der außervertraglichen Schadensersatzansprüche’, in: Festschrift für Ernst Rabel, vol. 1, Tübingen 1954, pp. 682 et seq.; RABEL E., The Conflict of Laws, vol. 2, 2nd ed., Chicago 1960, pp. 334 et seq. 25 KADNER GRAZIANO T. (note 23), pp. 206 et seq. 26 See the criticism by recent authors: SAKURADA Y. (note 17), p. 231; TAMEIKE Y. (note 17), p. 396. 27 Hosoku Setsumei (note 7), pp. 181 et seq. 28 KOIDE K. [et al.], ‘Kokusaishihô no gendaika ni kansuru yôkô’ no gaiyô’ [Summary Proposal for the Modernization of Japanese Private International Law] (hereinafter ‘Gaiyô’), in: Hô no Tekiyô ni kansuru Tsûsokuhô Kankeishiryô to Kaisetsu, Tokyo 2006, p. 57. This rule was modelled at the Dutch, Portuguese and Swiss legislations (see supra note 19). 29 According to the explanation of the Ministry of Justice, the foreseeability is aimed at the place of the harmful event, not the substantive result. For example, A, resident of the state X, sends a flower contaminated by scientifically unknown bacteria to B, resident of the state Y. The foreseeability in the sense of conflict of laws is fulfilled because A sent the flower to the destination country deliberately: the law of state Y is applicable. Then, the fact that A could not have foreseen its contamination by bacteria is taken into account within the framework of the substantive tort law of the state Y. KOIDE [et al.], Gaiyô (note 28), p. 57 (note 32).

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The Rome II Regulation from a Japanese Point of View tion of foreseeability, depending on which law is more favourable.30 For the purpose of loss allocation, the model of Rome II arguably offers a better solution than the Japanese Act.31 Under Rome II, however, the lex loci commissi still comes into play to a certain extent (see infra I-A-2).

2.

Exceptions

Harmful events can occur fortuitously in a country with no substantial tie with the parties. A Japanese case from 1997 concerned a claim for damages between two Japanese nationals residing in Japan. They took part in a package ski tour and collided with one another while skiing in British Columbia, Canada. The injured party was brought to the hospital after returning to Japan and subsequently claimed damages before the Chiba District Court in Japan. Although Article 11, § 1 of Hôrei designated the lex loci delicti as the law governing torts, the judge applied Japanese law on the following grounds: (1) the locus damni - in the sense of Article 11, § 1 of Hôrei - is also the place where the losses and medical costs were incurred; (2) In the court proceedings, the parties presupposed that Japanese law would apply; and (3) Article 11, §§ 2 and 3 of Hôrei order the cumulative application of Japanese law.32 Apparently, none of these arguments were convincing;33 however, the judge presumably undertook this approach to circumvent the application of Canadian law pursuant to the regular interpretation of Article 11, § 1 of Hôrei, which had to be, in contrast to some legal systems, applied ex officio without exception. When the locus delicti is fortuitous, application of the lex loci delicti must give way to exceptional rules. As to the subsidiary connecting factors, Article 4, § 2 of Rome II first designates the law of the parties’ common habitual residence.34 In principle, the same result is attained pursuant to the escape clause in Article 20 30

KADNER GRAZIANO T. (note 23), pp. 224 et seq.; NISHITANI Y., in: IPRax (note 6),

p. 556. 31 Needless to say, the tortfeasor can still rely on the defense pursuant to the substantive applicable law that the damage could not have been predicted, so far as the tort is governed by negligence, not by strict liability. 32 Chiba District Court, 24 July 1997, in: Hanrei Jihô 1639, 86; see HÔREI KENKYÛKAI (ed.), Hôrei no minaoshi ni kansuru shomondai, vol. 2 - Fuhôkôi, Bukken tô no Junkyohô ni tsuite, Tokyo 2003, pp. 9 et seq. 33 First, the locus delicti in the sense of Article 11, § 1 of Hôrei does not include the places where indirect consequences take effect, according to the majority of authors. Second, this provision does not provide for parties’ freedom to choose the law governing torts or a procedural agreement. Third, Article 11, §§ 2 and 3 of Hôrei, which stipulates a cumulative application of Japanese law (‘double actionability’), does not justify the designation of Japanese law as the lex loci delicti pursuant to Article 11, § 1 of Hôrei. 34 Comparatively, the same principle is provided for in Article 40, § 2 of EGBGB; Article 3, § 3 of the Dutch Act; Article 45, § 3 of the Portuguese Civil Code; Article 99, § 1, No 1 of the ‘Code du droit international privé’ of Belgium of 16 July 2004 (hereinafter ‘Belgian Code’); Article 133, § 1 of Swiss Code.

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Yuko Nishitani of the Japanese Act. 35 In the above-mentioned case, the judge would rightly be requested to apply Japanese law under these rules. The common habitual residence is the social environment into which the parties are integrated. It therefore reflects their living standard and the appropriate criteria for damages. Furthermore, the parties usually sign an insurance contract at their habitual residence. After the harmful event arises, they return there to initiate court proceedings in the majority of cases. As a result, this rule often results in the application of the lex fori and facilitates the entire procedure for compensation.36 Second, Article 4, § 3 of Rome II and Article 20 of the Japanese Act37 provide an escape clause that allows the judge to correct the objective connecting factors case by case, favouring the country that is manifestly more closely connected to the harmful event.38 Both instruments put weight, as an indication of the closest connection, on the pre-existence of a specific legal relation between the parties, especially a contractual relation (akzessorische Anknüpfung). Following these rules, the intricate questions of characterization and adaptation are circumvented, even if there is a concurrence of actions for contractual and non-contractual obligations (Anspruchskonkurrenz).39 Yet, the accessory reference to the lex causae is ineffective so long as the parties have recourse to party autonomy (Article 14 of Rome II, Article 21 of the Japanese Act). Even if a law other than the lex loci commissi is applicable, the rules of ‘safety and conduct’ of the latter can still be taken into consideration as ‘local

35 Article 20 of the Japanese Act, as an escape clause, specifies the common habitual residence and the pre-existing contractual relation as indications for the closest connection. NISHITANI Y., in: IPRax (note 6), p. 556. 36 KADNER GRAZIANO T. (note 23), pp. 379 et seq.; see also Hosoku Setsumei (note 7), pp. 184 et seq.; HÔREI KENKYÛKAI (ed.) (note 32), pp. 27 et seq. 37 See supra note 35. 38 An escape clause is generally provided for in recent legislations. See Article 41, §§ 1 and 2 of EGBGB; Article 48, § 1 of ‘Bundesgesetz vom 15. Juni 1978 über das internationale Privatrecht (IPR-Gesetz)’ of Austria (hereinafter ‘Austrian Code’); Article 12 of ‘Private International Law (Miscellaneous Provisions) Act 1995’ of the United Kingdom (hereinafter ‘UK Code’); Article 99, § 3 of the Belgian Code; Article 15 of the Swiss Code. 39 See the explanation of Article 3, § 3 of the 2003 Proposal (note 10), pp. 12 et seq. The majority of Japanese academics and case law under Hôrei granted the concurrence of actions for contractual and non-contractual obligations. TAMEIKE Y. (note 17), pp. 398 et seq.; YAMADA R. (note 17), pp. 363 et seq.; DOGAUCHI M., Point Kokusaishihô - Sôron, 2nd ed., Tokyo 2007, pp. 103 et seq.; Tokyo District Court, 25 September 2000, in: Hanrei Jihô 1745, 102; Tokyo District Court, 27 May 1998, in: Hanrei Jihô, 1668, 89; Osaka District Court, 23 May 1995, in: Hanrei Jihô, 1554, 91. On the other hand, a minor opinion put forth a conclusive characterization as a contractual relation when the harmful event impairs contractual obligations between the parties at the same time. ORIMO Y., Shôgai Fuhôkôi-ron, Tokyo 1976, pp. 165 et seq.; KUNITOMO A., Kokusaishihôjô no Tôjisha-rieki ni yoru Seishitsu-kettei, Tokyo 2002, pp. 44 et seq. The legislature of the Japanese Act presupposes an independent characterization as torts. Hosoku Setsumei (note 7), pp. 187 et seq.

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The Rome II Regulation from a Japanese Point of View data’ (Article 17 of Rome II).40 It comprises the rules that the alleged tortfeasor was supposed to abide by in the conduct state, such as traffic rules (e.g., right hand traffic, speed limit etc.), as well as safety standards for products, work sites, buildings and other installations. An extensive view purports to subsume also the standard of ‘duty of care’ (Sorgfaltsstandard) as a constitutive element of tort under Article 17 of Rome II.41 This interpretation may have been in line with Article 13 of the 2003 Proposal,42 but the more restrictive wording of Article 17 of Rome II (‘in assessing the conduct’ of the alleged tortfeasor) suggests a negative. Because Article 17 of Rome II does not presuppose a cumulative ‘application’ of the lex loci commissi, it will arguably be consistent de lege lata to limit its scope to regulations on safety and conduct,43 and subject the consequences of violating them civil liability or presumptions and inferences of fault - to the law governing the tort.44 Hence, the direct applicability of the lex loci commissi should be confined to its internationally mandatory rules (Article 16 of Rome II).45 On the other hand, in order to ‘strike a reasonable balance between the parties’,46 the judge should be allowed - in deviation from the wording of Article 17 - to take the victim’s conduct into consideration as well.47 This provision is modelled at Article 7 of the 1971 Hague Convention on Traffic Accidents and Article 9 of the 1973 Hague Convention on Products Liability. 2003 Proposal (note 10), p. 25. The same principle will presumably be deduced by a teleological interpretation of the Japanese Act. For the theory of ‘local data’, see EHRENZWEIG A.A., Private International Law - General Part, 2nd printing, Leyden [et al.] 1972, pp. 83 et seq. 41 WAGNER G. (note 23), pp. 5 et seq.; for further discussions, see SYMEONIDES S.C., Rome II (note 13), pp. 211 et seq. 42 Article 13 of the 2003 Proposal was to operate ‘in determining liability’, namely ‘in assessing the seriousness of the fault or the author’s good or bad faith for the purposes of the measure of damages’ (2003 Proposal (note 10), p. 25). For the problems inherent in this provision, see HAMBURG GROUP FOR PRIVATE INTERNATIONAL LAW, ‘Comments on the European Commission’s Draft Proposal for a Council Regulation on the Law Applicable to Non-Contractual Obligations’, in: RabelsZ 67 (2003), pp. 43 et seq. 43 See Recital No 34 of Rome II. 44 The application of Article 17 of Rome II requires prudence with regard to environmental damage. The regulatory function of Article 7 would be undermined if, as the explanation of the 2003 Proposal suggests ((note 10), p. 20), the administrative authorization of installations in the conduct state, e.g., exempted the tortfeasor from the liability incurred under the lex loci damni. See JUNKER A., ‘Das Internationale Privatrecht der Straßenverkersunfälle nach der Rom II-Verordnung’, in: Juristenzeitung 2008, p. 177; MÜNCHKOMM/ JUNKER, 4th ed., München 2006, Art. 42 EGBGB Anh., Rn. 80. 45 Some authors advocate to apply (or take into consideration) internationally mandatory rules of a foreign third country as well. See, e.g., VON HEIN J. (note 13), p. 446; LEIBLE S./LEHMANN M., ‘Die neue EG-Verordnung über das auf außervertragliche Schuldverhältnisse anzuwendende Recht («Rom II»)’, in: RIW 2007, p. 726. Although the Japanese Act remains silent, it is admitted de lege lata that internationally mandatory rules of the forum state are always applicable. See NISHITANI Y., IPRax (note 6), p. 555. 46 See Recital No 34 of Rome II. 47 WAGNER G. (note 23), p. 6. 40

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The Principle of Party Autonomy

Following some recent legislations,48 party autonomy has been introduced in Article 14 of Rome II and Article 21 of the Japanese Act. In both instruments, the choice can be made either expressly or implicitly. The rights of third parties, especially insurers, are always reserved (Article 14, § 1, 2nd sentence of Rome II; Article 21 of the Japanese Act). In fact, some Japanese authors have criticized party autonomy, advocating that tort liability - in contrast to contracts - is directed at maintaining the social order, and that the parties, having opposed interests, would seldom reach a valid agreement.49 Nevertheless, the Subcommission felt that the modern concept of tort liability emphasizes the compensation of damage rather than social order or general interests. In addition, it was put forth that a claim for damages could be disposed of in the majority of substantive laws and the parties can conclude a settlement. Eventually, the principle of party autonomy was adopted, parallel to the rule in contracts.50 Article 21 of the Japanese Act, same as Article 14, § 1 of Rome II, even allows the parties to choose a law that does not have any connection with the tort, although the Subcommission had first envisaged to limit the choice to the lex fori. This restriction has been removed in light of the needs of international commerce and a possible criticism of the ‘homeward trend.’51 On the other hand, Article 21 of the Japanese Act grants - in contrast to Article 14, § 1 (b) of Rome II - only a post-tort (ex post) choice of law subsequent to the harmful event. The decision to exclude a pre-tort (ex ante) choice was made for two reasons: (1) it has no practical relevance due to the accessory reference to the lex contractus by operation of the escape clause (Article 20), and (2) it may be abused by the stronger party.52 Considering the latter point, the community legislator rightly limited the pre-tort choice to an agreement freely negotiated between the parties ‘pursuing a

See comparatively, Article 42 of EGBGB; Articles 11 and 35 of the Austrian Code; Article 6, §§ 1 and 2 of the Dutch Act; Article 101 of the Belgian Code; Article 132 of the Swiss Code (restricted to the choice of lex fori). In France, the choice of lex fori has been admitted in the form of procedural agreement. See FAUVARQUE-COSSON B., Libre disponibilité des droits et conflits de lois, Paris 1996, pp. 335 et seq.; idem, ‘L’accord procédural à l’épreuve du temps - Retour sur une notion française controversée’, in: Mélange Paul Lagarde, Paris 2005, pp. 263 et seq.; cf. BUREAU D., ‘L’accord procédural à l’épreuve’, in: Rev. crit. dr. int. pr. 85 (1996), pp. 588 et seq. 49 DOGAUCHI M., Point Kokusaishihô - Kakuron, Tokyo 2000, p. 243; SAWAKI T./ DOGAUCHI M., Kokusaishihô Nyûmon, 6th ed., Tokyo 2006, pp. 251 et seq.; ORIMO Y. (note 39), p. 153 (note 4). 50 Hosoku Setsumei (note 7), p. 192; HÔREI KENKYÛKAI (ed.) (note 32), pp. 43 et seq. 51 See the minutes of the 6th (7 October 2003) and 7th (4 November 2003) session of the Subcommission. The minutes can be downloaded from http://www.moj.go.jp/. 52 Hosoku Setsumei (note 7), pp. 192 et seq. 48

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The Rome II Regulation from a Japanese Point of View commercial activity’ (Article 14, § 1 (b) of Rome II).53 In fact, an accessory reference to the lex contractus will not function when the contract is governed by CISG54, or the parties are possibly not bound by contracts (e.g., as a guest passenger and host). For the sake of clarity and foreseeability, a pre-tort choice is preferable to an accessory reference to the lex contractus as a mere indication of the closest connection within the escape clause (Article 4, § 3 of Rome II).55 The protection of a weaker commercial party - such as franchisee, licensee, or insured -56 is not a specific problem of torts. Under Rome II, an adequate protection should be sought pursuant to the restrictions for internal and intra-community cases (Article 14, §§ 2 and 3), as well as internationally mandatory rules (Article 16), 57 before having recourse to public policy (Article 26).

II.

Special Categories of Torts

Among the special categories of torts, we should distinguish between torts that are aimed at primarily protecting individual and private interests (A) and torts that are directed to general and public interests (B).

A.

Individual Interests

Following intense lobbying activities by the media, Rome II excluded the violation of privacy and rights relating to personality, especially defamation, from its scope of application (Article 1, § 2 (g)).58 Hence, the national conflicts rules of Member States continue to apply in this field. The media feared that their activities may unexpectedly be governed by the unfavourable law of the place of distribution. Article 6, § 1 of the 2003 Proposal,59 which restricted the application of the lex loci 53 See Recital No 31 of Rome II. Article 14, § 1 (b) of Rome II does not clearly define the ‘commercial activity’, which arguably deviates from the usual definition of ‘professional’, as opposed to ‘consumer’, in the community law. LEIBLE S./LEHMANN M. (note 45), pp. 726 et seq.; LEIBLE S., ‘Rechtswahl im IPR der außervertraglichen Schuldverhältnisse nach der Rom II-Verordnung’, in: NJW 2008 (forthcoming). 54 United Nations Convention on Contracts for the International Sale of Goods (CISG), signed at Vienna on 11 April 1980 (entered into force on 1 January 1988). 55 See, inter alia, KADNER GRAZIANO T., ‘General Principles of Private International Law of Tort in Europe’, in: BASEDOW J./BAUM H./NISHITANI Y. (eds.) (note 6), pp. 249 et seq.; idem (note 23), pp. 185 et seq.; LEIBLE S. (note 53); MÜNCHKOMM/JUNKER (note 44), Rn. 76. 56 SYMEONIDES S.C., Rome II (note 13), p. 216. 57 For internationally mandatory rules, see supra note 45. 58 WAGNER G. (note 23), p. 10. 59 2003 Proposal (note 10).

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Yuko Nishitani damni (Article 3, § 1) when it violated the freedom of expression under the lex fori, did not satisfy the media either, because several alternative fora are always available under the Brussels I-Regulation.60 Nevertheless, the fragmentation of the conflict laws among 27 Member States is certainly not an ideal solution.61 There could also be contradictory parallel decisions, for the scope of each locus damni’s jurisdiction (Article 5, No 3 of Brussels I-Regulation) is restricted to the damage that occurred in the territory concerned.62 Further developments might be expected by the end of December 2008, following the envisaged study by the Commission (Article 30, § 2 of Rome II).63 On the other hand, Article 19 of the Japanese Act provides that defamation is governed by the law of the victim’s habitual residence where the harm is usually most strongly felt. This connecting factor enables the judge to apply a single law, even if the damage occurs in different countries (Streudelikt).64 The subtle question of balancing between the conflict of laws policy and the freedom of expression does not arise de facto with regard to the Japanese media, owing to the principle of ‘double actionability’ (Article 22). 65 Nevertheless, this solution is questionable, since the cumulative application of Japanese law draws upon an illegitimate priority for the lex fori, and the bifold reference to the applicable laws risks to delay 60 Article 2 and Article 5, No 3 of the Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ 2001, L 12/1. See BUREAU D./MUIR WATT H. (note 13), p. 405. As a compromise, Article 5 of the European Parliament Legislative Resolution of 6 July 2005 (P6_TA(2005) 0284) pointed to the country to which a publication or broadcast was principally directed or, if it was not apparent, to the country in which editorial control was exercised. This provision was, however, refused by the Commission for being too generous to press editors (Amended Proposal of 21 February 2006, COM (2006) 83 final, p. 6). 61 The conflicts rules of Member States vary considerably: (1) France favours the law of the place of distribution (Civ. 1er, 8 February 1983, in: Clunet 1984, p. 123; Civ. 1er, 14 January 1997, in: Rev. crit. dr. int. pr. 1997, p. 504). (2) The same principle applies to the UK, subject to ‘double actionability’ (DICEY A.V./MORRIS J.H.C./ COLLINS L. (eds.), The Conflict of Laws, 14th ed., London 2006, pp. 1957 et seq.; infra note (65)). (3) Austria points to the locus commissi delicti, or in exceptional cases to the locus damni (i.e., the victim’s habitual residence: OGH, 19 March 1975, SZ 48, 140) under the condition of forseeablility (RUMMEL P. (ed.), AGBG-Kommentar, vol. 2-2, 3rd ed., Wien 2002, § 48 IPRG, Rn. 24). (4) Germany, Italy and Belgium follow the ‘principle of ubiquity’, allowing the victim to choose between the lex loci commissi and the lex loci damni (Article 40 EGBGB; Article 24, § 2 and Article 62 of the Italian Code; Article 99, § 2, no 1 of the Belgian Code (subject to the tortfeasor’s foreseeability); cf. Article 139, § 1 of the Swiss Code). 62 European Court of Justice, 7 March 1995, Case C-68/93, in: ECR 1995-I, 415 (Shevill). 63 Commission Statement on the review clause (Article 30), in: OJ 2007, L 199/49. 64 Hosoku Setsumei (note 7), pp. 88 et seq. Article 19 of the Japanese Act is subject to the exceptions of the escape clause (Article 20) and party autonomy (Article 21). 65 The same solution was adopted by Article 13 of the UK Code, which excludes defamation from the code’s scope of application and maintains the ‘double actionability’ principle to protect the British media.

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The Rome II Regulation from a Japanese Point of View court proceedings. It is also contradictory to apply the lex fori systematically while allowing the parties to freely designate any foreign law to govern the tort (Article 21).66 With regard to product liability, Article 5, § 1 of Rome II adopted the ‘grouping of contacts’ approach. This cascading reference, which is more simplified than the 1973 Hague Convention on Products Liability (Articles 4-7), primarily seeks to designate a law that is closely connected with the victim (Article 5, § 1, 1st sentence (a), (b) and (c) of Rome II), and at the same time guarantee the manufacturer’s ability to foresee the applicable law (Article 5, § 1, 2nd sentence of Rome II).67 This rule presumably protects the victim better than Article 18 of the Japanese Act, which simply points to the country in which the victim obtained the product if it was foreseeable to the manufacturer, otherwise to the manufacturer’s habitual residence.68 Still, Article 5, § 1 of Rome II has an ambiguity when the product circulated without being marketed in the country where the victim habitually resides (a), or in the country where the product was acquired (b) or the damage was sustained (c). The derogative rule in Article 5, § 1, 2nd sentence of Rome II directed to the manufacturer’s foreseeability of marketing should, although not applicable literally, be invoked to fill the gap and protect the manufacturer in such an exceptional case.69

B.

General Interests

For the categories of torts concerning general interests, Rome II adopted conflict of laws rules on unfair competition and acts restricting free competition (Article 6), environmental damage (Article 7), infringement of intellectual property rights (Article 8), and industrial action (Article 9). After discussing comparable special See NISHITANI Y, IPRax (note 6), p. 556; see infra Conclusion. Article 5, § 2 of Rome II comprises an escape clause. Party autonomy (Article 14) and the reference to the parties’ common habitual residence (Article 4, § 2; Article 5, § 1) have priority in Article 5 as well. The connecting factors in national legislations vary comparatively: (1) locus damni, under the reservation of an escape clause (Articles 11 and 12 of the UK Code), (2) the victim’s habitual residence (Article 99, § 2, No 4 of the Belgian Code), (3) the market place (Austrian case law: OGH, 29 October 1987, in: IPRax 1988, 363), and (4) the manufacturer’s principal place of business and the place where the product was acquired (under the condition of the manufacturer’s foreseeability) pursuant victim’s choice (Article 63 of the Italian Code; cf. Article 135, § 1 of the Swiss Code). For the Contracting States to the 1973 Hague Convention, see supra note 16. 68 According to Article 18 of the Japanese Act, product liability is, in principle, governed by the law of the manufacturer’s habitual residence when, e.g., the victim purchased the product in a foreign country where it was not marketed, even if the marketing in the victim’s home country had caused him the desire to buy it, or when the product exploded during the victim’s trip to a country where it is marketed. This rule is, however, subject to the escape clause (Article 20) and party autonomy (Article 21) as well. 69 Also LEIBLE S./LEHMANN M. (note 45), p. 728; WAGNER G. (note 23), p. 7. 66 67

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Yuko Nishitani conflicts rules,70 the Subcommission decided not to introduce any black-letter rules for such torts in Japan. First, environmental damage was held not to deserve a special rule in Japan considering its geographical location surrounded by the sea.71 On the other hand, Article 7 of Rome II adopted - derogating from Article 4, § 1 - the ‘principle of ubiquity,’ allowing the defendant to choose between the lex loci commissi and the lex loci damni. This conflicts rule, which favours strict responsibility of the tortfeasor for the sake of environmental protection, will rightly have preventive effects for companies that extend their activities across the border.72 Yet, the system based on the victim’s choice compromises the harmony of decisions when there are - for lack of class action - several parallel procedures for the same environmental damage. Furthermore, the fact that the tortfeasor can choose any law by an agreement with the victim a posteriori (Article 14) may well attenuate the function of deterrence envisaged by Article 7. Viewing the legislative purpose, it may have been preferable to exclude party autonomy and adopt an alternative reference to the lex loci commissi and the lex loci damni, requesting the judge to determine ex officio which law provides for stricter responsibility. Second, the bilateral conflicts rules in Japan’s preliminary draft that pointed to the law of state of the market for acts restricting free competition were not adopted, for fear of applying a foreign anti-trust law.73 In fact, the scope of territorial application of anti-trust law is generally determined by the ‘effects doctrine’, confining the prescriptive jurisdiction of each sovereign state;74 even the damages against private actors are not necessarily of purely private character.75 In this re70 A special rule on industrial action was not deliberated in Japan. For the background of Article 9 of Rome II, see BRIÈRE C., ‘Le règlement (CE) no 864/2007 du 11 juillet 2007 sur la loi applicable aux obligations non contractuelles («Rome II»)’, in: Clunet 2008, pp. 48 et seq.; JUNKER A., ‘Die Rom II-Verordnung: Neues Internationales Deliktsrecht auf europäischer Grundlage’, in: NJW 2007, p. 3680. 71 See the preparatory discussions on the reform of Hôrei, HÔREI KENKYÛKAI (ed.) (note 32), p. 59. 72 Recital No 25 of Rome II; see BUREAU D./MUIR WATT H. (note 13), p. 409; MUIR WATT H., ‘Rome II et les «intérêts gouvernementaux» : pour une lecture fonctionnaliste du nouveau règlement du conflit de lois en matière délictuelle’, in: CORNELOUP S./JOUBERT N. (eds.), Le règlement communautaire «Rome II» sur la loi applicable aux obligations non contractuelles, Paris 2008, pp. 131 et seq. Concerning the demarcation of Article 17 in relation to Article 7, see supra note 44. 73 Hosoku Setsumei (note 7), pp. 200 et seq. 74 See Japanese Fair Trade Commission, 3 September 1998 (MDS Nordion case) (); Article 130, § 2 of the German Anti-trust Act; for the European Union, see European Court of First Instance, 25 March 1999, Case T-102/96, in: ECR 1999II, 753 (Gencor); for the U.S., see §§ 402 and 403 of the Restatement (Third) of the Foreign Relations Law of the United States (1987); for the development of the U.S. case law, see, inter alia, LOWENFELD A., International Litigation and Arbitration, 3rd ed., St. Paul. Minn. 2006, pp. 55 et seq. 75 According to Article 26, § 1 of the Japanese Anti-trust Act, damages (Article 25, § 1) cannot be requested until a court decree of injunction (Article 49, § 1) or a Fair Trade

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The Rome II Regulation from a Japanese Point of View spect, the implementation of Article 6, § 3 (a) of Rome II, which presupposes the applicability of a foreign anti-trust law - save the applicability of lex fori under (b) - would require, in a given case, an adaptation of the result. With regard to unfair competition, the Japanese Subcommission did not adopt any special rules, on the grounds that the interests protected by this legal institution are diverse, and the judge should decide the applicable law on a case-bycase basis.76 Yet, the majority of authors recognize the same principle contained in Article 6, §§ 1 and 2 of Rome II:77 (1) the category of unfair competition that affects economic policy and order in the market (e.g., illicit advertising) is governed by the law of the market concerned, 78 and (2) the other categories of unfair competition exclusively directed at the interests of certain competitors (e.g., knowhow infringement; headhunting of employees) are subject to general tort conflicts rules (Articles 17, 20, and 21 of the Japanese Act).79 With regard to the first category, a specific black-letter rule would have been desirable to explicitly exclude a recourse to the escape clause favouring the law of the state with the closer connection to the parties (Article 20) and party autonomy (Article 21), as provided for in Article 6, § 1 and 4 of Rome II. On the other hand, Article 6, § 1 of Rome II itself has a drawback: in contrast to Article 6, § 3, it does not allow concentration of the

Commission order (Article 66, § 4) has become res judicata. Therefore, the unconditional application of a foreign anti-trust law would deviate from these special rules, which are to be characterized as internationally mandatory rules. For the private law character of damages in Europe, see European Court of Justice, 20 September 2001, Case C-453/99, in: ECR 2001-I, 6297 (Courage); cf. FALLON M., ‘The Law Applicable to Specific Torts in Europe’, in: BASEDOW J./BAUM H./NISHITANI Y. (eds.) (note 6), pp. 268 et seq. 76 Hosoku Setsumei (note 7), pp. 200 et seq. 77 Recent legislation followed the same principle: Article 48, § 2 of the Austrian Code; Article 4 of the Dutch Act; Article 99, § 2, No 2 of the Belgian Code; Article 136 of the Swiss Code; see also the motives of EGBGB at BT-Drucks. 14/343, p. 10. 78 See NAKANO S., Article 11 of Hôrei, in: KIDANA S. [et al.] (eds.), Kihon-hô Kommentar, Tokyo 1994, p. 74. In the case of Osaka District Court, 9 November 2004 (Hanrei Jihô 1897, 103), defendant Y (Japanese company) requested a Korean company to produce counterfeits of the products of plaintiff X (Japanese company) and sold them in China, Germany, and the U.S. While an injunction and damages on the grounds of Japanese unfair competition law were refused, damages pursuant to Article 709 of Japanese Civil Code were granted based on torts. This provision was held applicable under Article 11, § 1 of Hôrei, since X’s principal place of business was located in Japan. However, in such a case where market order was at stake, the law of the markets where X lost his sales interests should have been applied. KOIDE K., Kokusaishihô Hanrei Hyakusen, revised ed., Tokyo 2007, p. 73; KUNITOMO A., Heisei 17nendo Jûyô Hanrei Kaisetsu, Tokyo 2006, p. 308. 79 KUNITOMO A., Heisei 3nen Jûyô Hanrei Kaisetsu, Tokyo 1992, p. 261; NAKANO S. (note 78), p. 74 ; Tokyo District Court, 24 September 1991, in: Hanrei Jihô 1429, 83; Tokyo District Court, 16 October 2003, in: Hanrei Jihô, 1874, 23; Chiteki Zaisan High Court, 27 December 2005 (LEX/DB 28110187). Defamation of a company that constitutes unfair competition falls under Article 19 of the Japanese Act.

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Yuko Nishitani connecting factors into a single market place when unfair competition is committed in an uncountable number of states.80 Third, for infringement of intellectual property rights, a rule identical to Article 8, § 1 of Rome II was primarily envisaged by the Subcommission in Japan. Intellectual property rights (copyright, trademark, patent, et al.) are - except for the unitary community intellectual property rights (cfr. Article 8, § 2 of Rome II)81 granted by each country; their existence and content depend on the law of the country concerned and they do not unfold their effects beyond the border (‘principle of territoriality’).82 Hence, the most reasonable connecting factor is the locus protectionis.83 Nevertheless, the Subcommission abstained from adopting this principle pursuant to the unconvincing reasoning that the authors and court decisions are not yet unanimous about the definition of the lex loci protectionis. 84 The absence of a specific provision is regrettable in light of growing needs in the practice,85 and also because, de lege lata, the applicability of the escape clause invoking the law of state with the closer connection with the parties (Article 20) and party autonomy (Article 21) should be set aside, as stipulated in Article 8, §§ 1 and 3 of Rome II. On the other hand, Article 8, § 1 of Rome II should have been complemented by an exceptional rule that allows concentrating upon one governing law in the case of a ubiquitous infringement of intellectual property rights, especially those effected via satellite broadcast or the Internet.86

80 Article 6, § 4 of Rome II should be interpreted as not excluding party autonomy (Article 14) in case of Article 6, § 2, where private interests of the parties are primarily involved. LEIBLE S./LEHMANN M. (note 45), p. 730; WAGNER G. (note 23), p. 8. 81 Regulation (EC) No 40/94 of 20 December 1993 on Community trade mark, OJ 1994, L 40/1; Regulation (EC) No 6/2002 of 12 December 2001 on Community design, OJ 2002, L 3/1. 82 The Berne Convention for the Protection of Literary and Artistic Works of 9 September 1886 (as amended) and the Paris Convention for the Protection of Industrial Property of 20 March 1883 (as amended) presuppose the principle of territoriality. 83 See comparatively, Article 34, § 1 of the Austrian Code; Article 110 of the Swiss Code (subject to the choice of lex fori); the motives of EGBGB at BT-Drucks. 14/343, p. 10. 84 Hosoku Setsumei (note 7), p. 201. 85 For further details, see NISHITANI Y., ‘Intellectual Property in Japanese Private International Law’, in: JAIL 48 (2005), pp. 87 et seq. 86 In this respect, see § 321 of the ALI-Principles (AMERICAN LAW INSTITUTE, Intellectual Property: Principles Governing Jurisdiction, Choice of Law, and Judgments in Transnational Disputes (forthcoming 2008)). The European Max-Planck-Group for Conflict of Laws in Intellectual Property (CLIP), as well as Japanese research groups are developing alternative principles on these issues. For the activities of CLIP, see http://www.cl-ip.eu/; also KUR A., ‘Applicable Law: An Alternative Proposal for International Regulation - The Max-Planck Project on International Jurisdiction and Choice of Law’, in: Brook. J. Int’l L. 30 (2005), pp. 962 et seq.

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The Rome II Regulation from a Japanese Point of View

III. Conclusion For legislators, it is always a difficult task to strike a fair balance between legal certainty and flexibility. The tort conflicts rules of Rome II, as a whole, set a higher value on certainty and uniformity. The detailed conflicts rules for specific categories of torts in Rome II offer better guidelines for the judge than the rules in the Japanese Act. The only exception is the category of violation of privacy and defamation. It would be desirable to adopt a uniform rule in this area to ensure better functioning of the internal market. Other loopholes in Rome II that require a reasonable interpretation could hopefully be filled by preliminary rulings of the European Court of Justice in the near future. Interestingly enough, Professor Symeonides maintains that Rome II is not flexible enough to achieve a reasonable result in some fact patterns, because it seeks the ‘geographically’ closest connection and precludes inappropriately an issue-by-issue analysis and dépeçage between conduct-regulating rules and lossdistribution rules. 87 Indeed, Rome II is primarily focused on loss allocation, pointing in many cases de facto to the law of the victim’s habitual residence concerning torts involving private interests (Article 4, § 1 and 2; Article 5). The regulatory, preventive function of tort liability is supposed to be fulfilled - except for environmental damage (Article 7) - by the law governing torts, not by the law of the country where the tortfeasor acted, even if it provides for stricter rules of conduct. The bilateral conflicts rules of Rome II with a limited deviation by an escape clause have, same as the Japanese Act, the advantage of simplicity and practicality, guaranteeing the coherency of one single applicably law.88 The substantive justice in individual cases must be sought, within the framework of Rome II, with reference to internationally mandatory rules (Article 16), rules on safety and conduct (Article 17), public policy (Article 26), or possibly by an elastic handling

According to S.C. SYMEONIDES, the GEDIP proposal of 1998 (), which consists of cascading presumptions rather than rules, provides for a better model. SYMEONIDES S.C., Rome II (note 13), pp. 179 et seq. 88 This conflict of laws system reflects the developments in Europe in the last four decades, after experiencing the ‘crisis of conflict of laws’ evoked by the U.S. conflicts revolution. See SYMEONIDES S.C., Private International Law at the End of the 20th Century: Progress or Regress?, London 2000, pp. 26 et seq.; for the impact of the U.S. conflicts revolution in Europe, see, inter alia, KEGEL G., ‘The ‘Crisis’ of Conflict of Laws’, in: Recueil des Cours 112 (1964-II), pp. 91 et seq.; NEUHAUS P.H., ‘Neue Wege im europäischen internationalen Privatrecht?’, in: RabelsZ 35 (1971), pp. 401 et seq. Dépeçage was provided for in the Benelux Uniform Law on Private International Law of 1969, same as in the UK Code of 1995, but was gradually given up in Europe for the sake of simplicity and coherency. KADNER GRAZIANO T. (note 23), pp. 372 et seq. 87

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Yuko Nishitani of the escape clause (Article 4, § 3).89 This difficult task is now assigned to the judge of the Member States and the European Court of Justice. With regard to the Japanese legislation, it was obviously ill-advised to maintain the principle of ‘double actionability’ (Article 22). The primary concern of the legislator was that Japanese companies doing business in the United States should not be subject to punitive damages before Japanese courts.90 As was indicated above,91 however, the alleged advantage of retaining this principle does not seem to outperform its various disadvantages. A last resort to protect the social, economic, and moral order of the forum state can be entrusted to the general public policy clause (Article 42), as was decided by the Supreme Court of Japan concerning the exequatur of a California judgment that had condemned a Japanese company to pay punitive damages for its breach of contract.92 Arguably, the Japanese Act should renounce the principle of ‘double actionability’ in the future, in order to circumvent a possible criticism that Japan is enclosed in excessive unilateralism and protectionism at the expense of cooperation and coordination of legal systems.93

89 In order to calculate damages adequately, the victim’s actual centre of life, i.e., where he resides and where he incurred damage, should be taken into account, so far as the law governing the tort allows it. In the Japanese Supreme Court decision of 28 January 1997 (Minshû 51-1, 78) (Kaishinsha case), a Pakistani worker had an accident while using a press machine at work in Japan. The tort was governed by Japanese law under Article 11, § 1 of Hôrei. The judge, however, calculated the loss of profits only for the coming 3 years by the actual amount of salary the worker had been receiving in Japan and for the remaining 39 years pursuant to the Pakistani standard, on the grounds that the worker was supposed to return to Pakistan after his permit to stay in Japan had expired. A similar adjustment should be effected by the so-called ‘substantive law solution in conflict of laws’ (materiellrechtliche Lösung im IPR), when the foreign governing law does not grant sufficient damages for the victim and is therefore contrary to public policy (Article 26 of Rome II; Article 42 of the Japanese Act). In this sense, see Recital No 33 of Rome II. 90 The minutes of the 26th session (14 June 2005) of the Subcommission (note 51). 91 See supra II-A. 92 Supreme Court, 11 July 1997, Minshû 51-6, 2573 (Mansei Kôgyô case). The Supreme Court refused exequatur to the California judgment for punitive damages on the ground of Japan’s public policy (Article 200, No 3 of Civil Procedure Code at that time (now Article 118, No 3)), which has the same function as Article 42 of the Japanese Act. On the other hand, the Court granted exequatur for the compensatory damages and the procedural cost. See NISHITANI Y., ‘Anerkennung und Vollstreckung US-amerikanischer punitive damages-Urteile in Japan – anhand des Mansei Kôgyô-Falls’, in: IPRax 2001, pp. 365 et seq. 93 For the concept of the coordination of legal systems, see MAYER P., ‘Le phénomène de la coordination des ordres juridiques étatiques en droit privé’, in: Recueil des Cours 327 (2007), pp. 9 et seq.

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A QUICK LATIN AMERICAN LOOK AT THE ROME II REGULATION Cecilia FRESNEDO DE AGUIRRE / Diego FERNANDEZ ARROYO∗

I. II.

IV.

First Impressions The General Rules in the ‘Rome II’ Regulation A. Party Autonomy B. Subsidiary General Rules 1. Survey 2. National Codification Drafts on Private International Law 3. Unification Some Specific Rules in the ‘Rome II’ Regulation A. Product Liability B. Environmental Damage C. Infringement of Intellectual Property Rights D. Unjust Enrichment and Negotiorum Gestio Concluding remarks

I.

First Impressions

III.

When reading Regulation (EC) Nº 864/2007 of the European Parliament and of the Council on the law applicable to non-contractual obligations, the first thing that calls the attention of Latin American’s, where the savignyan choice of law dogma has been a common feature since the 19th century,1 is that it re-establishes Savigny’s main idea:2 ‘in order to improve the predictability of the outcome of litigation, certainty as to the law applicable and the free movement of judgments, it is necessary to ensure that the conflict-of-law rules of the Member States designate the same national law irrespective of the country in which an action is brought.’3 ∗ FRESNEDO DE AGUIRRE C., Professor at the University of the Republic and at the Catholic University in Uruguay. FERNANDEZ ARROYO D.P., Professor of Private International Law, Universidad Complutense, Madrid. 1 Actually, the eight 1889 Montevideo Treaties on Private International Law and its Additional Protocol clearly follow the Berliner mantras. The same had made previously the Argentinean Civil Code of 1869, although, in this case, some traces of Joseph Story’s doctrine can be found. 2 SAVIGNY F.C., Sistema del Derecho Romano Actual, t. VI, Madrid 1879, p. 137142. 3 Regulation (EC) Nº 864/2007, Recital 6.

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Cecilia Fresnedo de Aguirre / Diego Fernández Arroyo However, the Regulation emphasizes the importance of providing some exceptions for solving the problems caused by the automatism of conflict-of-law rules and enabling courts ‘to treat individual cases in an appropriate manner.’4 These are not new resources in Latin American law.5 For decades, the classic conflict system has provided general instruments in order to reach these targets. Beyond theirs labels, these instruments have played an important role in allowing acceptable solutions, notwithstanding the rigidity of conflict-of-law rules.6 Besides, the judges’ imagination has contributed in the search for links between the rules and the real cases. The work of the CIDIP – Inter-American Specialized Conference on Private International Law – has been adding, since 1975, specific means aimed towards the same objective.7 The main tool is, in our view, Article 9 of the Inter-American Convention on General Rules on Private International Law (CIDIP-II, Montevideo, 1979),8 which clearly introduces value-oriented, teleological approaches that are not exclusive to the common law system. In fact, the objective of achieving a due balance between legal certainty and substantive justice in individual cases is shared by Latin American PIL, not only in non-contractual obligation matters, but in general. It is difficult to say, when the Regulation is not yet in force, whether or not the objective of due balance has been reached. Nevertheless, it seems obvious that the European approach – like the Latin American one – is inclined to certainty, rather than open flexibility like the U.S. conflict system.9 Finally, one should not ignore that regardless of the content of the adopted rules, they are introduced in a supranational (community) system, economically characterized by the existence of a single market and legally supported by the presence of a court in charge of the ‘authentic’ and uniform interpretation of community law. In this context, furthermore, the free movement of judgments is granted. Taking this into account, nuances are required in order to accomplish any comparison with either national legal systems or multilateral (intergovernmental) convenRegulation (EC) Nº 864/2007, Recital 14. See, in this connection, HERBERT R. / FRESNEDO DE AGUIRRE C., ‘Flexibilización teleológica del derecho internacional privado latinoamericano’, in: Avances del derecho internacional privado en América Latina, Liber Amicorum Jürgen Samtleben, Montevideo 2002, p. 55-76. 6 From another perspective, the extensive utilisation of these instruments is regarded as a rather negative fact and as a confirmation of the flaws of conflict approach. See JUENGER F.K., Derecho internacional privado y justicia material, México 2006, p. 95-96. 7 Supra (note 5). 8 ‘The different laws that may be applicable to various aspects of one and the same juridical relationship shall be applied harmoniously in order to attain the purposes pursued by each of such laws. Any difficulties that may be caused by their simultaneous application shall be resolved in the light of the requirements of justice in each specific case.’ The General Rules Convention is in force in ten Latin-American States. 9 See SYMEONIDES S., ‘Rome II and Tort Conflicts: A Missed Opportunity’, in: Am. J. Comp. L. (56) 2008 (criticizing that ‘Rome II errs too much on the side of certainty, which ultimately may prove elusive’). 4 5

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A Quick Latin American Look on the ‘Rome II’ Regulation tions. Thus, on the one hand, terms that in a multilateral convention could seem rather broad or even confusing have within the EU context the ‘security’ of a future unique interpretation. On the other hand, the very function of the EU conflict rules is more related with the ‘proper functioning of the internal market’10 than with that traditionally attributed to conflict rules. In spite of this fact, what is very important from a Latin-American point of view is that the universal character of the Rome II Regulation (Article 3) will imply its application even in cases not related exclusively to EU Member States. In other words, within the material scope of the Regulation, national rules on non-contractual obligations will never apply.11

II.

The General Rules in the ‘Rome II’ Regulation

A.

Party Autonomy

Article 14(1) authorizes parties to submit non-contractual obligations to the law of their choice.12 Freedom of choice is not allowed in obligations related to competition or to intellectual property rights. The choice shall be expressed or demonstrated with reasonable certainty by the circumstances of the case and shall not prejudice the rights of third parties. When establishing the existence of an agreement, the court has to respect the parties’ intentions. Protection should be given to weaker parties by imposing certain conditions on the choice.13 The framework within which party autonomy is admitted reflects the goal of giving enough guarantees to both the weaker and third parties involved.14 Many scholars have expressed doubts about the EC Court’s approach. See BORRAS A., ‘Le droit international privé communautaire : réalités, problèmes et perspectives d’avenir’, Recueil des Cours, 2005, p. 419. 11 See, in favour of this option, HAMBURG GROUP FOR PRIVATE INTERNATIONAL LAW, ‘Comments on the European Commission’s Draft Proposal for a Council Regulation on the Law Applicable to Non-Contractual Obligation’, in: RabelsZ 67 (2003), p. 3-4. 12 Doubts have been expressed about the practical significance of parties freedom to choose the law. GARCIMARTIN F.J., ‘La unificación del derecho conflictual en Europa: el Reglamento sobre ley applicable a las obligaciones extracontractuales (‘Roma II’)’, www.laley.net, Nº 6811, October 11, 2007. The placement given to this rule shows that in spite of its character as a ‘first general rule,’ it is, rather, regarded as an exception. However, it seems that in cases of non-contractual obligations arising out of contractual relationships, freedom of choice could play an important role. See Articles 10(1), 11(1) (see WAGNER G., ‘Die neue Rom II-Verordnung’, in: IPRax, 2008, p. 14) and also Article 12(1). 13 Regulation (EC) Nº 864/2007, Recital 31. 14 This objective is pursued by limiting the exercise ex ante facto of party autonomy to parties ‘pursuing a commercial activity’ and to agreements ‘freely negotiated’ (Article 14(1)(b)). A skeptical vision about this goal can be found in S. SYMEONIDES, ‘Tort Conflicts and Rome II: Impromptu Notes on the Rapporteur’s Draft’, . 10

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Cecilia Fresnedo de Aguirre / Diego Fernández Arroyo This kind of rule does not expressly exist in Latin American systems. However, that does not mean that party autonomy is excluded in non-contractual obligations. Party autonomy, an issue traditionally controversial in Latin American countries, is becoming much more accepted by Latin American national and international law makers, judges, and scholars.15 To the extent parties may choose an applicable law, they might at least do it by searching for the most suitable law. Furthermore, the idea that if a previous relationship between parties exists the law applicable to non-contractual obligations should follow the law governing that relationship is well known in Latin America.16 If that relationship is contractual, the basic rule (or, at least, the apparent trend) in most Latin American countries is that parties may choose the law.

B.

Subsidiary General Rules

1.

Survey

Article 4(1) of the Regulation leaves aside the lex loci delicti commissi rule in favor of the lex loci damni rule, unless otherwise provided in the Regulation. When both the person claimed to be liable and the person sustaining damage have their habitual residence in the same country, the law of that country shall apply (Article 4(2)). However, a third rule – that of the closer connection – applies when it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2 (Article 4(3)). The lex loci delicti commissi rule is the basic solution in almost all European Union Member States,17 as well as in Latin American countries. This is the solution contained in the 1889 Montevideo Treaty on International Civil Law (Article 38), which binds Argentina, Paraguay, and Uruguay with Bolivia, Colombia and Peru, and in the 1940 Montevideo Treaty on International Civil Law (Article 43), which binds Argentina, Paraguay and Uruguay. It is also the main solution in the Bustamante Code (Articles 167 and 168) and in many Latin American countries’ PIL rules. Although the Argentinean PIL lacks a specific rule in the matter, the lex loci delicti rule is generally applied by courts either under Article 8 of its Civil Code or by analogy to the Montevideo Treaties.18 The same occurs in Brazil, under See FERNÁNDEZ ARROYO D.P., ‘What’s New in Latin American Private International Law?’, in: YbPIL 7 (2005), p. 110-111. 16 See GONZÁLEZ LAPEYRE E., ‘El régimen internacional de las obligaciones extracontractuales’, in: Cuadernos de DIPr, Nº 3, 1979. 17 Regulation (EC) Nº 864/2007, Recital 15. 18 DREYZIN DE KLOR A. / URIONDO DE MARTINOLI A., in: FERNÁNDEZ ARROYO D.P. (ed.), Derecho internacional privado de los Estados del MERCOSUR, Buenos Aires 2003, p. 1192-1195 15

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A Quick Latin American Look on the ‘Rome II’ Regulation Article 9 (Lei de introdução ao Código Civil).19 The lex loci delicti rule is clearly enacted in Article 16 of the Preliminary Rules of Cuba’s civil code and in Article 2097(1) of the Peruvian civil code. The Venezuelan Private International Law Act provides, in Article 32, that torts are governed by the law of the place where its effects have been produced, which is the lex loci damni rule of Regulation Nº 864/2007 (Article 4(1)). Nevertheless, Article 32 allows the victim to require that the law of the State where the cause of the tort occurred be applied. Thus, the classic rule of the lex loci delicti survives in the Venezuelan law, at the option of the victim (favor laesi principle).20 In Panama, the lex loci damni is generally applied under Article 1644 of the Civil Code.21 Uruguayan PIL rules expressly incorporate Article 38 of the 1889 Montevideo Treaty into Article 2399 of the Civil Code. Although the text clearly lays down the lex loci delicti rule, its application shows that in some cases courts construe it flexibly, making the lex loci damni rule prevail.22

2.

National Codification Drafts on Private International Law

If we look at some recent drafts on the subject, we find that the Argentinean 2003 Draft Code of PIL keeps the lex loci delicti commissi rule dominant (Article 89) without any option or subsidiary rule. The Brazilian 2002 Draft of PIL Act provides in Article 12 that non-contractual obligations shall be ruled by the law with the closer connection, whether it is that of the place of the tort/delict or that of the place where the damage occurred. The Uruguayan 2004 Draft General Act on PIL makes the lex loci delicti rule the general rule in Article 51(1). If the tort/delict and the resulting damage occur in different States, the law of either state shall apply at the plaintiff’s option (Article 51(2)). If the tortfeasor and the victim have a common domicile, the law of that State shall apply (Article 51(3)). The 2007 version of the Draft General Act, which is not yet a final Draft, merges paragraphs 1 and 2 of Article 51 into one rule: the law of the place where the tort/delict occurred or the law of the place where the damage occurred shall apply, at the victim’s option. The 2007 Draft retains the original third option in Article 51(2). Finally, the general

ARAUJO N. DE, in: FERNÁNDEZ ARROYO D.P. (ed.) (note 18), p. 1195-1196. MADRID MARTÍNEZ C., Las relaciones entre la responsabilidad civil contractual y extracontractual en el derecho internacional privado venezolano, Caracas 2007, p. 131-136. The question has been asked whether or not the option includes the possibility to apply both laws by using mechanisms of adaptation. See MAEKELT T.B. DE, Ley venezolana de derecho internacional privado. Tres años de su vigencia, Caracas 2002, p. 103-104. 21 BOUTIN G., Derecho Internacional Privado, 2nd ed., Panama 2006, p. 710. 22 TAC 3º, Sent. Nº 82/2004 (14.4.04), ‘DRI c/ Banco de Montevideo y otros’, IUE 7-240/2003 (Fa 240/03), published in DDU Primera Plana (Jurisprudencia) (<www.el derechodigital.com.uy>) which confirms first instance JL Concursos 1º, Sent. Nº 2067 (11.8.03). 19 20

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Cecilia Fresnedo de Aguirre / Diego Fernández Arroyo provision of the Mexican 2006 Draft gives the victim the choice of either the lex loci loci damni or the lex loci delicti commissi (Article 102).

3.

Unification

The 1996 San Luis Protocol on civil liability matters regarding car accidents, which is binding on MERCOSUR Member States,23 provides as a general rule that the law of the place where the accident took place shall apply (Article 3(1)). However, if all those involved in the accident were domiciled in another Member State, the law of that State shall apply (Article 3(2)). In any case, civil liability for damages to things other than vehicles will be governed by the law of the State where the accident occurred (Article 4). The Sixth Inter-American Specialized Conference on Private International Law (CIDIP-VI), held in Washington D.C. in 2002, included in its agenda the topic ‘Conflicts of Laws on Extracontractual Liability, with an emphasis on competency of jurisdiction and applicable law with respect to civil international liability for transboundary pollution.’ Though it was not possible to reach a Convention on the matter,24 the Conference resolved to continue work on the subject and to adopt some guidelines to be taken into account in considering an international instrument.25 Mainly, the Conference recognized the advisability of considering two things: (1) the plaintiffs’ reasonable expectation of filing suit in courts that are accessible and have a favorable legal system and (2) the defendants’ reasonable expectation of not being sued and judged in courts or by laws lacking a reasonable connection with the subject of the suit or the parties.26 Beyond the concrete subject of environmental damages, non-contractual obligations are one of the two subjects already included in the agenda of the CIDIP for future projects. In fact, after CIDIP VI, several documents on the issue have been discussed by the Inter-American Juridical Committee. Some of these recommend the treatment of certain aspects of non-contractual obligations.27

23 This is based on the previous Argentinean-Uruguayan bilateral agreement on the same matter. 24 Critic with the (no) treatment given to the subject by the CIDIP VI, SIQUEIROS J.L., ‘La Sexta Conferencia Especializada Interamericana sobre Derecho Internacional Privado (CIDIP-VI)’, in: Rev. Mex. DIPr, 11 (2002), p. 21-24. See also FRESNEDO DE AGUIRRE C., ‘Responsabilidad por hecho ilícito en el ámbito internacional con especial referencia a la responsabilidad civil por contaminación transfronteriza. Recientes desarrollos y perspectivas para la convención regional en la material’, Liber Amicorum en homenaje al Profesor Dr. Didier Opertti Badán, Montevideo 2005, p. 208-215. 25 CIDIP-VI, OEA/Ser. C/VI.21.6, Final Act, Vol. I, p. 111. 26 Ibid., p. 112. 27 See the Resolution of the Committee CJI/RES. 55 (LXII-O/03) and the reports of its members VILLALTA A.M. – CJI/doc. 97/02 y CJI/doc. 130/03 and VÁZQUEZ C.M. – CJI/doc. 104/02 rev.2 y CJI/doc. 133/03.

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A Quick Latin American Look on the ‘Rome II’ Regulation

III. Some Specific Rules in the ‘Rome II’ Regulation Most Latin American laws on the subject lack specific rules governing some issues included in the Regulation.28 With respect to proposed PIL drafts, the situation varies. On the one hand, the Uruguayan 2004 Draft General Act on PIL has no specific rules for special torts/delicts. During the 2007 revision process, the working group considered the possibility of adopting some specific rule, but it has been – by now – left aside. On the other hand, the Argentinean 2003 Draft and the Mexican 2006 Draft both included some specific provisions on particular torts/delicts. Some of those provisions even regulate situations for which the European Regulation has no specific rule. That is the case with Argentinean rule on traffic accidents (Article 92), which allows the victim to choose (1) the law of the country where the event giving rise to the damage occurred, (2) the law of the parties’ common domicile, or (3) the law of the country of common registration for the vehicles implicated. The Argentinean 2003 Draft also includes a specific provision governing obligations arising out of personality rights violations (Article 93),29 which applies the law of the victim’s domicile. The Mexican 2006 Draft has a particular rule on obligations arising out of a unilateral declaration (Article 100), which are governed by the law of the place of the declaration or, failing that, by the law of the author’s declaration.

A.

Product Liability

Article 5 creates a cascading system of connecting factors for the law applicable to product liability issues. Level one calls for application of the law of the country where the injured party had his habitual residence when the damage occurred if the product was marketed in that country (1(a)). The other elements of the cascade are triggered if the product was marketed in a different country, as long as there is no prejudice to Article 4(2) or the possibility of a manifestly closer connection to another country.30 On the Latin-American side, the structure of the rules and the general solutions are different, even though there are some coincidences. The Argentinean 2003 Draft on PIL gives the victim the choice between the law of the manufacturer’s establishment or domicile or the law of the place where the product was acquired if one of two elements are were located in one of those states: (1) an authorized technical service, or (2) local media advertising (Article 91). The Mexican 2006 Draft adds to these two possibilities the law of the country in which the damage occurred, introducing the criteria according to which the most favorable law to the victim shall apply (Article 104). Neither the Argentinean nor Mexican In particular, there are no conflict rules on unfair competition, industrial action, or culpa in contrahendo. 29 This issue is expressly excluded from the scope of Rome II (Article 1(2)(g)). 30 Regulation (EC) Nº 864/2007, Recital 20. 28

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Cecilia Fresnedo de Aguirre / Diego Fernández Arroyo Drafts expressly provide for the application of the law of the injured party’s habitual residence.

B.

Environmental Damage

The lex loci damni applies – Article 7 expressly refers to Article 4(1) – unless the person seeking compensation for his damages chooses the lex loci delicti commissi: i.e., the classic general rule. The Regulation’s solutions coincide with those proposed by the delegation of Uruguay regarding item 3 on the Agenda of CIDIP-VI (‘Conflicts of Laws on Extracontractual Liability, with an emphasis on competency of jurisdiction and applicable law with respect to civil international liability for transboundary pollution’), in the Preliminary Draft Inter-American Convention on the subject.31 In fact, the connecting factors proposed in Article 5 of the Preliminary Draft give plaintiff’s the choice of the law where either the pollution-originating event took place or where the damage that is the object of the proceedings occurred: i.e., the lex loci delicti commissi or the lex loci damni rules. Article 90 of the Argentinean 2003 Draft gives plaintiffs three possible choices of law: (1) the lex loci delicti commissi, (2) the lex loci damni, or (3) the law of the place where the tortfeasor has his domicile or habitual residence. The Mexican 2006 Draft recognizes the same possible connections; however, the wording does not give plaintiffs the choice but rather calls for the law most favorable to the victim (Article 103).

C.

Infringement of Intellectual Property Rights

The Regulation adopts the universally acknowledged principle of the lex loci protectionis: i.e., the law of the country for which protection is claimed (Article 8(1)). Freedom of choice is excluded (Article 8(3)). Early in 1889, the Montevideo Treaty on Literary and Artistic Property adopted the lex loci originis rule. By now, many Latin American countries – including all the MERCOSUR Member States – are also members of the main universal instruments on this subject.32

D.

Unjust Enrichment and Negotiorum Gestio

Article 10 creates a cascading system of subsidiary connecting factors. First, if a non-contractual obligation arising out of an unjust enrichment claim concerns a relationship existing between the parties, it shall be governed by the same law that governs that relationship (Article 10.1). Second, where that law cannot be deterCIDIP-VI, OEA/Ser. K/XXI.6, Documents, Vol. II, p. 713-715. See in this connection, ARMANDO M. / LIPSZYC D., in: FERNÁNDEZ ARROYO D.P. (ed.) (note 18), p. 905-948. 31 32

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A Quick Latin American Look on the ‘Rome II’ Regulation mined on the basis of paragraph 1 and the parties have their habitual residence in the same country when the event giving rise to unjust enrichment occurs, the law of that country shall apply (Article 10(2), coinciding with the general rule in Article 4(2)). Third, where the law applicable cannot be determined on the basis of paragraphs 1 and 2, it shall be the law of the country in which the unjust enrichment took place (Article 10(3)). And finally, an escape clause modeled on Article 4(3) is established. Article 11 provides the same solution as Article 10, with its terminology adapted to the category. The Mexican 2006 Draft, on the contrary, provides for the application of the classical rule of the lex loci delicti commissi for only unjust enrichment, negotorium gestio, and undue payment (Article 101).

IV. Concluding Remarks The previous comments show that although we do not have a complete instrument on the subject like ‘Rome II’ in Latin America, our conventional, legal, and jurisprudential solutions do not differ dramatically from the European instrument’s. This means that the ‘Rome II’ rules will not be looked at with astonishment by Latin American eyes. Nevertheless, trends in Latin American – with the precedent of the 1998 Venezuelan PIL Act – favour the favor leasi as a real substantial option for victims. Since ‘Rome II’ only exceptionally provides victim’s with the unilateral choice of the applicable law, it seems that rules on non-contractual obligations will move apart in Europe and Latin American, as far as current Latin American drafts become laws in force.

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A COMMON LAW COCOON: AUSTRALIA AND THE ROME II REGULATION Reid MORTENSEN∗

I. II.

IV.

Introduction Australian Choice of Law in Tort A. The Resilience of Phillips v Eyre B. The Reform The Rome II Regulation A. The EU and Australian Law B. The Basic Principle C. The Exceptions D. Characterisation E. Renvoi Flexibility, Formalism and Fiction

I.

Introduction

III.

The Australian law dealing with cross-border tort claims has experienced profound changes since the year 2000. All of this has taken place by common law adjudication in the High Court of Australia, which has deliberated at length on a range of policy objectives of choice of law rules, their interplay with Australian federalism, the relationship of choice of tort law with the characterisation of aspects of tort claims as procedural law, the identification of the place where different kinds of torts have occurred, and the relevance of foreign choice of law rules to Australian choice of law method (that is, the question of renvoi). For the most part these changes are welcome, and bring a high degree of certainty and regularity to decision-making on cross-border torts. There are, however, notable exceptions to this pattern of disciplined adjudication. For much of this period, the European Union has also been involved in extensive deliberation on proposals relating to choice of law rules for non-contractual obligations – including those that arise by tortious or delictual liability. The result is the Regulation on the Law Applicable to Non-Contractual Obligations adopted by the EU on 11 July 2007,1 also known as the ‘Rome II Regulation’, which will ∗

Professor of Law, University of Southern Queensland, Australia. Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the Law Applicable to Non-contractual Obligations (‘Rome II’). 1

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Reid Mortensen take general effect from 11 January 2009. In this article, the extent to which Rome II and Australian choice of law can learn from each other is explored. This requires, first, an account of the radical changes to Australian choice of tort law that have taken place since 2000. Secondly, Rome II’s provisions for choice of law in tort and delict are considered. Although the Rome II Regulation addresses some non-contractual obligations that arise in other ways, these are of almost no concern to Australian law. This assessment therefore will be limited to Rome II’s chapter on tort and delict.2 Here, I discuss the model that Rome II presents for choice of law in comparison with Australian developments in choice of tort law, and the way that issues that have arisen in Australian choice of law can illuminate our understanding of Rome II. It will be evident from this discussion that, despite the risk Rome II has of replaying some of the excessive formalism that Australian choice of law has recently shown, it strikes the balance between certainty and flexibility more effectively than the High Court of Australia’s adjudication has.

II. Australian Choice of Law in Tort A.

The Resilience of Phillips v Eyre

The choice of law rules applicable to cross-border tort claims in Australia have, with only the slightest exceptions,3 been rules of common law. The first reports of Australian courts dealing with choice of law questions in tort arose in 1905,4 at a time when, deeply integrated in the Imperial British judicial system, they did not question that cross-border torts would be governed by the English rule in Phillips v Eyre.5 This rule, originating in litigation in an English court for a claim for assault and false imprisonment in a British colony, made reference to both the law of the forum (lex fori) and the law of the place where the tort occurred (lex loci delicti). The particular use of Phillips v Eyre in Australia, however, was notable for two reasons. First, after the British colonies in Australia agreed to become a federal dominion within the Empire, Phillips v Eyre was applied by State courts, without question, to claims involving torts that arose in other States.6 The common law rule did not distinguish between interstate and overseas tort claims, and this remains an enduring feature of Australian choice of tort law. Secondly, the view eventually emerged that, despite its origins in choice of law, Phillips v Eyre did not give a Chapter II (Arts 4-9) Rome II. E.g., s 11 Defamation Act 2005 (NSW), and equivalent legislation on other States and Territories. See MORTENSEN R., Private International Law in Australia, Sydney 2006, 430-3 (‘Private International Law’). 4 Potter v Broken Hill Proprietary Ltd [1905] VLR 612. 5 (1870) LR 6 QB 1. 6 Potter v Broken Hill Proprietary Ltd [1905] VLR 612; Koop v Bebb (1951) 84 CLR 629. 2 3

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A Common Law Cocoon: Australia and the Rome II Regulation genuine choice of law rule at all. The High Court accepted that the rule in Phillips v Eyre was merely one of justiciability. Once it was found that a claim was actionable in the forum and not justifiable in the locus delicti, the claim could then be entertained in the forum State. The substantive rights and duties of the parties would be governed by the lex fori.7 Perhaps because of the forum-bias of the Australian approach to Phillips v Eyre, it was strongly resistant to change. This understanding of the decision was nevertheless directly contradicted by the emergence of ‘the double actionability’ approach to Phillips v Eyre in the English courts in the 1970s. Double actionability had its own complications but, as the English courts eventually interpreted the approach, it accepted Phillips v Eyre as a double-barreled choice of law rule with a ‘flexible exception’ that could, at times, see the lex fori alone8 or (on one occasion) the lex loci delicti alone9 applied to the claim. That, too, was embraced by some State courts in Australia.10 However, by the time a cross-border tort claim next reached the High Court of Australia, the judges were both of a more radically reformist mind and, Australian courts just having been freed of appeals to the Privy Council in London, were putting a more decidedly nationalist stamp on the common law of Australia. In 1988 in Breavington v Godleman,11 the High Court held (by a slim 4:3 majority)12 that an interstate tort claim was to be governed by the lex loci delicti, and rejected any role for Phillips v Eyre in interstate tort cases. This nevertheless did not last long. A differently constituted High Court would backtrack to Phillips v Eyre in the early 1990s. Technically this return to Phillips v Eyre was only made in obiter dicta, as these questions of choice of tort law arose in cases more directly concerned with the characterisation of questions of substance or procedure. In an interstate tort case in 1991, McKain v RW Miller & Co (SA) Pty Ltd,13 the High Court held that statutes of limitation should generally be classified as procedural law and be governed by the lex fori. In the course of doing so, a majority14 took the view that the double actionability version of Phillips v Eyre represented the correct approach to choice of tort law for interstate cases in Australia. In 1993 in Stevens v Head,15 the Anderson v Eric Anderson Radio & TV Pty Ltd (1965) 114 CLR 20, 41-2; Hartley v Venn (1967) 10 FLR 151; Pozniak v Smith (1982) 151 CLR 20, 41. 8 Boys v Chaplin [1971] AC 356, 391. 9 Red Sea Insurance Co v Bouyges SA [1995] 1 AC 190. 10 Kemp v Piper [1971] SASR 25; Warren v Warren [1972] Qd R 386; Corcoran v Corcoran [1974] VR 164. 11 (1988) 169 CLR 41. 12 Mason CJ and Deane, Wilson and Gaudron JJ; Brennan, Dawson and Toohey JJ dissenting. 13 (1991) 174 CLR 1. 14 Brennan, Dawson, Toohey and McHugh JJ; Mason CJ and Deane and Gaudron JJ dissenting. 15 (1993) 176 CLR 433. 7

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Reid Mortensen court held that questions of the assessment of damages were also procedural and governed by the lex fori. Again, a majority16 endorsed the double actionability approach of Phillips v Eyre.

B.

The Reform

The resuscitation of Phillips v Eyre in Australia, after a short experience of a lex loci delicti rule in interstate tort cases,17 was deeply unsatisfactory. Lower courts were confused by the complexity of the double actionability rule and its relationship with the earlier justiciability approaches to Phillips v Eyre, and so understood the rule in widely different terms. For some it was a choice of law rule. For others it was a rule of justiciability, but there was then disagreement as to whether the governing law of the tort was the lex fori or the lex loci delicti.18 The confusion was so profound that one judge applied the lex fori by way of a flexibility exception to the double actionability rule, but did so as a rule of justiciability!19 This fragmentation of choice of tort law, inevitable in the Australian reading of Phillips v Eyre, had to be corrected. Coupled with the broad reading of procedural law in McKain and Stevens, it led many Australian courts into an unusually parochial attitude towards cross-border tort cases. At a policy level, this strong forum bias also compromised the High Court’s own pronouncements on the need to discourage forum shopping.20 Early efforts to change this position were made by the Australian Law Reform Commission in 1992.21 Its Choice of Law report dealt with a range of difficulties then present in Australian private international law: including questions of federal jurisdiction; substance and procedure; and choice of law for statutes, contracts, succession claims and trusts. Still, choice of law for tort and quasi-tort claims was prominent in the report.22 McKain had been decided just before the report was completed, and that decision’s endorsement of Phillips v Eyre received short shrift from an unimpressed Commission.23 Instead, it proposed three options 16 Mason CJ and Brennan, Dawson, Toohey and McHugh JJ; Deane and Gaudron JJ dissenting. 17 See Byrnes v Groote Eylandt Mining Corporation (1990) 19 NSWLR 13, 23, 323; Stevens v Head (1991) 14 MVR 327, 330. 18 DAVIES M., ‘Exactly What is the Australian Choice of Law Rule in Torts?’, in: (1996) 70 Australian Law Journal 711. 19 Nalpantidis v Stark (1995) 65 SASR 454, 472-3. 20 Breavington v Godleman (1988) 169 CLR 41, 73–4, 76, 88, 91, 113, 147-8, 161, 170; McKain v RW Millar Pty Ltd (1991) 174 CLR 1, 23, 29, 50; Stevens v Head (1993) 176 CLR 433, 452; also Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197, 212. 21 Australia. Law Reform Commission, Choice of Law: Report No 58 (Law Reform Commission, Sydney, 1992) (‘ALRC’). 22 Ibid., 40-80. 23 Ibid., 42-5.

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A Common Law Cocoon: Australia and the Rome II Regulation for reforming choice of tort law – the lex causae to be either: (1) the proper law of the tort (‘the law of the place which has the most significant relationships with the occurrence and the parties’); (2) the lex loci delicti with no exceptions; or (3) the lex loci delicti with an exception in favour of the proper law of the tort.24 The Commission preferred the third option,25 as it provided a clear rule of relatively certain application, while allowing flexibility if the centre of gravity for a tort claim were plainly over the law of a different country or State.26 It is interesting, especially given future developments, that the Commission rejected a lex loci delicti rule that would have no exceptions (i.e., option 2) on the ground that its ‘rigidity and inflexibility’ and its ‘single mechanistic formula’ could force courts to decide cases with arbitrary results.27 The Choice of Law report had only the smallest effect on the reform of Australian private international law. Legislative action across the field was never seriously contemplated by the State and Territory Parliaments, and was only forthcoming with uniform statutes that specifically abrogated the decision in McKain and, therefore, required a statute of limitation from another Australian jurisdiction or from New Zealand to be treated as substantive law.28 Nothing more has eventuated, and after 16 years the Choice of Law report must be considered a largely wasted effort. The need for the reform of Phillips v Eyre in particular was nevertheless evident, and in 2000 the High Court itself made a radical change to the law in John Pfeiffer Pty Limited v Rogerson.29 An interstate tort case, Pfeiffer shifted the Australian approach to both the definition of procedural laws and the choice of law rule for torts. A narrow approach was taken to procedural laws, which were defined as those ‘which are directed at governing the mode or conduct of court proceedings’.30 This was an implicit overruling of both Stevens and McKain, but with explicit recognition that questions of the assessment of damages and limitation of actions were to be treated as substantive.31 The High Court also held that the common law of Australia on choice of tort law had to be changed, and adopted a lex loci delicti rule. Here, the majority held that there could be no exceptions what-

Ibid., 45. This had been the approach taken by Mason CJ in Breavington v Godleman (1988) 169 CLR 41, 76. 26 ALRC (note 21), 48-50. 27 Ibid., 48. 28 Private International Law, (note 3), 186-8. See, e.g., Choice of Law (Limitation Periods) Act 1993 (NSW), and comparable legislation in other States and Territories. 29 (2000) 203 CLR 503. 30 Ibid., 543. 31 Ibid., 544, 554, 570-5. As the position on the question of limitation had been settled for interstate and New Zealand statutes of limitation by legislation, this dictum has actually had greater significance for the treatment of the statutes of limitation of foreign countries (other than New Zealand). 24 25

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Reid Mortensen soever to this rule.32 A range of policies suggested an exceptionless lex loci delicti regime: certainty, predictability of outcome, the deterrence of forum shopping, and people’s expectations to be governed by the law of the State where they happened to be.33 In addition, two important legal reasons directed the majority away from Phillips v Eyre and any necessary reference in choice of tort law to the lex fori. The first was the federal Constitution, which requires State courts to give full faith and credit to the laws of other States.34 Although the scope and effect of the Australian full faith and credit clause remains unclear, in Pfeiffer the High Court was prepared to hold that the clause obliges States not to apply their own policies to events that occurred in a sister-State. The lex fori could therefore not be applied in an interstate tort case.35 The second legal consideration was that the federal Judiciary Act required a federal court to apply the choice of law rules of the State or Territory in which it was sitting.36 As such, if a tort claim were governed in any way by the lex fori, the governing law of the case would depend entirely on the arbitrary consideration of the place where the federal court was sitting. Presumably, if the court were to change the venue of the proceedings, the governing law would change with it. The High Court thought that this could be corrected by a lex loci delicti rule that fixed liability in accordance with the law of one State only – regardless of where the court was sitting.37 While this is a sensible result, the use of the provisions of a statute to suggest the shape and content of the common law is completely unorthodox. Legislation in Australian jurisdictions overrides the common law but, even with a statute as long embedded in the Australian legal environment as the Judiciary Act, it is not regarded as basic law (like the Constitution) to which other law must conform. If the interaction of statute law and common law leads to strange results, that is traditionally a matter that the Parliament itself must correct by further legislation. This aspect of the majority’s decision in Pfeiffer is an aberration, but raises the prospect that legislation can be used to influence the shape of the common law. Pfeiffer did not deal with foreign torts, and the lex loci delicti rule it adopted was significantly influenced by considerations internal to the Australian federation. However, it still proved determinative of the rule eventually adopted in 2002 for claims involving wrongs in foreign countries. Regie National des Usines Renault SA v Zhang38 was a claim brought in New South Wales for the negligent design or manufacture of a Renault sedan built in France. A majority on the High Court39 Ibid., 503, 538. Ibid., 532, 536, 538-40, 552-3, 560. 34 S 118 Constitution (Cth). 35 (2000) 203 CLR 503, 533-4, 536-7, 541, 551. 36 Ss 79-80 Judiciary Act 1903 (Cth). 37 (2000) 203 CLR 503, 529-32. 38 (2002) 210 CLR 491. 39 Gleeson CJ and Gaudron, McHugh, Gummow, Hayne and Kirby JJ; Callinan J dissenting. 32 33

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A Common Law Cocoon: Australia and the Rome II Regulation inevitably accepted ‘that the reasoning and conclusion in Pfeiffer that the substantive law for the determination of rights and liabilities in respect of intra-Australian torts is the lex loci delicti should be extended to foreign torts, despite the absence of the significant factor of federal considerations’.40 The High Court therefore maintained its policy of keeping the law applicable to interstate and foreign torts aligned, and so also, more controversially, rejected any proper law exception to the lex loci delicti for foreign torts, as it had done in Pfeiffer. The only difference between the law for interstate torts as stated in Pfeiffer, and that for foreign torts as stated in Renault, was that the law of a foreign locus delicti could be refused application if it were contrary to the public policy of the forum State.41 Pfeiffer-Renault was a paradigm shift for Australian private international law, and the two cases together have brought the deepest changes to the law and its application. But the reform could be equally understood as a Reaction. As I have argued before,42 the inflexibility of the Australian regime for choice of tort law might have forced the use of surreptitious means of avoiding the lex loci delicti rule. This has not happened in the lower courts. They have applied Pfeiffer-Renault with an impressive consistency, even to the point of maintaining an extremely narrow understanding of procedural law. It is the High Court itself, confronted by its own decision not to allow any flexibility in the choice of law rule, which has broken the discipline of Pfeiffer-Renault. However, these efforts are best considered as we examine how, in many respects, the Rome II Regulation delivers a better model for choice of law in tort and delict.

III. The Rome II Regulation The Rome II Regulation complements the EU’s Convention on the Law Applicable to Contractual Obligations,43 commonly known as the Rome (I) Convention, and which is currently in draft as a planned Regulation of the European Parliament and Council.44 Accordingly, the Rome I Convention and the Rome II Regulation bring the EU closer to comprehensive coverage of choice of law for obligations. But it is not yet possible to refer to a ‘Rome matrix’ in this area. Unlike the long-term approach of Australian law, Rome II does not require that international conflict of laws on the one hand, and intranational conflicts within federations or legally com(2002) 210 CLR 491, 520. Ibid., 516-17, 520, 528-9. 42 MORTENSEN R., ‘Homing Devices in Choice of Tort Law: Australian, British, and Canadian Approaches’, in: (2006) 55 ICLQ 839, 873-4 (‘Homing Devices’). 43 Convention on the Law Applicable to Contractual Obligations, OJ C 027, 19 June 1980. 44 See LANDO O. and NIELSEN P.A., ‘The Rome I Proposal’, in: (2007) 3 J. Priv. Int. L 29; CARRUTHERS J.M. and CRAWFORD E.B., ‘Conflict of Laws Update’, in: [2004] Scots Law Times, 19 (‘Update’). 40 41

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Reid Mortensen posite states (like the UK) on the other, be dealt with in the same way. EU nations can deal with intranational choice of law by means other than Rome II45 – even if it would be preferable that there be a rough alignment of the rules for dealing with the two kinds of conflicts.46 Rome I and II also continue to provide distinct choice of law rules for discrete areas of obligatio. Even then, when considered together they do not attempt either an encompassing definition of obligations or even (in contrast to Australian law) a general definition of procedural law that could sit in contrast with the substantive law of obligations. Indeed, Rome II only applies to choice of law in tort and delict, unjust enrichment, negotiorum gestio and culpa in contrahendo. There is no attempt to capture other areas of non-contractual obligation through residually applicable choice of law principles. Further, amongst other matters, the Regulation is expressly excluded from application to obligations arising from matrimonial and family relationships, negotiable instruments and trusts, and defamatory expression.47 So, while we will see that Rome II certainly models means by which Australian choice of tort law could be improved, there are aspects of the Regulation that also suggest that its influence on Australian legal development is likely to be minimal. These are its status as EU legislation, and the piecemeal approach it has taken to the field of non-contractual obligations.

A.

The EU and Australian Law

To European observers, Australian legal systems would probably appear to be unusually open to the direct influence of foreign legal developments. This is a natural consequence of the common law tradition, particularly as it is played out in Commonwealth countries, where (regardless of the technicalities of stare decisis) judgments of courts made in one country will often be assumed, without further question, to represent statements of the law in another. This tradition is even more significant in choice of law where, particularly in the field of obligations, Australian approaches continue to be found in the common law rather than in legislation. And, so far as European influences are concerned, on a daily basis Australian courts still use the judgments of English courts in large numbers when trying to determine the status of Australian law.48 The nationalism that was prominent in

See Art. 25(2) Rome II. Cf. Update (note 44), 23-4; CARRUTHERS J.M. and CRAWFORD E.B., ‘Variations on a Theme of Rome II. Reflections on Proposed Choice of Law Rules for Non-Contractual Obligations: Part I’, in: (2005) 9 Edinburgh Law Review 65, 70-6 (‘Variations I’). 47 See Art 1(2)(a)-(g) Rome II. 48 Irish, Northern Irish and, to less extent, Scots decisions are also part of this transnational ‘trade’ in common law adjudication, but do not feature as prominently in Australian adjudication as English decisions do. The borrowing of precedents is also reciprocated. Australian appellate decisions are probably more influential in English courts than 45 46

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A Common Law Cocoon: Australia and the Rome II Regulation Australian legal development in the late 1980s, and of which Breavington v Godleman was an example, receded in the late 1990s with the emergence of an increasingly conservative High Court that was more prepared to bring Australian law into line with the law elsewhere in the Commonwealth.49 At this highest level, the use of English precedents is certainly selective and discriminating, and must be adjusted for the peculiar effect that the federal Constitution has on the common law.50 But habitual reference to English decisions remains a characteristic feature of Australian law. Still, the common law of Australia is often maintained in a more conservative form than English common law is, in the sense that the position in Australian law sometimes remains one that has been long abandoned by the English courts.51 Some earlier assessments made in the High Court attributed English departures from older common law positions to the United Kingdom’s place in the EU. For instance, Australia has maintained the most parochial position in the common law world on questions of holding and declining jurisdiction, largely because the High Court has refused to adopt the English doctrine of forum non conveniens. In 1988, when assessing the relevance for Australia of the doctrine of forum non coveniens which had been recently adopted in England, Gaudron J observed that ‘expressions of preference in England for ‘judicial comity’ rather than ‘judicial chauvinism’ … are readily understandable when it is borne in mind that England is a member of the European Community, which is not merely an alliance of similarly minded sovereign nation states, but a community with its own parliament, its own laws and its own courts.’52 The connection that Gaudron J made between England’s place in the EU and its embracing of the doctrine of forum non conveniens is, to say the least, tenuous, because the doctrine had been known in Scots law for over a century.53 If anything, the European Court of Justice has also tried to eliminate a role for forum non conveniens in any aspect of community jurisprudence.54 However, the comment reveals some disquiet that the common law of England could effectively infect Australian legal conditions with suspect European legal policies. other Commonwealth cases are. See BRIGGS A., ‘Foreign Law in Civil Litigation’ [2005] Lloyds Maritime and Commercial Law Quarterly 119, 120 (Book Review). 49 Esso Australia Resources v Commissioner of Taxation (1999) 201 CLR 49, 71-2. 50 Theophanous v Herald & Weekly Times Ltd (1994) 182 CLR 104, 140; Lange v Australian Broadcasting Corporation (1997) 189 CLR 520, 562-6; John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503, 534-5. 51 Cf. KIRBY M., ‘Judicial Activism? A Riposte to the Counter-Reformation’ (2006), in: 24 Australian Bar Review 219, 221. 52 Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197, 263. 53 In Oceanic Sun, Wilson and Toohey JJ did wish to adopt the English doctrine of forum non conveniens, and doubted Gaudron J’s reasoning. However, it was the absence of a European dimension to the doctrine that appears to have been used to reinforce their argument for adopting it: (1988) 165 CLR 197, 212-13. This again reflects a suspicion of European law. 54 Owusu v Jackson [2005] 2 WLR 942; Turner v Grovit [2005] 1 AC 101.

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Reid Mortensen The nationalism underlying Gaudron J’s concerns about European influences in Australian law has now cooled. Murray Gleeson, the present Chief Justice of Australia, has admitted that European legal ideas have, through an English conduit, entered Australian law – perhaps without explicit recognition that this was happening. Nevertheless, the Chief Justice has pleaded for Australian lawyers to use European legal resources when they are helpful. In contrast to the earlier isolationism of the High Court’s approach to legal development, he argues that ‘the issues that arise, and the problems that require solution, are in many respects the same throughout large parts of the world.’55 As yet, though, there is little evidence that this more generous attitude to EU law has had any impact in Australian choice of law. The development of the lex loci delicti rule in Australia through Pfeiffer and Renault saw the High Court make passing references to the choice of law rules for delict in the national civil law systems in continental Europe,56 and the Private International Law (Miscellaneous Provisions) Act 1995 (UK) which had seen a legislative adoption of a lex loci delicti rule for the UK countries.57 However, the influence of the UK Act of 1995 was bound to be minimal as it would be unconventional to adopt a change in the common law on the basis of the provisions a foreign statute. In Renault, Kirby J did find that the policy considerations which led the UK to pass the Act of 1995 added to the arguments that favoured the adoption of a lex loci delicti rule for foreign tort claims58 - a judicial technique that is perfectly compatible with the Chief Justice’s plea to learn from foreign legal materials. That is as far as either community or national statute-based approaches to choice of law in Europe have been used in the development of Australian choice of law, despite the use in Pfeiffer of an Australian statute to reshape the common law. And in no case has the policy basis of community or national law in Europe been as important to the High Court as developments in the common law in Canada have been.59 The possibility of any further development of Australian choice of tort law through the influence of the Rome II Regulation will therefore depend entirely on whether the present Pfeiffer-Renault paradigm is seen as being in need of improvement by common law adjudication, and whether the solutions or approaches evident in Rome II can turn Australian judicial thinking in other directions. But to date, the strong territorialism underlying the exceptionless lex loci delicti rule has not been formally questioned. A survey of all Australian choice of tort cases (de55 GLEESON M., ‘Global Influences on the Australian Judiciary’ (2002), in: 22 Australian Bar Review 184, 187-9. For another example of European influence, but on Australian statute law, see WATERS N., ‘The European Influence on Privacy Law and Practice’, in: [2003] Privacy Law and Policy Reporter 2. 56 John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503, 536. 57 Ibid., 558, 570; Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491, 533, 537, 549. 58 Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491, 537 59 I.e., the decision in Tolofson v Jensen [1994] 3 SCR 1022.

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A Common Law Cocoon: Australia and the Rome II Regulation cided after Pfeiffer) shows almost every Australian court consistently applying the lex loci delicti, respecting conventional methods of identifying the locus, and taking an extremely narrow view of procedural law that might be subject to the lex fori.60 Indeed, the only Australian court that has not, in effect, given unstinting respect to the claims of the locus delicti is the High Court itself. It has never in a formal sense questioned its own reasoning in Pfeiffer and Renault, but it has used two different strategies to have the lex fori applied in cross-border tort cases. These reveal practical and conceptual weaknesses in the Pfeiffer-Renault paradigm – weaknesses which, at least in part, Rome II seems to address more effectively.

B.

The Basic Principle

Rome II consciously makes a significant departure from national choice of law regimes in Europe by submitting cross-border tort and delict claims heard in any EU country to the lex loci damni – the law of the place where the damage was incurred.61 The lex loci delicti rule that dominated the national law of EU countries, including the UK’s Act of 1995, was thought to create uncertainty where different elements of the wrong were spread over different jurisdictions.62 Australian experience in locating the locus damni shows that, without more, Rome II’s rule would represent a fundamental displacement of the present policy of territorialism being pursued through Pfeiffer-Renault. This would be particularly so in personal injuries cases, where a lex loci damni rule could often be a proxy for the lex fori as the governing law in more substantial damages claims. In adjudication that identifies the place where the injury occurs, Australian courts have been prepared to hold that loss of earning capacity (often the greater proportion of damages in personal injuries claims) is damage suffered by a plaintiff wherever he or she may be. Renault was precisely a case of this kind. As a result, the place of the plaintiff’s residence, which is the place where litigation is most often commenced, has been regarded as a locus damni.63 Rome II, though, adds more, and locates the injury in the place where it occurred, regardless of any place where consequential damage might arise.64 Presumably, this compels courts to decide personal injuries claims in accordance with the law of the place where the accident occurred. Rome II’s principal rule therefore parallels the Australian practice of placing the locus delicti in the

Homing Devices (note 42), 873-4. Art 4(1) Rome II; Update (note 44), 20; CARRUTHERS J.M. and CRAWFORD E.B., ‘Variations on a Theme of Rome II. Reflections on Proposed Choice of Law Rules for NonContractual Obligations: Part II’, in: (2005) 9 Edinburgh Law Review 238, 240-9. 62 Recital 15 Rome II. 63 Flaherty v Girgis (1985) 4 NSWLR 248; Regie National des Usines Renault SA v Zhang (2002) 210 CLR 491. In most Australian jurisdictions, the court can exercise jurisdiction if it is the forum damni: Private International Law (note 3), 67-8. 64 Art 4(1) Rome II. 60 61

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Reid Mortensen place of the accident.65 There are also parallels between Rome II’s definition of the locus damni in product liability claims as the place where the consumer was resident, where the product was acquired, or where the product was marketed.66 Australian courts have tended to identify the locus delicti as the place where the damage first became manifest, rather than the place of manufacture.67 In defamation claims (which Rome II does not deal with), the Australian lex loci delicti rule also places the tort in the place where the injury to reputation was suffered.68 Any significant differences between Rome II and the Australian lex loci delicti rule do not therefore appear to stem from Europe’s principal use of the lex loci damni. Instead, it is in the exceptions to the general lex loci damni rule that are required by Rome II and, therefore, it is in its inherently more flexible character, that important differences between the two approaches emerge.

C.

The Exceptions

The unqualified character of the Australian lex loci delicti rule can be traced to the rule’s origins in Pfeiffer – an interstate tort case. Full faith and credit requirements in the federal Constitution influenced the adoption of a choice of law rule that did not allow one State’s courts to prefer its own law over that of a State which was the locus delicti.69 That was so whether the lex fori would have been preferred because of public policy objections to the law of the other State, or because the forum State could be seen as providing the proper law of the tort. Oddly, the federal considerations that suggested this exceptionless lex loci delicti rule were ignored when foreign tort claims were considered in Renault – so the High Court also rejected any proper law exceptions in choice of law for foreign tort claims. No good reason was given for this.70 A public policy exception is recognised for foreign tort claims,71 65 Reid v AGCO Australia Ltd [2000] VSC 363, [4]; Simonfi v Fimmel [2000] ACTSC 54; Fawcett v Oliver [2000] ACTSC 70, [16]; Thompson v Evanoss [2000] ACTSC 73, [28]; El-Syoufi v Alcazar [2000] ACTSC 109, [1], [20]; Moon v Moon [2001] FCA 1712, [1]; Moon v Moon [2001] ACTSC 17, [114]; Bellotti v Stair [2002] QDC 161, [3]; ElSyoufi v Alcazar [2001] ACTSC 1; Kalsbeck v Williams [2001] ACTSC 5, [1]; Hardham v Flood [2001] ACTSC 21; Labuda v Langford [2001] ACTSC 108, [38]; Janetski v Janetski [2001] VSC 328, [27]; Hooper v Robinson [2002] QDC 80, [21]; FAI Allianz Insurance Ltd v Lang [2004] NSWCA 413, [23]. 66 Art 5(1) Rome II. 67 Davey v Medtel Pty Limited (No 3) [2004] FCA 807, [19]-[20]; cf Regie National des Usines Renault SA v Zhang (2002) 210 CLR 491; Nicholls v Brisbane Slipways and Engineering Pty Ltd [2003] QSC 193, [8]-[10]; Homing Devices (note 42), 853-4. 68 Dow Jones Inc v Gutnick (2002) 210 CLR 575. 69 (2000) 203 CLR 503, 533-4. 70 The majority in Renault merely said that arguments relating to an exception to the lex loci delicti rule ‘may often be subsumed in the issues presented in a stay application’: (2002) 210 CLR 491, 519-20. It is hard to see how this is relevant to the initial definition of the choice of law question: Homing Devices (note 42), 853-4.

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A Common Law Cocoon: Australia and the Rome II Regulation but Australian courts have never used it.72 The extension of Pfeiffer’s policy of inflexibility for interstate tort claims to foreign torts is also roundly criticised73 especially since an exception is recognised in the common law of Canada,74 and since one had been developed in the last iterations of Phillips v Eyre and in the UK Act of 1995.75 As will be seen, the High Court’s more recent efforts at securing the application of the lex fori in cross-border tort claims are thought to originate in an intuition that choice of tort law requires greater flexibility. The Court has nevertheless been unwilling to admit that it made a mistake in not explicitly allowing flexibility in Renault. The Rome II Regulation has a sequence of two exceptions to its lex loci damni rule, both of which are familiar in common law adjudication in the Commonwealth. The ‘flexible exception’ that was added to the rule in Phillips v Eyre in Boys v Chaplin76 allowed application of another law when ‘because of its relationship with the occurrence and the parties [the other law] has the greater concern with the specific issue raised in the litigation’. In applying a different lex causae under this exception, the court would also consider ‘the policy of the rule; […] to what situations, with what contacts it was intended to apply; [and] whether not to apply it, in the circumstances of the instant case, would serve any interest the rule was devised to meet’.77 As in Boys v Chaplin itself, this proper law principle was used by English courts to apply the lex fori when all litigants were English residents – an application carried into adjudication on the proper law exception adopted in the UK Act of 1995.78 However, English and Canadian courts eventually narrowed the use of this exception by refusing to apply it merely because the parties were resident in the forum.79 Rome II therefore, in the first place, is more (2002) 210 CLR 491, 519-20, 535. Private International Law (note 3), 217-24. 73 ANDERSON R., ‘International Torts in the High Court of Australia’, in: (2002) 10 Torts Law Journal 132, 140-1; DAVIS G., ‘John Pfeiffer Pty Ltd v Rogerson: Choice of Law in Tort in the Dawning of the 21st Century’, in: (2000) 24 Melbourne University Law Review 982, 1014-15; GRAY A., ‘Flexibility in Conflict of Laws Multistate Tort Cases: The Way Forward in Australia’, in: (2004) 23 University of Queensland Law Journal 435, 462-3; JAMES E., ‘John Pfeiffer Pty Ltd v Rogerson: The Certainty of ‘Federal’ Choice of Law Rules for Intranational Torts: Limitations, Implications and a Few Complications’, in: (2001) 23 Sydney Law Review 145, 146, 163; LINDELL G., ‘Regie Nationale des Usines Renault SA v Zhang’, in: (2002) 3 Melbourne Journal of International Law 362, 372-3. 74 Tolofson v Jensen [1994] 3 SCR 1022, 1078. 75 Boys v Chaplin [1971] AC 356, 391; Red Sea Insurance Co v Bouyges SA [1995] 1 AC 190; s 12 Private International Law (Miscellaneous Provisions) Act 1995 (UK). 76 [1971] AC 356. 77 Ibid., 390-1. 78 Edmunds v Simmonds [2001] 1 WLR 1003; Hulse v Chambers [2002] 1 All ER (Comm) 812; Roerig v Valiant Trawlers Ltd [2002] 1 All ER 961, 967-8. 79 Harding v Wealands [2005] 1 All ER 415, 424-6; Wong v Lee (2002) 211 DLR (4th) 69, 75; Somers v Fournier (2002) 214 DLR (4th) 611, 624. 71 72

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Reid Mortensen generous to the residential law in requiring that it be applied if both parties are habitually resident in the same country when the damage occurs.80 It then, as a second stage exception, also gives a more generally expressed proper law exception. The law of some place other than the locus damni and the country of habitual residence must be applied if ‘it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with’ that other place.81 While, in common law countries, a proper law exception has mostly favoured the use of the lex fori, it has also seen the lex loci delicti alone applied.82 Under Rome II’s second stage exception, the lex loci delicti might well have a better claim to application where no element of the cause of action in question, but the injury or damage alone, has occurred in the locus damni.

D.

Characterisation

As has been mentioned, Rome II identifies specific non-contractual obligations for which choice of law rules are provided. It also identifies specific issues that must be treated as substantive questions of obligatio and which, without this provision, could have been regarded in some EU countries as procedural issues governed by the lex fori.83 In neither case is an attempt made to give a general definition of obligation, or of substantive or procedural law. A consequence is not only that courts are required to characterise claims in one category or another, they also have opportunities to characterise questions in the penumbra of tort or delict in ways that enables them to be removed from the reach of Rome II’s lex loci damni rule and to be governed by forum law. The use of characterisation as a means of applying the lex fori is wellknown in Australian law. By characterising claims as procedural rather than substantive, Australian courts in the 1990s could determine critical issues like limitation of actions and the assessment of damages in accordance with their own law.84 Pfeiffer brought an end to that form of parochialism, both by giving a narrow a priori definition of procedure and by concluding that statutes of limitation and questions of the quantification of damages were substantive matters for the lex loci delicti.85 Australian courts since then have been completely unable to use a procedural characterisation as a backdoor means of applying the lex fori.86 Rome II only goes half-way towards this position. It has parallel positions to Australian law on Art 4(2) Rome II. Art 4(3) Rome II. 82 Red Sea Insurance Co v Bouyges SA [1995] 1 AC 190; cf. Homing Devices (note 42), 863-4. 83 Art 15 Rome II. 84 McKain v RW Miller & Co (SA) Pty Ltd (1991) 174 CLR 1; Stevens v Head (1993) 176 CLR 433. 85 John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503, 543. 86 Homing Devices (note 42), 858-61. 80 81

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A Common Law Cocoon: Australia and the Rome II Regulation characterising questions involving the assessment of damages or of limitation or prescription as matters of substantive law.87 However, the absence of a general but narrow definition of procedural law may mean that courts in the EU are not compelled to prefer as consistently a substantive characterisation of debatable issues of tort or delict. A similar issue arises with the characterisation of substantive questions of tort-like obligations. The Australian Law Reform Commission hoped to overcome this problem by recommending that both ‘tort’ and ‘tort-like’ claims be subject to the same choice of law rule to prevent courts from making these technical distinctions through characterisation.88 The recommendation has not been adopted in Australia, and there is nothing comparable in Rome II. Long term trends in Australia have certainly shown courts as being willing to characterise tort-related claims as contractual where that either assists recovery for the plaintiff, or promotes application of the lex fori. Rome II allows parties under certain circumstances to agree in a contract to submit a question of tort for determination by the governing law of that contract.89 It also provides for the existence of any rights of subrogation against a defendant to be determined by the law that governs the contract that gives a third person the plaintiff’s rights of subrogation. Likewise, the common law tends to characterise rights of subrogation as questions of contract.90 Similarly, the Regulation favours plaintiffs by allowing them to bring claims directly against insurers if either the lex causae for the question of tort or that which governs the insurance contract permits it.91 That issue is one that has been particularly vexing for Australian courts, although the more recent adjudication, like Rome II, seems to favour any characterisation that assists the plaintiff.92 Therefore, by a piecemeal approach to the classification of questions in issue, both Rome II and Australian choice of law still enable reference to be made to the lex fori for matters that are closely related to tort claims. For instance, statutory indemnity claims for personal injuries compensation seem to have worried Australian courts more than other common law courts93 - and it should be admitted that Art 15 Rome II. ALRC (note 21), 65-6. 89 Art 14 Rome II. 90 Drews v Insurance Corporation of British Columbia (1998) 55 BCLR (3d) 281; Wawanesa Mutual Insurance Co v Lindblom (2001) 200 DLR (4th) 123, 128; Kingsway General Insurance Co v Canada Life Insurance Co (2001) 149 OAC 303; Guardian of Matt v Barber (2002) 216 DLR (4th) 574, 582; West Tankers Inc v Ras Riunione Adriatica Di Sicurta SpA [2005] EWHC 454 (Comm). 91 Art 18 Rome II. 92 Cf. Li Lian Tan v Durham and General Accident & Life Assurance Corporation Ltd [1966] SASR 143, 149; and Ryder v Hartford Insurance Co [1977] VR 257; with Plozza v South Australian Insurance Co Ltd [1963] SASR 122; Hodge v Club Motor Insurance Agency Pty Ltd (1974) 7 SASR 86. 93 In 1990, there were no UK decisions on indemnities: ANTON A. with BEAUMONT P., Private International Law, 2nd ed. (GREEN W.), Edinburgh 1990, 408. The English texts overwhelmingly cite Australian decisions on the characterisation of indemnities: COLLINS L. 87 88

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Reid Mortensen the question of how to characterise them might also not be as immediate a problem in Europe. The Australian Law Reform Commission did not think a right to an indemnity for having satisfied a tort claim was distinguishable from the quality of the underlying tort itself, and therefore an indemnity attached to a primary claim in tort should be characterised as a tort.94 However, in 2006 in Sweedman v Transport Accident Commission,95 the High Court characterised a right to an indemnity in an interstate tort claim as a matter of quasi-contract. The State of Victoria has a statutory no-fault compensation scheme for motor accidents. Compensation is paid by the Transport Accidents Commission to any Victorian-registered driver who is injured in a motor accident, and no liability attaches to the other driver unless that person’s vehicle is not registered in Victoria. The requirement to register is also conditioned on residence in Victoria, so under the Victorian legislation the Commission is effectively only able to seek an indemnity from out-of-State residents and Victorian drivers who are unlawfully unregistered. In Sweedman, the Commission had paid compensation to a Victorian driver who was injured in an accident in New South Wales, and sought an indemnity for this compensation from the other driver who was resident in NSW. This driver objected; Pfeiffer providing that, if this claim were one in tort, the action would be governed by the NSW law that provided for a lesser amount to be recoverable in damages. The matter was heard in the Victorian courts and taken on appeal to the High Court of Australia. There, the majority96 denied a tortious classification to the question of this indemnity, and held that the matter was quasi-contractual. As a result, it was governed by ‘the law of the State with which the obligation … to indemnify … has the closest connection’.97 And in this case, despite one of the parties being a NSW resident and the accident occurring in NSW, the obligation to indemnify was held to be governed by the law of Victoria.98 What Sweedman overlooked is that, taken together, the claim for compensation from the Commission for the accident in NSW, and the Commission’s claim for a full indemnity from a NSW resident, amount to a claim for compensation against another person for a motor accident in another State. In any other setting, this would be regarded as a tort, and the administrative machi(ed), Dicey and Morris on the Conflict of Laws, 13th ed., Sweet & Maxwell, London 2000, 1533 (‘Dicey and Morris’); NORTH P. and FAWCETT J., Cheshire and North’s Private International Law, 13th ed., Butterworths, London 1999, 665. (‘Cheshire and North’s’). 94 ALRC (note 21), 66. 95 (2006) 226 CLR 362. 96 Gleeson CJ and Gummow, Kirby and Hayne JJ; Callinan J dissenting. 97 Ibid., 401. 98 A significant reason was that the indemnity was created by Victorian legislation. This is specious reasoning. Because Victorian law created an obligation to indemnify and NSW law did not, the High Court thought that Victorian law should be preferred. In other words, if a State creates an extraterritorial obligation to indemnify, that alone will enable it: (a) to extend its obligation to indemnify to acts that occur in the locus delicti; and (b) to have the indemnity satisfied simply because it was created in legislation: ibid., 401; cf. Private International Law (note 3), 441-3.

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A Common Law Cocoon: Australia and the Rome II Regulation nery that Victoria has created to ease those claims for its own residents should not be regarded as a relevant difference when characterising the claim or identifying the governing law.99 However, whether the High Court did this knowingly or not, the result is that, regardless of where a motor accident in Australia occurs, Victorian residents can always have a claim brought in Victoria determined in accordance with the lex fori, and can impose liability on non-Victorian residents in accordance with the lex fori. Elsewhere, litigants must meet the standards of Pfeiffer and have this claim governed by the law of the State where the accident occurred. In a direct sense, Rome II gives little guidance as to how this unprincipled departure from the lex loci delicti can be improved. Indirectly, it might suggest when a reference to the lex fori in a tort claim would have more credibility.

E.

Renvoi

Rome II bans the use of renvoi in any matter that is covered by the Regulation, including claims relating to cross-border torts or delicts.100 Renvoi, especially a single renvoi that sees the choice of law rules in the governing law remit the question to the lex fori, is evidently another backdoor means of applying the local law.101 For Commonwealth courts before 2005, it could not have been foreseen that an explicit statement about the availability of renvoi in cross-border tort claims was even needed. The position at common law had been that renvoi was only permitted in a few areas: marriage, legitimation and succession.102 It had never been used in Commonwealth courts in tort cases, and any obiter dicta or juristic authority on the point dismissed its relevance to cross-border tort or delict claims entirely.103 Its use by the High Court of Australia in a foreign tort claim in Neilson v Overseas Projects Corporation of Victoria Ltd104 was therefore close to revolutionary, and requires some explanation. Neilson related to an injury suffered by a Western Australian resident when in the People’s Republic of China. The action was brought in Western Australia against the plaintiff’s husband’s employer, a Victorian company, which admitted negligence. This was just inside the six-year limitation period in Western Australia, but outside the one-year limitation period set in China. At the time this action was brought, McKain made it clear that, regardless of the law governing the tort claim, Cf. the reasoning in Callinan J’s dissent: ibid., 425-8. Art 24 Rome II. 101 COWAN T.A., ‘Renvoi Does Not Involve a Logical Fallacy’, in: (1938) 87 University of Pennsylvania Law Review 34, 34. 102 Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1995] 1 WLR 978, 1008. 103 McElroy v McAllister 1949 SC 110, 126; Dicey and Morris (note 93), 80-2; Cheshire and North’s (note 93), 72; CASTEL J.-G., Canadian Conflict of Laws, 3rd ed., Toronto 1994, 115-16; NYGH P., Conflict of Laws in Australia, 6th ed., Sydney 1995, 240. 104 (2005) 223 CLR 331. 99

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Reid Mortensen the question of limitation would be governed by Western Australian law. Pfeiffer and Renault were decided by the time the case went to trial, and apparently shifted the question of limitation for determination by the lex loci delicti – which had the action out of time. That at least was how the Western Australian courts dealt with the question of limitation. On appeal in the High Court of Australia, a majority held that the Western Australian limitation period applied. Gleeson CJ and Gummow, Hayne, Callinan and Heydon JJ reached this conclusion – and avoided application of the locus delicti’s limitation period – by adopting the doctrine of renvoi. The most common approach taken to this was the doctrine of double renvoi:105 the forum court had to decide the case as a court in the locus delicti would decide it. The majority reasoned that, in the circumstances of Neilson, a Chinese court (as the forum delicti) would have applied Western Australian law. It was found that Chinese law would remit the question of limitation to Western Australian law and, further, that Chinese law did not recognise renvoi. So, on a remission to the law of Western Australia a Chinese court would not apply that State’s choice of law rules. The majority therefore held that a Chinese court would apply the Western Australian limitation period, and so the Western Australian court should apply its own limitation period as well. The resort to renvoi in Neilson is best explained as an effort on the part of the High Court to apply the lex fori in a foreign tort claim. There was not a shred of evidence before the Australian courts in Neilson as to how China’s choice of law rules would be applied, whether they would refer any question in the proceedings to Western Australian law, whether China had a doctrine of renvoi, and how any principles of renvoi that it did have would be applied. The result based on ‘China’s’ choice of law regime was therefore entirely artificial; and reached by selective use of presumptions, ignoring aspects of Chinese and Australian law, simple invention of what the ‘Chinese’ law should look like, and some guesswork.106 Evidence was used in an unprecedented manner, but ‘every unprecedented step taken by the High Court carefully laid a pathway to the forum.’107 It therefore appears that, in Neilson, the High Court refused to admit the mistake it made in Renault of not including a proper law exception to the lex loci delicti, and instead tried to find a means to the lex fori from inside the lex loci delicti – or at least from inside the lex loci delicti as the Court pretended that law to be. The case was one where the Court might have been attracted to an exception to the lex loci delicti. The plaintiff was entitled to sue when she commenced the proceedings. It was the High Court itself which (if it had not resorted to renvoi) would have changed her rights by deciding, midway through the litigation, that questions of limitation would be governed by the limitation period of the locus delicti.108 The Ibid., 341-2, 365-7, 418-19. MORTENSEN R., ‘«Troublesome and Obscure»: The Renewal of Renvoi in Australia’, in: (2006) 2 J. Priv. Int. L. 1, 5-9 (‘Troublesome and Obscure’). 107 Ibid., 21. 108 John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503, 513, 544, 554, 571-4; Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491, 520. 105 106

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A Common Law Cocoon: Australia and the Rome II Regulation decision in Neilson – which is highly eccentric109 – may have been impelled by the Court’s own recognition that, when it changed the law through common law adjudication in Pfeiffer and Renault, it did so with retrospective effect on litigants whose cases were already pending. The High Court may have corrected an injustice that it caused, but in doing so it compromised the principles of territoriality that, through its own exceptionless lex loci delicti rule, it has been so doggedly asserting. It also introduced the clumsy mechanisms of renvoi to choice of law in tort.

IV. Flexibility, Formalism and Fiction Since Neilson, it has been observed that the doctrine of renvoi in tort claims might correct the rigidity of the exceptionless lex loci delicti rule that was adopted in the Pfeiffer-Renault regime.110 Renvoi might well be an indirect means of bringing an exception to the Australian lex loci delicti regime in choice of tort law. However, from the comparison of Australian choice of law and Rome II undertaken in this article, this actually suggests four different responses. First, it would be better lawmaking in Australia to allow application of the lex fori openly through an explicit adoption of a proper law exception, than it is to use the complications of renvoi. If the way that renvoi was used in Neilson is any guide, it would certainly be better to have an explicit proper law exception than to make up the content of the foreign law without any evidence to support it.111 Rome II has the best response to renvoi in tort claims – prohibit it.112 Secondly, although there is some support for the idea that Neilson could have been a case for a proper law exception to the lex loci delicti rule to be applied,113 the usual thresholds for application of these exceptions do not bear this out. If Rome II’s exceptions to its lex loci damni rule were applied to the circumstances of Neilson, the Chinese limitation period would still have been applied. The parties were habitually resident in different States,114 and this would mean the first stage Homing Devices (note 42), 873. KEYES M., ‘The Doctrine of Renvoi in International Torts: Mercantile Mutual Insurance v Neilson’, in: (2005) 13 Torts Law Journal 1, 14-15; GRAY A., ‘The Rise of Renvoi in Australia: Creating the Theoretical Framework’, in: (2007) 30 University of New South Wales Law Journal 103, 110-13; MILLS A., ‘Renvoi and the Proof of Foreign Law in Australia’, in: (2006) Cambridge Law Journal 37, 40. 111 Troublesome and Obscure (note 106), 22. 112 Art 24 Rome II. 113 KEYES M. (note 110), 14-15. 114 For the purposes of Rome II, the defendant company was habitually resident in Victoria (Art 23(1)) and the plaintiff in Western Australia. Sub-national territorial units with their own tort law are different ‘countries’ for the purposes of the Regulation: Art 25(1) Rome II. 109 110

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Reid Mortensen exception would be unavailable. Similarly, the only connection with Western Australia was the plaintiff’s residence, and it would be difficult to argue that the tort was ‘manifestly more closely connected with’ that State than with China. The second stage exception could therefore not be invoked. Sweedman offers the same result. The plaintiff’s residence was in Victoria but, against NSW as the locus delicti, the locus damni and the place of the defendant’s residence, this would not allow either exception available under Rome II to be invoked. Thirdly, the High Court of Australia, refusing openly to admit the need for flexibility in choice of tort law, has swung from the use of excessive formalism (Sweedman) to the writing of fiction (Neilson) in order to get that flexibility without having to say so. Rome II only stops the writing of fiction.115 The Regulation is replete with rules,116 not principles or approaches. As such, it cannot model any improvement on the formalism allowed in Australia through the process of characterising claims. The reversion to forum law seen in Sweedman would be as possible in the EU as in Australia. And this brings us to a final observation. The two instances in Australia where the High Court has defied its own lex loci delicti regime are notable as cases that, even under the generous exceptions of Rome II, are not regarded as legitimate candidates for application of the lex fori. That itself shows that the Pfeiffer-Renault paradigm needs exceptions like those that Rome II has. They are needed not just to obviate the need for deploying the surreptitious means of avoiding the lex loci delicti that the High Court has used. They are also needed to signal credible cases where application of the lex fori to cross-border cases can be considered legitimate. But all indications so far suggest that it is unlikely, in the medium term, that the High Court will break from its common law cocoon to recognise the need to incorporate measures like those modeled in Rome II into Australian choice of tort law. Australian courts might have indicated that they are now more open to the use of European legal resources when developing Australian law for the better. It is just that the High Court first needs to overcome a stubborn refusal to admit that its choice of law regime could benefit from some explicit flexibility.

115 116

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A DECADE OF PRIVATE INTERNATIONAL LAW IN AFRICAN COURTS 1997-2007 (PART I)∗ Richard Frimpong OPPONG∗∗ I. II.

III.

IV.

Introduction Jurisdiction A. Jurisdiction over Foreign Defendants B. Enforcing Choice of Forum Agreements C. Enforcing Arbitration Agreements D. Sovereign and Diplomatic Immunity E. Extra-Territorial Jurisdiction F. Domicile as a Basis of Jurisdiction Choice of Law A. Preliminary Topics 1. Characterization – the Problem of ‘Gap’ 2. Characterization – Substance and Procedure B. Specific Topics 1. Contract 2. International Carriage by Air 3. Torts 4. Property and Succession 5. Foreign Currencies Conclusion

‘Access to academic material on conflict of laws in [Africa] has been difficult. Firstly, such material is scarce. Secondly, few libraries stock the material that is available.’ Justice D. Pillay in Roger Parry v. Astral Operation Ltd. (Labour Court, South Africa, 2005)

I.

Introduction

If the voice of African academics on issues of private international law at the international level has, historically, remained inactive, the impact of the judiciary, ∗

Part II of this paper will be published in the next volume of this Yearbook. It will deal with the recognition and enforcement of foreign judgments and awards, international civil procedure, judicial and administrative cooperation. It will also provide a general assessment of the cases and discuss whether from them it can be argued that an ‘African private international law regime’ is emerging. ∗∗ Lecturer in Law, Lancaster University Law School. LL.B., BL (Ghana) LL.M (Cantab) LL.M (Harvard). Yearbook of Private International Law, Volume 9 (2007), pp. 223-255 © sellier. european law publishers & Swiss Institute of Comparative Law

Printed in Germany

Richard Frimpong Oppong which in other countries remains at the forefront of the subject’s development, has been even more minimal. There is a great lack of awareness about the private international law jurisprudence of African courts. This results from a mixture of lack of interest, the absence of up-to-date systems of law reporting, and the difficulty in accessing the judgments. Law reports on decided cases are rarely available outside their countries of origin, and where they are, are hardly ever up-to-date. They are seldom cited judicially or academically reviewed in jurisdictions within Africa or internationally. But international academic obliviousness should not be misconstrued for national judicial inactivity. Indeed, the past decade witnessed some interesting private international cases in African courts: mere presence became a basis of international competence, but Canada real and substantial connection test was rejected; a court declined to compel diplomatic assistance to enforce a judgment against a sovereign; a court affirmed its jurisdiction to issue a pre-trial anti-dissipation interdict (freezing order or mareva injunction) in respect of assets situated outside its jurisdiction to support a prospective foreign proceeding; the courts remained divided on whether in personam extra-territorial relief infringes the sovereignty of a foreign country; a court missed an opportunity to decide the applicable law in international torts; a court held that in ordinary commercial contracts contractual capacity is determined by the lex loci contractus; a court decided that lex causae is a relevant consideration in deciding on immunity from jurisdiction; courts accepted the via media approach to solving the problem of gap in characterization; a court adopted the facultative approach in determining the formal validity of contracts; a choice of forum agreement survived a constitutional challenge; the Hague Child Abduction Convention also survived a constitutional challenge; but arrest of peregrini as a basis of jurisdiction in claims sounding in money failed to stand a constitutional test; a court described jurisdictions stressing juristic interventionist approaches against arbitration and other alternative modes of dispute resolution as pariahs; a court held that in the absence of a contractual choice of currency provision, the currency of payment of damages is presumed to be the legal tender of the place of transaction; a court declined to reform the law on the domicile of married women, choosing to await a United Nations convention on the issue; courts queried whether the categorical application of the husband’s lex domicilii in determining the patrimonial consequences of marriage is still acceptable in a gender-equal society; inter-country adoptions were judicially sanctioned in two countries; a court held that in inter-country adoptions the subsidiarity principle must be subsidiary to the paramountcy principle; a court held that legal cost was a matter of procedure governed by the lex fori; and regional economic integration began to impact national civil procedure rules on depositing security for costs. Except for a few South African cases, these cases have not received the necessary academic interest although some deal with difficult and unsettled private international law problems. This paper brings together and examines over three hundred (300) cases decided or reported in the past decade in thirteen (13) English-

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A Decade of Private International Law in African Courts 1997-2007 (Part I) speaking African countries.1 They are Botswana, Ghana, Kenya, Lesotho, Malawi, Namibia, Nigeria, South Africa, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe. These countries cover two of the principal legal traditions in Africa, namely common law and Roman Dutch law. Ghana, Kenya, Malawi, Nigeria, Tanzania, Uganda and Zambia are common law countries. Botswana, Lesotho, Namibia, South Africa, Swaziland and Zimbabwe adhere to a mixture of Roman Dutch law and common law. My goal is not to provide a comprehensive statement of the conflict law in any of these countries. Rather, I report cases decided by the courts in the principal categories of private international law, namely jurisdiction, choice of law, the recognition and enforcement of foreign judgments and awards, and international civil procedure.2 I sometimes look beyond principles established in the judgments and discuss their potential impact on individual and business decision-making. My goal is to expose areas of divergence and convergence, reveal issues on which the law is still unsettled or developing, hopefully stir up research interest in some of these issues and provide primary case-law source material covering the past decade for those interested in or researching private international law in Africa.

II.

Jurisdiction

A.

Jurisdiction over Foreign Defendants

When will a court assume jurisdiction over a foreign defendant? Perhaps there is no issue where common law differs more from Roman Dutch law than this. Common law’s response appears straightforward: jurisdiction is founded on service. 1 The following law reports were used: Botswana Law Reports [B.L.R.] 1997-2006; Namibia Law Reports [N.R.] 1997-2006; Electronic Kenya Law Reports [eK.L.R.] 19972007; Kenya Law Report [K.L.R.] 2002-2004; East African Law Reports [E.A.] 1998-2006 (reports cases from Kenya, Uganda, Tanzania); Law Africa Law Reports [L.L.R.] 1997-2007 (reports cases from Kenya, Uganda, Tanzania); Nigerian Weekly Law Reports [N.W.L.R.] 1997-2006; South African Law Reports [S.A.] 1997-2007 (reports cases from South Africa, Namibia and Zimbabwe); Kampala Law Reports [K.A.L.R.] 1997-1998; Ghana Law Reports [G.L.R.] 1997-2001; Supreme Court of Ghana Law Reports [S.C.G.L.R] 1997-2006; Tanzania Law Reports [T.L.R.] 1997; Zambia Law Reports [Zam. L.R.] 1997-2002; Zimbabwe Law Reports [Z.L.R.]; 1997-2002; Lesotho Law Reports and Legal Bulletin [L.L.R.L.B.] 1999-2000. The following websites were also consulted: ; ; ; http://www. worldlii.org/cgi-bin/gen_region.pl?region=250>; ; ; in>; . 2 By international civil procedure, I include all forms of inter-country judicial cooperation and national laws relating to the evidence, witnesses and documents abroad which are aimed at facilitating the administration of justice either within or without the jurisdiction.

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Richard Frimpong Oppong The court may assume jurisdiction over a foreign defendant when the latter is present within its jurisdiction, has submitted to the jurisdiction or leave to serve out of the jurisdiction has been granted to the plaintiff and service has been effected on the defendant.3 This jurisdiction is qualified by the discretion not to exercise it under the doctrine of forum non conveniens. In some of the cases examined, the doctrine was expressly invoked or applied.4 In others, the reasoning of courts suggested the doctrine was at play.5 In South Africa, until recently, there was doubt as to the existence of the doctrine in Roman Dutch law.6 Roman Dutch law’s response to the question of when a court will assume jurisdiction over a foreign defendant is more complicated. It is important in this regard to distinguish between two types of actions; those between foreign defendants (peregrini) and domestic plaintiffs (incolae), and those between peregrini inter se.7 In general, the South African courts will not assume jurisdiction over a foreign defendant unless his assets within the jurisdiction have been attached to

It appears a similar procedure prevails in Roman Dutch law. In Westwood v. Westwood 1997 (1) Z.L.R. 295, it was held that the formal procedure of edictal citation had been abolished in Zimbabwean law. Thus, where a spouse wished to initiate divorce proceedings against the husband who was in the USA she must follow the simplified procedure of applying for leave to serve the defendant out of the jurisdiction. In Monarch Steel (1991) (Pty) Ltd. v. Fourway Haulage (Pty) Ltd. 1997 (2) Z.L.R. 342, it was held that in a money action, the fact of service abroad did not relieve the plaintiff of the burden of showing that at the time of the summons the peregrinus defendant was resident in or had assets in the jurisdiction capable of attachment to found or confirm jurisdiction. 4 Nika Fishing Co Ltd v. Lavinia Corporation [2001] 16 N.W.L.R. 556, 576. See also Adel Kamel Barsoum v. Clemessy International [1999] 12 N.W.L.R. 516 where the court declined to assume jurisdiction over a contract whose place of execution and performance was uncertain but which was in French with payment to be made in Switzerland. 5 See e.g. Valentine Investment Company Ltd. v. Federal Republic of Germany [2006] eK.L.R. 6 FORSYTH C.F., Private International Law the Modern Roman Dutch Law including the Jurisdiction of the High Court, Cape Town 2003, p. 173-176; SCHULZE C., ‘Forum nonConveniens in Comparative Private International Law’, in: South African Law Journal (S.A.L.J.) 2001, p. 812, 827-828. In one case the court made reference to the celebrated forum non conveniens cases of The Spiliada and Lubbe. See Moslemany v. Unilever Plc Case No D102/06 (Labour Court, South Africa, 2006) at [35]. In National Union of Namibian Workers v. Naholo [2006] Namibia High Court 9, the Namibian High Court assumed (without deciding) that the High Court of Namibia has the power to decline to exercise its jurisdiction on the ground of inconvenience in certain circumstances. In November 2007, the South African Court of Appeal held that is cases where jurisdiction is assumed over a peregrini on the basis of presence within the jurisdiction, it was open to the defendant to contest whether South Africa was the forum conveniens. See Bid Industrial Holding v. Strang [2007] SCA 144. 7 In so far as natural persons are concerned, a peregrinus is a person who is not resident or domiciled in the area of the court’s jurisdiction. Citizenship does not per se enter the equation. See Sandton Square Finance v. Biagi, Bertola and Vasco 1997 (1) S.A. 258, 260. 3

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A Decade of Private International Law in African Courts 1997-2007 (Part I) found or confirm jurisdiction. Until November 2007, the defendant could also be arrested for this purpose but the courts doubted its constitutionality.8 The practice of attachment to found or confirm jurisdiction dates back to seventeenth century Holland. It was instituted for the benefit of incolae to enable them to proceed in local courts against peregrini who were, for the time being, physically within the jurisdiction of the court or possessed property there. Additionally, attachment provided security, enabling the plaintiff eventually to execute the judgment in his own jurisdiction.9 Attachment may impose hardship on foreign defendants. It may even be unfair, but it remains a cornerstone of South Africa’s jurisdiction rules. Indeed, even in instances where the foreigner is the plaintiff, the courts have admitted that they have long treated an incola plaintiff more leniently than his peregrinus counterpart. The former may found jurisdiction by arrest or attachment, no other ground of jurisdiction is required. The latter may also attach or arrest to found jurisdiction in actions between peregrini inter se, but only if another ground of jurisdiction is present.10 Any of the foreign defendant’s movable property11 present or situated within the jurisdiction can be attached.12 This represents a great challenge for foreign defendants since they cannot deal with the attached assets during the period. In Drive Control Services (Pty) Ltd. v. Troycom Systems (Pty) Ltd (N-Trigue Trading CC Intervening),13 it was held that an order for costs given in favour of a foreigner who had successfully taken steps to set aside an unmeritorious order for the Himelsein v. Super Rich 1998 (1) S.A. 929, 936. See also Naylor v. Taylor 2006 (3) S.A. 546, 557; Tsung v. Industrial Development Corp. of SA Ltd., 2006 (4) S.A. 177, 181. In Bid Industrial Holding v. Strang [2007] S.C.A 144 the court held that arrest of peregrini to found jurisdiction in claims sounding in money must be abolished since it violated the right to freedom and security of the person guaranteed under article 12(1)(a) of the South African Constitution. 9 Jamieson v. Sabingo 2002 (4) S.A. 49; Tsung v. Industrial Development Corporation of SA Ltd. 2006 (4) S.A. 177, 180-181. 10 Hay Management Consultants (Pty) Ltd. v. P3 Management Consultants (Pty) Ltd. 2005 (2) S.A. 522, 529. 11 Manna v. Lotter 2007 (4) S.A. 315 held that in any claim relating to immovable property – whether in rem or in personam – the court within whose territory the property was situated always had jurisdiction and it was therefore irrelevant whether the defendant was an incola or peregrinus. An interest in property, even if short of ownership, constitutes a right capable of being attached. See Stanmarker Mining (Private) Limited v. Mettalon Corporation Limited Civil Appeal No. 113/03 (Supreme Court, Zimbabwe, 2004). 12 A legal claim the existence of which was denied by the postulated debtor and which the creditor had no present intention to assert, had no saleable value which could be attached. Ex Parte Usko in: re Usko Ltd. v. Cortinovis SPA 1998 (4) S.A. 976, held that the applicant who sought attachment must establish that he had a prima facie cause of action against the respondent. The requirement was satisfied by showing that there was evidence which, if accepted, would establish a cause of action. See also Simon No v. Air Operations of Europe 1999 (1) S.A. 217. 13 2000 (2) S.A. 722. 8

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Richard Frimpong Oppong attachment of goods or who had successfully opposed an application for attachment can be attached. In this instance, the foreign respondent had to abandon its claim for costs to avoid the possibility of attachment. The court found this rule unfair and oppressive and called for reform. The value of the property to be attached need not bear any relationship to the value of the claim.14 It can be nominal.15 Attachment is not meant to guarantee the complete satisfaction of any prospective judgment debt, it simply provides plaintiffs with something to look to if successful, and ensures that the court does not act totally in vain. The fact that the value of the attached asset may be nominal, and that generally foreign courts may enforce judgments of the South African courts, casts doubt on the continuing propriety of attachment. Its goal of providing security for the satisfaction of a prospective judgment is diminished, but we should not ignore its value of saving plaintiffs the cost of seeking enforcement abroad and the risk that the judgment will not be enforced abroad. Indeed, it is doubtful whether, without more, attachment will be considered a ground of international competence in common law jurisdictions so as to render the judgment enforceable. Foreign defendants can avoid the effects of attachment by submitting to the jurisdiction of the court. The issue in American Flag plc v. Great African T-shirt Corporation16 was whether an incola plaintiff, who was entitled to attach the property of a peregrinus defendant ad fundandam jurisdictionem, was precluded from doing so if the defendant submitted to the court’s jurisdiction. It was held that where the defendant had submitted to the jurisdiction of the court, an attachment was neither necessary nor permissible. This principle was followed in the Botswana case of Bizy Holdings (Pty) Ltd. v. Eso Management (Pty) Ltd.17 Submission to jurisdiction does not have to be in any particular form. It may be by conduct, in writing or by a statement from the Bar.18 In Ex Parte Hay Management Consultant (Pty) Ltd.,19 it was held that a South African choice of law clause, and a clause for the service of notices and legal process (domicilium citandi et executandi) in South Africa in a contract, amounted to submission, which made attachment neither necessary nor permissible. This case suggests that it is important for foreigners who believe they are likely to be sued in South Africa and, indeed, in other Southern African countries where Roman Dutch law prevails, to include such a clause in their contracts to avoid attachment. A foreign defendant who wishes to avoid attachment should submit before execution of the order of attachment or the institution of the action.20 Tsung v. Industrial Development Corporation of SA Ltd.21 held that where an incola plaintiff MT Tiger: Owners of the MT Tiger v. Transnet Ltd. 1998 (3) S.A. 861. Bizy Holdings (Pty) Ltd. v. Eso Management (Pty) Ltd. 2002 (2) B.L.R. 125, 129. 16 2000 (1) S.A. 356. 17 2002 (2) B.L.R. 125. 18 Agro-Grip (Pty) Ltd. v. Ayal 1999 (3) S.A. 126. 19 2000 (3) S.A. 501. 20 Himelsein v. Super Rich CC 1998 (1) S.A. 929. 21 2006 (4) S.A. 177. 14 15

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A Decade of Private International Law in African Courts 1997-2007 (Part I) had a claim sounding in money against a peregrinus defendant and the plaintiff secured and executed an ex parte order against the defendant for attachment of his assets to found or confirm jurisdiction, the defendant’s subsequent consent to jurisdiction will not undo the attachment.22 Until there is submission to jurisdiction, an incola plaintiff is entitled as of right to seek an order of attachment or arrest.23 He is under no obligation to first invite the peregrinus respondent to submit to the jurisdiction, nor does the peregrinus respondent enjoy the right to be afforded an opportunity to submit to the jurisdiction before the applicant sought an arrest or attachment order.24 This is an interesting principle because an application for attachment is often ex parte; by the time the defendant is aware, it would have been granted. Again, this suggests the propriety of foreign defendants submitting to the jurisdiction in their contract or, at worst, before the order is executed.25 As regards actions between two peregrini, attachment alone is not enough to confer jurisdiction on the South African courts. The cause of action must have some connection with South Africa. In Chong Sun Wood Products Pte Ltd. v. K & T Trading Ltd.,26 it was held that a South African court would not assume jurisdiction in an action between peregrini, sounding in money, unless there was both a ratio jurisdictionis and an attachment or arrest to confirm jurisdiction. Thus, where the making of the contract and its place of performance occurred outside South Africa, it was held that no ratio jurisdictionis existed to invest the South African courts with jurisdiction to entertain a claim sounding in money in connection with the contract. Also in Hulse-Reutter v. Godde,27 it was held that where both the plaintiff and the defendant are peregrini, an attachment or arrest was insufficient to establish jurisdiction. There must also be present a recognised ratio jurisdictionis. These South African rules represent a severe constraint on foreigners who seek to use its courts as fora for dispute settlement. They suggest, for example, that the mere presence of a South African choice of forum agreement in a contract between foreigners is not enough to confer jurisdiction on the South African courts. At common law, this will not be the case. This is troubling given that a judgment resulting from the exercise of jurisdiction on the basis of such an agreement would be enforced in many jurisdictions where submission is a recognised See also Bizy Holdings (Pty) Ltd. v. Eso Management (Pty) Ltd. 2002 (2) B.L.R. 125. But see Ghomeshsi-Bozorg v. Yousefi 1998 (1) S.A. 692 suggesting that in cases where attachment is meant to confirm jurisdiction, submission, even after execution, should suffice to undo the attachment. 23 The degree of proof needed to establish whether a prima facie case has been made to justify attachment to found jurisdiction is not proof on the balance of probability but evidence which, if accepted, would show a cause of action. See MV Lina Union Shipping and Managing Co SA v. Lina Maritime 1998 (4) S.A. 633. 24 Naylor v. Taylor 2006 (3) S.A. 546. 25 Tsung v. Industrial Development Corporation of SA Ltd. 2006 (4) S.A. 177, 185. 26 2001 (2) S.A. 651. 27 2001 (4) S.A. 1336. 22

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Richard Frimpong Oppong basis of international competence.28 This rule prevents the South African court from developing into an international commercial litigation centre like England; not all foreign litigants will have assets in South Africa and not all causes of action will have a connection with South Africa. Arguably, the rule also prevents them from building up expertise in the application of foreign law by adjudicating cases in which South African choice of forum clauses are potentially combined with foreign choice of law clauses.29

B.

Enforcing Choice of Forum Agreements

Choice of forum agreements have increasingly become a feature of international contracts as parties try to hedge against the risks inherent in litigating in different states. African courts upheld choice of forum agreements in a number of cases.30 In Raytheon Aircraft Credit Corporation v. Air Al-Faraj Limited,31 the court rejected a constitutional challenge to the enforcement of a state of Kansas choice of law and forum clause in an aircraft lease agreement. The respondent argued that the original jurisdiction of the Kenya courts under section 60 of the Constitution of Kenya The importance of choice of forum agreements has been given a further boost under the Hague Convention on Choice of Court Agreements 2005. The convention is not yet in force and there are no African countries currently party to it. See generally FORSYTH C., ‘The Impact of the Domestic on the International: Some Crucial Deficiencies in the South African Law of Jurisdiction with their Regional and International Consequences,’ in: South African Mercantile Law Journal (S. Afr. Mercantile L.J.) 2006, p. 1-12; SCHULZE C., ‘The 2005 Hague Convention on Choice of Court,’ in: S. Afr. Mercantile L.J. 2007, p. 140-150. 29 Significantly, in only one of the cases was there a direct application of foreign law. In Phelan v. Phelan 2007 (1) S.A. 483, the court applied Australian law as the lex loci celebrationis in holding that an Australian marriage between the parties was void because of a subsisting marriage of the husband which had not been validly dissolved with a Dominican Republic divorce decree. See also Mashchinen Frommer GmbH & CO KG v. Trisave Engineering & Machinery Supplies (Pty) Ltd. 2003 (6) S.A. 69; Bominfolot Ltd. v. Kien Hung Shipping Co. Ltd. 2004 (2) S.A. 556; and Point Trading (Pty) Ltd. v. Attorney General 2004 (1) B.L.R. 75 where the reliance of foreign law (Germany, Taiwan, and South Africa respectively) failed for want of proof. In Registrar-General of Citizenship v. Todd 2002 (2) Z.L.R. 680, it was held that the Zimbabwean court was competent to interpret a New Zealand statute without the assistance of an expert on New Zealand law. 30 In Arjay Limited v. Airline Management Support Ltd. [2003] 7 N.W.L.R. 577, it was held that in the absence of a choice of forum agreement, the place for trial in an action for breach of contract should be the place where the contract was entered into or its place of performance. Thus where an aircraft lease agreement was made in the United Kingdom (between UK resident defendants and a Nigerian plaintiff) to be performed in Equatorial Guinea but the aircraft made a stopover in Nigeria, it was held that the Nigerian court did not have jurisdiction to entertain an action alleging breach of the contract. 31 [2005] eK.L.R., [2005] 2 K.L.R 47. See generally OPPONG R.F., ‘Choice of Law and Forum Agreement Survives a Constitutional Challenge in the Kenya Court of Appeal’ in: Commonwealth Law Bulletin 2007, p. 158-163. 28

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A Decade of Private International Law in African Courts 1997-2007 (Part I) could not be limited or overridden by contract. The court held that section 60(1) of the Constitution, which provided that the High Court had unlimited original jurisdiction in civil matters, did not authorise it to disregard the private international law rules on the status of choice of law and exclusive jurisdiction agreements. To the court, where parties had bound themselves by an exclusive jurisdiction clause, it will give effect to it. The party who wished to sue in the non-contractual forum must discharge a heavy burden before such a breach of contract was allowed. In Fonville v. Kelly III,32 the Kenyan court upheld a state of Florida choice of law and forum clause in a stock purchase agreement executed in the USA. In Friendship Container Manufacturing Ltd. v. Mitchell Cotts (K) Ltd.,33 the court upheld an exclusive jurisdiction clause contained in a bill of lading vesting jurisdiction in the South Africa courts. It held that the party who wished to depart from the clause must discharge ‘a heavy burden of showing strong cause’. An interesting aspect of Friendship Container was that the only connection of the contract with South Africa was that the defendant had its registered offices there. This raises a question as to whether the willingness of African courts to uphold jurisdiction agreements34 offers enough protection to Africans transacting with foreigners, especially as most of the jurisdiction agreements select foreign courts. Should the mere existence of a choice of forum clause make the courts decline exercising jurisdiction? Do the courts have to make a much more detailed assessment of all relevant factors? In Valentine Investment Company (msa) Ltd. v. Federal Republic of Germany,35 the Kenyan court appeared attentive to the issue of offering protection to Africans engaged in international transactions. The case involved an application for a stay of the Kenya proceedings on the ground that the parties had agreed on a Germany choice of law and a Bonn forum clause. The subject matter of the dispute was a contract for the supply of motor vehicles with drivers. Two earlier contracts between them contained Kenya choice of forum clauses. In dismissing the application, the court held that the parties did negotiate on level ground, that the relevant evidence was in Kenya, that litigation would be convenient and less expensive in Kenya, that Kenya was a common law country and the respondent would be greatly prejudiced if sued in Germany, and that the German defendants were operating in Kenya and contracted with a Kenyan businessman. Although not expressly referred to in the case, the court appeared to have applied a forum non conveniens analysis in deciding the appropriate forum for the litigation. Reasonable minds may differ on the propriety of the factors the court took into account. However, it is undeniable that, in a number of instances, the interests of Africans engaged in

[2002] 1 E.A. 71. [2001] E.A. 338. 34 See OPPONG R.F., ‘Choice of Law and Forum Agreement Survives a Constitutional Challenge in the Kenya Court of Appeal’ in: Commonwealth Law Bulletin 2007, p. 158-163 for references to some pre-1997 cases from other African countries. 35 [2006] eK.L.R. 32 33

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Richard Frimpong Oppong international transactions will be ill-served if they are made to litigate outside Africa.36 This is not to suggest that all disputes relating to contracts involving Africans should be litigated in Africa. Indeed, as noted in Adel Kamel Barsoum v. Clemessy International,37 ‘the courts do not adopt or rely on pure sentimental approach in assuming jurisdiction merely because a person of its nationality is involved’.38 What is being suggested is that, the enforcement of choice of forum agreements requires the reconciliation of multiple and often conflicting interests and courts should be attentive to this.

C.

Enforcing Arbitration Agreements

It is also a common feature of international commercial contracts for parties to refer disputes arising thereunder to international arbitration. As of December 2007, eight African countries, namely Egypt, Kenya, Madagascar, Nigeria, Tunisia, Uganda, Zambia, and Zimbabwe had enacted legislation based on the UNCITRAL Model Law on International Commercial Arbitration.39 In the years under review, courts upheld agreements to arbitrate. The courts have been willing to enforce arbitration agreements. Indeed, in Preferential Trade Area Bank v. ESCOM,40 Justice Mwaungulu of Malawi held that ‘for international trade and globalization, jurisdictions stressing juristic interventionist approaches against arbitration and other alternative modes of dispute resolution are pariah’. In the Ghanaian case of Paul Gyasi v. Abosso Goldfields Ltd.,41 the parties agreed, in an employment contract, that disputes arising under it would be referred See also Nika Fishing Co Ltd v. Lavinia Corporation [2001] 16 N.W.L.R. 556 where the Nigerian court refused to stay an action on the basis of an Argentina choice of law and forum agreement in a bill of lading. It found the ‘centre of gravity’ of the action lay in Nigeria: the alleged breach occurred there; Nigeria was the place of delivery; and the necessary witnesses were in Nigeria. Barlows Central Finance Corporation v. Joncon (Pty) Ltd. Case No 2491/99 (High Court, Swaziland, 1999) where the Swaziland court upheld a South African choice of law agreement, but declined to uphold the South African choice of forum agreement. The court took into account the following factors: the close connection between the court and the substance of the case; the convenience of trial in Swaziland for the parties; the similarities between Swaziland and South African law and the seriousness of the parties intention to litigate in South Africa. 37 [1999] 12 N.W.L.R. 516. 38 [1999] 12 N.W.L.R. 516, 526. 39 in: Zimbabwe Broadcasting Corporation v. Flame Lily Broadcasting (PVT) Ltd. 1999 (2) Z.L.R. 448 it was held that the Model Law applies to both domestic and international arbitration in Zimbabwe. 40 Civil Cause No 238 of 2000 (High Court, Malawi, 2003). 41 Suit No ANR 17/2004 (High Court, Ghana). 36

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Civil Appeal No 18 of 2002 (Supreme Court, Uganda, 2004). [2002] 2 E.A. 388, [2002] K.L.R.810. 44 2000 (1) Z.L.R. 157. 42 43

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Richard Frimpong Oppong D.

Sovereign and Diplomatic Immunity

The courts have grappled with problems involving sovereign and diplomatic immunity. The central issue has been when to allow a sovereign to be sued. The divide has been between adherents to restrictive and absolute immunity. It appears the prevalent trend is towards restrictive immunity, but a Tanzanian case suggests that absolute immunity is the rule there. Beynse v. Republic of Tanzania45 was an action for damages arising under an agreement in which the Republic of Romania leased its premises to the plaintiff. The defendants subsequently evicted the plaintiff. The defendants claimed immunity under the Vienna Convention on Diplomatic Relations 1961. The Ministry of Foreign Affairs and International Co-operation informed the court that the defendants were not amenable to its jurisdiction. The court noted the divide between the restrictive and absolute theory of immunity. It held that, given the tone of the Ministry’s letter, Tanzania still adhered to the absolute theory of immunity. Where restrictive immunity is the norm, the onus is on the plaintiff to prove that the case falls within the scope of matters for which immunity should be denied. In Alhaji Kehinde Asafa Oluwalogbon v. Government of the United Kingdom & Simeon Ashiwell,46 the first defendant’s vehicle, which was driven by the second defendant, was involved in an accident that resulted in injuries to the plaintiffs. The second defendant was a member of the diplomatic mission of the United Kingdom in Nigeria. The plaintiffs commenced action jointly against the defendants claiming severally for damages suffered as a result of the second defendant’s negligence. The defendants challenged the court’s jurisdiction on the grounds that they enjoyed absolute immunity. The court upheld the challenge. It held that the doctrine of sovereign immunity was of great antiquity, but there was no agreement as to when and on which facts the immunity might be lifted. Also, the doctrine of restrictive immunity was not a new one, and courts must be cautious in applying it. They must be satisfied that from the plaintiff’s claim it was manifest the sovereign acted in a manner inconsistent with the sovereign’s superior authority, something the plaintiff failed to do in this instance. Under the restrictive doctrine, private and commercial transactions are not entitled to immunity. The problem has been how to define the scope of these exceptions.47 In Amadou Oury Bah v. Libyan Embassy,48 the plaintiff, whose contract of employment with the Libyan Embassy in Botswana was terminated without the requisite notice, sought damages for wrongful dismissal. It was argued that [2000] 2 E.A. 322. [2005] 14 N.W.L.R. 761. 47 KJ International v. MV Oscar Jupiter 1998 (2) S.A. 130. 48 2006 (1) B.L.R. 22. See also International Committee of the Red Cross v. Sibanda 2007 (1) S.A. 476 (where the Zimbabwean Supreme Court held that the ICRC did not enjoy immunity in a breach of employment contract action). See ABRAHAM G., ‘Yes,… But does it have Personality?’ The International Committee of the Red Cross and Sovereign Immunity’, in: S. Afr. L. J. 2007, p. 499-513. 45 46

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A Decade of Private International Law in African Courts 1997-2007 (Part I) since an employment contract was a private transaction, the embassy did not enjoy immunity. The Botswana court held that an action arising from a breach of an employment contract was a private law transaction and, as a result, fully justiciable. The embassy did not enjoy immunity as the plaintiff was not challenging a governmental act. Bah can be contrasted with the Kenyan case of Gerard Killeen v. International Centre of Insect Physiology & Ecology49 which also arose from a dispute over a contract of employment between the plaintiff and the defendant, an international organisation. The defendant claimed immunity from the legal process of the court under the Privileges and Immunity Act (Cap 179). The Kenya court held that since the contract fell squarely within the operations of the defendant in Kenya, the defendant was entitled to immunity from legal process.50 In African Reinsurance Corp v. Aim Consultants Ltd,51 the Nigerian court held that where an act was of a commercial nature, the fact that it was done by a department of the state for government or political reasons did not attract sovereign immunity. Thus, a government department that enters into a commercial transaction, in this instance a building consultancy contract, was not immune from legal action instituted in respect of any dispute arising from it. The effect of a waiver of immunity on the constitutional allocation of jurisdiction was explained in the Nigerian case of Tsvetan Dimitrov v. Multichoice Nigeria Ltd.52 The court held that a waiver of diplomatic immunity did not affect the constitutional allocation of jurisdiction among national courts. A waiver amounted to submission to the exercise of jurisdiction, but did not create jurisdiction where none existed. Thus, where article 251(1)(h) of the Nigerian Constitution granted the Federal High Court exclusive jurisdiction in civil causes and matters relating to diplomats, consular and trade representation and article 272(1) vested in the State High Courts jurisdiction to hear and determine libel suits, it was held, in a libel action instituted by the plaintiffs, Bulgaria’s Ambassador to Nigeria and the Bulgarian Embassy, that the action must be tried by the Federal High Court.

E.

Extra-Territorial Jurisdiction

In the years under review, courts also grappled with the issue of extra-territorial jurisdiction in the sense of providing remedies with extra-territorial reach and assuming jurisdiction over acts committed abroad. The South African case of Ex

[2005] eK.L.R. See also CGM Industrial (Pty) Ltd. v. KPMG 1998 (3) S.A. 738 (immunity exists to an action seeking the repossession of documents seized in pursuance of an investigation into alleged customs violations. Such an investigation was an exercise of sovereign authority.) 51 [2004] 11 N.W.L.R. 223. 52 [2005] 13 N.W.L.R. 575. 49 50

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Richard Frimpong Oppong Parte Hay Management Consultant (Pty) Ltd.53 was an application for a prohibitory interdict against a peregrinus respondent. All the acts complained of were committed outside South Africa. The court held that since it had no control over the respondent or over the acts in question it could not entertain the application, and that this lack of jurisdiction could not be cured by an attachment to found jurisdiction. In B v. S,54 it was held that the South African courts had no jurisdiction to order a person resident in the USA to return to South Africa a child that had been removed from there to the USA. The court reasoned that such an order would be ineffective since it could not enforce it. It held that under the Hague Convention on the Civil Aspects of Child Abduction, the appropriate court to order the return of the child was in the USA. In First National Bank of Namibia v. Kaure,55 the applicant bank sued for judgment on a mortgage bond securing a loan for the purchase of property in Namibia. It sought an order declaring the property in Namibia to be specially executable. The Zimbabwe court held it had no jurisdiction to make such an order. The courts have been circumspect in their response to arguments about the exercise of extra-territorial jurisdiction and the sovereignty concerns they raise. In the Swaziland case of Molly Kiwanuka v. Samuel Muwanga,56 the applicant sought an order of maintenance for the parties’ children. The respondent challenged the jurisdiction of the court on the ground that one of the children was resident in Uganda, and that it was the Ugandan courts which had jurisdiction. The court rejected this argument. It held that the child’s residence was an irrelevant consideration. The fact of the parties’ residence in Swaziland, coupled with the doctrine of effectiveness, laid the foundation of its jurisdiction. The South African case of Metlika Trading Ltd. v. Commissioner, South African Revenue Service57 was an appeal against a court order that the appellant take all necessary steps to procure the return of an aircraft to South Africa. The appellant challenged the order on the ground that the aircraft was in a foreign country and that the court had no jurisdiction to order its return to South Africa. The appellant argued that such an order would infringe the sovereignty of the foreign country, and that the court would be unable to give effect to it. The court rejected these arguments. It held that with incolae respondents, it might assume jurisdiction to grant an in personam interdict (whether mandatory or prohibitory) 2000 (3) S.A. 501. 2006 (5) S.A. 540. See also Julie Brown v. Malcolm Clive Stone Case No 489/05 (Supreme Court of Appeal, South Africa, 2005). 55 1999 (2) Z.L.R. 269. 56 Civil Case No 1506/98 (High Court, Swaziland, 1999). See also Sello v. Sello (No 2) 1999 (2) B.L.R. 104 [on appeal from Sello v. Sello 1998 B.L.R. 502]. In this divorce proceeding, the applicant sought an order that two children who had been removed from Botswana to Lesotho be returned to Botswana and custody granted to her. The court rejected the contention that since the children were outside its jurisdiction it had no jurisdiction over the matter. Botswana is not party to the Hague Convention on Child Abduction. 57 2005 (3) S.A. 1. 53 54

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A Decade of Private International Law in African Courts 1997-2007 (Part I) no matter if the act in question was to be performed or restrained outside the court’s territory. The court reasoned that such an order did not affect the sovereignty of a foreign court; it was an in personam order against the respondent subject to the court’s jurisdiction and not against third parties. If not complied with, it would be domestically enforced against the respondent by contempt proceedings. In Bozimo Trade and Development Co (PVT) Ltd. v. First Merchant Bank of Zimbabwe Ltd.,58 the applicant applied for an anti-dissipation interdict in respect of assets situated outside Zimbabwe in anticipation of a prospective suit in the USA. The Zimbabwean court held that it might issue an order prohibiting a person within its jurisdiction from doing something outside the jurisdiction, but, before doing so, it must be satisfied that the order would be effective. This might be so where, for example, the order could be enforced by contempt proceedings against a non-compliant respondent. The factors the court took into account included whether the respondent was an incola or a peregrinus, but it was no bar to the granting of an anti-dissipation interdict that the assets were situated outside its jurisdiction. Unlike the South African case of Metlika Trading, the Zimbabwean court drew a distinction between mandatory and prohibitory injunctions, and held that it had no jurisdiction to grant a mandatory injunction for acts to be committed outside its jurisdiction as that would infringe the sovereignty of the foreign country. This is an unfortunate distinction. The issue is whether the court has jurisdiction over the person and not whether it has jurisdiction over the act to be prohibited or done abroad. It is suggested that the approach of the South African court in Metlika Trading which looked solely to the issue of whether or not it had jurisdiction over the person was better. This is not to suggest that the act to be prohibited or performed abroad is irrelevant, but such consideration should go to the exercise of jurisdiction, not its existence. Although the courts have shown a willingness to assume jurisdiction over acts done abroad, they have always required some connection with the forum. Thus, where a contract was entered into in Kigali (Rwanda), but the place of performance was in Kenya, it was held that the Kenya courts had jurisdiction.59 Absent such connections, the courts will not assume jurisdiction. In Kenya School of Flying Ltd. v. Ace Ina UK Ltd.,60 the court set aside an order granting leave to serve summons and service of the summons on the defendant in the UK. The insurance policy upon which the claim was founded was made in England. The defendants were resident and carried on business in England. They were not domiciled or resident in Kenya. The court held that although the risks covered by the policy might occur worldwide, it did not mean the contract was to be performed in Kenya. This was so even though the accident which gave rise to the claim occurred in Kenya. It further held that the claim did not fall under paragraph Order V Rule 21 (f) of the Civil Procedure Rule as the accident was not a tort alleged against the defendants but an event giving rise to liability under the insurance contract. 2000 (1) Z.L.R. 1. Georgina Ngina v. Inter Freight East Africa Ltd. [2006] eK.L.R. 60 [2005] eK.L.R. 58 59

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Richard Frimpong Oppong In Sunrise Travel and Tours Ltd v. Wanjigi,61 the facts upon which the plaintiff’s cause of action was founded arose outside Kenya. The plaintiff was a limited liability company incorporated in the UK and carried on business outside Kenya. The defendant resided in Kenya. The court held that under the laws of Kenya, the courts had no jurisdiction over a contract wholly entered into and performed outside Kenya even if the defendant actually resided in Kenya. The court reasoned that the Foreign Judgments (Reciprocal Enforcement) Act (Cap 43) was enacted to deal with such situations, and the plaintiff should have sued in the UK and enforced the judgment in Kenya. This reasoning is not legally sound. At common law, residence is an indisputable basis on which the court could have assumed jurisdiction over the Kenyan defendant, although given the facts it could have declined to exercise that jurisdiction.62

F.

Domicile as a Basis of Jurisdiction63

Domicile is used as a basis of jurisdiction, especially, in matrimonial causes, in the countries under review. In Nku v. Nku,64 the Botswana court refused to reform the rule that a married woman acquired the domicile of the husband on marriage.65 It was argued that the rule discriminated against women. The court reasoned that countries had adopted a uniform system using the law of domicile with a view to stabilising the status of married persons, and that a unilateral change in the law would bring confusion. It was held that a change in the law of domicile should be broadly based, such as could be achieved by international convention concluded by members of the United Nations, so as to reduce possible conflicting status of persons as they move from one country to another. De Jager v. De Jager66 was an application for divorce. At issue was whether the Zimbabwean court had jurisdiction on the basis of the husband’s domicile. The husband was a New Zealander who was in Zimbabwe on a temporary residence permit. The court held that whether a person was domiciled in Zimbabwe was a question of fact. The fact that a person stayed in Zimbabwe did not necessarily mean he was domiciled there. There must be an intention to remain permanently.67 [2002] L.L.R. 5933. Generally, it appears some of the courts have not been careful to draw a distinction between the existence and exercise of jurisdiction. The distinction is important to the proper application of the doctrine of forum non conveniens, and in analysing the effect of choice of forum agreements on the jurisdiction of the courts. 63 On domicile as a connecting factor in choice of law see section III (B) (4). 64 1998 B.L.R. 187. 65 Compare Amponsah v. Amponsah [1997-1998] 1 G.L.R. 43, 45 where the Ghanaian court described this rule as not ‘progressive.’ 66 1998 (2) Z.L.R. 419. 67 In Latif v. Latif 2002 (2) Z.L.R. 466, it was held, relying on statutes and case law that a minimum of one year residence, in addition to an intention to reside permanently, was 61 62

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A Decade of Private International Law in African Courts 1997-2007 (Part I) In Drew Brown v. Caroline Angela Brown,68 the Malawian court held that the acquisition of a domicile of choice required ‘a clear, unequivocal, and fixed intention’ of permanently abandoning one’s domicile of origin and permanently adopting Malawi as the new home. The case was an application for divorce. The applicant unsuccessfully argued that he had acquired a Malawian domicile of choice on the basis of his approximately one year’s residence in Malawi, attempts to buy a home, his investment in a company, and the renewal of his Temporary Employment Permit in Malawi. The court gave strong weight to the fact that the applicant had, a month before the application, sworn an affidavit in which he averred that he was domiciled in England. Drew can be contrasted with Toumbis v. Antoniou69 where the South African court held that a Cypriot who had been resident in South Africa for about eight months70 on a temporary permit, had acquired a business there, and had a pending application for permanent residence with the Department of Home Affairs was domiciled in South Africa. Grindal v. Grindal71 involved the question as to whether the applicant was domiciled in South Africa so as to confer jurisdiction on its courts in a divorce application. The applicant’s domicile of origin was South Africa, but she had abandoned it in favour of an Australian domicile of choice. She argued unsuccessfully that she had abandoned the Australian domicile of choice and, thus, her domicile of origin revived automatically. The court reasoned that by virtue of the Domicile Act 3 of 1992, the common law doctrine of revival of domicile was not part of South African law. It was held that to revert to one’s domicile of origin, one had to be lawfully present within the jurisdiction with an intention to settle permanently. Although the applicant had that intention, she was, at the date of the application, resident in England and, thus, did not meet the residency requirement. The Australian domicile of choice persisted until she acquired a new domicile. These cases suggest that a very high degree of proof is required before a change in domicile is accepted.72 However, the degree of proof required has not been uniform.73 These cases have all involved matrimonial causes. It is arguable required to establish the acquisition of a domicile of choice in Zimbabwe. In Juliet Chikwenengere v. George Chikwenengere Case No HC 747/05 (High Court, Zimbabwe, 2005 it was held that a Zimbabwean national who held a working visa in the United Kingdom, had applied for citizenship and bought a house had acquired an English domicile of choice. 68 Matrimonial Cause No 9 of 2002 (High Court, Malawi, 2002). 69 1999 (1) S.A. 636. 70 The applicant had earlier been resident in South Africa for about seven years. 71 1997 (4) S.A. 137. 72 See also Christine Main v. Gideon Frederic Johannes Van Tonder 2006 (1) N.R. 389, and Amponsah v. Amponsah [1997-98] 1 G.L.R. 43 where the Ghanaian court held that merely acquiring the citizenship of another country did not imply the automatic abandonment of one’s domicile of origin. 73 Compare ‘a clear, unequivocal, and fixed intention’ in Drew Brown v. Caroline Angela Brown with ‘preponderance of probabilities’ in Christine Main v. Gideon Frederic Johannes Van Tonder 2006 (1) N.R. 389.

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Richard Frimpong Oppong whether the courts would adopt a lower degree of proof on other issues for which domicile may be relevant.

III. Choice of Law A.

Preliminary Topics

1.

Characterization – the Problem of ‘Gap’

Characterization is perhaps one of the most fascinating areas of private international law. It is a process judges undertake in solving private international law problems, albeit often unconsciously and in the background.74 However, when it becomes a triable issue, its challenge is formidable. One of the pitfalls of the process is what has been termed ‘gap.’ A gap arises when the characterization process with respect to substance and procedure leads to no applicable law for the subject matter. In 1982, Professor Forsyth predicted that the problem of gap would rear its head in the South African courts.75 The years under review saw two cases in this regard. Rarely do these cases come up, so one cannot but commend the judges for the depth of their analysis in these cases.76 In Society of Lloyd’s v. Price,77 the plaintiff sought provisional sentence for default judgments obtained in England. The judgments had been granted in respect of a contract with an English choice of law clause. The defendants argued that the claims were prescribed under South African law since they were brought three years after the judgments. The plaintiff argued that the English law of prescription applied, and under it the claims were not statute barred. The South African court classified the South African prescription rule as one of substance and the English rule as one of procedure. This resulted See e.g. Hassan v. Hassan 1998 (2) S.A. 589, discussed in NEELS J.L., ‘Classification as an Argumentative Device in International Family Law’, in: S. Afr. L. J. 2003, p. 883894. See also SCHULZE C., ‘Formalistic and Discretionary Approaches to Characterization in Private International Law’, in: S. Afr. L. J. 2006, p. 161-179. EISELEN S., ‘Laconia RevisitedA Reappraisal of Classification in Conflict of Laws’, in: S. Afr. L. J. 2006, p. 147-160. 75 FORSYTH C.F., ‘Extinctive Prescription and the Lex Fori: A New Direction?’, in: S. A. L. J. 1982, p. 16, 20. 76 See generally FORSYTH C.F., ‘ “Mind the Gap”: A Practical Example of the Characterization of Prescription/Limitation Rules’, in: J. Priv. Int’l. L. 2006, p. 169-180; ‘“Mind the Gap II”: The South African Supreme Court of Appeal and Characterization’, in: J. Priv. Int’l. L. 2006, p. 425-431 77 2006 (5) S.A. 393. The South African court had earlier in Society of Lloyd’s v. Romahn 2006 (4) SA 23 held on facts similar to Price that in case of a ‘gap’ the court should follow the via media approach. This meant regard should be had to both the lex fori and lex causae in considering whether the South African prescription regime or the English limitations regime should apply to the plaintiff’s claim against the defendant. 74

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A Decade of Private International Law in African Courts 1997-2007 (Part I) in a ‘gap’ in which neither South African nor English law applied. The court held that the appropriate way to deal with the gap was to adopt the via media approach. As described by the court, under this approach, the court first makes a provisional determination as to whether, under the relevant South African and English law, prescription was a matter of substance or procedure, and then a final determination, taking into account policy considerations, to which legal system the dispute has it closest and most real connection. In this instance, it held that considerations of policy, international harmony of decisions, justice and convenience dictated that the gap be resolved by dealing with the questions of prescription in terms of the lex causae, in this case English law. The court rejected the residual lex fori approach adopted by the court a quo.78 The approach advocated in Price had earlier been adopted in the Zimbabwe case of Coutts v. Ford,79 the defendant bank sought to recover a debt owed by the plaintiff. Under Zimbabwe law the claim was prescribed but, under English law, the lex causae, it was not. The court characterized the Zimbabwe prescription rule as substantive and the English rule as procedural. This resulted in a gap, or what the court termed ‘a vicious circle’. It held that the traditional approach was for the lex fori to characterize according to its own law and not the lex causae. But the better approach, in a case like this, was to apply the via media approach. This approach enabled the court to take into account the consequences of deciding the case one way or the other. To the court the approach was more enlightened and likely to achieve international comity and justice. In this instance, the court held that English law applied and the claim was not prescribed.

2.

Characterization – Substance and Procedure

Another aspect of characterization that arose in the years under review related to substance and procedure. In Preferential Trade Area Bank v. ESCOM,80 the defendants suggested that they were not liable for lawyer’s costs under Malawi’s Legal Practitioners (Scales and Minimum Charges) (Amendment) Rules because the law governing the contract on which the dispute arose was English law and that costs should be paid under English law. The contract provided ‘This Loan Agreement shall be construed and governed in accordance with the Laws of England’.81 It was held that the costs of litigation were not part of the contract and were governed by the rules of the court seized with the matter. The Malawi court found no reason in principle why lawyers litigating in Malawi should be remunerated on foreign scales and principles. Society of Lloyd’s v. Price 2005 (3) S.A. 549. 1997 (1) Z.L.R. 440. 80 Civil Cause No. 238 of 2000 (High Court, Malawi, 2003). 81 The Malawi court held that the provision related to the construction and law governing the contract, but it did not prescribe the forum. To the court because of its close connection with the place of performance of the contract and the two defendants, it was the forum conveniens. 78 79

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Richard Frimpong Oppong In Godka Group of Companies v. PS International Ltd.,82 the action was instituted on the plaintiff’s behalf by a Ghanaian lawyer, the donee of a Power of Attorney executed by the Vice President of the plaintiff company which was registered in Indiana, USA.83 The defendant was dissatisfied with the Ghanaian lawyer instituting the action, but the judgment is confused on what the real issues were. There are dicta which suggest that the dissatisfaction related to both the formal validity of the power of attorney and his capacity to institute the action. To make matters worse counsel sought to rely on Indiana law, but did not call any expert witness for that purpose.84 The Ghanaian court was equally not careful to distinguish between the issue of the formal validity of the power and the capacity to act under the power. Indeed, it appears to have treated the power as part of the contract for the supply of the goods.85 It held that the question of whether or not the power was valid, was merely procedural, and was determinable by the laws of Ghana, the lex fori. The Kenyan case of Tononoka Steels Ltd. v. The Eastern and Southern Africa Trade and Development Bank86 raised an interesting issue of whether immunity was a question of procedure or substance. The case suggests that the lex causae may be a relevant consideration in determining the availability of immunity. In this case, the plaintiff sought damages for breach of contract against the defendant bank, a body corporate established by some African states under a multilateral treaty, and made an interlocutory application for an injunction. The bank claimed immunity from civil process under the Kenyan Privileges and Immunity Act. It further contended that by virtue of an arbitration clause in the contract, the applicable law was the law of England. The court held that under the Act the bank enjoyed only qualified immunity. It further held that the defence of immunity was not available to the bank because the applicable law of the agreement was the law of England and, under that law, immunity did not extend to commercial transactions. Given that countries are still divided between restrictive and absolute immunity, this is a significant holding. If immunity is a question of substance, hence governed by the applicable law, it offers the possibility to parties to escape its effect through their choice of law agreements.

[1999-2000] 1 G.L.R. 409. The judgment is not very clear on where the Power of Attorney was executed but, at pages 421-222, it appears it was executed in Ghana. 84 It was held that foreign law was a question of fact. It must be proved by judicial evidence and, in the absence of such proof, Ghana law will apply. 85 It was held that the issue raised was not one that went to formal validity or substance and did not render the contract unenforceable. 86 [2000] 2 E.A. 536. 82 83

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Specific Topics

1.

Contract

The courts showed willingness to uphold choice of law agreements. Bank of Uganda v. Bano Arabe Espanol87 was an appeal from a judgment against the appellant, the Bank of Uganda, as guarantor of a loan between the respondent and the Government of Uganda. The appellant argued that the loan agreement was invalid since, contrary to the by-laws of the Bank, it did not have the Bank’s seal. The agreement provided that it should be governed by and construed in accordance with English law and the parties irrevocably submitted to the non-exclusive jurisdiction of the English court. The court held that this clause totally excluded Ugandan law in the interpretation of the agreement. The total exclusion was reinforced by the non-exclusive jurisdiction clause. If it was the intention of the parties to apply Uganda law, they would have used the same expression used when deciding on jurisdiction. It was held that the agreement was governed by English law. The judgment is unclear on whether the court treated the absence of a seal as an issue of formal or substantive validity. Ekkehard Creutzburg v. Commercial Bank of Namibia88 involved the issue of the formal validity of a deed of suretyship executed in Namibia between the appellants, who were residents in South Africa, and a Namibia company. The deed contained a ‘Republic of South Africa and/or the Republic of Namibia’ choice of law clause, and a ‘Supreme Court of South Africa and/or the Republic of Namibia’ choice of forum clause.89 The deed was invalid under South African law since it did not contain the identity of the creditor. But it was valid under Namibian law. The South African court held that the formal validity of the deed was governed by the lex loci contractus. The court discussed and upheld the facultative approach to determining the formal validity of contracts. The facultative approach ensures that a contract is not rendered invalid merely for lack of the forms required by the lex loci contractus when it complies as to form with its proper law.

Civil Appeal No. 23 of 2000 (Court of Appeal, Uganda, 2000). Case No 29/04 (Supreme Court of Appeal, South Africa, 2004). Reported in 2006 (4) All South Africa Reports 327. 89 The court did not comment on counsel’s argument that given the ordinary and grammatical meaning of the wording of the agreement, it follows that the parties intended that, in South African courts, South African law would apply and, in Namibian courts, Namibian law would apply. See also Afinta Financial Services (PTY) Limited v. Luke Malinga T/A Long Distance Civ Case No 123/2001 (Court of Appeal, Swaziland, 2001) where the agreement provided that it “shall be governed by and construed in accordance with the laws of the Republic of South Africa and the Kingdom of Swaziland” The Swaziland court applied Swaziland law. It held that the agreement was entered into in Swaziland by parties domiciled, resident and carrying on business in Swaziland and the agreement was to be performed wholly in Swaziland. 87 88

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Richard Frimpong Oppong In Indigo EPZ Ltd. v. The Eastern and Southern Africa Trade and Development Bank,90 the Kenyan court interpreted a choice of law clause.91 It read: ‘This agreement shall be construed and governed in accordance with the Laws of England’. It was held that ‘the clause concerned itself with matters of construction or rather interpretation of the agreement and does not relate to issues of jurisdiction or applicability of Kenyan laws to the agreement’. This dictum should be confined to the principles that, notwithstanding the choice of law agreement, matters of procedure are still governed by the lex fori. The choice may also be overridden by mandatory rules of the forum. Unless these are the case, the dictum whittles down the effect of choice of law agreements and undermines their utility. Another issue discussed in the Ghanaian case of Godka Group of Companies v. PS International Ltd.92 was that of the applicable law in the absence of an express choice of law agreement. The plaintiff, an Indiana, USA registered company sought to recover the purchase price of goods supplied to the defendant Ghanaian company. The court held that in the absence of an express choice of law agreement, the proper law of the contract was that with which it was most closely associated or connected. In this instance, the contract was between an Indiana company and a Ghanaian company. It was to be performed in Ghana by the delivery of the goods in Ghana. The goods were to be sold in Ghana. Payment was to be effected in Ghana through Ghanaian agents. It was held that the legal system of Ghana governed disputes arising from the contract. In Roger Parry v. Astral Operations Ltd.,93 the applicant sought damages for breach of a contract of employment with the respondent South African company. The applicant was responsible for the Malawi operations of the respondent and he was located there. A central issue was the applicable law. The South African court rejected the respondent’s argument that the contract was governed by Malawi law since it was the place of performance. The court characterized South African labour legislation as mandatory and directly applicable to all employment contracts [2002] 2 E.A. 388. The court was responding to an argument that by virtue of the clause no other laws had any application in the matter; neither could the Kenyan courts be moved under Kenya laws for any relief pursuant to the parties’ agreement. See also Papco Industries Ltd v. Eastern and Southern African Trade and Development Bank [2006] eK.L.R. It was argued that the court had no jurisdiction over the case because the contract at issue contained an English choice of law clause. The court accepted this argument. It held ‘The courts of Kenya are obligated to uphold the Constitution of Kenya. It would therefore follow that this court cannot construe the law of England.’ But see Eastern and Southern African Trade v. Hassan Basajjabalaba [2007] Uganda Commercial Court 30 where the court held that an English choice of law clause did not oust its jurisdiction. 92 [1999-2000] 1 G.L.R. 409. 93 Case No. C 190/2004 (Labour Court, South Africa, 2005). Reported in 2005 (10) Butterworths Labour Law Reports [B.L.L.R.] 989. See also Kleinhans v. Paramalat SA (Pty) Ltd. [2002] 9 B.L.L.R. 879 discussed by FREDERICKS E.A., ‘The Proper Law of the International Contract of Employment: Interpreting the Kleinhans Decision’, in: S. Afr. Mercantile L. J. 2006, p. 75-82. 90 91

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A Decade of Private International Law in African Courts 1997-2007 (Part I) in South Africa. There was no choice of law clause in the contract. But even if there was a foreign choice of law clause, the court was prepared to be ‘guided by’ article 6 of the Rome Convention on the Law Applicable to Contractual Obligations and uphold that choice only if it did not deprive the employee of the protections afforded by the mandatory rules of South African law.94 The court found that from the terms of the contract the parties had tacitly adopted South Africa law as the applicable law. Additionally, there were strong factors connecting the contract with South Africa. The South African case of Tesoriero v. BHYJO Investment Share Block (Pty) Ltd.95 considered the issue of the applicable law as regards capacity to contract. The court held that in the case of an ordinary commercial contract, capacity was determined by the lex loci contractus. In this instance, a deed of suretyship was executed in South Africa by a woman who was married in community of property under Argentinean law. It was argued that under Argentinean law she had no capacity to sign the deed.96 It was held that the issue of capacity was governed by South African law. From the common law’s perspective this is a significant decision. The law which governs capacity to make a commercial contract is ‘a matter of speculation so far as the English common law authorities is concerned’.97

2.

International Carriage by Air

The Convention for the Unification of Certain Rules Relating to International Carriage by Air (Warsaw Convention) is one of the principal international instruments regulating international air travel. The South African case of Potgieter v. British Airways Plc98 held that with matters to which the convention applied, it was intended that the convention was exclusive of any resort to the rules of domestic law. The plaintiff sued in contract and delict. He alleged that he was humiliated and degraded by the conduct of a flight attendant who requested him to stop kissing his partner during a flight from Cape Town to London. He did not allege any physical harm. The defendant’s exception to the claim was upheld by the South African court after an extensive review of cases from the UK, USA, Canada and France. Some cases discussed the issue of the applicable law for damages resulting from the loss of baggage and delay in the transport of cargo. Cameroon Airline v.

The court noted that South Africa was not bound by the Convention but found it relevant to consider it since article 39(1) of the South African Constitution mandates the consideration of international law in the determination of cases. 95 2000 (1) SA 167. 96 No evidence was offered to support this argument. 97 NORTH P.M. and FAWCETT J.J., Cheshire and North’s Private International Law, London 1999, p. 592. 98 2005 (3) S.A. 133. 94

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Richard Frimpong Oppong Miss Jumai Abdul Kareem99 involved a claim for damages for the loss of baggage on a flight from Jedda, Saudi Arabia to Lagos, Nigeria. The Nigerian trial court awarded damages for the loss in accordance with common law. On appeal, it was held that for international carriage by air, the applicable law in computing compensation was the Warsaw Convention (as amended by the Hague Protocol) adopted by the Carriage by Air (Colonies, Protectorates and Trust Territories) Order 1953.100 Ngunjiri v. British Airways World Cargo101 was an action to recover damages for loss resulting from delay in the carriage by air of goods from Kenya to the USA. The Kenyan court held that the preamble of the Carriage By Air Act No 2 of 1993 made the Warsaw Convention as amended by the Hague Protocol of 1955 part of Kenyan law. Its provisions on limitations of the carrier’s liability therefore applied.102 These cases can be contrasted with the Ghanaian case of Slyvanus Juxon-Smith v. KLM Royal Dutch Airline.103 In this case, the court found the defendant liable for deliberately and unjustifiably preventing the plaintiff from boarding a flight to the UK. Although it held that the parties’ relationship was governed by the Warsaw Convention, it applied common law principles in determining the amount of damages. In Impala Platinum Limited v. KLM,104 the South African court held that a consignor or consignee that did not suffer damage from a loss of cargo under an international air carriage agreement had title to sue the carrier. The court, after an extensive review of comparative authorities from many jurisdictions, held that since the inception of the convention, there was no case dealing with the issue of whether a nominal consignor or consignee had title to sue. The decisions in other jurisdictions dealing with the extension of the right to sue had readily and correctly assumed that such title to sue exists. A contrary holding would disregard the reali-

99

[2003] 11 N.W.L.R. 1.

The Supreme Court of Nigeria held in Joseph Ibidapo v. Lufthansa Airlines [1997] 4 N.W.L.R. 124 that the Warsaw Convention was applicable in Nigeria. 101 [2003] K.L.R 222. 102 See also the Uganda case of Kenya Airways Limited v. Ronald Katumba Civil Appeal No. 43 of 2005 (Court of Appeal, Uganda, 2006) where the court held that, in the absence of wilful misconduct, compensation for loss of cargo was limited under article 22(2) of the Warsaw Convention. 103 Suit No. FTC 46/2002 (High Court, Ghana, 2003); Civil Appeal No. HI/18/2004 (Court of Appeal, Ghana, 2004); Civil Appeal No. J4/19/2005 (Supreme Court, Ghana, 2006). See also Madam Happy Akos Hloradzi v. Lufthansa German Airlines Accra Suit No. C. 801/2001 (High Court, Ghana) (where the Ghanaian court, in a default judgment, awarded the plaintiff damages for losses occasioned by inter alia a loss of luggage and maltreatment at the hands of airline staff without any reference to the Warsaw Convention) and Akharali Karim Kurji v. British Airways Plc Ltd. [2005] eK.L.R. (where the Kenyan court, in a default judgment, awarded damages for defendants refusal to allow the plaintiff, who had a valid ticket, to board the aircraft without any reference to the Warsaw Convention) 104 Case No. 315/05 (Supreme Court of Appeal, South Africa, 2006). 100

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A Decade of Private International Law in African Courts 1997-2007 (Part I) ties of modern day international air carriage, would not make commercial sense and would offend the need for uniformity under the convention. The Lesotho case of S. Carlos v. Government of Lesotho105 held that the Warsaw Convention as amended and incorporated into the laws of Lesotho by section 3(1) of the Carriage by Air Act, No 35 of 1975, applied only to international carriage as defined in the convention. Thus, where the appellants were involved in a crash during an airlift of equipment in a helicopter supplied by the Royal Lesotho Defence Force, it was held that the convention was not applicable.

3.

Torts

In recent times, choice of law in torts has been a prominent area of study and jurisprudence. However, in Africa the area remains largely inactive; choice of law in torts remains unsettled in the countries under review. In Nigeria, a federal state, case law on intra-state torts supports both the double actionability rule and the lex loci delicti principles, but the position on international torts is unclear.106 In Ghana, it has been held that parties should sue in the state where ‘the cause of action arose and according to whose law the liability is to be determined’.107 But it is yet to be decided what law will apply if the court decides to assume jurisdiction. In South Africa, the issue is res nova. It is for the courts to decide which of various approaches to choice of law in torts they want to adopt.108 The Kenya case of Rage Mohammed Ali v. Abdullahim Maasai109 presented a rare opportunity to decide the issue of tort choice of law rule. However, counsel chose to pursue a contractual claim instead of a tortious one. The case arose out of an accident in Uganda. Both parties were citizens of and residents in Kenya. The plaintiff brought a claim in contract for general and special damages arising from injuries sustained in the accident. The court held that it had no jurisdiction over the claim since the plaintiff was unable to prove that he was an employee of the defendant, and also that the accident took place in Uganda. To the court this was a simple and straightforward case of a motor vehicle accident that took place in a foreign country outside the limits of the jurisdiction of the courts in Kenya. This observation suggests that the court appreciated the ‘foreign’ dimension of the claim. [1999-2000] L.L.R.-L.B. 139. AGBEDE I.O., Themes on Conflict of Laws, Lagos 1989, p. 159-179. AGBEDE I.O., ‘Nigeria’ in: International Encyclopaedia of Law Private International Law (VERSCHRAEGEN B. ed.) (Kluwer Law International 2004), p. 39-40. 107 Signal Oil & Gas Company v. Bristow Helicopters Ltd. [1976] 1 G.L.R. 371, 379. But see Wachter v. Harlley [1968] G.L.R. 1069 which supported the double actionability rule in a case which involved slander allegedly committed in Switzerland. 108 FORSYTH C., Private International Law the Modern Roman Dutch Law including the Jurisdiction of the High Court, Cape Town 2003, p. 326-327 and the writers cited therein. SCHOEMAN E., ‘South Africa’, in: International Encyclopaedia of Law Private International Law (VERSCHRAEGEN B. ed.) (Kluwer Law International 2001), p. 70. 109 [2005] eK.L.R. 105 106

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Richard Frimpong Oppong Indeed, one of the grounds of appeal was that the trial court erred on the ‘legal regime applicable’ to the suit. But it appears in so arguing, counsel did not have in mind a foreign law. In the Ghanaian case of Kisko Products (GH) Ltd. v. Delmas America Africa Line Inc.,110 the plaintiff, owner of goods that were shipped from the USA to Ghana, sued the defendant carrier for damages in contract and negligence for loss resulting from the under-delivery of and damage to the goods. The goods originated from Canada and it appears the contract of carriage was made there. The plaintiff pleaded res ipsa loquitur. None of the judgments discussed the issue of applicable law111 although it was admitted that the damage to the goods occurred outside Ghana.112 Justice Atuguba, perhaps applying Ghana law, held that the defendant had failed to rebut the presumption of negligence raised against them by the doctrine of res ipsa loquitur. Justice Ocran was influenced by the United Nations Convention on the Carriage of Goods by Sea, particularly article 5 on the liability of carriers.113 He held that the defendant was liable for the damage without clearly specifying under what law. On the whole the court applied Ghana law to a tort that was, admittedly, committed outside Ghana. In both Rage and Kisko, the judges cannot be overly criticised for ignoring this private international law aspect of the cases since counsel did not plead foreign law. However, one would have expected that a judge who was abreast with the subject and who also had an appreciation of the unsettled nature of the issue, would have, at least, alerted counsel to this aspect of the case. It is unfortunate that, in both cases, the choice of law in torts issue was not pursued. Given that internationally there are diverse approaches to the issue, it is impossible to predict the direction the courts will take in future.114

4.

Property and Succession

The question of the applicable law for determining the ownership of movable property was in issue in the South Africa case of Bominfolot Ltd. v. Kien Hung

Civil Appeal No J4/28/2005 (Supreme Court, Ghana, 2004). It does not appear any of the parties pleaded a foreign law in the action. 112 It was unclear whether the goods were damaged when they were loaded in Canada for transportation to the USA or at the USA port where, because the container exceeded the allowed weight, part was unloaded. 113 He noted that although Ghana has signed the convention, it has not ratified it. Thus, the convention was technically not part of Ghana law. But given Ghana’s obligation under article 18 of the Vienna Convention on the Law of Treaties not to defeat the object and purpose of a treaty prior to its entry into force, its contents were ‘highly relevant’. 114 It appears that internationally, the lex loci delicti commissi rule is gaining ground. See KIGGUNDU J., ‘Choice of Law in Delict: The Rise and Rise of the Lex Loci Delicti Commissi’, in: S. Afr. Mercantile L. J. 2006, p. 97-105. 110 111

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A Decade of Private International Law in African Courts 1997-2007 (Part I) Shipping Co Ltd.115 The case involved a dispute over the ownership of containers in South Africa which the applicant sought to attach. The applicant contended that the applicable law was the lex domicilii of the owner. The intervening party argued it was the lex situs. The court held that under South African law, disputes concerning the ownership of movables were governed by the lex situs at the time of the transaction. This rule is not usually difficult to apply in cases of tangible movables. However, in cases of intangible moveables, such as securities, locating the situs can be a formidable challenge.116 In MV Snow Delta Serva Ship Ltd. v. Discount Tonnage Ltd.,117 the South African court held that the situs of an incorporeal right was where the debtor resides. Thus, the contractual rights of a time charterer were not located wherever the vessel may happen to be from time to time. They were located where the owner, from whom the vessel was time chartered, resided. The Zimbabwe case of Lafontant v. Kennedy118 involved a dispute over the ownership of a house acquired in Zimbabwe in the joint names of the parties, neither of whom was domiciled in Zimbabwe. At the time of the action, they had been divorced by a court in Haiti. It was held that under Roman Dutch law, the proprietary consequence of marriage was governed by the law of the husband’s domicile at the time of the marriage. It was further held that, in the case of immovable property situated in Zimbabwe, Zimbabwe law was the lex loci rei sitae. In the South African case of Emmanuel Rotimi Sadiku v. Grace Jumai Sadiku,119 the parties married in Nigeria where the concept of community of property was unknown. They moved to South Africa, where the husband, after obtaining a decree of divorce, sought to evict the wife from his house. The wife challenged the eviction arguing that she was entitled to a share of the property under South African law. The court held that the patrimonial consequences of marriage was governed by the husband’s lex domicilii at the time of marriage, and that only an express agreement between them could alter that governing law. An agreement to move domicile to a new country would not suffice. The court queried whether the categorical application of the lex domicilii of the husband in determining the patrimonial consequences of marriage was still acceptable within a gender equal society.120 115 2004 (2) S.A. 556. See generally MENDELSOHN J.M., ‘The Choice of Law Rule for Goods in Transit: Bominflot Ltd v Kien Hung Shipping Co Ltd’, in: S. Afr. Mercantile L.J. 2007, p. 387-393; NEELS J., ‘The Proprietory Effect of Reservation-of-Title Clauses in South African Private International Law’, in: S. Afr. Mercantile L.J. 2006, p. 66-74. 116 The Hague Convention on the Law Applicable to Certain Rights in respect of Securities held with an Intermediary 2006 is meant to solve some of the choice of law problems associated with securities. Currently, there is no African state party to it. See generally ROODT C., ‘The Law Applicable to Certain Rights in Respect of Securities held with an Intermediary: The Hague Securities Convention’, in: S. Afr. Mercantile L.J. 2006, p. 83-96. 117 2000 (4) S.A. 746. 118 2000 (2) Z.L.R. 280. 119 Case No 30498/06 (High Court, South Africa, 2007). 120 See also Esterhuizen v. Esterhuizen 1999 (1) S.A. 492.

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Richard Frimpong Oppong The Namibian case of Christine Main v. Gideon Frederic Johannes Van Tonder121 involved a claim for maintenance by a mentally disabled adult female without legal capacity against the estate of her deceased father who, at the time of death in 2001, was domiciled in Namibia. Since 1957, the daughter had been resident in a mental home in Germany. Five applicable laws were suggested.122 The court held that the law which governed the claim was the lex domicilii of the daughter at the time of the deceased’s death. The court rejected the argument that the deceased had changed the daughter’s domicile and that she was now domiciled in Germany. The facts—that she had been resident in Germany since she was about five years old and for over forty years, that the deceased acquiesced in her removal to Germany, that the deceased at the time of death no longer maintained her, and that she had had no association with Namibia for over 48 years—were held insufficient, on a preponderance of probabilities, to establish a change of domicile. The court held that she was still domiciled in Namibia and under Namibian law she was entitled to maintenance from the estate. The area of succession also saw some cases of interest. In Re Estate of Naftali (Deceased),123 the Kenyan court considered the applicable law of intestate succession with respect to the movable property of the deceased who was not domiciled in Kenya at the time of death. It held that the applicable law was the lex domicilii. The deceased appeared to have been domiciled either in Rwanda or the Democratic Republic of Congo. The Ugandan case of Suman Naresh Kara v. Norattam Bhatia124 was an application in Uganda for probate of a Will relating to movable property in Uganda owned by the Indian domiciled deceased. It was held that, by virtue of section 4(2) of the Succession Act (Cap 162), which provided that succession to movable property of a deceased person was regulated by the law of the country of domicile at the time of death, the High Court had no jurisdiction to grant Probate. The court held that, in Ugandan law, the distinction between administration and succession was non-existent. Petitions for grant of probate and devolution were merely part of succession and regulated by the law of domicile. It appears the court confused the choice of law issue with that of the jurisdiction to grant probate.125 The South African case of Tomlinson v. Zwirchmayr126 considered the applicable law governing the formal validity of a Will executed in Austria disposing of immovable property in South Africa. It was held that a Will, valid according to the 2006 (1) N.R. 389. The lex situs of the estate of the deceased; the lex fori of the plaintiff’s claim; or the lex loci domicilii of the deceased as at the time of the child’s birth; the lex loci domicilii of the deceased at the time of his death; the lex loci domicilii of child at the time of the death of the deceased. 123 [2002] 2 K.L.R. 684. 124 [1997] IV K.A.L.R. 1. 125 See section 235 of the Succession Act and the Administration of Estates (Small Estates) (Special Provisions) Act (Cap 156). 126 1998 (2) S.A. 840. 121 122

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A Decade of Private International Law in African Courts 1997-2007 (Part I) internal law of the place of execution, was valid in South African law to dispose of immovable property situated in South Africa, although the execution might not necessarily be valid under the formal requirements of South African law. The court reasoned that any other conclusion would, first, lead to the intolerable situation under which a testator with immovable property in multiple jurisdictions would have to execute a Will that complied with the law of all the jurisdictions! Second, it would be inconsistent with South Africa’s obligations under the Hague Convention on the Conflicts of Laws relating to the Form of Testamentary Dispositions.127 In Kells v. Ako Adjei,128 the Ghanaian court held that a Will executed in London was not valid because it was not executed in accordance with the requirement of section 2 of the Wills Act, 1971 on the execution of Wills. Although the court did not expand on its rationale for relying on Ghana law, the decision may be explainable on the grounds that the testator was a Ghanaian. Under section 15(1) of the Act, a Will shall be deemed to be properly executed if its execution conformed to the internal law in force in the territory where it was executed, or in the territory where, at the time of its execution or of the testator's death, he was domiciled or had his habitual residence or in a state of which he was a national at either of those times. The court did not examine the prospect of the Will being valid under the laws of England where it was executed. Were the Will to be held valid under English law, the interpretive question of the relationship between the various parts of section 15(1) would have arisen.

5.

Foreign Currencies

A peril of international business is foreign currency risk. This is brought out poignantly in the Zimbabwe case of Echodelta Ltd. v. Kerr and Downey Safaris.129 The plaintiff, a foreign company, sought repayment of a US$ 90,385.06 debt in the equivalent Zimbabwe dollars. The defendant consented to judgment and tendered payment of the amount in Zimbabwe dollars using the official exchange rate of 55:1. The plaintiff rejected the tender, and demanded payment at the parallel market exchange rate of about 300–350:1. To the plaintiff, justice required that it should not suffer loss by reason of the devaluation of the Zimbabwe dollar. The defendant argued that it was, by statute, illegal to acquire foreign currency from an unauthorised dealer or to pay anything above the official exchange rate. Although the court noted that, in appropriate cases, it had jurisdiction to give judgment in foreign currency, it held that it could not order payment at any rate other than the official rate despite the reality of the parallel market. The defendant was ordered to pay the Zimbabwe equivalent of the debt at the official rate of 55:1.130 The effect of South Africa is party to the convention. Case No CA 8/2000 (Supreme Court, Ghana, 2001). 129 2004 (1) S.A. 509. 130 But see Meristem Investment (Pvt) Ltd. v. NMB Bank Ltd. 2002 (2) Z.L.R. 729 where it was held that the respondent who acquired foreign currency on the parallel currency 127 128

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Richard Frimpong Oppong this was that the plaintiff recovered only about US$ 18,000 of the original debt! This judgment enabled the debtor to benefit inordinately from the depreciation of the Zimbabwe dollar. In Charles Thys v. Herman Steyn,131 the Kenyan court held that it would be contrary to public policy for judicial procedure to be exploited to rake in supernormal profits associated with the rapid fluctuations of the Kenyan shilling on the international money markets. In Zambia Industrial Mining Corp. Ltd. v. Lishomwa Muuka,132 the Zambian court held that there was ample authority and reason for disallowing attempts in transactions expressed in Kwacha (the Zambia currency) to hedge against the depreciation of the internal value of the Kwacha by notionally storing the value in a foreign currency at an earlier and more favourable exchange rate and then reconverting the foreign sum at the rate prevailing when the sum was due.133 In Eden v. Pienaar,134 the South African court held that under South African law, the law of currency determined the composition, denomination and nominal value of the foreign currency concerned. On the other hand, it was the law governing the transaction from which the debt arose (e.g. the law applicable to a contract) that determined whether and to what extent the debtor was liable to make additional payment to the creditor by way of revalorisation in the event of a depreciation of the currency. This suggests that the applicable law of the contract is an important instrument through which the contracting parties can address the risks associated with fluctuations in the value of currencies. Where the applicable law allows for revalorisation, the purchasing power of the debt can be maintained over time. The Ghanaian case of Delmas America Africa Line Inc v. Kisko Products Ghana Ltd.,135 discussed the question of the appropriate currency in which damages should be denominated. The Ghanaian court held that in the absence of a clear statutory prohibition in the country of payment, parties to an international contract for goods or services could make a choice of law decision as to the currency of market for the applicant to enable the latter discharge its pre-existing contractual obligation was entitled to debit the applicants account with that amount. 131 [2006] eK.L.R. 132 [1998] Zam. L.R. 1. 133 In this case, the plaintiff was sold a house in 1975 for K 60,000. At that time, and with an exchange rate of $ 1 to K 0.64, the value of the house was $ 93, 750. The defendant did not perform and when in 1998 the plaintiff sought specific performance the defendant argued that with the present exchange rate of K 1332.27 to $ 1, the value of the house was K 124, 900, 312. 50. Failing to consider the potential development of a ‘parallel’ currency market when entering into a contract with a foreign currency dimension can have serious financial consequences. See Annandale v. Material Finance (Pvt) Ltd. 2002(2) Z.L.R.740. 134 2001 (1) S.A. 158. 135 [2005-2006] S.C.G.L.R. 75. Although an obligation may be denominated in foreign currency, there is a statutory prohibition on making or receiving payment in the foreign currency in Ghana. See Sam Jonah v. Duodu-Kumi [2003-2004] S.C.G.L.R. 50; Takoradi Flour Mills v. Samir Faris [2005-2006] S.C.G.L.R 882.

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A Decade of Private International Law in African Courts 1997-2007 (Part I) payment, but, where there was no contractual choice of currency provision, the currency of payment was presumed to be the legal tender of the place of transaction. In this instance, there was no choice of currency agreement. The court applied the presumption and held that damages should be denominated in Canadian dollars.136 This is a significant decision for international commercial transactions. It implies that damages for disputes arising under most international contracts, which presumably would have their place of transaction outside Ghana, will be denominated in a foreign currency by the Ghanaian court. Although this does not mean the damages will necessarily be payable in foreign currency,137 the financial consequences of the rule for the parties involved can be grave. Given the value of most African currencies, a judgment denominated in foreign currency presents an immediate financial advantage to the judgment creditor. The jurisdiction of the court to grant judgments in foreign currency provides some guarantee against adverse currency movements. At issue in Charles Thys v. Herman Steyn138 was the currency in which judgment should be denominated. The court held that in proper cases, it might grant judgment in foreign currency.139 The protection afforded by this jurisdiction is stronger where the debt obligation is denominated in foreign currency. In such an instance, courts may be more reluctant to give judgment in the local currency, especially where manifest injustice will ensue. In the Zimbabwe case of Chiraga v. Msimuko,140 the applicant sought amendment of a South African Rand denominated judgment so that he could pay it in Zimbabwe dollars. He argued that there was an acute shortage of foreign currency in Zimbabwe. The respondent denied this, and further argued that he had no proprietary or financial interest in Zimbabwe for which he needed the Zimbabwean dollars. The Zimbabwean court held that the respondent’s rejection of the Zimbabwean dollars payment was reasonable. The court refused to take judicial notice of the perceived shortage of foreign currency. It held that even if there was a shortage, it did not mean complete non-availability; some people might be able to secure some and the applicant might well be that person. Another issue discussed in the cases was how to assess the rate of interest exigible on a foreign currency debt. In Mawere v. Mukuna,141 the Zimbabwe court The goods under the contract of carriage originated in Canada, the goods were presumably purchased in Canada through the plaintiff’s representatives resident in Canada. 137 In Erik Emborg Export v. Jos International Breweries Plc [2003] 5 N.W.L.R. 505 the Nigerian court held that in converting a foreign currency debt into the local currency, that rate of exchange should be that prevailing on the date of payment. 138 [2006] eK.L.R. 139 See also AMI Zimbabwe (Pvt) Ltd. v. Casalee Hldgs (Successors) (Pvty) Ltd. 1997 (2) Z.L.R. 77; Erik Emborg Export A/S v. Jos International Breweries Plc [2003] 5 N.W.L.R. 505; Attorney General v. Sisi Enterprises Ltd. Civil Appeal No. 30 of 2004 (Court of Appeal, Tanzania, 2005). 140 2002 (2) Z.L.R. 368. 141 1997 (2) Z.L.R. 361. See also AMI Zimbabwe (Pvt) Ltd. v. Casalee Hldgs (Successors) (Pvty) Ltd. 1997 (2) Z.L.R. 77. 136

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Richard Frimpong Oppong held that where a loan was advanced in foreign currency, it was desirable that the contract should specify the money of payment as opposed to the money of account. Where both the money of payment and money of account were the same, then the applicable rate of interest was that of the money of account. If the money of payment was different from the money of account, the rate applicable should be that of the money of payment.142 In the court’s opinion, by agreeing to a different currency for the money of payment, the parties, by implication, agree that the rate of interest applicable was that of the money of payment. In PTC v. Xan Zhong143 the Zimbabwean court held that where an award was made in foreign currency the interest that was claimable on such award would be that which would be awarded by a court dealing with a similar matter in the country to which the currency related. In National Investment Bank Ltd. v. Silver Peak Ltd., the Ghanaian court held that it made commercial and economic sense for a dollar debt to attract a dollar interest rate and a Ghanaian cedi debt to attract a cedi interest rate.144

IV. Conclusion The past decade witnessed some interesting cases before African courts on jurisdiction and choice of law. The concentration of cases was on jurisdiction. Many more cases were decided by the South African courts than by those in the other countries. Comparatively, South Africa’s jurisprudence was richer, in terms of its ability to draw on multiple domestic and international sources, and the depth of judicial engagement with the complexity of the issues involved. There was also a fair amount of judicial dialogue among the Southern African countries; they borrowed from each other’s case law. Generally, South Africa was treated as the parent jurisdiction. The other countries relied heavily on its case law. This was not the case with the common law countries. They all looked mainly to England for comparative case law. Other common law jurisdictions with innovative approaches to private international law problems such as Australia and Canada were hardly looked at. It is on jurisdiction that Roman Dutch law rules diverges most from common law. With the abolition of arrest of peregrini as a basis of jurisdiction in claims sounding in money, and the acceptance of mere presence as a basis of jurisdiction in cases where attachment is not possible, the extent of divergence has

See also Chisese v. Garamukanwa 2002 (2) Z.L.R. 392. 1999 (1) Z.L.R. 525 144 [2003-2004] S.C.G.L.R. 1008. See also Royal Dutch Airlines v. Farmex Ltd. (No. 2) [1998-99] S.C.G.L.R. 682; Butt v. Chapel Hill Properties Ltd. [2003-2004] S.C.G.L.R. 636. 142 143

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A Decade of Private International Law in African Courts 1997-2007 (Part I) been bridged to some extent.145 Compared with common law jurisdictions, the jurisdiction rules of Roman Dutch law appear foreigner-unfriendly and reform is needed on some issues. Areas of concern in choice of law include torts and claims involving foreign currency. On the former, there is yet to be an authoritative pronouncement. On the latter, one is unsure whether the courts have been able to fully appreciate and reconcile the multiple and often conflicting interests of the state, its economy and individual claimants at stake in foreign currency claims.

Bid Industrial Holding v. Strang [2007] S.C.A. 144. The procedure of arrest was rarely used. I came across only one other instance in which the procedure was in issue. See Lesotho Express Delivery Services Ltd. v. Ravin Panambalana Civ/T/634A/02, Civ/T/APN/469/02 (High Court, Lesotho, 2006). Although abolished in South Africa, the procedure is allowed by legislation in some Southern African countries. It remains to be seen how they will react to this South African decision. See e.g., Zimbabwe, High Court Act, Chapter 7.06, section 15; Namibia, Rules of the High Court of Namibia, section 9(1); and Lesotho, High Court Rules 1980, Rule 6(8). 145

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SOURCES AND GENERAL PRINCIPLES OF PORTUGUESE PRIVATE INTERNATIONAL LAW: AN OUTLINE Dário MOURA VICENTE∗

I. II. III. IV. V. VI. VII. VIII.

Sources Relevance of General Principles Human Dignity Party Autonomy Reliance Equality Social Values Conclusions

I.

Sources

The recent history of Portuguese Private International Law reveals three basic trends regarding its sources: the codification of conflict of laws rules, the major achievement in this area being the provisions of the 1966 Civil Code1; the specialization of conflict of laws rules through specific enactments in matters such as general conditions of contracts, arbitration, agency contracts, time-share contracts, sale of consumer goods, and e-commerce, etc.; and the Europeanisation of rules on jurisdiction, conflict of laws, and the recognition of foreign judgements by virtue of the European Union’s adoption of several acts pertaining to this field that are directly applicable in Portugal.2 At the top of the hierarchy of Private International Law sources in this country are international treaties and conventions to which Portugal is a party. ∗

Professor of Law, University of Lisbon. See articles 14 to 65 of the Civil Code. See also the German translation appended to NEUHAUS P./RAU H., 'Das internationale Privatrecht im neuen portugiesischen Zivilgesetzbuch', RabelsZ 1968, pp. 500 et seq. A French translation, established with the contribution of Taborda Ferreira and Jean Lisbonne, was published in: Rev. crit. dr. int. pr. 1968, pp. 369 et seq. (a partially updated version was inserted in ibidem, 1978, pp. 598 et seq., with a note by MOURA RAMOS R.). 2 See the compilation of these sources in MARQUES DOS SANTOS A., Direito Internacional Privado. Colectânea de textos legislativos de fonte interna e internacional, Coimbra 2002. 1

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Dário Moura Vicente They include, inter alia, the following categories of instruments: a) Conventions originating in The Hague Conference on Private International Law3; b) Conventions made under the auspices of the United Nations Organisation4; c) Conventions of the International Commission on Civil Status5; d) Conventions entered into with other Member States of the European Union or the European Economic Space6; e) Bilateral treaties on legal and judicial cooperation entered into with other nations7; and f) Agreements on the promotion and reciprocal protection of foreign investments.8 According to article 8, paragraph 2, of the Portuguese Constitution (adopted in 1976 and subsequently modified several times), the rules contained in these treaties and conventions are in force in Portugal upon their ratification or approval by the competent organ and official publication, and they remain in force as long as they bind the Portuguese State internationally; their transformation into internal law through a Governmental act is thus unnecessary. Insofar as they are self-executing, they may be invoked by any interested person in support of his/her claims deduced before Portuguese courts or administrative organs. Furthermore, they also prevail over all internal legal rules, even if enacted subsequent to the relevant convention's ratification or approval. The latter principle also applies to rules contained in European Union acts, by virtue of article 8, paragraph 4 of the Constitution (as revised in 2004), according to which such rules are applicable in the internal legal order ‘in the terms defined by the law of the Union, with respect for the fundamental principles of the democratic rule of law.’ The primacy of European Union law, as defined by European Court of Justice case law, is thus constitutionally accepted in Portugal.

3 Since 1951, Portugal has ratified 16 such conventions. On their relationship with Portuguese Private International Law, see MOURA RAMOS R., ‘The Impact of The Hague Conventions on Portuguese Private International Law’, in: Das relações privadas internacionais, Coimbra 1995, pp. 277 et seq. 4 Such as the New York Convention on the Recognition and the Enforcement of Foreign Arbitration Awards, in force in Portugal since 1995. 5 To which Portugal acceded in 1973. Eleven conventions emanating from this organisation were so far ratified by this country. 6 Which include the Brussels and the Lugano Conventions on Jurisdiction and the Enforcement of Judgements in Civil and Commercial Matters, both of which are in force in Portugal since 1992, and the Rome Convention on the Law Applicable to Contractual Obligations, ratified in 1994. See MOURA RAMOS R., ‘L’adhésion du Portugal aux conventions communautaires en matière de droit international privé’, in: Das relações privadas internacionais (note 3), pp. 143 et seq. 7 E.g. the agreements with S. Tomé and Príncipe (1976), France (1983), GuineaBissao (1988), Mozambique (1990), Luxembourg (1992), Angola (1995) and Cape Verde (2003). 8 Such as the ones concluded in 1980 with Germany, in 1994 with Brazil, in 1990 with Cape Verde, in 1991 with Guinea-Bissao, in 1994 with Venezuela, in 1995 with Mozambique and with S. Tomé and Príncipe, in 2002 with Tunisia, and in 2004 with Algeria.

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Sources and General Principles of Portuguese Private International Law Given the widening scope of Private International Law rules contained in European Union acts, many of which are of ‘universal’ application, the scope of application of internal legislative conflict of laws rules is gradually being reduced. Nevertheless, internal legislation is still the major source of Portuguese Private International Law. Due to the enactment, over the past few years, of many special conflict of laws rules concerning particular subjects, which are not included in the Civil Code but dispersed throughout particular acts, the ideal of a system, which was highly regarded at the time of the adoption of the Civil Code, has suffered a certain erosion.9 As for case law, its relevance is much more restricted in Portugal, particularly since the normative rulings (assentos) of the Supreme Court (Supremo Tribunal de Justiça) whereby it could adopt new rules on points of law which had been the object of conflicting judgments by superior courts were abolished in 1995. This does not mean, however, as we shall see below, that Portuguese courts do not play a creative role when they decide Private International Law cases. Also, decisions of the Supreme Court and of the Courts of Appeal (Tribunais de Relação) tend to exercise considerable influence over the lower courts. Legal doctrine is particularly influential in this country, among other reasons because the major legal codes were drafted by scholars. Such was the case of the 1966 Civil Code, the conflict of laws provisions of which were drafted by the late Professors Ferrer Correia and Baptista Machado of the University of Coimbra10. Not surprisingly, the Code has sometimes been pointed out as an example of Professorenrecht.

II.

Relevance of General Principles

We shall now attempt to determine what values are at the basis of Portuguese Private International Law and to define the legal principles that express those values. The relevance of such values is threefold. First, they allow us to determine the ultimate purposes of Portuguese Private International Law – that is, the idea of law (Rechtsidee) that underscores it – and thus enable us to better understand this part of the legal system. Second, they are of utmost importance in the interpretation of specific conflict of laws and jurisdiction rules, which must be construed, according to article 9 of the Civil Code, in the light of their purposes. Finally, according to article 10 of the Civil Code, gaps in the law must be filled, absent a rule applicable This is also noted by MOURA RAMOS R., ‘Linhas gerais da evolução do direito internacional privado português posteriormente ao Código Civil de 1966’, in: Estudos de Direito Internacional Privado e de Direito Processual Civil Internacional, vol. II, Coimbra 2007, pp. 275 et seq. (at pp. 320 et seq.). 10 See the 1951 and 1964 drafts in FERRER CORREIA A./FERREIRA PINTO F., Direito Internacional Privado. Leis e projectos de leis. Convenções internacionais, Coimbra 1988, pp. 20 et seq. and 79 et seq. 9

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Dário Moura Vicente to an analogous case, according to the rule that the court would create if it had to legislate in conformity with the system’s spirit – that is, its general principles.

III. Human Dignity The safeguard of human dignity constitutes the essential basis of the Portuguese legal system.11 From this basis stems, inter alia, the recognition of legal personality to all human beings and of a certain number of personality rights that Portuguese law ensures.12 Portuguese Private International Law reflects this personalism at different levels. On the one hand, it explains the fact that foreign citizens have the possibility of enjoying rights in Portugal.13 On the other hand, one may see it as the underlying reason for subjecting the personal status of individuals to their personal law. Indeed, in Portugal status, capacity, and personality rights of natural persons are subject to a law that is, in principle, permanently applicable: i.e., always the same regardless of where such persons are located or where they act.14 This is so not only because of the practical inconveniences that would arise for individuals should the territorial law or the lex fori be applied to these matters, but above all because these solutions might deprive them of certain aspects of their legal status, qualities, or situations (e.g. those of spouse and of child) which are a part of their identity.15 See article 1 of the Portuguese Constitution. On this subject, see also GOMES DA SILVA M., Esboço de uma concepção personalista do Direito, Lisboa 1965, specially pp. 131 et seq.; and, in a Constitutional Law perspective, OTERO P., Instituições políticas e constitucionais, vol. I, Coimbra 2007. 12 See OLIVEIRA ASCENSÃO J., Direito Civil. Teoria Geral, vol. I, Introdução. As pessoas. Os bens, Coimbra 1997, p. 64; CARVALHO FERNANDES L., Teoria geral do Direito Civil, vol. I, 3rd. ed., Lisboa 2001, pp. 72 et seq.; MOTA PINTO C., Teoria geral do Direito Civil, 4th ed., Coimbra 2005 (by PINTO MONTEIRO A./MOTA PINTO P.), pp. 98 et seq.; PAIS DE VASCONCELOS P., Teoria geral do Direito Civil, 3rd ed., Coimbra 2005, p. 11. 13 See article 14, paragraph 1, of the Civil Code. In Portuguese doctrine, see FERRER CORREIA A., commentary on article 1 of the draft legislative project relating to Private International Law, of 1951, in: FERRER CORREIA A./FERREIRA PINTO F., Direito Internacional Privado. Leis e projectos de leis. Convenções internacionais (note 7), p. 22; MAGALHÃES COLLAÇO I., Direito Internacional Privado, vol. I, Lisboa 1966, p. 239; MOURA RAMOS R., ‘Estrangeiro’, in: Polis, vol. 2, columns 1215 et seq. (column 1217); and MARQUES DOS SANTOS A., Direito Internacional Privado. Sumários, Lisboa 1987, pp. 34 and 241. 14 See articles 25, 26 and 27 of the Civil Code. 15 See FERRER CORREIA A., ‘Unidade do estatuto pessoal’, in: Estudos jurídicos III. Direito Internacional Privado, Coimbra 1970, pp. 291 et seq. (pp. 296 et seq.); ID., Lições de Direito Internacional Privado. Aditamentos. I. Nacionalidade: doutrina geral e direito português. II. Lei reguladora do estatuto pessoal, Coimbra 1975, p. 118. 11

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IV. Party Autonomy Another fundamental feature of Portuguese Private International Law is the possibility, in certain areas, for parties to choose the law applicable to their private international relationships. Such a choice highly contributes to the certainty of which legal regime will be applicable to cross-border relationships16; but, it also allows parties to choose the law that, in their view, is best suited to their specific situation and aims.17 Therefore, the principle of autonomy in Private International Law is not a mere expedient aimed at overcoming the ‘embarrassment’ created by the need to determine the law applicable to international contracts. Rather, it guarantees the freedom required to achieve personal aspirations and develop one's own personality,18 both of which should be ensured by the legal system as long as they do not run counter to the common good or rights of third parties. Private autonomy is especially upheld in Portuguese Private International Law in determining the law applicable to obligations arising from a juridical act (negócio jurídico).19 Autonomy should, however, also be allowed in other areas. For example, the State could allow foreign nationals residing in Portugal to choose the law of their habitual residence to govern their personal status. In fact, article 31, paragraph 2, of the Civil Code already allows for recognition of juridical acts pertaining to personal status, when they have been made according to a foreign lex domicilii. There is no reason why the same possibility should not be granted for the benefit of Portuguese law, at least where the interested person has had his/her ha16 See in this sense MOURA RAMOS R., Da lei aplicável ao contrato de trabalho internacional, Coimbra 1991, pp. 461 et seq. 17 See MAGALHÃES COLLAÇO I., Da compra e venda em Direito Internacional Privado, vol. I, Lisboa 1954, p. 49; FERRER CORREIA A., ‘Algumas considerações acerca da Convenção de Roma de 18 de Junho de 1980 Sobre a Lei Aplicável às Obrigações Contratuais’, in: Revista de Legislação e Jurisprudência, vol. 122 (1989/90), pp. 289 et seq. (pp. 291 e 362); LIMA PINHEIRO L., Contrato de empreendimento comum (joint venture) em Direito Internacional Privado, Lisboa 1998, p. 460; ID., Direito Internacional Privado, vol. II, 2nd ed., Coimbra 2002, p. 182; MAYER P./HEUZÉ V., Droit International Privé, 8th ed., Paris 2004, pp. 513 et seq.; and KROPHOLLER J., Internationales Privatrecht, 6th ed., Tübingen 2006, pp. 295 et seq. 18 Which is a fundamental right since the constitutional revision of 1997: see article 26, paragraph 1, of the Constitution. In the sense of the inclusion of private autonomy within the protective scope of this provision, see: SOUSA RIBEIRO J., O problema do contrato. As cláusulas contratuais gerais e o princípio da liberdade contratual, Coimbra 1999, pp. 145 ss., note 350, and MOTA PINTO P., ‘O direito ao livre desenvolvimento da personalidade’, in: Portugal-Brasil ano 2000. Tema Direito, Coimbra 1999, pp. 149 et seq. (p. 214). 19 See articles 34 and 41 of the Civil Code; article 33, paragraph 1, of the Law on Voluntary Arbitration; article 3, paragraph 1, of the Rome Convention on the Law Applicable to Contractual Obligations; and article 6 of the Legal Regime of Insurance Contracts, approved by Decree-Law no. 72/2008, of April 16th, 2008.

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Dário Moura Vicente bitual residence in Portugal for a reasonable length of time.20 This solution is entirely justified in light of the demographical changes that have occurred in this country in the past decades (during which it evolved from being fundamentally an emigration country to being also an immigration country). To a certain extent, it is already enshrined in article 53, paragraph 3, of the Civil Code, according to which: ‘If the applicable law is foreign and one of the spouses is habitually resident in Portuguese territory, they may agree upon the application of one of the [matrimonial property] regimes allowed by this code’. We would also allow the parties to choose the applicable law regarding tortious liability (except when this liability derives from the violation of a legal rule aimed at protecting non-disposable private interests, such as those protected by Criminal Law rules), negotiorum gestio, and unjust enrichment, as long as that choice is made after the facts which gave rise to the corresponding obligations and does not affect the rights of third parties.21 The so-called doctrine of facultative conflict rules (fakultatives Kollisionsrecht) goes even farther in allowing private autonomy. According to it, parties may choose the lex fori in any matter by not invoking the foreign law that would otherwise be applicable according to local conflict rules22 or by reaching a procedural agreement to that purpose. In Portugal, however, this solution is not admissible de jure constituto, considering the provisions of article 664 of the Code of Civil Indeed, article 31, paragraph 2, of the Civil Code states that ‘juridical acts concluded in the country of the habitual residence of the person making the declaration, in conformity with that country’s law, are recognised in Portugal, as long as that law considers itself applicable’. According to FERRER CORREIA A., Direito Internacional Privado. Alguns problemas, Coimbra 1981, p. 258 (Portuguese version of the author’s lectures delivered at the Academy of International Law in The Hague, entitled ‘Les problèmes de codification en droit international privé’, in: Recueil des Cours, tome 145, 1975-II, pp. 57 et seq.), and to BAPTISTA MACHADO J., Lições de Direito Internacional Privado, 3rd ed., reprint, Coimbra 2002, p. 177, an act concluded abroad may also be recognized if it was made in conformity with the law of a third country that is applicable according to the rules of Private International Law of the State of the declarant's domicile. The said provision does not, however, foresee the possibility that foreign citizens residing in Portugal could conclude juridical acts in this country valid according to Portuguese law but that their national law considers invalid. This last scenario will only be possible if, as foreseen in article 18 of the Code, in casu the Private International Law of the lex patriae orders the application of Portuguese internal law. 21 We have already held this point of view in our book Da arbitragem comercial internacional, Coimbra 1990, pp. 127 et seq., and in ‘Applicable Law in Voluntary Arbitrations in Portugal’, in: I.C.L.Q. 1995, pp. 179 et seq. (at p. 188). Recently, article 14 of Regulation (EC) no. 864/2007 of the European Parliament and the Council of 11 July 2007 concerning the Law Applicable to Non-Contractual Obligations (‘Rome II’) has expressly allowed for such a choice of the applicable law. 22 See the presentation of this doctrine in FLESSNER A., ‘Fakultatives Kollisionsrecht’, in: RabelsZ 1970, pp. 547 et seq.; ID., Interessenjurisprudenz im Internationalen Privatrecht, Tübingen 1990, pp. 119 et seq. For criticism, see, in Portuguese doctrine, MOURA RAMOS R., Da lei aplicável ao contrato de trabalho internacional (note 16), pp. 131 et seq.; and MARQUES DOS SANTOS A., As normas de aplicação imediata no Direito Internacional Privado, vol. I, Coimbra 1991, pp. 60 et seq. 20

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Sources and General Principles of Portuguese Private International Law Procedure23 and article 348, paragraph 2, of the Civil Code,24 and also because it would potentially imply a breach of international commitments assumed by the Portuguese State through the above-mentioned treaties and conventions. Thus, a Portuguese judge is not restricted to the parties’ allegations regarding the determination, interpretation, and application of conflict of laws rules and foreign law designated by them. The abovementioned solution would furthermore not be acceptable de jure constituendo since it could be detrimental to both the social values pursued by Private International Law and the certainty of the law applicable to international legal relationships. In addition, that doctrine would be a powerful incentive for fraud in situations in where the forum State has no relevant connection to the disputed relationship.

V.

Reliance

Another fundamental aim of Portuguese Private International Law is to protect reliance in cross-border relationships. Generally, protecting party reliance is one of the main functions of any legal system.25 It is indispensable for maintaining social peace,26 which is largely dependent upon the fulfilment of legitimate expectations. If a legal system failed in protecting party reliance, legal relationships would be deprived of security and a peaceful and cooperative collective life would be impossible. In Portuguese law, protecting reliance constitutes an essential principle derived from the rule of law (Estado de Direito).27 Its corollaries include the non-

23 Which states: ‘The judge is not subject to the allegations of the parties in what concerns the determination, interpretation and application of the rules of law […].’ 24 According to which the court must ex officio take cognizance of the applicable foreign law, even if none of the parties has invoked it. 25 See LARENZ K., Richtiges Recht. Grundzüge einer Rechtsethik, München 1979, pp. 80 et seq.; LUHMANN N., ‘Die Funktion des Rechts: Erwartungssicherung oder Verhaltenssteuerung’, in: Ausdifferenzierung des Rechts. Beiträge zur Rechtssoziologie und Rechtstheorie, Frankfurt a.M. 1981, pp. 73 et seq.; ID., Vertrauen. Ein Mechanismus der Reduktion sozialer Komplexität, 3rd ed., Stuttgart 1989, passim; BAPTISTA MACHADO J., ‘Tutela da confiança e «venire contra factum proprium»’, in: Obra Dispersa, vol. I, Braga 1991, pp. 345 et seq. (p. 346); HAYEK F., Law, Legislation and Liberty, London 1993, vol. I, p. 98, and vol. II, p. 37; MOTA PINTO P., Declaração tácita e comportamento concludente no negócio jurídico, Coimbra 1995, p. 425; PAIS DE VASCONCELOS P., Teoria geral do Direito Civil (note 12), pp. 19 et seq. 26 In this sense LARENZ K., Richtiges Recht (note 25), p. 80. 27 See GOMES CANOTILHO J./MOREIRA V., Fundamentos da Constituição, Coimbra, 1991, p. 84; GOMES CANOTILHO J., Direito Constitucional e Teoria da Constituição, 7th ed., reprint, Coimbra 2003, pp. 256 et seq.

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Dário Moura Vicente retroactivity of laws28 and the res judicata effect of judgments.29 This principle is also the reason for the adoption of objective criteria regarding the construction of juridical acts, the assessment of parties' consent,30 the protection of bona fides acquirers of property belonging to another person,31 and of the person who in good faith enters into a contract with an agent who acts without sufficient powers of representation.32 Reliance is so dear to the Portuguese legal system that, because of it, certain situations created unlawfully – e.g. possession without title – may become lawful when maintained for a certain period of time. This is the case, for example, in a possessor’s acquisition of the right of ownership over the thing or things possessed.33 On the other hand, protecting reliance is an ethical and legal imperative, expressed in the rules that enshrine the principle of good faith.34 Because of it, whoever truly believes in the righteousness of his/her own legal position deserves certain legal protection35; whereas deceitful or abusive behaviour in contrahendo in performing obligations and in exercising rights in general are forbidden, as is also venire contra factum proprium.36 Protecting reliance is typically required by consumerist economies. These are characterised by the use of standard form – mass produced – contracts; by the technical sophistication of many products placed on the market, which their acquirers are incapable of evaluating; and by the use of powerful marketing tools. In this context, obtaining certainty in legal relationships requires protecting the contracting parties’ reliance on the correctness of information provided for the purpose of creating a contractual agreement. This is perhaps why the clearest legal formulation of the principle for protecting reliance in Portugal concerns general conditions of contracts.37 28 See articles 18, paragraph 3, and 29 of the Constitution and 12, paragraph 1, of the Civil Code. 29 See article 671 of the Code of Civil Procedure. 30 See articles 236, paragraph 1, 239, 244 and 257 of the Civil Code. 31 See articles 892 to 904 and 956 of the Civil Code. 32 See article 23 of Decree-Law no. 178/86, of July 3rd, 1986 (which regulates the agency or commercial representation contract). 33 See articles 1287 to 1301 of the Civil Code. On the protection of reliance as a value safeguarded through the legal institution of possession, see MENEZES CORDEIRO A., A posse: perspectivas dogmáticas actuais, 2nd ed., Coimbra 1999, pp. 49 et seq. 34 See, in this sense, MENEZES CORDEIRO A., Da boa fé no Direito Civil, vol. II, Coimbra 1985, pp. 753 et seq., 1234 et seq. and 1298 et seq., and Tratado de Direito Civil Português, vol. I, tome I, 3rd ed., Coimbra 2005, pp. 409 et seq. 35 See articles 243, paragraphs 1 and 2, 612, 1269 to 1275, 1294 to 1296, 1298, 1299, 1647 and 1648 of the Civil Code. 36 See articles 227, paragraph 1, 272, 275, paragraph 2, 334 and 762, paragraph 2, of the Civil Code. 37 In article 16, paragraph a), of the Legal Regime of General Conditions of Contracts, approved by Decree-Law no. 446/85, of October 25th, 1985 (as revised by Decree-

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Sources and General Principles of Portuguese Private International Law Protecting reliance is strictly connected to the idea of autonomy. In two senses: on the one hand, because reliance translates to a large extent into the expectation that the other party will use his/her freedom to act according to what one may legitimately expect from him/her; on the other hand, because defrauding reliance often affects the other person’s self-determination38. Furthermore, protecting reliance is indispensable to the normal functioning of societies based on the division of labour - and even more so the greater their degree of functional specialisation. Such a social structure is only compatible with self-determination insofar as each individual may rely upon the information provided by others in areas that transcend his/her personal aptitudes and where, consequently, he/she requires the cooperation of others in order to satisfy his/her needs. Hence the tendency of contemporary legal systems, including Portugal’s,39 to impose on professionals both the duty to provide consumers of their goods and services the information deemed necessary for the formation of their consent, as well as liability for damages for the infringement of this duty. If reliance is protected in internal legal relationships, it should equally be so in international ones. Indeed, international legal relationships favour to the highest degree the creation of situations in which one or more legal systems award a right to a certain person, which its holder expects that the remaining legal systems connected with the same situation will recognize. In Private International Law, protecting reliance takes on multiple meanings: a) First, it is one of the main reasons why national courts apply foreign laws. If private international situations were systematically subjected to the lex fori legitimate expectations would inevitably be disrupted. People must be able to know in advance the law applicable to cross-border relationships to which they are parties, so that they will know what rules they must comply with and, as a result thereof, what goods they may lawfully dispose of or to what extent they may intervene in another person’s legal sphere. b) Second, protecting reliance requires avoiding a situation where crossborder relationships are awarded certain legal effects in one State but not in others to which they are significantly connected. In order to achieve this objective, the forum State must recognise rights awarded by foreign legal systems relevantly connected to the facts at stake; the same principle also requires that legal situations Law no. 220/95, of August 31st, 1995, and by Decree-Law no. 249/99, of July 7th, 1999) it is indeed stated that one should consider ‘the reliance spurred in the parties by the global sense of the contractual clauses in question, by the process of formation of the individual contract which was concluded, by its contents and by any other relevant elements.’ 38 In the case of a conflict between the protection of reliance and the freedom of individual action, Portuguese Law tends to prioritize the former over the latter. See, for example, articles 227, 899, and 909 of the Civil Code, which allow for pre-contractual liability in very wide terms. 39 See, for example, article 8 of Law no. 24/96, of July 31st, 1996 (consumer protection law).

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Dário Moura Vicente created in the forum State be recognized in countries where those situations are aimed at producing their normal effects. c) Third, reliance may, in certain cases, require protecting an individual’s erroneous assessment of the validity or efficacy of a juridical act that is based on the rules of one of the legal systems with which it is connected, because he is unaware of a defect of that act according to the law applicable under the forum’s conflict of laws rules.40 d) Finally, protecting reliance requires preventing, in the forum State, private international situations from being subjected to rules contrary to those stipulated by all other legal systems with which those situations are connected. For some authors, the very basis or key issue of Private International Law is protecting an individual’s natural and reasonable expectations.41 Without going so far, it may be said that the principle of reliance justifies several solutions of the Private International Law in force in Portugal. Concerning, for example, the regulation of personal status, the reliance principle is the reason for certain limits to the applicability of the personal law of individuals42 and legal persons.43 Such limits are aimed at ensuring the application of a law that those persons presumably relied upon, inter alia, because it was the law in force in the social and legal milieu in which a certain act was carried out. This principle is also at the core of certain Portuguese legal provisions regulating

40 See, on this point, JOBARD-BACHELLIER M.-N., L'apparence en droit international privé. Essai sur le rôle des représentations individuelles en droit international privé, Paris 1984, pp. 377 et seq. 41 This perspective was particularly adopted in Italian doctrine: see for example BETTI E., Problematica del Diritto Internazionale, Milano 1956, p. 162; and QUADRI R., Lezioni di Diritto Internazionale Privato, 5th ed., Napoli 1969, pp. 147 et seq. In Portugal, BAPTISTA MACHADO J. wrote that the protection of the natural expectation of individuals (of the interested parties in certain legal positions or situations and of third parties) is the ‘primary objective of the Law of Conflicts, both in space and in time’: see Âmbito de eficácia e âmbito de competência das leis, Coimbra 1970, p. 180; and Lições de Direito Internacional Privado (note 20), p. 49. The same fundamental conception is shared by FERRER CORREIA A., Direito Internacional Privado. Alguns problemas (note 20), at pp. 24 and 109 et seq.; Lições de Direito Internacional Privado, vol. I, Coimbra 2000, p. 31; and MOURA RAMOS R., Da lei aplicável ao contrato de trabalho internacional (note 16), pp. 201 and 306. 42 Such as those contained, e.g., in article 28, paragraph 1, of the Civil Code and in article 11 of the Rome Convention. 43 See article 3, paragraph 1, of the Code of Commercial Corporations (‘Código das Sociedades Comerciais’, adopted in 1986, last revised in 2006), according to which: ‘The personal law of commercial corporations shall be the law of the State where the principal and effective seat of their administration is located. A corporation whose seat according to its by-laws is in Portugal may not, however, oppose to third parties its subjection to a law other than the Portuguese one.’

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Sources and General Principles of Portuguese Private International Law the so-called conflit mobile,44 which allows for the maintenance of legal positions acquired under a previous personal law. Protecting reliance also justifies certain limits to the applicability of the lex contractus concerning whether conduct or omissions can be given the effect of a declaration of intent45 and certain alternative connecting factors on the formal validity of juridical acts.46 The principle of reliance is also at the basis of article 15 of the Civil Code, insofar as it excludes any lege fori primary classification of private international situations.47 Reliance is frequently associated with the need for legal certainty.48 In the field of Private International Law, this is correct to the extent that protecting reliance aims at both ensuring the predictability of the applicable law and allowing every person the possibility of knowing the law to which he/she is subject, so that he/she may exercise his/her freedom; also, respecting legitimate expectations contributes to the fluidity of cross-border legal relationships. But protecting reliance is much more than that: It is a requirement of justice when what is at stake is the forum State’s recognition of subjective rights or other legal situations validly created under foreign legal systems to which those situations are relevantly connected. For this reason, we believe that the principle of reliance brings together the axial values, or ultimate goals, of Private International Law: the very idea of law which inspires it. Protecting reliance presupposes the fulfilment of certain requisites that make up, according to the terminology suggested by Claus Canaris, the so-called Vertrauenstatbestand.49 Generally, these requisites may be listed as follows: a) An

See for example article 29 of the Civil Code, according to which a change of personal law does not affect the majority already reached by someone according to his/her previous personal law. 45 See articles 35, paragraphs 2 and 3, of the Civil Code and article 8, paragraph 2, of the Rome Convention. 46 See articles 36, paragraph 1, and 65, paragraph 1, of the Civil Code and article 9, paragraphs 1 and 2, of the Rome Convention. 47 On the problem of classification in Portuguese Private International Law, see MAGALHÃES COLLAÇO I., Da qualificação em Direito Internacional Privado, Lisboa 1964; FERRER CORREIA A., Direito Internacional Privado. Alguns problemas (note 20), pp. 166 et seq.); ID., Lições de Direito Internacional Privado, vol. I (note 38), pp. 199 et seq.; LIMA PINHEIRO L., Direito Internacional Privado, vol. I, Coimbra 2001, pp. 391 et seq.; and MOURA VICENTE D., Da responsabilidade pré-contratual em Direito Internacional Privado, Coimbra 2001, pp. 381 et seq. 48 See, in this sense, for example, BAPTISTA MACHADO J., ‘Tutela da confiança e «venire contra factum proprium»’ (note 25), p. 362. 49 See Die Vertrauenshaftung im deutschen Privatrecht, München 1971, pp. 503 et seq.. In Portuguese doctrine, one may consult in this respect: MENEZES CORDEIRO A., Da boa fé no direito civil (note 34), vol. II, p. 1248; ID., Tratado de Direito Civil Português (note 34), vol. I, tome I, pp. 411 et seq.; BAPTISTA MACHADO J., ‘Tutela da confiança e 44

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Dário Moura Vicente expectation by a given person; b) The legitimacy of that expectation, consisting of the subjective good faith of the relying person and the existence of objective elements abstractly capable of leading to that expectation; c) An investment based on the reliance, consisting of acts or omissions that demonstrate the person’s expectation and the damage that the person would suffer were his/her reliance not protected; d) A causal link between the expectation and the above-mentioned acts or omissions; and e) When protecting a reliance negatively affects another person (maxime the person responsible for the investment made by the relying person), the imputable nature of that reliance to this person. Let us now consider the possible applications of these requisites to crossborder relationships. a) In this domain, an expectation normally consists of the hope that the forum State will recognise the allocation of a good to a certain person under one of the legal systems connected with the situation in question. Typically, it derives from situations where a juridical act appears to be valid or effective, and, indeed, is valid under the legal system of either the forum country or of another country where it was concluded, but is invalid under the applicable law. It may also derive from the existence of a right to compensation for a given damage under the law of a country other than the one where the damaging act or omission occurred. b) Reliance may be justified, in the above mentioned cases, by the existence of a relevant spatial connection with the legal system under which either the expectation in question was created or where the decision or act to be recognised originated. c) A reliance-based investment is based, for example, in the fact that the relying person disposes of his/her property or changes his/her personal status in the belief that those acts will be recognised as valid in the forum State. d) The causal link between the relationship and the reliance-based investment is generally that the relying person has acted in accordance with the substantive rules, the conflict of laws rules, or the jurisdictional rules in force in one of the legal systems to which the situation is connected. Naturally, that link will have to be assessed on the basis of objective criteria – e.g. the normal course of things in analogous situations –; it should not be required that the relying person demonstrates that his/her actions were as a matter of fact determined by the expectation formed in his/her spirit. e) Reliance may be invoked against anyone who, through acts or omissions, promoted it, instigated it, or in any other way gave rise to it, and who, at the same time, foresaw or should have foreseen that this would be result of his/her conduct. This occurs, e.g., if in a consumer contract someone conceals from the other party to that he/she is a national of (or resides in) a foreign country and is legally incapable under its legal system, whereas he/she would be legally capable under the law of the country where the contract is executed.

«venire contra factum proprium»’ (note 25), pp. 416 et seq.; and CARNEIRO DA FRADA M., Uma ‘terceira via’ no Direito da responsabilidade civil?, Coimbra 1997, pp. 103 et seq.

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Sources and General Principles of Portuguese Private International Law It should be stressed that these conditions do not have to occur simultaneously. There is, for example, no issue regarding the imputation of reliance to another person when no one is burdened by the protection of such reliance. Such is the case when the recognition of a marriage concluded between Portuguese citizens in a foreign country is requested under article 31, paragraph 2, of the Civil Code on the basis that the marriage is deemed valid in the country of the spouses habitual residence, although it would be null and void under Portuguese law. Naturally, in Private International Law one may not raise the expectations of parties to the same level as conflict of laws rules so that the former are allowed to systematically derogate the latter: otherwise, these rules would only be applicable when the parties had actually foresaw the applicability of the law they indicated. Also, parties’ expectations must be assessed on the basis of objective criteria: the forum’s common conflict rules may only be derogated on that basis when the parties could have reasonably expected the application of a different law.50

VI. Equality Portuguese Private International Law also pays tribute to the principle of equality before the law. Equality requires a uniform valuation of social relationships, both at the internal and at the international levels: Similar situations must be treated similarly. Cross-border relationships must therefore be subjected, as much as possible, to the same rules regardless of the country before whose courts the ensuing disputes are brought to trial. It is often the case, however, that multiple national jurisdictions deem themselves competent to rule on the same disputes. When this happens, it is important to ensure that the claimant is not granted the possibility of unilaterally choosing the most favourable law to his/her claims by commencing legal proceedings in the country where that law is in force – i.e. forum shopping. Conflict rules must therefore ensure that, in spite of the diversity of national legal systems, the solution given to the said disputes in the countries with which they are connected is as uniform as possible. International legal harmony is therefore required by the principle of equality. This principle is relevant both for the formulation of conflict of laws rules and for the solution of the so-called conflicts of systems. In the first case, connecting factors should be adopted that are capable of being accepted by other national conflict of laws systems. In the second case, renvoi and other mechanisms giving relevance to foreign conflict of laws rules should be allowed by the national legal system. In this sense, see BUCHER A., ‘L'attente légitime des parties’, in: MEIER I./SIEHR K. (eds), Rechtskollisionen. Festschrift für Anton Heini zum 65. Geburtstag, Zürich 1995, p. 95; ID., Droit International Privé Suisse, vol. I/2, Partie générale, Basel 1995, p. 87. 50

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Dário Moura Vicente However, the importance of equality in this sense is limited: it cannot prevent the relevant national legislature from freely determining the law applicable to private international situations. These may indeed require applying a given law even if its applicability is not accepted by other relevant legal systems: this is, we think, the basis of article 16 of the Portuguese Civil Code, which states that, in principle, the substantive law provisions of the applicable foreign law shall be applied, not its conflict of laws provisions (thereby adopting the system of materiellrechtliche Verweisung). Hence, from our perspective, renvoi should only be admitted if it does not frustrate the policy reasons underlying the applicability of a given law according to the conflict of laws rule at stake – at least when these reasons must be held to equal or higher importance than those that justify renvoi.51 This idea surfaces in articles 17, paragraph 2, and 18, paragraph 2, of the Portuguese Civil Code.52 However, we believe that it should be extended to other situations not contemplated by these provisions. On the other hand, it should be noted that, within certain limits, forum shopping may be deemed acceptable because it allows the interested parties to take advantage of different solutions for the same legal issues enshrined in distinct legal systems, thus ensuring, e.g., that the weaker party to the dispute is better protected.53 Equality also implicates a uniform treatment of private international issues within the same legal system, an idea that authors have attempted to express by referring to the principles of substantive or internal legal harmony54 and, more

51 A solution which is explicitly adopted in article 4, paragraph 1, of the Introductory Law to the German Civil Code (Einführungsgesetz zum Bürgerlichen Gesetzbuche). 52 Indeed, the Code excludes renvoi in the first of these provisions and subjects it to special conditions in the second one, so as to avoid the application, in what concerns the personal status of natural persons, of a law other than that of their nationality or habitual residence. These are, in the Portuguese conflict of laws system, the main connecting factors in this respect. 53 That is the case, e.g., of insured persons, consumers, and workers to whom Regulation (EC) no. 44/2001, of 22 December 2000, concerning jurisdiction, recognition, and the enforcement of foreign decisions in civil and commercial matters grants access to alternative jurisdictions. 54 See specially the works of WENGLER W., ‘Die Vorfrage im Kollisionsrecht’, in: RabelsZ 1934, pp. 148 et seq. (p. 204); ‘Les principes généraux du droit international privé et leurs conflits’, in: Rev. crit. dr. int. pr. 1952, pp. 595 et seq. (pp. 602 et seq.); ‘The General Principles of Private International Law’, in: Recueil des Cours, tome 104 (1961-III), pp. 273 et seq. (pp. 398 et seq.); and Internationales Privatrecht, vol. I, Berlin/New York 1981, p. 70. In Portuguese doctrine, see MAGALHÃES COLLAÇO I., foreword to CORTES ROSA M., A questão incidental em Direito Internacional Privado, Lisboa 1960; BAPTISTA MACHADO J., Âmbito de competência e âmbito de eficácia das leis (note 41), p. 177; ID., Lições de Direito Internacional Privado (note 20), 49; FERRER CORREIA A., Direito Internacional Privado. Alguns problemas (note 20), pp. 113 et seq.; and MARQUES DOS SANTOS A., Direito Internacional Privado. Sumários, Lisboa 1987, p. 42.

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Sources and General Principles of Portuguese Private International Law recently, coherence.55 Any application of rules extracted from different legal systems to a private international situation, to the extent that it ignores the ties between those rules and the remaining rules of their respective systems, may lead to a different result than the one that would arise from the application in toto of any of those systems. This is what occurs, for example, if one legal system grants compensation to someone who suffered damages and another legal system grants additional compensation for the same fact, but on different grounds, while both systems reject the accumulation of compensations. Such a result – allowed by Private International Law due to its specific method of regulating life situations (i.e. dépeçage) – must be corrected, since it is necessarily harmful to the principle of equality.

VII. Social Values In the previous sections we have already made it clear that, in our view, private autonomy in Private International Law is not unbounded. Indeed, this branch of the law restricts private autonomy in several areas where the legal system as a whole protects social values.56 Among these is the protection of weaker parties against the risk of abuses by those in a position of economic or social power. This objective is enshrined in contemporary Portuguese conflict of laws rules relating to contracts entered into by consumers,57 individual working contracts,58 agency or commercial representation contracts,59 time-share contracts,60 financial intermediation contracts concluded with non-institutional investors,61 contracts for the sale of consumer goods,62 and distance contracts relating to finan55 See, in this respect, JAYME E., ‘Identité culturelle et intégration: le droit international privé postmoderne. Cours général de droit international privé’, in: Recueil des Cours, tome 251 (1995), pp. 9 et seq. (pp. 129 et seq.); and BRITO M. H., A representação nos contratos internacionais. Um contributo para o estudo do princípio da coerência em Direito Internacional Privado, Coimbra 1999, pp. 571 et seq. and 747. 56 The phenomenon was already pointed out, in beginning of the seventies, by ZWEIGERT K., in: ‘Zur Armut des Internationalen Privatrechts an sozialen Werten’, in: RabelsZ 1973, pp. 435 et seq. (especially pp. 443 et seq.). 57 See article 5 of the Rome Convention and, in Portugal, article 23 of the Legal Regime of General Conditions of Contracts, as revised by Decree-Law no. 249/99, of July 7th, 1999. 58 See article 6 of the Portuguese Labour Code (‘Código do Trabalho’, adopted in 2003) and article 6 of the Rome Convention. 59 See article 38 of Decree-Law no. 178/86, of July 3rd, 1986. 60 See article 60, paragraphs 7 and 8, of Decree-Law no. 275/93, of August 5th, 1993, as revised by Decree-Law no. 22/2002, of January 31st, 2002. 61 See article 321, paragraph 3, of the Securities Code (‘Código dos Valores Mobiliários’, adopted in 1999). 62 See article 11 of Decree-Law no. 67/2003, of 8 April, 2003.

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Dário Moura Vicente cial services rendered to consumers.63 Although through different techniques, all these provisions aim at ensuring the weaker party the protection granted to him/her by the law of one of the countries with which those contracts are connected (particularly the one whose legal provisions would be applicable if no law had been chosen by the parties). One can see herein a tendency to return to the personal status of individuals as the criterion for determining the rules applicable to their relationships. As a result, the rights and duties of certain categories of persons are derived more from their individual economic or social conditions than from what they have freely agreed to. The principle of subsidiarity in transnational adoptions64 is yet another example of conflict of laws solutions aimed at satisfying particular needs for social protection. Its aim is to preserve the well-being of the adopted child and to guarantee the child deprived of a normal family environment the protection that he is entitled to according to article 69, paragraph 2, of the Portuguese Constitution. Social values – inter alia the safeguarding of national sovereignty, which presupposes that each country has some degree of self-determination in matters of economic and social organisation65 – are also partly at the basis of Portuguese conflict of laws rules that determine the applicability of the lex rei sitae to the creation and transfer of rights in rem over corporeal property.66 In fact, such rules grant the State the power to regulate the ownership of means of production and, generally, the enjoyment of moveable and immoveable property located on its territory, particularly by way of defining the rights in rem which may be created over such property and by regulating their content, by the imposition of limits on the acquisition or disposition of the said rights and by the adoption of nationalisation, expropriation, requisition, confiscation, or other measures relating to such property. In this respect, one should also mention the rules that (1) grant effects to the legal provisions of the forum State (or of another State closely connected to the situation) that are mandatory in regulating the specific case at issue, regardless of the law applicable to the contract67 and (2) determine the application of Portuguese law to practices restricting competition, mergers of companies occurred on national

See article 40 of Decree-Law no. 95/2006, of 29 May, 2006. Enshrined in article 15, paragraph 1, of Decree-Law no. 185/93, of May 22nd, 1993, as revised by Decree-Law no. 120/98, of May 8th, 1998, and Law no. 28/2007, of August 2nd, 2007. 65 See GOMES CANOTILHO J./MOREIRA V., Fundamentos da Constituição (note 27), p. 75. 66 See article 46 of the Civil Code. On the policy reasons for this rule and, in general, on the applicability of the lex sitae, see, in Portuguese doctrine, FERRER CORREIA A., ‘Conflitos de leis em matéria de direitos sobre as coisas corpóreas’, in: Revista de Legislação e Jurisprudência, tome 117 (1984/85), pp. 298 et seq.; and LIMA PINHEIRO L., Direito Internacional Privado, vol. II (note 17), p. 258. 67 See e.g. article 6, paragraph 5, of the Labour Code. 63 64

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Sources and General Principles of Portuguese Private International Law territory or having had effects in it,68 and to securities offers directed specifically at persons residing or established in Portugal.69 These rules aim at ensuring the application of mandatory provisions that pursue a vast array of social interests – such as the normal functioning of markets and the stability of prices and exchange rates – that fall into the notion of common good. Among the social values pursued by Private International Law, one should also include the preservation of cultural identity. In the regulation of cross-border relationships, this ideal may require, aside from the recognition of the plurality and diversity of legal systems, the application of an individual’s national law to the issues comprised in their personal status.70

VIII. Conclusions Having sketched the ultimate objectives of Portuguese Private International Law, we may now, as a conclusion, try to answer the following questions: Is there an idea of justice (Gerechtigkeitsidee) specific to this field? If so, what are its contents? The first question is answered affirmatively by authors according to whom Private International Law basically aims at applying the law that is most suited because of its spatial connections with the dispute at stake, rather than the best law from the perspective of the substantive regulation of the legal issues that it addresses. In this line of reasoning, Savigny wrote, over a century and a half ago, that one ‘should seek out for each legal relationship the legal system to which, according to its own nature, that relationship belongs or to which it is subjected (where it has its seat).’71 Within a similar frame of thought, it was stated more recently that, according to the so-called ‘principle of proximity’ or the ‘closest connection,’ legal relationships should be governed by the law of the country with which they show the closest ties.72 However, it was especially under the influence of the works of

See article 1, paragraph 2, of Law no. 18/2003, of June 11th, 2003 (which adopts the legal regime on antitrust competition). 69 See article 108, paragraph 1, of the Securities Code. 70 As determined by article 31, paragraph 1, of the Portuguese Civil Code. See, on the point addressed in the text, JAYME E., 'Identité culturelle et intégration: le droit international privé postmoderne. Cours général de droit international privé' (note 55), p. 253. 71 ‘Dass bei jedem Rechtsverhältniss dasjenige Rechtsgebiet aufgesucht werde, welchem dieses Rechtsverhältniss seiner eigenthümlichen Natur nach angehört oder unterworfen ist (worin dasselbe seinen Sitz hat)’: see System des heutigen römischen Rechts, vol. 8, Berlin 1849, p. 108. See also ibidem, at pp. 28 and 118. 72 See, in this sense, LAGARDE P., ‘Le principe de proximité dans le droit international privé contemporain’, in: Recueil des Cours, tome 196 (1986-I), pp. 9 et seq. (p. 29). 68

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Dário Moura Vicente Kegel73 that a part of legal doctrine accepted the view that the distinction between Private International Law and substantive law should be drawn on the basis of the different interests they are deemed to pursue. According to this perspective, Private International Law’s idea of justice would be ‘eminently formal’ or ‘materially neutral’, its ex libris being the principle of harmony of judgments. However, contemporary Private International Law’s idea of justice – that is, the ultimate principles and values that inspire it – is not limited to a formal directive on how to find the law applicable to cross-border situations. It must include guidelines on the court’s own modelling of the substantive solutions required by those situations. On the other hand, the choice of the legal system competent to govern private international situations is not exclusively guided by the idea of spatial proximity; instead, the relevant connecting factors are highly sensitive to the prevailing policy aims or values in each branch or sector of substantive law and the principles that express them.74 This is simply an expression of the unity of the legal system, conceived as an axiological or teleological order of general legal principles.75 This openness of Private International Law to substantive values is particularly visible in the so-called ‘substantial connection’ conflicts rules,76 which designate the applicable law in view of a substantive result deemed to be desirable. It is equally so in those rules that require, by way of cumulative connections, that cer73 See ‘Begriffs- und Interessenjurisprudenz im Internationalen Privatrecht’, in: Festschrift für Hans Lewald, Basel 1953, pp. 259 et seq. (pp. 270 et seq.); and Internationales Privatrecht, 9th ed., München 2004 (with SCHURIG K.), pp. 131 et seq. 74 See already, in this sense, WENGLER W., ‘Les principes généraux du droit international privé et leurs conflits’, in: Rev. crit. dr. int. pr. 1952, pp. 595 et seq. (pp. 606 et seq.), and 1953, pp. 37 et seq. (pp. 49 et seq.); and BATIFFOL H., Aspects philosophiques du droit international privé, Paris 1956, p. 39, holding the existence of a ‘lien organique’ between internal law and conflicts rules. In more recent literature, see: SCHURIG K., Kollisionsnorm und Sachrecht. Zur Struktur, Standort und Methode des internationalen Privatrechts, Berlin 1981, pp. 94 et seq., 102 and 210 et seq.; AUDIT B., ‘Le caractère fonctionnel de la règle de conflit (sur la «crise des conflits de lois»)’, in: Recueil des Cours, tome 186 (1984), pp. 270 et seq.; ID., ‘Le Droit International Privé à fin du XXe siècle: progrès ou recul’, in: Revue Internationale de Droit Comparé 1998, pp. 421 et seq. (pp. 423 et seq. and 437 et seq.); ID., Droit International Privé, 4th ed., Paris 2006, p. 85; VON BAR C./ MANKOWSKI P., Internationales Privatrecht, 2nd ed., München 2003, vol. I, pp. 218 et seq.; SCHWANDER I., ‘Der Wandel des Privatrechts und seine Rückwirkungen auf das internationale Privatrecht’, in: Annuaire Suisse de Droit International 1989, pp. 247 et seq.; KROPHOLLER J., Internationales Privatrecht (note 17), pp. 33 et seq.; and CALVO CARAVACA A.-L./CARRASCOSA GONZÁLEZ J., Derecho Internacional Privado, vol. I, 8th ed., Granada 2007, p. 209. In Portuguese doctrine, see MOURA RAMOS R., Direito Internacional Privado e Constituição, Coimbra 1980, p. 169, and MARQUES DOS SANTOS A., Defesa e ilustração do Direito Internacional Privado, Coimbra 1998, p. 165, note 933. 75 Sic CANARIS C., Systemdenken und Systembegriff in der jurisprudenz, 2nd ed., Berlin 1983, Portuguese translation, pp. 77 and 280. 76 See PATOCCHI P., Règles de rattachement localisatrices et règles de rattachement à caractère substantiel, Genève 1985, pp. 241 et seq.

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Sources and General Principles of Portuguese Private International Law tain legal effects be recognised by two or more systems so that they may be produced in an internal legal system.77 In both cases, the aim of the conflicts rule is to ensure the attainment of certain objectives of substantive law (such as, for example, the preservation of juridical acts, the protection of the weaker party, or the institutional stability of the family). But this phenomenon is also visible in conflict of laws rules which designate the applicable law based on the spatial location of the facts in dispute, since also in this case the choice of the relevant connecting factors is often determined by the fundamental values which shape the internal legal system in the field in question – as is demonstrated, for example, by the changes introduced in Portuguese Private International Law rules concerning family relationships after the entry into force of the 1976 Constitution78 and several subsequent legislative acts.79 Of course, the law most suited to regulate a multi-located situation is not necessarily the one that leads to the best result from the perspective of the forum’s substantive law. But, in Portugal the values that preside over the solution of conflict of laws largely correspond, as was seen above, to the regulatory basis of the legal system in general and, in particular, Private Law. To sum up: in Portuguese Private International Law, conflict rules are not ‘neutral.’ Rather, they express the fundamental principles of the Private Law system, which they adapt using a specific technique, to the necessities of the specific situations that they envisage and the specific function awarded to them by the legal system. Private International Law rules serve, in their own field, the ‘idea of law’ that is at the basis of their respective legal system. This can be seen both in the choice of law rules’ connecting factors, the limits to the application of the law designated by these rules, and the regulation of several general conflict of laws problems. Hence, there is no antinomy between the so-called justice of Private International Law and that of substantive Private Law, but rather a diversity of means of expression and action.

This is what occurs, for example, in the fields of divorce and international adoption: see, respectively, articles 55, paragraph 2, and 60, paragraph 4, of the Portuguese Civil Code. 78 See, articles 52, 53, and 56 to 61 of the Civil Code. See also paragraphs 5 and 11 of the preamble of Decree-Law no. 496/77, of November 25th, 1977, which revised that code, where it is explicitly recognised that the modifications introduced in those rules were imposed by the new principles inserted in the Constitution in 1976. 79 On this, see MOURA RAMOS R., Aspectos recentes do Direito Internacional Privado português, Coimbra 1995, pp. 9 et seq.; ID. (note 9), at pp. 305 et seq. 77

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SOME REMARKS ON THE APPLICABLE LAW TO INTERNATIONAL SUCCESSIONS IN ROMANIA Dan Andrei POPESCU∗

I. II. III. IV. V. VI.

Prolegomena The Importance of the Connecting Element in International Successions Romanian Doctrine and Jurisprudence Prior to the Act 105/1992 Lex rei sitae vs. lex personalis The Law Applicable to Successions in Romanian Private International Law; Sedes materiae; Principle. Professio juris in the Matter of International Successions

I.

Prolegomena

Nothing, absolutely nothing in this world is as sure as death. It underlies one of the features of our existence on Earth. We are born and we live each moment of our ephemeral life with the certainty of death, with the fear of it. Death is the natural result of the lapse of the ‘sublunary’ time, of the time that ‘ebbs away’ that ‘burns’, that ‘makes, alters and unmakes.’1 ∗

Professor Dan Andrei Popescu, Ph.D., ‘Babeş-Bolyai University’, Cluj-Napoca, Romania ([email protected]). 1 Greek cosmology distinguished between two types of ontology, fundamentally different one from another both time-wise as well as substance-wise: the sublunary world (namely, the one dwelling under the Moon) and the celestial world (namely, the one dwelling above the Moon) – divided through a cosmological caesura. The two worlds were characterized by different types of temporality. Consequently, in the sublunary world time ‘strikes, throbs,’ It is a temporality that destroys, that grinds – that makes and unmakes. The time of violent motion. In this world, the one Aristotle called that of birth and destruction, one is born, matures, withers, and dies. It is a world where all things are governed by various transformations. A world of making, shape-shifting and unmaking. Time aids growth as well as destruction. ‘All four elements (earth, water, air, and fire) morph into compounds that, once done, are doomed to be undone at a given time’ (PATAPIEVICI H.-R., The eyes of Beatrice. How did Dante’s world really look like?, Bucureşti 2004, p. 21). On the other hand, the celestial world is the reign of a completely different temporality. Here, one finds the time that ‘lingers, whiles away.’ This kind of time is that of eternity, the property of a unique substance which Aristotle called aithér or ‘the fifth element,’ quinta essentia – wherefrom the words ‘quintessence’ or its derivate, ‘quintessential,’ originated. It is thought

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Dan Andrei Popescu Through death man transcends to the other dimension of his existence, of a nature immaterial, invisible, and most of all, ungoverned by ‘human law.’ ‘For what is to die but to stand naked in the wind and to melt into the sun? And what is to cease breathing but to free the breath from its restless tides, that it may rise and expand and seek God unencumbered ? Only when you drink from the river of silence shall you indeed sing. And when you have reached the mountain top, then you shall begin to climb. And when the earth shall claim your limbs, then shall you truly dance’ (Kahlil Gibran – of Death). Death is ever present, testimony of the ephemeral and perishable nature of our ‘wandering’ on Earth. What sets us apart from the other living creatures on Earth is solely the fact that we enjoy the ‘privilege’ of contemplating our own death. It is forever by our side and even part of our being. Death is there from the very beginning, deeply embedded: millions of cells die and are reborn incessantly in our body, a process which ensures our survival and good health. Death is thus part of the natural circle of life. It is not the opposite of life but an essential part of it and its natural extension. It is a shadow rising from the very moment we are born, wandering by our side; a constant, silent, and patient companion, till the time comes to pass away. Life itself is a symbiosis of light and shadow. We should not aim to cast the shadows away! They are ‘delicate’ in being and free from our will, a creation of life itself, from which they cannot be torn asunder. Therefore, we must accept light as well as the shadows it creates, as we must embrace our destiny, joy and sadness, life and death, and good and evil. From a legal perspective, death terminates our capacity, our legal existence as subjects of law. This is its most visible, direct, and surely most profound effect. Consequently, death is a ‘terrestrial imperative,’ a universal phenomenon, absolute and compulsory. It does not know degrees of comparison or intensity. It does not discriminate. It just comes about. Its perception, the ‘fear’ of it, reminds us that we are mere ‘passers-by’ on this Earth, renters of things we regard as being forever in our possession. We all perish, those who walk through the ‘valley of the shadow of death’ (Psalms 23,4), and death has the same effect, irrespective of the nation we belong to, the ethnic origin we bear, the civilization we have lived in and

that the planets and the stars are made out of this fifth element, an element that knows but one type of motion: the permanent, uninterrupted motion of eternity – the uniform circular motion of the stars. The uniform circular motion was the contrary of a violent motion, for it did not end. Unending, it was eternal for the Greeks. The objects that populated the celestial world were neither born, nor did they alter shape or perish. The stars, bearing the same traits, the same attributes, were in the end like the gods – they were ‘visible deities’ (Ibid., p. 23).

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Private International Law of Successions in Romania grown attached to, the legal system we have known and embraced and to which we have been thought to refer to during our lifetime. However, despite its ubiquity and universality, despite its generally extinctive effect, national law systems tend to differ (and they often do – sometimes substantially) regarding the organization of the patrimonial consequences of death. In other words, on the one hand, all law systems admit that through death a person’s legal capacity is terminated and that with ‘the great passing,’ the departed instantaneously and irrevocably ceases to be a subject of law. But, on the other hand, the devolution of assets belonging to the departed is often regulated differently, taking into consideration the customs and particularities of historical evolution in every country, the development of legal thought, the moral concepts valid at the time. Last but not least, according to the interests pursued and the broadmindedness and liberal spirit of the lawmaker. ‘Successions are opened by death’ – that is stipulated under Article 651 of the Romanian Civil Code from 1864. This article has established an international public policy provision. This means that death constitutes our unique source and the only foundation for the opening of a person’s succession. Further, irrespective of what a foreign succession law would stipulate in this regard and whether it would be potentially applicable in a given case, the opening of someone’s succession cannot be accepted while that person is (still) alive. Therefore, both the civil death and the opening of the succession of a person declared missing by the Court contravene our public policy of private international law. The succession opening is therefore linked to the biological death of the person (is de cujus successione agitur), the successoral devolution being a mortis causa transfer. The moment of death is also the moment when the succession is opened. The science of law, from the very ancient times onward, could not leave aside the material, patrimonial effects of death. Everything that belonged to us we leave behind. But to whom? And in what conditions? The burden of answering this question is assigned to succession law. However, things may become extremely complicated when the succession hangs in the balance of several systems of law, belonging to different countries that might claim competence. When the succession involves different law systems, we speak of an international succession (internationaler Erbfall). In succession matters, the element of extraneity may be diverse. It may be linked to the person of the deceased, either by the assets that form the mass of the succession or by other circumstances. However, not every element of extraneity is legally relevant. According to our system of private international law, the personal connection of the de cujus to a particular country – through nationality, domicile or residence, as the case may be – the situation of the immovables (or stock-in-trade), the will of the testator materialized in an electio juris clause, the place of conclusion, modification or revocation of the testament, and the domicile of the testator are legally relevant to the settlement of conflicts of law in succession matters. Yearbook of Private International Law, Volume 9 (2007)

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Dan Andrei Popescu In contrast, issues such as the nationality or domicile of heirs of the deceased, the localisation of movables forming the mass of the succession, or even the latest domicile of the deceased are, under Romanian private international law, totally irrelevant for the settlement of a conflict of laws. We hurry to specify, however, that the latest domicile of the deceased is relevant with regard to the settlement of the conflict of jurisdictions, namely, for the determination of the international competence of the court or, in case of non-contentious procedure, for determining the competent notary public.2 In addition, the latest domicile of the deceased in Romania constitutes a factor aimed at driving towards the exclusive competence of Romanian jurisdictions (Article 151 (6) of Act 105/1992).3 In the same time, the latest domicile of the deceased is relevant, as a subsequent connecting factor in movable succession matters, in cases of dual or multiple foreign citizenship of de cujus. The general rule is that succession over movable property is governed by the national law of de cujus. According to Article 66 of Act 105/1992, ‘The succession shall be subject to: a) the national law the defunct had As an exception, the latest domicile of the deceased may also be relevant with regard to the settlement of conflicts of law in succession matters, namely in the case of renvoi. We have in mind the hypothesis in which the Romanian conflict of law rule assigns competence to a foreign law, which, at its turn, will renvoi, i.e. refer to, to the Romanian law as the law of the latest domicile of the deceased. That was the case of a succession of the movable property of a French national having his latest domicile in Romania. In this particular case, the Romanian conflict of law rule assigned competence, as far as the moveable estate was concerned, to the national law of the deceased, namely, the French law (Article 66 section (a) of Act 105/1992). In its turn, the French conflict of law rule (Article 3 of French Civil Code), by submitting the movables to the law of the latest domicile of the deceased, made a renvoi to Romanian law (as law of the latest domicle) – renvoi accepted according to Article 4 (1) of Act 105/1992. 3 Under Article 151 of Act 105/1992, ‘Romanian courts shall have exclusive competence to judge matters of private international law relations referring to: (…) 6. heritage left by a person having his last domicile in Romania’. Although the law mentioned above refers in terminis to the international jurisdiction of Romanian Courts, it is obvious that the same solution must be acknowledged in case of a non-contentious procedure as well. In other words, if the deceased had, at the date of death, his domicile in our country, the succession debate will come under the exclusive competence of a Romanian notary public – practicing in the administrative area where the author of the legacy had his latest domicile (with the observance of the rule stipulated under Article 68 (4) of Act 36/1995). The solution just presented is self-evident for an identity of reason (ubi eadem ratio est eadem solutio esse debet), the will of our lawmakers was to grant, independently from the contentious or noncontentious character of the succession, exclusive competence to the Romanian forum when the latest domicile of the deceased was situated in Romania. Regardless, in the 4th section of Chapter XII – the section dedicated to the effect of foreign decisions – the lawmaker did not hesitate to specify that ‘the term foreign decisions refer to acts of jurisdiction of foreign courts, notary’s offices or any other competent authorities.’ We do not aim at taking into discussion here to what extent and whether or not such measure is justified, especially in a system of law that does not assign to the latest domicile any significance from the point of view of determining the law applicable to the succession. 2

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Private International Law of Successions in Romania at the time of his death, for movables, wherever they be; b) the law of the place where each of the goods is situated, for real property and the goodwill.’ The national law of the defunct is the law of the state the citizen of which he was in his time of death (Article 12 (1) of Act 105/1992). For the Romanian citizen who, according to the foreign law, is considered to have another citizenship, the national law shall be the Romanian law. For the foreigner who has several citizenships, the national law hall be the law of the State where he has his domicile or, in its absence, his residence. If a person has no citizenship, the law of his domicile or, in its absence, the law of his place of residence shall be applied (Article 12 (2-4) of Act 105/1992).

II.

The Importance of the Connecting Element in International Successions

The subject of succession has seen a wide variety of regulations in the laws of the States.4 The main regulatory differences are obvious in the way in which classes of heirs are being formed, including the determination of the succession shares due to legal heirs; the status of the surviving spouse; the existence, nature, and extent of successoral reserved portions; the persons included in the category of reserved heirs; and the extent of the obligation of heirs to assume liability for the succession debts. Differences may occur also with regard to the manner and moment of the devolution of succession property;5 in the conditions, forms, and effects of mortis For a presentation of the main regulatory differences, see VERBEKE A. / LELEU Y.H., Harmonization of the Law of Succession in Europe, in: Towards a European Civil Code, second revised and expanded edition (coord. HARTKAMP A. / HESSELINK M. / HONDIUS E., JOUSTRA C. / DU PERRON E.), Nijmegen/The Hague/London/Boston 1998, p. 173-188; LELEU Y.-H., La transmission de la succession en droit comparé, Antwerp/Brussels 1996, no. 154, p. 491, no. 864, p. 500; GARB L., International Succession, Union Internationale du Notariat Latin, 1998; PINTENS W. (ed.), Family and Succession Law International Encyclopaedia of Laws, 1997 (in two volumes); FERID M. / FIRSCHING K. / LICHTENBERGER P., Internationales Erbrecht, 4 Aufl., München 1993; FLICK H. / PILTZ D.J., Der Internationale Erbfall (Erbrecht. Internationales Privatrecht. Erbschaftsteuerrecht), München 1999; ZILLMANN D., Die Haftung der Erben im internationalen Erbrecht, Berlin 1998; GORÉ M., L’administration des successions en droit international privé français, Paris 1994; BOULANGER F., Les successions internationales, Problemès contemporains, Paris 1981; BOULANGER F., Droit international des successions. Nouvelles approches comparatives et jurisprudentielles, Paris 2004; HÉRON J., Le morcellement des successions internationales, Paris 1986. See also TOADER C., Armonizarea dreptului succesoral în Europa, in: Juridica 2000, p. 136 and foll., article that is inspired, to a large extent, by VERBEKE A. / LELEU Y.-H. (this note), p. 173-188. 5 Without entering into details, we note, however, that from this point of view succession systems have been divided in three categories: a) system of direct and immediate 4

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Dan Andrei Popescu causa provisions; or in the determination of the nature of the right of the State in intestate successions, etc. Unlike other private law institutions that experienced numerous uniform codifications (especially on the European side), the issue of successions has been, it seems, forgotten, being left to the discretion of the national lawmaker. The absence of uniform material regulations for international successions6 may be exdevolution of the succession property by effect of the law. This is the established system in our country, but also in countries such as France, Belgium, Germany, Greece, the Netherlands, and Switzerland. The assets of the succession are devolved to the heirs from the very moment of the death of the de cujus, without any further initiative from the heirs. ‘Le mort saisit le vif son hoir plus proche et habile à lui succéder’: VERBEKE A. / LELEU Y.-H. (note 4), p. 177. Acceptance of the succession has only the role of confirming the succession devolution that took already place. The characteristic feature of this system is that, in principle, heirs have an unlimited liability; they are liable ultra vires hereditatis. Limited liability occurs in case of incapable heirs or in case of acceptance of the succession under the benefit of inventory. Exceptionally, the German succession system established limited liability of heirs (intra vires hereditatis), aiming at their protection; b) system of direct but deferred devolution of the succession property. This system is in force in Austria. It has as a characteristic feature the fact that, although the devolution of the succession property devolves directly to heirs, the moment of devolution does not coincide with the moment of the opening of the succession (date of death of de cujus), but is subsequent upon the initiative of the heir, meaning the acceptance of the legacy (aditio hereditatis). Moreover, a court ruling is required for the devolution to take effect (Einantwortung), the ruling date coinciding with that of the devolution of the succession mass. It is obvious that in such a system the saisine does not play any role at all. Although such a system presents the advantage of a controlled and orderly devolution, it cannot, however, explain the void created between the moment the succession is opened and the devolution thereof as an effect of the court ruling (hereditas jacens); c) system of indirect but deferred devolution of the succession property is the third system, specific to countries that ‘are not part of the Gaius classification’, namely common law countries. In such a system, the property is provisionally devolved to a ‘personal representative’, with heirs and legatees having to wait until the liquidation of the debts of the succession. Consequently, the opening of the succession invokes the first transfer, to the personal representative, by means of a legal procedure (probate procedure). The position of personal representative may be assigned to the executor of the will, or, if he is absent, to one of the heirs, in both cases the appointment being made by the Court. The personal representative is an appointee, a temporary administrator, with his prerogatives being limited both in time (liquidation of the succession debts) and in the scope of transactions under his remit (settlement of the succession debts). All along this period the heirs and legatees only have the capacity of creditors of the net succession assets, capacity which allows them to file suit against the executor of the will or against the succession administrator. After the liquidation of debts and determination of net succession assets, the second succession transfer takes effect – to statutory heirs and legatees. It is worth noting that in such a system the subject of succession devolution to heirs is limited to net assets, with debts being settled in the previous stage. This is the reason why the liability of the heirs is only a strictly limited one: VERBEKE A. / LELEU Y.-H. (note 4), p. 178. 6 We have in mind, obviously, international treaties or conventions for a systematic and holistic regulation of international successions, and not merely sequential regulation.

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Private International Law of Successions in Romania plained, in the first place, by the lack of a direct link between succession law and the economic objectives of the European Community. On the one hand, in view of attaining the Community’s objectives, one of its aims is to strive to ‘bring national legislations closer to a level required by the operation of a common market’ (Article 3 (h) of the Treaty enshrining the European Community).7 Also, an additional aim is the unitary regulation of international successions, which does not have a direct impact on the functionality of the common market and has been considered – at least until now – a secondary objective, less pressing. Secondly, the idea of uniform codification is sometimes seen by the Member State with reserve and coldness, especially when unified rules differ significantly from similar national norms. Any renunciation to the application of the latter is seen as an abdication from the national legal tradition which forms the substance of the norm, as an abandonment to that national ‘Kultursgefühl,’ it being known that ‘in law no textual wording exists which is not the product of culture: extra culturam nihil datur.’8 On the other hand, it should not be forgotten that the actual real estate status and successions law represent areas with a high degree of ‘emotional charge,’ where pride is fully at play, sacrificing quite frequently logic and rationale, areas in which states are prone, in general, to make very few concessions. That is why the idea of a jus europaeum in succession matters is rather difficult to achieve, and even the prospect of it is quite far off. In this context, the role of the norms on conflict of laws is overriding, though in this area differences of approach and regulation slowly emerge, rendering it considerably difficult to find a solution. To better understand the current position of our lawmakers on this matter, we undertake to examine, though briefly, the doctrine and jurisprudence previous to the emergence of the current law on private international law.

For instance, we come across unified (material) norms in the matter of the form of international wills: Washington Convention of 26 of October 1973 which established the uniform form applicable to international wills; Basel Convention of May 16, 1972 on establishing a system for the registration of wills. Uniform (choice of law) norms are to be found in the following conventions: The Hague Convention of October 5, 1961 on conflict of laws relating to the form of testamentary dispositions, The Hague Convention of October 2, 1973 on international administration of successions, The Hague Convention of August 1, 1989 on the law applicable to succession to the estates of deceased persons. 7 See, with regard to that treaty, ‘Documente de bază ale Comunităţii şi Uniunii Europene’ (edited by CONSTANTIN V.), Bucureşti 1999, p. 29 and foll. 8 LEGRAND P., Dreptul comparat, Bucureşti 2001, p. 105 (translated by BERCEA R.). The author indicates that behind the technicality of legal formulae stand ‘choices and determinations of a cultural nature, deeply rooted in a history and a geography, in a society and a political life’; or to put it otherwise, ‘any technical formula is supported by a cultural commitment that conditions its form and substance […]’ (p. 104).

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III. Romanian Doctrine and Jurisprudence Prior to the Act 105/1992 It is common knowledge that before the emergence of Act 105/1992 – entered into force on 1 December 1992 – our country’s legislation included very few rules of private international law. Article 2 (now abolished) of our Civil Code undoubtedly stood out in terms of importance, ratifying in terminis three fundamental principles intended to resolve conflicts of laws: (1) the principle of applying the national law (lex patriae) to the status of natural persons (paragraph 2 of Article 2); (2) the principle of applying the law where the real property is situated (lex rei sitae) to the real statute (paragraph 1 of Article 2); (3) and the principle of applying the law of the place of execution (locus regit actum) to the form of the legal act – the status of forms (paragraph 3 of Article 2). No rules on resolving conflicts of laws in succession matters could be identified either in the Civil Code or in any other regulatory act. Therefore, in the absence of an explicit conflict of law rule, the doctrine and jurisprudence had to define the references conducive to the positioning of international successions, resorting to analogies, historical and comparative law arguments, or judgements meant to reveal the ‘presumed’ will of the lawmaker on this matter, thus trying to provide a solution de lege lata that would become unanimously recognised and accepted. The starting point was the wording of Article 2 (1) of the Civil Code, which stipulated: ‘Only the real property located on the territory of Romania is subject to Romanian laws, even where it is owned by foreigners.’ Hence the conclusion that succession to real property or the devolution and transfer of immovable assets of the estate are to be governed by the law where the real property is situated (lex rei sitae), because the lawmaker does not distinguish between real property regarded ut singuli or as part of an estate, ut universitas (the inheritance): therefore ubi lex non distinquit nec nos distinquere debemus. Besides, paragraph 1 of Article 2 was an almost identical copy of paragraph 2 of Article 3 of the French Civil Code, which still stipulates: ‘Les immeubles, même ceux possédés par des étrangers, sont régis par la loi française.’ Yet the French jurisprudence did not hesitate to apply the law of rei sitae to immovable assets that were part of an estate, and the Romanian jurisprudence followed the French model.9 Hence it results that the Romanian legislature of 1864 embraced the old theory of statutes, transposing it – according to the model of Article 3 of the Napoleonic Code – into Article 2 of our Civil Code. Besides, our legislature of the time was in no way unfamiliar with the old tradition of statutes, with their traditional disjoining into real and personal statute, especially that such disjoining was ratified as well by Article 396 of the Calimach Code (the civil code of Moldavia, from 1817, promulgated by Prince Scarlat Calimach): ‘Immovable assets are subFor the jurisprudence that emerged in respect of the application of Article 2 of Civil Code, see HAMANGIU C. / GEORGEAN N., Codul civil adnotat, vol. I (art. 1-460), Bucureşti 1927, p. 19-35. 9

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Private International Law of Successions in Romania ject to the law where they are situated, whereas all other things are subject to the laws their owner is subject to.’10 Consequently, immovable assets located in the territory of Romania were entirely subject to Romanian law, whether they were regarded ut singuli or as part of an estate, also regardless whether there was a question of transfer of property (or encumbrance thereof) by inter vivos deeds or by way of succession.11 The truth is that immovable assets presented too high an importance at the time for their transfer – even though by way of succession – to be left to the jurisdiction of a foreign law, depending on the nationality of the deceased. Succession laws were considered to have a political purpose, ownership of real property being generally responsible for a person’s position or rank in society. The writers of the Napoleonic Code could not ignore this reality – with the theory of statutes prospering at the time –, as any loss of control by the territorial lawmaker of the property transfer, be it by way of succession, was inconceivable. The dominant position of our doctrine and, especially, our jurisprudence results unequivocally from the words of Dimitrie Alexandresco: ‘Since immovable assets situated on the territory of Romania are subject to Romanian law, without any distinction, the laws on mortgages, on inscription and transcription of real estate, on expropriation, on prescription, on land taxation, on the pursuit of immovable assets, and even on intestate or testamentary succession, are also applicable to immovable assets owned by foreigners; therefore we must recognise, as far as immovable property is concerned, as many particular inheritances as there will be territories, where immovable assets of the deceased are situated. Quot sunt bona diversis territoriis obnoxia, totidem patrimonia intelliguntur.’12 This Article of the Calimach Code was in its turn inspired by § 300 of the Austrian General Civil Code (ABGB), which stipulated, ‘Unbewegliche Sachen sind den Gesetzen des Bezirkes unterworfen, in welchen sie liegen; alle übrige Sachen hingegen stehen mit der Person ihres Eigenthümers unter gleichen Gesetzen’. § 300 of the Austrian Civil Code was abolished by §. 51, paragraph (1), point 2 of the Federal Law on private international law of 15 June 1978 (Bundesgesetz vom 15. Juni 1978 über das internationale Privatrecht / IPRGesetz) – still in effect today. The Austrian General Civil code – Das Allgemeine bürgerliche Gesetzbuch – promulgated by Imperial Patent No 946 of 1 June 1811 of Emperor Frances I, was brought into force on 1 January 1812; in Transylvania, it was brought into force on 1 September 1853 – in accordance with the Imperial Patent of 29 May 1853 for the implementation of the General Civil Code in the Great Principality of Transylvania – and in the Banat of Timişoara on 1 May 1853 – in accordance with the Imperial Patent of 29 November 1852. The Code was translated into Romanian (with the corresponding amendments operated until the date of publication of the translation) by CORJESCU I. (Codul civil general austriac, Bucureşti 1921) and by PAPP I. and BALAŞIU P. – the translation of the latter being taken over by LADAY ŞT. in Codul civil austriac, vol. I, Cluj 1924, and vol. II, Cluj 1926. 11 To this end, see ALEXANDRESCO D., Explicaţiunea teoretică şi practică a dreptului civil român, Tome I, Bucureşti 1906, Preliminary title, p. 128-129. 12 Ibidem. For the same purpose, see NACU C., Dreptul civil român, vol. I, Bucureşti 1901, p. 95-96. 10

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Dan Andrei Popescu A further argument was brought in support of the idea that the Romanian legislature was influenced by the old tradition of statutes, which it took over (under simplified form) in the content of Article 2 of the Code. By the time our Civil Code was under elaboration, the Italian Draft Civil Code was already completed, ratifying in its Article 8 a revolutionary solution – explicitly drifting from the statutory doctrine of the period – subjecting successions, regardless of the movable or immovable nature of the assets composing the estate, to the national law of the deceased. Although the writers of our Civil Code were aware of this Draft, which influenced them to a certain extent, they differed from the solution of the Draft on this issue. Yet, this could only reinforce the conclusion of a tacit acceptance of the traditional statutory principles of the period,13 which means, as far as succession to real property is concerned, the application of the law where the immovable assets of the estate are situated (lex rei sitae); that is, the strict territoriality of succession to real property, resulting in a fragmentation of the estate transfer.14 Article 1912 of our Civil Code – bearing no counterpart in the Napoleonic Code – has also been invoked, 15 which stipulates that all previous civil laws ‘are to be abrogated where they fail to conform to regulations set forth in the present codex.’ ALEXANDRESCO D. (note 11), p. 131. The fact that our legislature adopted the then-fashionable old theory of statutes, blinded by its ‘popularity,’ also results from other ‘traces’ that this famous theory left in the Civil Code. Thus, the legislature’s habit of dividing the estate into a movable and immovable estate also results from Article 894 of the Civil Code. In this Article, referring to ‘the legacies of a portion of the inheritance,’ the legislature gathers under this category the legacies that include either the whole amount of immovable property or the whole amount of movable property, or a portion of the whole immovable property or a portion of the whole movable property. According to this article, the residuary bequest or legacy (‘legs a titre universel’) ‘may have as object a portion of the inheritance, such as one half, one third, or all of the immovable or movable assets, or a portion of the immovable or movable assets.’ Yet the legacies having as object the entirety of immovable assets of the estate or the legacies referring to the entirety of movable assets (including those conferring to the legatee a portion of the immovable or of the movable estate) do not correspond to a joint portion in reference to the universality of the estate. The designation of the above-mentioned legacies as legacies (‘legacies of a portion of the inheritance’) demonstrate the legislature’s ‘habit’ of distinguishing – under the influence of the old law – between the immovable and movable estate. The reason for this attitude of the legislature might be, as it has been noted, that it seemed to be ‘in accordance with the testator’s intention to subject the holders of such legacies to the obligation to contribute to the payment of debts, an obligation which is the duty of universality’ (CANTACUZINO M. B., Elementele dreptului civil, Bucureşti 1921, p. 358). Concerning this anomaly, see also ELIESCU M., Moştenirea şi devoluţiunea ei în dreptul RSR, Bucureşti 1966, p. 256. 15 HILLARD V., International private law principles in the positive Romanian law (Nationality – Extraneity. The conflict of laws. Interprovicial Conflicts – Exequatur), Bucureşti 1932, p. 210-211. ‘Although the statutory system is untenable before a rational critique – claims the author (on page 211) – it must be abided by in Romania as a side of the compulsory positive law. 13 14

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Private International Law of Successions in Romania Or, given the fact that the lawmaker did not explicitly state in Article 2 of the codex a principle that would take into consideration the law to be applied in the case of successions, different from the statutory viewpoint, one must admit that this viewpoint was acquiesced in, even more so when it was enforced before 1864 and established in the Calimach Code as in terminis. In other words, as long as the Civil Code did not establish any univocal conflict rules in succession matters different from those previously known, the principles of the old statutory doctrine continued to subsist, for they did not contravene ‘the rules set forth in the present codex.’ That means they could consequently be finding themselves upheld in the general and obscure phrasing of the legislature. In addition, the phrasing of Article 2 betrays not only the ‘troubled mind’ of the maker of the rule, but also his confoundedness in surpassing – under the impetus of the desire to finalize the Code as quickly as possible – the numerous discussions and controversies generated by a similar article in the Napoleonic Code (Article 3). Or maybe our lawmaker, although aware of the controversies present in the French law, preferred not to go to unnecessary lengths, deciding that it was wiser to leave the road to doctrinal discussions and debates open so jurisprudence could ‘mend’ the rule in time ‘to polish’ and to adapt it to the times ahead. Consequently, this is the reason why the law-maker remained anchored in the past, remorselessly embracing – or only giving the impression of so doing? – a feudal viewpoint: reflecting the typical mindset of the common man to surround himself with fortifications and high walls, who does not accept anything (or almost anything) from the outside, and is even less prone to tolerate, ‘behind fortifications,’ the application of foreign principles or rules of law. However, the doctrine (with some exceptions) as well as the jurisprudence that followed proved to be just as opaque. It looked instead to historical reasons to decipher the supposed will of the legislature, rather than undertaking, praetorially, the mission of renewing, of adapting the norm to the requirements of the new times, of identifying the law to be normally applied to successoral transmission, taking, of course, into consideration the nature of this transmission, the fact that it comprises an entire patrimony, being universal and by no means a summum of particular transmissions. The universal nature of the devolution of succession is strongly connected to its unitary nature. Or, accepting the statutory doctrine leads to the conclusion that devolution by succession of real property belonging to the de cujus does not have a universal nature – which would only be logical and natural. But, on the contrary, it represents a gathering of individual real estate transmissions, each governed by individual devolution laws that are validated by laws issued by different states. The theory of statutes dates back to the time when ‘man was reduced to the role of humble accessory of the earth he lived on’.16 This is why its transfer of estate (of real estate in general) could only be looked at from an object-to-subject perspective (and not the other way around), the statute being, therefore, real. 16

ALEXANDRESCO D. (note 11), p. 131.

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Dan Andrei Popescu And realty laws have a territorial character (clauduntur territorio). The inheritance was regarded, first of all, as a means of acquiring property rights: a means like any of the ones enumerated under Articles 644 and 645 of the Civil Code. Consequently, it could only be governed by the same principle that applied to the other means of acquiring property, namely lex rei sitae. Moreover, perhaps not by chance, the decision to allow real estate in Romania to be governed by Romanian succession law was influenced by the fact that in this respect, Romanian courts had exclusive jurisdiction.17 A significant ‘detail’ that is able to shed some light on the intention of the 1864 legislature is the layout of Article 2, Section 1 of the Civil Code: ‘Only the real estate on Romanian territory is governed by Romanian law, even when owned by foreigners.’ The phrasing of the text betrays the spirit of the lawmaker, ‘the territorial euphoria’ that had seized him, ‘the doctrinal perfume’ which he ‘inhaled,’ which bewitched him and which he could not, at the time, forgo. He does not say that real estate is governed by the law of the state of the land on which they find themselves, but prefers to give a one-sided phrasing to the conflictual norm, being interested in ‘the property located on Romanian territory.’ However, adding the word ‘solely’ – which is missing from the text of the similar French norm – sheds light, eventually, on the matter, his reference point being the property located on Romanian territory.18 Therefore, the hypothesis of the norm excludes all other types of property, namely those located on foreign territory. Nevertheless, there are no doubts regarding the law to be applied to foreign real estate, all authors agreeing that these are also governed by the rei sitae.19 The solution derived both from the reciprocity principle as well as from the principle of territoriality of the laws that govern the transmission of real estate, which is accepted in the case of successions dealing with real estate located in Romania. Consequently, we are dealing with a bilateral conflict norm, but ‘egoistically,’ one-sidedly phrased: Simply because the legislature is solely interested in real estate located in Romania. Moreover, the fact that sections 1 and 2 do not refer in any way to movables – the latter being ‘forgotten about’ - further demonstrates ALEXANDRESCO D. (note 11), p. 127, note 1: ‘Consequently, only Romanian courts are able to judge any contestation regarding real estate located in Romania and this even when the parties involved are non-native (…) This principle, related to public policy, cannot be abrogated by the parties through mutual decision.’ Conversely, it was decided that Romanian courts have no authority either to declare ‘the establishing of ownership in the case of real estate located abroad or to determine the effects of a will regarding such real estate’ (Ibidem; translation is ours). 18 In this respect see JUVARA A., Drept internaţional privat. Conflictele de legi (International Private Law Course. Conflict of Laws), Bucureşti 1934, No. 43. 19 JUVARA A. (note 18), no. 43; ALEXANDRESCO D. (note 11), p. 127 (‘Romanian law should not be applicable to real estate that Romanians own abroad’); PÂRÂIANU N., Testamentul în dreptul internaţional privat [The will in the private international law], Bucureşti 1940, p. 7. 17

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Private International Law of Successions in Romania the influence of the time did not value movables, as they were considered worthless (res mobilis res vilis). Quid juris when it comes to movables? What is the law that shall apply to the succession to them? We would like to remind that Article 2 of the Romanian Civil Code was silent regarding movable assets. This is why we had to appeal to the old principles of the theory of statutes, which admitted that movable assets that are regarded as ad universum juris do not have a fixed location; this is why they follow the person of their owner. From this, d’Argentré arrived at the conclusion that the status of the succession to movables is an extraterritorial one and, as a consequence, a personal one (which is not very rigorous). According to this vision, we must consider that movable universalities are tightly connected to the person of their owner. They follow his status, thus being governed by the law controlling the personal status of their owner: ‘mobilia sequuntur personam.’ Included among the followers of this theory are d’Argentre, Burgundus, Bouhier, Hertius, and Pothier.20 20 There have also been doctrinaires who alleged that in the case of succession to movables we deal with a real statute (Dumoulin, Chopin, Challine, Boullenois, Jean Voet, Merlin, and Rodenburgh). In order to locate the movable assets of the succession from the point of view of the applicable law, they resorted to a fiction: they presumed that all the movable assets which belonged to the deceased are located in the same place, and this place would be ‘the centre of his activity’ – the deceased’s domicile. Thus the law applicable to the succession to movables can not be other than the law of the country where they are presumably located – the law of the deceased’s domicile. Thus the statute is real. One can notice that regardless of the theory used – the real statute of the movable assets of the succession (based on the above mentioned fiction) or the personal statute – finally, the solution was the same. The successions to movables were governed by the law of the deceased’s domicile – lex domicilii – as the law governing the personal status of the deceased’s (according to the sympathizers of the personal statute of the movable assets of the succession) or – as a law establishing by fiction the location of the movable assets of the succession (in the view of the sympathizers of the real statute). Thus, both conceptions lead to the implementation of one law for all the movable assets of the succession, ascertaining the unity of the movable succession. The situation became complicated after the Napoleonic Code appeared: nationality (citizenship) replaced domicile as a connecting factor in matters of personal statute. Thus, it became really important to discern the exact meaning of the rule ‘mobilia sequuntur personam’ – determining the nature of the statute of the movables of a succession. After a period of exploration, the French jurisprudence, marked by the old dogma of the real statute of the law, favoured Dumoulin’s theory, maintaining the traditional solution. For Dumoulin, the succession as a whole was integrated in the real statute, irrespective of the assets composing it; as far as the movable assets are concerned, for lack of a ‘fixed base’, it is presumed that they are fictitiously located at the deceased’s domicile. Although at the time the personal theories – connecting the succession to movable property to the deceased’s national law – were in fashion and exercising a tremendous influence in Europe, the French jurisprudence continued to apply to the successions to movables the law of the country were the deceased had his last domicile. In fact, towards the end of the XIXth century, many national legal systems had already embraced the principle of the national law (both in the case of succession to immovables and movables), thus ensuring the unity of the devolution and transmission of the succession regardless of the nature of the assets composing it (article 8 of the Italian Civil Code, Article 10 of the Spanish Civil Code,

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Articles 24 and 25 of the Law introducing the German Civil Code etc.). The possibility of shifting the French jurisprudence’s view in this matter towards the national law could have been favoured by strange circumstance. Article 13 of Napoleonic Code stated that a condition for the recognition of a foreigner’s domicile in France was the French Government’s authorisation. According to this article, ‘the alien to whom the government will have authorized a domicile in France shall enjoy all his civil rights for the entire period he has the domicile in France.’ Thus, a person who although living in France had not gone through the formalities of getting his domicile approved by the government was considered to have his domicile in his country of origin. In this way the succession to movables of the aliens who were living in France but did not get the government’s approval for their domicile was governed by their national law – but under the cover of the domicile of origin. In fact, the purpose of Article 13 of the French Civil Code was not to establish the conditions under which an alien could choose his domicile in France, but to establish the conditions under which he could benefit from the civil rights – which he was refused in principle (with the exception of diplomatic reciprocity). After Article 13 of the French Civil Code was repealed – by the Act of July 10th, 1927 – choosing between the law of the deceased’s actual domicile and the national law became an issue again. But, by this time, the personal current had lost its intensity and the French Court of Cassation redefined its position in the famous case of Labedan vs. Labedan, maintaining its attachment to the law of the domicile. Here are the facts of this case: a Spanish citizen (Jean Labedan) who had lived in France since his youth died in France on December, 21st, 1931. His heirs were his wife, who was a universal legatee by an authentic will, and his mother, a forced heir both under Spanish and French law. The latter died before the finalisation of the probate proceedings. Under these circumstances the deceased’s brother (Alfred Labedan) disputed the quality of universal legatee of the Labedan widow, appealing to the provisions of Article 814 of the Spanish Civil Code, according to which naming a universal legatee is void if the testator failed to mention the direct line of forced heirs. The deceased (Jean Labedan) left his entire patrimony to his wife, without making any provisions for his mother. Thus, although the will was valid according to the French law, it was void according to the Spanish law. The civil court of Bayonne, by its decision of January 13th 1933, solved the conflict of laws favouring the Spanish law, considering Article 814 of the Spanish Civil Code a rule of statute and capacity, thus referring to personal statute; on the other hand, the Court did not recognize the deceased’s domicile as being in France because although he had lived almost his entire life in France, he did not obtain the authorisation to establish his domicile in that country. As a consequence, since his legal domicile was not in France, the Court applied the deceased’s national law (the Spanish law) through the medium of the domicile of origin (Spain), declaring that the general legacy was void. In the appeal, the Court of Pau ruled – by its decision of March 19th 1934 – that the will should be considered valid because on one hand Article 814 of the Spanish Civil Code had to apply to the succession governed by the law of the deceased’s last domicile and not by its national law, and on the other hand, since Article 13 of the French Civil Code had been repealed (by the law of August, 10th, 1927) there was no doubt that the deceased’s last domicile was in France pursuant to Article 102 of the French Civil Code. The Court of Cassation, on June, 19th 1939, reversed the second appeal of the deceased’s brother, reinstating the original ruling. The Court stated that the movable assets of the succession are presumed to exist at the place of the opening of the succession, thus their devolution is governed by the law of the deceased’s last domicile. On the other hand, ‘the law of the last domicile cannot replace the national law (the law of the domicile of origin) unless the deceased was refused his civil rights gained by choosing his

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Private International Law of Successions in Romania The Romanian doctrine and jurisprudence decided that with regard to the devolution of the succession to movables, the deceased’s national law should be applied because the status is a personal one. To sustain this solution, the old doctrine of statutes was brought to light. It stated that all the movables of a succession (regarded as referring ad universum juris) should be governed by the deceased’s personal law. Personal property does not have a fixed location, that’s why it follows the person of its owner: ‘mobilia sequuntur personam, et ejus ossibus personae adhaerent.’21 A textual argument has also been evoked: Article 2, paragraph 1 of the Romanian Civil Code stated that: ‘only immovables located on Rodomicile in France by a particular text of law’ But Article 13 of the French Civil Code – which imposed the authorisation of any alien’s domicile in France and which had such a consequence under the rule of the previous legal system – was repealed before the opening of Jean Labedan’s succession. As a consequence of the fact that the deceased’s domicile was no longer deprived of the effect disputed during the second appeal, the French law was applicable, because it was the law of the last domicile; thus, the will is valid. To view a detailed commentary of this case see ANCEL B., LEQUETTE Y., ‘Les grands arrêts de la jurisprudence française de droit international privé, 5e éd., Paris 2006, p. 157-163: ‘D’après l’ancienne règle, toujours subsistante, les meubles héréditaires étant réputés exister au lieu d’ouverture de la succession, leur dévolution est régie par la loi du dernier domicile du défunct.’ We must emphasize that the law of the deceased’s last domicile is still applied in French law with regard to the succession to movables, although nowadays status and capacity of a person are no longer governed by the law of the domicile (like they used to be), but they are governed by the law of the state of their citizenship, respectively the law of the nationality, as the French like to say (lex patriae). Consequently, we can ascertain that even today the French international private law is firmly attached to the idea of the territoriality, considering that the succession belongs to the real statute. The statute of the succession to movables, materialized in the French legal system by the law of the deceased’s last domicile – as a place where all the deceased’s movable property is presumably located – is finally defeated by the very principle designed to serve it. In other words, the principle of the last domicile, even if it is the mere consequence of the principle of territoriality regarding the succession to movables, finally leads, through the above mentioned fiction, to the application of one law, thus ensuring the unitary statute of the succession to movables. If the movables ‘scattered’ throughout the territories of various nations are transferred in accordance to one succession rule, we do not think we can talk about a strict territoriality, but rather about a fictitious or presumed one. So, the movable property of the succession shall also be governed by the law of the place where they are located, but presuming that this place is also the place of the deceased’s last domicile. Only in the case of the succession to movables does the ‘redeeming fiction’ help avoid the fragmentation of the succession, maintaining its unity. However, in the case of the succession to immovables, the same principle leads to an illogical, ‘unnatural’ conclusion entailing the fragmentation of the devolution and transmission of the succession, multiplying them according to the number of immovables located on various national territories. 21 On the contrary, movable property regarded as single units (ut singuli) was governed by the territorial law, respectively by the Romanian law if they were located in Romania, even if they belonged to aliens (ALEXANDRESCO D., note 11, p. 133: ‘indeed, the public policy demands that movable property regarded as single units be governed by the territorial law’.

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Dan Andrei Popescu manian territory are governed by Romanian law, even if their owner is an alien.’ Hence, since the code does not mention anything about personal property, it has been argued that they are an exception from the principle of territoriality if the object of the transmission is a universality of movable assets regarded ut singuli. It has been stated22 that the classification of an asset, determining whether its nature is personal or real, has to be performed pursuant to the legal criteria used where the asset is located. This rule has been established in terminis by the present system (Article 50 of Law no. 105/1992). We cannot close this section without making two more important observations. First, even if most of our doctrine remained loyal to the theory of statutes (by believing that the legislature, in its evasive wording of Article 2, paragraph 1 of the Civil Code, embraced this theory and subjected the succession to immovables to the law of the state where the real estate is located and the succession to movables to the national law of the deceased), even if the jurisprudence remained firm in its beliefs, there were some voices who, starting from the major inconveniences of embracing the theory of statutes in this matter, from the catastrophic consequences it produces in the case of international successions, they sustained even de lege lata that our legislature did not have in view the successions when designing Article 2 paragraph 1 of the Civil Code. They sustained that he envisaged only singular real estate properties and not those which are part of a legal universality like the patrimony of a succession. Thus, it has been alleged that if the legislature’s intent had been that of supporting the traditional theory in the matter of successions, he would not have hesitated to say so openly. But, ‘since he did not state anything, we can not assume that he wanted to apply the old tradition.’23 On the other hand, it is considered, and with good reason, that one must start from the very nature of the succession, which has nothing to do with the nature of the assets composing it, nor with the territoriality of the immovables belonging to the deceased: ‘The laws regarding the successions are of personal status because they envisage the person; they only deal with assets in a subsidiary manner. The patrimony, as a whole, may consist of all sorts of things; and these things may be located in different places; admitting that each immovable asset is governed by the law of the place where it is located equals to admitting having several independent successions, which is abnormal; the succession law are based on the preALEXANDRESCO D. (note 11), p. 133: ‘Thus, the laws establishing whether the nature of an asset is real or personal, those regarding liens, compulsory execution, prescription etc. can be applied not only to immovables possessed by Romanians, but also to those possessed by aliens.’ 23 MEITANI G. (Son), ‘Despre legea care guvernează succesiunea imobiliară şi mobiliară a străinului’ [‘About the law governing the immovable and movable succession of an alien’], in: Dreptul 1901, p. 707. 22

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Private International Law of Successions in Romania sumed will of the deceased; can we admit that the deceased’s will varied according to where his assets were located? The succession matter belongs to the family law, and each legislature is entitled to organize the families of its subjects as it sees fit; he has no right to enforce against aliens other laws than those personal to them in this matter. We believe that article 2 can not be evoked in order to sustain that the succession to immovables should be governed by the law of the state where the immovable assets are located; because this article only refers to the immovable assets as single units; but the succession is a universality of assets. On the other hand, since we admit that movable assets taken as single units are governed by the law of the place where they are located, and those taken as universality are governed by the personal law of their owner, why wouldn’t we apply the same system to the immovable assets as well? The differentiation made between movable and immovable assets cannot be sustained because either the succession laws are mandatory public policy laws and in this case movable assets too must be governed by the territorial law, or they are of private order and in this case we don’t see why would the deceased’s and his family’s interest demand that different laws would apply to movable and immovable property (…) So, we draw the conclusion that the succession to movable and immovable property of an alien is governed by his national law unless it contravenes to public policy.’24 Let’s not forget the fact that this trend of applying a unique law to a succession regardless of the nature of the assets composing has been encouraged by the International Law Institute, which in 1880, at Oxford, adopted a resolution called ‘Principes généraux en matière de nationalité, de capacité, de succession et d'ordre public.’ Here is article VII of the Resolution: ‘Les successions à l’universalité d’un patrimoine sont, quant à la détermination des personnes successibles à l'étendue de leurs droits, à la mesure ou quotité de la portion disponible ou de la réserve, et à la validité intrinsèque des dispositions de dernière volonté, régies par les lois de l’Etat auquel appartenait le défunt, ou subsidiairement, dans les cas prévus ci-dessus à l’article VI, par les lois de son domicile, quels que soient la nature des biens et le lieu de leur situation.’25

24 Ibidem, p. 707-708 (our translation). See also SUCIU A. I., ‘Combaterea teoriei Statutelor în dreptul român’ [‘Confuting the theory of statutes in Romanian law’], in: Dreptul 1905, p. 181-185. 25 Article VI of the Resolution stated: ‘L’état et la capacité d’une personne sont régis par les lois de l’Etat auquel elle appartient par sa nationalité. Lorsqu’une personne n’a pas de nationalité connue, son état et sa capacité sont régis par les lois de son domicile.

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Dan Andrei Popescu But, in spite of all arguments and criticisms against the divisive system created by the doctrine of that time, our doctrine remained firm. The jurisprudence refused unyieldingly to assume a praetorian role, remaining attached to the wording of Article 2 paragraph 1 of the Romanian Civil Code. Thus, it favoured an easy and comfortable position, safe from potential criticisms, instead of assuming the task of ‘building’ a rule of law starting from an extensive and finalistic interpretation of the old rule. The second observation we propose concerns the fact that although successions continued to be governed by Article 2 of the Civil Code, a change of the localisation rule of successions was attempted by means of legislative intervention. Thus, the pre-project of the Civil Code published in 193226 - prepared by the Legislative Council – and the project of the Civil Code of 1933 were both in favour of applying a unique law – the national law of the deceased at the time of his death. Although the articles of the project that were dedicated to private international law were drastically reduced by the editors of the King’s Carol the 2nd Civil Code (promulgated on November the 7th, 1939 and published in the Official Journal issue no. 259 of November the 8th, 1939), from 58 to 15, the principle of the unique law applicable to the succession remained established in Article 18, paragraph 1 of the 1939 Code: ‘the testate and intestate succession is governed by the law of the state to which the deceased belonged at the time of his death, regardless of where the assets are located.’ The modified version of the 1939 Code – according to Decree-law no. 2886/1940 regarding the modification of the King’s Carol the 2nd Civil Code – was published in the Official Journal no. 206 of September 6th, 1940 and later suspended by Decree-Law no. 4225 (published in the Official Journal no. 306 of December 31st, 1940). In this later version of the Civil Code, an entire chapter was dedicated to private international law – Chapter II of the preliminary title (articles 9 to 50). Section IV of Chapter II ruled conflicts of laws regarding successions and donations. According to Article 35 of the 1940 Civil Code ‘the succession - as far as the title to inheritance, the order of the heirs, those unworthy of inheriting, the shares, collation, the disposable portion and the forced portion - is governed by the national law of the deceased at the time of his death, regardless of the location and nature of the assets.’27

Dans le cas où différentes lois civiles coexistent dans un même Etat, les questions relatives à l'état et à la capacité de l'étranger seront décidées selon le droit intérieur de l'Etat auquel il appartient.’ 26 See article 56 of the pre-project. 27 For details see ANTONESCU E.E., Principiile de drept internaţional privat din Codul civil ‘Regele Mihai I’ [International private law principles in King Mihai the 1st Civil Code] – suspended by the Decree-Law no 4225 of December 31st, 1940, Bucureşti, p. 3-79; JUVARA A., ‘Noul sistem de drept internaţional privat pozitiv românesc [The New Romanian private international law system]’, in: Pandectele române 1940, p. 41 and the following.

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IV. Lex rei sitae vs. lex personalis As it is commonly known, lex rei sitae governs in principle the legal regime of the assets. The question that arises - and to which we shall try to answer - regards the extent to which applying the law of the place where the asset is located is logically justified in the case of a universality of assets (movables and / or immovables) rising from a succession. Should all the assets of a succession be governed by a unique law (lex patriae or, possibly, lex domicilii): a law that settles the rules of devolution and transmission of the succession and the rules of sharing out a succession? Or, on the contrary, should the legal regime of the assets be different according to their nature (movable or immovable) and their location? Does the law of the place where the asset is located have the right to govern each of the assets of the succession, thus sacrificing the unity of the devolution and transmission of the succession? Or, on the contrary, should a universality of assets belonging to a succession be governed by a unique law, thus maintaining the unity of the transmitted patrimony regardless of the nature or the location of the assets of the succession? In other words, should the role of lex succesionis be played by only one law – according to the universal attribute of transmission of a succession28 – or, on the contrary, should it be played by several laws applied simultaneously and concurrently, thus fractioning the transmission? If the succession (mortis causa) was to be governed by a unique law - which one would it be: the deceased’s national law, the law of the deceased’s last domicile, or the law of the state that the deceased had chosen as his habitual residence? If several laws are chosen to govern the succession, what are the reasons why the legislature would proceed in such way? Whose interests are being protected and how strong are these interests to break the natural order of things by scarifying a logical, fair, and natural principle? Another option is available: an intermediary solution according to which all movables of the succession shall be governed by a unique law (lex patriae or lex domicilii), while the universality of the immovables of the succession remains fragmented by being governed by a number of laws (lex rei sitae) equal to the number of states in which there are im28 Concerning this attribute see ELIESCU M., Mostenirea si devolutiunea ei în dreptul R.S.R. [Succession and its devolution in Romanian Law], Bucureşti 1966, p. 49; ID., Curs de succesiuni [Succession Law], Bucureşti 1997, p. 27 and following (printed after a lithography of the course of 1949); CHIRICĂ D., Drept civil. Succesiuni şi testamente [Civil Law. Successions and testaments], Bucureşti 2003, p. 30-31; DEAK F., Tratat de drept succesoral [Treaty of succession law], Bucureşti 1999, p. 14-17; SAFTA-ROMANO E., Dreptul de mostenire. Doctrină si jurisprudentă [Succession Law. Theory and jurisprudence], vol. I, Iaşi 1995, p. 29-30; CĂRPENARU S. D., Drept civil. Drepturile de creatie intelectuală. Succesiunile [Intellectual Property Law. The Successions], Bucureşti 1971, p. 162; MACOVEI D., Drept civil. Succesiuni [Civil Law. The Successions], Iaşi 1993, p. 7-8; PETRESCU R., Dreptul succesoral. Moştenirea. Devoluţia şi împărţeala. Curs [Succession Law. Devolution and division of estate assets], Bucureşti 1995, p. 14; MANOLIU J., Drept civil. Succesiuni [Civil Law. Successions], Iaşi, 1995, p. 8-11.

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Dan Andrei Popescu movables belonging to the succession; in this case, on the whole, the transmission of the succession shall no longer be unitary, but it shall be fragmented – movables shall be governed by the lex patriae or the lex domicilii, and the immovables shall be governed by the les rei sitae. What is the position of our legislature and how do things stand from the point of view of comparative law? What are the latest international trends in this field?

V.

The Law Applicable to Successions in Romanian Private International Law; Sedes materiae; Principle.

Act 105/1992 regarding the conflicts of laws devotes three articles 66-68 (included in chapter VI) to the matter of successions. By derogation from the unity of devolution and transmission of the succession, article 66 states that the succession is governed by: - The national law of the deceased at the time of his death as far as the movable assets are concerned; - The law of the state where the asset is located as far as immovable assets (real property) and goodwill are concerned. Accordingly, the patrimony of the succession shall be fractioned from the point of view of the applicable law according to the nature of the assets composing it. Movables belonging to the deceased at the time of his death. The devolution and transmission of these assets, regardless of the place where they are located at the time of the deceased’s death shall be governed by a unique law, namely the deceased’s national law (mobilia sequuntur personam; ossibus personae inhaerent). And now, according to Article 12, paragraph 1 of Law no. 105/1992, the national law of a natural person is ‘the law of the state whose citizen he is,’ thus, mutatis mutandis, the succession to movables shall be governed by the law of the state whose citizenship the deceased had (lex patriae). If the deceased had, besides Romanian citizenship, one or more other citizenships, the law applicable to the succession (to movables) shall still be the Romanian law (according to Article 12 paragraph 2 of the same law). If the deceased had several citizenships - all foreign - then ‘the law of the state where he has his domicile29 or, in default, his resiWhat shall we do if, for instance, the deceased had several citizenships and in each personal identity card issued by a different country he has a different domicile? We believe that in such case the state authorities invested with the opening of the succession should first establish which one is the deceased’s domicile. Since we are in the presence of a characterisation process we shall apply the domestic law of the court dealing with the case (lex fori). Hence, if the lex fori is the Romanian law, in order to establish the law applicable to the movable assets of the succession we should first establish where the deceased had his last domicile, and this shall be done according to the Romanian law regardless of what is written 29

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Private International Law of Successions in Romania dence shall apply’ (Article 12, paragraph 3). The same law – of the last domicile (lex domicilii) or, in default, the law of the residence30 – shall apply if the deceased on the deceased’s identification cards issued by foreign authorities. Thus, it is possible to find that the deceased’s last domicile was in Romania or even in the territory of a third state (whose citizenship he didn’t have) if his permanent establishment or his main establishment was there (Article 13 of Decree no. 31/1954 and Article 25 paragraph 1 of Law no 105/1996). Characterisation of domicile is done according to the lex fori (in our example – the Romanian law) according to the rule in this matter stated by Article 3 of Law no. 105/1992. We can easily notice that it is of little importance whether the deceased who had several citizenships had his last domicile on the territory of one of the states whose citizenship he had or, on the contrary, on the territory of a third state. Our legislature chose to apply the law of the last domicile (lex domicilii) only because it was impossible to locate the person of the alien (and, implicitly, his succession to movables) according to the criterion of nationality by citizenship (lex patriae). In conclusion: both domicile and residence are subordinate criteria used to locate the natural person as far as his personal status and succession to movables are concerned. Hence, they are criteria used only when a ‘tie-break[er]’ is necessary, which is when a person has double or multiple citizenship, due to the inability of using the criterion of nationality by citizenship or, more precisely, due to a lack of involvement in looking for a criterion to distinguish between the competing foreign laws. In exchange, in Swiss private international law the localisation of persons who have multiple citizenships – regardless of whether of them is Swiss or not – is done by reference to one of the citizenships, more precisely, to the one with which the person has tightest connections. Thus Article 23 paragraph 2 of the Federal Swiss Law regarding private international law (Bundesgesetz uber das Internationale Privatrecht – IPRG) of December 18th, 1987 states that, in the absence of provisions to the contrary, if a person has multiple citizenships, from the point of view of determining the applicable law, the conclusive citizenship is that of the state with which the person has tightest connections. In its original wording, Article 23 (2): ‘Besitzt eine Person mehrere Staatsangehörigkeiten, so ist, soweit dieses Gesetz nichts anderes vorsieht, für die Bestimmung des anwendbaren Rechts die Angehorigkeit zu dem Staat massgebend, mit dem die Person am engsten verbunden ist.’ See also PIERRE P., ARNOLD K. W., PATOCCHI M. P., Switzerland’s Private International Law, 2nd ed., Zurich / Deventer 1994, p. 50; RIERING W., IPR-Gesetze in Europa, München / Bern 1997, p. 215. We must make haste to add that in Swiss private international law, the deceased’s citizenship is of no importance in determining the law applicable to the succession. Irrespective of the nature of the assets composing the succession and of their location at the time of the opening of the succession, the succession shall be governed by the Swiss law if the deceased’s last domicile was on the territory of the Swiss Confederation – article 90 (1) of the above mentioned law – or, if not, it shall be governed by the competent law according to the conflict rules of the state where the deceased had his last domicile – article 91 (1). 30 The next question is: why did our legislature establish residence as a connecting factor subsidiary to domicile when it comes to the status of the person possessing two or more citizenships or the status of a stateless person and when it comes to the his succession to movables? Since it has been known that one of the domicile’s legal attributes is the fact that it is compulsory, it is unbelievable that a person could have no domicile. We must remind you that the enunciation of Article 12, paragraphs 3 and 4 of Law no. 105/1992, where the legislature states that the nationality law for an alien who possesses more (foreign) that one citizenship and that of a stateless person is, lack of domicile, the law of his residence. Our opinion is that the legislature chose wisely this time. The truth is that unlike

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Dan Andrei Popescu had no citizenship at the time of his death – a stateless person (heimatlos).31 As regards ut singuli immovables which belonged to the deceased at the time of the opening of the succession,32 their devolution and transmission shall be in the case of civil law, things prove to be more complicated in the practice of private international law and it is common for a person’s domicile to be unknown or very difficult to establish. That’s why the legislature had to resort to a connecting factor subsidiary to domicile – which in his turn is subsidiary to the citizenship – and this factor is the person’s residence. Hence, whenever it is impossible to determine that a person had a domicile, the localization shall be done according to the connecting factor subsidiary to the domicile: the person’s residence. Some legal systems speak of the habitual residence of a natural person (‘gewőhnliche Aufenthalt’, ‘habitual residence’, ‘résidence habituelle’), which is considered to be more relevant for the localisation in matters like personal status due to a person’s persistence in one place even if the ultimate intention of permanently settling there is missing. Such an option could also be explained by the fact that domicile has more than one meaning, varying from one legal system to another, and sometimes recognition of a person’s domicile in a country may imply some prior administrative formalities. Lately, habitual residence – ‘rattachement qui tend à se répandre’ (B. AUDIT) – seems to gain more and more terrain and it should be seen like a connecting factor detached from any affiliation to a certain state or legal system, as opposed to citizenship or even domicile. As a concept, it is undeniably more close to domicile than to citizenship. Still, it does not express a compromise – which is not even possible – between the two connecting factors. What distinguishes it from domicile is the fact that in the case of residence, the person’s intention to permanently settle there is not required, as continuity is not an essential attribute of residence. ‘La résidence – says the French professor B. AUDIT (in Droit international privé, 4e éd., Paris 2006, p. 129-130) – désigne un établissement objectif dans un pays donné. Bien que l’habitude soit impliquée dans la notion même de résidence, l’adjectif qui lui est accolé est destiné à marquer qu’il ne doit pas s’agir d’une demeure éphémère ou épisodique, même si la résidence n’est pas nécessairement continue; une durée minimum est parfois fixée. L’intention pourrait être prise en considération pour déterminer s’il y a résidence ou quel en est le caractère (principale, secondaire). Des faits de nature personnelle, familiale ou professionnelle peuvent également intervenir, dans la mesure où ils révèlent des liens stables entre une personne et un établissement’. In the second place, because it is a fact habitual residence cannot be determined by implication, unlike legal domicile (also called domicile of dependency). Last but not least, unlike domicile, (habitual) residence is beyond any intervention from the public authorities, as it does not require any formalities. The French doctrine appreciated that if what is invoked as domicile is different than the habitual residence, the latter should prevail, in principle (ibidem). Using the words of the same Bernard Audit we can say that the habitual residence is just a functional connecting factor – ‘désignant la loi du milieu actuel de l’intéressé’ (ibidem), independent from any intervention of the public authorities. It appears to be an ad hoc domicile, or a ‘simplified domicile’ meant to support a person’s localisation for the purpose of determining the law applicable to his personal status. In fact, The Hague Convention relating to the settlement of conflicts between the law of nationality and the law of domicile concluded on June 15th, 1955 – but never entered into force – defines domicile in Article 5 as ‘the place where a person usually resides without depending on that of another person or the headquarters of an authority’ for details see POPESCU D.A. in: POPESCU D.A., HAROSA M., Drept internaţional privat. Tratat elementar, vol. I, Bucureşti 1999, p. 153 and following. 31 See Article 12, paragraph 4 of Law no. 105/1992.

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Private International Law of Successions in Romania governed by the law of the state where each of the immovable assets is located, meaning lex rei sitae. As a consequence, the immovable assets shall be regarded separately, according to their localisation, instead of as a part of a whole succession – object of the devolution and transmission. Although the immovable assets of a succession are a part of a legal universality whose rules should logically apply regardless and independently of the nature of the assets composing it, our legislature seems to have abdicated from the natural order of things and to have scarified the unity of the succession whenever it contains immovable assets located on different national territories or whenever the immovable assets are located on the territory of another state than the state of the deceased’s national law at the time of his death. Accordingly, the lex rei sitae is applied both to movable assets regarded ut singuli, and to immovable assets (‘imobilia vero territorium’), regardless of whether or not the latter are part of a succession (article 66, letter b) of Law From the point of view of determining the applicable law, the legislature assimilates the immovable assets of the succession to the stock-in-trade, although, regarded as a whole, the latter is considered to be ‘an impersonal mass of movable assets’ (PĂTULEA V., TURIANU C., Elemente de drept commercial [Elements of commercial law], Bucureşti 1993, p. 114) or an ‘intangible movable property’ (GEORGESCU I. L., Drept comercial roman [Romanian Commercial Law], Bucureşti 1947, p. 252, 517 and following). On the other hand, Law no. 298/2001 on modification and completion of Law no. 11/1991 on unfair competition in article 1, letter c) defines the stock-in-trade as ‘all movable and immovable property corporeal or incorporeal (trademarks, brand marks, patents, good business location, or location of business) used in carrying on a business by a trader.’ Therefore, although goodwill (stock-in-trade) is movable by nature since it is universality in fact (universitas facti) – from the point of view of the applicable law – it is not assimilated to the movable assets, but to the immovable assets. Article 66: ‘the succession is governed by: […] b) the law of the place where each of the immovable assets and goodwill are located.’ We wonder if it hadn’t been more natural for the stock-in-trade to be governed by the same laws that govern the movable assets of the succession, thus observing the nature of movable universality of the stock-in-trade. At least this is the logical solution since goodwill is integrated in the movable succession governed by the law of the deceased’s nationality. The fact that the legislature subjects the transfer by succession of the stock-in-trade to the law of the state on whose territory they are at the time of the death (lex rei sitae) – thus using the same criterion as he used for the immovable assets of the succession – can only be considered as bizarre and inappropriate. We must look for an ‘explanation’ of this unfortunate resemblance in the legislature’s view in the doctrine’s dispute towards the affiliation of the immovable assets of the stock-in-trade. As things are still not clear – the doctrine and the jurisprudence remain divided in their opinions – the legislature found this ‘solution’ and assimilated what was not supposed to be assimilated, in order to eliminate any possibility of an immovable asset (part of stock-in-trade) being transmitted by succession in accordance with a law different from the law of the state where the immovable is located. Of course, the hypothesis contemplated is the one in which the stock-in-trade belonged to the deceased as a person and not to a company in which he was partner; because in this latter case, the equity securities belonging to the deceased (shares or equity bonds – according to the type of company) shall enter in the mass of the succession instead of the entire goodwill. 32

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Dan Andrei Popescu no. 105/199233) and regardless of the deceased’s nationality, his last domicile, his citizenship, or the domicile of the heirs. ‘Breaking down’ the succession according to the nature of the patrimonial elements composing it is, in our opinion, a disputable solution which ignores the attributes of universality and unity of the transmission of the succession and certainly ignores the indivisibility of the transmission. In addition, such a ‘solution’ will only make it harder to liquidate the debts of the succession, which are not always easy to locate by reference to the nature of the active elements; more precisely, the debts may have no connection to any of the assets of the succession. Our interwar doctrine stated that ‘the efforts of the jurisprudence to divide the debts of the succession in debts related to the immovable assets and debts related to movable assets proved palliative in practice.’34 Law no. 105/1992 makes no reference to the law applicable to the debts of the succession. What will this law be and how shall we determine it? Should liquidation of the debts of the succession be done according to one law or, in this matter too, shall we apply several laws? Of course, all these questions would not have arisen if our legislature had chosen to apply a unique law – like other legislatures – for the entire succession, regardless of its structure and of the nature of the passive and active elements composing it. Thus, we could have avoided the simultaneous application of several legal regimes which, often, each impose dissimilar criteria for assuming the debts of the succession. On the other hand, dividing the succession, as far as the applicable law is concerned, according to the nature of the elements composing it often gives birth to obviously unfair consequences among the heirs. This is because not all countries have the institution of the forced portion; among those that do, its nature and extent differ from one country to another; and the scope of the persons included in the category of forced heirs also varies. Let’s imagine for example that a deceased has two immovables of equal value: one in France and one in England. He passes them on to his two children. The second child (who received the immovable located in England) could demand his share of the French immovable corresponding to the forced portion while the first child (who received the immovable located in France) will not be able to claim anything of the English property because this system does not recognize the institution of forced heirship, allowing even (with small excep-

33 By way of exception, as we can see in Article 68 of Private International Law Act, no 105/1992, the testator is allowed to choose another law to govern the transfer of the succession other than the law which would have normally been competent: ‘The testator can subject the transferring of his goods by heritage to another law than that stipulated under Article 66, without having the right to remove the latter's imperative provisions’ (Art. 68, paragraph 1). 34 HILLARD V., Principii de drept international privat în legislatia pozitivă română (naţionalitate – extraneitate; conflictul legilor; conflicte interprovinciale – exequatur) – [Principles of Romanian private international law (Nationality-Extraneity; conflict of laws; interprovincial conflicts – exequatur], Bucureşti 1932, p. 216.

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Private International Law of Successions in Romania tions) the total disinheritance of the blood relatives regardless of their rank.35 Although, in this case, the deceased’s intention was to divide his estate equally between his two children, giving each of them assets equal in value, the final result is profoundly unfair due to the fact that several laws apply to international successions. This is due to ‘the game of forced portion,’ which is calculated in a different manner for each set of assets governed by a different law.36 Here is how the forced portion, designed to maintain certain equity, leads to inequity despite its purpose. Dividing the patrimony subjected to transmission by succession may generate real difficulties for the creditors of the succession, who will now have to pursue their receivables by participating in multiple probate proceedings, which sometimes may prove costly. They will also have to face different legislative conceptions regarding the liquidation of the debts of the succession. They will also have to sue different heirs – according to the title to inheritance established for different persons by The case Stewart c. Marteau – published in ANCEL B. / LEQUETTE Y. (note 20), p. 22-29, is illuminating to this respect. 36 See Cour de cassation, chambre civile (Civ. 1 re), 4 déc. 1990 in: Clunet 1991, p. 398, note REVILLARD M., Rev. crit. 1992, p. 76, note DROZ G.A.L. for French private international law. We can explain the division of the estate from the point of view of the competent law by the French jurisprudence’s effort to eliminate, as much as possible, the fraud in this matter. Thus, the French doctrine considers that the testator cannot be allowed to choose the law applicable to the estate based on the principle of freedom of contract. In matters of commercial contracts, the parties have this liberty in order to eliminate any hindrances that might be stipulated by the internal laws of the states. Instead, succession law reflects certain social concepts in family and property matters which materialize as imperative rules not generally compatible with the possibility of choosing the applicable law. On the other hand, it is considered that the freedom to choose the law applicable to the succession would open the possibility to avoid the rules stipulating forced heirship in favour of the close relatives and the surviving spouse, which cannot be permitted. Following the same line of thinking, it has been argued that we should fear more the risk of fraud inherent to any professio juris, to the extent that it would arise from a unilateral deed in favour of a third person rather than in contract matters where this risk is limited by the natural opposition between the parties’ interests (AUDIT B., note 30, p. 722). This is why this factor (the freedom to choose the applicable law) – states the same doctrine – is foreign to the nature of wills. The French law does not allow this possibility, and the testamentary succession is governed by the same law that governs the intestate succession (ibidem; see Cour de cassation, June 19th, 1939 – Labedan vs. Labedan, on which see note 20 above). As a consequence, the deceased shall only be able to dispose of the succession within the limits established by the law objectively applicable, as forced heirship can be re-established if needed. In French law, subordinating testamentary succession to intestate succession expresses the doctrine’s and jurisprudence’s preoccupation with respecting the rules regarding forced heirship. This is the reason why electio juris is not permitted in the case of successions and it is considered ‘a factor foreign to the nature of wills’ (AUDIT B., ibidem, p. 722), which allows the illusion of these rules. Also, this is the reason why the validity of donations – as far as the extent to which they harm the forced heirship – is also a subject of succession law (see to this respect AUDIT B., ibidem, p. 723-724; Cour de cassation, March, 3rd, 1971 in Rev. crit. 1938, p. 283, note BATIFFOL H.). 35

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Dan Andrei Popescu different legal systems to which the succession is connected – who often fight with one another regarding the division of the debts of the succession. On the other hand, this allows the creditors to speculate, giving them the ability to choose the better solution, even if the best interests of certain heirs are jeopardized. This means that the creditors can choose the estate from which to have their fill.37 Finally, among other distortions created by the scission system is its influence on some norms of personal status. According to Article 807 of the Romanian Civil Code, a person between the ages 16 and 18 may leave a testament only for half of the estate he could have had if he was 18. How will we calculate the half for which the person between the ages of 16 and 18 can leave a testament? It would be only logical to assume that this half is calculated from the entire estate regardless of the place where the assets are located, and not only the estate subject to the Romanian law. Especially that, since it is a matter of personal status, it should have no connection either with the location of the assets of the succession or with the applicable law. For example, if such a person leaves a testament for the only immovable located in Romania, normally and logically his testament should be validated if the value of his other assets located abroad is higher than the half for which he could leave a testament. Still, we believe that even if we are in the presence of an issue regarding personal status, in order to calculate the ‘half’ we have to relate to the whole – which is composed of all assets governed by the Romanian succession law: all movables of the deceased who was a Romanian national at the time of his death, all of his immovables located in Romania, and all the immovables located abroad which are governed by the Romanian law as an effect of the remission of the conflict law of the country where the immovables are located.38 In other words, for the Romanian legislature the immovables located abroad (and which are not In other words, if the deceased died before writing a will and he has several general legatees – each legacy composed of immovables located on different national territories – the creditors may raise their claims only against one of the legatees, leaving him broke, while the other general legatees will not have to pay any of the debts of the inheritance. This is because the assets of the succession can be located, a function of the nature of the assets and their location (in the case of immovables), while the debts of the succession do not have a fixed location (they are usually hard to locate). On the contrary, if the payment of debts was made according to unique probate proceedings and according to a single law, it would lead to an equal contribution by all the legatees. 38 This is also the case, for example, of some immovables located in Germany and belonging to a deceased Romanian national. In this case, the Romanian conflict law stipulates that the applicable law is the law of the place where the immovable is located (Article 66, letter b) of Act no. 105-1992), which is the German law (if the testator does not choose the German law), but the German conflict law refers to the national law of the deceased (Article 25 of the Introduction Law to the German Civil Code – EGBGB) and this remission is accepted by the Romanian law system (Article 4 paragraph 1 of Act no. 1051992) and as a consequence, the Romanian succession law is applied. We have to mention that in Romanian private international law operates a single renvoi system (Article 4 paragraph 2 of Act no. 105-1992). 37

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Private International Law of Successions in Romania governed by the Romanian law following a renvoi) are simply inexistent. This is the natural consequence of the principle stipulated under Article 66 of Act no. 1051992, or more precisely, another anomaly resulting from the separation of the assets of the succession and their assessment to different patrimonies ‘belonging’ to the same person.

VI. Professio juris in the Matter of International Successions One of the innovations of Act no. 105-1992 is the introduction of professio juris in matters of successions. By professio juris we mean the testator’s choice of the succession law applicable to his estate. As an effect of this choice, the lex successionis determined according to objective connecting factors (the location of the immovables or the citizenship of the deceased as far as the movables are concerned) is replaced with the chosen law. According to Article 68, paragraph 1 of the Act ‘The testator may choose another law to govern the transfer of the estate, than the law stipulated under article 66 paragraph 1 of the Act, without dismissing its imperative provisions.’ From the first glance we notice the dilettante and opportunistic character of this text. In the wording of this article we meet the problem of the domain it governs. As far as this aspect is concerned, we noted in our literature the opinion of D.-A. Sitaru,39 according to whom the testator’s right to choose the law applicable to the succession is limited to the transfer of the testamentary succession. We can infer this opinion from the author’s wording40: ‘… in the case of testamentary succession the conflict of law rules stipulated under article 66 – namely the one stating the succession to movables is governed by the deceased’s national law and the one stating that the succession to immovables is governed by the law of the place where the immovable is located – are not mandatory and the testator may choose, at his will, a different law.’ We do not agree with this opinion because: a) the legislature in Article 68 of the Act no. 105-1992 speaks about the testator’s choice to ‘transfer the succession according to a law different from the law stipulated under Article 66…’ without differentiating between testamentary and intestate succession. And because ubi lex non distinquit, nec nos distinquere debemus; b) the fact that the testament is the legal instrument used to express and materialize the testator’s option to apply a 39 40

SITARU D.-A., Drept international privat: Tratat, Bucureşti 2000, p. 203. Ibidem.

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Dan Andrei Popescu certain law cannot and should not lead to the conclusion that this right to choose is limited to the testamentary succession. In fact, the testator’s right to choose exists regardless of the contents of the testament, more precisely, regardless of whether or not the testament contains a legacy; c) on the other hand, it seems senseless on the part of the legislature to expressly stipulate the testator’s option to choose the law applicable to the succession if such an option is limited to the testamentary succession, as it is obvious that this right exists implicitly as long as – even if there was no legal text in this respect – the testator enjoys a discretionary right on the disposable portion of the estate. It is possible for the testator to include in his will an electio juris clause without leaving any legatees. It is obvious that in this case the law chosen by the testator shall apply to the intestate succession; since there are no gifts there is no testamentary succession. But if there are gifts, the law chosen by the testator shall apply to both the intestate succession and to the testamentary succession. Therefore, the law chosen by the testator shall apply both to the testamentary succession and to the intestate succession. It shall apply to the latter only when the testator leaves a testament comprised of a single disposition – designating only the law applicable to the succession or other clauses that neither concern the transfer of the succession nor the disposition of the estate.41 The second observation we make concerns the significance of the term ‘imperative disposition’ as used in the final part of Article 68, paragraph 1 of Act no. 105-1992 regarding private international law relationships. Thus, the legislature allows the testator to choose a law to apply to his succession different than the one that would have applied - the deceased’s national law at the time of his death, as far as his movables are concerned and, respectively, the law of the place where the immovables are located, as far as immovables are concerned. Nevertheless, he cannot dismiss the ‘mandatory provisions’ of the succession law stipulated in Art. 66. In other words, ‘The testator can subject the transferring of his goods by heritage to another law than that stipulated under Article 66, without having the right to remove the latter's imperative provisions’ (Art. 68, paragraph 1). About this aspect, our literature provides that by ‘imperative regulations’ of the applicable law – meaning of the succession law applicable according to the objective localization factors – we must understand the public policy provisions of the private international law. We do not believe this opinion is correct. First, the text of this article refers explicitly to the imperative regulations of the applicable succession law pursuant to Article 66, meaning those of the internal law belonging either to the State whose citizenship the deceased had at the time of his death (in the case of the movables of the succession) or to the state where the immovables are located (in the case of the immovables of the succession). In other words, ‘the choice’ must refer to the contents of the above mentioned succession laws. This only demonstrates that the testator’s option to choose the law is only illusory since, DEAK F., Tratat de drept succesoral [Treaty of succession law], 2nd ed., Bucureşti 2002, p. 22-23. 41

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Private International Law of Successions in Romania in fact, from the point of view of the international private law it has no significance as a factor of judicial localisation. Without exception, the ‘chosen law’ must comply with the mandatory provisions of the deceased’s national law or the law of the place where the immovables are located. In other words, the right to choose the applicable law is subordinated to the flexibility of the above mentioned laws. Second, the legislature could not have thought of the international private law’s public policy because it is a general eviction clause for the foreign law (Article 8 letter a) of Act 105-1992) and consequently, there is no need to reiterate it in Article 68. This attitude of the legislature is inexplicable and only proves that it does not understand the professio juris’s role in successions as a flexibility factor and a source of certainty and security in international succession relationships, thus permitting an anticipation of the law applicable to the succession at the time of its opening.42 We believe that by ‘imperative regulations’ the legislature contemplates mainly the regulations regarding the internal succession law (belonging to the national law of the deceased’s or the law of the place where the immovables are located) and limits the discretion of the testator to distribute his assets under a will: or more specifically, the regulations regarding the reserve. This means that the provisions of the chosen law shall apply to the entire succession only if there are no compulsory heirs. If there are compulsory heirs, the chosen law shall apply only as far as the disposable portion is concerned. On this assumption we create greater fragmentation of the transmission of the estate, as we first have to determine which law is ‘objectively’ applicable (or the succession laws objectively applicable). It is this law that establishes the extent and nature of the reserve, and it is only then that the regulations of the chosen law will apply to the disposable portion. A pure proof of opportunism! Because pursuant to the internal legislation the testator could do whatever he wanted as far as the disposable portion was concerned and it was not necessary that the legislature ‘allowed’ the testator’s choice of law on the plan of private international law. This is why we assume that Article 68 paragraph 1 of the law is senseless and illogical. What’s the reason in ‘deceiving’ the testator by allowing him to choose the law to be applied when this choice will be constantly subjected to a ‘conformity control,’ referring to the contents of the imperative regulations of the law objectively applied? Thus, professio juris exists only for42 Indeed, the role of professio juris is to offer the testator predictability and security regarding the applicable succession law by giving him the opportunity to designate the lex successionis. On one hand, the testator knows (or may know) the internal succession law at the time when he prepares his will, on the other hand, at an international level, determining the succession law applicable to the succession may not be as certain due to ‘the game’ of conflict laws. Only the testator’s personal status is always subject to his national law at the time when the will was prepared, and all the other provisions of the will – regarding the transmission of the succession – shall be governed by lex successionis. By giving the testator the opportunity to choose the law applicable to the succession, we offer him the privilege to know, from the very moment he prepares his testament, the law which he should refer to.

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Dan Andrei Popescu mally and only in the obscure imagination of our legislature, as it is not an independent localization factor based on the real need of certainty and predictability meant to reunite the succession. On the contrary, it is subordinated to the internal succession law (determined according to Article 66) contributing even more to the fragmentation (division) of the succession. This is further proof of the mentality at the level of the internal succession law that subordinates, according to the French model, the testamentary succession to the intestate succession, and at the level of the private international law it is proof of the substantial character of the regulations regarding the conflict of laws in the matters of successions.43 The third observation refers to the fact that the wording of Article 68 paragraph 1 is silent about the limits of the choice of law applicable to the succession. We believe that we can only explain this by the manner in which the legislature chose to regulate the freedom of contract in the matters of successions (professio juris). Since, anyway, the chosen law has ‘to bend’ in front of the imperative regulations of the law objectively applicable, any limitation of choice (both as far as the choosing criteria is concerned and as far as the number of laws chosen) seemed senseless. Fourth, the choice made by the testator shall contemplate the material law of that country, with renvoi being excluded. The choice made by the testator shall relate to the material law of the respective country without renvoi. Although this solution is provided for only in contract law (Article 85), we have to extrapolate it, or apply it by analogy, to the matters of successions when the applicable law is chosen through a testament, since the reasons are the same in both situations. Fifth, as far as form is concerned, the choice has to be made as to the form of testaments, provided by the law. Sixth, the very existence and validity of the testator’s consent and the validity of conditions in the testament are going to be ascertained according to the chosen law. As far as the means to locate international successions is concerned, especially their degree of flexibility, the national systems of private international law can be divided into several categories. a) Systems which do not allow the possibility of choosing the law applicable to the succession, based entirely on objective factors of localization. Such systems are, for example, the common law44 system and the French,45 Austrian,46 and Spanish47 systems; 43 For a more analysis of the substantial character of the conflict regulations in the matters of successions from a French perspective, see BILLARANT S., Le caractere substantiel de la réglementation française des successions internationales. Réflexions sur la méthode conflictuelle, Paris 2004. 44 According to these systems, the succession to movables is governed by the law of the deceased’s last domicile, and the succession to the immovables is governed by the law of the place where they are located. For details, see DICEY A.V., MORRIS J.H.C. & COLLINS L., Conflict of Laws, 14th ed., Vol. 2, London 2006, p. 1236-1279; MORRIS J.H.C., The Conflict of Laws, 6th ed., by MCCLEAN D. & BEEVERS K., London 2005, p. 447-457; CLARKSON

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Private International Law of Successions in Romania b) Systems which allow the possibility of choosing the law applicable to the succession, but they limit its effects regarding certain assets of the estate. The typical example is the German one. Article §25 II of the Introductive law of the German Civil Code (EGBGB) allows the testator to choose the German law with regard to the immovables located in Germany. But, according to Article § 25 I EGBGB, the entire estate is subjected to the deceased’s national law at the time of his death, regardless of the nature of the assets of which it consists. Thus it results that this possibility of choice only refers to foreign citizens. More precisely, the foreigners who acquire immovables in Germany and whose succession law, according to the German conflict law, is their national law. Thus, professio juris is limited; the choice of law is limited to the immovables located in Germany. Article §25 II of EGBGB contains a unilateral conflict law which defies the principle of multilateral conflict laws stipulated for under article 3 EGBGB; thus, it is an exclusive rule.48 Article 25 II EGBGB provides for two situations when the testator may dispose of his immovables located in Germany by choosing the German law: his national law (Art. 25 I EGBGB) allows him to choose by renvoi the German conflict law, or if his national law does not contain such provisions, then he may invoke article 25 II EGBGB; but, in this case he risks that his choice might not be recognized outside Germany49; c) Systems which allow the possibility of choosing the law applicable to the succession, but they allow it only within the limits of internal forced heirship, C.M.V., HILL J., The Conflict of Laws, 3rd, Oxford 2006, p. 444-455; HAYTON D. (ed.), European Succession Laws, Jordans 2002, p. 81 and next. 45 AUDIT B. (note 30), p. 717-736; BUREAU D., MUIR WATT H., Droit international privé, Tome II, Partie speciale, Paris 2007, p. 233-246; MAYER P., HEUZE V., Droit international privé, 8e éd., Paris 2004, p.583-593; NIBOYET M.-L., DE GEOUFFRE DE LA PRADELLE G., Droit international privé, Paris 2007, p. 28-30; BOULANGER F., Droit international des Successions, Paris 2004. 46 § 28 Bundesgesetz vom 15. Juni 1978 über das internationale Privatrecht. 47 Article 9 point 8 of the Spanish Civil Code: ‘La sucesión por causa de muerte se regirá por la ley nacional del causante en el momento de su fallecimiento, cualesquiera que sean la naturaleza de los bienes y el país donde se encuentren. Sin embargo, las disposiciones hechas en testamento y los pactos sucesorios ordenados conforme a la ley nacional del testador o del disponente en el momento de su otorgamiento conservarán su validez, aunque sea otra ley que rija la sucesión, si bien las legítimas se ajustarán, en su caso, a esta última. Los derechos que por ministerio de la ley se atribuyan al cónyuge supérstite se regirán por la misma ley que regule los efectos del matrimonio, a salvo siempre las legítimas de los descendientes.’ 48 Münchener Kommentar zum Bürgerlichen Gesetzbuch, Band 10 – Internationales Privatrecht, herausgegeben von REBMANN K., SÄCKER F. J., 4. Aufl., München 2006, p. 1496-1497; KEGEL G. / SCHURIG K., Internationales Privatrecht, 9. Aufl., München 2004, p. 1004. 49 Ibidem. Also see KROPHOLLER J., Internationales Privatrecht, 6. Aufl., Tübingen 2006, p. 436-439; KEGEL G. / SCHURIG S. (note 48), p. 1002-1004.

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Dan Andrei Popescu which is determined according to objective localization factors. This is the case of Article 68 of the Romanian private international law (Act no. 105-1992) and other recent codes. Thus Article 79 of the Belgian Code of Private International Law adopted by the Act of July 16th, 2004, in force since October 1st, 2004, states that: ‘A person may designate the law applicable to his entire estate. The choice will only have effect if that person upon the designation or at the time of his death had the nationality of the State concerned or had his habitual residence on the territory of that State. Such designation cannot result in depriving an heir of the reserved part, which is guaranteed by the law applicable in accordance with article 78. The designation and revocation thereof must be expressed in a declaration taking the form of a will.’ We must first notice that the choice must cover the entire estate; a partial choice is not allowed as it would lead to a ‘dépeçage du patrimoine.’ Then, the choice must regard either the succession law of the state whose citizenship the deceased had (at the time of the choice or at the time of his death) or the law of the state where the deceased had his habitual residence (at the time of the choice or at the time of his death). But, regardless of the situation, the chosen law shall not reduce the reserve provided for by the law of the deceased’s last habitual residence (as far as the movables are concerned) or, if it is relevant, the law of the place where the immovables are located.50 This means that professio juris is losing its autonomy, and that it is subordinated to the objective localization factors stipulated under Article 78. In other words, the exercise of the right to choose is only possible within the limits of the internal succession law determined according to objective criteria. Without doubt, this is a false recognition of professio juris in succession matters, and it creates more problems than it solves; it rises from the mentality of the intestate succession’s superiority over the testate succession. The Bulgarian Code of Private International Law from 17 May 2005 also follows the same line. According to its Article 89 (1) The succession of movable objects shall be settled by the law of the state, where the testator had his/her customary residence at the moment of his/her death. (2) The succession on immovable objects shall be settled by the law of the state, where the objects are located.

VASSILAKAKIS E., ‘La professio juris dans les successions internationales’, in: Le droit international privé: esprit et méthodes. Mélanges P. Lagarde, Paris 2005, p. 803-816; RIGAUX F., FALLON M., Droit international privé, Bruxelles 2005, p. 742-743; BARNICH L., ‘Le nouveau droit international privé belge’, in: Journal de tribunaux, 12 mars 2005; TRAEST M. in: ERAUW J., FALLON M., GULDIX E., MEEUSEN J., PERTEGAS M., VAN HOUTTE H., WATTE N., WAUTELET P. (eds.), Le code de droit international privé commenté, Antwerp/Bruxelles 2006, p. 400-406. 50

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Private International Law of Successions in Romania (3) The testator may choose the succession of his property as a whole to be settled by the law of the state which he/she was a citizen of at the moment of his/her death. (4) The conditions for the validity of the choice of applicable law and its cancellation shall be settled by the chosen law. The choice of applicable law and its cancellation shall be done in the form of a testament disposition. (5) By way of choosing the applicable law the reserved part for the successors defined by the applicable law under Para. 1 and 2 shall not be impacted. In this case as well, the chosen law is subordinated to the imperative dispositions of the laws mentioned in paragraphs 1 and 2 of Article 89, in order to maintain the nature and the extent of the reserve established by these laws. On one hand, it is requested that the choice regards the entire estate to avoid dépeçage. However, on the other hand, paradoxically, the succession is more fragmented as a consequence of relating the chosen law to the regulations regarding the reserve, belonging either to the state where the deceased had his last habitual residence or to the law of the state where the immovables are located. Similar are the provisions of Article 46 of the Italian law regarding the reform of the Italian private international law system of May 31st, 1995. This article, if the deceased was an Italian citizen, subordinates the law chosen by the testator (the law of the deceased’s habitual residence) to the internal regulations regarding the reserve of the forced heirs who at the time of the deceased’s death had their habitual residence in Italy.51 d) Systems which allow the testator to choose the law applicable to the succession without subordinating that choice to the mandatory rules of the legal system determined according to the objective localization factors. Thus, professio juris becomes an autonomous localization factor equal to the objective factors and yet free from them. Indeed, a basic scientific rigor demands that once we give the right to choose the applicable law and since this right was exercised, the chosen law shall take the place of the law that would have applied in the absence of the choice. This is the correct way to see professio juris. We can enumerate from this category the Swiss law52 elaborated based on the Convention of 1 August 1989 on 51 For further details, see DE CESARI P., Autonomia della volontà e legge regolatrice delle successioni, Padova 2001; MOSCONI F., CAMPIGLIO C., Diritto internazionale privato e processuale, Parte speciale, 2 ed., Torino, 2006, p. 148-151; BAREL B., ARMELLINI S., Manuale breve diritto internazionale privato, Milano 2006, p. 173-177; NOVELLI G., Compendio di dritto internazionale privato e processuale, Napoli 2006, p. 99-101. 52 See Articles 90-91 of the Federal Swiss Law of December 18th, 1987 regarding the private international law. For details, see DUTOIT B., Droit international privé suisse. Commentaire de la loi fédérale du 18 décembre 1987, 4 éd., Bâles (etc.) 2005; HONSELL H. / VOGT N.P. / SCHNYDER A. / BERTI S. (Hrsg.), Basler Kommentar IPRG, 2. Aufl., Basel 2007;

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Dan Andrei Popescu the Law Applicable to Succession to the Estates of Deceased Persons – The Hague Convention on Succession (Article 5)53 and the Dutch system (which integrated the provisions of the Hague Convention of 1 August 1989). We must not infer that the choice of the law applicable to the succession can be made with discretionary or unlimited powers. There must always be equilibrium between the interest of the testator and the interest of his relatives (his close heirs). In other words, the testator can only choose a law with significant connections to his person and, implicitly, to his succession. Limiting the choice is a matter of private international law. Thus, we must not be mislead: if the choice is coupled with unconditioned subordination to the mandatory rules of the internal law competent according to the objective localization factors of the succession, professio juris is only illusory and has no significance from the point of view of private international law.54 In conclusion, we believe that future European regulations on the matter should be associated to those regarding the personal status, since both are to be subjected to the habitual residence of the person (respectively, in the case of successions, the law of the last habitual residence of the deceased).55 The questions relating to successions are inseparably connected to the deceased for they spring from his death. Thus we believe that it is vital that a person must have one and only one connecting factor, based on habitual residence – which should be adopted as the European connecting factor – and its definition should be clearly laid down.

BUCHER A. / BONOMI A., Droit international privé, 2e éd., Bâles 2004; BUCHER A., Droit international privé suisse, Tome II: Personnes, Famille, Successions, Bâles 1992. 53 See article 5 of the Convention. We do not propose here to analyze the provisions of the Convention in this regard. For further details see SCOLES E. F., The Hague Convention on Succession, in: Am. J. Comp. Law, Vol. 42, No. 1. (Winter, 1994), pp. 85-123; BORRÁS A., ‘La Convention de La Haye de 1989 sur la loi applicable aux successions à cause de mort et l’Espagne’, in: E Pluribus Unum. Liber Amicorum G.A.L. Droz, The Hague/Boston/London 1996, p. 7; LAGARDE P., ‘La nouvelle Convention de La Haye sur la loi applicable aux successions’, in: Rev. crit. 1989, p. 249; BOULANGER F., ‘Codifications nationales et convention de La Haye du 1er août 1989: l’improbable unification du droit international des successions’, in: Le droit international privé: esprit et méthodes, Mélanges P. Lagarde, Paris 2005, p. 155. 54 For a more detailed study on the professio juris in succession matters, see DAVÌ A., ‘L’autonomie de la volonté en droit international privé des successions dans la perspective d’une future réglementation européenne’, in: Riv. dir. int. priv. proc. 2004, p. 473-498; ID. in: Conflict of Law of Succession in the European Union. Perspectives for a Harmonisation, edited by the German Notary Institute (DNotI), Brussels 2004, p. 387-411; BOUCKAERT F., ‘Professio Juris dans le Code de Droit International Privé Belge’, ibidem, p. 417-427. 55 SIEHR K., ‘General Problems of Private International Law in Modern Codifications. De lege lata and De lege ferenda’, in: this Yearbook 2005, p. 59; HAYTON D., ‘Determination of the Objectively Applicable Law Governing Succession to Deceased’s Estates’, in: Conflict of Law of Succession (note 54), p. 363-364.

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Private International Law of Successions in Romania At the same time, we believe that a future European regulation dedicated to successions should allow professio juris, and thus the testator shall be able to choose the law he knows best, to which he related during his life, or the one which best reflects his interests. The testator’s choice of the law applicable to the succession should be limited, in our opinion, to the deceased’s national law (the law of the state whose citizenship he has either at the time of his death or at the time when he makes the choice), to the law of deceased’s domicile (either at the time of his death or at the time when he makes the choice), or to the law applied to the matrimonial property regime. If the deceased has more than one citizenship, the chosen law may be any of the national laws the deceased had either at the time of his death or at the time when he makes the choice. We believe that the choice must regard the entire succession; a partial choice is not recommendable, so as to avoid the dépeçage while respecting the principle of the unity of the succession rules. Finally, we believe that the place where the assets of a succession are located should bear no part in establishing the law applicable to the succession, regardless if we talk about the chosen law or the law applicable in the absence of a choice.

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THE 2007 TURKISH CODE CONCERNING PRIVATE INTERNATIONAL LAW AND INTERNATIONAL CIVIL PROCEDURE Gülören TEKINALP∗ I. II. III.

IV.

V.

The Need for Reform Preparation of the Draft and the Justice Ministry Commission Objectives of PIL A. Principles and Rules Complying with International Standards B. Formulation of a Core of Concepts and Principles Based on International Conventions C. Inclusion of Rules Conforming to Modern Doctrine and Approaches 1. Abandonment of the Criterion of Place of Domicile in Family Law 2. Applicable Law Regarding Law of Obligations a) Contractual Obligations and Abandonment of the Criterion of Place of Performance b) Torts 3. International Civil Procedure Law and the Recognition and Enforcement of Foreign Court Decisions and Arbitral Awards a) International Jurisdiction of Turkish Courts b) Recognition and Enforcement of Foreign Court Decisions and Arbitral Awards D. New Rules E. Issues not Addressed in PIL A Look at the Changes of General Provisions of PIL A. Renvoi B. Stateless Persons and Refugees C. Overriding Mandatory Rules of Turkish Law D. Form in Legal Transactions and Ban on Renvoi An In-Depth Look at the Substantial Conflict of Laws Provisions of PIL A. Capacity B. Family Law 1. Marriage and Effects of Marriage in General 2. Divorce and Separation 3. Marital Property and the Effect of Marriage on Property 4. Establishment of the Parent-Child Relationship and the Effects of the Relationship 5. Adoption ∗

Former Chairperson of the Department of Private International Law of the Faculty of Law of İstanbul University and head of the commission set up and charged by the Ministry of Justice to prepare a new private international law. Yearbook of Private International Law, Volume 9 (2007), pp. 313-341 © sellier. european law publishers & Swiss Institute of Comparative Law

Printed in Germany

Gülören Tekinalp C. D.

E.

F.

G.

I.

6. Maintenance Succession Law Real Rights 1. Goods in Transit 2. Means of Transportation 3. Intellectual Property Rights Applicable Law to Contractual Obligations 1. General Rule 2. Contracts Relating to Immovable Properties 3. Consumer Contracts 4. Individual Employment Contracts 5. Contracts Relating to Intellectual Property Rights 6. Contracts Relating to the Carriage of Goods 7. Agency 8. Overriding Mandatory Rules 9. The Existence and Material Validity of a Contract 10. The Manner and Performance of Measures The Law Applicable to Non-Contractual Obligations 1. Torts 2. Liability in Violations of Privacy and Rights Relating to the Personality 3. Manufacturer’s Non-Contractual Obligations Due to Product Liability 4. Unfair Competition and Restraint of Competition 5. Unjust Enrichment International Civil Procedure 1. International Jurisdiction of Turkish Courts a) General Jurisdiction b) Jurisdiction in Disputes over Personal Status and Inheritance c) Jurisdiction in Individual Employment Contracts, Consumer Contracts, Insurance Contracts d) Choice of Jurisdiction and its Limits 2. Recognition and Enforcement of Foreign Court Decisions and Arbitral Awards

The Need for Reform

‘The Code Concerning Private International Law and International Civil Procedure’ (‘ex-PIL’)1, which stayed in effect between 20 November 1982 and 12 See TEKINALP G. / NOMER E. / ODMAN A., ‘Turkey’, in: Encyclopedia of Laws, Kluwer Law International, The Hague, London, Boston 2001. For a German translation of the Turkish PIL of 1982, see TEKINALP G., ‘Gesetz über Internationales Privatrecht vom 1

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The 2007 Turkish Code on Private International Law December 2007, was the first act of Parliament to codify private international law in Turkey. Prior to this act, the only substantial source of private international law in Turkey was article 4 of the ‘Provisional Law on the Rights and Duties of Foreign Residents in Turkey’, which originally dated back to the late Ottoman Empire. Discovering in that single article of a ‘provisional’ law the foundations needed to set forth the rules governing not only which court should have jurisdiction but also what the applicable law should be was a thorny and contentious issue for legal theoreticians and practitioners. Over the decades, there emerged a doctrine of private international law in Turkey that was based on precedent rulings by the Supreme Court of Appeals and, especially, the interpretations of university professors and researchers. The 1982 PIL was composed partly on the basis of that accumulated experience but also by taking advantage of generally accepted doctrines in European countries (particularly Germany, Switzerland, and Italy) as well as trends in the codification of case law. The preliminary draft was produced as a result of the efforts of the ‘International Law and International Relations Institute’ (as it was called in those days), a commission headed by Professor Nihal Uluocak and consisting of members of the İstanbul University Faculty of Law. Ex-PIL, dated 1982, was a ‘compact’ law, which is to say that it governed only the fundamental institutions and issues of private international law, established a fair balance among competing interests, and harmonized theoretical and dogmatic principles based on the notion of objective justice. In the twenty-four years following its passage, ex-PIL acquired a position of respect in basic Turkish law by virtue of its systematic nature, language, and sound and modern structure. An extensive body of literature including substantial original contributions has been published concerning this law. Nevertheless in the more than two decades since the law’s enactment, various new needs have emerged that had to be addressed. In addition, in all civilized countries there has been substantial progress on the scholarly front in private international law: action plans have been published and innovations have been introduced that bring new dimensions to this field of law. All these developments have made it necessary to reform ex-PIL today. Said developments have taken place and continue to take place in almost all branches of EC Law and Private International Law. As a result of these developments, a movement of ‘Europeanisation’2 has 22.5.1982’, in: RabelsZ. 1983, 211-221. For the draft of Turkish PIL of 1982, see ULUOCAK N., in: Annales de la Faculté de Droit d’Istanbul, 27 (1980), 131-140; KRÜGER H., ‘Gesetz Nr. 2675 über das Internationales Privat und Zivilverfahrensrecht’, in: IPRax 1982, 254-259. 2 JAYME E. / KOHLER CH., ‘Europäisches internationales Privatrecht’, in: IPRax 1998, 417-429; JAYME E. / KOHLER CH., ‘Europäisches Kollisionsrecht 2000: Anerkennungsprinzip statt IPR?’, in: IPRax 2001, 501-504; JAYME E. / KOHLER CH., ‘Europäisches Kollisionsrecht 2003: Der Verfassungskonvent und das internationales Privat-und Verfahrensrecht’, in: IPRax 2003, 485-495; BOELE-WOELKI K., ‘Unification and Harmonization of Private International Law in Europe’, in: Festschrift K. Siehr, The Hague (etc.) 2000, 61-77; SONNENBERGER H.-J., ‘Privatrecht und internationales Privatrecht im künftigen Europa’, in: RIW 2002, 183-188; BASEDOW J., ‘The Communtarisation of the Conflict of Laws under the Treaty of Amsterdam’, in: CMLRev. 2000, 687; KREUZER K., ‘Zu Stand und Perspektiven des Europäischen Internationalen Privatrechts’, in: RabelsZ. 2006, 1-88; MANKOWSKİ P.,

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Gülören Tekinalp started, which resulted in intense studies aimed at the creation of a ‘European Private Law’3. In the context of the EU, creating a common body of law related to private international law at the EU level and achieving compatibility among national legal systems as well as composing harmonized texts4 that can be used in resolving problems and dealing with issues are matters of great importance to Turkey because our country’s candidacy for full EU membership was formally acknowledged at the Helsinki Summit and this puts it under an obligation to incorporate the acquis communautaire into Turkish law. National programs for this have been published (in 2001 and 2003).5 On 17 December 2004, the Council of Europe agreed that Turkey had sufficiently satisfied the Copenhagen criteria to start negotiations and called upon the Commission to prepare a framework document to start negotiations on 3 October 2005. On that date, Turkey accepted the framework document and received a date for the start of negotiations.6 Accordingly the European Council approved the ‘negotiating framework document’ and voted to commence negotiations.7 At this point there is a matter that needs to be clarified. Neither the 1968 Brussels Convention8, which has become a part of European procedural law and undergone modifications to one degree or another when new members joined the ‘Der Vorschlag für die Rom I Verordnung’, in: IPRax 2006, 101-113; JAYME E. / KOHLER CH., ‘Europäisches Kollisionsrecht 2005: Hegemonialgesten auf dem Weg zu einer Gesamtvereinheitlichung’, in: IPRax 2005, 481-493; JAYME E. / KOHLER CH., ‘Europäisches Kollisionsrecht 2007: Windstille im Erntefeld der Integration’, in: IPRax 2007, 493-506. 3 Among others see HEISS H., ‘Vom EU zum gesamteuropäisches Privatrecht? Privatrechtharmonisierung in den sich erweiternden Union’, in: Aufbruch nach Europa, 75 Jahre Max-Planck-Institut für Privatrecht, Tübingen 2001, 123-140; BASEDOW J., ‘Die Entstehung eines Europäischen Privatrechtes’, in: Festschrift Gülören Tekinalp, Public and Private International Law Bulletin, 23 (MHB) (Special Issue), (2003) 115-138; DROBNIG U., ‘Vereinheitlichung von Zivilrecht durch Soft Law: neuere Erfahrungen und Einsichten’, in: Aufbruch Nach Europa, 75 Jahre Max-Plank-Institut für Privatrecht, Tübingen 2001, 745-755. 4 The work in this area being done at Max-Planck-Institut für ausländisches und internationales Privatrecht Hamburg and at the Hamburg Group for Private International Law (among others) is noteworthy. See RabelsZ. 2004, 1-118. For an example of the basic texts on this subject see SCHULZE R. / ZIMMERMANN R., Basic Texts on European Private Law, 2nd ed., Baden-Baden 2002. 5 See Council of Ministers resolution 2001/2129 (‘Avrupa Birliği Müktesebatının Üstlenilmesine İlişkin Türkiye Ulusal Programı’, Turkish Official Gazette, 24352, 24 March 2001) and resolution 2003/5930 (The Turkish Official Gazette, 25178 m., 24 July 2003) concerning its renewal. 6 See . 7 See . 8 OJ 1978 L 304/1, OJ 1982 L 388/1, OJ 1989 L 285/1; OJ 1997 C 15/1.

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The 2007 Turkish Code on Private International Law Community on various dates (1978, 1982, 1989, 1997), nor the corresponding European Regulation9 (which is, in effect the most recent version of that Convention and bears the same name) have been reflected in PIL although their provisions were taken into account during the preparation stage of the Draft. This is because while provisions pertaining (particularly) to courts’ jurisdictions are part of domestic law, they are associated with the sovereign rights of states. This means that they can only be applicable to states that are already members. In any case, avoiding compliance on this issue is of course impossible because when Turkey becomes a full EU member, implementation of these rules will be automatic inasmuch as they are a part of the acquis communautaire. Ex-PIL has not been modified in the course of its over twenty-year history. During the same period however, there were substantial changes in the Turkey's civil law, company law, competition law, consumer protection law, transportation law, and private insurance law. These changes necessarily – and sometimes fundamentally – altered private international law as well. EU countries amended or considered amending their own laws within the framework of European agreements pertaining to private international law and procedural law, even doing the same to the agreements themselves. The clearest examples of this are the activities to turn the EC’s Rome I Convention concerning contracts law into regulation, EC regulation concerning non-contractual obligations, and the green papers that the Commission has published on a variety of issues. Switzerland, which is not even a member of the EU, has made changes in its own domestic law in order to keep itself in compliance with EU norms. In light of ongoing developments, in 2004 Switzerland made substantial alterations in its ‘Private International Law Statute’ (dated 1987) concerning same-sex marriages, Fusiongesetz (Law on Mergers), and the relocation of corporate headquarters. The Turkish PIL of 1982 also needed to be changed to bring it to the same level of development. In the 25 years that ex-PIL has been in force, many international agreements concerning private international law have gone into effect. The World Trade Organization, a product of globalization, has an undeniable impact on the subject on private international law as well.

II.

Preparation of the Draft and the Justice Ministry Commission

Like ex-PIL, the preliminary draft titled ‘the Draft of the Code concerning Private International Law and International Civil Procedure’ was also prepared by a commission of the İstanbul University Faculty of Law and the Center for Research in International Law and International Relations, headed by this author, who was the director of the Center at that time. The preliminary Draft was prepared as an 9

Nr 44/2001 L 12/1.

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Gülören Tekinalp amendment of ex-PIL within the framework of a systematic scholarly study and was thrown open to debate at an all-inclusive symposium in December 2002. Emeritus Professor Nihal Uluocak, who had headed the commission that put together the draft of the 1982 PIL, involved herself into this work with utmost dedication. The revised preliminary draft was completed and delivered to the Ministry of Justice in April 2004. The Justice Ministry Commission (‘Commission’) was set up by the Ministry of Justice during the same year. It consisted of a majority of the members of the preliminary draft commission; as well as professors from other universities and judges from the Supreme Court of Appeals, İstanbul commercial courts, and the representatives of the Justice Ministry. This author was elected head of the Commission at its first meeting. For the remainder of 2004, the Commission met in several sessions, completing its draft by the end of the year. Known as the ‘Justice Ministry Draft’ (‘the Ministry Draft’), this document was sent out for the opinions of ‘interested parties’ in line with established Ministry practice. The interested parties in this case were universities, ministries, the Supreme Court of Appeals (Yargıtay), the Council of State (Danıştay), the bar associations of the country’s major cities such as Ankara, İstanbul, and İzmir, the Turkish Bar Association, appropriate general directorates of the Ministry of Justice, the Justice Academy, institutes and centers involved in such matters, a number of courts, and various non-governmental organizations. The Commission considered and assessed the opinions it received and finalized the Draft on the basis of its findings. The preliminary draft, as mentioned above was put together for the purpose of amending ex-PIL. In view of its extensive content, the Ministry Draft was transformed into a subsequent 2005 draft (the ‘2005 Draft’) of completely new law consistent with the gathered opinions of interested parties, the demand of the Justice Ministry representatives, and a number of fundamental conceptual changes by the Commission. The Ministry of Justice sent the 2005 Draft to the Prime Ministry for Cabinet's signature and then it was sent to the Parliament. The Draft has underwent some minor amendments during the Parliament's Justice Commission meetings (2006). No amendment was made by Parliament's General Assembly, save for an additional article. The additional article in question (art. 6) was added to the Draft under the sub-heading of ‘Overriding mandatory rules of Turkish law’. The Draft on PIL was passed by Parliament's General Assembly on 27.11.2007 and has become an act10. On 12.12.2007 it has been published in the Official Gazette and entered into force. Therefore the 2005 Draft shall hereinafter be referred to as ‘PIL’ and the PIL dated 1982, which has ceased to have effect, shall be referred to as ‘ex-PIL’ or ‘PIL dated 1982’.

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Statut 5718 (Turkish Official Gazette, 26728, 12 December 2007).

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The 2007 Turkish Code on Private International Law

III. Objectives of PIL A.

Principles and Rules Complying with International Standards

When preparing the Draft, a fundamental objective was pursued that was reflected in the recent amendments to Turkey’s Constitution and in the preparation of draft revisions of such basic laws as the Commercial Code, the Code of Obligations, and the Civil Procedures Code. The objective was the recognition that principles, rules and mechanisms conforming to international standards need to be embodied into the laws of a country that is committed to being an active and accepted member of the international community. Having a national legal system that is based on impartiality and objective justice, rather than simplistic protectionism, and which incorporates a universal approach respecting human rights and the rule of law is a conditio sine qua non of both the senior specialists preparing the Draft as well as Turkish legislature. A contemporary national legal system can achieve its objectives and sustain success only to the degree that it coincides with international standards. For this reason, incorporating modern views and approaches on all matters from protecting individuals and families to inheritance and property law, from commercial, corporative, and economic relationships to the principles governing intellectual property, into every element of PIL has ranked among the highest and most central priorities during the preparation stage.

B.

Formulation of a Core of Concepts and Principles Based on International Conventions

The second objective of PIL is to duly incorporate into the Turkish law the currently accepted concepts and principles of international conventions in the area of private international law. These include inter alia the ‘Convention on the Law Applicable to Maintenance Obligations’ (2 October 1973), the ‘Convention on the Law Applicable to the Matrimonial Property Regime’ (14 March 1978), the ‘Convention on the Law Applicable to Agency’ (14 March 1978), the ‘Rome Convention on the Law Applicable to Contractual Obligations’ (Rome I, 1980, entered into force 1990), and the ‘Convention on Protection of Children and Co-Operation in Respect of Inter-country Adoption’ (29 May 1993). Even though Turkey is not a party to some of these conventions, they nevertheless represent assets that are worth taking advantage of as expressions of a collective intelligence; as texts on which there is general mutual agreement; and as manifestations of successful, universal implementation. Furthermore it was anticipated that, in the event that Turkey does become a party to any of these conventions, their inclusion in PIL and their subsequent embodiment into the law would minimize the risk of conflicting court decisions in the future, ensuring compatibility between domestic and foreign court decisions in advance.

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Gülören Tekinalp C.

Inclusion of Rules Conforming to Modern Doctrine and Approaches

Modern doctrines lead to different perceptions or even complete transformations of the connecting factors of concepts and systems and this is what makes it necessary for laws to be reformed. Principle and conceptual changes of this nature in PIL, that must be underscored, will be dealt with and explained in the appropriate sections of this paper. For now, it is beneficial here to point out the following changes so that the overall picture of PIL can be seen clearly and unmistakably.

1.

Abandonment of the Criterion of Place of Domicile in Family Law

The ‘connecting factor with scalar forms system’ in the area of family law contained the 1982 PIL has been retained without change in PIL. Although the requirement of common national law is retained as the first tier, the second connecting factor of domicile has not been included in PIL. This is because the current and generally held opinion of the Commission is that, compared with habitual residence, the place of domicile criterion obstructs equitable and reasonable treatment on account of disparate legal rules and attitudes in different countries. Thus the concept of place of domicile as contained in the ex-PIL does not play a role in the provisions of PIL concerning the effects of marriage in general [Art. 13 (3)], divorce [Art. 14 (1) and (3)], marital property [Art. 15 (1)], parent-child relationships [Art. 16 (1)], and maintenances [Art. (19)].

2.

Applicable Law Regarding Law of Obligations

a)

Contractual Obligations and Abandonment of the Criterion of Place of Performance

In addition to a general article, contractual obligations in PIL are governed by ten articles dealing with contracts of a special nature as well as with various other issues such as the legal consequences of remaining silent and overriding mandatory rules. A conceptual change has been made in the general article [Art. 24] concerning contractual obligations that involves the adoption of the Rome I rules concerning contractual obligations that went into effect in EEC member states in 1990. It should be noted here, however, that in terms of its basic criteria, Rome I has not been fully reflected in PIL. Turkey is not yet an EU member and PIL is to apply in all international dealings. Furthermore it is known that texts are currently being prepared involving changes pertaining to the conversion of Rome I into an EC regulation and it is expected that the approved regulation will contain those changes. In that respect, in composing the PIL we eschewed making a complete Turkish translation of Rome I and opted instead for its conceptual content and proposed criteria concerning applicable law. This was the only way that Turkey could preclude the possibility of difficulties in EC harmonization.

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Torts

In ex-PIL, torts were governed by only a single article. In the new PIL there is both a general article and newly introduced rules regarding such issues as liability in violations of individual rights, products liability, and the prevention of unfair competition and restraint of competition. These new provisions are based on articles 135, 136, 137, and 139 of Switzerland’s 1987 Private International Law (‘Swiss PIL’). Current efforts to incorporate ‘protection of personal information’ into domestic law are another source of the PIL's provision on this issue. Consideration was also given to ‘Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Non-Contractual Obligations’ (‘Rome II’)11 which was adopted on 31.7.2007 as a Regulation12.

3.

International Civil Procedure Law and the Recognition and Enforcement of Foreign Court Decisions and Arbitral Awards

a)

International Jurisdiction of Turkish Courts

PIL makes no major changes in the area of international civil procedure law. Taking the needs of implementation into account, a number of terms and concepts that were susceptible to misunderstanding have been replaced with new ones, some problematic wordings have been corrected, and provisions that caused problems in interpretation have been clarified. One innovation that should be mentioned in international civil procedure law concerning courts of jurisdiction was the introduction of special rules to determine which courts have jurisdiction over contracts of a special nature such as employment, consumer insurance and carriage contracts. On the other hand there is no provision in PIL concerning the applicable law on insurance contracts. The reason for this omission is that there are many kinds of insurance contracts that are inherently different from one another and should therefore be governed by a new, specific law particular to them. While PIL does not address insurance contracts specifically, there is a general rule that says that the rights of the consumers are also to be protected in determining which court has jurisdiction. b)

Recognition and Enforcement of Foreign Court Decisions and Arbitral Awards

While ex-PIL remains essentially the same on the issue of enforcing foreign court decisions and arbitral awards, a number of minor changes were made giving rise to some difficulties. For example ex-PIL Art. 45 was based on the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The 11 12

2003/0168 (COD). OJ Nr. 864/2007, L.199/40.

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Gülören Tekinalp matter of finalizing decisions and the point at which they become enforceable have always caused problems and led to doubts and contraversial decisions: according to the Convention, it is sufficient that the decision is binding among the parties (Art. V e) whereas according to ex-PIL Art. 45, the decision must be finalized in accordance with the rules of the place where it is given, which is an issue that is governed by the finalization conditions of Turkish civil procedure law. For this reason, a rule has been added to PIL that conforms to the New York Convention stating that it will be sufficient if the decision is ‘binding on the parties’ [PIL 60 (1)].

D.

New Rules

A large number of matters have been dealt with in the PIL of 2007 that were not addressed in the 1982 PIL for which there was a strong practical need as was pointed out in doctrinal criticism. Among these issues, which will be discussed below, are ownership of means of transportation, intellectual property rights, contractual obligations concerning immovable properties, carriage contracts, consumer contracts, individual employment contracts, authority of agent's, overriding mandatory rules, responsibility when individual rights are violated, product liability, unfair competition, and protection of competition.

E.

Issues not Addressed in PIL

A number of issues are not addressed in PIL even though their inclusion was debated. They cover issues either given consideration to or proposed for inclusion when the PIL was circulated for opinions. For example cross-border mergers and cross-border changes of headquarters, in other words corporate mobility are not presently studied in PIL, although that could change with Turkey’s EU membership or at some future stage of the country’s accession negotiations. As noted above rules governing the applicable law on contracts of insurance were excluded because of the complexity of the issue and the many ramifications involved, making it better dealt with by a separate law. Despite the astonishing progress taking place in e-commerce, the matter has not really reached a level of maturity sufficient to warrant the inclusion of governing rules in private international law, even though there are already isolated references in the draft of Commercial Code and the Code of Obligations to such issues as secure electronic signatures, online board of directors meetings, online voting in the general meetings of joint-stock companies, online proxy instructions, and entering into contractual agreements online. Also, it must be stated that, registered partnerships in family law have neither been studied nor debated during the preparing of PIL.

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IV. A Look at the Changes of General Provisions of PIL A.

Renvoi

Article 2, one of the general provisions and which is concerned with renvoi, has undergone major changes in the PIL. The article substantially circumscribes renvoi and also clearly states that renvoi is not to be applied in the choice of law stage. The determination of the applicable law in federated states is also dealt with in a separate paragraph. In Turkish legal practice, including rules of private international law in every aspect of determining the applicable law has always given rise to doubts. In the conduct of our work, the prevailing view of the Commission was that the application of renvoi especially in law of contracts and in disputes involving property rights in rem did not serve to resolve problems but rather made them even more difficult – or at the very least, less understandable. These views resulted in the inclusion of a provision in PIL [Art. 2 (3)] providing that renvoi is to be taken into account only in disputes involving personal law and family law. If a law has been chosen in situations where choice of applicable law is possible, the generally accepted rule is that the substantive provisions of that law should apply and not those of its private international law. To clarify this, a new paragraph [Art. 2 (4)] was added to article 2 of PIL stipulating that the rules of private international law will not apply unless the parties have decided to the contrary. A third change made in the same article addresses the issue that arises when the country whose law is to apply has more than one regional unit. Under this rule [Art. 2 (5)], the laws of the country involved will be followed in order to determine which one of several regional laws may be applicable; however, if there is no such a provision then the law of the region that is most closely connected to the dispute applies.

B.

Stateless Persons and Refugees

In article 4a of PIL, the word ‘refugees’ has been included along with ‘stateless persons’. This inclusion makes the rule concerning the determination of applicable law based on the principle of citizenship valid for refugees as well.

C.

Overriding Mandatory Rules of Turkish Law

According to prevailing opinion, where these kind of rules exist in lex fori or in the applicable law, they would compulsorily be applied. Therefore during the commission meetings on the Draft, such an article was contemplated to be unnecessary. However the Parliament's General Assembly determined that a clarification was Yearbook of Private International Law, Volume 9 (2007)

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Gülören Tekinalp necessary in this regard. As is known, other countries' laws also contain such clearly formulated articles on overriding mandatory rules.

D.

Form in Legal Transactions and Ban on Renvoi

The only change made by PIL in article 7 (ex-PIL Art. 6), which is the general rule regarding the form of legal transactions, was the inclusion of a prohibition of renvoi in such matters. The alternative locus regit actum and lex causae rules of PIL Art. 7 have been retained unchanged.

V.

An In-Depth Look at the Substantial Conflict of Laws Provisions of PIL

A.

Capacity

Article 9 of PIL, the rule governing capacity, underwent two important changes although the principle of applying the national law of the person involved was retained. The first change [PIL Art. 9 (2)] makes the protection of legal transactions rule bilateral: if a person has capacity according to the law of the place where the legal transaction took place, the transaction will be deemed valid under Turkish law. This is because ‘the law of the place’ operates in a bilateral manner. The second change eliminated a lacuna regarding corporations by adding a fifth paragraph after the general rule of article 9 (4) of PIL. According to the new paragraph, the legal capacity of both corporate entities without statute and legal entities consisting of persons and properties which are not corporate entities is determined by the law of the ‘place where they are administered in fact’.

B.

Family Law

1.

Marriage and Effects of Marriage in General

The ex-PIL rule pertaining to the capacity for marriage (each party is subject to their own national law) has been retained unchanged. On the other hand, a provision on the form of marriage that references international conventions concerning consular marriages has been removed, since it is no longer necessary in view of the special provision in article 1 (2) that makes a general reservation concerning international conventions. A change made in ex-PIL concerning the general provisions governing marriage and a change made in articles governing divorce and marital property which had a global impact on family law in general resulted in the removal of common domicile from among the list of connecting factors. PIL 13 (3) still contains a sca324

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2.

Divorce and Separation

According to Article 14 (1) of PIL, the grounds for and the effects of divorce and separations shall be governed by the same law that governs the general provisions of marriage in Art. 13 (3). A new paragraph added to article 14 of PIL says that the first subparagraph that applies in cases of divorce and separation will apply to maintenance claims based on such cases. This approach is consistent with the rule on this issue in the ‘Hague Convention of 2 October 1973 on the Law Applicable to Maintenance Obligations’, which has gained wide acceptance in private international law. In addition, PIL even states [Art. 14 (2)] that the 1973 Convention’s rules concerning the applicable law will also apply to claims for maintenance in cases where a marriage is annulled, as well as in divorces and separations. Under the third paragraph of article 14, the issue of guardianship in divorce and separation is subject to the same rules as divorce. In the 1982 PIL this provision was in article 20. In PIL 2007 it was relocated to this article, where it fits better structurally, but no other change was made. The last change to article 14 is concerned with the taking of ‘provisional measures’ in divorces and separations, according to which Turkish law will apply because of the urgent nature of such situations. This provision embodies in the law a rule that is consistent with established practice on matters pertaining to substantive law in situations not otherwise governed by the provisions of bilateral or multilateral international conventions.

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Gülören Tekinalp 3.

Marital Property and the Effect of Marriage on Property

A number of changes made in provision of ex-PIL, which is concerned with marital property, were designed to provide clarity and eliminate doubts on this subject in PIL. The parties' ability to elect the regime governing marital property has been retained in PIL (Art. 15); however parties must now make this choice explicitly. Of the tiers in objective conflict of laws system in ex-PIL (common national law, otherwise common domicile law, otherwise law of the place where the properties are located, otherwise Turkish law), two of them (common domicile law and law of the place where the properties are located) have been eliminated. The reason is that the first ‘common domicile law’ can no longer be applied in light of what was said above about article 13 (3) of PIL. The second connecting factor of the ‘law of the place where the properties are located’, on the other hand, was eliminated because the new Turkish Civil Code that went into effect on 1 January 2002 substantially changed the regime governing marital properties in general, including those in marriages between Turkish and foreign nationals. This connecting factor was therefore removed for the purpose of avoiding the difficulties that arise when different laws apply to properties in different countries. Thus the rules that apply to marital properties in the PIL are common national law, otherwise common habitual residence law, and finally, if the other two are inapplicable, Turkish law.

4.

Establishment of the Parent-Child Relationship and the Effects of the Relationship

Two new articles (16 and 17) in PIL govern the parent-child relationship. These provisions are a complete departure from the system provided for in ex-PIL and are instead, centered on the child. As in ex-PIL, there is a scale system with the objective of establishing the parent-child relationship as much as possible. However, unlike ex-PIL, the scales are formulated in a completely different way. The first scale is the child’s national law at the moment of birth which is the fundamental rule. If the parent-child relationship cannot be established on that basis, then scale two applies, which is the child’s habitual residence. This rule follows from the principle that the child is central in the process of deciding the parent-child relationship. If the parent-child relationship cannot be established on the basis of the first two rules, then scale three calls for the application of the national law of the mother or father at the moment of the child’s birth. If the relationship still cannot be established, then the law of the common habitual residence of the parents at the moment of the child’s birth applies. If all of these are insufficient to establish the parent-child relationship then the law of the child’s place of birth applies [PIL Art. 16]. As for an annulment or cancellation of the parent-child relationship, the law applicable to its establishment also applies to its dissolution [PIL Art. 16 (2)]. The same principle applies to the rules governing the effects of parent-child relationship. According to PIL, the rules governing the effects of the parent-child relationship are subject to the same law by which the relationship is established [Art. 17]. 326

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5.

Adoption

There are no essential changes between the old and new PIL articles concerning adoption. Pursuant to Article 18, capacity and conditions for adoption remain subject to the national law of each party. Where the other spouse’s consent is at issue, the national laws of both spouses apply. The law of the adopter will apply to the effects of adoption, while the general conflict of law rules governing the effects of marriage will apply when spouses adopt together.

6.

Maintenance

Article 19 of PIL was composed by adopting a concept entirely different from that used in ex-PIL. Initially there was an agreement within the Commission to make a direct reference to the 2 October 1973 Hague Maintenance Convention as is done in Italian and Swiss laws. Subsequently, however, disagreements arose as the Commission was addressing issues not governed by that Convention with the result that this initial decision was changed. The final decision was to refrain from making any direct references to the Hague Convention. This was the result of insistent objections of Ministry representatives that a direct reference was unacceptable, due to fact that the provision in article 1 (2) of PIL makes a general reservation for all international conventions to which Turkey is a party. Nevertheless the Commission applies to all claims for maintenance accepted as a generally applicable conflict of laws rule ‘the law of the habitual residence of the creditor of maintenance’, because of the view that the main connecting factor accepted in the 1973 Maintenance Convention was fair. All claims for maintenance will therefore be subject to the law of the creditor’s habitual residence. In situations that are governed by an international convention, the first tier of the connecting factor system will still be the law of the creditor’s habitual residence. If maintenance cannot be obtained under that law then the other connecting factors will successively come into play. The generally prevailing view among Commission members was that the minor reservations Turkey made when it signed the 1973 Maintenance Convention will not give rise to serious problems and that any problems that do arise can be resolved through interpretation or, if necessary, by means of legislation.

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Gülören Tekinalp C.

Succession Law

The provisions of ex-PIL Art. 22 concerning the law applicable to succession were incorporated into article 20 of PIL without undergoing much change. The general rule is that the national law of the decedent will govern the succession. However, there are exceptions to this general rule. One is related to the concept of the ‘opening of the succession’. To eliminate doctrinal and practical doubts that have arisen in the past over the general reference to this concept, PIL clarifies the matter by clearly stating that the term refers to the reasons for the opening of the succession [PIL Art. 20 (2)].

D.

Real Rights

Article 21 of PIL, which governs property and other real rights pertaining to movables and immovables, has been left relatively unchanged; however, the first paragraph of the article makes it clear that, when determining the applicable law, the law of the place where properties are located ‘at the moment of the transaction’ governs.

1.

Goods in Transit

The rule that the law of the country of destination will apply to goods in transit and the rule that the law of the place where movables have most recently arrived (final lex situs) will apply to the acquisition of real rights by imperfect transactions over the movables have been retained unchanged in PIL. At the same time, two new articles pertaining to applicable law governing real rights have been added: means of transportation [Art. 22] and intellectual property rights [Art. 23].

2.

Means of Transportation

The composition of article 22 of PIL concerning means of transportation was inspired by Germany’s private international law statute [German PIL Art. 45 (1)]. In the first paragraph of this article, the criterion of ‘country of origin’ is said to be fundamental. The second paragraph explains what ‘country of origin’ means in land, sea, and air means of transportation. The Commission was unable to come to a consensus of opinion on what the applicable law should be in the case of rights of statutory pledges pertaining to these means of transportation. For this reason PIL differs from German PIL inasmuch as the proposed rule of ‘applying the law to which the right that is to be guaranteed is subject’ was removed from the text in view of the perceived difficulties of applying it internationally. Both the ‘law applicable to the claim being guaranteed’ and ‘lex fori’ suggestions that were advanced during numerous sessions were also rejected by the Commission, due to a variety of drawbacks in both approaches. Another justification for refraining 328

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3.

Intellectual Property Rights

The PIL rule concerning law applicable to intellectual property rights was inspired by Swiss PIL Art. 110: ‘Rights in intellectual property are governed by the law of the country in which protection of those rights is sought.’ The second paragraph of article 23 of PIL allows the parties to choose the applicable law only after a violation of intellectual property rights has occurred. As in Swiss PIL, however, this choice is not an unlimited one and is restricted to the lex fori.

E.

Applicable Law in Contractual Obligations

1.

General Rule

The conceptual approach governing article 24 of PIL, which is concerned with the general rule governing the law applicable to contractual obligations, is entirely different from that of ex-PIL. The principles and criteria of the general rule embodied in this article are discussed below. (1) The scope of the choice of law principle has been expanded and the option of ‘implied choice of law’ has been included. As a result, the principle, which is embodied in PIL and which is currently adhered to, of permitting the parties to only explicitly state the law governing the contract between them has been abandoned for the purpose of achieving accordance with acquis communautaire. (2) The ‘place of performance’ criterion as an objective connecting factor in law of contractual obligations was also rejected in principle and PIL is instead based on the more modern approach of ‘the most closely connected law’ criterion. Exactly as in Rome I, a contract is presumed to be most closely connected with the country where the party who is to effect the performance characteristic of the contract, at the time of its conclusion has his habitual residence. In this way PIL adopts the system that is the standard in international practice and a requirement of EU law. In other words, as a general criterion ‘the most closely connected law’ is the ‘law of the habitual residence of the party responsible for the characteristic performance of the contract.’ On the other hand, in contracts that are entered into on account of commercial or professional activities, the law of the ‘place of business’ of the party responsible for the characteristic performance of the contract is deemed to be the most closely connected law. As there may be more than one place of business, however, a number of practical subsidiary rules make it clear that the law of the place of business that is most closely connected with the performance of a particular contract is the applicable law.

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Gülören Tekinalp Rome I Art. 4 (2) also mentions the law of the place of ‘central administration’ as the law applicable to corporate entities. This criterion has been omitted from article 24 (4) of the Draft. This omission does not entail any conceptual changes in PIL, however, because PIL Art. 9 (4) contains a general rule called ‘the law of the statutory center of administration’13 that applies to the capacity of corporate entities and it was thought undesirable to repeat that rule in article 24 (4) of PIL. As is the case both in Rome I and in the legal systems of most EU member states, there is no general rule that is applicable on the capacity of corporate entities. The upshot is that this rule pertaining to the capacity of corporate entities and arising from PIL creates no inconsistencies. It should be kept in mind that PIL applies to the private international law relations of all corporate entities and not just business enterprises. Furthermore, when Turkey becomes a full member of the EU, Rome I (or whatever regulation may replace it) will become the applicable law in this country. Another reason for using the concept of ‘place of business’14 rather than ‘center of administration’ in PIL Art. 24 (4) is that the former encompasses private individuals as well as legal entities and does so both commercially and professionally. In addition, the term is employed frequently in international relations and in doctrine, and it has become a concept that is appearing in the drafts and texts of many new international conventions. The concept of ‘principal place of business’ is also embodied in PIL [Art. 27, 29] to cover special situations in which it may be required. Under article 24 (4) of PIL, the law of place of business of private individuals and legal entities will govern their commercial and professional contractual agreements. If a party has more than one place of business, then the law of the place of business most closely connected with the performance of the contract will be the applicable law. If there is no place of business, then the law of the ‘place of domicile’ will apply. However if the objective conflict of laws rule is to be applied and if there exists a country that is more closely connected with a specific contract on the basis of special conditions contained in it, then PIL allows the applicable law to be that 13 In Turkish law, the seat (center) of administration is one and the same with the statutory seat (center) of administration by law. For more information on the actual seat (center) of administration, see TEKINALP G., Milletlererası Özel Hukuk [Private International Law], 9th ed., İstanbul 2006, pp. 75. See also by the same author, ‘Milletlerarası Özel Hukukta Ortaklıkların Merkezi Kriteri, AT Hukuku ve MÖHUK [The Seat of Corporations Criterion in Private International Law, in EU and Turkish PIL’, in: Festschrift Aysel Çelikel, in Public and Private International Law Bulletin, 19-20 (MHB) (Special Issue), 1999-2000, 909-921. 14 The concept of ‘place of business’ appears in a number of international conventions such as the United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980), The Hague Convention of 22 December 1986 on the Law Applicable to Contracts for the International Sale of Goods, and the EC Convention of 19 June 1980 on The Law Applicable to Contractual Obligations.

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2.

Contracts Relating to Immovable Properties

An article governing contracts pertaining to immovable property was added to PIL to make it clear that the doctrine of lex rei sitae will apply in all such cases [PIL Art. 25].

3.

Consumer Contracts

The PIL of 1982 contained no provisions pertaining to consumer contracts. Such contracts have become increasingly more important in international practice, however, and the related legal doctrine has become deeper and acquired new dimensions. As a result, rules governing consumer contracts have been added to many countries’ private international laws. In Turkey, a law concerning consumer protection has been passed15 and provisions specific to consumer contracts have been added to the drafts of the Commercial Code and Code of Obligations. Consumer contracts are governed by article 26, thereby eliminating a serious lacuna in PIL. In composing this article, consideration was given to other countries’ laws and the literature on the subject, but article 5 of Rome I was the fundamental source of inspiration. According to article 26 (1) of PIL, consumer contracts governing the provision of goods and services (including credit) that are not of a commercial or professional nature, may be subject to a choice of law made by the parties. However, such a choice is not allowed if it has the result of depriving the consumer of the protection afforded to him by the mandatory rules of the law of the country where he has his habitual residence. This is essentially the same as Rome I Art. 5 (1, 2). If no choice of law has been made, a consumer contract is to be governed by the law of the country where the consumer has his habitual residence which recognizes that this is the law that the consumer is likely to be the most familiar with [PIL Art. 26 (2), Rome I Art. 5 (3)]. In consumer contracts, the parties are allowed a choice of law whose limitations are beneficial to the consumer. However no provisions of the chosen law that provide the consumer with less protection than the law of his habitual residence will be applicable. In other words, in the context of consumer protection, the law of his habitual residence is the minimum to which he is entitled. In the formulation of the objective conflict of laws rule, the article follows Rome I by spelling out the conditions under which consumer contracts will be subject to the rule of the article. 15

Statute 4077 (The Turkish Official Gazette, 22221, 8 March 1995).

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Gülören Tekinalp The PIL Art. 7 provides an alternative opportunity for its application in determining the law governing the formal validity of contracts. For consumer contracts, instead of this general rule, a provision based only on lex causae was included [Art. 26 (3)]. In composing this provision, Rome I Art. 9 (5) was taken into account. However, the issue is addressed in article 26 of the PIL, which is specifically concerned with the governing law of consumer contracts, and not within the framework of the general rules governing contracts as Rome I convention does. This is because PIL will apply in general to all conflict of laws issues and not just specific ones as Rome I does. Furthermore, legislative technique requires that a rule pertaining to a special case be dealt with in the particular article of law dealing with that type of contract (in this case article 26) and not in the article (7) setting out general conflict of law rules regarding the form of transactions. As is the case in Rome I Art. 5 (4), article 26 of the PIL does not apply to contracts of carriage or contracts for the supply of services if the services are to be supplied to the consumer exclusively in a country other than that of his habitual residence. However, in Turkish legal literature there is an expression called ‘package tour’, which references a situation where the consumer pays an all inclusive price that covers the combination of travel and accommodation at one or more places. Package tour contracts are specifically excluded from the scope of the carriage-contract exception, as they also are under article 4 (5) of Rome I.

4.

Individual Employment Contracts

Individual employment contracts were not addressed in ex-PIL. This is rather surprising because Turkey is a country which has sent many workers abroad and for that reason, must contend with numerous private international law issues concerning ‘guest workers’ in other countries, who are Turkish citizens. Furthermore, Turkey attracts large numbers of foreign workers who may or may not be qualified, while also having to deal with problems associated with foreign nationals who are employed both legally or illegally on a full or part-time basis. Individual employment contracts are governed by article 27 of the PIL, which, consistent with article 6 of Rome I, allowes a choice of law that is limited in favor of the employee. More succinctly, a choice of law made by the parties must not deprive the employee of the protection afforded to him had the choice not been made. If the parties have not made a choice of law, then the contract will be governed by the law of the country in which the employee habitually carries out his work in performance of the contract, even if he is temporarily employed in another country [PIL Art. 27 (2)]. According to the 3rd paragraph of article 27 of the PIL, if the employee does not habitually carry out his work in any one country, the contract will be governed by the law of the country where the place of business engaging him is situated. Nevertheless, if it appears from the circumstances as a whole that the contract is more closely connected with the law of another country, the contract will be governed by the law of that country [Art. 27 (4)].

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Contracts Relating to Intellectual Property Rights

Ex-PIL contained no rules governing contracts pertaining to intellectual property rights. Since 1995 however, the legal framework governing intellectual property rights in Turkey has been completely overhauled and brought into full compliance with the ‘Council Decision relating to a common position by the Community implementing the final phase of the Customs Union’ dated 6 March 1995.16 As a result, the consensus of opinion among Commission members was that a provision specifically dealing with intellectual property rights contracts should be included in the PIL (Art. 28). According to this article, in contracts pertaining to intellectual property rights, the parties are at complete liberty to choose the law applicable to the contract, with one exception in Art. 28 (3) of PIL. In the absence of any choice of law, the law of the place of business of the party transferring a right or the use of a right will be the applicable law on the grounds that granting those rights is characteristic of intellectual property rights contracts. If the party contractually obliged to transfer a right has no place of business, then the contract is governed by the law of the transferor’s habitual residence. As used in PIL, the term ‘intellectual property’ encompasses inter alia copyrights, trademarks, patents, utility models, registered designs, geographical names, plant varieties, and integrated circuit topographies. According to article 28 (3) of PIL, disputes over intellectual property created by an employee as part of and during the conduct of his work are subject to the law where the employee ‘habitually performs his work’. Let me also refer to what was said about the limitations imposed on choice of law in individual employment contracts.17 Swiss PIL Art. 122 (3) was the source of inspiration for the composition of this article of PIL.

6.

Contracts Relating to the Carriage of Goods

Contracts pertaining to the carriage of goods are not addressed by ex-PIL. Such contracts are the ones most frequently encountered in international trade, but because they incorporate features that make them substantially different from general contracts, they are subject to a number of international conventions. These conventions do not address the issue of conflict of laws, or if they do, they are inadequate to the task. For this reason, article 29 of PIL, which is inspired by Rome I, fills an important need. According to article 29 (1), if the parties have not indicated a choice of applicable law, the law of the country where the carrier has his principal place of business at the time the contract was concluded will apply. The wording of article 29 of PIL is sufficiently general to make it applicable to the carriage of goods of whatever nature by land, sea, air, and combinations thereof.

16 17

The Council Interinstitutional File Nr 95/0101, ACC. See V.E.4 above.

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Gülören Tekinalp In the most general terms, what distinguishes the rule governing the carriage of goods from that governing other contracts is that there are a number of contingent conditions involved in the application of the conflict of laws rule. If the country in which, at the time the contract is concluded, the carrier has his principal place of business is also the country of loading, discharge or the principal place of business of the consignor, it is presumed that the contract is most closely connected with that country. It is only in the absence of one of these situations that the contract will be subject to the general rule of article 24. Contracts for single voyage charter-parties and other contracts whose main purpose is the carriage of goods are also treated as contracts for the carriage of goods. Article 29 (2) of PIL also contains an ‘exception clause’, providing that if a contract for the carriage of goods is more closely connected to a particular country, then it may be possible to apply the law of that country to that specific contract.

7.

Agency

A new provision has been proposed for article 30 of PIL, which is concerned with contracts of agency. Inspired by Swiss PIL Art. 126, the new rule was formulated only after lengthy debate among Commission members.18 According to this article, the competence of the agency arising from the legal relationship between agent and principal will be subject to the same law governing the contract between the agent and principal. The law of an agent’s place of business will apply to determine whether an agent’s action will put the principal under an obligation with respect to a third party. If the agent has no place of business, or if the third party is unaware of it, or if the agent exercised his competence somewhere other than where his place of business is located, then the law of the country where the competence was exercised will govern. The same rule applies to the relationship between an unauthorized agent and a third party. If a service relationship exists between a principal and agent, and if the agent does not have an independent place of business of his own, then the contract is subject to the law of the principal’s place of business. In developing the rules pertaining to agency, the underlying concern was achieving a balance in the triangular relationship among principals, agents, and third parties. This article of PIL is in accord with The Hague Agency Convention of 1978 and will help achieve uniformity in dealing with international conflict of laws issues.

18 See and compare MAX-PLANCK INSTITUTE FOR FOREIGN PRIVATE AND INTERNATIONAL LAW, The Working Group: ‘Comments of the European Commission’s Green Paper on the conversion of the Rome Convention of 1980 on the applicable law in contractual obligations into a community instrument and its modernization’, in: RabelsZ. 2004, 1-118, Art. 8a, 109 and art. 7 of the Rome I Proposal of 15.12.2005, COM (2005) 650, 2005/0261 (COD).

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The 2007 Turkish Code on Private International Law 8.

Overriding Mandatory Rules

The question of whether or not a provision concerning overriding mandatory rules needed to be included in PIL was debated repeatedly at every stage of its composition. This is because rules of this sort apply to not only contractual obligations but also nearly every field of law. For this reason, the debate tended to focus on the question of whether the provision should be drafted as a general provision or whether it should instead address only instances of contracts that were exceptional. The prevailing view among the members of the Commission was the latter19. There was also another issue that arose from the unique nature of overriding mandatory rules: the impact of governmental policy on private law is what makes overriding mandatory rules necessary, and these rules apply whether or not a foreign element is present in the contractual relationship. These rules will be abided by if they exist in applicable law or in lex fori. The problem arises over whether or not such rules of third-party states are to be taken into account. Eventually it was agreed that in determining whether the rules of third-party states should be taken into account it was necessary to look at the special nature of the rules and also see if the state required certain conditions associated with a specific case. According to the rule in PIL, lex causae applies to the contractual relationship, but if there is a close relationship with the contract, the influence of the overriding mandatory rules of another state may be recognized. When recognizing the influence of these rules and deciding whether or not they will be followed, the objective, nature, content, and consequences of the rules are all taken into account. Despite the specificity of the heading of article 31 of PIL which governs this issue, the wording itself is quite flexible. This flexibility was purposeful, so as make it possible to take advantage of developments in international practice and interpretation. The provision of PIL concerning overriding mandatory rules requires a judge to take the issues they address into account, however, it does not impose upon him any obligation to abide by the rules in the absence of a treaty or international convention. That being said, if the rules qualify as overriding mandatory rules by virtue of their objectives, nature, and content and if the consequences of the rules can be clearly discerned, then it would not be possible for the judge to refuse to abide by them.

9.

The Existence and Material Validity of a Contract

Inspired by Rome I, article 32 of PIL says that, in principle, the existence and material validity of a contract are to be determined according to the applicable law of the contract. However, if it becomes understood, on the basis of circumstances of a case, that it would not be reasonable to recognize the validity of the conduct of one of the parties (including his silence) on the basis of the same law, the law of the country where that party has his habitual residence will apply to the validity of his declaration of consent. 19

Also see IV.C above.

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Gülören Tekinalp 10.

The Manner of Performance and Measures

Article 33 of PIL concerning the manner of performance and related measures of a contract was modeled on article 10 (2) of the Rome I Convention and employs the same wording: In relation to the manner of performance and the steps to be taken in the event of defective performance, regard shall be had to the law of the country in which performance takes place.

F.

The Law Applicable Law to Non-Contractual Obligations

1.

Torts

Although a number of new paragraphs were added to article 25 of ex-PIL20, which was concerned with torts, the general concept and principles on which that article was based remain unchanged (PIL Art. 34). The reason is that ex-PIL 25 was the one article of that law that was most amenable to development. The rule that the law of the place where a tort is committed applies to obligations arising from the tort was retained unchanged in PIL. After some debate over the second paragraph, it was initially decided that if the place of a tort’s commission and the place where damage occurs are different, the ‘place where damage occurs’ is to be the connecting factor. Furthermore, the concept of ‘damage’ has emerged as the fundamental concept in the regulation concerning non-contractual obligations21 (Rome II), and the view that there was no need to change the concept already embodied in ex-PIL gained favor. The notion of supporting legal harmonization with the EU to the maximum degree possible also lent weight to this idea. However, while the phrase ‘the damage arises’ in provisions of Rome II was accepted by the Commission, the phrase ‘the damage is likely to arise’ was viewed as being nebulous and was therefore not included in article 33 of PIL. The existing exception clause in ex-PIL was also kept unchanged [PIL Art. 34 (3)]. That is, if there is a country that is more closely connected to a tort, then the law of that country will apply to the non-contractual obligation arising from the tort. The provision in article 4 (2) of Rome II: ‘However, where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply’ was not included in PIL on the grounds that it falls within the scope of ‘the more closely connected country’ rule of PIL article 34 (3). Two new paragraphs have been added to PIL. One of these [Art. 34 (4)] makes it possible for an injured party to apply directly to the insurer of the party that caused the damage. The other [Art. 34 (5)] allows the parties to come to an agreement and choose what the applicable law will be after a tort has been committed. Both provisions are in line with current thinking on tort law. 20 21

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2.

Liability in Violations of Rights Relating to the Personality

The violation of privacy and personality rights rule in article 35 of PIL stands outside the scope of the general rule governed by article 34. The rule of article 35 is concerned with determining the applicable law when privacy or personality rights are violated in the face of indeterminately large numbers – potentially even millions – of people by means of the technical resources that are available today. Article 35, in other words, provides the rule whereby the applicable law will be determined in violations of privacy and the rights relating to personality by means of all forms of mass communication, including the internet. The view adopted was that a person whose privacy or personality rights have been violated is in a more vulnerable position than the person committing the violation. Therefore the article allows the former to choose one of several alternative ways available to protect himself [Art. 35 (1)]. Swiss PIL Art. 139 provided the inspiration for these options and the general formulation of the article. An exception is made for a person whose personality rights have been violated to respond under Art. 35 (1) when the violation takes place in a periodical publication [Art. 35 (2)]. Taking the need to protect freedom of the press into account, PIL accepts the principle of applying the law of the country where publication or broadcasting takes place because it is in the interests of the publisher or broadcaster. Rome II Art. 6 (2) proposes in such cases the application of the law of the country where the publisher or broadcaster has a habitual residence. The prevailing opinion among the members of the Commission, however, was that the Swiss model should be followed because, in view of the likelihood that the publisher or broadcaster might be a corporate entity, it would be better to use the more generalized concept of ‘country in which the publication takes place or the program is broadcast’. This would also be better from the standpoint of preserving the overall unity of PIL. The rule of article 35 (1) of PIL that gives the party suffering damage the right to choose among alternative applicable laws will also apply in violations of personality rights involving the processing of personal information and the restricting of a person’s right to have access to such personal information.

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Gülören Tekinalp 3.

Manufacturer’s Non-Contractual Obligations Due to Product Liability

The prevailing view among Commission members was that determining the applicable law in the case of someone suffering damage due to products exclusively on the basis of a general tort rule would lead to results that were unsatisfactory and unfair. For this reason, article 36 of PIL grants the party suffering the loss the right to determine the applicable law in a way that also takes into consideration the manufacturer’s rights. According to the article, which is inspired by Swiss PIL Art. 135, the party suffering damage may elect the law of the habitual residence of the party that caused it or the law of the country where the product was acquired. However the law of the place of acquisition is applicable only if the party causing the damage is unable to demonstrate that the product was brought into that country without his consent. This rule provides protection for the manufacturer inasmuch as the place of acquisition rule might be a country that the manufacturer did not or could not be expected to take into account.

4.

Unfair Competition and Restraint of Competition

Unfair competition is a special type of tort that is governed by article 37 of PIL. The formulation of a conflict of laws rule concerning unfair competition was guided by the realization that it needed to be a rule that would be closely connected to all the competitive market actors to the same degree. The rule that was adopted in the PIL was the ‘law of the country whose market has been affected’ as this is viewed as being in the best interests of suppliers, consumers, and the public in general. In fact in order to make different circumstances more specific, the connecting factor of ‘directly affected market’ was chosen. In article 37 (2) of PIL, if only the business interests of a victim of unfair competition have been harmed, a different conflict of laws rule is provided, according to which the law of the country where that business establishment is located will apply. This is because in the second paragraph, the market has not yet suffered damage even though the business establishment has. Article 38 of PIL is concerned with losses arising from restraint of competition. The inclusion of this conflict of laws rule not only fills an important lacuna in PIL but also achieves compliance with Turkey’s law on the protection of competition (Statute 4054),22 an adaptation of EC competition law that was put into effect in the wake of the Customs Union Resolution of 1995. The rule in article 38 of PIL was modeled on the one in Swiss PIL (Swiss PIL Art. 137) as was the unfair competition rule. This rule seeks to protect competition against restrictions and distortions arising from the actions of cartels and other associations, abuse of market dominance, and mergers and acquisitions. The rule in article 38 of PIL is also based on the criterion of the ‘directly affected market’. The Commission held the view that it was preferable to address the issues of unfair competition and restraint of competition in separate articles of the law due to their completely different sub22

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The 2007 Turkish Code on Private International Law jects and circumstances as that was the only way to make their second paragraphs intelligible from the standpoint of legislative technique. Article 38 (2) of PIL says that if a foreign law is applied to a restraint of competition claim, recovery is limited to the amount of compensation that could be given if Turkish law had been applied.

5.

Unjust Enrichment

The ex-PIL rules governing conflict of laws for unjust enrichment claims were only subject to one change: ‘unjust acquisition’ was replaced with unjust enrichment as the underlying legal concept. In cases involving unjust enrichment the law governing the legal relationship for which unjust enrichment is alleged applies. If there is no such legal relationship, then the law of the place where the enrichment takes place is the applicable law. The number of the article was also changed to 39, and a second paragraph pertaining to choice of law was added. Under that clause [PIL Art. 38 (2)], the parties may come to an agreement on the applicable law after the unjust enrichment has taken place.

G.

International Civil Procedure Law

1.

The International Jurisdiction of Turkish Courts

As mentioned earlier, the PIL does not make any substantial changes with respect to the international jurisdiction of Turkish courts. PIL of 2007 does, however, introduce a new underlying concept that has been a part of private international law doctrine for some time: the principle of protecting the more vulnerable party in any contractual relationship. This covers, for example, employees in disputes over individual employment contracts, consumers in disputes over certain consumer contracts, and the insureds in disputes over insurance contracts. New rules serving this aim have been provided when determining courts of jurisdiction. a)

General Jurisdiction

Article 40 of PIL says that the jurisdiction of Turkish courts in disputes incorporating a foreign element is to be determined on the basis of the domestic civil procedure rules used to determine venue. This is identical to the rule contained in exPIL Art. 27. b)

Jurisdiction in Disputes over Personal Status and Inheritance

Ex-PIL Art. 28 was intended to ensure that a Turkish court would always have jurisdiction in cases involving the personal status of Turkish nationals. The phrase ‘Turkish nationals who do not have a place of domicile in Turkey’ contained at the Yearbook of Private International Law, Volume 9 (2007)

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Gülören Tekinalp beginning of the ex-PIL Art. 28 has been removed in PIL Art. 41 because it was misinterpreted and did not serve any useful purpose. No conceptual changes were made in this article however. The reason for making this change is that in the application of Turkish civil procedure law, a Turkish citizen could, in the worst possible scenario, at least be considered domiciled in the place where he or she is registered in the public registry of Turkey. No jurisdiction-related changes whatsoever were made in article 42 (individual rights of foreign nationals) or article 43 (inheritance). c)

Jurisdiction over Individual Employment Contracts, Consumer Contracts, Insurance Contracts

Because the existing provisions of domestic law concerning jurisdiction in employment, consumer and insurance contracts cases were regarded as inadequate, new rules were added to the PIL in Art. 44 (employment contracts), Art. 45 (consumer contracts) and Art. 46, (insurance contracts). The general aim of the new rules was to give greater protection to the vulnerable party. In disputes arising from individual employment contracts, the court of general jurisdiction is the Turkish court of the place where the employee habitually does his work. If an employee initiates a suit against an employer the court of jurisdiction is the Turkish court of the employee's domicile, employee's habitual residence, or employer's domicile, at the employee’s option. In disputes arising from consumer contracts, the consumer has the option of initiating suit in the Turkish court of either his own domicile or habitual residence or the domicile or habitual residence of the manufacturer. However, when suit is brought against the consumer, the Turkish court of the consumer’s habitual residence is the only court with jurisdiction. In disputes arising from insurance contracts, the Turkish courts of the insurer’s principal place of business have general jurisdiction as do those of the places where a branch or agent entering into the contract is located. In suits initiated against policyholders, insureds, or beneficiaries, however, the Turkish courts of their places of domicile or habitual residence have jurisdiction. d)

Choice of Jurisdiction and its Limits

Ex-PIL Art. 31, which is concerned with choice of jurisdiction agreements among parties, has not been modified in PIL Art. 46. The current article now includes a rule saying that a choice of jurisdiction henceforth has exclusive jurisdiction so as to preclude any doubts over how such agreements are to be implemented in practice. The second paragraph of this article in PIL now has a rule saying that in individual employment, consumer, and insurance contract disputes, a choice of jurisdiction agreement will not obviate the jurisdiction of the courts cited in articles 44, 45, and 46 of the PIL.

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Recognition and Enforcement of Foreign Court Decisions and Arbitral Awards

No major changes have been made in PIL in the recognition and enforcement of foreign court decisions and arbitral awards. However, one seemingly small change is, in my opinion, an important innovation from the standpoint of Turkish legal practice: although previously a ‘certified original’ of a foreign judgment had to be submitted to a court for it to be recognized or enforced, article 53 of PIL now says that ‘a copy certified by the judicial authority issuing the decree’ is sufficient. Ex-PIL Art. 38 took a very liberal approach with respect to the recognition and enforcement of foreign court decisions and arbitral awards that did not take into account whether or not the court hearing the case had the jurisdiction to do so. Some countries grant their courts such exorbitant jurisdiction, however, (jurisdiction that is excessively broad and protectionist) that it had become essential for this provision to be changed. For this reason, a subparagraph (b) has been added to article 54 of PIL concerning the conditions for accepting petitions for enforcement: ‘the decree has not been issued by a court of a state that granted the court jurisdiction even though it possesses no genuine connection with the circumstances of or parties to the case’. On the other hand, subparagraph (e), which granted Turkish nationals the right to object to foreign court decisions pertaining to their individual rights has been eliminated because it provided little real benefit in practice and simply served to prolong litigation. A new rule introduced in article 55 of PIL (Art. 39 ex-PIL) makes foreign courts’ non-contentious jurisdiction subject to the same rules governing the recognition and enforcement of judgements. Article 59 of PIL contains a newly added rule to determine at what moment a foreign judicial decision becomes a ‘final judgment’ and, thus, ‘conclusive evidence’. In the face of doubts that have been encountered in practice, the new provision of PIL makes it clear that such a ruling becomes a final judgment and has the effect of conclusive evidence as of the moment it does so under its own law. Starting from article 60 (1) of PIL [ex-PIL 43 (1)] concerning the enforcement of foreign arbitral awards, an addition has been made that allows the enforcement of such awards that have become binding on the parties as well as those that have become finalized and enforceable. The rule of ‘arbitral awards that are binding23 on the parties’ has in fact been valid in Turkey since the country became a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958. However, ex-PIL only mentioned ‘finalized and enforceable arbitral awards’ which had led to doubts in Turkish legal practice. The same addition has been made to other articles as well: PIL Art. 61 b; PIL Art. 62 i. A lacuna in the 1982 PIL has been eliminated by including an explicit statement [Art. 63] that the rules of PIL also apply to the recognition of foreign arbitral awards. 23

Turkish Official Gazette, 21002, 25 September 1991.

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RECOGNITION AND ENFORCEMENT OF FOREIGN JUDGMENTS IN QUEBEC Claude EMANUELLI∗

I. II. III. IV. V. VI. VII. VIII. IX. X.

Introduction Constitutional Background Time Element Scope of Application Conditions for Recognition and Enforcement Applicable Law Merits of the Case Conversion of a Sum of Money Procedural Matters Conclusion

I.

Introduction

On 1 January 1994, new Quebec rules of Private International Law came into force within the framework of the reform of the Quebec Civil Code. These rules are mainly found in Book X of the new Code, which includes rules governing the recognition and enforcement in Quebec of foreign decisions. The latter were supplemented by the adoption of transitional and procedural rules dealing with practical issues relating to their application. Also, as they have applied the new rules, Quebec courts have contributed and continue to contribute to their understanding and their development. The new rules, which are intended to facilitate the recognition and enforcement of foreign decisions in Quebec, apply on an equal footing to both decisions rendered in sister-provinces and to foreign-country judgments. However, this approach is tempered by constitutional principles, which affect the recognition in Quebec of decisions rendered in sister-provinces. Moreover, under the transitional rules, which were adopted together with the new Civil Code, the recognition and enforcement of some foreign decisions in Quebec are still governed by pre1994 rules. This paper examines former and current rules governing the recognition and enforcement of foreign decisions as the rules have been applied and interpreted by Quebec courts.1 ∗

Full Professor, Faculty of Law, University of Ottawa, Canada. Many cases and statutes cited in this paper can be found online at: <www. canlii.org>. 1

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Claude Emanuelli

II.

Constitutional Background

Traditionally, the recognition and enforcement of foreign judgments in Quebec are informed by the legal autonomy, which provinces enjoy under the Canadian Constitution.2 Thus, with respect to matters falling under provincial jurisdiction,3 Quebec has its own rules of Private International Law. In other Canadian provinces, common law rules of Private International Law apply. As to matters falling under federal jurisdiction, federal rules of Private International Law are applicable in all provinces and territories. As a result of the legal autonomy of Canadian provinces, an Ontario judgment is considered just as much a foreign judgment in Quebec as a judgment rendered in Argentina.4 Both judgments must be formally recognized and declared enforceable by Quebec courts to have full force in Quebec. The recognition and enforcement in Quebec of foreign judgments relating to provincial matters are governed by the rules adopted by the Quebec legislator and interpreted by the Quebec courts. The rules governing the recognition and enforcement of foreign judgments relating to federal matters are either adopted by Parliament, or developed by courts. In Morguard Investments Ltd. v. De Savoye5, the Supreme Court of Canada took issue with the legal autonomy of Canadian provinces as it relates to the recognition and enforcement of foreign judgments. The Court held that the old common law rules which were informed by the doctrine of territoriality were outmoded.6 These rules had to be replaced by more liberal rules, informed by the doctrine of comity, in order to accommodate the flow of wealth, skills and people across State lines.7 Moreover, the approach based on the doctrine of territoriality was considered to ‘fly in the face’ of the federal structure of Canada.8 Indeed, according to the Court, the doctrine of comity should apply with greater force between the component units of a Federal State, such as Canada.9 This idea was found to be supported by Canadian constitutional law and a ‘full faith and credit’ clause was read into the Constitution. As a result, the Court held that courts in one province must give full faith and credit to the judgments rendered in a sister-province where there 2 Each Canadian province has its own legal system, which is made up of both federal and provincial rules. They are divided along the lines of sections 91-92 of the Constitution Act of 1867, 30 &31 Victoria, c. 3. 3 Most matters giving rise to Private International Law issues fall under provincial jurisdiction. 4 According to Article 3077 of the Civil Code of Quebec (hereinafter ‘C.C.Q.’), Q.C.C., each Canadian province is a country. 5 [1991] 3 S.C.R. 1077. See also Hunt vs. T & N plc, [1993] 4 S.C.R. 289. 6 See Morguard Investments Ltd. vs. De Savoy (note 5), p. 1095 et seq. 7 Ibid., at p. 1098. 8 Ibid., at p. 1099. 9 Ibid., at p. 1098.

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Recognition and Enforcement of Foreign Judgments in Quebec is a ‘real and substantial connection’ between the case which gave rise to a foreign judgment and the province or territory where it was decided. This condition was seen to be necessary to satisfy the principles of order and justice as well as constitutional constraints.10 The decision in Morguard welcomed in ‘the beginning of a new era in Canadian conflicts law’. However, in Quebec, private international law, including the rules governing the recognition and enforcement of foreign judgments, are not informed by the doctrine of territoriality to the same extent as it is in the rest of Canada.11 Therefore, the doctrine of comity plays a lesser role in Quebec.12 The decision in Morguard is less useful in Quebec on the issue of comity than on the issue of why a judgment rendered in Ontario should have full force in Quebec and vice versa. The explanation for the latter is based on ‘constitutional imperatives’13 rather than on comity. Moreover, the practical impact of the decision is limited, as it does not precisely define the substance of the ‘real and substantial connection’ test.14 As a result, Canadian provinces are left with the task of defining that test. The Uniform Law Conference of Canada15 adopted and recommended the Uniform Enforcement of Canadian Judgments Act16 (1991) for provincial enactment in order to implement the ‘full faith and credit’ principle. The Conference did the same thing with respect to the Uniform Court Jurisdiction and Proceedings Transfer Act17 (1994) in order to give substance to the ‘real and substantial connection’ test. So far, only some common law provinces and territories have enacted corresponding legislation.18 In Quebec, the implementation of the principles developed in Morguard was based on local solutions.19 Ibid., at p. 1102 et seq. It is modeled after the so-called statute theory. 12 In Spar Aerospace Ltd. v. American Mobile Satellite Corp., [2002] 4 S.C.R. 205 (hereinafter ‘Spar Aerospace’), at para. 17, Lebel J. identified comity as a ‘guiding principle’ in Quebec. 13 See Beals, [2003] 3 S.C.R. 416, at para. 164. 14 Ibid., at para. 161. In Beals, Lebel J. attempted to define the test: ibid., at para. 175 et seq. 15 The Conference is an independent organization which is not directly responsible to any government or other authority, but is closely linked to the Canadian Bar Association. One of its main objectives is ‘to promote uniformity of legislation throughout Canada [...] on subjects on which uniformity may be found to be possible and advantageous.’ See the website of the Uniform Law Conference of Canada at <www.ulcc.ca>. 16 See the website of the Conference, ibid. 17 Ibid. 18 In relation to the Uniform Enforcement of Canadian Judgments Act: Yukon, British Columbia, Saskatchewan, New Brunswick, Prince Edward Island, Newfoundland and Labrador, Manitoba. In relation to the Uniform Court Jurisdiction and Proceedings Transfer Act: Yukon, Saskatchewan, British Columbia, Nova Scotia. 19 In Spar Aerospace (note 12), at para. 55, the Court explained that under book X of the C.C.Q. ‘the system of private international law is designed to ensure that there is a ‘real 10 11

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Claude Emanuelli In Beals, the Court extended the ‘real and substantial connection’ test to foreign-country judgments.20 However, in the case of foreign judgments, comity alone underlies the rule, and comity does not create obligations on legally autonomous provinces in the same manner as does constitutional law. Thus, in Beals, the Supreme Court held that foreign-country judgments should be recognized in Canada if there is a ‘real and substantial connection’ between the foreign court and the case decided, though. The Court also held that Canadian provinces may adopt a different approach by statute. Even though the ‘real and substantial connection’ test applies to both foreign-country judgments and to judgments rendered in sister-provinces, ‘the considerations informing the application of the test to foreign-country judgments are not identical to those that shape conflict rules within Canada.’ Since the entry into force of the Civil Code of Quebec (1994)21, the recognition and enforcement of foreign judgments in Quebec are governed by Articles 3155-3168 C.C.Q. They are supplemented by Articles 785-786 and Articles 825.6825.7 of the Code of Civil Procedure (C.C.P.).22 Articles 3155-3168 C.C.Q. are intended to replace the former rules developed by Quebec courts on the basis of Articles 1220 of the Civil Code of Lower Canada (C.C.L.C.)23 and 178-180.1 C.C.P. (now repealed).24

III. Time Element The operation in time of Articles 3155-3168 is governed by Article 170 of the transitional provisions of the Act Respecting the Implementation of the Reform of the Civil Code.25 According to its provisions, Articles 3155-3168 C.C.Q. apply only to the recognition and enforcement of foreign judgments rendered after 1 January 1994 in relation to proceedings commenced before foreign courts after that date. The recognition of foreign judgments rendered before and after 1 January 1994 in

and substantial connection’ between the action and the province of Quebec and to guard against the improper assertion of jurisdiction.’ 20 See Beals (note 13), at para. 28 et seq., majority decision by Major J. 21 S.Q. 1991, c. 64. 22 R.S.Q., c. C-25. 23 29 Vict. S.C. 1865, c. 41. 24 See EMANUELLI C., Droit international privé québécois, 2nd ed., Montréal 2006 at para. 273 et seq. 25 S.Q. 1992, c. 57.

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Recognition and Enforcement of Foreign Judgments in Quebec relation to proceedings commenced before that date, is still governed by the former rules.26 On the other hand, procedural matters relating to the recognition and enforcement of all foreign judgments are governed by Articles 785-786 and 825.6825.7 C.C.P. in accordance with Article 9 of the transitional rules.27

IV. Scope of Application Unlike the former rules,28 Articles 3155-3168 C.C.Q. do not distinguish foreigncountry judgments from judgments rendered in sister-provinces. However, under the transitional rules (Article 170), the distinction still applies to foreign judgments governed by former Articles 178-180.1 C.C.P.29 Also, under Article 3163, the rules governing the recognition and enforcement of foreign judicial decisions apply equally to foreign transactions.30 On the other hand, the recognition and enforcement of foreign arbitration awards are governed by Articles 948 et seq. C.C.P. Their provisions are informed by the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.31

V.

Conditions for Recognition and Enforcement

Under the introductory terms of Article 3155 C.C.Q., Quebec courts will recognize and declare enforceable a foreign judgment32 in Quebec except in a number of cases, which are set out and commented here below. 1)

The foreign authority did not have jurisdiction over the case under Quebec rules governing indirect jurisdiction.33 These rules are found in Articles 3164-3168 C.C.Q.34

26 See The Mutual Trust Co. v. St-Cyr, [1996] R.D.J. 623 (C.A.). See also EMANUELLI C. (note 24), at para. 275; GOLDSTEIN G./GROFFIER E., Droit international privé, t. I, Cowansville 1998, at para. 173. 27 See EMANUELLI C. (note 24), at para 439; GOLDSTEIN G./GROFFIER E. (note 26), at para. 172. 28 See former Articles 178-180 C.C.P. 29 See EMANUELLI C. (note 24), at para 275; The Mutual Trust Co. v. St-Cyr (note 26). 30 See EMANUELLI C. (note 24), at para. 307-308. 31 (1959) 330 U.N.T.S. 2. 32 See Arab Monetary Fund v. 1954933 Nova Scotia Ltd., J.E. 2004-1027 (C.S.). 33 See Labs of Virginia Inc. v. Clintrials Bioresearch Ltd., J.E. 2003-1205 (C.S.).

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Claude Emanuelli Article 3164 embodies a modified version of the mirror principle. Under its provisions, indirect jurisdiction is governed by the same rules as those governing direct jurisdiction. In other words, the jurisdiction of foreign courts depends on the same rules as those which govern the jurisdiction of Quebec courts. However, a supplementary condition is added: there must be a substantial connection between the case which gave rise to the foreign judgment and the country where it was decided. This condition is informed by the ‘real and substantial connection’ test developed by the Supreme Court of Canada. The test also informs the rules governing the jurisdiction of Quebec courts35 (Articles 3134-3154 C.C.Q.).36 With respect to indirect jurisdiction, the ‘real and substantial connection’ test allows Quebec courts to consider whether the foreign court was forum conveniens or not. If the foreign court had jurisdiction, but was forum non conveniens, Quebec courts will not recognize the foreign decision.37 However, the mirror principle does not apply when the jurisdiction of foreign courts is governed by special rules. Such is the case under Articles 3166-3168 C.C.Q. Article 3166 deals with foreign judgments relating to parentage. Its provisions are more generous than those found in Article 3147 C.C.Q. which govern the jurisdiction of Quebec courts over the same matter. Indeed, under Article 3166, foreign courts have jurisdiction if either the child or one of his/her parents is domiciled in the country where the judgment was rendered, or is a national thereof. In Article 3147, domicile38 is the only relevant connecting factor. Nationality is not considered since there is no Quebec nationality. Article 3167(1) deals with foreign divorce judgments. Its provisions were found to be unconstitutional by the Quebec Superior Court since divorce is a federal matter in Canada.39 Therefore, the recognition of foreign divorce judgments in Canada is governed by Article 22 of the Divorce Act.40 Under 34 See EMANUELLI C. (note 24), at para. 279 et seq.; GOLDSTEIN G./GROFFIER E. (note 26), at para. 174.1 et seq. 35 See Spar Aerospace Ltd. (note 12), at para. 55 et seq. 36 On these articles, see EMANUELLI C. (note 24), at para.163 et seq.; GOLDSTEIN G./GROFFIER E. (note 26), at para. 131.1 et seq. See also HSBC Bank Canada v. Hocking, [2006] R.J.Q. 804 (S.C.). 37 See EMANUELLI C. (note 24), at para. 282. See also HSBC Bank Canada v. Hocking (note 36). 38 Domicile is to be determined on the basis of Articles 75 et seq. Q.C.C. See EMANUELLI C. (note 24), at para. 114 et seq. 39 See Droit de la famille – 2054, [1997] R.J.Q. 1124 (S.C.). However, see S.F. v. R.J.-S., J.E. 2005-1718 (S.C.). 40 R.S.C. (1985), c. 3 (2nd suppl.).

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Recognition and Enforcement of Foreign Judgments in Quebec its main provisions, the mirror principle applies: foreign courts have jurisdiction under the same conditions as Canadian courts. In particular, this will be the case if either spouse ordinarily resided in the foreign country for at least one year immediately preceding the action for divorce (paragraph 1).41 Moreover, Article 22 (3) incorporates rules developed by Canadian courts before the entry into force of the Act with respect to indirect jurisdiction over divorce cases. According to these rules, a foreign authority has jurisdiction if the parties are domiciled where the judgment is rendered or if that judgment is recognized in the country where the parties are domiciled when it is rendered. This latter solution involves the application of the theory of renvoi. Article 3167(2) deals with the dissolution of a civil union by a foreign authority. Under its provisions, the jurisdiction of the foreign authority is recognized only if civil union is acknowledged in the country where it sits. In that case, the jurisdiction of the foreign authority is governed by rules found in paragraph 1. According to those rules, the foreign authority has jurisdiction if ‘one of the spouses had his or her domicile in the country where the decision was rendered or had his or her residence in that country for at least one year before the institution of the proceedings, or if the spouses are nationals of that country or, again, if the decision has been recognized in that country’. Unlike Article 3167 (1), Article 3167 (2) does not raise any constitutional issue relating to its validity. Article 3168 deals with foreign judgments arising from personal actions of a patrimonial nature (money judgments). Its provisions are less generous than those found in Article 3148 C.C.Q., which govern direct jurisdiction over similar actions brought in Quebec. Thus, residence is not a relevant connecting factor under the first paragraph of Article 3168.42 Also, under paragraph (3), which is very different from Article 3148 (3),43 only one ground of jurisdiction is mentioned: damage was suffered in the foreign country as a result of a fault committed there or as a result of an injurious act which took place in that country.44 Moreover, under paragraph (4), all the obligations arising from a contract must be performed in the same country for that country’s authorities to have jurisdiction.45 Finally, as it provides that the See S.F. v. R.J.-S. (note 39) (a contrario). With respect to the jurisdiction of Canadian courts, see Article 3 (1) of the Act. 42 Under Article 3148 (1), both the domicile and residence of the defendant in Quebec ground the jurisdiction of Quebec courts. 43 With respect to this paragraph, see Spar Aerospace (note 12), at para. 24. 44 On the other hand, Article 3148 (3) is built around several alternative connecting factors: See Spar Aerospace (note 12) ibid. 45 See HSBC Bank Canada v. Hocking (note 36); Labs of Virginia Inc. v. Clintrials Bioresearch (note 33). Under Article 3148 (3), the jurisdiction of Quebec courts can be founded on the fact that one of the obligations arising from a contract was to be performed in Quebec. 41

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Claude Emanuelli waiver by a consumer or by a worker of the jurisdiction of authorities of their domicile may not be set up against them, domicile is preferred to residence, which is also relevant under Article 3149 C.C.Q.46 Moreover, Article 3165 C.C.Q. prevents Quebec courts from recognizing foreign judgments in the following conditions: Quebec courts have exclusive jurisdiction by reason of the subject matter of the dispute (Article 3151 C.C.Q.), or of an agreement between the parties (Article 3148 (4) C.C.Q.). As a result, Quebec courts will not recognize a foreign judgment rendered in relation to an action arising out of damage caused by exposure to, or use of, Quebec asbestos.47 However in view of Morguard, this solution will not apply when the foreign decision was rendered in a sister-province. Foreign courts in a third country have exclusive jurisdiction for the same reasons as above (Article 3148 in fine C.C.Q.). An arbitrator in Quebec or abroad has exclusive jurisdiction by reason of an agreement between the parties (Article 3148 in fine C.C.Q.). 2)

The foreign decision is not final and conclusive. It is subject to revision or appeal where it was rendered (Article 3155 (2) C.C.Q.).48 Therefore, under Article 786 C.C.P., the party who seeks the recognition or enforcement of a foreign decision must attach to his/her application, ‘a copy of the decision and an attestation emanating from a competent foreign public officer stating that the decision is no longer, in the State in which it was rendered, subject to ordinary remedy and that it is final or enforceable’. Prior to 1994, the exception, now included in Article 3155 (2), was developed by courts. It created problems with respect to foreign support orders. Indeed, support orders can always be varied. According to case law, such orders could only be recognized and declared enforceable with respect to past payments.49 Today, Article 3155 (2) is tempered by Article 3160. Under its provisions, a foreign support order can be recognized and declared enforceable with respect to both past and future payments.50

See Dominion Bridge v. Knai, [1998] R.J.Q. 321 (S.C.). See Worthington Corp. v. Atlas Turner Inc., J.E. 2004-1759 (C.A.) 48 See EMANUELLI C. (note 24), at para. 294; GOLDSTEIN G./GROFFIER E. (note 26), at para. 162 et seq; Aboud v. Eplus Technology Inc., J.E. 2005-209 (S.C.) (a contrario); C.M. v. Ca. A.S., J.E. 2005-253 (C.A.). 49 See Bedell v. Hartmann, [1956] B.R. 157 (C.A.). 50 See C.M. v. Ca. A.S. (note 48). 46 47

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Recognition and Enforcement of Foreign Judgments in Quebec 3)

The foreign decision was rendered in violation of the defendant’s rights, as defined in terms of universally recognized principles of procedure.51 Before 1994, this concern was addressed by Articles 178-180 C.C.P.52 Article 178 dealt with foreign-country judgments. It allowed the defendant to raise before Quebec courts, arguments which had already been raised before foreign-country courts or which could have been raised if the judgment was rendered by default. Articles 179-180 dealt with judgments rendered in sister-provinces. These provisions allowed the defendant to raise, before Quebec courts, arguments which could have been raised before foreign courts provided that he/she was not served in the foreign country and did not appear before its courts.53 Under Article 3156 C.C.Q., the plaintiff must prove that the defaulting party was duly served under the law of the place where the default judgment was rendered. Even if this condition is met, Quebec courts can refuse to recognize the foreign default judgment if the defendant can establish that he/she did not know that he/she had been served or that he/she was not given enough time to present a defence.54 Under Article 786 C.C.P., a party who seeks recognition or enforcement of a foreign default judgment in Quebec, must attach to the application a certified copy of the documents establishing that the defendant was duly served.

4)

Lis pendens will bar a foreign judgment from being recognized in Quebec if a dispute between the same parties, based on the same facts and having the same object: a) has given rise to a Quebec judgment, whether it is final or not; b) is pending before Quebec courts, where it was brought first;55 c) has given rise to a judgment rendered in a third country, and that judgment can be recognized in Quebec.56 These provisions had no equivalent under the pre-1994 rules.

5)

The outcome of the foreign judgment manifestly clashes with Quebec public order as understood in international relations.57 These provisions reflect

51 See EMANUELLI C. (note 24), at para. 295-296; GOLDSTEIN G./GROFFIER E. (note 26), at para. 165 et seq.; Society of Lloyd’s v. Alper, J.E. 2006-717 (S.C.); HSBC Bank Canada v. Hocking (note 36); S.F. v. R.J.-S. (note 41). 52 See The Mutual Trust Company. v. St-Cyr (note 26). 53 See Canada Trustco Mortgage Co. v. Cyr, J.E. 93-523 (S.C.). 54 See Droit de la famille – 2054 (note 39) (a contrario). 55 See M.-B.C. v. J.B., J.E. 2004-969 (C.S.) (a contrario). 56 See EMANUELLI C. (note 24), at para 297 ; GOLDSTEIN G./GROFFIER E. (note 26), at para. 164. 57 See EMANUELLI C. (note 24), at para. 298-299; GOLDSTEIN G./GROFFIER E. (note 26), at para. 166; A. v. Quebec (Procureur général), J.E. 2007-1134 (S.C.); Society of

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Claude Emanuelli the traditional distinction made by Quebec courts between public order as understood in domestic situations and public order as understood in international relations. The latter is more liberal to allow foreign law to apply in Quebec even if it conflicts with Quebec public order as it applies in purely domestic situations.58 As a result, Quebec public order will rarely bar the recognition of foreign judgments: it will bar the recognition of foreign judgments mainly in cases where the outcome of the judgment creates some discrimination between the parties on the basis of race, colour, sex59, political opinions, religious belief, etc. 6)

The judgment is decided on the basis of foreign penal60 or taxation laws. As a rule, Quebec courts do not recognize such foreign judgments because they relate to foreign public policy and are supposed to have territorial application only. However, the rule was tempered before 1994 by Article 21 C.P.P. which was replaced by Article 3162 C.C.Q. Under both articles, Quebec courts will recognize foreign taxation judgments on a reciprocal basis. However, Article 3162 has a wider scope of application than the former rules. It applies to foreign-country judgments as well as to judgments rendered in sister- provinces, whereas Article 21 C.C.P. applied only to the latter.61 Finally, the wording of Article 3155 suggests that Quebec courts are not expected to check as of right whether a foreign judgment should not be recognized because of one of the exceptions provided in its paragraphs (1) to (6). Recognition will be automatic except when the applicant must comply with conditions described in Article 786 C.C.P. and when the defendant objects to the recognition of the foreign judgment by raising some of the exceptions provided in Article 3155.62

VI. Applicable Law Under Article 3157 C.C.Q., Quebec courts cannot deny the recognition of a foreign judgment, because it was decided on the basis of a legal system other than the one Lloyd’s v. Alper (note 55); HSBC Bank Canada v. Hocking (note 36); Advant Leasing Ltd. v. 2995450 Canada inc., J.E. 2005-139 (S.C.). 58 See Auerbach v. Resorts International Hotels Inc., [1992] R.J.Q. 302 (C.A.). 59 See Droit de la famille – 2054 (note 39). 60 See Pro Swing inc. v. Elta Golf inc., [2006] 2 S.C.R. 612. 61 See EMANUELLI C. (note 24), at para. 301; GOLDSTEIN G./GROFFIER E. (note 26), at para. 170. 62 See EMANUELLI C. (note 24), at para. 326; The Mutual Trust Company Co. v. StCyr (note 26); Kevco inc. (Syndic de), J.E. 2005-578 (S.C.).

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Recognition and Enforcement of Foreign Judgments in Quebec which Quebec conflict rules would designate in the same situation.63 This new article settles a controversy created by some Quebec courts before 1994 with respect to that question.64 Its application is tempered with respect to foreign adoptions: under Article 574 C.C.Q., a Quebec authority which is called upon to recognize a foreign adoption judgment must ascertain whether or not there has been compliance with the rules governing consent to and eligibility for adoption. The applicable rules are designated by the domicile of the child (Art. 3092 C.C.Q.).

VII. Merits of the Case Under Article 3158 C.C.Q., Quebec courts cannot dispute the merits of the foreign decision.65 This new rule differs from the solutions provided by former Articles 178-180 C.C.P. Under these provisions, the defendant could dispute the merits of the foreign decision in some cases.66 Article 574 C.C.Q., which deals with the recognition of foreign adoptions, provides a limited exception to the rule included in Article 3158. Indeed, under Article 574 C.C.P., the recognition of a foreign adoption in Quebec is informed by the interests of the child.67 If Quebec courts decide that a foreign adoption was not justified by the interests of the child, they will not recognize that adoption.

VIII. Conversion of a Sum of Money Article 3161 C.C.Q. is intended to settle the controversy concerning the date on which a sum of money indicated in foreign currency in a judgment should be converted in Canadian dollars. Under its provisions, the conversion must take place when the decision becomes enforceable in the country where it was rendered. Prior to 1994, the date of conversion was usually chosen by courts to accommodate the Under former Article 180.1 C.P.C. a foreign judgment could not be recognized in Quebec if it was decided on the basis of foreign law, when Quebec mandatory rules were applicable. 64 See EMANUELLI C. (note 24), at para. 302 et seq.; GOLDSTEIN G./GROFFIER E. (note 26), at para. 160. In some cases, Quebec courts used to check that the law applied by the foreign court was the right one according to Quebec conflict rules: see Karim v. Ali, [1979] C.S. 439 (S.C.). 65 See The Mutual Trust Company Co. v. St-Cyr (note 26). 66 See EMANUELLI C. (note 24), at para. 305-306; GOLDSTEIN G./GROFFIER E. (note 26), at para. 159. 67 Droit de la famille – 2954, [1998] R.J.Q. 1317 (C.Q.); Y.E. (Dans la situation d’), [2002] R.D.F. 1050 (C.Q.). 63

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Claude Emanuelli creditor unless he/she was not diligent.68 The rule still applies with respect to the recognition and enforcement of foreign arbitral awards.69 It also applies to foreign decisions, the recognition of which in Quebec is still governed by pre-1994 rules.

IX. Procedural Matters Procedural matters relating to the recognition and enforcement of foreign judgments in Quebec are now governed by Articles 785-786 and by Articles 825.6825.7 C.C.P.70 Under Article 785, a party may apply to have a foreign judgment recognized in Quebec by way of a motion. However, the application may also be made incidentally,71 even in defence if it comes within the jurisdiction of Quebec courts. Under Article 786, a party who seeks recognition and enforcement of a foreign judgment must take the steps described above to show that the judgment is final and conclusive, and that the defaulting party was duly served if the judgment was rendered by default. All required documents which are ‘drafted in a language other than French or English must be accompanied with a translation authenticated in Quebec.’ As a rule, Article 786 C.C.P. still applies when the recognition and enforcement of foreign judgments in Quebec are governed by reciprocal agreements with foreign countries, such as the entente between France and Quebec respecting mutual aid in judicial matters (Article 3).72 However, the agreement includes specific procedural rules relating to the recognition and enforcements of judgments rendered by the other party.73 Under Article 825.6 C.C.P., the application for recognition of a foreign judgment of adoption must be filed either by the adopter or by the adoptee. The application must include certified copies of the judgment of adoption and of the foreign law. These provisions do not apply when the foreign adoption was granted in a country which is a party to 1993 Convention on Protection of Children and Co-operation in respect of Intercountry Adoption.74 See EMANUELLI C. (note 24), at para 317; GOLDSTEIN G./GROFFIER E. (note 26), at para. 174. 69 See Varma-Sampo v. Beninco Holdings Canada Inc., J.E. 2002-95 (S.C.). 70 See EMANUELLI C. (note 24), at para. 309 et seq.; GOLDSTEIN G./GROFFIER E. (note 26), at para. 172. 71 See Droit de la famille – 2147, [1995] R.D.F. 213 (S.C.). 72 See R.S.Q., C.A-20.1. 73 See EMANUELLI C. (note 24), at para. 350 et seq. 74 For the full text of the Convention, see the website of the Hague Conference on Private International Law: <www.hcch.net>. See also EMANUELLI C. (note 24), at para. 184 and 502. 68

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Recognition and Enforcement of Foreign Judgments in Quebec Article 825.7 stresses that the applicant who acts under Article 825.6, may join incidental application to his/her main application, for instance to change the name or given name of the adoptee and to alter the register of civil status.

X.

Conclusion

The federal structure of Canada, as well as the principle of territoriality, explain that a judgment rendered in a sister-province is a foreign judgment in Quebec and vice versa. This situation has been tempered by Supreme Court decisions rendered since 1993 on the basis of Canadian constitutional law. However, these decisions leave room for interpretation and only provide guidelines regarding judgments rendered outside Canada. As a result, each Canadian province can still develop its own rules governing the recognition and enforcement of foreign judgments, provided that such rules comply with the constitutional principles developed by the Supreme Court. Those principles are intended to ensure security and justice of international transactions. Since 1994, the recognition and enforcement of foreign judgments in Quebec are governed by new rules adopted within the framework of the reform of the Civil Code. However, the application in time of these rules is conditioned by transitional rules which came into force at the same time as the new Civil Code. As a result, the recognition in Quebec of some foreign judgments is still governed by pre-1994 Quebec rules. Under the new rules, just as it was under the former ones, a presumption exists in favor of the recognition of foreign judgments in Quebec. According to the new rules the presumption can be rebutted for reasons dealing mainly with lack of jurisdiction of foreign courts, lack of conclusiveness of the foreign judgment, violation of the defendant’s rights, lispendens and public policy. On the other hand, Quebec courts cannot deny the recognition of a foreign judgment because of the legal system applied by the foreign court. Moreover, Quebec courts are no longer longer allowed to look at the merits of the foreign decisions. Other differences exist between the new rules and the former ones. Thus, the new rules do not distinguish judgments rendered in sister-provinces from foreign country judgments. However, in practice some differences still exist in light of the principles stated by the Court in Morguard. Also, the new rules have introduced nationality as a connecting factor justifying the jurisdiction of foreign courts in some cases. Moreover, as in other areas of Private International Law, Quebec judges are granted discretionary powers to promote a flexible approach to the application of the relevant rules. All in all, in a much needed effort to modernize Private International Law in Quebec, the rules governing the recognition and enforcement in Quebec of foreign decisions benefit from a reform which is much more than a facelift.

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A WIDER VISION IN CHOICE OF PRESCRIPTION LAW Christa ROODT* I. II. III. IV.

V.

Introduction ‘Inflation of Knowledge’ A Closer Look at Classification in the Lloyd’s Cases In Need of a Wider Vision A. Pertinent Aspects of the Via Media B. Relationship between Comparative Law and Private International Law Conclusion

I.

Introduction

Prescription is one of the most important defences to actions founded upon contract, delict or recognition and enforcement of a foreign judgment or award. Called upon to determine the time limits within which claims must be instituted and foreign default judgments or arbitral awards enforced, some jurisdictions remain hard pressed to decide whether to apply foreign or local statutes. The principle that the forum follows its own rules where rules of procedure are in issue is a well-known doctrine of the statutists, but has caused its share of confusion. Jacobus Balduinus was the first to draw a distinction between rules of procedure (ad litis ordinationem) and rules of substance (ad litis decisionem) circa 1235.1 For choice of law purposes, this distinction is reflected in the well-known adage that the ‘law of the cause’ governs matters of substance whereas the law of the forum governs procedural issues.2 After all, the forum court cannot be expected * Dr. Christa ROODT teaches Private International Law in the School of Law at the University of Aberdeen, Scotland. Until recently, she taught Private International Law and Comparative Law at the University of South Africa. 1 LIPSTEIN K., Principles of the Conflict of Laws, National and International, The Hague 1981, p. 7. 2 EDWARDS A.B./KAHN E., ‘Conflict of Laws’, in: JOUBERT W.A. (Founding Editor) LAWSA Vol 2 Part 2, Durban 2003, § 343; FORSYTH C.F., Private International Law: The Modern Roman-Dutch Law including the Jurisdiction of the High Courts 4th ed., Lansdowne 2003, p. 21-23; WHINCOP M.J./KEYES M., Policy and Pragmatism in the Conflict of Laws Dartmouth 2001, p. 40; NORTH P.M./FAWCETT J.J., Cheshire and North’s Private Institutional Law 13th ed., London 1999, p. 67-68; REED L., ‘Mixed Private and Public International Law Solutions to International Crises’ in: Recueil des Cours 2003, vol. 306, p. 180410, at 229.

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Christa Roodt to adopt whole-scale every intricate procedural rule of another state, even if that state’s law applies to the substance of the dispute in hand. The South African prescription regime3 resembles that of civil law systems.4 On the expiry of the prescription period, the right itself is extinguished. The judicial remedy is not merely barred. This is the position in terms of the 1969 Prescription Act, which did not change the underlying conflict rules. The UK Foreign Limitation Periods Act, 1984 has no South African equivalent; in fact, no legislation exists to deal with foreign limitation periods. Case law is the primary source of law in this area. In cases where South African courts proceeded to formulate decisions on the basis that a foreign statute of limitations is procedural,5 the implications of extending the notion and scope of ‘procedure’ left them seemingly unperturbed. The exclusion of the lex causae on account of the lex fori’s refusal to budge or withdraw, and the resulting variance between fora, caused little concern.6 From a choice of law perspective, it may be asked how effective7 such an approach can be, or what good is gained if the court is oblivious to the escape it offers. Adjudication may have turned out more satisfactory where the courts decided that the prescription period related to substance and that the lex causae8 governed. Nonetheless, even in these instances an alternative classification strategy known as the via media has caused legal argument to be overstated. The via media formula dates from the 1950s, when Falconbridge managed to give his idea about classification definite shape. The court makes a tentative or provisional classification and then finds out what the content is of ‘each of the … laws which may be the proper 3 The South African Prescription Act 68 of 1969 provides for a short extinctive prescription operating upon a wide range of obligations other than delictual and quasidelictual obligations in s 11(d). Both the shorter and the longer prescription extinguish the obligations. S 10 (1) of the 1969 Act replaced s 3(1) of the Prescription Act 18 of 1943, which rendered a right of action unenforceable. 4 Compare with s 23A of the Prescription and Limitation of Actions (Scotland) Act, 1973; ANTON A.E./BEAUMONT P.R., Private International Law 2nd ed., 1990, p. 302. See generally the remarks of the India Law Commission Transnational Litigation – Conflict of Laws – Law of Limitation 193rd Report, June 2005, available on , p. 20, 35. 5 For example Laconian Maritime Enterprises Ltd v Agromar Lineas Ltd 1986 (3) SA 509 (D) at 518-521; Minister of Transport Transkei v Abdul 1995 (1) SA 366 (N) at 369F-G; Society of Lloyd’s v Price and Lee a quo 2005 (3) SA 549 (TPD) § 31 at 559G and § 37 at 563E; Society of Lloyd’s v Romahn 2006 (4) SA 23 (CPD) § [75] at 50F. 6 WHINCOP M.J./KEYES M. (note 2), p. 15, 31 footnote 16. 7 Ibid., p. 97. 8 Kuhne & Nagel AG Zurich v APA Distributors (Pty) Ltd 1981 (3) SA 536 (WLD) at 539D-E; Laurens v Von Höhne 1993 (2) SA 104 (W) at 121D-F; Society of Lloyd’s v Romahn 2006 (4) SA 23 (CPD) § [78] at 51F-G; §§ 87-89 at 54A-G; Society of Lloyd’s v Price; Society of Lloyd’s v Lee [2006] JOL 17577 (SCA) § [31] at 18. The via media is merely referred to in passing in Society of Lloyd’s v Price and Lee a quo 2005 (3) SA 549 (TPD) at 560F-I, and a policy approach was preferred in Society of Lloyd’s v Romahn § [73] at 50D.

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A Wider Vision in Choice of Prescription Law law’ before making a final selection.9 The via media teaches us to consider the nature, scope and purpose of foreign rules in their context. In the most recent Lloyd’s cases, Lloyd’s had instituted separate claims for provisional sentence against different names. Default judgments had been obtained against them in the Queen’s Bench Division of the High Court of Justice in London for non-payment of the so-called ‘equitas premium’.10 This premium was payable by all members who did not accept the settlement of claims under Lloyds’ 1993 Reconstruction and Renewal Plan. The names were resident in South Africa and Lloyd’s sought to enforce the judgments in South Africa. Each defendant had entered into a General Undertaking with Lloyd’s that contained both a choice of law clause (i.e. that the Undertaking shall be governed by and construed in accordance with the laws of England) and a choice of venue clause (i.e. that the courts of England shall have exclusive jurisdiction to settle any dispute arising from or relating to Lloyd’s membership or the underwriting of insurance business). In broad terms, the judges saw the requirement that matters of procedure be determined in accordance with the lex fori as belonging to English law; prescription as a procedural matter under the English Act and the forum as precluded from applying aspects of foreign procedural law.11 The 1969 South African Prescription Act effectively renders the substance/procedure dichotomy false. Nonetheless, the essential harmony embodied in this internal classification was not spared a second thought in these cases. Legal argument was a conceptual muddle12 of untested assumptions, unsolved dilemmas and justifications either evaded or simply overlooked. Paradoxically, the basic ability of the judiciary to classify lies at the root of the difficulty. Those who were supposed to direct the application of the knowledge concerning classification fell under its direction instead.

FALCONBRIDGE J.D., ‘Conflict Rule and Characterization of Question’, in: Canadian Bar Review 1952, p. 264 at 266; FALCONBRIDGE J.D., Essays on the Conflict of Lawsi, 2 ed., Toronto 1954, p. 59-60. 10 In the Price and Lee cases, judgment was obtained in 1997, and in the Romahn case, the judgments were obtained between 1997 and 2004. 11 Society of Lloyd’s v Price; Society of Lloyd’s v Lee 2005 (3) SA 549 (TPD) at 563G-H; Society of Lloyd’s v Romahn 2006 (4) SA 23 (CPD) §§ [30], [31], [32], [73], [76] and [77]; Society of Lloyd’s v Price; Society of Lloyd’s v Lee [2006] JOL 17577 (SCA) § [11], [22]. Counsel relied on similar reasoning in Laurens v Von Höhne 1993 (2) SA 104 (W) at 118A-118B (with inaccurate reference to Kuhne & Nagel AG Zurich v APA Distributors (Pty) Ltd 1981 (3) SA 536 (WLD) at 537-8). Some of the flaws of this type of argument have been spelt out by COOK W.W., ‘«Characterization» in the Conflict of Laws’ in: Yale Law Journal 1941, p. 191 at 199. 12 COLLINS L. (Gen. Ed.), Dicey and Morris: The Conflict of Laws, Vol 1, 13th ed., London 2000, § 2-034, p. 42 refers to ‘mere conceptualism’. 9

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II.

‘Inflation of Knowledge’

There is nothing wrong with the kind of knowledge that classification brings to Private International Law; in fact, there is much to commend classification in its modern form, as it represents a distinct improvement on the difficulties created by the statutist doctrine. However, knowledge can also lead to self-deceit if the eye that looks at it, fails to see beyond itself, or if it seizes hold or mesmerizes the one utilizing it.13 Over the last twenty odd years, ever since Laconian Maritime Enterprises v Agromar Lineas, the courts have considered themselves both constrained to ignore the procedural rules of time limits of foreign legal systems, and unable to apply the corresponding domestic rules that are substantive in effect. The argument is that whereas the lex fori is substantive, the English limitation law, being the law of the underlying contract, is procedural, yet South African law governs only procedure and English law governs only substance.14 Scholastic disputations of ‘strict logic’ suggest that neither legal system applies to determine the time limits within which actions must be instituted and foreign judgments enforced, and that a ‘gap’ exists.15 A ‘gap’ results from the situation where no rule from either the lex fori or the lex causae, classified by the legal system from which it comes, is applicable.16 Cook ascribes ‘gap’ to misused verbal symbols in certain contexts;17 Dicey consigns NUSSBAUM A., Principles of Private International Law, New York 1943, p. x noted that the occasional use of non-legal data, including psychological explanations, may foster a more realistic approach to Private International Law. Psycho-analyst, Carl Gustav Jung observed that the phenomenon of inflation is not specific to psycho-analysis, but occurs whenever one is overcome by new knowledge or some new realisation. Jung warns against a new realisation seizing one’s thinking and preventing one from seeing and hearing anything else. He describes this phenomenon as an unpleasant consequence of ‘greater awareness’. See JUNG C.G., Two Essays on Analytical Psychology Collected Works Volume 7, London 1953 § 243 at p. 154. A closer look is taken at this phenomenon in the context of classification in the Lloyd’s cases under III below. 14 Society of Lloyd’s v Romahn 2006 (4) SA 23 (CPD) at (§ [30] at 35F and § [31] at 35H-I); Society of Lloyd’s v Price and Lee a quo 2005 (3) SA 549 (TPD) at 563G-H; Society of Lloyd’s v Price; Society of Lloyd’s v Lee [2006] JOL 17577 (SCA) §§ [21]-[22]. 15 In Laconian Maritime Enterprises Ltd v Agromar Lineas Ltd 1986 (3) SA 509 (D) at 524A-E, for instance, Booysen J. was soon convinced that a dilemma had arisen. He referred to DICEY A.V./MORRIS J., The Conflict of Laws 10 ed., 1980, p. 1181 and FORSYTH C., ‘Extinctive Prescription and the Lex Fori. A New Direction?’ in: South African Law Journal 1982, p. 16 ff. For other examples, see Society of Lloyd’s v Price; Society of Lloyd’s v Lee 2005 (3) SA 549 (TPD) at 563G-H; Society of Lloyd’s v Romahn 2006 (4) SA 23 (CPD) § [38], § [73] at 50D. Judge van Zyl proposed a ‘residual lex causae’ approach to resolve the gap (§ [32] at 36D-E; § [77] at 51D); Society of Lloyd’s v Price; Society of Lloyd’s v Lee [2006] JOL 17577 (SCA) § [22]. 16 FORSYTH C., ‘«Mind the Gap»: A Practical Example of the Characterisation of Prescription/Limitation Rules’, in: Journal of Private International Law 2006, p. 169, 173. 17 COOK W.W. (note 11), p. 198. 13

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A Wider Vision in Choice of Prescription Law ‘gap’ to the realm of illusion18 but South African courts and scholars treat it as very real. In the Price and Lee case,19 the Supreme Court of Appeal decided to resolve it by application of English law, the lex causae. It did so based on ‘policy considerations’ underlying the relevant rule, but these considerations were neither declared nor ascertained. A policy approach was also preferred in other cases but it has never been defined.20 The intermediate or alternative streams21 of classification are supposed to provide insights that prevent cumulation and gap from having detrimental effects, but whether the risk of cumulation or gap is caused by conflict of laws processes or by the way in which the domestic law interprets its rules was not discussed in any of the Lloyd’s cases. ‘New knowledge’ of the middle way occluded the rationale that underlies the idea that the forum follows its own procedural law in matters, such as service of process, pleadings and evidence and ultimately, of the substance/procedure dichotomy.22 In traditional multilateralist doctrine, pre-formulated conflict rules assign relationships on the basis of a class and a connecting factor based on factual circumstances or a legal concept.23 However, the basis of the substance/procedure dichotomy is dissimilar. Forum judges find it easy to utilise COLLINS L. (note 12), § 2-043, p. 45. Society of Lloyd’s v Price; Society of Lloyd’s v Lee 2005 (3) SA 549 (TPD). 20 In Laurens v Von Höhne 1993 (2) SA 104 (W) at 121E, Schutz J. explained that his decision to have recourse to the foreign law was the result of having followed the via media based on policy. He did not so much as take a second look at the scope or breadth of ‘procedural issues’ as a category. Mynhardt J. was the only judge to have expressed his reluctance to follow the example of a policy decision as adopted by Schutz J. in the Laurens case, but his reluctance was due to his conviction that a gap existed in the case before him whereas both the lex fori and lex causae treated prescription as a matter of substance in the Laurens case (see Society of Lloyd’s v Price and Lee a quo 2005 (3) SA 549 (TPD) at 563F). In general KAHN-FREUND O., General Problems of Private International Law Leyden 1976, p. 231-232. 21 I.e. the via media and enlightened lex fori approaches as alternatives. 22 Balduinus (see LIPSTEIN K. (note 1)) thought that the differences in the nature of legal rules justify their application in space. COOK W.W. (note 11), p. 200 states simply that no court can undertake to follow the rules of foreign courts in these instances. In Tolofson v Jensen [1994] 3 SCR 1022, the Canadian court distinguished between rules that make the court machinery run smoothly and rules relating to the determination of both parties’ rights (at 1071-2). In John Pfeiffer Pty Ltd v Rogerson (2000) 172 ALR 625 at 651 the Australian court relied on the distinction between ‘rules which are directed to governing or regulating the mode or conduct of court proceedings’ and other provisions, as Mason CJ did in McKain v RW Miller & Co (SA) Pty Ltd (1991) 174 CLR 1 at 26-27. TILBURY M./DAVIS G./OPESKIN B., Conflict of Laws in Australia, Oxford 2002, p. 332 emphasise that expedience and the efficient and expeditious conduct of litigation justify the dichotomy, the relevant question being how far the forum court may go in applying the rules of the foreign legal system without unduly inconveniencing itself. 23 BENNETT T.W. Customary Law in South Africa, Lansdowne, 2004, p. 142. CORBETT M.M., ‘The Zambian Trust: An Opinion Revisited’ in: Tydskrif vir SuidAfrikaanse Reg 1993 p. 1, 5. 18 19

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Christa Roodt rules that aid the forum court to ‘administer [its] machinery as distinguished from its product’24 since they understand these rules, whereas a foreign judge may not be able to make sense of them. Australian and Canadian courts are sensitive to language depicting that the subject derives from what the court finds convenient, and consequently, are freer to adjust the scope of the categories of the substance/procedure dichotomy. In South African courts, however, getting down to rationale is difficult given the ‘dense verbal smog’25 kicked up by debates covering not only the doctrinal26 and alternative streams27 of classification, but also theories concerning the object of classification;28 the dangers of secondary classification; the causes of ‘cumulation’ and ‘gap’29 and ways of overcoming the problems caused by these phenomena. Concerned with how to prevent claims from remaining perpetually enforceable, whether by means of ad hoc decisions (as South African courts have done in other cases30) or otherwise,31 the assumption underlying ‘gap’ is easily overlooked. The assumption entails that classification involves a choice of law.

24 Per Lusl LJ in Poyser v Minors (1881) 7 Q.B.D. 329 at 333; See, in general, India Law Commission Report (note 4), p. 18. 25 Expression borrowed from COOK W.W. (note 11), p. 191. 26 I.e. lex fori classification, lex causae classification and creating a new language of independent universal concepts built on comparative sources. 27 I.e. the via media and enlightened lex fori approaches as alternatives. 28 See, for instance, FORSYTH C. (note 16) p. 169, 172, n. 16; FORSYTH C., ‘«Mind the Gap Part II»: The South African Supreme Court of Appeal and Characterization’, in: Journal of Private International Law 2006, p. 425, 426 (hereafter ‘Mind the Gap Part II’); FORSYTH C. (note 2), p. 70; EDWARDS A.B./KAHN E. (note 2), § 285 n 9; NEELS J.L., ‘Recent Developments in Private International Law 1993-2000’ RAU Legal Update, 30 November 2000, available on at 2; SCHULZE C., ‘Formalistic and Discretionary Approaches to Characterization in Private International Law’, in: South African Law Journal 2006, p. 161, at 173 and 176. 29 Forsyth observes that the problem of gap arises before a South African court whenever the lex causae has procedural prescription rules. See FORSYTH C. (note 2), pp. 7576; FORSYTH C. (note 15), p. 16; FORSYTH C. (note 16), p. 178. Contrast ALLAROUSSE V., ‘A Comparative Approach to the Conflict of Characterization in Private International Law’, in: Case Western Reserve Journal of International Law 1991, p. 479 at 510, who states that all conceptual methods of classification create the risk of cumulation and gap. 30 Laconian Maritime Enterprises Ltd v Agromar Lineas Ltd 1986 (3) SA 509 (D) at 524E-G, 530J; Minister of Transport Transkei v Abdul 1995 (1) SA 366 (N) at 369F-G; Society of Lloyd’s v Price and Lee a quo 2005 (3) SA 549 (TPD) at § [38]. In Society of Lloyd’s v Romahn 2006 (4) SA 23 (CPD) ad hoc solutions were explicitly rejected (see at § [79] at 52A; § [86] at 53H-I; § [87] at 54B). See, in general, KAHN-FREUND O. (note 20), p. 232; NEELS J.L., ‘Tweevoudige Leemte: Bevrydende Verjaring en die Internasionale Privaatreg’, in: Tydskrif vir Suid-Afrikaanse Reg 2007, §§ [11] and [12] at p. 182-183. 31 In Society of Lloyd’s v Romahn 2006 (4) SA 23 (CPD), compeçage (note 42) was implicitly rejected at § [86]. NEELS J.L (note 30), §§ [9] and [12] at pp. 181-183.

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A Wider Vision in Choice of Prescription Law The risks of inflation include losing the ability to see or hear anything else.32 The call of Comparative Law33 may fade into the background; and comparative trends may be afforded ever more superficial and perfunctory treatment.34 A closer look at classification in the cases under discussion reveals other consequences of inflation.

III. A Closer Look at Classification in the Lloyd’s Cases In English law, judgments founded in contract are subject to a six-year limitation period under the Limitation Act of 1980 whereas in South African law judgments debts are prescribed after 30 years under the South African Prescription Act of 1969. In the Romahn case35 as well as the Price and Lee cases, the plaintiff took judgment in English courts more than three, but less than six years, prior to effecting, on the defendants, service of the South African provisional-sentence summons issued on the strength of such judgments. Thus the claims were alive under both legal systems.36 The trial court was particularly eager to stress that if s.24 of the English Limitation Act of 1980 were to be applied, the claims on the judgments would not be statutorily prescribed but application of the three-year prescription period of s 11(d) of the South African Prescription Act 68 of 1969 would mean that the claims had prescribed.37 In fact, no real conflict presented itself. In their haste to

JUNG C.G. (note 13), § 243 at p. 154. On the importance of comparative study in choice of law, see SUNDSTRÖM G.O.Z., Three Discussions on the Conflict of Laws: Theory and Comments on Fundamental Principles, Stockholm, 1970, p. 9; FORSYTH C., ‘The Provenance and Future of Private International Law in South Africa’ in: Tydskrif vir Suid-Afrikaanse Reg 2002, p. 60, at 67; KROPHOLLER J., ‘Die vergleichende Methode und das internationale Privatrecht’, in: Zeitschrift für Vergleichende Rechtswissenschaft 1978 (77), p. 1 et seq. 34 In Society of Lloyd’s v Price; In Society of Lloyd’s v Price and Lee a quo 2005 (3) SA 549 (TPD), Mynhardt J considered how English law classifies statutes of limitation yet no evidence was heard on the direction developments are taking in common law jurisdictions. In Society of Lloyd’s v Price; Society of Lloyd’s v Lee [2006] JOL 17577 (SCA), one German case was alluded to (at § 22 p. 12-13) and the judge referred to the applicability of the 1980 Rome Convention on the Law Applicable to Contractual Obligations in EU countries and the movement away from a dual (‘either/or’) classification in common law countries (at § 29 p. 16). However, no in-depth comparative analysis was conducted. 35 Society of Lloyd’s v Romahn 2006 (4) SA 23 (CPD). 36 See counsel’s argument in Society of Lloyd’s v Price; In Society of Lloyd’s v Lee a quo 2005 (3) SA 549 (TPD) at 562A. 37 At 560A-B. 32 33

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Christa Roodt overcome the dilemma of ‘gap’ once and for all, the bench never even realised that no real choice of law arose in the Lloyd’s cases. There was little doubt in the mind of Judge Mynhardt at trial that, even where the rule of the foreign procedural law concerned would pose no inconvenience to the court, it would be incorrect to apply it. He applied the South African Prescription Act 68 of 1969 and dismissed the claims as prescribed.38 Preconceptions about categories were not supposed to have any place in the courts’ vision.39 However, the riddle had to be solved. In the Romahn and last Price & Lee cases the judges were intent on locating the via media to lead them out of the conceptual maze. The conviction that operates is that via media classification is ‘the only way’ open to South African courts.40 The more furtive the search, the sooner systems shut down. In Romahn, English law was found to be the proper law of the contract and the system most closely connected with the underlying cause of action.41 While this fact was seen as the reason why the matter of the prescription term had to be dealt with in terms of the English prescription law, the judge failed to explain that this was perfectly logical and fully justifiable on the basis of ‘compeçage’ (as opposed to dépeçage).42 He dwelt on classification instead, deeming it essential to adopt a strained via media approach.43 The court’s interpretation was that it was duty-bound to apply the internal English category. Strain was evident first from the argument that both the lex fori and the lex causae had to be taken into account in considering which prescription regime governed the claims against the defendants. It was also evident from the argument that the ‘rule of English law’ that procedural matters are to be governed by the lex fori had to be critically assessed before it could be applied to the facts of the case.44 The first premise is problematical in as far as it implies that the court’s freedom becomes limited.45 The second premise does not hold either. English law does At 564C. In Society of Lloyd’s v Price; Society of Lloyd’s v Lee [2006] JOL 17577 (SCA) § [28], Van Heerden A.J. referred to the artificiality of the traditional distinction between extinctive and remedy-barring statutes of limitation. In Society of Lloyd’s v Romahn 2006 (4) SA 23 (CPD) § [83] at 53A, Van Zyl J. criticises ‘artificial attempts to fit an issue into a «prefabricated» or preconceived form or structure’. 40 This conviction was displayed in Society of Lloyd’s v Romahn 2006 (4) SA 23 (CPD) § [84] at 53B-C; Society of Lloyd’s v Price; Society of Lloyd’s v Lee [2006] JOL 17577 (SCA) §§ [14], [26]. 41 Society of Lloyd’s v Romahn 2006 (4) SA 23 (CPD) at § [89] at 54F. 42 Parties practise dépeçage or dismemberment when different laws apply to different parts of an agreement or different legal issues arising in the dispute because the choice of law rules covering various aspects refer to different legal systems. The opposite of dépeçage would be to conjoin different legal issues arising in a dispute for purposes of identification of the choice of law rule (the new term ‘compeçage’ may be appropriate in this regard). 43 Society of Lloyd’s v Romahn 2006 (4) SA 23 (CPD) at § [84] at 53B-C. 44 Society of Lloyd’s v Romahn 2006 (4) SA 23 (CPD) at § [84] at 53B-D. 45 Infra text accompanying notes 83-85. 38 39

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A Wider Vision in Choice of Prescription Law not own, nor can it appropriate the wide-spread practice that the forum follows its own procedural law (lex fori). If a ‘critical look’ at the rule precludes aspects of foreign procedural law from application by the forum at the outset, critique has little chance of uncovering fresh insights. Judge van Zyl argued, furthermore, that since the matter of prescription was substantive in the lex fori but the defendants have agreed that the proper law of the contract was English law, the defendants could not have contemplated the extinction of the claims against them. Had they known that limitation provisions in the lex fori would not be procedural, they would have qualified the rule of English law to read that prescription issues should revert to the lex causae where they are classified as substantive in the lex fori.46 Justice, fairness, reasonableness and policy considerations dictated reverting back to the lex causae.47 What he meant by ‘policy considerations’ was not explained, but a new rule was laid down to enable the judge to recognise the claims as legally alive under English law.48 The Supreme Court of Appeal49 upheld the appeals against Mynhardt J’s trial court judgment and casually dismissed a single law approach based on the broadening of categories (compeçage) as ‘self-defeating’. The reasoning closely resembled van Zyl J.’s reasoning on the ‘gap’ as occurring because the forum cannot apply aspects of foreign procedural law. Upon noticing potential conflict between the legal systems concerned, Van Heerden AJ resorted, predictably so, to classification to help her decide whether or not the claim had been time-barred. This conflict triggered the steps associated with via media classification of Laurens NO v Von Höhne50 and elicited commendations for Van Zyl’s efforts to develop the via media approach.51 It was on this basis that the court eventually settled for the limitation provisions of English law.

IV. In Need Of A Wider Vision The formation of a mature discipline does not shut it out from the world. It gathers the world unto itself.52 In the Lloyd’s cases, the conceptual device of the via media Society of Lloyd’s v Romahn 2006 (4) SA 23 (CPD) at § [76] at 51C. Society of Lloyd’s v Romahn 2006 (4) SA 23 (CPD) at §§ [85], [86] at 53E-H. 48 The rule formulated in § [86] is an ad hoc rule that does not lend itself to easy classification in terms of either compeçage or dépeçage. 49 Society of Lloyd’s v Price; Society of Lloyd’s v Lee [2006] JOL 17577 (SCA). 50 Society of Lloyd’s v Price; Society of Lloyd’s v Lee [2006] JOL 17577 (SCA) at §§ [14]-[17.3]. 51 Society of Lloyd’s v Price; Society of Lloyd’s v Lee [2006] JOL 17577 (SCA) at § [32]. 52 Image borrowed from JUNG C.G., The Structure and Dynamics of the Psyche Collected Works, Vol 8 (translated by R.F.C. Hull), London 1960, § 432 at p. 226 where he 46 47

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Christa Roodt seems to have operated both as a cause of the under-utilisation of a comparative ethos and as a consequence of misdirected comparison. In as far as classification serves as a corrective for an over-generalised formula, it constitutes a pseudoproblem.53 Pre-occupation with pseudo problems makes it hard to listen to what another discipline has to offer, or to calculate jurisprudential costs resulting from failing to test assumptions. The tendency to overwork one method to the exclusion of the bigger picture does not support the emancipation of the discipline. The conviction that via media classification is ‘the only way’54 amounts to methodological ‘fundamentalism’ and raises concerns that are bound to cloud a court’s vision. It is simply too much to ask of a conceptual device to offer any final solution to problems that arise at a conceptual level. Not only does it conflate purpose and method in choice of law; the conceptual also does not offer a substitute for the practical. Forum shopping would cease if the foreign limitation period were to be applied in each case, even if an action was to have been filed in another country. The surface argument that a statute of prescription pertains to procedure but not to substance ignores the implications of forum shopping; a mere distinction between barring the remedy and extinguishing the right should not of itself lead to the conclusion that its law of limitation must be classified as procedural. It is worth pondering that treating the law of limitation of another country as procedural makes it easier for the forum to justify ignoring those rules and ultimately promotes forumshopping; and if forum law always governs prescription, parties are bound to file suits in states with long limitation periods.55 The ultimate goal of Comparative Law is the study of the relationship of one legal system and its rules with another. It displays a bias in favour of international legal uniformity. The ultimate goal of Private International Law, on the other hand, is to support the orderly co-existence of distinct legal systems as a neutral co-ordinating framework. The measure of the realisation of this goal is found in the extent of international decisional harmony. Classification and its alternatives are also predicated on international decisional harmony. However, harmony is possible without wholescale unification of legal concepts, choice of law rules or even without a universal new language built on comparative sources for purposes of classification. Even classification lege fori does not rule out international harmony of decision altogether! The legal categories applied in English cases prove the point, but they do not necessarily coincide with the domestic classifications of English law. South African courts are not duty-bound to develop the common law of classification. Classification is a contingent path. If classification is treated as ‘an declared: ‘[i]ndividuation does not shut one out from the world, but gathers the world to oneself’. 53 See EHRENZWEIG A.A., ‘Choice of Law: Current Doctrine and «True Rules»’, in: California Law Review 1961, p. 240 at p. 245. 54 See note 40 above. 55 Cf. India Law Commission (note 4), p. 26-27. Its recommendation that the Indian Limitation Act 1963 requires amendment is based on this insight.

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A Wider Vision in Choice of Prescription Law independent means of establishing the proper choice of law’ it could become dishonest.56 Moreover, the uncertainties inherent in classification, application of connecting factors and the public policy reservation can undermine international uniformity of result.57 International harmony of decision could result from legislation or a comparative ethos that may inform legislative or common law law reform. The cost and the demands of each of these options differ, but international decisional harmony is as much a function of the relative health of the relationship between Private International Law and Comparative Law, as it is an indicator of the level of harmony with which distinct legal systems co-exist. International decisional uniformity is worth striving for because of the limiting effect it has on forum shopping. It does not help to overreach our grasp, however. Insisting on a universal language understood and embraced by all courts, as Rabel58 did, would be overambitious. But in the absence of the possibility of unification of substantive or applicable law, a clear insight into the social factors that prevent harmony is possible from deeper understanding of legal language.59 The most encouraging part of the Supreme Court of Appeal judgment is where Van Heerden AJ takes her cue from author David McClean.60 She quotes him on the importance of the role of international harmony, language, forum shopping and convenience. It is unfortunate that she leaves the implications of almost all of these aspects to dangle in the air,61 since superficial attention to these vital aspects of the discussion pose the risk that choice of law may lose its footing. 56 Per Booysen J in Laconian Maritime Enterprises Ltd v Agromar Lineas Ltd 1986 (3) SA 509 (D) at 519J. 57 JUENGER F.K., Choice of Law in Multistate Justice, Dordrecht [etc.] 1993, at p. 7174, 86; JUENGER F.K., ‘The Problem with Private International Law’, in: Centro di studi e ricerche di diritto comparato e straniero: saggi, conferenze e seminari, No. 37 (Rome 1999) p. 11, text available online at ; ZEKOLL J., ‘A Review of Choice of Law and Multistate Justice’ in: International Conflict of Laws for the Third Millennium (BORCHERS P.J./ZEKOLL J. eds), Ardsley 2001, p. 9 ff; PETERSON C.H., ‘American Private International Law at the End of the 20th Century: Progress or Regress’ in: SYMEONIDES S.C. (ed.) Private International Law at the End of the 20th Century: Progress or Regress?, The Hague [etc.] 1999, p. 413. 58 Rabel was a proponent of the so-called ‘third school’ of Private International Law, who suggested that courts, in making their initial classification, should have regard to the findings of analytical jurisprudence and comparative law. See RABEL E., ‘Das Problem der Qualifikation’, in: RabelsZ 1931 (5), p. 241 et seq.; RABEL E., The Conflict of Laws: A Comparative Study, Vol. 1, Chicago 1945, p. 49 et seq. 59 Aspects of Cook’s theory on the relativity of meaning or variability of the distinction between substance and procedure, which dates from the 1940s, (e.g. in COOK W.W. (note 11), p. 191) are revisited below. 60 Society of Lloyd’s v Price; Society of Lloyd’s v Lee [2006] JOL 17577 (SCA) at § [27] quoting from MCLEAN D., Morris on The Conflict of Laws, 4th ed., London 1993, p. 386-387. 61 Society of Lloyd’s v Price; Society of Lloyd’s v Lee [2006] JOL 17577 (SCA) at § [12] refers merely to how the via media is supposed to foster international decisional harmony, whereas the judge mentions it in passing in §§ [27], [28] and [31].

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Christa Roodt A.

Pertinent Aspects of the Via Media

Deceived by the belief that classification solves ‘the riddle of the universe’,62 courts and scholars have been selective in what they consider to be the pertinent aspects of Falconbridge’s via media. Some aspects are continually reworked in the case law but crucial aspects are overlooked. Firstly, Falconbridge was not afraid of inviting comparison of concrete rules and concepts. He proposed that the court should compare the two statutes and if they were intended to perform essentially the same function, differences in wording notwithstanding, the court should decide which one is subsumed under the conflict rule of the forum.63 As with the distinction between substance and procedure, the difference between rights and remedies is relativised inter alia by progressive legal developments and the valuable information that comparative law and experience yields about the content of concepts in other legal systems. Comparative Law teaches by the clear examples of compeçage found in the English Contracts (Applicable Law) Act, 1990,64 and in the most recent developments in relation to non-contractual obligations in the European Union.65 American law has seen a shift towards treatment of statutes of limitation as matters of substance, which is seen to neutralise the invitation to forum-shopping extended by a procedural classification.66 In transnational litigation in Canada,67 Australia,68 New ZealJUNG C.G. (note 13) states: ‘[h]ypnotized by [a new realisation], [he] … instantly believes he has solved the riddle of the universe. But that is equivalent to almighty selfconceit.’ 63 FALCONBRIDGE J.D. (note 9 Essays), p. 303-304. 64 Act implementing the European Community Convention on the Law Applicable to Contractual Obligations (1980) in the UK. Art 10 (1) (d) of the Convention states that the law applicable to a contract by virtue of Articles 3 to 6 and 12 of this Convention shall govern ‘the various ways of extinguishing obligations, and prescription and limitation of actions’. See also Art 12g of the Convention on the Law applicable to Contracts for the International Sale of Goods (1986) (not in force). 65 Cf. Article 15 of Regulation (EC) No 864/2007 on the law applicable to non-contractual obligations (Rome II), intended to take effect on 11 January 2009. 66 PETERSEN C.H. (note 57), p. 440. 67 In Tolofson v Jensen [1994] 3 SCR 1022 at 1069, the Canadian court failed to find justification for regarding any limitation rule as procedural even if it does not extinguish the substantive right. LaForest J. stated that ‘the court takes jurisdiction not to administer local law, but for the convenience of litigants …’ at 1070. 68 In Rahim v Crawther 1996 25 MVR 190 the Australian court went through the classification process in detail. However, after the decision of the High Court of Australia in John Pfeiffer Pty Ltd v Rogerson (2000) 172 ALR 625 the actual process of characterisation undertaken in the Rahim case will no longer be necessary. See TILBURY M./DAVIS G./OPESKIN B. (note 22), p. 979. Each State and Territory agreed to enact legislation providing that, ‘if the substantive law of another Australian jurisdiction governs a claim before a Court within the enacting jurisdiction, a limitation law of that other jurisdiction is to be regarded as part of that jurisdiction’s substantive law and applied accordingly.’ The minority judgment of Mason C.J. in McKain v RW Miller & Co (South Australia) Pty Ltd (1991) 174 62

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A Wider Vision in Choice of Prescription Law and69 and the UK,70 the classification detour is avoided. The debate does not go beyond the substantive nature of prescription rules, because regardless of whether prescription rules bar the remedy or extinguish the action, the effect is the same: the plaintiff is precluded from enforcing his/her rights. Falconbridge harboured reservations concerning the value of the distinction between right and remedy, yet these have never featured in any of the cases. Falconbridge observed that judicial discussion of limitation of actions continually resolves itself into a problem of classification71 and criticised the logic of the argument that a particular statute of limitation only affects the availability or otherwise of the remedy. He found it difficult to understand why a rule of law that denies a right of action should ever be construed as procedural and maintained that ‘remedy is a wider concept than procedure’.72 Falconbridge was concerned about functional equivalence, which is an important element of a functional method of Comparative Law. At the surface level, it may help us to conclude that legal systems share a basic common conception of law in a particular area, for instance that prescription rules under South African and English law are dissimilar with regard to the length of time they propose but they are similar in terms of source and in terms of function, i.e. the liberative or extinctive effect they have on claims or judgments. But at this level, differences may also be easily exaggerated. Perhaps Thomas Hobbes had in mind the passing concerns manifesting at the surface of literal language when, in the Leviathan, he spoke about the ‘frivolous Distinctions, barbarous Terms and obscure Language’ of the scholars teaching at universities.73 Falconbridge never mentioned comparison with regard to reasoning or discourse at a deeper level of the comparative endeavour, beyond legislative texts and

CLR 1 has been influential with regard to third states outside Australia. Several state statutes (such as Victoria, New South Wales and Queensland) adopt the position that there is no inconvenience involved in applying the foreign limitation period or the foreign substantive limitation law. 69 New Zealand reformed its law in 1996 and now treats the foreign law of limitation as substantive as part of a pragmatic legislative solution that ensures uniformity and prevents forum shopping. 70 In 1982, in its Report No.114, the British Law Commission concluded that ‘there is a clear case for the reform of the present English rule’, and their recommendations formed the basis of the Foreign Limitation Periods Act, 1984. See India Law Commission report (note 4), p. 21. 71 Turn of phrase borrowed from FALCONBRIDGE J.D. (note 9 Canadian Bar Review), p. 282. 72 FALCONBRIDGE J.D. (note 9 Essays), p. 308. 73 The phrase ‘frivolous distinctions, barbarous terms and obscure language of the schoolmen, taught in the universities’ appears in Part 4 Chapter XLVII in HOBBES T., Leviathan or The Matter, Form and Power of A Commonwealth, Ecclesiastical and Civil, London 1885, p. 311.

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Christa Roodt judicial decisions.74 Beyond the literal level of words and conceptual distinctions, there lies a wider vision of harmony in the light of which the law can evolve. If there is disinterest in adopting a wider vision, the ideal of choice of law degenerates into a passive acceptance of discord among legal systems. Passive acceptance will no doubt render practical solutions to conceptual problems elusive. In 1919 Lorenzen observed that: ‘a right which can be enforced no longer by an action at law is shorn of its most valuable attribute’.75 If a right for which the legal remedy is barred is not much of a right,76 the idea that time limits that affect only remedies are always procedural, is a construct of language. And so it is necessary to concede that to distinguish between rules that destroy remedies and rules that destroy rights is to allow tortuously abstract reasoning to render rights and remedies discrete.77 Barring rights or refusing remedies relates not only to procedure but to both sides of the dichotomy. Both are involved in effectuating the rights and the remedies of parties under substantive law.78 As such, various assumptions beg to be re-evaluated in the light of decisional harmony and in the interest of effectiveness of proceedings. Among these, count the assumption that a word that appears in two or more legal rules necessarily has the same scope. Clearly the purposes for which we use verbal symbols are always of paramount importance79 just as it is vital to test the assumption that a word that appears in two or more legal rules, each having its own unique social, economic or political purpose, necessarily has the same scope.80 Cook’s conviction81 was that one cannot characterize a rule of law in the abstract or for all purposes, whether domestic or international purposes, and that the line that divides one category from another must be drawn with reference to the purposes for which such a line is required. However, even this conviction requires testing, just as the less obvious assumption requires it: a concept used at the domestic and international levels necessarily carries different He remains silent on this point in FALCONBRIDGE J.D. (note 9 Canadian Bar Review), p. 282. Contra LEGRAND P., Fragments on Law-as-Culture, Deventer 1999, p. 5. 75 LORENZEN E.G., ‘The Statute of Limitations and the Conflict of Laws’, in: Yale Law Journal 1919, p. 492 at p. 496. 76 LEFLAR R./MCDOUGAL L./FELIX R., American Conflicts Law, 4th ed., Charlottesville, 1986, p. 349. Van Heerden J.A.’s quote is taken from a secondary source (see note 50), in Society of Lloyd’s v Price; Society of Lloyd’s v Lee [2006] JOL 17577 (SCA) at § [27]. 77 See, in general, WHINCOP M.J./KEYES M. (note 2), p. 97, with reference to Stevens v Head (1993) 176 CLR 433. 78 REED L. (note 2), p. 230. 79 COOK W.W., The Logical and Legal Bases of the Conflict of Laws, Cambridge, 1949, p. 162. Cook argues that it is entirely possible, for instance, to classify all the events of a properly conducted lawsuit (service of process, pleadings, proof, instructions of judge to jury, verdict of jury, judgment) as substantive on account of their giving rise to a substantive obligation (at p. 158); also SCHULZE C. (note 28), p. 171. 80 COOK W.W. (note 79), p. 159, 167. 81 Ibid., p. 154 et seq.; p. 222-223; see, in general, SCHULZE C. (note 28), p. 170-172. 74

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A Wider Vision in Choice of Prescription Law meanings and the line drawn between substance and procedure in the domestic sphere must differ from where the line is drawn in the conflicts sphere. The distinctions drawn in Australian and Canadian cases do not fully reflect this but their adjustment in relation to ‘substance’ elevates them above reproach. The via media offers no definitive solution82 to the dilemmas associated with prescription. That the via media approach also supports a wider vision is clear enough, but it does not necessarily ensure comparative study. In the Lloyd’s cases, the respective prescription policies employed in South African and the UK were not considered. The ‘policy considerations’ of the via media did not elucidate the rationale of the substance/procedure dichotomy either. In the case of classification lege causae harmony of decision becomes unlikely if the concepts of the lex causae are narrowly construed. In the case of the via media, harmony is hindered if only the internal foreign law classification is considered relevant; or if, as in the Romahn83 case, the internal foreign law categories in the potentially applicable systems are given relevance on account of a perceived obligation to do so. There is no escaping a dilemma if the forum strains to adopt the category preferred by the lex causae for its own rules because it considers itself obligated to do so.84 A judge may declare an issue to be one for forum law without taking this to mean that the forum court is restricted to its own domestic notions. The forum court may allow the foreign system’s classification to take on relevance. It is equally free to check how narrowly or broadly a certain category is in forum law applying the forum’s understanding of substance and procedure, as it is free to check this aspect within foreign law applying the foreign system’s understanding of substance and procedure.85 Projecting obligations onto the via media is clearly not the best way in which to co-ordinate different legal systems.

FALCONBRIDGE J.D. (note 9 Canadian Bar Review), p. 282. In Society of Lloyd’s v Romahn 2006 (4) SA 23 (CPD) § [85] at 53E-F, the judge took the choice of law clause to mean that an agreement existed that the rule requiring procedural matters to be dealt with by the lex fori, would apply. Arguably, to interpret a choice of law clause as anything other than a choice of substantive law, or as a connecting factor for purposes of determining the validity of that clause, is to lend it a status it should not have. He also interpreted the via media to mean that both the lex fori and the lex causae had to be taken into account in considering which prescription regime governed the claims against the defendants (§§ [84]-[85] at 53A-G). 84 FALCONBRIDGE J.D. (note 9 Canadian Bar Review), p. 265 adopted the approach that ‘the court which is applying its own conflict rules is not obliged, for the purpose of those rules, to adopt as its own the characterisation of the provision of the foreign law expounded by the foreign experts’. Compare also FALCONBRIDGE J.D. (note 9 Canadian Bar Review), p. 272; COOK W.W. (note 11), p. 199. 85 See TILBURY M./DAVIS G./OPESKIN B. (note 22) p. 985. NEELS J.L. (note 30), § 3 at p. 178-179 and FORSYTH C. (note 16), p. 175-177 both argue that only the internal foreign law classification is relevant in classification lege causae. However, this assumption need not affect the outcome of an international case. 82 83

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Relationship between Comparative Law and Private International Law

The questions of choice of law do not necessarily coincide with questions of conflict of laws (Private International Law).86 The latter has more to do with the coexistence of diverse legal systems than with their national rules for choice of law. ‘Conflict situations’ are unlike ‘choice problems’ in that the disturbing insolubility of the situation confronts the court head-on when choice rules fail to produce a solution.87 When this happens, it is important to lift the veil of legal language, but equally important, to clarity of vision, is to have the right perspective regarding the relationship between Private International Law and Comparative Law.88 It is necessary to steer clear of compartmentalisation and methodological fundamentalism. The under-utilisation of a comparative ethos or disrespect for its fruits in international litigation is indicative of a dysfunctional and troubled relationship, one in which the disease of insularity objectifies Comparative Law and treats it as no more than a tool. A healthy relationship between the two disciplines goes beyond practical utility or information on the content of foreign legal systems. Its best fruits derive from a deeper symbiosis and complementarity, where, on the branches of systematic, critical and evaluative thinking, one finds the fruit of a simple and unencumbered vision. This vision encompasses legal discourse and reasoning, as well as practical common sense solutions. Looked at through a global lens, the choice available in international cases often seems simpler, and reveals whether the approach opted for, remains isolated or is encountered elsewhere.89 Over a period of fifty years, almost all leading writers on Private International Law have highlighted the advantages of treating the foreign law of limitation as substantive. A great many jurisdictions treat it so.90 In this way, rights still in existence in a foreign country are not nullified, and claims that are non-existent at the source are not enforced in the domestic forum. For a South African court, this means that it must apply its own concept of prescription and treat it in accordance with its own domestic law. If the court unskillfully insists on applying a foreign concept of prescription that regards it as a procedural issue,91 the forum will need to 86 LEVONTIN A.V., Choice of Law and Conflict of Laws, Leyden 1976, p. 2-3 draws this distinction. 87 LEVONTIN A.V. (note 86), p. 3. 88 REIMANN M., ‘Comparative Law and Private International Law’ in REIMANN M./ZIMMERMANN R. (eds.), The Oxford Handbook of Comparative Law, Oxford 2006, p. 1363 at 1366; GROSSFELD B., The Strength and Weakness of Comparative Law, Oxford 1990, p. 19 et seq.. 89 GROSSFELD B. (note 87), p. 22 et seq.; KROPHOLLER J. (note 33), p. 1. 90 See the large number of jurisdictions referred to by NEELS J.L. (note 30), § 14.5.3 at p. 185. 91 See, for example, counsel’s argument that the foreign concept of substance be applied in Society of Lloyd’s v Price; In Society of Lloyd’s v Lee a quo 2005 (3) SA 549 (TPD) at 561.

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A Wider Vision in Choice of Prescription Law remedy its own inability to look beyond lopsided language and allow the application of the foreign prescription law on considerations of justice and convenience. This approach allows the underlying structure of domestic law to be mirrored in choice of law and prevents both the gap and forum shopping problems in cases where a real conflict exists.92 Utilising the broadened categories of compeçage displays the same advantages.

V.

Conclusion

South African courts have made little headway in prescription cases in the course of the last 20-odd years. While keen to overcome the distortions of pallid scholastic language, they find themselves unable to withstand the lure of the via media and the temptation to force their hand in its application. The via media contingency offers a helpful tool when available to conflicts lawyers and scholars, but it is not a necessity in the process of reasoning. Comparative Law may not be an absolute requirement either, but the discipline commands vast resources that can help choice of law avoid classification conflicts. The broad co-ordinating framework constituted by Private International Law remains alive to the ideal of international decisional harmony, and Comparative Law offers the resources for its exploration. Legal reasoning and discourse concerning decisional harmony and the phenomenon of forum shopping offer vital insights. A proper perspective on the relationship between the two disciplines can lead courts beyond the din of words and out of the conceptual muddle. However, Comparative Law is more than a tool in some court’s classification programme. It must participate freely, as an equal, in international cases.

92 The belief that one has solved the riddle of the universe may cause forgetfulness that a real conflict is required to exist.

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THE BULGARIAN PRIVATE INTERNATIONAL LAW CODE OF 2005 Christa JESSEL-HOLST∗

I. II.

V.

Introduction Survey of the Bulgarian PIL Code A. Structure and General Features B. The Rules on Conflict of Law 1. General Rules 2. Legal Status of Natural Persons 3. Legal Status of Legal Persons 4. Property Rights and Rights on Intellectual Property 5. Family Law 6. Inheritance Law 7. Contractual Obligations 8. Non-Contractual Obligations C. International Civil Proceedings 1. Scope of Application 2. Jurisdiction 3. Procedure 4. Recognition Other Sources of Bulgarian Private International Law Recent Developments in Connection with Bulgaria’s Accession to the EU A. The Implementation of European Law in Bulgaria B. The Rome Convention Provisions Implementing Hague Conventions

I.

Introduction

III. IV.

Only a few years ago it was said that ‘Bulgarian private international law is not easily accessible, especially to foreigners[, and] is full of gaps.’1 Fortunately, this is no longer true; 2005 marked the first systematic regulation of both the Bulgarian private international law and the law of international civil procedure. In addition, ∗ Dr. iuris, Senior Research Fellow, Max Planck Institute for Comparative and International Private Law, Hamburg. 1 See JESSEL-HOLST C., ‘Current State and Future Perspectives of Bulgarian Private International Law’, in: this Yearbook 2003, pp. 143-153 (144).

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Printed in Germany

Christa Jessel-Holst the Bulgarian Code on Private International Law2 (hereinafter: PIL-Code) is now also available in German.3 Legal literature on the Code is developing.4 This contribution shall give an outline of the Bulgarian reform (infra II), and other sources of Bulgarian private international law will be briefly addressed (infra III). Furthermore, Bulgaria is now a member of the European Union, which raises the issue of how the European law affects the Bulgarian law. Therefore this article continues with a look at the most recent developments, especially the effectivity of the Rome Convention, and a survey of the new Bulgarian provisions for implementing the European law on civil proceedings (infra IV). Finally, this article concludes with a very brief analysis of the Bulgarian implementation of some Hague Conventions (infra V). The pre-codification history of Bulgarian private international law was delineated in the 2003 volume of this Yearbook.5 The recent codification was accomplished through cooperation between the Bulgarian Ministry of Justice and the German Foundation for International Legal Cooperation (IRZ-Stiftung). The draft was written by Bulgarian experts in private international law. To this purpose, a working group was established that included not only leading Bulgarian scholars and practitioners but also international experts,6 both of which have discussed the relevant questions at a number of meetings held in Sofia and Hamburg. In addition, the Max Planck Institute in Hamburg also hosted four distinguished Bulgarian experts in early 2004, resulting in the elaboration of a first draft. It is no exaggeration to state that the Code of 2005 has revolutionized the Bulgarian private international law and the law of international civil proceedings. Like all revolutions, total perfection cannot be expected immediately; rather, subsequent improvements may be necessary, as will be indicated below (infra II 3). Nevertheless, the overall impression is that the Bulgarian lawyers have done an excellent job. The successful completion of the Bulgarian reform is also an encouraging signal for the region, where things have been placed in motion. The most recent

2 Dăržaven Vestnik (Bulgarian legal gazette, hereinafter: DV) 2005 No. 42, as amended by DV 2007 No. 59. 3 See RabelsZ 2007, pp. 457-493. 4 See ZIDAROVA J./STANČEVA-MINČEVA V. [as the two main authors of the conflict of laws rules of the draft law], ‘Gesetzbuch über das Internationale Privatrecht der Republik Bulgarien’, in: RabelsZ 2007, pp. 398-456; MUSSEVA B., ‘Das neue internationale Zivilverfahrensrecht Bulgariens in Zivil- und Handelssachen’, in: IPRax 2007, pp. 256-261; TODOROV T., Meždunarodno častno pravo. Evropejskijat săjuz i Republika Bălgarija, Sofia 2007. 5 See above (note 1). See also JESSEL-HOLST C., ‘Zur Übernahme des Römischen Schuldvertragsübereinkommens in Bulgarien’, in: IPRax 2004, pp. 150-153. 6 The international experts involved were Prof. Dieter Martiny (Europe-University Viadrina, Frankfurt/Oder), Prof. Ulrich Magnus (University of Hamburg), and the author of this contribution.

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The Bulgarian Private International Law Code of 2005 example is the new Macedonian Private International Law Act of 2007.7 Serbia and Croatia are also planning to replace the Yugoslav Private International Law Code of 1982 with new regulations. Also, in Albania a reform of the private international law is under preparation and will hopefully replace the existing 1964 act.

II.

Survey of the Bulgarian PIL Code

A.

Structure and General Features

The Code8 is divided into the following four parts: a) general provisions; b) jurisdiction of the Bulgarian courts and other organs and proceedings upon international civil suits; c) the applicable law; and d) recognition and enforcement of foreign decisions. It consists of a total of 124 articles and became effective on 21 May 2005. Part Three, governing the applicable law, strongly reflects the influence of the European Union. Where the EU influence did not exist, various models were used by the Bulgarian legislator. Bulgarian traditions were retained only as far as they were compatible with the contemporary requirements. For the required modernisation and gap filling, extensive comparative research was done. The result is that the Bulgarian Code now contains many solutions that were shaped after international conventions (especially the Hague conventions), even though Bulgaria was not a member of these conventions.9 Bulgaria has also profited from the legislative experience of Belgium, Italy, Switzerland, and many other European countries. For quite a number of issues, express rules had to be developed for the first time in Bulgaria: specifically the issues of characterisation, remission/transmission (renvoi), mandatory rules, personal status of the legal person, property rights, inheritance, and non-contractual obligations. Where regulations already existed, especially in family law, funda7 Služben Vesnik na Republika Makedonija 2007 No. 87. For details see JESSELHOLST C., ‘Zum Gesetzbuch über internationales Privatrecht der Republik Mazedonien [Introduction and German translation], IPRax 2008, pp. 154-168. 8 Following the French tradition, Bulgarian law makes a distinction between ‘Code’ (kodeks) and the simple lex (zakon). The (rather few) Codes cover a whole area of the law, whereas the scope of application of a simple lex is more limited. 9 Bulgarian membership in the Hague Conference came into force on 22 April 1999. At this moment, Bulgaria is a member to the Hague Conventions on: Abolishing the Requirement of Legalisation for Foreign Public Documents of 1961; the Service abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters of 1965; the Taking of Evidence Abroad in Civil or Commercial Matters of 1970; the Civil Aspects of International Child Abduction of 1980; International Access to Justice of 1980; Protection of Children and Co-operation in respect of Inter-country Adoption of 1993; Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in respect of Parental Responsibility and Measures for the Protection of Children of 1996.

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Christa Jessel-Holst mental changes were made. One striking feature of the PIL-Code is that the right of the parties to choose the applicable law has been extended and is now granted, although within clear limits, in the area of family and inheritance law as well as in non-contractual obligations (party autonomy has of course always applied to contractual obligations). What has been achieved in the end is a well thought out, very convincing set of rules that evidence the high standard of Bulgarian legal science in the field of private international law. Special attention has been paid to making the PIL-Code as user-friendly as possible, since historically the members of the legal profession have had little experience in this particular field of the law. Academic training will also profit from the comprehensive, clear-cut regulation in the Code. Regarding civil procedure, the basic provisions on the recognition and enforcement of foreign judgments were previously found in Articles 303-307 of the Code of Civil Procedure of 1952, whereas Articles 7 and 9 of that Code dealt generally with the jurisdiction of the Bulgarian courts; these provisions have been repealed by the PIL-Code and replaced with a more modern regime. With respect to the Bulgarian courts’ jurisdiction, the provisions on local jurisdiction were previously applied by analogy to the international jurisdiction – now, international jurisdiction has been dedicated its own independent regulation in the PIL Code. On 17 July 2007, a new Code on Civil Procedure10 was enacted in Bulgaria, and the provisions on jurisdiction and international civil suits in the PIL-Code had to be adapted accordingly, insofar as they refer to provisions of the Civil Procedure Code. The PIL-Code has therefore been amended11 (so far, this is the only amendment to the PIL-Code). The changes are, however, only of a technical nature and do not affect the substance of the regulation. The following remarks will bring focus on some of the main aspects of the Bulgarian Code on private international law.

B.

The Rules on Conflict of Laws

1.

General Rules

Article 2 of the PIL-Code emphasizes the closest connection principle as the common basis for all conflict of laws-rules contained in the Code. Therefore, if the applicable law cannot be determined by applying Part Three of the Code, the law of the state to which the relation is most closely connected on the base of other criteria shall be applied (Art. 2). The priority of international treaties is regulated in Article 3. For the first time in the history of the Bulgarian private international law, a comprehensive set of general provisions has been enacted (Articles 39-47). This includes a clear provision on remission (Rückverweisung) as well as transmission 10 11

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The Bulgarian Private International Law Code of 2005 (Weiterverweisung) (Art. 40 para. (1)). Paragraph (2) of Article 40 specifies those case-groups for which referring back to the Bulgarian law or referral to the law of a third state is not accepted, like choice of the applicable law or maintenance. There is also now a provision on the application of (Bulgarian and foreign) mandatory rules in Article 46 of the Code that has been shaped after the Article 16 of the Swiss law and Article 7 of the Rome Convention. Foreign law is determined and applied by the court ex officio. The contents of the foreign law may be determined in different ways. On the one hand, Bulgaria has been a member of the European Convention on Information on Foreign Law of 1968 since the year 1991. On the other hand, information obtained from the Ministry of Justice, experts, and specialized institutions may be used, or the parties may give their support to the court. In the case of a choice of the applicable law, the court may even oblige the parties to assist in establishing its content. The legislature has deliberately refrained from regulating situations where the applicable law cannot be ascertained, leaving these matters for the judge to decide (for details see Articles 43 and 44). The application of a provision of foreign law is prohibited only if the consequences of its application are obviously incompatible with Bulgarian public order. When such incompatibility is found, another appropriate provision from the same foreign law shall be applied; however, if no such provision exists, a provision from the Bulgarian law will be applied if it is needed for the settlement of the dispute (Art. 45).

2.

Legal Status of Natural Persons

For the personal status of natural persons, the principle of nationality still predominates. However, it is now supplemented, and in certain cases even replaced by, the principle of habitual residence. The lex patriae of the person is thus defined as the law of the state of the person’s citizenship. When a person has dual nationality, one of which is Bulgarian, the latter prevails. If a person has two or more foreign citizenships, the law of the habitual residence applies; but, if the person either has no habitual residence or the residence cannot be determined, the closest connection principle applies. Since the concept of habitual residence is new for Bulgaria, the notion has been given a legal definition (see Art. 48).

3.

Legal Status of Legal Persons

The provisions on legal persons are consistent with modern developments. The basic connecting factor is the registration of the legal person, and for branch offices of a legal person, the registration of the branch office (Art. 56). There is a special provision on non-personified entities (that is: associations or organizations without legal personality), which are governed by the law of the state where they are registered or established (Art. 57).

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Property Rights and Rights on Intellectual Property

For property rights, the principle of lex rei sitae prevails. It is also applied for determining whether a thing is considered movable or immovable (Art. 64). There are special rules on transported objects as well as on the means of transport (Articles 67 and 68). A special provision on cultural property that is included in the cultural heritage of a state deserves mentioning. In recent years, Bulgaria, which can look back on a rich cultural heritage even from ancient times, has suffered big losses from illegal excavations and export of cultural values. Clear and strict rules on the applicable law may facilitate the return of such values to the country of origin (Art. 70). It is also remarkable that Bulgaria has a whole set of provisions on intellectual property rights (Articles 71-74) that bear comparison with the best regulations in Europe. Article 71 para. (1) should be interpreted so as to make applicable the law of the state ‘for’ which protection is sought, as in Article 8 of the Rome II regulation.

5.

Family Law

International family law has been thoroughly modernized. Unilateral provisions regulating only the legal status of Bulgarian citizens and the application of the Bulgarian law are no longer used. The scope of application of the principle of favor has been enlarged (see especially Art. 83 on descent, Art. 85 on relations between parents and children, and Art. 87 on maintenance). The new regulation is also more comprehensive than its predecessor. The conditions of marriage are defined for each future spouse by his/her lex patriae. Impediments to marriage that are contained in the applicable foreign law but are, according to the Bulgarian law, incompatible with the freedom of marriage may be ignored by the Bulgarian registrar (Art. 76). The personal relations of spouses are governed by the common lex patriae of the spouses, and if their citizenship differs, by either the law of the state where their common habitual residence is located or the law of state with which both spouses are the most closely connected (Art. 79 para. (1) and (2)). With regard to matrimonial property, the same regime applies; but here, the spouses may choose the applicable law if such choice is permitted by the law determined in accordance with para. (1) and (2) of Art. 79. A caveat, however, is that the choice must be permitted by the applicable law – this is explained by the fact that the Bulgarian Family Code as yet does not provide for matrimonial property agreements. The authors of the PIL-Code did not want to anticipate the (necessary) reform of Bulgarian family law and have left the introduction of such agreements to a future Family Code. There is also a provision on protection of third parties in the case of a choice of law (for details see Articles 79-81). For divorce, the lex patriae of the spouses at the time of filing applies. If their citizenship differs, the law of the common habitual residence applies or, as the last resort, Bulgarian law. If the applicable foreign law does not allow divorce 380

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The Bulgarian Private International Law Code of 2005 and there is a strong connection with Bulgaria, Bulgarian law will be applied (for details see art. 82). Adoption is now regulated in the PIL-Code; the pertinent provision, Art. 84, is based on the principle of nationality and supplemented by provisions of the Family Code that have remained effective (see infra III). The provisions on maintenance (Articles 87 and 88) evidence the influence of the Hague Convention of 1973 on the Law Applicable to Maintenance Obligations, although Bulgaria is not a member of this convention.

6.

Inheritance Law

For the first time in Bulgaria, the law applicable to inheritance is determined by the law. A distinction is made between succession of movables and immovables. For movables, the law of the habitual residence of the decedent at the moment of his/her death applies, whereas the succession of immovables is determined by the lex rei sitae (Art. 89 para. (1) and (2)). However, the decedent may choose to have his entire succession settled by the law of the state of his citizenship at the moment of death. Such a choice has no impact on the reserved portion (zapazenata čast) defined by the law applicable under para. (1) and (2). Article 90 para. (2) regulating a will’s formal requirements has been modelled after the Hague convention on the conflict of laws relating to the form of testamentary dispositions of 1961, of which Bulgaria is not a member.

7.

Contractual Obligations

Chapter Ten on contractual obligations constitutes the third attempt12 (!) at transposing the Rome Convention into the Bulgarian law. It must be pointed out that as of 15 January 2008, Bulgaria has finally become a member to that convention (see infra IV 2). In the future, the Rome Convention shall be replaced by the Regulation on the law applicable to contractual obligations (Rome I), which is currently in the process of being adopted.

8.

Non-Contractual Obligations

From 11 January 2009, Regulation (EC) No. 864/2007 on the law applicable to non-contractual obligations (Rome II)13 will apply directly in Bulgaria. Chapter Eleven of the PIL-Code on non-contractual obligations was already modelled on the draft of the Rome II Regulation.

12 13

See infra, IV 2. OJ L 199, 31.7.2007, pp. 40-49.

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International Civil Proceedings

1.

Scope of Application

The practical significance of the pertinent provisions of the PIL-Code has been diminished considerably by the effectivity in Bulgaria of European regulations in this field of the law (see infra IV 1).

2.

Jurisdiction

The jurisdiction of the Bulgarian courts and other bodies is regulated in Chapter Two. According to the general rule contained in Article 4 para. (1), Bulgarian international competence exists if a) the defendant has his habitual residence, the seat as per his articles of association, or the location of his de facto administration in Bulgaria or b) the plaintiff or applicant is a Bulgarian citizen or a legal person registered in Bulgaria. The concept of a general and unlimited competence based on the domestic nationality of the plaintiff or his registration within the country was preserved from the previous law contained in the Civil Procedure Code of 1952; this concept is certainly contradictory to the European law, which will limit the scope of application of Article 4 Para. (1) Lit. 2 considerably.14 There are also a large number of specific rules on Bulgarian international competence that cannot be dealt with here in detail. Both their compatibility and incompatibility with EU-law has been discussed in a recent publication.15 In cases expressly mentioned in the law, Bulgarian courts have exclusive international competence (Art. 22). The international competence of the Bulgarian courts is examined ex officio (Art. 28).

3.

Procedure

Chapter Three consists of ten articles regulating evidence, service of documents, and legal assistance etc. Article 29 clarifies the fact that proceedings before Bulgarian courts are subject to Bulgarian law. Under the old regime, Bulgaria did not respect an earlier issued foreign lis pendens;16 this has fortunately been changed. According to Article 37 of the PIL-Code, the Bulgarian court shall ex officio suspend its proceedings if those proceedings are between the same parties, based on the same grounds, for the same claim as an earlier procedure initiated before a foreign court, and if the foreign procedure is expected to end in a sensible term with a final decision that can be recognized and enforced in Bulgaria.

In this context see MUSSEVA B. (note 4), p. 258 et seq. See MUSSEVA B. (note 4), p. 259. 16 See Article 9 para. (4) of the Civil Procedure Code of 1952. 14 15

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The Bulgarian Private International Law Code of 2005 4.

Recognition and Enforcement of Foreign Decisions

The most striking novelty contained in Chapter Twelve is that Bulgaria has abolished the reciprocity-requirement for the recognition of foreign decisions (see Article 117 on conditions for recognition). Again, this is a big step forward (which has by the way been copied by Macedonia in its 2007 PIL-Codification). The mechanism for recognizing foreign decisions is new and has led to problems with application in legal practice. The reason for this uncertainty lies in the fact that the recognition is treated as a preliminary question and is examined only ‘incidentally’ by the body before which the decision is asserted in some other context. However, for dispute over the conditions for recognition of foreign decisions, a declaratory action may be brought before the Sofia City Court (Art. 118). For the declaration of enforceability of a foreign judgment, the PIL-Code provides for a special procedure before the Sofia City Court (Art. 119).

III. Other Sources of Bulgarian Private International Law Bulgaria has concluded a number of bilateral treaties on mutual judicial assistance, some of which also contain provisions on the applicable law that then prevail over the national law (see also Art. 3 PIL-Code). The PIL-Code itself is supplemented by provisions in a number of other Bulgarian statutes. One prominent example is the Act on international commercial arbitration of 1988.17 There are also regulations concerning the various fields of transport law, securities,18 insolvency law,19 and, also of late, insurance contracts.20 The Act on electronic commerce of 2006,21 which has been drafted in accordance with the EU-Directive 2000/31/EC on electronic commerce, regulates the applicable law in Chapter Five (Art. 19) that went into force on the day of Bulgaria’s accession to the European Union. The chapter XI of the Bulgarian Family Code22 on the law applicable to family law relations with an international element has been repealed, with the exception of provisions on international adoption contained in articles 136 para. (2)-136h; these exceptional provisions were inserted into the Family Code in 2003 DV 1988 No. 60. Articles 563-572 of the Commercial Code, DV 1991 No. 48. 19 Articles 757-760 of the Commercial Code. 20 See articles 244 et seq. of the Code on Insurance regulating the law applicable to insurance contracts within the framework of the European Union and the European Economic Area (DV 2005 No. 103). 21 DV 2006 No. 51. 22 DV 1985 No. 41. 17 18

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Christa Jessel-Holst in connection with the Bulgarian accession to the Hague Convention on Protection of Children and Co-operation in respect of Inter-country Adoption of 1993. There is also Ordinance No. 3 of the Bulgarian Ministry of Justice of 3 September 2003 concerning preconditions and procedures for giving the permission to a foreigner to adopt a Bulgarian citizen23

IV. Recent Developments in Connection with Bulgaria’s Accession to the EU A.

The Implementation of European Law in Bulgaria

As a consequence of Bulgaria’s accession to the EU on 1 January 2007, the European regulations on conflict of laws and civil procedure now apply directly in the Republic of Bulgaria. There has been some discussion of delaying the effectivity of the civil procedures rules in Bulgaria (and also in Romania) by the adoption of protective clauses that would hinder the application of rules, especially on recognition and enforcement of foreign judgments, for a transition period. However, no such clauses have been enacted. Therefore all pertinent European regulations are in force for Bulgaria. Regarding conflict of laws, this means that in Bulgaria the regulation on non-contractual obligations (Rome II) is currently in force and will be effective as of 11 January 2009, soon to be followed by the Rome I Regulation on contractual obligations. Part Seven of the new Code of Civil Procedure in Articles 608-633 contains special provisions regarding the proceedings in civil suits where the law of the European Union applies. This includes implementing provisions for the following regulations: No. 1348/2000 on service of documents in civil and commercial matters, No. 1206/2001 on the taking of evidence in civil and commercial matters, No. 805/2004 on European enforcement orders for uncontested claims, No 44/2001 on jurisdiction, recognition and enforcement of judgments in civil and commercial matters (Brussels I), No. 2201/2003 on jurisdiction, recognition, and enforcement of judgments in matrimonial matters and matters of parental responsibility (Brussels II), and also already for the regulation No. 1896/2006 on the European order for payment procedure. There is also a special chapter now in the Civil Procedure Code on the preliminary ruling procedure before the European Court of Justice (Articles 628-633). The Bulgarian parliament has also enacted a special act that regulates legal aid in international civil and commercial cases within the EU.24

23 24

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The Bulgarian Private International Law Code of 2005 B.

The Rome Convention

The Act of Accession, inter alia, provided for Bulgaria to become a member of the Rome Convention. According to Council Decision 2007/856/EC of 8 November 2007 concerning the accession of the Republic of Bulgaria and Romania to the Convention on the Law applicable to Contractual Obligations, opened for signature in Rome on 19 June 1980,25 the Convention has become effective between the Republic of Bulgaria and the other Member States on 15 January 2008. Before the effectivity of the PIL-Code, Bulgaria had provisions on the law applicable to contractual obligations in articles 437-449 of the Law on Obligations and Contracts of 1950, which were shaped after the Rome Convention and were inserted into the law in 200326 but repealed on 21 May 2005. A simplified version for only commercial contracts had earlier (1996) been inserted into the Commercial Code and then repealed in 2003.27

V.

Provisions Implementing Hague Conventions

The 2007 version of the Act of the protection of the child28 implements the following conventions: Hague Conventions on: (1) the Civil Aspects of International Child Abduction of 1980; (2) Jurisdiction, Applicable Law, Recognition, Enforcement, and Co-operation in respect of Parental Responsibility and Measures for the Protection of Children of 1996, as well as (3) the European Convention on Recognition and Enforcement of Decisions concerning Custody of Children and on Restoration of Custody of Children of 1980.

OJ L 347, 29.12.2007, pp. 1-2. DV 2003 No. 19. German translation in: IPRax 2004, pp. 158-160. 27 Articles 605-606f of the Commercial Code, repealed DV 2003 No. 19. 28 DV 2000 No. 48 as amended by DV 2007 No. 59. For German translation see: JESSEL-HOLST C., ‘Bulgarien’, in: BERGMANN A./FERID M./HENRICH D., Internationales Ehe- und Kindschaftsrecht, Loose-leaf (174th supplement) pp. 64-78. 25 26

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NEW PERSPECTIVES IN SPANISH LEGAL PRACTICE ON THE EXERCISE OF RIGHTS OF ACCESS ACROSS INTERNATIONAL BORDERS Mónica HERRANZ BALLESTEROS∗

I. II.

IV.

Introduction Rights of Access in Statutory Instruments Dealing with Child Abduction A. International Conventions B. Institutional Sources Rights of Access in the Framework of the 1980 Hague Convention A. Regulatory Framework B. Application to Two Practical Cases 1. Application for Scheduling of Rights of Access without Wrongful Removal of the Child 2. Application for Return as a Result of Obstacles in Rights of Access Conclusions

I.

Introduction

III.

Approaching rights of access as human rights, in our opinion, has a basic component that should preside over any other perspective of analysis.1 In this respect, Article 10 of the 1989 UN Convention on the Rights of the Child must be mentioned, which provides as follows: ‘A child whose parents reside in different States shall have the right to maintain on a regular basis, save in exceptional circumstances personal relations and direct contacts with both parents.’ Therefore, any approach to access rights is suitable if access is seen as a right of children regarding their parents, rather than a parental right concerning children. Child abduction is a consequences that results from parents’ difficulties in suitably exercising visitation rights across international borders. Thus, correctly

∗

PHD, Lecturer of Private International Law, Universidad Nacional de Educación a Distancia, Spain. This paper is part of the project SEJ 2007-67381 Derecho civil internacional: pluralidad e interacción de normas internacionales. Problemas de aplicación. 1 FORNER DELAYGUA J., ‘El acceso de los hijos a sus progenitores: el «Derecho de visita»’, in: Mundialización y Familia, Madrid 2001, pp. 23-50. Yearbook of Private International Law, Volume 9 (2007), pp. 387-398 © sellier. european law publishers & Swiss Institute of Comparative Law

Printed in Germany

Mónica Herranz Ballesteros organizing and exercising such parental visitation rights might be one way of solving the problem of the so-called international displacement of minors.2 As has been seen, there is a clear connection between rights of access and international abductions. In this respect, it is logical to analyse the legal instruments and remedial mechanisms proposed to solve an increasingly frequent occurrence, such as the displacement of a minor by one of the parents, and what has been termed the corollary to custody rights, i.e. rights of access. In addition, it seems interesting to review cases, especially in Spain, where judges have recently been called to adjudicate on two different situations: (1) when visitation rights are requested without a minor having been abducted, and (2) when a request is made for a minor’s recovery after visitation rights having become impossible (when a custodial parent has removed a minor from the country).3 This analysis will clarify whether new procedures have been found to tackle these issues and what are the questions that may arise in practical implementation.

II.

Rights of Access in Statutory Instruments Dealing with Child Abduction

At present, the law dealing with abduction is both abundant and complex. This complexity has two sources: the number of new instruments appearing over the past several years and the inevitable interaction among norms arising from various sources offering different remedial techniques.4 For our analysis, a division is made between three different blocks depending on the statutory source for each instrument: (1) international conventions; (2) institutional sources, particularly from the European sphere; and (3) rules passed by Spanish law-making bodies, i.e. internal rules with various functions

2 PÉREZ VERA E., ‘Traducción del Convenio núm. XVII de la Conferencia de La Haya sobre los aspectos civiles de la sustracción de menores, de 25 de octubre de 1980 e Informe Explicativo del Convenio’, B.I.M.J., no., 1895, March 15, 2000. 3 It had already become visible that most child abductions were carried out not by the parent holding visitation rights, but increasingly by the parent holding custody rights. Conclusions and Recommendations of the fifth meeting of the Special Commission to review the operation of the Hague Convention of 25 October 1980 on the Civil Aspects of International Child Abduction and the practical implementation of the Hague Convention of 19 October 1996 on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in respect of Parental Responsibility and Measures for the Protection of Children (30 October – 9 November 2006). See the website of the Hague Conference: <www.hcch. net>. Also see BRUCH C., ‘The Hague child Abduction Convention: Past, Accomplishments, Future Challenges’, in: European Journal of Law Reform 1998-1999, pp. 97-118. 4 GUZMÁN ZAPATER M., Sociedad internacional y Derecho internacional privado, Madrid 2006.

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New Perspectives in Spanish Legal Practice on the Exercise of Rights of Access regarding the abduction of minors.5 Emphasis will be placed on the first two groups, in order to discuss, where applicable, the importance of visitation rights within the regulatory framework.

A.

International Conventions

There exist various instruments that must be considered when discussing these types of sources from a Spanish perspective. Their relevance depends on their practical effectiveness in solving particular cases. Furthermore, these instruments have varying degrees of emphasis regarding access rights. The European Convention of Luxemburg of May 20, 1980 on Recognition and Enforcement of Decisions Concerning Custody of Children and on Restoration of Custody of Children is a convention governing mainly recognition and enforcement, although it contains some rules on cooperation between authorities. For the purposes of our study, it is sufficient to say that its provisions, especially Article 11, treat the recognition of custody decisions and rights of access decisions in the same way. In addition, the Convention contains what we believe is an important mandate: the authority of the state addressed may determine the procedures for both enforcement and exercise of rights of access. Alongside these powers, the central authority of the state addressed may, in two cases, when requested by the interested party, refer to its authorities in order to request the establishment of rights of access: (1) if a decision has been made on the rights and (2) if the recognition of that decision on custody rights has been refused.6 In Spain, the efficiency of this text has been underscored by continuous references to other international instruments. Also, within the European sphere, the said instrument has been replaced by Council Regulation (EC) No. 2201/2003 of November 17, 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and in matters of parental responsibility, repealing Regulation (EC) No. 1347/2000 (hereinafter, Regulation (EC) No. 2201/ 2003)7. When it comes to international conventions, the Spanish authorities have consistently relied on The Hague Convention of 25 October 1980 on the Civil Aspects of International Child Abduction to deal with cases of wrongful displacement of minors. However, it is nonetheless true that the efficacy of this

5 We are referring to Spanish Organic Act 9/2992, of December 10, modifying Organic Law 10/1995, of November 2003, of Criminal Code and Civil Code on Child Abduction, BOE (‘Spanish Official Gazette’), no. 296, December 11, 2002. 6 On cooperation between authorities regarding ex novo actions within the Luxemburg Convention, see GARCÍA CANO S., Protección del menor y cooperación internacional entre autoridades, Madrid 2003, p. 208. 7 Article 60.

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Mónica Herranz Ballesteros instrument was endangered by the Spanish authorities’ initial incorrect usage8 and the lack of domestic procedures for the enforcement of the provisions in the Convention.9 Both problems have been solved, and currently, Spanish authorities consistently rely on the provisions in the Convention to restore the status quo of minors who have been wrongfully removed to a state other than their usual place of residence. Both the protection, if any, accorded to rights of access in the Hague Convention of 1980 and the way in which this instrument is implemented in Spain for the exercise of such rights will be studied in detail in section III. However, it can be said at this stage that regardless of the fact that the Hague Convention scarcely deals with access rights,10 the Spanish experience is opening up new prospects that may be interesting to analyze. Regarding conventions and treaties, just a brief reference must be made to the Agreement of May 30, 1997 between Spain and Morocco on judicial cooperation, recognition and enforcement of judgments concerning custody and visitation rights, and recovery of minors; however, any reference to this agreement must be a theoretical one, given the little practical experience regarding implementation.11 Rights of access are covered in Chapter IV, Article 13. The agreement combines the solutions provided for by both the Luxemburg and the 1980 Hague Convention concerning visitation rights. Concerning cooperation between authorities, there is a visible resemblance among all three instruments, insofar as the same powers are conferred to central authorities regarding the organization and protection of the rights.12

B.

Institutional Sources

Since the European Union has shifted its focus from economic issues to citizens’ issues, one of its objectives has become the creation of a space of freedom, secu8 BORRÁS A., ‘Comisión especial de octubre de 1989 sobre el funcionamiento del Convenio de La Haya de 25 de octubre de 1980 sobre los aspectos civiles de la sustracción internacional de menores’, in: REDI, 1990-1, pp. 289-290. 9 RODRÍGUEZ PINEAU E., ‘Sustracción internacional de menores: una tarea para el legislador’, in: Revista Jurídica La Ley, núm. 4986, pp. 1-6. ÁLVAREZ GONZÁLEZ S., ‘Nuevas medidas relativas al retorno de menores supuestos de sustracción internacional en la Ley de Enjuiciamiento Civil’, in: REDI, 1996-1, pp. 504-506. 10 As pointed out by professor PÉREZ VERA E., it was not possible to advance any further; see ‘El Convenio de La Haya de 1980 sobre los aspectos civiles de la sustracción internacional de menores’, Cartagena de Indias, August 2001 (unpublished). 11 A practical context for the said agreement can be seen in PÉREZ BEVIÁ J.A., ‘Convenio entre España y Marruecos de 30 de mayo de 1997, sobre asistencia judicial, reconocimiento y ejecución de resoluciones judiciales en materia de derecho de custodia y de visita y devolución de menores’, in: Estatuto personal y multiculturalidad de la familia. Madrid 2000, pp. 139-162. 12 J.A. PÉREZ BEVIÁ (note 11) disagrees with this regulation.

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New Perspectives in Spanish Legal Practice on the Exercise of Rights of Access rity, and justice, where the free movement of people is guaranteed.13 Substantial progress regarding family law was made through Council Regulation (EC) No 1347/2000 of 29 May 2000 on jurisdiction and the recognition and enforcement of judgments in matrimonial matters and in matters of parental responsibility for children of both spouses;14 however, this instrument soon became unsuitable, leading to continuous proposals for its amendment. Clearly, for our purposes the most worthy of mention was France’s initiative to propose a Council Regulation on the mutual enforcement of judgments on rights of access to children, made on July 3, 2000. The purpose of this proposal was to abolish the exequatur procedure for judgments concerning rights of access, together with a guarantee of the minor’s automatic return once the period of enjoyment of the rights has ended.15 At last, on December 23 the Official Journal of the European Union (hereinafter, O.J.)16 published Council Regulation (EC) of November 27, 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and in matters of parental responsibility, repealing Regulation (EC) No 1347/2000 (hereinafter Regulation (EC) 2001/2003).17 This instrument introduced important changes concerning both cross-border child abduction within the European Union18 and the regulation of rights of access,19 more specifically, the exercise of these rights in cases of a minor’s wrongful removal. The European text defines wrongful removal or retention of a minor in the same manner as the 1980 Hague Convention; however, in our opinion, Regulation (EC) no. 2201/2003 includes an important difference regarding rights of access.20 Thus, there is a provision for the cases where it is understood that there is shared custody. More specifically, cases where that shared custody prevents one parent from determining the minor’s usual place of residence without the consent of the 13 GAUDEMENT-TALLON H., ‘Droit privé et droit communautaire: quelques réflexions’, in: Revue du Marché commun et de l’Union européenne 2000, pp. 228-242. 14 OJ L 160, of June 30, 2000. 15 OJ C 234, of August 15, 2000. 16 Series L 338/1, of December 23, 2003. 17 Regulation 1347/2000 was repealed by Regulation (EC) no. 2201/2003, which came into force on August 1, 2004 and applies from March 1, 2005, with the exception of Articles 67, 68, 69 and 70, which apply from August 1, 2004. 18 HERRANZ BALLESTEROS M., ‘El Reglamento (CE) Nº 2201/2003. Alcance de la reforma en materia de sustracción internacional de menores en el espacio judicial europeo’, in: Revista Aranzadi Civil 2004, no., 13, pp. 13-32. A recent application of Regulation (EC) 2201/2003 together with the 1980 Hague Convention in a case of removal of a minor, may be seen in the Order by the Provincial Court of Granada (Third Division) of June 16 (AC 2006/1076). 19 GUZMÁN ZAPATER M., ‘La superación del exequátur en el espacio judicial europeo: decisiones relativas a derecho de visita y a la obligación de alimentos’, in: Derechos Humanos y conflictos internacionales, Cursos de Derecho Internacional y Relaciones Internacionales de Vitoria-Gasteiz, 2006, pp. 214-246. 20 Article 2.

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Mónica Herranz Ballesteros other. This issue, as shall be seen below in our analysis of the 1980 Hague Convention, is important in deciding on the wrongfulness of a removal that was carried out by the custodial parent, and, therefore, in determining if it is possible to initiate return proceedings. For instance, a recent judgment by the Provincial Court (Audiencia Provincial) of Santa Cruz de Tenerife, on June 1, 2004,21 interpreted this issue (rightly in our opinion) consistent with the European Union provisions. The Court held that, pursuant to Article 2.11. b) the removal was wrongful, since custody was held jointly by both parents and neither one could individually choose the minors’ usual place of residence without the consent of the other. Therefore, the Court held that the removal of the minors by the custodian mother was wrongful because there had been a breach of joint custody, as the mother could not remove the minors without the consent of either the father or the competent authority. However, the Court’s application of Regulation (EC) no. 2201/2003 was incorrect, since given its field of application ratione temporis, the regulation did not apply in the case. In our view, the European instrument’s regulation of rights of access is to be approved, both as a preventive measure improving the organization of visitation rights and as an ex post measure – once such rights have been organized – aiming at removing obstacles to effectively exercising such rights. On this latter issue, the regulation provides that court judgments on rights of access shall be directly enforceable, and recognition cannot be opposed if the judgment has been certified in the Member State of origin in accordance with the regulation (Articles 42 and ff).22

III. Rights of Access in the Framework of the 1980 Hague Convention The choice of the 1980 Hague Convention is not a random one; indeed, it is the instrument most relied on by Spanish authorities to rule on child abductions, and it is also the one that in our view is opening new practical prospects guaranteeing both access to children by the parents and, most importantly, the right of children to maintain contact with their parents. A.

Regulatory Framework

Specialized doctrine in Spain has been critical of the way rights of access have been regulated by the 1980 Hague Convention.23 Although it is true that rights of 21

JUR 2004/198314. See for a commentary, QUIÑONES A., REDI, 2005-1, pp. 364-

368. GUZMÁN ZAPATER M. (note 19), pp. 231-233. ÁLVAREZ GONZÁLEZ S., ‘Secuestro internacional de menores («legal kidnapping») y cooperación internacional: la posición española ante el problema’, in: P.J., 1986-4, pp. 932. No criticism of the regulation can be seen in FORNER DELAYGUA J. (note 1), p. 34. 22 23

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New Perspectives in Spanish Legal Practice on the Exercise of Rights of Access access are dealt with by various provisions,24 it does seem symbolic, at least quantitatively, that out of more than forty articles only one is explicitly devoted to rights of access (which are considered corollary to custody rights). The wording of Article 21 of the Hague Convention is extremely ambiguous, which has led to very different interpretations in the various states:25 ‘An application to make arrangements for organizing or securing the effective exercise of rights of access may be presented to the Central Authorities of the Contracting States in the same way as an application for the return of a child. The Central Authorities are bound by the obligations of co-operation which are set forth in Article 7 to promote the peaceful enjoyment of access rights and the fulfilment of any conditions to which the exercise of those rights may be subject. The Central Authorities shall take steps to remove, as far as possible, all obstacles to the exercise of such rights. The Central Authorities, either directly or through intermediaries, may initiate or assist in the institution of proceedings with a view to organizing or protecting these rights and securing respect for the conditions to which the exercise of these rights may be subject.’ There are a number of defects attributed to the Convention in its regulation of rights of access that have had consequences at various stages. In this respect, a number of case studies shows that two different situations have arisen in Spain. Although the legal foundation has, in both cases, been Article 21 of the Hague Convention, the Spanish authorities’ solution is different in each case.

FARQUHAR K., ‘The Convention on international child abduction comes to Canada’, Canadian Journal of Family Law 1983, pp. 7-34. 24 For instance, in Article 1, which states that one of the objectives of the Convention is ‘to ensure that rights of custody and of access under the law of one Contracting State are effectively respected in the other Contracting States.’ 25 GONZÁLEZ BEILFUSS C., ‘Sustracción internacional de niños y ejercicio transnacional del derecho de visita’, in: Sustracción internacional de menores y adopción internacional, Colex, Madrid, 2004, pp. 89-114. ÁLVAREZ GONZÁLEZ S., ‘Derechos de visita y Convenio de La Haya sobre los aspectos civiles de la sustracción internacional de menores: la práctica española’, in: Dereito vol. 14, nº 2, 2005, pp. 255-273.

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Mónica Herranz Ballesteros B.

Application to Two Practical Cases

1.

Application for Scheduling of Rights of Access without Wrongful Removal of the Child

As seen above, only Article 21 of the Convention makes explicit reference to rights of access. However, critics have also pointed out that recent studies have shown that its lack of clarity has led to differing applications by authorities. Indeed, there are some decisions with strict interpretations, while other interpretations extend their scope beyond the literal wording of the article. Among the first group of decisions are those interpreting Article 21 as allowing neither the initiation of proceedings for the scheduling of rights of access, nor the recognition of any rights established by a foreign authority. On the contrary, a second group of decisions rely on the same article not only to organize rights of access previously scheduled by a foreign authority, but also to initiate court proceedings to organize new visitation rights. Although Spanish practice has varied between both approaches, it appears that more recent decisions support a more extensive interpretation of Article 21. An example of the decisions choosing a more strict interpretation is offered by the Hospitalet de Llobregat case, where the Court of First Instance held that Article 21 could not be relied on to organize or regulate rights of access, because there had been no previous holding on such rights by an English court, which was the minors’ usual place of residence. The Court held that regulating rights of access on the basis of Article 21 would be tantamount to giving an extensive interpretation of the term ‘organize’ in conflict with Article 1, which regulates the scope of the 1980 Hague Convention. A similar criterion was applied recently in an Order of March 4, 2005 by the Provincial Court of Las Palmas.26 In reviewing a mother’s application for a visitation schedule, the Court held that Article 21 exclusively provides for the organization and protection of the effective enjoyment of such rights, which, the Court goes on to say, must be previously decided in a Member State other than the one where the minors are located. Therefore, the order stated that it was not possible to rely on Article 21 as the basis for scheduling rights of access. The Court explicitly defined what it believed to be the scope of the Convention: the powers of the authorities are limited to organizing (arranging and coordinating) and protecting (ensuring, promoting, and defending its normal enforcement) a pre-existing schedule and deciding, where applicable, the return of the minor for such purposes. However, more recent decisions appear to follow a substantially different trend. The first example is an Order of the Provincial Court of Barcelona, of December 4, 2001,27 which was issued – pursuant to article 21 of the Hague Convention – in favor of a parent residing in Italy regarding the establishment of a visitation schedule for a minor residing in Spain. Because the child had not been wrong26 27

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New Perspectives in Spanish Legal Practice on the Exercise of Rights of Access fully removed, the Court held that the absence of this requirement allowed them to dismiss the action for return. However, for the case being tried, the scheduling of rights of access does not require any previous ruling for the application to be made, and the decision-making body does not require a wrongful removal as a prerequisite to the action. Basically, the Court has established two categories, one for each issue separately protected by the Convention: (1) the return of the minor when there is a violation of custody rights, and (2) the organization of rights of access through an extensive interpretation of Article 21. Apparently, such separation makes it possible to resort to different contexts to ensure the literal applicability of the Convention. To this decision we might add the judgment by the Provincial Court of Madrid, of April 25, 2005,28 where it was shown that the Spanish authority in practice rules out what it deems a restrictive interpretation of Article 21 of the Convention and, on the basis of that instrument, then allows for the organization and protection of the effective exercise of rights of access and cooperation between central authorities. In the words of the Court, the said instrument provides not only for the return of the minors, but also requires an effective enforcement of rights of access. Despite the well-intended efforts of the Spanish authorities, it cannot be forgotten that Article 21 is not a rule containing a criterion for either international court jurisdiction or the recognition of judgments; therefore, there are other areas of international private law that are affected and, besides, regulated by other instruments. The Provincial Court of Madrid is aware of this. Its April 25, 2005 judgment refers to the international judicial competence of Spanish authorities and courts, relying on Article 22 of the Spanish Organic Law of the Judiciary. These last two decisions show an open approach to Article 21 of the Convention that is supported by the Spanish Central Authority’s interpretation, which is responsible for representing those applying for the establishment of visitation schedules in Spain.29 As was announced in the past, the impact of the Hague Convention on the regulation of rights of access, even though it allows for little regulation of such rights, will greatly depend on the way the Central Authorities act in each specific case.30 Some authors, such as Nigel Lowe, even say that the intervention of these authorities should have been made mandatory by the Convention.31 28

JUR 2005/157727. Analysed by ÁLVAREZ GONZÁLEZ S., REDI, 2006-1, pp. 466-

469. In the Country Report for Spain, prepared by professors Nigel LOWE and Cristina GONZÁLEZ BEILFUSS it can be seen that Spanish Authorities generally apply Article 21 of the Hague Convention not to only establish rights of access but also to recognize other rights established in other countries. The report can be found at . 30 FARQUHAR K. (note 23), p. 28. 31 LOWE N., ‘Problems relating to access disputes under The Hague Convention on international Child Abduction’, in: International Journal of Law and The Family 1994, pp. 374-385. 29

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Mónica Herranz Ballesteros 2.

Application for Return as a Result of Obstacles in Rights of Access

This section will analyze situations where the minor’s removal was carried out by the custodial parent, thus preventing the exercise of rights of access by the other parent. It is key for both to know beforehand whether return proceedings can be initiated or, on the contrary, given the present legal framework, whether such an application is not possible. The first item that needs clarification is when the Convention should be applied. Based on the provisions in Article 1, it seems obvious that it should be activated when there is a breach of the objectives it sets out to protect. By reading this article, and more specifically section b), it may indeed be inferred that the Convention also protects rights of access (and not just custody rights) by including them as one of its objectives. Therefore, any violation of such rights should in principle lead to the application of the instrument. However, the rest of the Convention’s wording does not seem to be in line with this interpretation. Article 3 focuses on the protection of only one set of rights, namely custody, and removal can be described as wrongful only if these rights are violated. In this respect, if custody and removal are incompatible, only the breach of custody rights will trigger the application of the Convention mechanism, insofar as only the breach of custody rights defines the removal as wrongful. In our view, this is related to the definition of custody rights given by Article 5, according to which custody rights include ‘rights relating to the care of the person of the child and, in particular, the right to determine the child’s place of residence.’ Indeed, the right to determine the child’s place of residence has in practice been the basis for regarding any removal as lawful and, therefore, the reason to halt any return procedures under the Convention.32 For instance, the Provincial Court of Santa Cruz de Tenerife of November 22, 200633 held that the removal of a minor from Venezuela to Spain by the mother could not be considered wrongful and, therefore, return proceedings could not be initiated, even though the removal prevented the father’s exercise of rights of access as provided by a Venezuelan divorce ruling. The reason is, as the Court stated, that ‘if the mother holds custody and has decided to reside in Spain with her child, this does not entail that the rights have been violated for the exercise of which the return is applied for; only the father’s rights of access have been violated, for whose organization and protection the Convention states that the country receiving the application shall take any measures necessary…’ In order to attenuate this interpretation, which in our opinion entails a lower protection of access rights, numerous orders have been issued prohibiting a minor’s

A different interpretation, which holds that abduction also occurs through the breach of rights of access, can be found in MIRALLES SANGRO P.P., El secuestro internacional de menores y su incidencia en España, Ministerio de Asuntos Sociales, 1989, pp. 124. 33 JUR 2007/75775. 32

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New Perspectives in Spanish Legal Practice on the Exercise of Rights of Access removal unless it has been authorized by either the Court or the other parent.34 However, there are still rulings that leave rights of access unprotected, even where there have been orders prohibiting the custodial parent from removing the child, thus preventing the activation of the return proceedings provided for by the Convention.35 In this area, the Spanish situation offers a number of interesting (and in our opinion, correct) decisions, which tend to consider the removal as wrongful if it takes place against an order prohibiting a child’s removal from the country without the consent of either the other parent or the competent judicial body.36 It is true that a change can be felt and that there is an attempt to conciliate custody and access rights.37 In our opinion, this can be observed in the definition contained in Regulation (EC) No. 2201/2003 on whether a removal can be considered a wrongful one. Although section 11 of Article 2 literally reproduces the idea of the 1980 Hague Convention, part (b) refers to joint custody when, pursuant to a judgment or by operation of law, one holder of parental responsibility cannot decide on the child’s place of residence without the consent of the other holder of parental responsibility.38 Given this definition, if there is an order not to remove the child beyond the borders of a state, any of the two parents may seek the remedies in the Convention to apply for the minor’s return, since it is understood that the custody rights are exercised jointly. Such is the interpretation (rightly, in our opin-

34 Reference can be made here to a very interesting case in Canada which gives a correct analysis of the influence upon judgments of orders against removal to another State by the custodian, i.e. Thomson v. Thomson. See VAUGHAN B., ‘Thomson v. Thomson’, in: Canadian Family Law Quarterly 1994-1995, p. 328; MUIR WATT H., ANCEL B., Rev. crit. dr. int. pr., 1995-2, pp. 342-356; HERRANZ BALLESTEROS M., ‘El Estado canadiense ante los Convenios sobre protección de menores de la Conferencia de La Haya de Derecho Internacional Privado’, in: Boletín de la Facultad de Derecho de la UNED, núm., 14, 1999, pp. 447-469. 35 The critical debate on this issue remains open in such a way that some authors state that the right to decide on the child’s place of residence may be analyzed in some cases as a right of custody; see EEKELAR, J.M., ‘International Child Abduction by parents’, University of Toronto Law Journal 1982, pp. 281-309. The opposite view is held by professor C. BRUCH, who believes that the existence of a clause against the removal of a child from a State must be analyzed as a safeguard in order to protect rights of access, and it does not therefore entail the existence of rights of custody, Children on the Move, How to Implement their Right to Family Life, The Hague 1996, p.47. 36 Order of the Provincial Court of Zaragoza, of May 5, 1996, REDI, 1997-2, pp. 244-247, commented by MOYA ESCUDERO M.; Order by the Provincial Court of Málaga of October 10, 1999 (unpublished) quoted by GONZÁLEZ BEILFUSS C., ‘International Child Abduction in Spain’, in: International Journal of Law, Policy and the Family 2001, p. 333. More examples of orders limiting child removal, even with the custodian parent, are mentioned by JIMÉNEZ BLANCO P., ‘Modificación del régimen de visitas y solicitud de salida de los menores’, in: Anuario Español de Derecho Internacional Privado 2005, pp. 960-961. 37 See FORNER DELAYGUA J. (note 1) p. 38. This move is opposed, for instance, by JIMÉNEZ BLANCO P. (note 26) p. 963. 38 QUIÑONES A. (note 21).

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Mónica Herranz Ballesteros ion) given by the Provincial Court of Santa Cruz de Tenerife in the abovementioned ruling of February 1, 2004.39

IV. Conclusions It is our belief that one of the most clear conclusions deriving from this research is the need for not only improvement in regulatory instruments for the protection of children’s right to have access to their parents, but also to promote a much more uniform interpretation of the instruments that, like Article 21 of the Hague Convention, deal with the protection of such rights. In their most recent decision, Spanish authorities have chosen to expand the interpretation of the Hague Convention to increase the protection of rights of access. They also chose to rely on Article 21 as the legal basis both for the ex novo organization of visitation rights and for the recognition in Spain of rights as established by foreign authorities. Finally, a certain closeness – or at least a lack of differentiation – can be seen in regulatory instruments between rights of access and custody rights. This proximity makes it possible to activate regulatory return proceedings when a minor’s removal from his usual state of residence to a second state by a custodial parent (who does not have the full power to decide the child’s usual place of residence) hinders exercise of the rights of access.

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NEWS FROM BRUSSELS ACTIVITIES OF THE EUROPEAN COMMUNITY IN THE FIELD OF PRIVATE INTERNATIONAL LAW IN 2007 Kieran St Clair BRADLEY∗

I. II.

III.

IV.

I.

Introduction Institutional Developments A. EC Accession to Hague Conference B. The Treaty of Lisbon Jurisdiction and Applicable Law A. Law Applicable to Non-Contractual Obligations (‘Rome II’) B. Law Applicable to Contractual Obligations (‘Rome I’) C. Maintenance Obligations D. The Second Lugano Convention Civil Procedure A. European Small Claims Procedure (‘ESCP’) B. Service of Documents C. Mediation

Introduction

As regards the activities of the European Community1 in the field of private international law, 2007 will be remembered as an eventful, even an historic, year. On the institutional side, the Union became the 66th full member of the Hague Conference, and the reforms agreed upon in the Lisbon Treaty would rationalise and slightly extend the gamut of its powers in this area. As for substantive legisla∗ Head of Unit for Justice and Civil Liberties, Legal Service of the European Parliament; the views expressed are personal and may not be attributed to the service or institution with which the author is associated. My best thanks are due to Antonio Caiola, Maggie Dean, Ulrich Rösslein and Andrej Auersperger Matic who commented on an earlier version of the text; the usual disclaimer applies. 1 As the competence in question falls within the Community pillar of the Union’s activities, the more correct term is preferred to the more familiar ‘European Union’. Different considerations would apply if the Treaty of Lisbon were to enter into force (see II.B below).

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Kieran St Clair Bradley tion, in July the European Parliament and the Council adopted the ‘Rome II’ Regulation on the law applicable to non-contractual obligations, after a long and difficult conciliation procedure. This was followed later in the year by agreement on the text for the ‘Rome I’ Regulation on the law applicable to contractual obligations, and the adoption of the revised Lugano Convention. Regulations establishing a small claims procedure and on revised arrangements for the service of documents were also adopted, while significant progress was made on other proposals, notably on maintenance obligations and mediation. While the events of the year demonstrate that the Community is well able to exercise its competence in the area of private international law, the acts adopted clearly bring out the limits of what the Member States and the institutions consider can be achieved, whether for legal or political reasons. This is starkly illustrated by the ongoing disagreement between the Commission on the one hand, and the European Parliament and the Council on the other, as regards the application of measures of civil procedure (small claims, mediation) to purely domestic situations. The related proclivity for optional legislation, a relative rarity in Community law generally, is slightly disquieting, as if the Member States’ commitment to this form of judicial cooperation was less than whole-hearted. The exercise of the Community’s competence will continue to be constrained by developments at the international level too, as demonstrated by the uncertain fate of the maintenance obligations proposal.

II.

Institutional Developments

A.

EC Accession to Hague Conference

Although the European Community’s powers in the field of external relations are very extensive, its accession to another international organisation as a full member is far from an everyday event, particularly outside the core areas of the Community’s exclusive competence, such as trade and fisheries policies, and the internal market.2 Given the centrality of the Hague Conference for matters pertaining to international cooperation regarding private international law, and the Community’s relatively recent but very active interest in this area, it is not surprising that the Community would want an upgrading of its long-time observer status to that of member. Prompted, at least in part,3 by the fact that both the Conference and the Community were working on international arrangements regarding jurisdiction and the recognition and enforcement of judgments at the same time, the Community 2 The ‘mixed picture’ is presented in some detail in HOFFMEISTER F., ‘Outsider or Frontrunner? Recent developments under international and European law on the status of the European Union in international organizations and treaty bodies’, in: 44 CMLRev 41 (2007). 3 The link is suggested by SCHULZ A., ‘The Accession of the European Community to the Hague Conference on private international law’, in: 56 ICLQ 939 (2007).

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Activities of the European Community in 2007 applied for membership in December 2002. Following the amendment of the Conference’s statute to allow the accession of Regional Economic Integration Organisations, the Community duly acceded to the Conference in April 2007.4 While the procedure was carried out smoothly, if rather slowly, it did nonetheless throw up a number of interesting legal questions. The first of these is the definition of the notion of Regional Economic Integration Organisation or ‘REIO’. Though, this notion has been used in a number of other contexts, its precise meaning is still something of a moveable feast. This is reflected in the apparently overlapping provisions of paragraphs 2 and 9 of what is now Article 3 of the Statute of the Hague Conference (hereinafter the ‘Statute’).5 The latter defines REIO as ‘an international organisation that is constituted solely by sovereign States and to which its Member States have transferred competence over a range of matters, including the authority to make decisions binding on its Member States in respect of those matters’. Concerns that the use of the terms ‘regional’ and ‘economic’ were too limiting, given the existence of transregional international organisations and the Community’s own non-economic objectives,6 were met by a general agreement that these terms were only a minimum requirement, which would not exclude from membership organisations of wider geographical or material scope. Article 3 of the Statute does not require that all the member states of the REIO be members of the Hague Conference in order for the REIO itself to accede. While it is true that all the Member States of the EC are, in fact, members of the Conference, it is also true that one Member State (Denmark) has not transferred any competence in respect of most Hague Conference matters to the Community, while two others (Ireland and the United Kingdom) only transfer such competence on a case by case basis. A more substantive question which arose is that concerning the division of competences between the Community and its Member States. As required by Article 3(3) of the Statute, the Community submitted a ‘declaration of competence specifying the matters in respect of which competence has been transferred to it by its Member States’; Member States are presumed to retain competence over matters not specifically declared to have been transferred (Article 3(5)). The actual declaration7 recites the competences expressly granted under Title IV of the EC Treaty and lists all the legislative measures which had been adopted under that

For more details, see SCHULZ A. (note 3). Available at . 6 Indeed, its interest in private international law is situated within the more general objective of establishing ‘an area of freedom, security and justice’ (Article 2 EU and Article 61 EC). 7 Published as Annex II to Council Decision 2006/719/EC authorising the Community to accede to the Hague Conference (OJ 2006 L 297/1, 4). 4 5

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Kieran St Clair Bradley Title to date, such as the Brussels I Regulation and measures on the service of documents and on the taking of evidence.8 The declaration is nonetheless rather open-ended in character, not only as regards competence deriving from other areas of regulation under the EC Treaty, such as the internal market or consumer protection but also, and in particular, because of the relevant case law of the European Court of Justice. 9 This defines the Community’s external competence as being co-extensive in principle with its internal powers; its scope in a given case may depend on the extent to which the internal competence has in fact been exercised. The exact boundaries of the respective external relations competences of the Community and its Member States generate a great deal of political and legal controversy in practice. Little wonder that the Community insisted that queries regarding the division of competence on a specific matter be addressed collectively to, and answered by, ‘the Member Organisation and its Member States’, rather than the Member States acting individually. The potentially contentious issues of the participation of the Community in Hague Conference meetings and its voting rights were both handled pragmatically. While Article 3(7) of the Statute provides that the REOI ‘shall exercise membership rights on an alternative basis with its Member States’, it is accepted that this does not preclude attendance at, and active participation in, meetings of the Conference (including Special Commissions and Diplomatic Sessions) by representatives of both the Community and its Member States. Any other solution would have created enormous practical difficulties for those directly concerned, particularly given the fluidity of competence boundaries adverted to above. Where a vote is taken on substantive matters within its remit, the Community will exercise a number of votes equal to the number of Member States; in effect, the Community falls only a few votes short of a majority on its own. The significance of these arrangements is mitigated by the practice, now reflected in Article 7(2) of the Statute, that ‘[the] Sessions, Council and Special Commissions shall, to the furthest extent possible, operate on the basis of consensus’, and the exclusion of REIOs from participation in certain institutional decisions, such as the admission of new members, budgetary matters, and the amendment of the Statute itself. Finally, the accession debate in the European Parliament threw up the interesting suggestion that a ‘parliamentary forum', involving both national parliaments and the European Parliament, should ‘follow and inform the work of the [Hague] Conference’.10 The suggestion is timely, given that national parliaments would be Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ 2001 L 12/1, and Regulation (EC) No 1206/2001 on cooperation between the courts of the Member States in the taking of evidence in civil and commercial matters, OJ 2001 L 174/1; the Regulation on the service of documents referred to has subsequently be replaced (see section IV(B), below). 9 See for example ECJ Opinion 1/03, ‘Competence of the Community to conclude the new Lugano Convention’, [2006] ECR I-01145, especially paragraphs 114 to 133. 10 ‘Explanatory Statement to the Recommendation by the Committee on Legal Affairs’, rapporteur Diana Wallis, EP Docs A6-0250/2006, p. 7. 8

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Activities of the European Community in 2007 given an active, if limited, role in the adoption of future Union acts in the field of private international law.

B.

The Treaty of Lisbon

Meeting in Lisbon in December 2007, the 27 Member States of the European Union signed the eponymous Treaty which is intended to replace the European Union and European Community Treaties, and indeed merge the Community and the Union into the single Union.11 While the new provisions on judicial cooperation in civil matters are not dramatically different from those currently in force, a number of changes would be effected. In the first place, the ‘ordinary legislative procedure’ (which corresponds to the present codecision procedure) would be applied more or less across the board, which should do away with most of the time-consuming disputes between the institutions on the determination of the legal basis for legislative measures in this area. One exception which remains is for ‘measures concerning family law with cross-border implications’, which will still be adopted by the Council acting unanimously after consultation of the European Parliament; aspects of family law may be transferred to the realm of the ordinary legislative procedure, though a single national parliament may block such a transfer. As noted earlier, the national parliaments would play a role in the legislative procedure in this (and other) areas, in the form of a verification of compliance with the principle of subsidiarity. The scope of the Union’s explicit material competence in this domain would be extended, including to ‘the development of alternative methods of dispute settlement’; at the same time, the list of subject areas for judicial cooperation in civil matters would appear to be closed. However, for the first time it is provided that such cooperation may be effected by means of the approximation of national laws, and that it is based on the principle of the mutual recognition of judgments and decisions in extrajudicial cases. The recognition that the Union’s Charter of Fundamental Rights would have ‘the same legal value as the Treaties’12 may also have some impact on the content of future legislation in this regard.

OJ 2007 C 306/1. Though driven out of the text of the Treaty of Lisbon, the Charter, in the version adopted by the Union institutions on 12 December 2007 (OJ 2007 C 303/1), would have legal effects by virtue of Article 6(1) of the new Treaty on the European Union. 11 12

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III. Jurisdiction and Applicable Law A.

Law Applicable to Non-Contractual Obligations (‘Rome II’)

On 11 July 2007, Parliament and the Council finally adopted Regulation (EC) No 864/2007 on the law applicable to non-contractual obligations, the so-called ‘Rome II Regulation’.13 As this is examined in the first Section of the present volume of the Yearbook, it is not further considered here.

B.

Law Applicable to Contractual Obligations (‘Rome I’)

The third element in the Community’s structure on conflict of laws and jurisdiction, after the ‘Brussels I’ and ‘Rome II’ Regulations, was effectively established in December 2007 when the European Parliament and the Council agreed on a text for the ‘Rome I’ Regulation.14 This Regulation will replace the Rome Convention of 19 June 1980 on the Law Applicable to Contractual Obligations,15 which the Commission has described, without excessive modesty, as being ‘not only a widely-known instrument but also highly appreciated in relevant circles’.16 Together, again according to the Commission, the three instruments ‘form an indissoluble set of Community rules of private international law’, though of course there already exist other flanking structures, and work on the building site continues apace. While much of the material law established by the Convention remains unchanged, the Regulation heralds a number of significant reforms. Of these, perhaps the most noteworthy is the approach to identifying the law applicable where the parties have not made a clear choice, and where none of the special regimes for particular types of contract applies. Whereas Article 4 of the Convention provided that in these circumstances ‘the contract shall be governed by the country with which it is most closely connected’, and laid down a number of presumptions in that regard, Article 4 of the Regulation lays down a series of concrete rules determining the law applicable to the types of contracts listed. OJ 2007 L 199/40. As of writing, the Regulation had not been officially adopted or published; the present remarks are based on the text set out in Council document 15832/07 of 3 December 2007. 15 OJ 1980 L 266/1; the suggestion that the conversion of the Convention into a regulation was rendered less necessary by the entry into force of the protocols giving the Court of Justice interpretative jurisdiction underestimates to the point of misunderstanding the character of the Community legal order. It is also rather belied by the fact that nearly a quarter of a century elapsed between the conclusion of the Convention and the conferral in fact of such jurisdiction. 16 Explanatory Memorandum, section 2, p. 3, COM (2005) 650 final, 15 December 2005 (hereinafter the ‘Proposal’). 13 14

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Activities of the European Community in 2007 Commenting on the original proposal, Professor Lagarde had criticised the Commission for failing to maintain the principle of proximity which, together with that of the will of the parties, underpin the Convention.17 The Commission was said to have rejected flexibility in the name of legal certainty; moreover, not being based on a single coherent idea, the connecting factors could appear arbitrary, while the absence of any general derogation clause would create the risk of unsatisfactory situations. The Regulation as adopted retains the Commission’s preference for fixed rules rather than presumptions and, indeed, adds a few new rules, such as that on auctions and trade in financial instruments.18 Article 4(3) of the Regulation does however provide a general derogation clause requiring the application of the law of any country with which ‘it is clear from all the circumstances of the case that the contract is manifestly more closely connected’. Similar considerations of legal certainty, which abound in Community law outside the area of private international law, presumably inspired the removal of the possibility, allowed by Article 4(1) of the Convention, of ‘dépeçage’. The material scope of the Regulation as adopted is considerably enlarged compared to the Convention and in some respects even as regards the Commission’s proposal. Thus, while insurance contracts were excluded from the scope of the Convention and the proposal,19 Parliament and the Council preferred to define a new set of rules governing the law applicable to all types of insurance contracts except reinsurance contracts.20 Equally, from the presumption on the carriage of goods in the Convention, to a brief rule on contracts of carriage in the proposal, the legislature finally opted for a detailed set of rules, which moreover distinguish between the carriage of goods and the carriage of passengers.21 The legislature also adopted, albeit in a different formulation, the Commission’s suggestion to exclude from the scope Regulation ‘obligations arising out of dealings prior to the conclusion of a contract’ which had been described as ‘[l’innovation] la plus remarquable’ of the proposal.22 On the other hand, it deleted the rules regarding contracts concluded by an agent, perhaps because these merely reproduce those of the relevant Hague Convention,23 which has to date generated little enthusiasm amongst the Member States. As a result, the Convention’s exclu-

LAGARDE P., ‘Remarques sur la proposition de règlement de la Commission européenne sur la loi applicable aux obligations contractuelles (Rome I)’, in: Rev. crit. 2006, 331, 332-3, 334-5 and 338-9. 18 See Article 4(1)(g) and (h); see LAGARDE P. (note 17) 339. 19 The Commission had proposed maintaining what Lagarde calls the indigestible conflict of laws rules set out in the second non-life insurance and life insurance Directives; Article 22 of the Proposal (cited above, note 16), and LAGARDE P. (note 17), 333. 20 Regulation, Article 7. 21 Regulation, Article 5. 22 Regulation, Article 1(2)(j); LAGARDE P. (note 17), paragraph 5, p. 334. 23 Hague Convention of 14 March 1978 on the Law Applicable to Agency. 17

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Kieran St Clair Bradley sion of the regulation of an agent’s powers is restored in Article 1(2)(g) of the Regulation. After long deliberation, Parliament and the Council decided not to refer expressly to the possibility that parties chose non-State law, or ‘principles and rules of the substantive law of contract recognised internationally or in the Community’, such as UNIDROIT Principles or the Principles of European Contract Law, as the Commission had envisaged.24 The sole trace of this suggestion is to be found in Recitals 15 and 16 in the Preamble. Recital 15 provides that the ‘Regulation does not preclude parties from incorporating by reference into their contract a nonState body of law or an international convention’, while Recital 16 indicates, to no obvious purpose, that the parties may apply such rules if a Community instrument so provides. Other significant modifications include a number inspired by the desire to modernise, such as the reference to obligations arising as a result of relationships having effects comparable to marriage (which are excluded from the scope of the Regulation), or the reference to commercial or professional activities directed to the country where the consumer has his habitual residence, including presumably by internet.25 The provisions governing consumer contracts and individual employment contracts are also overhauled; the former reforms seek to provide a new, simple and foreseeable conflict rule, as well as boosting the legal protection consumers enjoy, while the latter takes account in particular of the case law of the European Court of Justice on what is now Article 18 of the Brussels I Regulation.26 The modified definition of what are now termed ‘overriding mandatory provisions’ was also inspired by a judgment of the European Court of Justice.27 Finally, the Regulation contains a number of provisions designed to ensure the integrity of what might be termed ‘general’ Community law within the field of application of its conflict of law rules. Thus, for example, Article 3(4) requires that ‘provisions of Community law ...which cannot be derogated from by agreement’ be respected in circumstances where the parties choose a non-Member State law but where the relevant factual elements are located within the Community including the United Kingdom and Denmark, though these Member States are excluded ratione personae from the scope of application of the Regulation. A similar question arises under Article 7 in relation to the application the Council Directives on insurance.

Proposal (note 16), Article 3(2). Regulation, Articles 1(2)(c) and 6(1)(b) respectively; the latter notion already appears in Article 15(1)(c) of the Brussels I Regulation (note 8). 26 See, for example, Case C-437/00 Pugliese v Finmeccanica [2003] ECR I-03573. 27 Joined Cases C-369/96 and C-374/96 Arblade [1999] ECR I-08453. 24 25

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Activities of the European Community in 2007 C.

Maintenance Obligations

The Commission’s 2005 proposal for a Regulation on maintenance obligations28 is quite comprehensive in scope, covering jurisdiction, applicable law, certain common procedural rules, recognition and enforcement of decisions, authentic instruments and cooperation between the national authorities. Despite the incentive not to fall behind the ongoing work at the Hague, the European Parliament’s examination of the proposal was delayed as a result of various internal uncertainties, and in particular the fraught question of which committee would be primarily responsible.29 In the end, the committees concerned completed their scrutiny of the proposal a matter of days before the Hague Convention on the international recovery of family maintenance and its accompanying Protocol on applicable law were opened for signature, while Parliament adopted its position in plenary on 13 December 2007.30 Parliament’s first, and possibly most contentious, amendment concerns the legal basis of the proposed Regulation, which it took the view should be Article 61(c) EC alone, thereby requiring the application of the codecision procedure. The Commission had proposed the application of the simple consultation procedure, which would give Parliament a single reading of the text and much less formal influence over its content. The question turns on the exclusion from the scope of the codecision procedure of ‘aspects relating to family law’ operated by Article 67(5), second indent, EC. One widely-held view is that the Community does not enjoy any legislative competence in relation to family law per se, and that the exclusion can hence only refer to private international law aspects of family law. This is the view which the Civil Liberties committee had itself taken in giving its opinion on the proposal for a regulation on small claims.31 The other view, heartened no doubt by the express inclusion of maintenance claims within the scope of application of the Brussels I Regulation,32 seeks to treat such claims as essentially pecuniary, notwithstanding their origin. While the latter view prevailed in Parliament, it remains to be seen whether the Council and the Commission will accept it. In its other, substantive, amendments, Parliament proposed in particular: to align the scope of application of the Regulation ratione personae with that of the Hague Protocol;33

COM (2005) 649 final, 15 December 2005. Within Parliament, the committees on Legal Affairs and on Civil Liberties are responsible for different aspects of private international law; the latter was eventually deemed responsible as regards maintenance obligations. 30 Minutes of EP, P6-TA-PROV(2007)0620, <www.europarl.eu.int>. 31 Justification of Amendment 11 to Article 2(2)(1)(b), Mayer Report EP Doc. A60387/2006, p. 64. 32 Article 5(2), Council Regulation 44/2001(note 8). 33 EP Amendment 4 to Recital 9 in the preamble and 16 to Article 1(1) of the proposal; Article 1, Protocol. See also the option provided by Article 2(3), Convention. 28 29

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to provide a definition of ‘maintenance obligation’, which is to be interpreted ‘in the widest possible sense’; to define more precisely the application of the Regulation to public bodies; to allow jurisdiction based on the ‘official establishment’ of the relationship between the parties; to oblige the court seised to consider whether any prorogation of jurisdiction has been ‘freely agreed’; to extend the circumstances in which the lex fori can be applied, including where this would allow ‘maintenance disputes to be equitably resolved in a simpler, faster and less expensive manner and there is no evidence of forum shopping’, and to delete the debtor’s defence based on the non-existence of the maintenance obligation under the law of the parties’ common nationality or that of the debtor’s habitual residence.34 As of writing, it is unclear what precisely will happen to this proposal, now that the matter has been dealt with at the international level.

D.

The Second Lugano Convention

The long process of revising the 1988 Lugano Convention on Jurisdiction and the Recognition and Enforcement of Judgments between the European Community and the EFTA Member States, which included a detour to the European Court of Justice,35 was finally completed in October 2007, when the European Community, Denmark, Iceland, Norway and Switzerland signed the Second Lugano Convention.36 The material provisions of the new Convention follow very closely the equivalent provisions of the Brussels I Regulation, with specific rules on the relationship between the Convention and the Regulation and on institutional matters. Three protocols to the Convention regulate miscellaneous matters such as the service of documents, jurisdiction in actions on a warranty or guarantee, recognition and enforcement of certain types of judgment, the uniform interpretation of the Convention, and the relationship between the Convention and other conventions to which the contracting parties are bound. Of the nine annexes to the Convention, five may, in effect, be amended by the individual Contracting Parties, while the other four may be amended by the Standing Committee established by Article 4 of Protocol 2.

Amendment 40; Article 6 of the Hague Protocol maintains this defence, though only if no such obligation exists in either of the laws referred to. 35 Opinion 1/03 [2006] ECR I-01145. See CASHIN RITAINE E. / BONOMI A. / ROMANO G.P., La nouvelle Convention de Lugano: passé, présent et devenir. Actes de la 19e Journée de droit international privé du 16 mars 2007 à Lausanne, Zurich 2007. 36 OJ 2007 L 339/3. 34

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IV. Civil Procedure A.

European Small Claims Procedure (‘ESCP’)

In pursuit of the Community’s policy of ‘eliminating obstacles to the good functioning of civil proceedings’, at least ‘in so far is necessary for the proper functioning of the internal market’,37 Parliament and the Council adopted a ‘European Small Claims Procedure’ on the same day they adopted the Rome II Regulation.38 Regulation 861/2007 establishes what is intended to be a user-friendly procedure in respect of claims of a cross-border character up to an amount of € 2000 (excluding interest, expenses and disbursements). All the claimant has to do is identify a court or tribunal with jurisdiction, and submit his claim to it on a standard form,39 along with the relevant supporting documents. If need be, the court may invite the claimant to complete or rectify his claim, using another standard form. The claim (and, if need be, the rectification thereof) is duly notified to the defendant, who is supplied with a further standard form on which to answer the claim within 30 days, and submit any supporting documents. The procedure is conducted exclusively in written form, unless the court decides to hold an oral hearing or either party so requests; the court may refuse a hearing request if it considers this to be ‘obviously not necessary for the conduct of the proceedings’. Legal representation during the proceedings ‘shall not be mandatory’, the parties are not required to make any legal assessments in respect of the claim, and they are entitled to receive practical assistance in filling the form as well as impartial guidance from the court on procedural questions. The judgment on the claim is enforceable notwithstanding any possible appeal and without the party seeking enforcement being required to lodge a security. The Regulation also lays down minimum rules on costs (to be borne by the unsuccessful party) and review of the judgment (essentially for lack of a proper opportunity to object to the claim), as well as rules providing for the simplified (i.e. without exequatur) recognition and enforcement of any such judgment in another Member State. In order to ensure claimants access to ‘a fast and inexpensive judgment’, almost every step of the procedure is subject to fairly short deadlines: 14 days for the court to serve documents on the parties, 30 days for the parties to submit their response and for the court to decide on whether the claim falls within the Regulation, summon the parties to an oral hearing and/or give judgment. The time limits set by the court may, exceptionally, be extended ‘in order to safeguard the rights of the parties’; the parties are systematically informed of the consequences of failing to comply with a deadline. Where the court ‘in exceptional circumstances’ fails to comply with the deadline set, it is required to act ‘as soon as possible’. The Regulation does not take up the Commission’s proposal to oblige the court to give judgment within six months of the registration of the claim, though in the normal Article 65 EC, especially paragraph (c). Regulation (EC) No 861/2007, OJ 2007 L 199/1. 39 All the standard forms are set out in the annexes to the Regulation. 37 38

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Kieran St Clair Bradley course of events, especially in the absence of a counterclaim, the court would in any case be obliged to deal with the matter within this period. Presumably, in this regard, the sending of a request for a preliminary ruling from the Court of Justice under Article 234 EC would be considered a sufficiently exceptional circumstance. In these days of cross-border shopping trips and internet commerce between and amongst businesses and private individuals, the new procedure could prove very useful. The Regulation nonetheless leaves a number of questions open. In the first place, the ESCP is an option to be made available ‘as an alternative to the procedures existing under the laws of the Member States’.40 According to Recital 8 in the preamble, ‘the laws of the Member States ... will remain unaffected’. However, as the Commission noted in the explanatory statement accompanying its 2005 proposal, for those Member States which do have small claims procedures, recourse to such national procedures ‘is in most cases obligatory (for claims below the threshold)’.41 Where a Member State’s threshold is above € 2000 and its small claims procedure is indeed obligatory, it may not be clear to potential users whether they may resort to the ESCP or whether they are obliged to use the national procedure. One might also regret that the arrangements concerning jurisdiction were not made more readily available to the potential claimant. While it is obvious that Jo Public must submit her claim to a ‘court or tribunal with jurisdiction’, it may be less obvious which court has jurisdiction in respect of a particular claim. The page on ‘competent courts’ on the website of the European Judicial Atlas to which the claim form refers only provides information, if at all, on the different tiers in the structure of the courts.42 The mere reference to the Brussels I Regulation may not be of much use to the non-lawyer, who is not necessarily familiar, for example, with the use of the term ‘domicile’ in this context. The small claims procedure is significantly narrower in scope than the Commission had originally proposed. The Commission had envisaged that its scope of application would coincide with that of the Brussels I Regulation, except as regards small employment claims.43 As adopted, the small claims Regulation excludes maintenance obligations, most tenancies of immovable property, and ‘violations of privacy and of rights relating to personality’. The first was presumably motivated by the likely prospect of the Hague Conference’s concluding a Convention on maintenance obligations by the end of the year, while conflict rules on privacy rights had proved one of the major bones of contention between Parliament and the Council as regards Rome II.44

Article 1, first paragraph, Regulation. COM(2005)87 final, paragraph 2.1.2, p. 4. 42 When consulted on 26 February 2008, no information was available for eleven Member States, while several others only provided information in one language. 43 Comments on specific articles, SEC(2005)352, Article 2, p. 2. 44 See Article 1(2) of Regulation 864/2007, and the ‘Commission Statement on the review clause’ appended to the Regulation; OJ 2007 L 199/40. 40 41

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Activities of the European Community in 2007 The most significant change, however, was the legislature’s decision to limit the procedure to ‘cross-border cases’, despite the Commission’s arguing that such a restriction ‘would not only be inappropriate but even counterproductive’.45 While one can see the political attraction of making such a procedure available for domestic claims too, the legislature may have had some reservations as to whether this extension was ‘necessary for the functioning of the internal market’, or indeed whether it cleared the subsidiarity hurdle.

B.

Service of Documents

Though it had only been in force for just over four years, in July 2005 the Commission proposed a revision of Council Regulation (EC) 1348/2000 on the service of judicial and extrajudicial documents in civil or commercial matters.46 The new measure, Parliament and Council Regulation (EC) 1393/2007,47 was adopted on 13 November 2007 and will apply from 13 November 2008. The 2000 Regulation was based on a Convention adopted by the Council in 1997,48 which never entered into force, and which in turn sought to update and adapt for the Community and its Member States the provisions laid down in the 1965 Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters. While maintaining the principal features of the previous regulation, which it replaces rather than merely amends,49 the new Regulation seeks to resolve a number of problems which had arisen in practice. In particular, Article 8 clarifies both the rules regarding the time limit for the refusal of service, and the consequences of such refusal which had previously given rise to a preliminary ruling by the Court of Justice.50 The provisions concerning the date of service and the payment of costs are also simplified; the latter maintain the possibility for service by means of recourse to a judicial officer, such as the huissier de justice so beloved of certain Member States once under Napoleonic legal sway, while restricting the costs the applicant may be obliged to pay to a single fixed fee which the Member State addressed must set in advance. The legislature nonetheless rejected the Commission’s suggestion for a single rule allowing such direct service, and retained the Members States’ option not to countenance this form of service. The option of ‘service by post’ under conditions fixed by each Member State individually is replaced ‘serSection 2.2.1 Explanatory Statement accompanying Commission proposal, COM (2005) 87 final, p. 6. 46 Regulation 1348/2000, OJ 2000 L 160/37; Commission proposal, COM (2005)305 final/2, 11 July 2005. 47 OJ 2007 L 324/79. 48 OJ 1997 C 261/1. 49 The Commission proposal of a series of amendments to the 2000 Regulation was rejected in favour of a single new instrument. 50 Case C-442/03 Götz Leffler v Berlin Chemie AG [2005] ECR I-09611. 45

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Kieran St Clair Bradley vice by postal services ... by registered letter with acknowledgement of receipt or equivalent’, thus providing a uniform rule for the exercise of this facility and allowing private operators in on the act, in conformity with the postal services Directive.51 Other amendments specify that the Regulation does not apply to revenue, customs or administrative matters or to acta iure imperii, in line with other recent acts on civil procedure such as the Regulation on the European order for payment procedure,52 seek to speed up the process of service by imposing a deadline on the receiving agency to effect service and, where this is not possible, requiring it to ‘continue to take the necessary steps ... where service seems to be possible within a reasonable period of time’. The European Parliament is given a role in supervising any implementing legislation through the application of the ‘regulatory procedure with scrutiny’, though this appears to be restricted to the updating of the standard forms set out in the Annexes to the Regulation.

C.

Mediation

After a rather slow start, progress on the Commission’s proposal for a Directive on certain aspects of mediation in civil and commercial matters53 gathered pace during the year. On 29 March 2007 the European Parliament adopted its first reading opinion, following both an online consultation exercise and two hearings on the Commission proposal. Overcoming her initial scepticism regarding the desirability of legislation, as distinct from a non-binding recommendation,54 rapporteur Arlene McCarthy set herself the objective of producing ‘a workable, light-touch directive, which reflects existing guidelines and best practice and can serve to encourage the wider use of mediation across the EU’.55 While a first reading agreement did not prove feasible, in its opinion Parliament followed closely the deliberations being conducted in parallel by its colegislator, and had even taken up what it considered ‘les meilleures idées du texte du Conseil’.56 The Council in turn reached a political agreement in November 200757 on a revised text for the regulation, which to a very large extent corresponds Directive 97/67/EC, OJ 1998 L 15/14, as amended. Regulation (EC) 1896/2006, OJ 206 L 399/1; on acta iure imperii, see the judgment of the European Court of Justice in Case C-292/05 Lecouritou [2007] ECR I-01519. 53 COM (2004) 718 final of 22 October 2004. 54 See Parliament’s resolution of 23 March 2005 on the Commission’s Green Paper on techniques of alternative dispute resolution. 55 Explanatory statement to the report of the Committee on Legal Affairs, EP Doc. A6-0074/2007, p. 22. 56 EP official Robert Bray, presentation to the EU Delegation of the French Assemblée nationale, Report of 13 February 2007, N° 3696, p. 47. 57 The common position was adopted on 28 February 2008 (Council Doc. 15003/07) and references hereafter are to the articles in this text. 51 52

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Activities of the European Community in 2007 with that adopted by Parliament earlier in the year. Should Parliament agree to this version on second reading, as appears probable, the Council text will become law. One of the main sticking points in the debates on this, and other Union instruments in the field of civil procedure such as the small claims regulation considered above, was whether the Community should only deal with cross-border cases, or whether it could or should adopt provisions applicable to purely domestic situations. As before, the Commission had argued strenuously that the former approach would not be feasible: ‘[promoting] mediation in relation to those disputes that display a cross-border element only would ... be arbitrary and create a risk of discriminatory effects, since the courts would suggest mediation to some parties, only depending on their place of residence’ increase legal uncertainty for the parties and ‘entail a substantial reduction in the practical impact of the proposed directive’.58 The Commission slightly undermined its own case by referring to ‘situations displaying a cross-border element’ in order to demonstrate that the principle of subsidiarity had been complied with.59 Be that as it may, Parliament and the Council agreed that the Directive itself should be limited to cross-border disputes, defined as those in which at least one of the parties is domiciled or habitually resident in a different Member State from that of the other party(ies). While Parliament had linked the application of the Directive to evidence of a cross-border element at the date on which the parties agreed to go to mediation, the Council extended it to include the date on which the parties are ordered or invited to use mediation by a court, or that on which an obligation to mediate arises under national law. The Directive will also apply if the cross-border element arises as a result of judicial or arbitration proceedings commenced after the mediation. Many of the substantive obligations the Directive imposes are optional, such as the possibility for a court to invite parties to use mediation and/or attend information sessions on the use of mediation,60 or hortatory, such as the duty of Member States to ‘encourage ... the development of and adherence to voluntary codes of conduct by mediators ... as well as other effective quality control mechanisms concerning the provision of mediation services’ and the training of mediators.61 This reflects the relatively underdeveloped character of mediation in many of the Member States, and the limited objective of the Directive, that is, ‘to facilitate access to alternative dispute resolution and to promote the amicable settlement of disputes by encouraging the use of mediation ... [and to] encourage (sic) … that information on how to contact mediators … is available to the general public’.62 Explanatory memorandum to Commission proposal, section 1.2, p. 5. Ibidem, section 1.3, p. 5. 60 Common position, Article 5; the apparently superfluous expression ‘if such [information] sessions are held’ presumably indicates that the Member States are not obliged, as a result of the Directive, to organise such sessions. 61 Common position, Article 4(1) and (2). 62 Common position, Articles 1(1) and 9. 58 59

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Kieran St Clair Bradley The concrete legal obligations laid down concern the enforceability of agreements resulting from mediation, the confidentiality of mediation proceedings (and the limits thereof), and the mitigation of limitation and prescription periods which is necessary to ensure that recourse to mediation does not subsequently prevent parties from initiating judicial proceedings or arbitration in relation to the same dispute. In line with recent practice in this area, the Commission was instructed to report back on the application of the Directive, including ‘the development of mediation throughout the European Union and the impact of this Directive’. The Council stopped short of explicitly requiring the Commission to report back on purely domestic mediation, as Parliament had suggested, though the Commission may well be minded to interpret its remit widely.

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COURT DECISIONS ENFORCEMENT OF ARBITRATION AGREEMENTS BY ANTI-SUIT INJUNCTIONS IN EUROPE – FROM TURNER TO WEST TANKERS Christian A. HEINZE / Anatol DUTTA∗

I.

II.

III. IV.

V.

The English Law Background – In a Nutshell A. Right not to Be Sued Abroad B. The Court’s Discretion C. Consequences of an Anti-Suit Injunction No Anti-Suit Injunctions within Europe to Protect Court Proceedings – the Turner Judgment A. Principle of Mutual Trust B. Risk of Contradictory Decisions From Turner to West Tankers – Is Arbitration Different? From Turner to West Tankers – How Different Is Arbitration? A. Scope of Art. 1(2) lit. d of the Brussels I Regulation B. Art. 1(2) lit. d of the Brussels I Regulation and Anti-Suit Injunctions C. Transferability of Turner Conclusion

If a party breaches an arbitration agreement by bringing suit in a foreign court, the court shall refer the claimant to arbitration. From time to time, however, claimants, although bound by arbitration agreement, try their luck before national courts – be it because they assert the nullity of the agreement or be it because they assume that their dispute does not fall within its scope. In such cases, the defendant has to decide how to react to the foreign proceedings. Such proceedings do not only generate additional cost but also bear, due to the danger of conflicting decisions, serious risks for the enforcement of a later arbitral award. Given the importance of London as a venue for arbitration and the procedural creativity of English judges, it does not come as a surprise that English law possesses an efficient tool to restrain other parties from initiating or continuing parallel proceedings: the anti-suit injunction. Yet, at least within Europe, this procedural weapon is becoming increasingly blunt. In 2004, the Court of Justice of the European Communities (ECJ) ∗ Senior Research Fellows, Max Planck Institute for Comparative and International Private Law, Hamburg.

Yearbook of Private International Law, Volume 9 (2007), pp. 415-438 © sellier. european law publishers & Swiss Institute of Comparative Law

Printed in Germany

Christian A. Heinze / Anatol Dutta held in the Turner decision1 that anti-suit injunctions directed against proceedings in other Member States conflict with European civil procedure law, especially with the Brussels I Regulation (BR).2 Unanswered, though, remained the question whether anti-suit injunctions aiming to protect arbitration agreements are compatible with European law. After affirmative decisions of the English High Court3 and the Court of Appeal,4 the House of Lords in February 2007 decided in West Tankers Inc v. RAS Riunione Adriatica di Sicurtà SpA5 to refer that question to the ECJ.6 The Lords, being of the opinion that anti-suit injunctions in the arbitration setting are well covered by European law and have to be distinguished from the litigation setting in Turner, asked the ECJ: ‘Is it consistent with EC Regulation 44/2001 for a court of a Member State to make an order to restrain a person from commencing or continuing proceedings in another Member State on the ground that such proceedings are in breach of an arbitration agreement?’7 Against this background, the following lines8 attempt to give a brief overview of the English law governing anti-suit injunctions for the enforcement of arbitration agreements and look ahead to how the ECJ might resolve the issue.

I.

The English Law Background – In a Nutshell

Anti-suit injunctions enforcing arbitration agreements have a long tradition in England.9 From a technical perspective, they are ordinary provisional or final court orders directed against a party to do, or to refrain from doing, a certain act. OrigiECJ, Case C-159/02, Turner, ECR 2004, I-3565. Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, O.J. 2001 L 12, p. 1. 3 West Tankers Inc v. Ras Riunione Adriatica di Sicurtà (The Front Comor) [2005] 2 Lloyd’s Rep. 257 (QB) 267 seq. (Colman J.). 4 Through Transport Mutual Insurance Association (Eurasia) Ltd v. New India Assurance Co Ltd [2005] 1 Lloyd’s Rep. 67 (CA) 88 seq. (Clarke LJ). 5 [2007] UKHL 4; [2007] ILPr 20; [2007] 1 Lloyd’s Rep. 391; [2007] 1 All ER 794. 6 The case is pending in Luxembourg as Case C-185/07. 7 West Tankers Inc v. RAS Riunione Adriatica di Sicurtà SpA [2007] UKHL 4 (HL) para. 23 (Lord Hoffmann). 8 Which are based on our earlier German papers published in the ZEuP 2005, pp. 428 seq. and in RIW 2007, pp. 411 seq. 9 See already Pena Copper Mines Ltd v. Rio Tinto Co Ltd (1911) 105 LT 846. On the continent, anti-suit injunctions in general are rare; two of the few examples are RG, RGZ 157, 136 and Cass. civ., SA Banque Worms v. Epoux Brachot, Rev. crit. DIP 2003, 631. 1 2

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Enforcement of Arbitration Agreements by Anti-Suit Injunctions in Europe nally, anti-suit injunctions were a prerogative of the Court of Chancery in order to stop parties from pursuing parallel proceedings in the common law courts, thereby ‘establishing the superiority of equity over the common law.’10 Today, anti-suit injunctions are based on Sec. 37(1) of the Supreme Court Act:11 ‘The High Court may by order (whether interlocutory or final) grant an injunction […] in all cases in which it appears to the court to be just and convenient to do so.’ As to provisional anti-suit injunctions enforcing arbitration agreements, Sec. 44(1) and (2) lit. e of the Arbitration Act12 additionally clarify that the English courts are empowered to issue the same interim injunctions regarding arbitral proceedings as in court proceedings – though, apparently not restricting the general power to also grant final anti-suit injunctions conferred by Sec. 37(1) of the Supreme Court Act.13 In accordance with general principles, the court granting an anti-suit injunction must have personal jurisdiction over the respondent.14 This is – as far as the jurisdictional rules of the Brussels I Regulation are not applicable to anti-suit injunction proceedings15 – the case if the respondent can be served with process or if the respondent has already submitted to English jurisdiction, for instance, during earlier proceedings.16 If the respondent cannot be served in England, the jurisdiction of the English courts has to be established by service outside jurisdiction.17 Rule 6.20 of the Civil Procedure Rules 199818 (CPR), ‘England’s long arm statute’19, permits such service out of jurisdiction in certain cases, but does not mention anti-suit injunctions. Nevertheless, if the applicant bases his claim on an arbitration agreement governed by English law, or part of a contract which is governed

Airbus Industrie GIE v. Patel [1999] 1 AC 119 (HL) 133 (Lord Goff). 1981 (UK) c. 54. 12 1996 (UK) c. 23. 13 Elektrim SA v. Vivendi Universal SA (No 2) [2007] 2 Lloyd’s Rep. 8 (QB) para. 52 (Aikens J.); Starlight Shipping Co & Anor v. Tai Ping Insurance Co Ltd, Hubei Branch & Anor [2007] 2 CLC 440 (QB) paras. 18 seq. (Cooke J). Cf. also Welex AG v. Rosa Maritime Ltd (The Epsilon Rosa) [2003] 2 Lloyd’s Rep. 509 (CA) 516 seq. (Tuckey LJ). 14 Donohue v. Armco Inc [2002] 1 Lloyd’s Rep. 425 (HL) 432 (Lord Bingham); Turner v. Grovit [2002] 1 WLR 107 (HL) 117 (Lord Hobhouse). British Airways Board v. Laker Airways Ltd [1985] AC 58 (HL) 81 (Lord Diplock); Airbus Industrie GIE v. Patel [1999] 1 AC 119 (HL) 144 (Lord Goff); Ibrahim Shanker & Co and Others v. Distos Compania Naviera SA [1978] 1 Lloyd’s Rep. 1 (HL) 6 (Lord Diplock). 15 See details infra IV B. 16 See, for example, Castanho v. Brown & Root (UK) Ltd [1981] AC 557 (HL) and Glencore International AG v. Exter Shipping Ltd [2002] CLC 1090 (CA). 17 Donohue v. Armco Inc [2002] 1 Lloyd’s Rep. 425 (HL) 432 (Lord Bingham). 18 UK SI 1998/3132. 19 Glencore International AG v. Exter Shipping Ltd [2002] CLC 1090 (CA) para. 45 (Rix LJ). 10 11

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Christian A. Heinze / Anatol Dutta by English law, a service outside jurisdiction could be rested on rule 6.20(5) lit. c20 provided one regards such an anti-suit injunction as a ‘claim made in respect of a contract.’21 Another viable solution drawing on Rule 6.20(2)22 has been proposed by A. Briggs and P. Rees.23 Although an anti-suit injunction is directed primarily against acts done abroad, the applicant incidentally claims that the respondent should sue – if he sues at all – in England.24 Finally, jurisdiction to grant anti-suit injunctions enforcing arbitration agreements is not excluded by Art. II(3) of the New York Convention on the recognition and enforcement of foreign arbitral awards,25 which provides that a national state court, if seized in a matter which falls within the scope of an arbitration agreement, must refer the parties to arbitration. This rule only relates to the proceedings in substance covered by the arbitration agreement and not to ancillary proceedings before state courts which, just as antisuit injunctions, support the arbitral proceedings.26 As to substance, an anti-suit injunction will only be granted if the applicant establishes two conditions. He is obliged to show both that a valid arbitration agreement creates a right not to be sued abroad against the respondent and that the ends of justice require an injunction to enforce this very right.

20 Rule 6.20(5) lit. c CPR: ‘a claim form may be served out of the jurisdiction with the permission of the court if [...] a claim is made in respect of a contract where the contract [...] is governed by English law’. 21 Cf. as to exclusive jurisdiction agreements Youell v. Kara Mara Shipping Co Ltd [2000] 2 Lloyd’s Rep. 102 (QB) 115 (Aikens J.). See also Albon v. Naza Motor Trading Sdn Bhd (No 4) [2007] 2 Lloyd’s Rep. 420 (Ch) para. 20 (Lightman J.). 22 Rule 6.20(2) CPR: ‘a claim form may be served out of the jurisdiction with the permission of the court if [...] a claim is made for an injunction ordering the defendant to do or refrain from doing an act within the jurisdiction.’ 23 BRIGGS A./REES P., Civil Jurisdiction and Judgments, 4th ed., London 2005, para. 5.37. 24 See, however, as to the predecessor of Rule 6.20(2) CPR, Order 11, Rule 1(1) lit. b of the Rules of the Supreme Court: Amoco (UK) Exploration Co v. British American Offshore Ltd [1999] 2 Lloyd’s Rep. 772 (QB) 778 (Langley J): ‘[…] to permit service out on this limited basis would be to ignore the reality of the claim the claimants seek to make and the spirit of this rule. The tail would indeed be wagging the dog.’ 25 Of 10 June 1958, 330 UNTS 38. 26 See Toepfer International GmbH v. Société Cargill France [1998] 1 Lloyd’s Rep. 379 (CA) 385 (Phillips LJ): ‘The disputes to which [the arbitration clause] applies are, on the proper construction of that clause, clearly substantive disputes and not disputes as to compliance with the very clause itself. The obvious purpose and meaning of the clause is that neither party can have resort to any action or legal proceedings in respect of substantive disputes unless and until the disputes have been referred to arbitration and an award obtained. A dispute as to whether an anti-suit injunction should be granted in order to cause one party to comply with the clause cannot have been intended by the parties to have been covered by the words ‘any dispute arising out of or under this contract’. The arbitrators could not grant such an injunction.’

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Enforcement of Arbitration Agreements by Anti-Suit Injunctions in Europe A.

Right not to Be Sued Abroad

According to English procedure, injunctions are based on a right of the applicant which might be impeded by behaviour of the respondent.27 With regard to anti-suit injunctions the cause of action is always a right of the applicant against the respondent not to be sued in a foreign court. This right not to be sued abroad can be of legal or equitable nature.28 The most important equitable right not to be sued abroad arises if the respondent vexatiously and oppressively sues before a foreign court which – according to English law – should not exercise its jurisdiction because the natural forum of the case is situated in a different place.29 A legal right not to be sued abroad flows from an exclusive jurisdiction agreement30 or an arbitration agreement:31 If the parties conclude such an agreement, each of the parties can claim that the case – as far as it falls within the ambit of the agreement – shall not be litigated before a foreign court. Hence, if the respondent thwarts that legal right by starting foreign proceedings, or being about to do so,32 an anti-suit injunction, in principle, can be granted. The right not to be sued abroad based on an arbitration agreement does not expire when an award has been rendered in the arbitral proceedings.33

Cf. Ibrahim Shanker & Co and Others v. Distos Compania Naviera SA [1978] 1 Lloyd’s Rep. 1 (HL) 6 (Lord Diplock): ‘A right to obtain an interlocutory injunction is not a cause of action. It cannot stand on its own. It is dependent upon there being a pre-existing cause of action against the defendant arising out of an invasion, actual or threatened by him, of a legal or equitable right of the plaintiff for the enforcement of which the defendant is amenable to the jurisdiction of the Court’. 28 British Airways Board v. Laker Airways Ltd [1985] AC 58 (HL) 81 (Lord Diplock). 29 See, for example, SNI Aerospatiale v. Lee Kui Jak [1987] AC 871 (PC). 30 British Airways Board v. Laker Airways Ltd [1985] AC 58 (HL) 81 (Lord Diplock); Continental Bank NA v. Aeakos Compania Naviera SA [1994] 1 Lloyd’s Rep. 505 (CA) 512 (Steyn LJ); Donohue v. Armco Inc [2002] 1 Lloyd’s Rep. 425 (HL) 432 seq. (Lord Bingham); Turner v. Grovit [2002] 1 WLR 107 (HL) 118 (Lord Hobhouse). 31 E.g. Aggeliki Charis Compania Maritima SA v. Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd’s Rep. 87 (CA) 94 (Leggatt LJ); Schiffahrtsgesellschaft Detlev Von Appen GmbH v. Voest Alpine Intertrading GmbH (The Jay Bola) [1997] 2 Lloyd’s Rep. 279 (CA) 285 seq. (Hobhouse LJ); Toepfer International GmbH v. Société Cargill France [1998] 1 Lloyd’s Rep. 379 (CA) 384 (Phillips LJ); Bankers Trust Co v. T. Jakarta International Hotels and Development [1999] 1 Lloyd’s Rep. 910 (QB) 915 (Cresswell J); XL Insurance Ltd v. Owens Corning [2000] 2 Lloyd’s Rep. 500 (QB) 509 (Toulson J.); Turner v. Grovit [2002] 1 WLR 107 (HL) 118 (Lord Hobhouse); West Tankers Inc v. RAS Riunione Adriatica di Sicurtà SpA [2007] UKHL 4 (HL) para. 14 (Lord Hoffmann). 32 Shell International Petroleum Co Ltd v. Coral Oil Co Ltd [1999] 1 Lloyd’s Rep. 72 (QB) 78 (Moore-Bick J.). 33 See Noble Assurance Co v. Gerling-Konzern General Insurance Co [2007] EWHC 253 (QB) para. 87 (Toulson LJ). 27

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Christian A. Heinze / Anatol Dutta Yet, from a choice of law perspective it is unclear which law governs the issue whether an arbitration agreement establishes a right not to be sued abroad enforceable by an anti-suit injunction. This question is highly relevant as it is far from being universally accepted that a party to an arbitration agreement has a subjective right not to be sued abroad. For example, the prevailing opinion in Germany attributes exclusive jurisdiction or arbitration agreements only procedural consequences as to the jurisdiction of a certain court but no substantive effects as to the rights and obligations of the parties.34 Hence, interim measures according to § 935 or § 940 of the German Zivilprozessordnung (Civil Procedure Code) are not possible failing a right of the applicant to be secured. Conceptually, the existence of a right not to be sued abroad could be governed by several laws. Firstly, the procedural character of the anti-suit injunction militates for the (English) lex fori to be the decisive law. Although the anti-suit injunction enforces a legal right not to be sued abroad, the legal relations between applicant and respondent are dominated by the anti-suit injunction as a procedural remedy.35 Following this lex fori approach, English courts would always apply their own law. As a result, even an arbitration agreement in favour of arbitration in Germany would create a right not to be sued abroad, albeit that German law does not infer such right from an arbitration agreement. Following this opinion would, however, not necessarily mean that an injunction has to be granted to enforce the agreement in favour of arbitration in Germany; the question whether an English judge should use his discretion to protect arbitration in Germany by enforcing a right not to be sued abroad is a distinct one.36 A second solution could be to apply on the issue of a right not to be sued abroad the law governing the arbitration proceedings which are to be protected by the anti-suit injunction, i.e. normally the law of the place of the arbitration.37 An argument in favour of this view would be that the anti-suit injunction only aims to protect arbitration proceedings; therefore a national court should not afford more

DE LOUSANOFF O., in: ZZP 1992, nr. 105, p. 111, p. 114; PFEIFFER T., Internationale Zuständigkeit und prozessuale Gerechtigkeit, Frankfurt/M. 1995, p. 770; WAGNER G., Prozeßverträge, Tübingen 1998, pp. 269 seq.; SPICKHOFF A., in: Festschrift für Erwin Deutsch, Cologne 1999, p. 327, p. 335; GEIMER R., Internationales Zivilprozeßrecht, 5th ed., Cologne 2005, paras. 1716 seq.; SCHACK H., Internationales Zivilverfahrensrecht, 4th ed., Munich 2006, paras. 771 seq. See, though, for a different view SCHLOSSER P., Der Justizkonflikt zwischen den USA und Europa, Berlin 1985, p. 37; ID., in: RIW 2006, p. 486, p. 488; ID., in: Festschrift für Walter Lindacher, Cologne 2007, p. 111, pp. 118 seq.; KURTH J., Inländischer Rechtsschutz gegen Verfahren vor ausländischen Gerichten, Berlin 1989, p. 74; SCHRÖDER J., in: Festschrift für Gerhard Kegel, Stuttgart 1987, p. 523, p. 532. 35 Cf. BRIGGS A., in: LMCLQ 1997, p. 90, pp. 92 seq.; HARRIS J., in: LMCLQ 1997, p. 413, pp. 417 seq. 36 See infra I B. 37 See, for example, Sec. 2(1) of the Arbitration Act 1996 or § 1025(1) of the German Zivilprozessordnung (Civil Procedure Code). 34

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Enforcement of Arbitration Agreements by Anti-Suit Injunctions in Europe protection than the applicable lex arbitri is willing to do.38 Yet, it seems most convincing to apply the law governing the arbitration agreement to the question of whether the agreement creates a contractual right not to be sued abroad.39 This issue relates to the legal consequences of the arbitration agreement and, hence, should be answered by the law which applies to the agreement. According to English law, in the absence of an express choice of law, one can regularly infer from the arbitration agreement an implicit choice of law in favour of the law of the agreed place of arbitration.40

B.

The Court’s Discretion

Still, the existence of a legal right not to be sued abroad and its lurking impediment by the respondent are not sufficient for an anti-suit injunction. Owing to its equity heritage, the injunction will only be granted if – as also highlighted by the wording of Sec. 37(1) of the Supreme Court Act – the ends of justice require doing so.41 In exercising his discretion, the judge has to balance notably the interests of the foreign state, whose proceedings shall be stopped, and the interests of the parties. See C v. D [2007] EWCA Civ 1282, paras. 16 seq., where Longmore LJ states that the choice of seat for the arbitration is also a choice for all remedies of the courts at that place going to the existence of the arbitrator’s jurisdiction. 39 This appears to be also the position of the English courts which always stress that the agreement to be protected at hand is governed by English law, cf. Aggeliki Charis Compania Maritima SA v. Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd’s Rep. 87 (CA) 96 (Millett LJ); Bankers Trust Co v. T. Jakarta International Hotels and Development [1999] 1 Lloyd’s Rep. 910 (QB) 915 (Cresswell J.); Shell International Petroleum Co Ltd v. Coral Oil Co Ltd [1999] 1 Lloyd’s Rep. 72 (QB) 78 (Moore-Bick J.); American International Specialty Lines Insurance Co v. Abbott Laboratories [2003] 1 Lloyd’s Rep. 267 (QB) 274 (Cresswell J.). 40 See, e.g. XL Insurance Ltd v. Owens Corning [2000] 2 Lloyd’s Rep. 500 (QB) 508 (Toulson J.): ‘I concluded that by stipulating for arbitration in London under the provisions of the [Arbitration] Act […] the parties chose English law to govern the matters which fall within those provisions, including the formal validity of the arbitration clause and the jurisdiction of the arbitral tribunal; and by implication chose English law as the proper law of the arbitration clause.’ (emphasis added). See also Deutsche Schachtbau- und Tiefbohrgesellschaft mbH v. Ras Al-Khaimah National Oil Co [1990] 1 AC 295 (CA) 309 seq. (Donaldson MR). 41 Cf. Castanho v. Brown & Root (UK) Ltd [1981] AC 557 (HL) 573 (Lord Scarman): ‘[…] the injunction can be granted […] where it is appropriate to avoid injustice’; SNI Aerospatiale v. Lee Kui Jak [1987] AC 871 (PC) 892 (Lord Goff): ‘the jurisdiction is to be exercised when the ‘ends of justice’ require it’; Airbus Industrie GIE v. Patel [1999] 1 AC 119 (HL) 133 (Lord Goff): ‘The broad principle underlying the jurisdiction is that it is to be exercised when the ends of justice require it’; Turner v. Grovit [2002] 1 WLR 107 (HL) 117 (Lord Hobhouse): ‘The applicant for a restraining order must have a legitimate interest in making his application and the protection of that interest must make it necessary to make the order.’ 38

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Christian A. Heinze / Anatol Dutta First, the judge can decline to grant an anti-suit injunction because of international comity. In England – unlike, for example, in Germany42 – there are no public international law concerns regarding the foreign state’s sovereignty. The English courts always emphasise that anti-suit injunctions are directed only to the respondent in personam and not to the foreign court.43 Nonetheless, the English courts are well aware that an anti-suit injunction can be understood by the foreign court as an indirect interference with its sovereignty.44 Therefore, it is commonly accepted that, due to international comity, anti-suit injunction should be used charily.45 In reality, though, this diffidence appears to occur only if the anti-suit injunction enforces an equitable right not to be sued abroad, for example, on the basis of perceived vexation and oppression by the respondent suing in a foreign court. With regard to the protection of jurisdiction and arbitration agreements, English courts since the decision of the Court of Appeal in The Angelic Grace take only little consideration of the foreign state’s interests.46 Millet LJ stressed in his opinion that: ‘the time has come to lay aside the ritual incantation that this is a jurisdiction which should only be exercised sparingly and with great caution. […] there is no good reason for diffidence in granting an injunction to restrain foreign proceedings on the clear and simple OLG Düsseldorf 10 January 1996, in: ZIP, 1996, p. 294, p. 295; MANSEL H. P., in: EuZW 1996, p. 335; HAU W., in: IPRax 1997, p. 245, pp. 247 seq. 43 See SNI Aerospatiale v. Lee Kui Jak [1987] AC 871 (PC) 892 (Lord Goff); Turner v. Grovit [2002] 1 WLR 107 (HL) 117 (Lord Hobhouse); Through Transport Mutual Insurance Association (Eurasia) Ltd v. New India Assurance Co Ltd [2004] 1 Lloyd’s Rep. 206 (QB) 214 (Moore-Bick J.); West Tankers Inc v. Ras Riunione Adriatica di Sicurtà (The Front Comor) [2005] 2 Lloyd’s Rep. 257 (QB) 266 (Colman J.); Markel International Company Ltd v. Mrs M. M. Craft [2006] EWHC 3150 (QB) para. 30 (Morison J.). 44 See only British Airways Board v. Laker Airways Ltd [1985] AC 58 (HL) 95 (Lord Scarman): ‘an injunction restraining a person […] from pursuing a remedy in a foreign court […] is, however disguised and indirect, an interference with the process of justice in that foreign court’; Airbus Industrie GIE v. Patel [1999] 1 AC 119 (HL) 133 (Lord Goff): ‘[…] indirect interference with the foreign court which an anti-suit injunction entails’; Donohue v. Armco Inc [2002] 1 Lloyd’s Rep. 425 (HL) 4321 (Lord Bingham): ‘such an order indirectly affects the foreign court’; Markel International Company Ltd v. Mrs M.M. Craft [2006] EWHC 3150 (QB) para. 30 (Morison J.): ‘however, the reality is that it [the anti-suit injunction] is to be seen as an interference with another court’s jurisdiction.’ 45 Cohen v. Rothfield [1919] 1 KB 410 (CA) 413 (Scrutton LJ); Castanho v. Brown & Root (UK) Ltd [1981] AC 557 (HL) 573 (Lord Scarman); British Airways Board v. Laker Airways Ltd [1985] AC 58 (HL) 95 (Lord Scarman); SNI Aerospatiale v. Lee Kui Jak [1987] AC 871 (PC) 892 (Lord Goff); Airbus Industrie GIE v. Patel [1999] 1 AC 119 (HL) 133 (Lord Goff); Glencore International AG v. Exter Shipping Ltd [2002] CLC 1090 (CA) para. 43 (Rix LJ); Turner v. Grovit [2002] 1 WLR 107 (HL) 119 seq. (Lord Hobhouse). 46 More diffident, however, were the courts, e.g., in Tracomin SA v. Sudan Oil Seeds Co Ltd (No.2) [1983] 2 Lloyd’s Rep. 624 (CA) 626 (Donaldson MR); World Pride Shipping Ltd v. Daiichi Chuo Kisen Kaisha (The Golden Anne) [1984] 2 Lloyd’s Rep. 489 (QB) 497 seq. (Lloyd J.). 42

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Enforcement of Arbitration Agreements by Anti-Suit Injunctions in Europe ground that the defendant has promised not to bring them […]. I cannot accept the proposition that any Court would be offended by the grant of an injunction to restrain a party from invoking a jurisdiction which he had promised not to invoke and which it was its own duty to decline.’47 Following that dicta the English courts grant anti-suit injunctions enforcing arbitration agreements without hesitation unless there is a good reason not to do so,48 the respondent bearing the burden of proof for that exception.49 Even in cases where the foreign court was bound by the New York Convention to stop the proceedings pursuant to Art. II(3), an anti-suit injunction was granted50 because the New York Convention was perceived not to vest the foreign courts being addressed by the respondent in breach of an arbitration agreement with exclusive jurisdiction to protect that agreement.51 Aggeliki Charis Compania Maritima SA v. Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd’s Rep. 87 (CA) 96 (Millett LJ). 48 See Toepfer International GmbH v. Société Cargill France [1998] 1 Lloyd’s Rep. 379 (CA) 386 (Phillips LJ); Bankers Trust Co v. T. Jakarta International Hotels and Development [1999] 1 Lloyd’s Rep. 910 (QB) 915 (Cresswell J.); XL Insurance Ltd v. Owens Corning [2000] 2 Lloyd’s Rep. 500 (QB) 509 (Toulson J.); Navigation Maritime Bulgare v. Rustal Trading Ltd (The Ivan Zagubanski) [2002] 1 Lloyd’s Rep 106 (QB) 124 (Aikens J.); Turner v. Grovit [2002] 1 WLR 107 (HL) 119 (Lord Hobhouse); Welex AG v. Rosa Maritime Ltd (The Epsilon Rosa) [2003] 2 Lloyd’s Rep. 509 (CA) 518 (Tuckey LJ); Electronic Arts CV v. CTO SpA [2003] EWHC 1020 (QB) paras. 76 seq., paras. 109 seq. (Glick QC); West Tankers Inc v. Ras Riunione Adriatica di Sicurtà (The Front Comor) [2005] 2 Lloyd’s Rep. 257 (QB) 266 (Colman J.); Starlight Shipping Co & Anor v. Tai Ping Insurance Co Ltd, Hubei Branch & Anor [2007] 2 CLC 440 (QB) para. 44 (Cooke J.). See for exclusive jurisdiction agreements Donohue v. Armco Inc [2002] 1 Lloyd’s Rep. 425 (HL) 432 seq. (Lord Bingham); OT Africa Line Ltd v. MAGIC Sportswear Corporation [2005] 2 Lloyd’s Rep. 170 (CA) para. 32 (Longmore LJ). More diffident, though, Markel International Company Ltd v. Mrs M.M. Craft [2006] EWHC 3150 (QB) para. 30 (Morison J.). 49 Shell International Petroleum Co Ltd v. Coral Oil Co Ltd [1999] 1 Lloyd’s Rep. 72 (QB) 78 (Moore-Bick J.): ‘Nonetheless the burden remains on the defendant, who is seeking to pursue proceedings abroad in contravention of an agreement of that kind, to make out a strong case why the Court should refrain from granting an injunction.’ See for exclusive jurisdiction agreements also Donohue v. Armco Inc [2002] 1 Lloyd’s Rep. 425 (HL) 432 seq. (Lord Bingham). 50 Aggeliki Charis Compania Maritima SA v. Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd’s Rep. 87 (CA) 96 (Millett LJ); Toepfer International GmbH v. Société Cargill France [1998] 1 Lloyd’s Rep. 379 (CA) 386 (Phillips LJ); West Tankers Inc v. Ras Riunione Adriatica di Sicurtà (The Front Comor) [2005] 2 Lloyd’s Rep. 257 (QB) 268 (Colman J.). 51 West Tankers Inc v. Ras Riunione Adriatica di Sicurtà (The Front Comor) [2005] 2 Lloyd’s Rep. 257 (QB) 269 (Colman J.): ‘Whereas this provision identifies the duty which rests on the court seised of court proceedings to stay those proceedings and to refer the parties to arbitration, it contains nothing which vests in that court exclusive jurisdiction to enforce that arbitration agreement. In this respect the Convention crucially has no provision 47

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Christian A. Heinze / Anatol Dutta However, the question remains whether the English courts would, with the same fortitude, enforce an arbitration agreement in favour of arbitration outside England. For example, a party to an agreement providing for arbitration in Germany might prefer to seek the help of the London courts rather than those of their German counterparts – keeping in mind that German law does not infer a contractual right not to be sued abroad from an arbitration agreement. Theoretically, the English courts would have jurisdiction to grant, at least, an interim anti-suit injunction in support of the German arbitration. According to Sec. 2(2) lit. b of the Arbitration Act, the powers given to the courts by Sec. 44(1) and (2) lit. e encompass interim measures regarding arbitration proceedings outside England and Wales or Northern Ireland, unless, in the opinion of the court, the foreign place of arbitration ‘makes it inappropriate’ to exercise that jurisdiction. Nevertheless, even if English law governed the agreement providing for arbitration outside England and, hence, a right not to be sued abroad exists, it still appears very doubtful whether the English courts would come to the assistance of the German arbitration. This doubt stems from the fact that an anti-suit injunction based on an equitable right not to be sued abroad will only be granted if the natural forum of the case is England,52 or if there is another close connection with the proceedings to be protected to England.53 Following this reasoning, it has been argued that only exclusive jurisdiction agreements in favour of the English courts should be enforced by an anti-suit injunction.54 The same would probably apply mutatis mutandis for antisuit injunctions protecting arbitration agreements55 because in either case there are no connections with England which could justify that English courts interfere, at least indirectly, with the jurisdiction of a foreign court56. More important for the exercise of the judge’s discretion than the interests of the foreign state are, though, the interests of the parties involved, at least as far as the enforcement of legal rights not to be sued abroad are concerned. While injunctions as subsidiary remedies shall in general be declined if ordinary damages equivalent to article 27 of Regulation 44/2001 which vests exclusive jurisdiction in the court first seized of the issue.’ 52 See only Airbus Industrie GIE v. Patel [1999] 1 AC 119 (HL) 134, 138, 140 (Lord Goff). 53 For example if proceedings in England have been established, cf. Turner v. Grovit [2002] 1 WLR 107 (HL) 119 (Lord Hobhouse). See, in more general terms, Airbus Industrie GIE v. Patel [1999] 1 AC 119 (HL) 138 (Lord Goff): ‘[…] comity requires that the English forum should have a sufficient interest in, or connection with, the matter in question to justify the indirect interference with the foreign court which an anti-suit injunction entails.’ 54 See BRIGGS A./REES P. (note 23) para. 5.39. 55 PETROCHILOS G., Procedural law in international arbitration, Oxford 2004, p. 107. 56 See, however, the decision of the Court of Appeal for Bermuda in IPOC International Growth Fund Ltd v. OAO ‘CT-Mobile’ LA Finance Group [2007] Bda LR 43, paras. 41 seq. (Sir Murray Stuart-Smith JA), where the court held that such a connection is not necessary and also courts other than the courts at the seat of the agreed arbitration can grant anti-suit injunctions.

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Enforcement of Arbitration Agreements by Anti-Suit Injunctions in Europe are sufficient,57 the insufficiency of damages for the protection of exclusive jurisdiction agreements58 or arbitration agreements59 is widely accepted. However, an anti-suit injunction enforcing an arbitration agreement was not regarded to conform with the interests of the parties if the proceedings before the foreign court are already too far advanced and the anti-suit injunction was not applied for promptly.60 Additionally, the danger of parallel proceedings and conflicting decisions can in some cases justify the refusal of an anti-suit injunction61 even if the legal right not to be sued abroad has been breached. Such situations may arise if not all parties on one side of the case are bound by the arbitration agreement and the case would, thus, be torn apart by an anti-suit injunction because not all parties would be barred by the injunction from commencing or continuing court proceedings abroad. Finally, an anti-suit injunction can be declined if the respondent cannot be blamed for the violation of the arbitration clause, for example as in the Through Transport case, because the respondent is, due to characterisation of his claim according to the English lex fori, bound as a third party by the arbitration agreement and bases his claim before the foreign court on a direct claim which is only available there.62

Cf. Donohue v. Armco Inc [2002] 1 Lloyd’s Rep. 425 (HL) 437 (Lord Bingham). See only Continental Bank NA v. Aeakos Compania Naviera SA [1994] 1 Lloyd’s Rep. 505 (CA) 512 (Steyn LJ). 59 See only Aggeliki Charis Compania Maritima SA v. Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd’s Rep. 87 (CA) 96 (Millett LJ). 60 Aggeliki Charis Compania Maritima SA v. Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd’s Rep. 87 (CA) 96 (Millett LJ); Toepfer International GmbH v. Molino Boschi Srl [1996] 1 Lloyd’s Rep. 510 (QB) 515 seq. (Mance J.); Schiffahrtsgesellschaft Detlev Von Appen GmbH v. Voest Alpine Intertrading GmbH (The Jay Bola) [1997] 2 Lloyd’s Rep. 279 (CA) 288 (Hobhouse LJ); The Charterers Mutual Assurance Association Limited v. British & Foreign and T.M.M.. Transcap [1998] I.L.Pr. 838 (QB) 854 (Diamond QC); Bankers Trust Co v. T. Jakarta International Hotels and Development [1999] 1 Lloyd’s Rep. 910 (QB) 915 (Cresswell J.); Shell International Petroleum Co Ltd v. Coral Oil Co Ltd [1999] 1 Lloyd’s Rep. 72 (QB) 79 (Moore-Bick J.); Markel International Company Ltd v. Mrs M.M. Craft [2006] EWHC 3150 (QB) para. 32 (Morison J.). 61 See Bouygues Offshore SA v. Caspian Shipping Co [1998] 2 Lloyd’s Rep. 461 (CA); Donohue v. Armco Inc [2002] 1 Lloyd’s Rep. 425 (HL). Cf. also XL Insurance Ltd v. Owens Corning [2000] 2 Lloyd’s Rep. 500 (QB) 509 (Toulson J.) and Electronic Arts CV v. CTO SpA [2003] EWHC 1020 (QB) paras. 92 seq. (Glick QC), where finally the court declined to accept that argument. 62 Through Transport Mutual Insurance Association (Eurasia) Ltd v. New India Assurance Co Ltd [2005] 1 Lloyd’s Rep. 67 (CA) 89 (Clarke LJ). However, the exact reason why the respondent cannot be blamed for his breach of contract is not entirely clear; see BRIGGS A., in: BYBIL 2004, p. 537, p. 558; HARRIS J, in: LMCLQ 2005, p. 159, pp. 166 seq. 57 58

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Christian A. Heinze / Anatol Dutta C.

Consequences of an Anti-Suit Injunction

The anti-suit injunction as a remedy in personam does not stop the foreign proceedings directly. It rather bars further proceedings abroad indirectly. It is true, English anti-suit injunction are generally not recognised or enforced abroad because they are regarded as a violation of the public policy of the foreign state.63 But already the consequences of an anti-suit injunction in England put in many cases sufficient pressure on the respondent to refrain from the foreign proceedings. The breach of an anti-suit injunction amounts to contempt of court because the respondent does not honour an order of an English court. Contempt of court can inflict harsh consequences on the respondent, in extreme cases leading to imprisonment or seizure of assets situated in England.64 Additionally, no application of the contemnor will be entertained by an English court ‘until he has purged himself of his contempt.’65 These consequences of contempt of court, of course, will not impress respondents whose person and assets are not within the reach of the English courts and who will, hence, not be refrained from continuing foreign proceedings. Yet, even in that case the anti-suit injunction has teeth. A judgment in the foreign proceedings obtained by the respondent in breach of an anti-suit injunction would not be recognised or enforced in England.66

II.

No Anti-Suit Injunctions within Europe to Protect Court Proceedings – the Turner Judgment

While the preceding lines have tried to sketch the ingenious practice of anti-suit injunctions by English courts, the second half of the paper shall be devoted to the 63 Cf. Rb. Brussels, in: Rechtskundig Weekblad, 1990-1991, p. 676; SCHLOSSER P., EU-Zivilprozessrecht, 2nd ed., Munich 2003, Art. 34–36 Brussels I Regulation, para. 5; KROPHOLLER J., Europäisches Zivilprozeßrecht, 8th ed., Frankfurt/M. 2005, Art. 27 Brussels I Regulation, para. 20 and Art. 34 Brussels I Regulation, para. 15. 64 See EADY D./SMITH A. T. H., Arlidge, Eady & Smith on Contempt, 3rd ed., London 2005, paras. 14–1. 65 Hadkinson v. Hadkinson [1952] 2 All ER 567 (CA); see, however, more restrictive Motorola Credit Corporation Respondent v. Uzan and others [2004] 1 WLR 113 (CA). 66 Toepfer International GmbH v. Molino Boschi Srl [1996] 1 Lloyd’s Rep. 510 (QB) 514 (Mance J.); Philip Alexander Securities and Future Ltd v. Bamberger [1997] ILPr 73 (QB) 101 (Waller J.), confirmed by [1997] ILPr 73 (CA) 115 (Leggatt LJ); Through Transport Mutual Insurance Association (Eurasia) Ltd v. New India Assurance Co Ltd [2004] 1 Lloyd’s Rep. 206 (QB) 215 (Moore-Bick J.). Within the scope of the Brussels I Regulation one might doubts whether this statement is compatible with Art. 32 and 35(3) second sentence of the Brussels I Regulation, see Opinion of Advocate General RUIZJARABO COLOMER of 20 November 2003 in Case C-159/02, Turner, ECR 2004, I-3565, para. 36.

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Enforcement of Arbitration Agreements by Anti-Suit Injunctions in Europe question whether anti-suit injunctions aiming to protect arbitration agreements can survive the incursion of European legislation into the common law world of civil litigation. The starting point for any such analysis needs to be the Turner case in which the full court of the ECJ held that the Brussels Convention67 – today the Brussels I Regulation – ‘is to be interpreted as precluding the grant of an injunction whereby a court of a Contracting State prohibits a party to proceedings pending before it from commencing or continuing legal proceedings before a court of another Contracting State, even where that party is acting in bad faith with a view to frustrating the existing proceedings.’68 The Turner court presented essentially two reasons in support of a general prohibition of anti-suit injunctions to protect court proceedings under the Brussels regime; namely the principle of mutual trust and the fact that the Brussels I Regulation does not permit the jurisdiction of one court to be reviewed by another court in another Member State (see infra II A), as well as the effectiveness of the Regulation rules on lis alibi pendens and the risk that anti-suit injunctions give rise to conflicts for which European law contains no solutions (see infra II B). Further arguments militating against anti-suit injunctions in the European context are the unilateral power of English courts to attribute jurisdiction by way of such injunctions and an infringement upon the subjective right of a litigant under the Brussels regime to choose which court to seize.69

A.

Principle of Mutual Trust

The central argument of the Turner court against anti-suit injunctions in the litigation setting appears to be the principle of mutual trust of the Member States in one another’s legal systems and judicial institutions, a principle which forms the basis of the Brussels regime.70 Mutual trust is mentioned in Recitals 16 and 17 of the Brussels Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, O.J. 1978 L 304, p. 36. 68 ECJ, Case C-159/02, Turner, ECR 2004, I-3565 para. 31. 69 Opinion of Advocate General RUIZ-JARABO COLOMER, Case C-159/02, Turner, ECR 2004, I-3565 para. 33 and para. 32 in n. 7. As to the discussion and potential justifications DUTTA A./HEINZE C., in: ZEuP 2005, p. 428, pp. 448–458. Conversely, anti-suit injunctions probably do not infringe Art. 6 of the European Convention on Human Rights (ECHR) because Art. 6 ECHR guarantees only general access to courts, not the choice of a particular court, see OT Africa Line v. Hijazi and others (The Kribi) [2001] 1 Lloyd’s Rep. 76 (QB) 86 seq. (Aikens J.); MAACK M., Englische antisuit injunctions im europäischen Zivilrechtsverkehr, Berlin 1999, p. 184. See, also, the different view of HAU W., Positive Kompetenzkonflikte im Internationalen Zivilprozeßrecht, Frankfurt/M. 1996, p. 219. 70 ECJ, Case C-159/02, Turner, ECR 2004, I-3565 para. 24 with reference to ECJ, Case C-116/02, Gasser, ECR 2003, I-14693 para. 72; see also ECJ, Case C-341/04, Euro67

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Christian A. Heinze / Anatol Dutta Brussels I Regulation and expresses the respect the Brussels regime demonstrates for foreign lis pendens (Art. 27 BR). A close relative of the principle of mutual trust is the rule that the jurisdiction of a Member State court may not be reviewed by another court in another Member State because that jurisdiction is determined directly by the rules of the Brussels I Regulation which are common to both courts and may be interpreted and applied with the same authority by each of them.71 Except for a few limited exceptions (see, e. g., Art. 35[1] BR72), the Brussels I Regulation does not permit any review of another Member State court’s jurisdiction.73 An anti-suit injunction violates both the principle of mutual trust and nonrevision of foreign jurisdiction as it undermines the foreign court’s jurisdiction to determine the dispute and constitutes an interference with the jurisdiction of the foreign court which, as such, is incompatible with the system of the Regulation.74 Such interference cannot be justified by the mere indirect in personam effect of the injunction75 and its purpose to prevent an abuse of process by the defendant in the foreign proceedings76 even if that abuse establishes a right not to be sued abroad according to English law. Any judgment made as to the appropriateness of the defendant’s conduct – which any ruling on a right not to be sued abroad and its enforcement entails – necessarily implies an assessment of the appropriateness of bringing proceedings abroad. Such an assessment runs counter to the principle of food, ECR 2006, I-3813 paras. 39 seq. (on the European Insolvency Regulation). The principle of mutual trust seems to appear for the first time in den opinion of Advocate General DARMON, Case C-172/91, Sonntag, ECR 1993, I-1963 para. 71 who refers to PLUYETTE G. in: Etudes offertes à Pierre Bellet, Paris 1991, p. 427. The scope of the principle of mutual trust is criticised by many commentators, see ALTHAMMER C./LÖHNIG M., in: ZZPInt. 2004, nr. 9, p. 23, pp. 36 seq.; BRIGGS A., in: LQR 2004, nr. 120, p. 529, p. 530; DICKINSON A., in: LMCLQ 2004, p. 273, p. 278; MANKOWSKI P., in: EWiR 2004, p. 439, p. 440; BLOBEL F./SPÄTH P., in: European Law Review 2005, nr. 30, pp. 528–547. 71 ECJ, Case C-351/89, Overseas Insurance, ECR 1991, I-3317 para. 23; ECJ, Case C-116/02, Gasser, ECR 2003, I-14693 para. 48. 72 A further – tacit – exception concerns provisional measures granted on the basis of Art. 31 BR: the court to which application for enforcement of such measures is made has to examine whether the original decision respected the limits of Art. 31 BR (definition of provisional measure, existence of a real connecting link between the subject matter of the measures sought and the territorial jurisdiction of the court); cf. ECJ, Case C-99/96, Mietz, ECR 1999, I-2277 paras. 53–56; HEINZE C., Einstweiliger Rechtsschutz im europäischen Immaterialgüterrecht, Tübingen 2007, p. 460. 73 ECJ, Case C-351/89, Overseas Union, ECR 1991, I-3317 para. 24; ECJ, Case C163/95, von Horn, ECR 1997, I-5451 para. 23; ECJ, Case C-116/02, Gasser, ECR 2003, I14693 para. 44; ECJ, Case C-159/02, Turner, ECR 2004, I-3565 para. 26; ECJ, Case C341/04, Eurofood, ECR 2006, I-3813 para. 42 (concerning the European Insolvency Regulation). 74 ECJ, Case C-159/02, Turner, ECR 2004, I-3565 para. 27. 75 Supra I B. 76 Supra I A.

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B.

Risk of Contradictory Decisions

Neither does the existence of anti-suit injunctions minimise the risk of multiple proceedings and conflicting decisions. On the contrary, such recourse endangers the Regulation mechanisms for lis alibi pendens and related actions (Art. 27, 28 BR) and may give rise to conflicts for whose solution the Regulation contains no rules, such as court decisions given in spite of an anti-suit injunction or even conflicting anti-suit injunctions.78 As a result, the effectiveness of the lis pendens rule and the risk of conflicting decisions speak against a compatibility of anti-suit injunctions to support court proceedings with the Brussels I Regulation.

III. From Turner to West Tankers – Is Arbitration Different? The decisive question for the outcome of the West Tankers case will be whether the Turner reasoning can be applied to anti-suit injunctions enforcing arbitration agreements.79 The proponents of a distinction of the Turner decision as to such ECJ, Case C-159/02, Turner, ECR 2004, I-3565 para. 28. ECJ, Case C-159/02, Turner, ECR 2004, I-3565 para. 30. 79 In favour of a compatibility of such anti-suit injunctions with the Brussels I Regulation after Turner: Through Transport Mutual Insurance Association (Eurasia) Ltd v. New India Assurance Co Ltd [2005] 1 Lloyd’s Rep. 67 (CA) 88 seq. (Clarke LJ); West Tankers Inc v. Ras Riunione Adriatica di Sicurtà (The Front Comor) [2005] 2 Lloyd’s Rep. 257 (QB) 267 f. (Colman J.); West Tankers Inc v. RAS Riunione Adriatica di Sicurtà SpA [2007] UKHL 4 (HL) paras. 14 seq. (Lord Hoffmann), para. 28 (Lord Mance); KRAUSE J., in: RIW 2004, p. 533, p. 541; id., Anti-suit injunctions als Mittel der Jurisdiktionsabgrenzung, 2005, Münster, pp. 244 seq.; Muir-Watt H., in: Rev. crit. DIP, 2004, nr. 93, p. 654, p. 662; BLANKE G., in: European Business Law Review 2005, nr. 16, p. 591, pp. 612–614; GROSS P., in: LMCLQ 2005, p. 10, pp. 26 seq.; HARRIS J., in: LMCLQ 2005, p. 159, p. 165, p. 167; MULCAHY C., in: Arbitration 2005, nr. 71, p. 211, p. 217; BLACK M./REECE R., in: Arbitration 2006, nr. 72, p. 207, p. 209; CACHARD O., in: Droit Maritime Français 2006, p. 869, p. 876; SCHLOSSER P., in: RIW 2006, p. 486, pp. 489 seq.; BOLLÉE S., in: Revue de l’arbitrage 2007, p. 223, p. 245; CLARKE A., in: European Business Law Review 2007, p. 101, p. 128; DUNDAS H., in: Arbitration 2007, nr. 73, p. 348, p. 353; FENTIMAN R., in: CLJ 2007, nr. 66, p. 493, p. 495. Against such compatibility (at least de lege lata on the basis of present ECJ jurisprudence): Tribunal de commerce de Marseille, in: Droit Maritime Français 2006, p. 856, pp. 859 seq.; BRIGGS A., in: LQR 2004, nr. 120, p. 529, p. 531; ID., in: ZSR 2005 II, p. 231, pp. 254 seq.; CARRIER R., in: Droit Maritime Français 2004, p. 403, p. 411; RAUSCHER T., in: IPRax, 2004, p. 405, p. 409; BRIGGS A./REES P. (note 23), para. 77 78

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Christian A. Heinze / Anatol Dutta anti-suit injunctions fear, on a practical level, severe consequences for London as an arbitration centre in its competition with non-European centres such as New York, Singapore or Bermuda and point, on the legal level, to the exception of arbitration from the scope of the Brussels I Regulation in Art. 1(2) lit. d BR. According to the advocates of anti-suit injunctions for the enforcement of arbitration agreements, all procedures for the grant of such injunctions fall under Art. 1(2) lit. d BR, and thus outside the Regulation, with the result that, being outside the Regulation, they cannot be inconsistent with that Regulation.80 The premise of Turner and the earlier Gasser decision81 that European law provides for a set of uniform and conclusive jurisdiction rules which the Member States must trust each other to apply shall not count in arbitration where a comparable Community instrument unifying the rules of jurisdiction is lacking.82 The contrary argument that any court order which restrains a party from invoking a jurisdiction available under the Regulation conflicts with the Regulation because that order (be it within the scope of the Regulation or not) amounts to an indirect interference with that jurisdiction83 is – in the words of Professor Schlosser – shrugged off as lebensfremd, going far beyond the reasoning in Gasser and Turner and ignoring the practical realities of commerce.84 The advocates of anti-suit injunctions for the enforcement of arbitration agreements point further to the usefulness of anti-suit injunctions in the reality of arbitration as a method of resolving commercial disputes. The parties choose arbitration in order to be independent of national court proceedings.85 An anti-suit injunction saves a party to an arbitration agreement from having to keep a watchful eye upon parallel court proceedings in another jurisdiction, protects effectively the 9.13; DUTTA A./HEINZE C., in: ZEuP 2005, p. 428, p. 461; ID., in: RIW 2007, p. 411, pp. 416–419, KROPHOLLER J. (note 63) Art. 1 Brussels I Regulation, para. 45, Art. 27 Brussels I Regulation para. 20; MCKNIGHT A., in: Journal of International Banking Law and Regulation 2005, p. 151, pp. 162 seq.; MERRETT L., in: CLJ 2005, nr. 62, p. 308, pp. 310 seq.; HILL J., in: LMCLQ 2006, p. 166, pp. 168–171; PENGELLEY N., in: Journal of Private International Law 2006, nr. 2, p. 397, p. 407; MANKOWSKI P., in: RAUSCHER T. (ed.), Europäisches Zivilprozeßrecht, 2nd ed., Munich 2006, Art. 1 Brussels I Regulation para. 29; ILLMER M. /NAUMANN I., in: IHR 2007, p. 64, p. 68; ID.,in: International Arbitration Law Review, 2007, p. 147, pp. 155 seq.; STEINBRÜCK B., in: CJQ 2007, nr. 26, p. 358, p. 372; TRUKHTANOV A., in: International Arbitration Law Review 2007, p. 136, p. 138. Undecided: SERIKI H., in: Journal of International Arbitration 2006, nr. 23, p. 25, pp. 36 seq. 80 West Tankers Inc v. RAS Riunione Adriatica di Sicurtà SpA [2007] UKHL 4 (HL) paras. 13 seq. (Lord Hoffmann). 81 ECJ, Case C-116/02, Gasser, ECR 2003, I-14693. 82 West Tankers Inc v. RAS Riunione Adriatica di Sicurtà SpA [2007] UKHL 4 (HL) para. 12 (Lord Hoffmann), para. 28 (Lord Mance). 83 HAU W., in: IPRax, 1996, p. 44, p. 47; DUTTA A./HEINZE C., in: ZEuP 2005, p. 428, p. 460. 84 West Tankers Inc v. RAS Riunione Adriatica di Sicurtà SpA [2007] UKHL 4 (HL) para. 15 (Lord Hoffmann) refering to SCHLOSSER P., in: RIW 2006, p. 486, p. 489. 85 West Tankers Inc v. RAS Riunione Adriatica di Sicurtà SpA [2007] UKHL 4 (HL) para. 17 (Lord Hoffmann), para. 29 (Lord Mance).

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Enforcement of Arbitration Agreements by Anti-Suit Injunctions in Europe parties’ autonomy to submit their dispute to arbitration and avoids conflicts between arbitration awards and court judgments.86 In light of the free choice of the seat of arbitration, it is argued, that EU organs should not hamper its successful arbitration centres by cutting off the power of their courts to make orders restraining parties from acting in breach of the arbitration agreement, as competing arbitration venues such as New York, Bermuda and Singapore offer comparable remedies to protect arbitration agreements.87

IV. From Turner to West Tankers – How Different is Arbitration? A.

Scope of Art. 1(2) lit. d of the Brussels I Regulation

If we leave practical considerations for a moment aside and look purely to the structure of the Brussels I Regulation, the compatibility of anti-suit injunctions to protect arbitration agreements with the Brussels I Regulation depends primarily on the scope of the arbitration exception in Art. 1(2) lit. d BR. This provision defines the negative scope of the Regulation and reads: ‘The Regulation shall not apply to (d) arbitration.’ Art. 1(2) No. 4 of the Brussels Convention (today Art. 1 lit. d BR) was included in the Brussels Convention to dovetail the Convention with the existing international agreements on arbitration,88 in particular the New York Convention.89 As these international agreements lay down rules which must be respected not by the arbitrators themselves but by the courts of the Contracting States, e. g. rules relating to arbitration agreements and rules relating to the recognition and enforcement of arbitral awards, the arbitration exception was intended to exclude arbitration in its entirety, including proceedings brought before national courts.90 However, the question as to which court proceedings connected with arbitration are covered by the arbitration exception has been controversial since the accession of the United 86 West Tankers Inc v. RAS Riunione Adriatica di Sicurtà SpA [2007] UKHL 4 (HL) para. 19 (Lord Hoffmann), para. 30 (Lord Mance) refering to Schlosser, in: RIW 2006, 486, 489. 87 West Tankers Inc v. RAS Riunione Adriatica di Sicurtà SpA [2007] UKHL 4 (HL) paras. 20 seq. (Lord Hoffmann). 88 JENARD report, O.J. 1979 C 59, p. 1, p. 13; EVRIGENIS/KERAMEUS report, O.J. 1986 C 298, p. 1, p. 10 para. 35. 89 On the recognition and enforcement of foreign arbitral awards (note 25). 90 ECJ, Case C-190/89, Marc Rich, ECR 1991, I-3855 para. 18; ECJ, Case C-391/95, van Uden, ECR 1998, I-7091 para. 31; for a narrower approach opinion of AG Darmon, Case C-190/89, Marc Rich, ECR 1991, I-3855 para. 105.

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Christian A. Heinze / Anatol Dutta Kingdom to the Brussels Convention. While the UK argued that the exception covers all disputes which the parties had effectively submitted to arbitration, including any secondary disputes connected with the arbitration, the original Member States regarded proceedings before national courts as part of ‘arbitration’ only if they refer to arbitration proceedings, whether concluded, in progress, or yet to be started.91 The divergent positions become relevant in particular if a national court rendered a decision on the subject matter of the dispute – because it overlooked an arbitration agreement or considered the agreement to be inapplicable – and recognition of this decision is sought in another Member State. While according to the UK position, the court decision would fall outside the scope of the Brussels regime with the result that its recognition may be denied,92 the continental European perspective would regard the court decision as a judgment in the sense of Art. 32 seq. of the Brussels I Regulation which (absent any grounds for non-recognition under Art. 34, 35 BR) has to be recognised in all Member States.93 According to the latter view, proceedings before national courts would be affected by Art. 1(2) lit. d BR only if they dealt with arbitration as a main issue, and not if they had to consider the validity of an arbitration agreement merely as a matter incidental to an examination of the competence of the court of origin to assume jurisdiction.94 These diverging positions also impact on the view about the compatibility of anti-suit injunctions to protect arbitration agreements with the Brussels I Regulation. On the basis of the broad UK understanding of Art. 1(2) lit. d BR it could be argued that not only the proceedings for the grant of the anti-suit injunction in England, but even the foreign court proceedings which the anti-suit injunction seeks to enjoin, are outside the Regulation because the arbitration exception covers all disputes which the parties had agreed should be settled by arbitration. However, the ECJ does not seem to endorse such a broad understanding of Art. 1(2) lit. d BR. While the Luxembourg court has held that the arbitration exception extends to arbitration in its entirety, including proceedings brought before national courts,95 court proceedings fall only under the arbitration exception if they are part of the process of setting arbitration in motion or otherwise ancillary to arbitration proceedings.96 If the subject matter of the dispute concerns such a court SCHLOSSER report, O.J. 1979 C 59, p. 71, p. 92, para. 61. Cf. Partenreederei M/s ‘Heidberg’ and Vega Reederei Friedrich Dauber v. Grosvenor Grain and Feed Co Ltd (The Heidberg) [1994] 2 Lloyd’s Rep. 287 (QB) 299– 303 (Diamond J.). 93 See SCHLOSSER report (note 91) p. 92, para. 62. 94 SCHLOSSER report (note 91) p. 92, para. 62. If conflicts between arbitral awards and court judgments arise, the solution seems to lie in an application of Art. 34 para. 3 and 4 BR. For a seemingly comparable conflict between foreign maintenance judgment falling under the BC and a conflicting national divorce decree which falls outside the BC see ECJ, Case 145/86, Hoffmann, ECR 1988, p. 645 paras. 15–18. 95 See references supra in note 90. 96 ECJ, Case C-190/89, Marc Rich, ECR 1991, I-3855 para. 19; ECJ, Case C-391/95, van Uden, ECR 1998, I-7091 paras. 32 seq. 91 92

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Enforcement of Arbitration Agreements by Anti-Suit Injunctions in Europe measure ancillary to arbitration proceedings, the court proceedings fall outside the Brussels I Regulation by virtue of Art. 1(2) lit. d BR, although the court has to rule on the existence or validity of the arbitration agreement as a preliminary issue.97 Examples for such court measures ancillary to arbitration are the appointment or dismissal of arbitrators, the fixing of the place of arbitration or the extension of the time limit for making awards.98 Excluded from the scope of the Brussels I Regulation are also court decisions ruling on the validity of an arbitration agreement or ordering the parties not to continue arbitration because of invalidity of the arbitration agreement, or court application for the revocation, amendment, recognition and enforcement of arbitral awards.99 Yet, the mere existence of an arbitration agreement is not sufficient to exclude court proceedings from the scope of the Regulation.100 While the ECJ has held that, in the case of a valid arbitration agreement, there are no courts of any State that have jurisdiction as to the substance of the case for the purposes of Art. 2 to Art. 24 of the Regulation,101 such proceedings nevertheless seem to fall within the scope of the Brussels I Regulation. The decisive point for the applicability of the Regulation appears to be whether the court proceedings are ancillary to arbitration and have the support of the arbitration procedure itself as their subject matter. For if they are merely ordered parallel to arbitration proceedings and do not concern arbitration itself, but rather the protection of other substantive rights (in particular provisional measures based on Art. 31 BR), the Brussels I Regulation applies.102

B.

Art. 1(2) lit. d of the Brussels I Regulation and Anti-Suit Injunctions

As the subject matter of the relevant court proceedings is decisive for the application of the arbitration exception, it becomes necessary to distinguish between the proceedings in England to grant the anti-suit injunction and the court proceedings in the other Member State by which the respondent allegedly breaches the arbitraECJ, Case C-190/89, Marc Rich, ECR 1991, I-3855 paras. 26–28. ECJ, Case C-391/95, van Uden, ECR 1998, I-7091 para. 32; Schlosser report (note 91) p. 93, para. 64. 99 ECJ, Case C-391/95, van Uden, ECR 1998, I-7091 para. 32; SCHLOSSER report (note 91) p. 93, paras. 64 seq.; see also JENARD report (note 88) p. 13: ‘The Brussels Convention does not apply to the recognition and enforcement of arbitral awards […]; it does not apply for the purpose of determining the jurisdiction of courts and tribunals in respect of litigation relating to arbitration – for example, proceedings to set aside an arbitral award; and, finally, it does not apply to the recognition of judgments given in such proceedings’; see also EVRIGENIS/KERAMEUS report (note 88) p. 10, para. 35. 100 EVRIGENIS/KERAMEUS report (note 88) p. 10, para. 35. 101 ECJ, Case C-391/95, van Uden, ECR 1998, I-7091 para. 24. 102 ECJ, Case C-391/95, van Uden, ECR 1998, I-7091 para. 33: ‘However, it must be noted in that regard that provisional measures are not in principle ancillary to arbitration proceedings but are ordered in parallel to such proceedings and are intended as measures of support. They concern not arbitration as such but the protection of a wide variety of rights.’ 97 98

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Christian A. Heinze / Anatol Dutta tion agreement. For both of these proceedings it should be asked whether they fall under the arbitration exception of Art. 1(2) lit. d BR. Concerning the English proceedings to grant the anti-suit injunction, it is doubtful whether they are merely ancillary to arbitration and only support the English arbitration proceedings, thereby falling under Art. 1(2) lit. d BR.103 It might be argued that the English arbitration could take place without an anti-suit injunction suppressing the foreign court proceedings – turning the anti-suit injunction into a court measure rather parallel than ancillary to arbitration104 which does not qualify for the arbitration exception. If no anti-suit injunction is ordered and the foreign proceedings continue, the English arbitration proceedings could well be concluded by an arbitral award. On the other hand, the anti-suit injunction seems to be primarily concerned with the arbitration agreement. As the ECJ has already held that court orders prohibiting further arbitration proceedings based on the invalidity of the arbitration agreement fall under Art. 1(2) lit. d BR, it might be argued, by analogy, that orders not to continue court proceedings because of a valid arbitration agreement should fall within the exception as well. Be that as it may, in any event the court proceedings in the other EU Member State, at which the anti-suit injunction is targeted, do not fall under the arbitration exception of Art. 1(2) lit. d BR. The subject matter of these proceedings is solely a decision on the merits. The validity of the arbitration agreement constitutes merely an incidental question in these proceedings and does not affect the applicability of the Regulation.105 Even if the arbitration agreement was in fact valid, this 103 Toepfer International GmbH v. Société Cargill France [1997] 2 Lloyd’s Rep. 98 (QB) 105 seq. (Colman J.); Navigation Maritime Bulgare v. Rustal Trading Ltd (The Ivan Zagubanski) [2002] 1 Lloyd’s Rep. 106 (QB) 122 (Aikens J.); Electronic Arts CV v. CTO SpA [2003] EWHC 1020 (QB) paras. 68–75 (Glick QC); MAACK M. (note 69) 149; AMBROSE C., in: ICLQ 2003, nr. 52, p. 401, pp. 419 seq.; GROSS P., in: LMCLQ 2005, p. 10, pp. 26 seq. An anti-suit injunction constitutes a suit in the meaning of Art. 2 BR, see BRIGGS A./REES P. (note 23) para. 5.36. 104 Toepfer International GmbH v. Molino Boschi Srl [1996] 1 Lloyd’s Rep. 510 (QB) 513 (Mance J); The Charterers Mutual Assurance v. British & Foreign and T.M.M. Transcap [1998] ILPr 838 (QB) 854 seq. (Diamond J); CARRIER R., in: Droit Maritime Français 2004, p. 403, p. 411; RAUSCHER T., in: IPRax 2004, 405, 409; KROPHOLLER J. (note 63) Art. 1 Brussels I Regulation para. 45; MANKOWSKI P., in: RAUSCHER T. (note 79) Art. 1 Brussels I Regulation para. 29; ILLMER M./NAUMANN I., in: IHR 2007, p. 64, pp. 65 seq.; STEINBRÜCK B., in: CJQ, 2007, nr. 26, p. 358, p. 364. 105 ECJ, Case C-190/89, Marc Rich, ECR 1991, I-3855 paras. 26–28; ECJ, Case C129/92, Owens Bank, ECR 1994, I-117 para. 34; EVRIGENIS/KERAMEUS report (note 88) p. 10 para. 35; HAU W., in: IPRax 1996, p. 44, p. 47; SCHLOSSER P. (note 63) Art. 1 Brussels I Regulation para. 25; KROPHOLLER J. (note 63) Art. 1 Brussels I Regulation para. 44; MANKOWSKI P., in: RAUSCHER T. (note 79) Art. 1 Brussels I Regulation para. 31. For the irrelevance of incidental questions to determine the civil nature of a dispute see ECJ, Case C-266/01, TIARD, ECR 2003, I-4867 paras. 41–43; ECJ, Case C-292/05, Lechouritou, paras. 44 seq. As to Art. 27 BR see also ECJ, Case C-111/01, Gantner Electronic, ECR 2003, I-4207 paras. 26, 31 seq.; ECJ, Case C-39/02, Maersk, ECR 2004, I-9657 para. 36. See, though, the different assessment of incidental questions if Art. 22 No. 4 BR is concerned: ECJ, Case C-4/03, GAT, ECR 2006, I-6509 para. 25.

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Enforcement of Arbitration Agreements by Anti-Suit Injunctions in Europe would according to the van Uden decision only have the result that there are no courts in the Community that have jurisdiction as to the substance of the case.106 It would, though, not follow that the Brussels I Regulation is wholly inapplicable. The applicability of the Brussels I Regulation on court proceedings brought in defiance of a valid arbitration agreement, either provisional measures as in van Uden or proceedings on the merits, remains unaffected due to the foreign court proceedings being in no way ancillary to arbitration and aiming to support arbitration, but rather are necessarily parallel to arbitration.107 This results in a paradoxical situation: the foreign proceedings which the anti-suit injunction seeks to enjoin fall – if the arbitration agreement is in fact valid – within the substantive scope of the Brussels I Regulation, but there are no courts of any Member State that have jurisdiction as to the substance of the case. Rather, the national courts seized of the action on the merits are obliged to refer the parties to arbitration unless they find the arbitration agreement null and void, inoperative or incapable of being performed, Art. II (3) New York Convention.

C.

Transferability of Turner

If we assume as a result that the foreign court proceedings on the merits allegedly brought in breach of the arbitration agreement fall within the scope of the Brussels I Regulation, while the English proceedings to grant the anti-suit injunction do not, does that mean that the English proceedings are compatible with the Regulation because they fall outside its scope and are, thus, a matter of national procedural law alone? This conclusion, even if it sounds plausible, would be premature. The Luxembourg court has repeatedly stressed that the application of national procedural rules outside the Regulation may not impair the effectiveness of the Regulation rules.108 The decisive question, therefore, should be whether anti-suit injunctions to protect arbitration agreements impair the effectiveness of the Regulation rules and principles, in particular those which justified the prohibition of anti-suit injunctions to support court proceedings in Turner. Concerning the effectiveness of the Regulation rules, it has been argued that the effectiveness of Regulation rules, in particular the principle of mutual trust and non-revision of foreign jurisdiction, cannot be impaired in the arbitration setting because in that situation no uniform Community rules on jurisdiction exist and, thus, there can be no trust among the Member States in their correct application. However, this position can be challenged on two grounds. First of all, even if an anti-suit injunction is granted it is not necessarily certain that a valid arbitration agreement exists. Albeit that an English court is convinced of its existence, a forECJ, Case C-391/95, van Uden, ECR 1998, I-7091 para. 24. ECJ, Case C-391/95, van Uden, ECR 1998, I-7091 para. 33. 108 ECJ, Case C-365/88, Kongress Agentur Hagen, ECR 1990, I-1845 para. 20; ECJ, Case C-68/93, Shevill, ECR 1995, I-415 para.36; ECJ, Case C-159/02, Turner, ECR 2004, I3565 para. 29; see already ECJ, Case 288/82, Duijnstee, ECR 1983, 3663 para. 14. 106 107

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Christian A. Heinze / Anatol Dutta eign court might come to a different conclusion and accept jurisdiction under Regulation rules – a jurisdiction which would be undermined by an English anti-suit injunction. In this situation, it is also by no means clear why the English court at the place of arbitration would always be in a better position to assess the jurisdiction of the foreign court in the light of the arbitration agreement.109 The law applicable to validity and scope of the arbitration agreement is not necessarily the same as the (English) law at the place of arbitration. Many aspects concerning the validity of arbitration agreements are subject to uniform law (see Art. II New York Convention).110 And even the remaining questions relevant for validity and scope of the arbitration agreement – which may be difficult in contractual chains or legal successions111 – are not necessarily governed by the law of the place of arbitration as the conflict rules of the arbitration agreement may point to the application of the law of the main contract by tacit choice of law.112 Secondly, and more importantly, the reasoning in Turner is not (only) based on jurisdictional concerns. Turner primarily argued that the assessment of the appropriateness of foreign proceedings as a necessary component of every anti-suit injunction runs counter to the principle of mutual trust and that anti-suit injunctions may give rise to conflicting decisions for which the Regulation contains no rules. Even if it was true that jurisdictional concerns are not relevant in the arbitration setting because here a valid arbitration agreement makes Art. 2 to Art. 24 BR inapplicable, the principle of mutual trust and the risk of conflicting decisions remain relevant. These latter aspects are related not primarily to the unification of jurisdiction rules, but rather to the rules on lis pendens and recognition and enforcement. The principle of mutual trust is a general principle of the Regulation which derives primarily from the liberal regime of recognition and enforcement and less from the unification of the jurisdiction rules. Recitals 16 and 17 of the Brussels I Regulation mention the principle of mutual trust in relation to recognition and enforcement. Recognition and enforcement of a foreign judgment under the Brussels I Regulation does not require the judgment to be issued by a court competent under the Brussels rules on jurisdiction (Art. 2 to Art. 24 BR). Rather the panAs to this point ECJ, Case C-351/89, Overseas Union Insurance, ECR 1991, I3317 para. 23; ECJ, Case C-163/95, von Horn, ECR 1997, I-5451 para. 25; ECJ, Case C116/02, Gasser, ECR 2003, I-14693 paras. 48 seq. 110 SCHLOSSER P., in: STEIN F. /JONAS M., ZPO, vol. IX, 22nd ed., Tübingen 2002, Anh § 1061 paras. 76, 49 seq. 111 For an example see the facts of Through Transport Mutual Insurance Association (Eurasia) Ltd v. New India Assurance Co Ltd [2004] 1 Lloyd’s Rep. 206 (QB) and Through Transport Mutual Insurance Association (Eurasia) Ltd v. New India Assurance Co Ltd [2005] 1 Lloyd’s Rep. 67 (CA); details see supra I B. 112 For the law applicable to the arbitration agreement see the references supra in note 40. The effects of the arbitration agreement are subject to the lex fori of the court seized, see SCHLOSSER P., in: STEIN F./JONAS M. (note 110) Anh § 1061 para. 40; the capacity to enter in an arbitration agreement is subject to the law applicable to the parties of the agreement, see Schlosser op. cit para. 44 and Art. V(1) lit. a of the New York Convention on the recognition and enforcement of foreign arbitral awards (note 25). 109

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Enforcement of Arbitration Agreements by Anti-Suit Injunctions in Europe European recognition extends to any judgment falling in the scope of the Brussels I Regulation, including those in which the basis of jurisdiction derives from national law (Art. 4 or Art. 31 BR).113 Similarly, the lis pendens provisions, which were also mentioned in Turner as an argument against anti-suit injunctions, apply regardless of the jurisdiction rules to any proceedings which fall within the scope of the Brussels I Regulation.114 If now most of the arguments which were relevant in Turner (principle of mutual trust, non-revision of foreign jurisdiction and risk of conflicting decisions) apply irrespective of the jurisdiction rules to any case which falls within the scope of the Brussels I Regulation, and the logic of van Uden dictates that foreign court proceedings parallel to arbitration fall in the scope of the Regulation in spite of the arbitration agreement (see supra IV B), it appears inevitable to conclude that antisuit injunctions to enforce arbitration agreements against court proceedings in other EU Member States impair the effectiveness of the Brussels I Regulation and are thus incompatible with its principles, even if the proceedings to grant the anti-suit injunction fall outside the scope of the Regulation.

V.

Conclusion

Judging from the existing jurisprudence of the ECJ, it seems probable that the West Tankers case will bid final farewell to the anti-suit injunction in the European arena. A more lenient approach would require either a broader interpretation of the arbitration exception in Art. 1(2) lit. d BR than could hitherto be observed (supra IV A and B) or require a linking back of the applicability of the principle of mutual trust and non-revision of foreign jurisdiction to the application of the Brussels jurisdiction rules (supra IV C). There is no doubt: anti-suit injunctions are an effective tool to enforce the arbitration agreement and the parties’ autonomy as embodied in it.115 Yet, it should not be forgotten that validity and scope of arbitration agreements are not always easily determined. Given the uncertainties of the law, not necessarily untrustworthy parties only might be hit by an English anti-suit injunction.116 However, anti-suit injunctions monopolise the decision regarding the validity and scope of an arbitration agreement with the English courts – and conflicting anti-suit injunctions as a 113 KROPHOLLER J. (note 63) Art. 32 Brussels I Regulation para. 4, 17; LEIBLE S., in: RAUSCHER T. (note 79) Art. 32 Brussels I Regulation para. 20. 114 ECJ, Case C-351/89, Overseas Union Insurance, ECR 1991, I-3317 para. 13; see also ECJ, Case C-129/92, Owens Bank, ECR 1994, I-117 paras. 35 seq. The lis pendens provisions are a somewhat weaker argument in the arbitration setting because they do not apply to arbitration proceedings. 115 For the effects of anti-suit injunctions supra I C. 116 See only Through Transport Mutual Insurance Association (Eurasia) Ltd v. New India Assurance Co Ltd [2005] 1 Lloyd’s Rep. 67 (CA); see supra I B.

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Christian A. Heinze / Anatol Dutta result of continental jurisdictions developing similar instruments should rather be left to imagination: even English courts do not always happily accept anti-suit injunctions directed against their proceedings.117 This monopolisation, and the fact that English anti-suit injunctions are apparently only available to protect English arbitration proceedings (supra I A and B), raise doubts whether a farewell to this instrument would, in fact, hurt European or rather primarily English interests. The existence of attractive arbitration settings without the availability of anti-suit injunctions seems to indicate that international arbitration can flourish without the support of anti-suit injunctions in Europe. One last word: should the Luxembourg court indeed decide as it is proposed here, it seems to be inevitable that English commentators will fear again a ‘systematic dismantling’118 of the common law principles of procedure. Even if it is undoubtedly true that the Brussels regime is at heart a civilian system, it should not be forgotten that the ECJ endorsed in other areas, such as patent litigation, the English position and ‘dismantled’ settled notions of continental (in this case German) civil procedure.119

See, for example, General Star International Indemnity Ltd v. Stirling Cooke Brown Reinsurance Brokers Ltd [2003] ILPr 314 (QB) 317 seq. (Langley J.) and, especially, p. 318: ‘If [the defendant] were right it would be open to any defendant properly sued in an English court to take proceedings in another jurisdiction claiming an anti-suit injunction and to have the English proceedings stayed whilst the other court pronounced on the jurisdiction of this court. That cannot be right’; Tonicstar Ltd v. American Home Assurance Company [2004] EWHC 1234 (QB) para. 13 (Morison J.): ‘The decision by [the respondents] both to make a […] application here and then immediately afterwards, without prior notice, to present a Petition to the New York Court is, in my view, at the very least, to be described as ‘oppressive’. The effect of their conduct is to seek to pre-empt this court from reaching its own decision on the arbitration questions. [The respondents] no doubt hoped that their tactic would lead to an earlier determination by the New York Court which would then be invited to restrain the English Court from considering the issue.’; see also para. 18. 118 HARTLEY T., in: ICLQ 2005, nr. 54, p. 813. 119 ECJ, Case C-4/03, GAT, ECR 2006, I-6509 para. 25. For a comment, see HEINZE C./ROFFAEL E., in: GRUR Int. 2006, p. 787. 117

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EUROPEAN UNION THE ECJ IN SEARCH OF LEGAL CERTAINTY FOR JURISDICTION IN CONTRACT: THE COLOR DRACK DECISION Anna GARDELLA∗

I. II. III. IV.

V.

I.

Introductory Remarks: the Issues and the Open Questions Jurisdiction in Contract Matters: the Amended Version of Article 5(1) of Regulation EC 44/2001 The Facts and the Question The ECJ’s Decision A. Whether Article 5(1)(b), first indent, Applies in Cases of Several Deliveries within one Single Member State B. Whether the Plaintiff May Bring Suit before Any Domestic Court of its Choice Performances in Several Member States and Article 5(1)(b): a Missed Opportunity by the ECJ?

Introductory Remarks: the Issues and the Open Questions

Color Drack1 is the first decision of the ECJ relating to the interpretation of the new version of art. 5(1)(b), first indent, Regulation EC n. 44/2001, relating to jurisdiction in contract matters. Although this fact alone makes the judgement per se worthy of note, the ECJ also seized the opportunity to set forth significant statements concerning the interpretation of the new connecting factor embodied in Article 5(1)(b). The Court emphasised the rationale of the amendment to former Article 5(1) of the 1968 Brussels Convention, notably the replacement by the Regulation of the conflict of laws methodology with the autonomous notion of place of

∗

Assistant Professor of International Law, Catholic University of Milan. ECJ, 3 May 2007, C-386/05, awaiting publication in the ECR. See comments by MANKOWSKI P., ‘Mehrere Lieferorte beim Erfüllungsortgerichtsstand unter Art. 5 Nr. 1 lit. b EuGVVO’, in: IPRax, 2007, pp. 404 et seq.; DE FRANCESCHI A., ‘Compravendita internazionale di beni mobili con pluralità di luoghi di consegna’, in: Int’l lis 2007, p. 120 et seq. 1

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Anna Gardella performance set forth by new Article 5(1)(b) in order to determine the locus solutionis.2 The judgment, however, may leave disappointed those who expected the ECJ to clarify certain issues still left unclear by the new wording of the Regulation. The specific facts of the case at hand, however, did not allow the European Court to elaborate further. As set forth below, doubts remain, for instance, on how Article 5(1)(b) applies (if it does) when several deliveries in different Member States are envisaged by the contract or when the place of delivery of the goods is situated in a third State.3 Questions left open by the ECJ include the determination of the place of delivery when it has not been agreed upon by the parties in the contract4 and the The amendment to Article 5(1) relating to contract matters is one of the most relevant to the process of conversion of the Convention into Regulation, see CARBONE S.M., Lo spazio giudiziario europeo in materia civile e commerciale. Da Bruxelles I al regolamento CE n. 805/2004, 5th ed., Torino 2006, at p. 85 et seq.; SALERNO F., Giurisdizione ed efficacia delle decisioni straniere nel Regolamento (CE) n. 44/2001. (La revisione della Convenzione di Bruxelles del 1968), 3rd ed., Padova 2006, at p. 138; MERLIN E., ‘Novità sui criteri di giurisdizione nel Regolamento CE «Bruxelles»’, in: Int’l lis 2002/2003, pp. 40 et seq.; BERAUDO J.-P., ‘Le Règlement CE du Conseil du 22 décembre 2000 concernant la compétence judiciaire, la reconnaissance et l’exécution des décisions en matière civile et commerciale’, in: JDI 2001, pp. 1033 et seq., at p. 1040; GAUDEMET-TALLON H., Compétence et exécution des jugements en Europe. Reglèment n. 44/2001, Conventions de Bruxelles et de Lugano, 3rd ed., Paris 2002, pp. 158 et seq. and extensively P. FRANZINA, La giurisdizione in materia contrattuale. L’art. 5 n. 1 regolamento n. 44/2001/CE nella prospettiva della armonia delle decisioni, Padova 2006, at pp. 36 et seq. and passim. 3 On this issue, see MICHAELS R., ‘Re-placements. Jurisdiction for contracts and torts under the Brussels I Regulation when Arts. 5(1) and 5(3) do not designate a place in a Member State’, in NUYTS A. / WATTÉ N. (eds.), International Civil Litigation in Europe and Relations with Third States, Brussels 2005, p. 129 et seq. 4 Italian courts have issued contradictory decisions, some holding that absent a specific reference in the contract, the place of delivery must be determined by application of juridical rules (see Court of first instance of Bolzano 16th September 2006, in: Giur. it., 2007, p. 428, with comment by REINSTADLER A., ‘Il forum contractus autonomo ed unitario nella vendita internazionale di merci ai sensi dell’art. 5, n. 1, lit. b), del Regolamento (CE) n. 44/2001: una riforma fallita?)’; Court of first instance of Padua, section of Este, 10th February 2004, in: Giur. It., 2006, p. 1013 et seq., with comment by FERRARI F., ‘L’interpretazione autonoma del Regolamento CE 44/2001 e, in particolare, del concetto di « luogo di adempimento dell’obbligazione », di cui all’art. 5, n. 1, lit. b’, The House of Lords in Scottish & Newcastle International Ltd. v. Othon Ghalanos Ltd., 20 February 2008, available at , has recently joined and supported such interpretation by ruling that the Regulation ‘does not purport to impose a uniform concept of delivery on all member states but leaves member states to apply whatever, under their rules of private international law, is the law properly applicable to the particular contract, in this case English law’. Others have taken the opposite view and have ruled that the place of delivery is a mere factual situation which must be ascertained pragmatically, see Court of first instance of Rovereto, 28th August 2004 and Court of first instance of Brescia, 28th December 2004, in: Int’l lis 2005, pp. 131, with comment by SILVESTRI C., ‘L’interpretazione del ‘luogo di consegna’ ai sensi del novellato art. 5, n. 1, lit. B) Reg. 44/2001: qualche osservazione sui limiti del criterio fattuale’; and by 2

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The ECJ in Search of Legal Certainty: the Color Drack Decision substantive definition of a contract for the sale of goods or for the provision of services, matters which have given rise to contradictory outcomes in national case law5 and have ultimately originated a new preliminary referral to the ECJ.6 Despite this, the decision which is the subject of this comment is relevant since it is a first step in the establishment of a uniform interpretation of the new version of the connecting factor relating to the jurisdiction in contract.

II.

Jurisdiction in Contract Matters: the Amended Version of Article 5(1) of Regulation EC 44/2001

A preliminary introduction to the changes to jurisdiction in contract introduced by Regulation EC n. 44/2001 is appropriate in order to best understand and appreciate the Color Drack case and decision. When the Brussels Convention was in force, the head of jurisdiction for contract matters – Article 5(1) – was one of the most controversial. To redress its A. POGGIO, ‘Vendita internazionale di beni e foro speciale contrattuale ai sensi del Regolamento (CE) 44/2001 del Consiglio dell’Unione Europea’, in: Giur. it., 2005, at 1008. Scholars, too, have expressed different views, in favour of the former see SALERNO F. (note 2), at 142; BÉRAUDO J.-P. (note 2), at 1044; in favour of the latter see CARBONE S.M. (note 2) , at 86 and MERLIN E. (note 2), at 41. 5 See in particular Cour de Cassation, 11th July 2006, available at <www.legifrance.gouv.fr>, and Cour de Cassation 6th October 2006, in: JDI 2007, 132, with comment by HEUZÉ V. / MARTEL D., both judgments characterising distribution contracts as contracts for the provision of services instead of for the sale of goods. See also Cour de Cassation, 27th March 2007, fitting within the category of contracts for the provision of services a contract for advertisement, available at <www.legifrance.gouv.fr>; in a further judgment of 23 January 2007 (Waeco) the Cour de Cassation held that a contract of concession exclusive fell neither within the category of sale of goods nor within provision of services, available at <www.legifrance.gouv.fr>. Recently see again Cour de Cassation, 5th March 2008, available at <www.legifrance.gouv.fr>. The process of identifying the principal obligation under the contract is likely to be employed by national courts when faced with contracts for the sale of goods which also include obligations to set up machinery (see Court of first instance of Padova, 10th February 2004, note 4, and Cour de Cassation in the Waeco case). 6 See Falco Privatstiftung and Thomas Rabitsch v. Gisela Weller-Lindhorst, C533/07, in OJ C 37 of 9 February 2008, at 15. This preliminary ruling recently referred to the ECJ again by the Austrian Supreme Court (Oberster Gerichtshof) can actually offer relevant guidance on these matters. For the sake of completeness, it is worth mentioning the main terms of the questions which have been addressed to the ECJ. The question is twofold and concerns the substantive notion of ‘contract for the provision of services’, in particular whether a licence agreement for the utilisation of intangible IP rights falls within this category and, in the affirmative, whether the service is provided at each place in a Member State where use of the right is allowed under the contract and also actually occurs.

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Anna Gardella shortcomings, some scholars have argued in favour of a more flexible wording,7 while others have advocated its complete abrogation.8 In converting the Convention into Regulation, the Community legislature, which praises efficiency and the ex ante predictability of competent jurisdiction, has opted for a clear cut norm embodying an autonomous notion of place of performance.9 A detailed provision has therefore been introduced, intended to set forth predetermined heads of jurisdiction covering all issues arising from the contract in an autonomous fashion, without reference to the conflict of laws method.10 Under the connecting factor provided for in Article 5(1) of the Brussels Convention, which was grounded on the specific contractual obligation in question, fragmentation of jurisdiction and multiplication of proceedings was an intrinsic risk. In addition, the circumstance that the place of performance of the obligation in question had to be determined by recourse to private international law was a source of legal uncertainty. The envisaged solution to avoid these pitfalls has been the harmonisation of the connecting factor by the establishment of fixed, predetermined criteria. This has allowed courts and parties to overcome the ‘analytical’ approach upheld in the Tessili11 and De Bloos12 decisions. Hence, new Article 5(1) is divided into two sub-provisions, the first one, laid down in lit. (a), reproduces former Article 5(1) and embodies the general crite7 HILL J., ‘Jurisdiction in matters relating to a contract under the Brussels convention’, in: Int’l & Comp. L.Q. 1995, pp. 591 et seq. 8 See DROZ G.A.L., ‘Delendum est forum contractus?’, in: Rec. Dalloz, chr 351-356; HEUZE V., ‘De quelques infirmités congénitales du droit uniforme: l’exemple de l’article 5. 1 de la Convention de Bruxelles du 27 septembre 1968’, in: Rev. crit. 2000, pp. 595 et seq. at 636 et seq. Contra, for a defence of the previous wording of Article 5, no. 1 also on efficiency terms, see VIRGÓS SORIANO M. / GARCIMARTÍN ALFÉREZ F., El convenio de Bruselas y las propuestas para su reforma: una crítica radical. Arts 5.1.I, 21, 24 y 27.2’, in: BORRÁS A. (ed.), La revisión de los Convenios de Bruselas de 1968 y Lugano del 1988 sobre la competencia judicial y la ejecución de resoluciones judiciales: una reflexión preliminar española, Barcelona 1998, pp. 77 et seq., at 93. For a critical review of the different opinions expressed see DE CRISTOFARO M., Il foro delle obbligazioni. Profili di competenza e giurisdizione, Padova 1999, p. 344. 9 The preference for clear cut rules rather than more flexible standards is an intrinsic feature of the Brussels Convention, which was drafted and signed by the six original Member States of the EC, sharing a civil law tradition. The approach has been maintained, though, over the years and the most recent European acts issued after the ‘communitarisation’ of private international law are characterised by this tenet, see GARDELLA A. / RADICATI DI BROZOLO L.G., ‘Civil law, Common Law and Market Integration: the EC Approach to Conflicts of Jurisdiction’, in: Am. Journ. Comp. Law 2003, 611; BONOMI A., ‘Conversion of the Rome Convention on Contracts into an EC Instrument: Some Remarks on the Green Paper of the EC Commission’, in: this Yearbook 2003, pp. 53-98. 10 ECJ, Color Drack, n. 26, the ‘rule of special jurisdiction in matters relating to a contract establishes the place of delivery as the autonomous linking factor to apply to all claims founded on one and the same contract for the sale of goods rather than merely to the claims founded on the obligation of delivery itself.’ 11 ECJ 6th October 1976, case 12/76, in: ECR 1976, 1473. 12 ECJ, 6th October 1976, case 14/76, in: ECR 1976, 1497.

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The ECJ in Search of Legal Certainty: the Color Drack Decision rium of jurisdiction in contract matters. It provides that the competent court is that of the ‘place of performance of the obligation in question’ and that it must be determined by application of the conflict of laws rules. The innovative part of the norm is subsequent lit. (b), which lays down an autonomous notion of ‘place of performance of the obligation in question’. To this end, contractual obligations are grouped into the two main economic categories of ‘sale of goods’ and ‘provision of services’, respectively. In the first case the head of jurisdiction is the ‘place in a Member State where, under the contract, the goods were delivered or should have been delivered’; in the second, ‘the place in a Member State where, under the contract, the services were provided or should have been provided’. Should the obligation not fall within one of the categories envisaged in Article 5(1)(b), reference must be made to the general rule set forth in Article 5(1)(a). Lastly, it is noteworthy that, unlike Article 5(1)(a) which takes into account the ‘performance of the obligation in question’, new Article 5(1)(b) sets forth one autonomous link – i.e. the place of delivery of the goods or provision of services – for all claims arising from the contract at issue. It can, therefore, be argued that this connecting factor determines not only the locus solutionis but also the principal obligation at the same time. In light of the prior debate, it is not surprising that the new provision has left many disappointed. Excessive rigidity and other flaws have soon been challenged, and the argument has been advanced that it actually provides little or no solution to the specific needs of jurisdiction in contract.

III. The Facts and the Question The preliminary ruling originates from a dispute brought by Color Drack, a company established in Austria, against Lexx, a company established in Germany. The case was brought before an Austrian court, and arose out of a sale contract, according to which the German seller was bound to deliver the goods to various retailers of the Austrian buyer, including at the place of the buyer’s registered office. On this ground, Color Drack filed suit before the court of its domicile, claiming the non-performance by Lexx of the contractual obligation to take back and reimburse the unsold goods delivered to the buyer. Before the Court of Appeal and the Supreme Court (Oberster Gerichtshof) the issue arose whether art. 5(1)(b) applied to the case at hand. The objection was made that its first indent sets forth only one head of jurisdiction (the place of delivery), and it is doubtful whether it is apt to determine the competent court when several deliveries are envisaged by the contract. The Austrian court then referred to the ECJ the question – in the terms summarised by the ECJ itself – of ‘whether the first indent of Article 5(1)(b) of Regulation No 44/2001 applies in the case of a sale of goods involving several places of delivery within a single Member State and, if so, where the claim relates to all

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Anna Gardella those deliveries, the plaintiff may sue the defendant in the court for the place of delivery of its choice13.’

IV. A.

The ECJ’s Decision Whether Article 5(1)(b), first indent, Applies in Cases of Several Deliveries within one Single Member State

To answer the question, the ECJ articulates its decision in two parts, the first focusing on whether Article 5(1)(b), first indent, of the Regulation applies at all in cases like Color Drack; the second on whether the plaintiff can sue in any domestic court of its choice or whether its discretion should be limited. With regard to the first question, the ECJ ruled that Article 5(1)(b), first indent, applies in cases where the contract contemplates several deliveries within a single Member State. In so holding, the ECJ preliminarily admitted that this issue is not specifically envisaged by Article 5(1)(b), first indent, – which makes reference to only one, not several, places of delivery – and that the relevant provision actually needs to be interpreted in light of its underlying rationale. In its reasoning the ECJ made reference to its constant case law by underlining that predetermined alternative fora satisfy the principles of predictability and proximity and must be interpreted accordingly. The combination of these two requirements ensures the highest protection to the parties by allowing the plaintiff and the defendant to identify in advance the court having jurisdiction to hear the dispute and to engage in only moderate forum shopping. With specific reference to jurisdiction in contract, the place of delivery of the goods is presumed to have a close connection with the forum and, therefore, meets these principles. In light of this, the ECJ held that it does not matter whether the contract envisages one or several deliveries within the same Member State, since all of them fall within the autonomous connecting factor set forth in Article 5(1)(b), first indent, and satisfy the Regulation’s objectives of predictability14 and proximity.15

B.

Whether the Plaintiff May Bring Suit before Any Domestic Court of its Choice

The ECJ, however, goes further. It was given this opportunity by the second part of the question referred to it, concerning the issue whether, in cases of several deliveries within a single Member State, the plaintiff is free to bring suit before any domestic court of its choice, provided it coincides with one place of delivery. Color Drack, n. 15. Color Drack, n. 32. 15 Color Drack, n. 34. 13 14

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The ECJ in Search of Legal Certainty: the Color Drack Decision In this respect, the ECJ rejected that Article 5(1)(b) ‘necessarily confers concurrent jurisdiction on a court for any place where goods were or should have been delivered.’16 This is consistent with the autonomous notion of place of performance set forth in Article 5(1)(b), which is aimed to centralise ‘jurisdiction over disputes concerning all the contractual obligations and to determine sole jurisdiction for all claims arising out of the contract.’17 Based on the strict language of the norm – which establishes that the place of delivery for a contract for the sale of goods incorporates a close link between the court and the contractual dispute – one could legitimately claim that in case of several deliveries within a single Member State, any place is apt to confer jurisdiction on all claims arising out of the contract. Disregarding this reading of the provision, in an ‘extreme’ search for legal certainty, the ECJ ruled that ‘where there are several places of delivery of the goods, ‘place of performance’ must be understood ... as the place with the closest linking factor between the contract and the court having jurisdiction. In such a case, the closest linking factor will, as a general rule, be the place of the principal delivery, which must be determined on the basis of economic criteria.’18 The ECJ goes on to state the fall back connecting factor which comes into question whenever a principal place of delivery cannot be identified. In the Court’s view, in such hypotheses, ‘each of the places of delivery has a sufficiently close link of proximity to the material elements of the dispute and, accordingly, a significant link as regards jurisdiction’. In such a case, the plaintiff may sue the defendant in the court for the place of delivery of its choice on the basis of the first indent of Article 5(1)(b).19 By these statements, the ECJ has created a hierarchy of the relevant connecting factors in the case at hand, i.e. the places of delivery. Rather than borrowing the well known concept of the ‘centre of gravity’ of the contract from the conflict of laws doctrine, where it is used to determine the law applicable to contractual obligations, the ECJ has created its own criterion, based on the economic value of the deliveries. The setting up of a hierarchy was not compelled by the literal interpretation of the provision, a provision which puts all linking factors on an equal footing, since they comply with Article 5(1)(b). Considering that every place of delivery individually satisfies the requirements of predictability and proximity underlying alternative fora, there was no reason to prevent a domestic court from retaining jurisdiction over all claims arising out of the same contract which contemplates several deliveries within the same Member State. In light of this, the ECJ’s approach may raise some scepticism and questions as to how necessary it actually was. In this regard, it is worth noting that AG

See Color Drack, n. 37. See Color Drack, n. 39. 18 See Color Drack, n. 40. 19 See Color Drack, n. 42. 16 17

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Anna Gardella Bot, in his Opinion, advocated that the matter should be governed by domestic law.20 This holding would certainly be unjustified should it turn out that the underpinning motivation was a ‘forum actoris phobia.’ This is a recurrent theme in the ECJ’s case law concerned with ‘proper’ international jurisdiction cases. One can legitimately maintain, however, that the rejection of the plaintiff’s forum is not compelling in cases involving domestic courts of the same Member State, entrusted with jurisdiction by predetermined criteria and entitled to hear all claims arising out of the contract. In this regard, the ECJ’s competence to rule on the matter could even be questioned, given that it involved a purely domestic allocation of jurisdiction. It is undisputed, however, that the ECJ’s judicial power derives from Article 5 of the Regulation itself, which establishes connecting factors working both as criteria for the international distribution of jurisdiction and the internal allocation of competence. Accordingly, in such cases, they directly determine the national court having jurisdiction to hear the dispute and overcome the internal law of civil procedure. To avoid any misunderstanding, the ECJ made clear that its decision applies only in cases involving several deliveries within one Member State and that it should not prejudice a different outcome in ‘proper’ international situations.21 In so doing, the ECJ has self-restrained the reach of its judgment which is not intended to impact the international distribution of jurisdiction.

V.

Performances in Several Member States and Article 5(1)(b): a Missed Opportunity by the ECJ?

By making clear that the decision does not tackle the ‘international dimension,’ the ECJ avoided ruling on the highly debated issue of the identification of the competent court(s) to entertain jurisdiction over contractual disputes involving several performances/deliveries in more than one Member State, instead of a single jurisdiction. Despite the new provision set forth in Article 5(1)(b) having swept away most doubts by entrusting the court with jurisdiction on all claims arising from the same contract, uncertainties still remain in light of the aforementioned statement by the ECJ confining the endorsed solution within national borders. Before Color Drack, and based on the reasoning of the ECJ’s judgment in Shenavai,22 some scholars have argued in favour of the application of the principle 20

See Opinion of AG Bot in Color Drack, delivered on 15th February 2007, at n.

124-128. 21 See Color Drack, n. 31, where the ECJ stressed that its holding ‘does not call into question the objectives of the rules on the international jurisdiction of the courts of the Member States set out in that regulation.’ 22 ECJ 15th January 1987, C-266/85, in: ECR 1987, p. 239 et seq.

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The ECJ in Search of Legal Certainty: the Color Drack Decision accessorium sequitur principale. According to this view, all claims arising from the same contract must be consolidated before the court of the place of the principal obligation in question. This opinion, however, was not shared by all authors. Some of them pointed out the nonexistence of a general forum connexitatis within the European judicial system and the special care employed by the ECJ in dealing with such matters. In addition, it can be argued that this is not a clear cut rule, rather it is conducive to uncertainties when it is not possible to establish a hierarchy of the different obligations in question, i.e. to determine the principal and the ancillary. In Leathertex23 the ECJ has excluded the application of accessorium sequitur principale in a similar situation. Against this background, the question arises why the ECJ has restricted the effects of its judgment to cases involving deliveries within a single Member State? Is this because, in proper international case, the Shenavai rule still applies, or because the amendment to Article 5(1)(b) does not require any such rule anymore. The argument has been made that the new wording renders the principle accessorium sequitur principale no longer necessary for two reasons: on the one hand it establishes both the place of performance of the contractual obligation and the competent court; on the other hand it ex ante identifies the principal contractual obligation in the delivery of the goods and the provision of services, and entrusts the court so identified with jurisdiction over all claims arising from the contract. The question which is still open, however, is the determination of the competent court in the case of disputes arising from connected contracts executed by the same contracting parties and involving several Member States. To cope with such a factual situation, the application of the accessorium sequitur principale has been advocated, provided a genuine ancillary relationship among the several obligations can be established. Dealing with this issue, however, requires special care since the fact cannot be disregarded that this principle was affirmed by the ECJ in a matter where all disputes originated from the same, rather than from several, contracts.24

ECJ 5th October 1999, C-420/97, in: ECR 1999, p. I-6747 et seq, see FRANZINA P. (note 2), p. 360. 24 See FRANZINA P. (note 2), p. 365. 23

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ENGLAND ENFORCEMENT OF ARBITRATION AGREEMENTS: THE END OF THE ENGLISH EXCEPTION Gilles CUNIBERTI∗

I. II. III. IV.

Introduction The Interpretation of Arbitration Agreements The Separability of Arbitration Agreements Conclusion

I.

Introduction

In the important decision Premium Nafta v. Fili Shipping of 17 October 2007,1 the House of Lords considerably strengthened the enforcement of arbitration agreements in English courts. The judgment lays down a general rule of interpretation of arbitration agreements which ends a long period of casuistry which had always amazed civil lawyers, but was clearly harmful to the parties. It also confirms the commitment of English courts to the separability principle. In this case,2 the relevant arbitration agreements were contained in charterparties. Various companies of a Russian businessman, Yuri Nikitin, had chartered vessels owned by one-ship companies of the leading Russian ship-owning group, Sovcomflot. At a later stage, Sovcomflot argued that the charterparties were procured by bribery of one or more of Sovcomflot employees (in particular the manager of the Sovcomflot office in London, Yuri Privalov), and that the charterparties contained terms extraordinarily favourable to the charterers, Nikitin’s companies. As a consequence, the Sovcomflot companies which had ∗

Ph.D. (Panthéon-Sorbonne), LL.M. (Yale), Associate Professor, Paris XII Faculty

of Law. 1

Fiona Trust and Holding Corp. and Others v. Yuri Privalov and Others under name of Premium Nafta Products Ltd (20th Defendant) & Others v. Fili Shipping Co Ltd (14th Claimant) & Others [2007] UKHL 40. 2 The judgment of the House of Lords does not provide a detailed report of the facts. They can be found in the judgment of the High Court of 20 October 2006: see Fiona Trust v. Yuri Privalov [2006] EWHC 2583 (Comm.), [2006] All ER (D) 254. See also GRANT T.D., ‘International Arbitration and English Courts’, in: I.C.L.Q. 2007, p. 871. Yearbook of Private International Law, Volume 9 (2007), pp. 449-458 © sellier. european law publishers & Swiss Institute of Comparative Law

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Gilles Cuniberti entered into the charterparties initiated proceedings before English courts in order to rescind them. Nikitin initiated arbitration proceedings in London pursuant to the arbitration agreements. Each of the parties then sought a ruling from English courts confirming that they had initiated proceedings before the proper adjudicator. Sovcomflot applied for an injunction against the arbitration proceedings under section 72 of the English Arbitration Act 1996.3 Nikitin applied for a stay of the judicial proceedings under section 9 of the same Act.4 In a judgement of 20 October 2006,5 the High Court granted the stay of the arbitration proceedings, as it found that bribery claims did not fall within the scope of the arbitration agreements.6 On 24 January 2007,7 the Court of Appeal reversed, holding that a claim of bribery did fall within the arbitration clause, and that in any case, the rescission of the contract on the ground of bribery would not invalidate the arbitration clause. Thus, the arbitration agreements existed and there was no power to enjoin the parties from arbitrating. The Sovcomflot companies appealed to the House of Lords. The case was argued before the House of Lords on the basis that it raised two issues: the interpretation of the arbitration agreements, and their separability from the charterparties.

II.

The Interpretation of Arbitration Agreements

The most important contribution of the decision is certainly the fresh start it makes with regards to the interpretation of arbitration agreements. As with all contractual provisions, arbitration agreements raise issues of interpretation. One of the most common of these issues is the interpretation of the intended scope of arbitration clauses. The most general arbitration agreements typically provide that all disputes ‘arising under’ the relevant contract shall be Section 72 provides that ‘1- A person alleged to be a party to arbitral proceedings but who takes no part in the proceedings may question— (a) whether there is a valid arbitration agreement, … by proceedings in the court for a declaration or injunction or other appropriate relief.’ 4 Section 9 provides that ‘1- A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.’ 5 Fiona Trust v. Yuri Privalov (note 2). 6 It is unclear whether Morison J. meant that the issue was one of interpretation of the arbitration agreements or one of arbitrability (for the latter interpretation, see GRANT T.D. (note 2), p. 876), or both. 7 Fiona Trust v. Yuri Privalov [2007] EWCA Civ 20 (CA). On the judgment of the Court of Appeal, see GRANT T.D. (note 2), p. 871. 3

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Enforcement of Arbitration Agreements in England resolved by way of arbitration. However, other seemingly general agreements commonly use other language. They provide that ‘any’ disputes ‘arising from the contract,’ or ‘out of,’ or ‘in relation with’ it, shall be settled by way of arbitration. Are these differences significant? Traditionally, common law courts have ruled that they can be. Agreements referring solely to disputes ‘arising under’ the contract have been given narrow meaning. U.S. courts regularly hold that they only cover contractual claims, as opposed to claims which, though relating to the contract, are pre-contractual,8 or non-contractual.9 Similarly, English courts held several times in the 1980’s that only obligations created or incorporated by the contract could be deemed to arise under it.10 Other wordings have also been given a narrow meaning. The Australian Supreme court interpreted narrowly an arbitration clause referring to disputes ‘arising from’ a contract.11 U.S. courts hold that clauses referring to disputes arising ‘out of’ the contract are as limited in scope as ‘arising under’ clauses.12 By contrast, clauses referring to disputes ‘relating to’ the contract, or arising ‘in connection with’ it, have been given a broad meaning.13 The consequences of these interpretations are far-reaching. Related claims may fall within the jurisdiction of different adjudicators. For instance, as a consequence of such interpretation, the Australian Supreme Court ruled that an action for breach of contract fell within the scope of the arbitration agreement, and had thus to be arbitrated in London, while pre-contractual and non-contractual claims were not covered by the agreement, and could thus be litigated before Australian courts.14 To a civil lawyer, drawing so far-reaching conclusions from such small differences of wording is simply astonishing. It certainly reveals a critical difference between the civil law and the common law traditions. Common law lawyers are always inclined to focus on the exact wording of texts. This is a logical consequence of the way their legal system functions. The interpretation of all sources of English law requires close attention to the details. Precedents can only be understood by reference to the facts of the case, which thus need to be assessed carefully. Statutes are sources of exception which do not purport to be applied extensively. As a result, they define their scope with the utmost precision, and require again close attention to the wording of the text. By contrast, the civil law tradition 8 In Re Kinoshita & Co, 287 F 2d 951 (2nd Cir 1961); Mediterranean Enterprises v Ssangyong Corp 708 F 2d 1458 (9th Cir 1984). 9 For instance, a quasi contractual claim (see Mediterranean Enterprises v Ssangyong Corp (note 8)) or a claim in tort (see Tracer Research Corp v National Environment Services Co, 42 F 3d 1292, 1295 (9th Cir 1994)). 10 Overseas Union Insurance Ltd. v AA Mutual International Insurance Co Ltd [1988] 2 Lloyd’s Rep. 63, 67; Fillite (Runcorn) Ltd v Acqua-Lift (1989) 26 Con. LR 66, 76. 11 Hi-Ferty Pty Ltd et al. v Kiukiang Maritime Carriers Inc. et al. (1999) 159 ALR 142. 12 Tracer Research Corp v National Environment Services Co (note 9). 13 See, e.g., Mediterranean Enterprises v Ssangyong Corp (note 8); Tracer Research Corp v National Environment Services Co (note 9). 14 Hi-Ferty Pty Ltd v Kiukiang Maritime Carriers (note 11).

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Gilles Cuniberti has an ideal of abstraction and generality. Statutes are drafted in very general terms, making it impossible to engage meaningfully into any effort of literal interpretation. Cases lay down rules in a very similar way, and do not make law in the light of the facts of the case. As a consequence, experience shows that, in practice, contract drafting15 and contract interpretation16 are essentially different in each world. In this context, the decision of the English highest court could appear as quite remarkable. In his opinion endorsed by all the members of the House of Lords, Lord Hoffmann said that, instead of focusing on the wording of each arbitration agreement, English courts ought from here forward interpret arbitration agreements under a particular assumption of the intention of the parties. This assumption is that, as rational businessmen, they intended to have all the disputes arising out of their relationship decided by the same tribunal. In other words, in case of doubt, English courts ought to consider that the claim falls within the jurisdiction of the arbitral tribunal rather than outside, that is within the jurisdiction of a national court of competent jurisdiction. Slight differences of wording should thus become irrelevant. In this case, the arbitration clause provided that only disputes ‘arising under’ the contract ought to be resolved by way of arbitration, and it is interpreted broadly. At first sight, one could think that there is a true civil law flavour to this decision. The inclination of civil lawyers to generalize is certainly one of the distinctive features of the civil law tradition, and one of the most important differences with the common law tradition.17 Interestingly enough, Lord Hoffmann finds support in a decision of a German supreme court, the Bundesgerichtshof.18 Yet, the English rules on the construction of contracts have evolved in recent times. English lawyers have never been fond of rules of construction relying on the undocumented intention of the parties rather than the language that they actually used. The traditional approach was that ‘one must consider the meaning of the words used, not what one may guess to be the intention of the parties.’19 However, in 1971, the House of Lords recognised that agreements may need to be placed in context to be See VAN HECKE G., ‘A Civilian Looks at the Common-Law Lawyer’, in: International Contracts: Choice of Law and Language, New York 1962, p. 10. For a procedural explanation of the difference, see LANGBEIN J., ‘Comparative Civil Procedure and the Style of Complex Contract’, in: Am. J. Comp. L. 1987, p. 381. 16 It is remarkable to note, however, that although practice reveals dramatic differences in the approach of texts by lawyers on each side of the Channel, an interesting study has shown that the actual rules of interpretation of contracts recognized in France, Germany and the United-Kingdom reach surprisingly close results: see VOGENAUER S., ‘Interpretation of Contracts: Concluding Comparative Observations’, in: BURROWS A., PEEL E. (ed.), Contract Terms, Oxford 2007, p. 123. 17 See LEGRAND P., ‘European Legal Systems are not Converging’, in: I.C.L.Q. 1996, p. 52. 18 Decision of 27 February 1970, in: Arbitration International 1990, p. 79. 19 Smith v. Lucas (1881) 18 Ch.D. 531, 542. See generally Chitty on Contracts – General principles, Vol. 1, London 1994, n. 12-040. 15

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Enforcement of Arbitration Agreements in England properly understood, and that they should not always be interpreted purely on internal linguistic considerations.20 In 1997, it is Lord Hoffmann who fully set out the modern approach in Investors Compensation Scheme Ltd. v. West Bromwich Building Society.21 He insisted that interpretation should take into account all the background knowledge which would reasonably have been available to the parties. He also underlined that parties make linguistic mistakes, and that although it should not be easily accepted, especially in formal documents, English courts should be ready to interpret contracts against their words when necessary. He said that, in particular, this should be done when literal interpretation leads to unreasonable results. The decision in Premium Nafta v. Fili Shipping could thus be regarded as a logical consequence of the general evolution of the rules of interpretation of contracts in English law. It is of course worth noting that Lord Hoffmann had already delivered the leading speech in the Investors Compensation Scheme case. Although he does not make any connection between the two cases, he seems to have considered that the traditional literal interpretation of arbitration agreements did not lead to reasonable results, and that it should only be accepted with the support of clear language.22 Yet, the rule of interpretation that he laid down for arbitration agreements is remarkably general. Lord Hoffmann did not truly seek to assess what the parties had intended in the case in hand. Indeed, he barely mentioned the facts of the case in the judgment. Instead, he recognised an actual presumption of the intention of the parties which seems to be meant to apply to all arbitration agreements. If the decision is not limited by the doctrine of precedent, it will result in a more general and less case specific construction of arbitration clauses, which is quite unusual in the common law world. However remarkable, the decision must be approved. There are many reasons why the focus of common law courts on the specific wording of arbitration agreements is not a good idea. The first one is the reason offered by Lord Hoffmann. It is indeed reasonable to assume that rational parties do not intend to have some of their disputes decided by one adjudicator, and certain others by another adjudicator. Litigating related actions before different adjudicators will normally be more expensive. The parties will need to explain twice the background of the case, and sometimes to argue twice some of the issues. This is a waste of resources that rational parties should not want. Moreover, it will often be necessary to define the respective jurisdiction of each of the adjudicators. Their coexistence may thus raise an additional jurisdictional issue which will need to be addressed. Again, this will be an 20 Prenn v. Simmonds [1971] 3 All ER 237. See generally STAUGHTON C., ‘How do the Courts Interpret Commercial Contracts?’ in: C.L.J. 1999, p. 303. 21 [1997] UKHL 28, [1998] 1 All ER 98. 22 The idea that the more unreasonable the result, the clearer the language should be, is not new in English law. See STAUGHTON C. (note 20), p. 308, citing Lord Reid: ‘The more unreasonable the result the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they should make that intention abundantly clear.’ See Wickman Machine Tools Sales Ltd. v. L. Schuler A.G. [1974] AC 231, 251.

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Gilles Cuniberti unnecessary cost for the parties. Finally, if there is no hierarchically superior authority supervising the decisions made by each of the adjudicators on their jurisdiction, they may rule that their jurisdiction overlaps and, eventually, reach conflicting decisions. The result will not be merely an increase in the cost of the resolution of the dispute. If the parties can rely on opposite decisions and enforce them in different legal orders, the dispute will never be truly settled and the whole process will amount to a denial of justice.23 Although it is unclear that most commercial parties would keep in mind all these potential dangers of parallel litigation, it is fair to assume that they would be often aware of some of them, and that they would most often want to avoid them. Furthermore, it is even harder to believe that rational parties would want to give jurisdiction to different adjudicators without referencing all of them in the particular agreement. A remarkable consequence of interpreting narrowly an arbitration agreement is that it indirectly gives jurisdiction to an adjudicator, if not several of them, which is or are not mentioned in the clause. A court will typically retain jurisdiction over a dispute which will be deemed not to arise under the contract (for instance an action in tort) without being mentioned by the arbitration clause. The assumption would then be that the parties intended to confer jurisdiction for certain disputes to an arbitral tribunal, and to confer jurisdiction for other disputes to a court. This interpretation of the intent of the parties, however, is not very convincing. If the parties had genuinely intended to confer jurisdiction over certain disputes to a court, they would have said so, and they would most probably have chosen one. The same circumstances which led them to draft the arbitration clause would have led them, in most likelihood, to write down, first, that a court had jurisdiction over certain disputes, and, second, to choose that court. Instead, the theory behind the narrow interpretation of arbitration clauses would be that, although they intended to confer jurisdiction to a court, they were happy to choose none. The competent court would then be one of the courts which would accept to retain jurisdiction somewhere. While the parties cared for certainty when they drafted the arbitration clause, they would have been satisfied with a mechanism providing no certainty at all for the designation of the competent court. This is, to say the least, hard to believe. Of course, one could argue that they were unable to agree on a specific court, and thus left the question open. But is it not precisely why parties to international contracts resort to arbitration? By definition, these parties appreciated arbitration. Why would they not have extended the scope of the arbitration agreement to all disputes? The truth of the matter is that it is indeed what they had intended. If one is serious about finding the intention of the parties, even the literal interpretation of arbitration clauses should almost always lead to giving them a broad meaning. An additional reason why arbitration agreements should not be interpreted literally is peculiar to international arbitration. English has now become the lan23 The hypothesis is not merely academic. For an action brought before an arbitral tribunal seeking the restitution of monies paid as the consequence of a Swiss judgment, see République du Congo v. SA Groupe Antoine Tabet, French Cour de cassation, Civ. 1ère, 4 July 2007, in: Clunet 2008, p. 173.

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Enforcement of Arbitration Agreements in England guage of international business. It is not only spoken and written in Oxford and Cambridge between English undergraduates and their professors, but throughout the world by people for whom it is not a native language. International contracts in general, and international arbitration clauses in particular, are thus very likely to be drafted by non-native English speakers, and sometimes indeed by people who have a limited command of the English language. When this is the case, focusing on differences of language such as those which have traditionally been considered by common law courts does not make any sense. For the vast majority of international businessmen, and indeed for many of their lawyers, there is simply no difference between a dispute arising ‘under’ or ‘out of’ a contract. The literal interpretation of contracts is only conceivable in a world where people mean what they write, and this is not always the case when people write in a foreign language. Some English native speakers may not like that their language is often torn and mistreated. But they have to do justice between the parties on the facts, not in some ideal world. And if English lawyers want London to be perceived as a truly international venue for international arbitration, they cannot afford to be snobbish in this respect.

III. The Separability of Arbitration Agreements The case also raised the question of the separability of the arbitration agreement. The defendants argued that the contracts which were the foundation of the substantive claims of the plaintiffs, had been procured by bribery. The defendants thus sought to rescind the contracts on this ground. As the contracts included the arbitration clauses, they argued that not only the contracts, but also the arbitration clauses should be rescinded, and that it would follow that no arbitral tribunal could found its jurisdiction on such clauses. The principle of separability, or severability, is one of the most widely accepted principles of international arbitration.24 In most jurisdictions, it is recognized that arbitration clauses are separate agreements from the contracts which contain them. As a consequence, the mere fact that a given contract is invalid or ineffective does not necessarily entail the invalidity or the ineffectiveness of the separate arbitration agreement. Disputes relating to the invalidity of the contract can thus be arbitrated. The principle of separability was recognised as early as 1963 in France25 and 1967 in the United States,26 but it was only accepted in the United Kingdom in

24 See generally POUDRET J.-F., BESSON S., Comparative Law of International Arbitration, London 2007, p. 132. 25 Gosset, Civ. 1ère, May 7, 1963, in: Recueil Dalloz 1963, p. 545. 26 Prima Paint Co. v. Flood & Conklin Manufacturing Corp., 388 U.S. 395, 402 (1967).

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Gilles Cuniberti the 1990’s. Section 7 of the English Arbitration Act 1996 now expressly endorses the principle of ‘separability of arbitration agreement.’27 The purpose of the principle of separability is to prevent automatic jurisdictional challenges to arbitral tribunals on the ground of the invalidity of the contract. The aim is to offer a logical argument defeating challenges of the existence of arbitration agreements based on their accessory character. Arbitration clauses exist because of the contract and its substantive clauses. Their purpose is to provide a dispute resolution mechanism if a dispute arises out of the contract. Arbitration clauses are thus accessory to the substantive clauses. As a consequence, if the validity of the contract is challenged, the existence of the arbitration is logically threatened by a causation argument. If the contract is set aside, so will any of its clauses which do not have an autonomous existence. And accessory clauses such as dispute resolution clauses precisely do not have such autonomous existence. This is the reason why the principle of separability was crafted. Arbitration clauses have been given more autonomy. They are now deemed separate from the rest of the contract, and are thus immune from any causation argument. They survive the rest of the contract in order to serve their purpose. In this case, the argument was made that the arbitration clauses should not survive the lack of authority of the agent who had signed the contracts. Was it a causation argument? Had the parties framed the argument as such? In the minds of the two Lords who delivered a speech for the House of Lords, the answer was clearly yes. The argument was presented as ‘essentially a causation argument’ (Lord Hope of Craighead), which as such was ‘exactly the kind of argument which section 7 was intended to prevent’ (Lord Hoffmann). It was thus easily dismissed. Although the argument could be made, and maybe was, along those lines, it could also have been framed differently. It could have been argued that the lack of authority of the agent who concluded the contract was not only a defect of the contract, but a defect of the arbitration clause. The argument here would not have been one of causation. It would have been an autonomous one, which could be made separately for each single clause of the contract, including the arbitration clause. It is indeed widely accepted that the contract and the arbitration agreement, though separate, can be impacted by the same defect.28 They could be both vitiated Section 7 provides that ‘Unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement (whether or not in writing) shall not be regarded as invalid, non-existent or ineffective because that other agreement is invalid, or did not come into existence or has become ineffective, and it shall for that purpose be treated as a distinct agreement.’ 28 LEW J.D.M., MISTELIS L.A., KROLL S.M., Comparative International Commercial Arbitration, The Hague London New York 2003, p. 104; REDFERN A., HUNTER M., with BLACKABY N., PARTASIDES C., Law and Practice of International Commercial Arbitration, London 2004, p. 164; MAYER P., ‘The limits of the Severability of the Arbitration Clause’, in: VAN DEN BERG A. (ed.), ICCA Congress Series no 9 – Improving the Efficiency of Arbitration Agreements and Awards: 40 years of Application of the New York Convention, The Hague 1999, p. 261; POUDRET J.-F., BESSON S. (note 23), p. 133; GAILLARD E., SAVAGE J. 27

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Enforcement of Arbitration Agreements in England by one single factor. In such a case, their being separate would not prevent the validity or the effectiveness of any of them from being challenged independently. The principle of separability is not a principle of immunity of the arbitration agreement.29 In all fairness, Lord Hoffmann did distinguish in his speech between attacks on the sole contract, and attacks on both the main agreement and the arbitration agreement. The distinguished judge took the example of a complete lack of consent, which would affect any single clause of the contract, and thus the arbitration clause as well. But he then went on to rule that the lack of authority of an agent to conclude a given contract was not a defect which would impact autonomously on the arbitration agreement. The argument that he put forward was that an agent who had authority to conclude certain international contracts on behalf on his principal had authority to conclude arbitration agreements. The mere fact that the agent would act ultra vires as far as the substantive obligations are concerned would not suppress his authority to conclude arbitration agreements, which are routinely found in all international contracts of this kind (here, charterparties). Indeed, Lord Hoffmann went as far as saying that it would have been remarkable if the agent had not included such clause in whichever charter he would have entered into, whatever its other terms had been. The conclusion reached by Lord Hoffmann on the irrelevance of the lack of authority of the agent as far as the arbitration agreement is concerned, was not obvious. As pointed out by Professor Mayer,30 the case of the agent acting ultra vires is delicate. At first glance, there does not seem to be a significant difference with a complete lack of consent. After all, the principal only empowered his agent to conclude certain contracts on his behalf. If the agent concludes other contracts, the principal simply did not consent to them. The same applies to any of the clauses of such contract: the principal did not agree to enter into the relevant contract, and thus to be bound by any of its clauses, including the agreement concluded by his agent on dispute resolution.31 However, it could be argued that some clauses of the contract would have been included in any contract. For such clauses, the truth of the matter would be that the principal would have consented to them by agreeing to appoint the agent. In certain industries, this could apply to arbitration agreements. This is the point made by Lord Hoffmann when he underlines that an arbitration clause would have been found in any charterparty regardless. The solution of the House of Lords is certainly convincing in the particular context of (ed.), Fouchard, Gaillard and Goldman on International Commercial Arbitration, The Hague, Boston, London 1999, p. 363. 29 It is of course conceivable to lay down such principle as well. This is what the French supreme court for private and criminal matters (Cour de cassation) did in its Dalico decision (Comité de la municipalité de Khoms El Mergeb v. Dalico Contractors, Civ. 1ère, 20 December 1993 in: 20 Y.B. Com. Arb. (1995)) where it ruled that arbitration agreements do not have to fulfil the validity requirements of any national law. 30 MAYER P. (note 28), p. 265. 31 MAYER P. (note 28), p. 265.

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Gilles Cuniberti charterparties. It is unclear to what extent it applies for other contracts which are not routinely submitted to arbitral tribunals. In any case, the English doctrine of precedent does not extend the relevance of the case beyond its facts, and the type of contract it considered.

IV. Conclusion The narrow interpretation of arbitration agreements and the limited recognition of the separability principle were two well known peculiarities of the English law of arbitration. Both had an impact on the enforcement of arbitration agreements by English courts. In some circumstances, English courts would not enforce arbitration agreements that most civil law jurisdictions would have enforced. This created an opportunity for forum shopping by giving an incentive to parties unwilling to go arbitration to initiate proceedings before English courts. They could either apply for a stay of the arbitration proceedings, or bring a claim on the merits, if English courts had jurisdiction. After Premium Nafta v. Fili Shipping, it seems that differences in the enforcement of arbitration agreements between England and the civil law world will cease to be significant. This harmonization should be welcome, but should not hide that the United Kingdom was only one of the common law jurisdictions which have narrowly interpreted arbitration agreements, and that opportunities for forum shopping still remain.

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SINGAPORE THE EFFECT OF CONTRACT ON THE LAW GOVERNING CLAIMS IN TORTS AND EQUITY Tiong Min YEO∗

I. II. III. IV. V. VI. VII.

Introduction The Choice of Court Agreement The Choice of Law Agreement Choice of Law for Tort Claims Choice of Law for Equitable Claims Multiple Claims Conclusion

I.

Introduction

There is no doubt that party autonomy plays a very significant role in the private international law of Singapore. This is most evident in the almost conclusive effect given to the exclusive choice of court and choice of law clauses in contracts between parties in a dispute. The effects of a contractual relationship on the law governing claims founded on non-contractual obligations and on multiple claims founded (or which could have been so founded) on contract, tort and equity arising from the same facts are less clear, but both issues have been the subject of a very important decision of the Singapore Court of Appeal in Rickshaw Investments Ltd v Nicolai Baron von Uexkull.1 The main issue was whether the action should be stayed in favour of proceedings already commenced in Germany, but the court made several important rulings on choice of law in the process. The defendant had been appointed by the second plaintiffs, a German partnership, to procure a buyer for certain Tang dynasty relics salvaged from a sunken ship. The defendant was a German national, and resident in Germany at the time of trial, but at the time of the alleged breaches of duties was resident in Singapore and a permanent resident by Singapore law. The first plaintiff was a company incorporated in the Cayman Islands which had taken over the assets and liabilities of the second plaintiff. The second plaintiff had been joined in the proceedings only to ensure that all parties were before the Sin∗ 1

Yong Pung How Professor of Law, Singapore Management University. [2007] 1 Sing LR 377. Yearbook of Private International Law, Volume 9 (2007), pp. 459-469 © sellier. european law publishers & Swiss Institute of Comparative Law

Printed in Germany

Tiong Min Yeo gapore court. A dispute had arisen between the first plaintiff and the defendant as to whether the defendant had released sensitive price information to the eventual buyer of the treasures in Singapore. The defendant sued the first plaintiff in Germany for wrongful dismissal, and in turn the plaintiffs sued the defendant in Singapore for damages in tort, for conversion (in refusing to return a number of relics in his possession) and deceit (in lying as to the course of the negotiations), and in equity, for breach of fiduciary duty and breach of the duty of confidence (in wrongfully disclosing information to the prospective buyer). Although the trial judge in the High Court2 found that the choice of court agreement in the employment was not exclusive, he felt that the claims in tort and equity advanced by the plaintiffs in Singapore were intended to circumvent the contractual dispute of wrongful dismissal in respect of which proceedings had already been commenced but had yet to be concluded in Germany, and stayed the proceedings. On appeal, the arguments turned on whether the action should be stayed on the basis that the German court was clearly the more appropriate forum to hear the case. The Court of Appeal held that the plaintiffs were in the absence of bad faith entitled to rely on the non-contractual claims and that although the claims in equity were governed by German law the claims in tort were governed by Singapore law, so that the governing law point was neutral. Stay was refused on the strength of the connections of the dispute with Singapore, in particular the availability and compellability of witnesses in Singapore and the presumption that the place where the tort occurred is the natural forum,3 and the finding that the proceedings in Germany were not at an advanced stage.

II.

The Choice of Court Agreement

The defendant argued before the trial judge that the jurisdiction agreement in the employment contract was exclusive. Had it been so,4 strong cause amounting to exceptional circumstances would have to be demonstrated by the plaintiffs why the proceedings in Singapore should not be stayed.5 Expert evidence were offered by both sides on the translation of the clause, and the trial judge preferred that of the plaintiffs’ expert witness that on the literal meaning of the clause the parties merely agreed to the competence of the German courts. The expert opinions were perhaps [2006] 2 Sing LR 850. Endorsing The Albaforth [1984] 2 Lloyd’s Rep 91. If the defendant wanted to invoke the presumption to advance the case that the natural forum is elsewhere, he should naturally bear the burden of convincing the court that the tort occurred outside Singapore. Oddly, however, the plaintiff was entitled to rely on this presumption to argue that Singapore was the natural forum when it was not clear from the pleadings where the tort (of deceit) had occurred (above, note 1, at 40, 41 and 72). 4 And assuming that the claims in question were within its scope. 5 The Vishva Apurva [1992] 2 Sing LR 175 (CA). 2 3

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Effect of Contract on the Law Governing Claims in Torts and Equity less than satisfactory6 in the sense that they appeared to offer no guidance on the rules of construction in German law given that the contract was expressly governed by German law. The contract was dated 30 June 2003, and presumably the German court would apply the Brussels I Regulation7 to any disputes arising from this contract. To the extent that principles of construction under German law would refer to the likely intentions of the parties at the time of contracting, it is noted that one of the original contracting parties (the second plaintiff) was domiciled in Germany, and it could be reasonable for the contracting parties at the time of the formation of the agreement to expect that if a dispute were brought before the chosen German court, a presumption of exclusivity would apply under Article 23, on the assumption that the defendant was not domiciled in Germany under German law.8 The contracting parties may reasonably have felt no need to expressly articulate the exclusivity if they had thought that this was going to be presumed as a matter of law. In the absence of evidence of German law (except to the extent of the expert witnesses’ own translations), the trial judge applied Singapore law by default. It is also notable that the judge applied the common law principle of contra proferentem; since the clause was drafted by the defendant’s lawyer, any ambiguities would be resolved against the defendant.9 In the Court of Appeal, it appeared to have been conceded that the choice of court clause was not exclusive. As all were proceeding on the basis of the common law governing the interpretation of the clause, an argument could have been made that even if it was not exclusive, as a matter of construction the parties could have intended that once proceedings were in fact commenced in the chosen court, no other proceedings should be commenced in other courts.10 Perhaps counsel tactically preferred the natural forum arguments because of lack of hard evidence on the contracting parties’ intentions, or it may be that this line of argument was abandoned at least in the Court of Ap-

6 See further, BRIGGS A., ‘A Map or a Maze: Jurisdiction and Choice of Law in the Court of Appeal’, in: (2007) 11 SYBIL (forthcoming). 7 Council Regulation (EC) No 44/2001 of 22 December 2000 on Jurisdiction and Recognition and Enforcement of Judgments in Civil and Commercial Matters, OJ L12/1, in force from 1 March 2002. 8 No such expectation would reasonably arise out of an employment contract where the employee is domiciled in a Member State since the jurisdiction agreement will be ineffective (Article 20), except in the case of a post-dispute jurisdiction agreement (Article 21), which was not the case here. 9 Hitherto, this principle of construction has not been used much in the context of jurisdiction agreements. Cf. Pearl v Soveriegn Management Group Inc (2003) 37 CPC (5th) 143. 10 See, e.g., Sabah Shipyard (Pakistan) Ltd v Islamic Republic of Pakistan [2003] 2 Lloyd’s Rep 571; BP Plc v Aon Ltd [2005] EWHC Comm 2554, [2006] 1 Lloyd’s Rep 549; YEO T.M., ‘The Contractual Basis of the Enforcement of Exclusive and Non-Exclusive Choice of Court Agreements’, in: (2005) 17 Sing Acad LJ 306 at 84-86 and 102.

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Tiong Min Yeo peal because of the concession11 that the choice of law (which was inextricably linked with the choice of court) agreement only applied to contractual issues.

III. The Choice of Law Agreement There is no doubt that had the claims before the Singapore court been classified as contractual, they will be governed by German law. An express choice of law will be effective, unless it is not legal or bona fide, or it is contrary to public policy. Singapore law takes a narrow approach to the limitations on parties’ choice of law for contract. The public policy objection is the same narrow public policy objection against the application of foreign law, and lack of bona fides is practically demonstrated only if the sole purpose of the choice is to evade the laws of a country which would otherwise govern the contract.12 What is of potentially far-reaching implication is the suggestion by the Court of Appeal that the parties’ choice of law to govern non-contractual claims may also be effective. The court proceeded on the explicit assumption that the common law choice of law rules for the claims in equity and tort only needed to be considered if the choice of law clause in the contract was ‘not exclusive’, in the sense that it only applied to questions arising from the contract itself.13 The decision itself says nothing about the extent to which it will give effect to the parties’ choice of law in respect of non-contractual claims. However, earlier in The Rainbow Joy,14 also a jurisdiction case, the Court of Appeal had observed that the parties’ choice of law in a contract will prevail over the common law choice of law rule in determining the law applicable to a tort committed on the high seas. Such choices have been given effect to under Californian conflict of laws,15 and of course, will be given effect to (with some limitations) under European private international law under the (soon to be effective) Rome II Regulation on the Law Governing Non-Contractual Obligations.16 But it is an innovation in the common law.17 Such a development will be of great practical importance, not only in enhancing certainty in the planning of commercial transactions, but also in the 11 12

Above (note 1), at 44. Peh Teck Quee v Bayerische Landesbank Girozentrale [2000] 1 Sing LR 148

(CA). Above (note 1), at 15, which apparently endorses the plaintiffs’ counsel’s argument recited at 44. 14 [2005] 3 Sing LR 719 (CA) at 31. 15 See, eg, Nedlloyd Lines BV v San Mateo 834 P 2d 1148 (SC Cal, 1992). 16 Regulation (EC) No 864/2007 of 11 July 2007, OJ L199/40, coming into force on 11 January 2009. 17 See BRIGGS A., ‘On Drafting Agreements on Choice of Law’, in: [2003] LMCLQ 389. 13

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Effect of Contract on the Law Governing Claims in Torts and Equity country’s efforts to promote itself as a hub for international dispute resolution.18 Further efforts will be required to work out the restrictions that may be created in tandem. However, the conclusion that the choice of law clause did not apply to noncontractual disputes is somewhat curious. In the Court of Appeal, the accepted translation was: “The Parties agree on German law for this contract and the competence of the German courts”. It is difficult to imagine that any reasonable contracting parties accepting this clause had intended the choice of law portion and the jurisdiction portion to apply to different legal aspects of their disputes. It is odd, then, that by implication the court took the view that the jurisdiction agreement only applied to contractual disputes. The court did not have the benefit of the House of Lords decision in Premium Nafta Products Ltd v Fili Shipping Co Ltd,19 which in a development much welcomed in commercial circles in the Commonwealth held that a pragmatic and commonsensical approach shorn of linguistic technicalities should be taken to the interpretation of arbitration clauses, particularly what disputes fall within the clause; commercial parties are generally presumed to intend a one-stop dispute resolution solution. There is no reason to suppose why this approach should not also apply to the interpretation of choice of court or choice of law clauses.20

IV. Choice of Law for Tort Claims The Rickshaw case has created a landmark in the common law tort choice of law rules in Singapore. The court accepted that the common law as developed up to Red Sea Insurance Co Ltd v Bouygues SA21 applied in Singapore. Thus, a claim based on a tort committed overseas was governed by the law of the forum and the law of the place where the tort was committed, but in an exceptional case an issue could be governed exclusively by the law of the forum22 or by the law of the place of the tort.23 However, the court made two significant points. First, the court refused to accept the suggestion in English law24 that the rule was confined to torts committed overseas and that the law of the forum invariably applied to torts committed within the forum. Moreover, it held that the same standard applied to the invocation of the exception whether the tort was committed within or outside the See (last accessed on 14 February 2008). [2007] UKHL 40, [2007] 4 All ER 951, [2007] Bus LR 1719. 20 Ibid, at 27 (Lord Hope of Craighead). 21 [1995] 1 AC 190 (PC, Hong Kong). 22 As established in Boys v Chaplin [1971] AC 356. 23 Red Sea Insurance Co Ltd v Bouygues SA, above, note 21. 24 Szalatnay-Stacho v Fink [1947] KB 1 and Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391. 18 19

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Tiong Min Yeo forum. Secondly, and this necessarily follows from the first, the exception could lead to the application of the law of a third country. This point is consistent with the emphasis on the flexibility of the exception in the reasoning in the Red Sea Insurance case although that case itself did not expressly go so far. In affirming (but extending incrementally) the common law rule, the Court of Appeal took the view that the double actionability rule with a flexible exception struck the best balance between certainty and flexibility. This has not been the modern view of major jurisdictions including the legislature in the United Kingdom25 and the courts in Canada26 and Australia,27 which have done away with the law of the forum requirement. The Court of Appeal was influenced28 by the existence of a law reform report in Singapore proposing changes to Singapore conflicts rules along the lines of the relevant English legislation.29 This was perhaps an unhappy step, as there has been no evidence of any legislative interest in such reform in Singapore. The court found that the double actionability rule applied to the tort claims,30 and held that given the connections of the case with Singapore, the situation was not exceptional enough for any other than Singapore law to apply. The court paid no heed to the underlying contractual relationship of the parties, but it did not appear from the judgment whether counsel had pressed the point. The court did not have the benefit of Trafigura Beheer BV v Kookmin Bank Co,31 where the English High Court had no doubt that at least in commercial cases, torts committed by one contracting party against another in the course of the performance of a contract were exceptionally governed by the law of the underlying contractual rela-

Private International Law (Miscellaneous Provisions) Act 1995. Tolofsen v Jensen [1994] 3 SCR 1022. 27 Regie Nationale des Usines Renault SA v Zhang [2002] HCA 10, (2002) 210 CLR 491. The Canadian and Australian authorities were not expressly mentioned in the Rickshaw judgment, but the Court of Appeal was clearly aware of them as they were extensively discussed in a case which the court referred to: Ang Ming Chuang v Singapore Airlines Ltd [2005] 1 Sing LR 409. 28 Above (note 1), at [66]. 29 Law Reform Committee of the Singapore Academy of Law, Reform of the Choice of Law Rule Relating to Torts (31 March 2003), available at (last accessed on 14 February 2008). 30 The court dismissed the defendant’s argument that the tort of deceit was not committed in Singapore as too speculative (at 72). This must proceed on the basis that Singapore law applied by default if foreign law (wherever the place of the tort was) was not proven, and that since the defendant was arguing for the exception to apply, he had to show the relevant circumstances to justify it, including the location of the tort. 31 [2006] EWHC 1450 (Comm), [2006] 2 Lloyd’s Rep 455, noted in BRIGGS A., ‘The Further Consequences of a Choice of Law’, in: (2007) 123 LQR 18. 25 26

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Effect of Contract on the Law Governing Claims in Torts and Equity tionship between the parties.32 This was decided in the context of legislation rather than common law, but on this point it is hard to see any distinction of principle from the common law. The Rome II Regulation also tries to give effect to the reasonable expectations of contracting parties in tort claims by way of an exception.33 The court’s position is perhaps surprising in the light of its earlier suggestion that an express choice by the parties as to the law applicable to tort claims would have been effective. The court may have been influenced by its conclusion that the choice of law agreement did not apply to non-contractual claims. But this is no different from a situation where the parties failed to specify a choice of law for the tort claims. It may be different if the parties had made it clear that their choice of law clause did not extend to non-contractual claims; in such a case the parties have indicated their wish that the law governing their contractual relationship should not apply to tort claims. The position is also surprising in the light of its application of the law of the underlying relationship to the equitable claims of breaches of fiduciary duties and duties of confidence. Breach of confidence is particularly close to torts in domestic law,34 and the Malaysian court has gone so far as to characterise it as a tort for choice of law purposes even if it occurs within a contractual relationship.35 The distinction in the view of the Singapore Court of Appeal may implicitly be that the equitable duties (fiduciary duty and duty of confidence) arose juridically36 from the relationship established by contract,37 while the tortious duties in question (duty not to convert property and duty not to lie) were imposed by the general law. It may be doubted whether a distinction which depends on very technical contents of domestic law is a good one to draw for choice of law purposes. It is undoubtedly true that the law must demand a close connection between the claim and the underlying relationship before considering applying that law to the claim. However, testing the connection by the juridical derivation of the duty appears to be unduly restricted.38 If the basis of the reference is to give effect to the reasonable expectations of the contracting parties, they are not likely to draw such fine distinctions. 32 But see Johnson v Coventry Churchill International Ltd [1992] 3 All ER 14 where the court applied what was effectively the law of the employment contract to a tort committed by the employer against the employee overseas, by way of the common law exception. 33 Article 4(3). 34 A leading torts textbook, DUGDALE A.M., Clerk & Lindsell on Torts, 18th ed., London 2000, contains a chapter on breach of confidence. Another, HEUSTON R.V.F. and BUCKLEY RA, Salmond and Heuston on the Law of Torts, 21st ed., London 1996) at 34 refers to breach of confidence as a ‘distinct tort’. See also NORTH P.M., ‘Breach of Confidence: Is There a New Tort?’, in: (1972) JSPTL 149. 35 A-G of Hong Kong v Zauyah [1995] 2 MLJ 620 (CA Malaysia). 36 Presumably from the point of view of the domestic law of the forum. 37 Above (note 1), at 83. 38 In comparison, neither the English legislation nor the Rome II Regulation requires that the tortious duty be one that arises juridically out of a relationship created by contract for the application of the exception.

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V.

Choice of Law for Equitable Claims

The Singapore Court of Appeal’s most significant contribution in this case is probably its holding that where fiduciary duties or duties of confidence arise from an established legal relationship like that of contract or tort, then the law governing the underlying legal relationship should apply to the claims for breaches of fiduciary duties or duties of confidence. Thus, on the facts, German law which governed the contract also applied to the equitable claims. In so holding, the court rejected the view that the principles of equity of the law of the forum applied in all cases. The court noted such a blanket rule would not be appropriate given disparate doctrines and causes of actions that could be found within the equitable jurisdiction, and the diversity of legal bases that could justify the imposition of equitable duties.39 The court also thought that such an approach would undermine the considerations of international comity which are integral to the theory and practice of the conflict of laws.40 This case adds to the growing body of case law in the Commonwealth which would generally consider the equitable principles of any jurisdiction (including the forum’s own) to be applicable only after determining that the law of that jurisdiction governs the issue in accordance with the forum’s rules of private international law.41 It has been argued elsewhere that equity is not an existing or suitable category for characterisation in the conflict of laws, and that issues involving equity must find their homes in categories already established or to be established in the conflict of laws.42 In contrast, the Court of Appeal reserved its opinion on the possible development of a separate category of equitable obligations in the future,43 but affirmed that:44 Above (note 1), at 76-80. Above (note 1), at 80. 41 See, eg, A-G for England and Wales v R [2002] 2 NZLR 91 (CA), affirmed without reference to the point in [2003] UKPC 22; Base Metal Trading Ltd v Shamurin [2004] EWCA Civ 1316, [2005] 1 WLR 1157, noted in YEO T.M., ‘Choice of Law for Director’s Equitable Duty of Care and Concurrence’, in: [2005] LMCLQ 144. 42 YEO T.M., Choice of Law for Equitable Doctrines, Oxford 2004; YEO T.M., ‘Choice of Law for Equity’, in: DEGELING S. and EDELMAN J., Equity in Commercial Law, Sydney 2005. 43 This appeared in the context of disagreeing with the proposition purportedly made in YEO T.M. Choice of law for Equitable Doctrines (note 42) that issues involving equity must always be characterised as falling into an existing category. No such case was in fact made: see ibidem, 3.27. In support of a distinct choice of law category of equitable obligations, see BARNARD L., ‘Choice of Law in Equitable Wrongs: A Comparative Analysis’ [1992] CLJ 474. See also STEVENS R., ‘Choice of Law for Equity: Is it Possible’, in: Equity in Commercial Law, above, note 42. 44 Above (note 1), at 81. On the facts, the duties would be regarded under domestic law as arising in the exclusive jurisdiction of equity, so this proposition of the court is not confined to auxiliary jurisdiction of equity (eg, the use of equitable remedies to enforce 39 40

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Effect of Contract on the Law Governing Claims in Torts and Equity ‘where equitable duties ... arise from a factual matrix where the legal foundation is premised on an independent established category such as contract or tort, the appropriate principle in so far as the choice of law is concerned ought to be centred on the established category concerned.’ It should be emphasized that the court was referring to the possible future development of a category for equitable claims.45 Since the court has not accepted such a category yet, and characterisation is a necessary step to arrive at a choice of law rule, the irresistible inference is that the claims for breach of fiduciary duty and breach of the duty of confidence have been characterised as contractual.46 At first sight this appears inconsistent with the premise of the court that it was examining the common law choice of law rules on the basis that the parties’ choice of law agreement applied only to contractual claims. However, closer reading reveals that the court was referring to claims which are classified as non-contractual in domestic law.47 This underlines the point made earlier that such legal subtleties should be avoided in the construction of the scope of a jurisdiction (in this case also a choice of law) clause. A jurisdiction taking the view that equitable principles always apply as the law of the forum may reach the same result. Thus, in Australian law, where the proposition has been strongly stated,48 it has also been said with high authority that where fiduciary duties arise from agreement, it is the law of the contract that should govern.49 Given the basic premise of the applicability of equitable principles without choice of law, this conclusion may be arrived at bypassing the characterisation process; the applicability of the law of the contract is not a choice of law rule, but an exception to the rule that the law of the forum applies.

common law rights). This itself is a technical distinction of domestic law that should not be projected to choice of law analysis. 45 Above (note 1), at 81. 46 Above (note 1), at 49. 47 Above (note 1), at 15 the reference is specifically to ‘claims in tort and equity’. 48 Paramasivam v Flynn (1998) 160 ALR 203 at 217; National Commercial Bank v Wimborne (1978) 5 BPR 11,958 at 11,982; OZ-US Film Production Pty Ltd v Heath [2000] NSWSC 967; OZ-US Film Production Pty Ltd v Heath [2001] NSWSC 298; Virgtel Ltd v Zabusky [2006] QSC 66. 49 MEAGHER R.P. and GUMMOW W.M.C. (eds.), Jacob's Law of Trusts in Australia, 5th ed., Sydney [etc.], 1986 at 712; Paramasivam v Flynn (1998) 160 ALR 203 (Full Court, Federal Court) at 217, noted in YEO T.M., ‘Choice of Law for Fiduciary Duties’, in: (1999) 115 LQR 571.

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VI. Multiple Claims The final point of note is the divergence of views between the High Court and the Court of Appeal on the effect of the multiplicity of claims in the case. The High Court saw the plaintiffs as trying to evade the choice of law provision in their agreement by framing their claims outside of contract when the various duties and breaches arose either from the contractual relationship or the performance of the contract.50 On the other hand, the Court of Appeal took the view that the plaintiffs were entitled to choose their causes of action as long as it was done in good faith.51 The Court of Appeal noted that the defendant’s tortious acts were probably also breaches of concurrent implied obligations in the contract.52 On this view, and subject to stay of proceedings on grounds of natural forum and to prohibition against double recovery, under Singapore law the plaintiff would be permitted to choose to sue either in contract (governed by German law) or tort (governed by Singapore law); the plaintiff is effectively granted a choice of law.53 Choosing the more favourable law by selective pleading cannot by itself be in bad faith. Concurrence raises a vexed issue in the conflict of laws.54 It has been judicially noted as a matter for regret that what is practically the same duty arising from a single factual matrix but conceptualized as different causes of action under the domestic law should be governed by different laws.55 However, common law courts are greatly influenced by domestic law attitude towards concurrence, even though it has never been satisfactorily explained why domestic concurrence rules should apply without modification at the choice of law level. The assumption appears to be that allowing plaintiffs to choose causes of action is a rule of pleading and thus a rule of procedure,56 but it remains to be tested whether this view is consistent with the modern trend in the common law towards a functional and narrow approach to the characterisation as procedure.57 There is no obvious or easy

Above (note 2), at 42. Above (note 1) at 48. 52 Above (note 1), at 48. 53 BRIGGS A., ‘Choice of Choice of Law?’, in: [2003] LMCLQ 12. 54 See BRIGGS A. (note 53); YEO T.M. Choice of Law for Equitable Doctrines (note 42), at 3.32-3.40. 55 Base Metal Trading Ltd v Shamurin (note 41), at 56-57. 56 Coupland v Arabian Gulf Oil Co [1983] 1 WLR 1136 at 1152-1153, followed by the Singapore Court of Appeal, proceeded on the basis of assumption rather than reasoning. In Base Metal Trading Ltd v Shamurin, above, note 41, suggests the ‘procedure’ reasoning (at [33]). See also COLLINS L., ‘Interaction between Contract and Tort in the Conflict of Laws’ (1967) 16 ICLQ 103, reprinted in COLLINS L., Essays in International Litigation and the Conflict of Laws, Oxford 1994, 352 at 358. 57 John Pfeiffer Pty Ltd v Rogerson (2003) 203 CLR 503; Tolofson v Jensen, above, note 26. Both were cited with approval by the majority in the Court of Appeal in Harding v Wealands [2004] EWCA Civ 1735, [2005] 1 WLR 1539, but the decision itself was over50 51

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Effect of Contract on the Law Governing Claims in Torts and Equity solution. Practically, the problem is usually avoided by deciding that the same law applies (whether by way of characterisation or, perhaps more commonly, by the application of the connecting factors). In this case, characterisation was indeed used to close the gap between the equitable and potential contractual claims; but connecting factors could have been used more flexibly to close the gap between the tortious and potential contractual claims.58

VII. Conclusion The Rickshaw case makes a significant contribution to common law jurisprudence in deciding that equitable duties arising from a contractual relationship are governed by the law of the underlying relationship. Implicitly, it accepted that in appropriate situations equitable duties may be characterised as contractual for choice of law purposes. An important contribution is also made to the understanding of the double actionability rule (to the extent that it still applies in the Commonwealth), in its decision that the flexible exception applies even to local torts. No less important is the way it nudged the common law closer towards acceptance of parties’ choice of law for non-contractual obligations. The criticisms in this note do not detract from these central points; they focus on the issues that, perhaps because of the way the case was presented and argued, were perceived by the court as marginal to the case.

turned by the House of Lords on a point of statutory interpretation: [2006] UKHL 32, [2006] 3 WLR 83. 58 See, e.g., Base Metal Trading Ltd v Shamurin [2004] 1 All ER (Comm) 159; cf the CA decision above (note 41), DICKINSON A., ‘Applicable Law Arbitrage’, in: (2005) LQR 374.

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SLOVAK REPUBLIC THE HABITUAL RESIDENCE IN SLOVAKIAN PRIVATE INTERNATIONAL LAW: DECISION OF THE DISTRICT COURT IN MARTIN OF 21 DECEMBER 2007 Elena JÚDOVÁ∗

I. II. III. IV.

Introduction The Case (Case Nr. 16P 239/2006) The Concept of ‘Habitual Residence’ and Similar Concepts in Slovakian Private International Law Conclusion

I.

Introduction

In the Private International Law of the Slovak Republic (hereinafter referred to as ‘SR’), there has long been an emphasis on nationality as the connecting factor for jurisdiction of the Slovakian courts, particularly with respect to personal status and family matters. Concepts, such as residence or stay for a longer period of time, were, until recently, rarely used. As a result of the SR’s ratification of the Hague Convention of 19 October 1996 on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in respect of Parental Responsibility and Measures for the Protection of Children, as well as of the Council Regulation (EC) Nr. 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility (hereinafter referred to as ‘Regulation Nr. 2201/2003’), however, the concept of ‘habitual residence’ has been incorporated into Slovakian Private International Law.1 This concept is also applicable in the territory of the SR in accordance with Community law, which has a direct impact in the SR, which, since 2004, is a member of the European Community. However, neither Community

∗ Lecturer in Private International Law at the Law Faculty of Matej Bel University in Banská Bystrica, Slovakia. 1 Act Nr. 539/2003 Coll. of Laws, which changes and amends Act Nr. 97/1963 Coll. of Laws on Private International Law and International Civil Procedure.

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Printed in Germany

Elena Júdová law, nor the case law of the European Court of Justice defines this concept and its definition is left to the interpretation of the national courts. Since there is neither a legal definition, nor consistent jurisprudence of the Supreme Court of the SR, describing what ‘habitual residence’ is, there is little hope that this concept will be clearly defined in the SR in the coming years. The following case comment provides an indication as to how the concept could be defined by the courts in the SR.

II.

The Case (Case Nr. 16P 239/2006)

On 16 August 2006, the mother of a minor child Michal Marián J., born 24 June 2005, requested a preliminary ruling granting her custody of the child. The District Court in Martin rejected her claim on 23 August 2006, reasoning that the conditions for the issuing of a preliminary ruling had not been met, since neither the life, nor the health of the child had been threatened. On 23 August 2006, the District Court in Martin began ex officio proceedings to award custody of the child and to decide matters regarding child maintenance. First, the court dealt with the question of whether the given matter was within the jurisdiction of Slovakian courts. The child and his father were citizens of the Czech Republic during this period and the father had his ‘habitual residence’ in the territory of the Czech Republic. Whereas the proceeding began after the SR entered the European Union, the court based its jurisdiction on Regulation Nr. 2201/ 2003. The Court concluded, that in accordance with Article 8, Paragraph 1 of Regulation Nr. 2201/2003, courts of a Member State have jurisdiction in matters of parental responsibility over a child who is ‘habitually resident’ in that Member State at the time the court is seized. On 6 September 2006, i.e. at the start of the proceedings, the child resided with its mother in the territory of the SR. The mother came with the child to the SR on 16 August 2006, after leaving the common household, where she had previously lived with the child’s father in Plzeň, Czech Republic. The child resided with his mother in the SR until 18 September 2007, when its father took him back to the Czech Republic. Since then, the child had permanently resided in the Czech Republic at the address where his parents had their common household in Plzeň. Here, since 19 September 2006, the child has continuously been registered for permanent residence. The father received parental contributions, as well as social security contributions at this address. Additionally, during the proceedings, it was shown that the District Court in Plzeň conducted proceedings regarding custody rights on the basis of an action brought by the father on 16 September 2006. From the report of the guardian, who was appointed for the child during the proceedings, it was also shown that the mother of the child was no longer residing in the territory of the SR, as she was employed in the Czech Republic. The District Court in Martin, therefore, found, at the start of the hearing, that the child did not have his ‘habitual residence’ in the territory of the SR, and 472

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The Habitual Residence in Slovakian Private International Law based on a decision dating from 21 December 2007, the court dismissed the case for want of jurisdiction. The court reasoned as follows: ‘In accordance with the above quoted Article 8 paragraph 1 of the Regulation [Regulation (EC) Nr. 2201/2003 of 27 November 2003], habitual residence may be understood as the place where the child, on the basis of the will of his parents or a parent, or any other person to whom the rights of custody of the child is awarded, is permanently residing for a longer period of time. According to the court’s opinion, for the court to state that the child resides habitually at a given place, a period of at least three months can be considered long enough. Nevertheless, where certain factual indications exist, such as, for example, that the child started to attend pre-school or an educiational institution, or that his parents have become employed at the given place, there is an assumption that the child shall stay at the place continuously for a longer period of time, though even a shorter period of time may be considered the habitual residence. However, in the given case none of these circumstances was proved, either on the side of the child Michal Marián J., or on the side of his mother. The court does not consider the registering of the child for permanent residence on the territory of the Slovak Republic itself as a fact indicating the establishment of habitual residence of the child on the territory of the Slovak Republic. On the contrary, the further progress of the situation of which evidence has been provided clearly shows that the habitual residence of the child at the beginning of the proceedings, as well as during the proceedings before this court, was and still ison the territory of the Czech Republic.’2 The habitual residence has been defined by the District Court in Martin as the place where the child ‘is continuously residing for a longer period of time’. The decisive time period to establish the habitual residence is, in the Court’s opinion, the minimum period of three months. However, the Court also cites particular factual indications that can imply that the child has its habitual residence at that place. Such factual indications include, for instance, attending of preschool or an educational institution, which leads to the assumption that the child will remain at that place for a longer time period. In our opinion and based on the reasoning given by the Court, the fact that the parent having the right of custody of the child has his/her habitual residence at the given place would be considered by the Court as the factual indication establishing the habitual residence of the child at that place. The occurrence of these factual implications can even prevail over the requirement of the threemonth residence. Upon existence of such factual implications, the shorter time period shall be enough to establish the habitual residence of the child.

2 Decision of the District court in Martin in the Case Nr. 16P 239/2006, p. 2 last paragraph (translation by the author).

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III. The Concept of ‘Habitual Residence’ and Similar Concepts in Slovakian Private International Law The concept of ‘habitual residence’ started to be used by the Hague Conference of Private International Law (hereinafter referred to as the ‘Hague Conference’) in its Conventions of the 1960s in order to avoid problems with different understandings of domicile in the national legal orders of Member States. It served as the substitute for domicile in order to provide a consistent definition of Conventions. ‘Habitual’ residence is a qualified residence as opposed to simple residence. The concepts of domicile and habitual residence are very similar: in the Hague Convention of 15 June 1955 relating to the settlement of the conflicts between the law of nationality and the law of domicile, which never entered into force, Article 5 defines ‘domicile’ as the place where the person resides habitually. Generally, the decisive factor used to determine a person’s domicile is the person’s will to settle at the given place and his/her intent to remain there for the foreseeable future. As a result, the intention to remain at a place for the foreseeable future is the major distinguishing factor between habitual residence and domicile. Legislation differs in terms of the importance attached to a person’s will. In Great Britain, a person’s will is the most important factor to consider in determining a person’s domicile, whereas in European countries equal importance is placed on the stability of the residence and the person’s connection to a given place, though residence need not be continual.3 Whether or not a person is registered at his or her place of residence is not a decisive factor although it may lend support to a claim that the person intended to remain in that place for the foreseeable future. Nowadays, ‘habitual residence’ is understood to be a factual concept. For example, the Resolution of European Council of 1972 on the standardisation of legal concepts of ‘domicile’ and ‘residence’4 states that the residence of a person is to be defined only according to factual concepts. When defining whether the residence is habitual, length and continuity of the residence are to be taken into account in addition to personal and professional connections to the place of residence. ‘Habitual residence’ is similarly characterised by the Report on the Fifth meeting of The Special Commission to review the operation of the Hague Convention of 25 October 1980 on the Civil Aspects of International Child Abduction.5

3 See also Explanatory Memorandum to European Council Ministerial Committee Resolution Nr. 1/1972 of 18 January 1972 on the standardization of the legal concepts of ‘domicile’ and of ‘residence’. 4 Resolution (72)1 on the standardization of the legal concepts of ‘domicile’ and of ‘residence’, accepted by the Committee of Ministers on 18 January 1972, source: <www.coe.int>. 5 Report on The Fifth Meeting of the Special Commission to review the operation of the Hague Convention of 25 October 1980 on the Civil Aspects of International Child Abduction and the practical implementation of the Hague Convention of 19 October 1996 on Jurisdiction, Applicable law, Recognition, Enforcement and Co-operation in respect of

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The Habitual Residence in Slovakian Private International Law The report, drawn up by the Permanent Bureau of the Hague Conference, indicates that concerned experts agree that the concept of ‘habitual residence’ is above all a question of fact to be decided on a case-by-case basis and should be distinguished from the more subjective concept of domicile. Factors, such as a child’s schooling, time spent in one place (although various experts pointed to the difficulty in determining the length of the time), the settling of the family in a certain place, and the integration of the child may all be taken into account in determining ‘habitual residence’. Experts also agree that it is wise not to define the concept of ‘habitual residence’, so that judges are free to exercise their discretion on this issue. The Hague Conference does not incline towards the adoption of the definition of the ‘habitual residence’.6 Nevertheless, certain implications can be found in explanatory reports to some Conventions, as well as in other working papers of the Hague Conference, as, for example, the above-mentioned Report. The concept of ‘habitual residence’ is also mentioned in Explanatory report to the Hague Convention of 5 October 1961 concerning the powers of authorities and the law applicable in respect of the protection of minors (hereinafter referred to as ‘the Hague Convention of 1961’), being the predecessor of the Hague Convention of 19 October 1996 on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in respect of Parental Responsibility and Measures for the Protection of Children (hereinafter referred to as ‘the Hague Convention of 1996’). Under the Explanatory report to the Hague Convention of 1961, the ‘habitual residence’ of the child shall be understood the place that represents the effective center (centre effectif) of the child’s life, especially with regard to other places of residence that may come into question. The duration of the residence can be important, however, it is not itself decisive. The explanatory report to the Hague Convention of 1961 emphasises the importance of the criterion of ‘habitual residence’ in determining the jurisdiction of the court in the best possible way.7 With the exception of a rather wide definition of domicile of the legal person in Regulation 44/2001 Brussels I, there is no universally accepted definition of domicile and ‘habitual residence’ even in European Community law. The various definitions under the national laws of Member States are applicable. One of a few legal definitions of ‘habitual residence’ of natural persons and legal persons may be found in the Belgian Act on Private International Law (Code de droit international privé) of 16 July 2004. Domicile, in accordance with this Act8, is used as a Parental Responsibility and Measures for the Protection of Children, available at <www.hcch.net>. 6 See de LEVAL G. / CANDELA SORIANO M. (ed.), Espace judiciaire européen, Bruxelles 2007, p. 62 et seq. 7 Rapport explicatif [to the Hague Convention of 5 October 1961 concerning the powers of authorities and the law applicable in respect of the protection of minors] presented by DE STEIGER M.W., p. 8 and 3, available at <www.hcch.net>. 8 In accordance with Article 4 of the Act on Private International Law of 16 July 2004, domicile is defined as the place where the natural person is enrolled in the Register of Inhabitants or Foreigners and the place where legal person in Belgium has its statutory seat. The habitual residence is then understood as the place where the natural person is estab-

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Elena Júdová factor to determine whether the Belgian courts have jurisdiction over a matter, while ‘habitual residence’ is used as the connecting factor.9 As far as the Council Regulation of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility Nr. 2201/2003 (hereinafter referred to as ‘Brussels II-bis Regulation’) is concerned, the explanatory report thereto refers to the customary practice of the Hague Conference, where the concept of ‘habitual residence’ has been developed, as a question of fact, not defined, but appreciated by the judge in each case.10 The Practice Guide for the application of the new Brussels II-bis Regulation of 1 June 2005 includes a similar approach to defining ‘habitual residence’. Moreover, it is emphasised here that the concept of ‘habitual residence’, for the purpose of the application of the Brussels II-bis Regulation, does not refer to any concept of ‘habitual residence’ under national law, but rather to an autonomous notion of Community law.11 With regard to the duration of the ‘habitual residence’, the Practice Guide provides that whilst the adjective ‘habitual’ tends to indicate a certain duration, it should not be excluded that a child might acquire habitual residence in a Member State at the very day of arrival, depending on factual elements of the concrete case.12 The concept of ‘habitual residence’ was a completely new term in Slovakian Private International Law in 2003. Slovakian Private International Law was codified in Act Nr. 97/1963 Coll. of Laws of 4 December 1963 on Private International Law and International Civil Procedure (hereinafter referred to as the ‘Act on PIL’). The nationality of parties has traditionally been the decisive factor determining whether the courts of the SR have jurisdiction over the parties. Besides nationality, concepts, such as domicile, which had rarely been evoked, were used mainly in matters of contractual obligations and unilateral legal acts. The term ‘habitual residence’ in The Hague Conventions which were ratified by the Czechoslovak Socialist Republic, since 1992 Czech-Slovak Federative Republic – predecessor of the SR, was officially translated into the Slovakian language as

lished (for the purpose of the definition, personal and professional circumstances, which imply reasons indicating permanent connections with the place, are to be taken into account) and the place where legal person has its main seat. 9 RIGAUX F. – FALLON M., Droit international privé, Bruxelles 2005, p. 211. 10 Proposal for a Council Regulation concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and in matters of parental responsibility repealing Regulation (EC) No 1347/2000 and amending Regulation (EC) No 44/2001 in matters relating to maintenance COM 2002/222 final (2). 11 To the possible definion of ‘habitual residence’ in Community law see the documents cited in note Nr. 6, p. 64 et seq. 12 Practice Guide for the application of the new Brussels II Regulation from 1 June 2005, available at .

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The Habitual Residence in Slovakian Private International Law bydlisko, which litterally means ‘domicile’.13 The change appeared in the Conventions ratified at the beginning of the decade.14 The concept of ‘habitual residence’ was introduced in Slovakian law via Act Nr. 589/2003 Coll. of Laws amending the Act Nr. 97/1963 Coll. of Laws, in matters of parental responsibility and maintenance claims in relation to minor children. Through later amendments, ‘habitual residence’ has been extended to matters of guardianship and trusteeship. However, even before the mentioned amendments, the Act on PIL defined another concept based on the residence of the person: residence for a longer period of time. Although there has been no uniform definition agreed on this concept, there prevailed a definition, according to which it was a period not less than one year, indicating an intention to reside at the given place for a longer time rather than just temporarily.15 The term ‘habitual residence’ has not been defined by the law of the SR either. The Explanatory Memorandum of Act Nr. 589/2003 Coll. of Laws has provided guidelines to follow in order to understand the term. This Memorandum states that it is a factual concept of purely objective character: it is the place, where the person really (more often) resides, while the person’s intention to reside at a different place is less evident. Another section of the Memorandum states that, with respect to minor children, ‘habitual residence’ shall be determined based on the residence of the parent with whom the child resides. With respect to more mature children, who study and live abroad, the situation may arise where they have their ‘habitual residence’ abroad. There is neither a time period serving as a guideline for the determination of ‘habitual residence’, nor a guideline to assist in the determination of whether there exist permanent or temporary residences in the SR. Given that the existence of one’s residence in the SR is not determinative as to whether the person has his or her permanent residence in the SR, and given that the emphasis is placed on the intention of the person to reside there permanently

13 In official translations published in the Collection of Laws (which is the official journal in Slovakia), bydlisko is still the term used in the following Conventions: Convention of 1 June 1970 on the Recognition of Divorces and Legal Separation, Convention of 4 May 1971 on the Law Applicable to Traffic Accidents, Convention of 14 April 1958 concerning the recognition and enforcement of decisions relating to maintenance obligations towards children, Convention of 2 October 1973 on the Recognition and Enforcement of Decisions relating to Maintenance Obligations. 14 See the Convention of 25 October 1980 on the Civil Aspects of International Child Abduction, Convention of 29 May 1993 on Protection of Children and Co-operation in respect of Inter-country Adoption, Convention of 19 October 1996 on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in respect of Parental Responsibility and Measures for the Protection of Children. 15 This is shown by an evaluation of the application of some provisions of Act Nr. 97/1963 Coll. of Laws on International Private Law and International Civil Procedure, Civil law board of the Supreme Court of Czechoslovak Republic, 15 May 1986, Cpjf 27/1986.

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Elena Júdová and on personal connections with the place of residence,16 it seems that the SR will join those states which use the will to settle down at the given place as the main factor in distinguishing between the place of residence and the ‘habitual residence’. Slovakian legal regulation uses the concept of ‘habitual residence’ in a rather unusual way. In accordance with the Act Nr. 589/2003 Coll. of Laws, amending Act Nr. 97/1963, the concept of ‘habitual residence’ was used in relation to minor children, whereas the term ‘domicile’ was used in relation to adult persons. However, as a result of the 2005 amendment, made by the Act Nr. 36/2005 Coll. of Laws, dealing with guardianship, trusteeship and competence of Slovakian courts in matters of restriction and disabling of legal capacity, the new regulation does not distinguish any further between children and adults and applies the concept of ‘habitual residence’ with respect to both. In the above-mentioned decision, the District Court in Martin defined the term ‘habitual residence’ in relation to the application of Brussels II-bis Regulation. From the formulation ‘the place where the child resides permanently for the longer period of time’, it is clear that in order to establish the child’s ‘habitual residence’, the Court would assess the permanence and continuity of residence of the child at the given place. The Court, in its decision, provided a set of criteria to assist in determining the ‘habitual residence’ of the child: attendance at a school or preschool institution, residence with the parent, who is employed at the place, etc. (by doing this, the court complies with the guidelines set by the Explanatory Memorandum on Act Nr. 589/2003 Coll. of Laws). The Court did not automatically find that the registration of the child for permanent residence in a certain place was indicative of ‘habitual residence’, though it did not exclude this as a possible criterion of ‘habitual residence. Most interestingly, the Court found that a period of three months was the approximate period of residence required in order to qualify as ‘habitual’. Based on this, one can assume that the Court intends to adopt a flexible interpretation of the concept of ‘habitual residence’, emphasizing, in accordance with the meaning of Article 9 and 15 of Brussels II-bis Regulation, the close connection between the environment in which the child lives and the court deciding over the case.

IV. Conclusion The District Court in Martin, in its decision of 21 December 2007, indicated the probable way that Slovakian court practice will proceed in terms of determining habitual residence. The Court based its decision on the definition provided in the Explanatory Memorandum to the Act of 2003 amending the Act Nr. 597/1963 16 KUČERA Z. – TICHÝ L., Zákon o mezinárodním právu soukromém a procesním. Komentář, Praha 1989, s. 107; HAŤAPKA M., ‘K pojmu ‘obvyklý pobyt’ v medzinárodnom práve súkromnom a procesnom’, in: Justičná, 53, 2001, N. 2, p. 185 et seq.

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The Habitual Residence in Slovakian Private International Law Coll. of Laws on Private International Law. Since this is the only definition of the ‘habitual residence’ available in the Slovak language and, at the same time, it is stated in the Explanatory Memorandum provided by the Ministry of Justice of the Slovak Republic, it may be assumed that this Memorandum will be the main source of influence on future court decisions, as was in the presented case. The most interesting aspect of the decision is the three month minimum period defining the concept of ‘habitual residence’ and the fact that the court concludes that a minimum stay for this length of time is not needed where there are relevant indications that the person’s stay in the given place shall continue. The particular decision of the District Court in Martin is not binding, as case law is generally not a mandatory source of law in the SR, although decisions of the Supreme Court of the SR have a certain authority, and courts and parties often mention them in their pleadings. Since the access to court decisions at all levels has improved in the SR, it is not excluded that the reasoning of the court of first instance in the District Court of Martin will serve as inspiration for other courts. The court’s definition of ‘habitual residence’ is in line with international standards in Private International Law and might be a suitable basis for the uniform application of both the Hague Conference Conventions and the Community law in the SR.

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SWEDEN THE VALIDITY OF A COLLECTIVE LABOUR AGREEMENT RESULTING FROM A SWEDISH BLACKING – THE RICKMERS TIANJIN (AD 2007 NR. 2) Carolina SAF∗

I. II. III.

IV.

I.

Introduction The Facts of the Case Determining the Applicable Law A. The Approach Taken by the Swedish Labour Court B. Fitting the Swedish Approach Into the Structure of the Rome Regime 1. The True Characterisation of the Test of Validity 2. The Validity of the Choice of Law Clause under the Rome Regime 3. Determining the Objective Applicable Law under the Rome Regime 4. Swedish Ordre Public 5. Swedish Internationally Mandatory Rules Conclusion

Introduction

In recent years the activities of Swedish trade unions have been the subject of a heated debate in Europe. The main reason is the differing views on where to draw the line as between lawful industrial actions and unlawful economic pressure, including infringements upon the individual’s right to provide cross-border services under Community law. In comparison with many other countries, the Swedish labour law is quite liberal in these matters. Both the general right to take and the scope of industrial actions are relatively extensive per se. Furthermore, the so called Lex Britannia1 ∗ Doctoral Candidate in Private International Law at the Faculty of Law, Stockholm University; LL.M. (London). The author would like to thank Professor Peter Stone (of the University of Essex) for his valuable comments on the methodology and structure of the Rome Convention. Any mistakes are of course entirely my own. 1 The legislation is named after an earlier case before the Labour Court, AD 1980 Nr. 120 – The Britannia, in which it was held that the undertaken industrial action was unlawful as the resulting collective labour agreement would be invalid under its proper law,

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Printed in Germany

Carolina Saf allows for industrial actions to be taken in order to achieve a collective union agreement between a foreign employer and a Swedish trade union, even where there is already such an agreement in place between the employer and a foreign trade union.2 Moreover, the agreement with the Swedish trade union will still be valid in Sweden, even where it is governed by foreign law and the Swedish industrial action constitutes a defence to its enforcement under the foreign lex contractus.3 The Rickmers Tianjin case concerns the validity of an international collective labour agreement, including its Swedish choice of law clause, signed during an industrial action against the Employer’s vessel Rickmers Tianjin when she lay at Luleå in Sweden.

II.

The Facts of the Case

The vessel Rickmers Tianjin is a cargo ship that was owned by the claimant, a Cypriotic company (the ‘Company’), from 1 August 2001 until 11 July 2003. The operation of the vessel was contracted out to a Greek company. The vessel was registered in the Bahamas and sailed under a Bahamian flag. The crew consisted of seven Polish officers and eighteen Filipino sailors. On 2 December 2001, the Rickmers Tianjin berthed at the Swedish port of Luleå to unload and load its cargo. Prior to the vessel’s arrival, the defendant, the Swedish Transport Workers’ Union (the ‘Union’) had contacted the Company in order to negotiate a new standard collective agreement (the ‘Agreement’) approved by the International Transport Workers’ Federation (‘ITF’). The Company replied that neither the Union nor ITF had received any request or other authorisation from the crew to do so. The day after the vessel’s arrival in Sweden, the parties met and the Company still refused to sign the Agreement. This was despite the Union’s continued warnings that it would take industrial actions against the Company unless it complied. On the following day the Rickmers Tianjin was blacked4 by secondary action by the Union. The blacking – together with the initial negotiations – were in pursuance of the ITF’s campaign against the registration of vessels under flags of even though the action was valid under Swedish standards. The legislation is a response to correct this situation and to allow for, inter alia, international solidarity actions against social dumping. Prop. 1990/91:162. 2 Medbestämmandelagen (1976:580) / The Act on the Joint Regulation of Working Life (MBL) § 42, under which the duty to respect existing collective labour agreements is explicitly limited so as to leave agreements with foreign trade unions outside its scope. 3 MBL § 25 a – the so called validation rule. See further infra section 3.1. 4 ‘Blacking’ is short for black-listed and means that the union and its members will refuse to deal with a particular company. It is a sympathy action by workers at other companies towards the employer in question, hence the term secondary action.

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The Validity of a Collective Labour Agreement convenience. As a result both the vessel and its cargo were effectively detained at the port and could not leave safely. This meant that the Company faced severe financial loss if the blacking were to continue. Thus, the industrial action proved very effective and later on the same day the Company signed the Agreement. Pursuant to its terms the Company paid sums totalling 7,475 USD to the Union covering member or service fees for the crew and a contribution to the ITF Welfare Fund. The Agreement also contained a choice of law clause referring all matters to Swedish law. The Company subsequently brought an action before the Swedish Labour Court on 9 January 2002, asking, inter alia, for a declaratory judgment that the Agreement was invalid (voidable) due to unlawful economic duress, and that the Union should be liable to return the sums totalling 7,475 USD paid under the Agreement.

III. Determining the Applicable Law The subject matter at hand deals with the formation and material validity of an international collective agreement, including its choice of law clause. More precisely, it is concerned with the validity of consent, i.e. whether the Union’s industrial action, which led to the Company signing the Agreement, constitutes unlawful economic duress invalidating the contract.5 The 1980 Rome Convention on the law applicable to contractual obligations6 has been in force in Sweden since 1998.7 An international collective labour agreement falls clearly within the scope materiae of the Rome Convention.8 Accordingly, as part of the Swedish lex fori, the Rome Regime9 should be applied in For a characterisation of duress and its effects under Swedish law, see e.g. GRÖNFORS K./DOTEVALL R., Avtalslagen. En kommentar, 3rd ed., Stockholm 1995. Under English law, see e.g. Dimskal Shipping Co v. ITWF (The Evia Luck) [1991] 4 All ER 871. 6 The Rome Convention on the law applicable to contractual obligations (consolidated version) [1998] O.J. C27/34, entered into force on 1 April 1991. 7 More precisely, since 1 July 1998. Lagen (1998:167) om tillämplig lag för avtalsförpliktelser / Act (1998:167) on applicable law to contractual obligations. Note that the Swedish Act of incorporation does not include Article 17 of the Rome Convention, under which it would not apply until 1 October 1998. Prop. 1997/98:14 pp. 21 and 31–32. See also PÅLSSON L., Romkonventionen, Stockholm 1998, p. 31; and STONE P., EU Private International Law, Cheltenham 2006, p. 264. 8 Articles 1 (scope materiae) and 2 (universal application) of the Rome Convention. It also falls within the scope of the Draft Rome I Regulation on the law applicable to contractual obligations, COM(2005) 650 final. 9 The expression ‘the Rome Regime’ refers to both the Rome Convention and the Draft Rome I Regulation. There will be separate references only where there are substantive differences between the two. 5

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Carolina Saf order to determine the lex contractus. Interestingly enough, however, the Swedish Labour Court does not apply the Convention rules to the dispute. Instead, the Labour Court relies on its own case law developed prior to the Rome Convention. The issue has been raised in the Swedish academic literature as to whether the Labour Court’s failure to apply the Rome Convention results from a misconception of the scope of the parties’ procedural autonomy.10 There is, however, really no explanation for the Labour Court’s approach, since there are several cases from the Swedish Supreme Court stating that the Community instruments on private international law are mandatory.11

A.

The Approach Taken by the Swedish Labour Court

The Labour Court completely ignores the Rome Convention and approaches the matter in line with previous Swedish case law.12 The traditional Swedish conflict rules also rely on the putative applicable law to govern issues of formation and validity of an international contract, i.e. the main rule of the Rome Regime.13

N.B. that all references in the text are to the Convention and that the corresponding provisions of the Draft Regulation are referred to in a footnote. 10 MALMBERG J., Apropå en AD-dom: Gamla principer gäller inte sedan Romkonventionen blev svensk lag, Nordiskt nyhetsbrev, EU & arbetsrätt 2007/1 p. 5. By virtue of the principle of procedural autonomy, a Swedish court cannot on its own accord investigate facts not pleaded by the parties. See the Swedish Code of Judicial Procedure, Chapter 17 section 3. 11 NJA 1999 p. 660 (re. the Lugano Convention); and Case Nr. Ö 893-05, Supreme Court judgment delivered on 6 November 2007 (re. the Brussels Convention), not yet reported. See also BOGDAN M., Svensk internationell privat- och processrätt, 6th ed. Stockholm 2004, pp. 43 et seq.; JÄNTERÄ-JAREBORG M., ‘Foreign Law in National Courts A Comparative Perspective’, in: Recueil des cours 2003, p. 257; PÅLSSON L. (note 7), pp. 38– 9; SAF C., A Study of the Interplay between the Conventions Governing International Contracts of Sale, <www.cisg.law.pace.edu/cisg/biblio/saf.html> 1999, section 2.1. This is in line with the European view, see e.g. DICEY A.V./MORRIS J./COLLINS L., Conflict of Laws, 14th ed. London 2006, § 32-044; NORTH P., Essays in Private International Law, 1993, pp. 186–7; and STONE P. (note 7), p. 264. 12 Inter alia NJA 1987 p. 885 – The Nervion case; and AD 1992 Nr. 10 – The Phillip Arkansas case. 13 See e.g. section 3 of the 1964 Act incorporating the 1955 Hague Convention on the Law Applicable to Contracts of International Sales of Movable Goods – Article 2 paragraph 3 of the 1955 Hague Convention states: ‘Les conditions, relatives au consentement des parties quant à la loi déclarée applicable, sont déterminées par cette loi.’ See also e.g. BOGDAN M., Svensk internationell privat- och processrätt, 4th ed., Lund 1993, p. 226; and KARLGREN H., Kortfattad lärobok i internationell privat- och processrätt, 4th ed. Lund 1971, p. 92 incl. footnote 2.

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The Validity of a Collective Labour Agreement The general application of this principle was confirmed by the Swedish Supreme Court in The Nervion case,14 in which it was held that the validity of a contract will be governed by its proper law, the lex contractus. The Supreme Court emphasised that insofar as the lawfulness of an industrial action constitutes an element of the validity of an international agreement, it cannot constitute an incidental question, to which the applicable law must be determined independently. The lex loci actus was thus irrelevant in determining this issue and could not be applied so as to validate a contract invalid under its lex contractus. The case concerned a collective labour agreement resulting from a blacking taking place in Sweden. The parties had made no choice of law and the objective governing law was Panamanian law, under which the blacking constituted unlawful duress. The Supreme Court thus held that the contract was invalid. In the present case, however there was a choice of law by the parties in favour of Swedish law. Thus, the starting point for determining the applicable law is to establish whether any effect should be given to the choice of law clause in the Agreement. Notably, in the decision at hand, there is no explicit reference to the putative applicable law, instead the issue is approached as a question of fact.15 ‘The Labour Court does not find any reason in this context to go any further into the question of whether [the blacking constituted] unlawful duress [under the law]. However, the Labour Court considers, having regard to the investigation presented, that it is established that the representative of the Company signed the Agreement for the sole reason that the Company found itself compelled to do so in order to escape significant economic loss. It is the opinion of the Labour Court, that the Company had a valid basis for this apprehension. […] The Labour Court thus holds that the choice of law clause shall be given no regard in determining which country’s law shall be applied to the issue of validity of the Agreement.’16 Accordingly, since the Company, as a matter of fact, was coerced to sign the Agreement including its choice of law clause, the Labour Court held that the choice of law clause was inapplicable to the question of determining the governing law. The duress created by the blacking thus frustrated the choice of law clause in the Agreement, even though its substantive terms most likely remained unaffected under Swedish law.17 That is to say, the Labour Court does not accept a unilaterally NJA 1987 p. 885 – The Nervion case. A similar approach was taken in the English case Dimskal Shipping Co v. ITWF (The Evia Luck) [1991] 4 All ER 871 (House of Lords). 15 This approach is similar to the method used to establish consent to a jurisdiction clause under Article 23 of the Brussels I Regulation, O.J. 2001 L 12/1. 16 AD 2007 Nr. 2, pp. 31–2. Emphasis added. Translation by the author. 17 AD 1998 Nr. 17 – Kellerman, in which it is was held that there is no general principle of law requiring proportionality as between the industrial actions undertaken on the 14

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Carolina Saf imposed choice of law where a party has acted in bad faith with the objective of validating the contract through the choice of Swedish law. Where there is no valid choice of law by the parties, the next step is to determine the objective lex contractus and apply it to the validity of the substantive provisions of the Agreement. The Labour Court thus proceeds to determine the objective proper law in accordance with traditional Swedish principles of choice of law. Under Swedish case law it is a well established in dubio rule that the law of the state in which the vessel is registered – the principle of the law of the flag – will govern the legal relationship as between shipowner and crew members, including collective labour agreements. The fact that the vessel flies under a flag of convenience is not enough in itself to rebut this presumption,18 and in the present case, no stronger connection to the law of another country was shown. Accordingly, Bahamian law is the proper law of the Agreement, including its validity. Under Bahamian law,19 a trade union can only be recognised as a contracting party – a bargaining agent – to a collective labour agreement where more than 50 percent of the workers are members of the said union. Accordingly, since none of the crew members was a member of the Swedish Union, the Agreement was invalid under its proper law. In comparison with Swedish law, the Bahamian requirement of representativity severely limits the possibility to enter into a collective labour agreement, especially for a Swedish trade union. The question is whether this limitation offends Swedish ordre public (public policy). The Labour Court answers this question in the negative: the application of the Bahamian representativity rule is neither impossible nor directly offensive in Sweden. Furthermore, there is no evidence that the right to become a member of a trade union is in any way limited in the Bahamas. Accordingly, the Bahamian representativity rule is not manifestly incompatible with the public policy of Sweden, and thus will not be disregarded. The final question for the Labour Court is whether the Agreement will still be valid in Sweden by virtue of the validation rule in § 25 a of the Act on the Joint Regulation of Working Life (MBL): ‘§ 25 a MBL: A collective labour agreement which is invalid under foreign law on the ground that it was entered into after an industrial action is nevertheless valid in this country, if the industrial action was lawful according to this Act.’20 one hand, and their objective on the other, in particular where the objective is a collective labour agreement. See also Cases C-341/05 Laval un Partneri Ltd, Judgment of the European Court of Justice (Grand Chamber) on 18 December 2007; and C-438/05 International Transport Workers’ Federation and Finnish Seamen’s Union, Judgment of the European Court of Justice (Grand Chamber) on 11 December 2007. 18 NJA 1987 p. 885; and AD 2007 Nr. 2. 19 The Bahamian Industrial Relations Act, Chapter 321, Section 41(1), as cited in AD 2007 Nr. 2, at p. 32. 20 Translation by the author.

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The Validity of a Collective Labour Agreement The function of this provision is to enable international actions of solidarity by Swedish trade unions in order to prevent social dumping. According to the preparatory work, § 25 a MBL should be strictly construed.21 That is to say, it will only validate collective union agreements which are invalid under their proper law due to the illegitimacy of the industrial action under that law. The provision does not cure any kind of invalidity due only to a Swedish lawful industrial action having taken place prior to its signing. Accordingly, since the Agreement is invalid under the Bahamian lex contractus already on the ground that the Union lacked representativity, and therefore there is no reason to determine whether any other ground of invalidity exists, the Agreement cannot be validated in Sweden pursuant to § 25 a MBL. Consequently, the Labour Court held that the Agreement between the Company and the Union was invalid, and that the Company was entitled to repayment of the moneys paid under it.

B.

Fitting the Swedish Approach Into the Structure of the Rome Regime

It has been suggested in the Swedish legal literature that the case would have been differently decided under the Rome Convention, viz. there would have been a valid Agreement.22 This argument presupposes that the Labour Court’s ruling on the validity of a choice of law clause resulting from a blacking is characterised as a choice of law issue, and as such falling under the Rome Regime. It is submitted that this argument is flawed and based on an incorrect characterisation of the ruling. It will be argued that based upon a true construction of the ruling and its test of validity, the ruling is concerned with Swedish substantive rules on validity of consent. Therefore, there will be no material difference as between the outcome under the Rome Regime and the traditional Swedish private international law, respectively.

1.

The True Characterisation of the Test of Validity

For the purposes of characterising the Labour Court’s test, in order to determine whether it refers to a conflict rule or a substantive rule, its function must be analysed. In doing so, it is important to keep in mind that the legal effect – if any – given to a choice of law is two-fold: first, whether the parties’ intention will be recognised by a court as a connecting factor so as to lead to the application of the chosen law. This is a matter of private international law, more specifically that of the forum state. Secondly, it concerns the validity and the consensus to a choice of law in their traditional sense as matters of national substantive contract law, i.e.

21 22

Prop. 1990/91:162 p. 12. MALMBERG J. (note 10).

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Carolina Saf substantive or material validity. Precisely according to which national substantive law will depend on the choice of law rules of the lex fori.23 In the present case, the Labour Court based its analysis on a factual appropriateness test: whether or not there was actual consent to the choice of law clause. The Court’s starting point is whether any effect should be given to the choice of law clause due to the alleged duress. In determining this issue, “it is of significant importance what effect the undertaken blacking has actually had on the formation of the contract.”24 Clearly, the test is applied to the question of consent to the choice of law clause, which means that it is concerned with the substantive validity of the parties’ choice of law. Accordingly, the factual appropriateness test introduced by the Labour Court must be characterised as a rule of substantive law. The fact that the Labour Court did not explicitly refer to any choice of law rule before applying its test to the parties’ choice of law25 does not alter the substantive character of the test. If there is no reference to any foreign law, the Court must have applied its own law, the lex fori. Furthermore, it is also possible that the Labour Court did follow, at least implicitly, the traditional Swedish conflict rule referring matters of formation and validity to the lex contractus. Either way, in the present case both choice of law rules result in Swedish law being the applicable law and there is no evidence that any other law was applied. In order to determine according to which substantive law the test was applied, it is not necessary to determine the capacity in which that law was applied, i.e. whether Swedish law was applied as either lex fori or lex contractus. Consequently, the test must be characterised as a rule of Swedish substantive law. A further complication in the present case is that the potentially invalidating factor – the blacking – affects the validity of the entire contract, since the lack of consent is not specific to the choice of law clause. The nature of the substantive contract is of course important when determining the validity of consent to its choice of law clause. That is to say, the relevant substantive rules are those governing consent to a collective labour agreement. Under Swedish labour law, particularly if there is no previous Swedish collective labour agreement, industrial actions may involve quite hard and real coercion and yet remain lawful.26 The Labour Court, however, does not refer to these rules, but instead applies its factual appropriateness test. Accordingly, a test of actual consent, applicable to the validity of a choice of law clause contained in a collective labour agreement, using completely different criteria for establishing consent as regards that particular term, must be characterised as a substantive rule of lex specialis. This is further supSee e.g. the Rome Convention: Article 3 provides for full international party autonomy, whereas Articles 3(4) and 8 determine the national law that will govern the substantive validity of the parties’ agreement. BOGDAN M. (note 11), p. 248; DICEY A.V./MORRIS J./COLLINS L. (note 11), § 32100; PÅLSSON L. (note 7), pp. 49–50; and SAF C. (note 11), sections 5.1 and 6.2.1. 24 At p. 31, following the ruling in AD 1992 Nr. 10. Translation by the author. 25 At pp. 30 et seq. 26 See e.g. AD 1998 Nr. 17 – Kellerman. 23

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The Validity of a Collective Labour Agreement ported by the fact that under Swedish law the validity of consent to the substantive provisions of the Agreement most likely remains unaffected by the undertaken industrial actions. The possibility must not be ignored, though, that the Labour Court’s ruling – in addition to the factual appropriateness test – also entails a new choice of law rule referring the material validity of the parties’ choice of law to the lex fori instead of the lex contractus. There is no guidance at all in the present judgment as to whether the Labour Court applied its substantive test under Swedish law as part of the lex fori, or as part of the lex contractus in line with the principles of The Nervion case. It is quite possible to interpret the judgment either way;27 the latter interpretation has the advantage that it is also in line with the Rome Regime, even though the structure of the judgment would seem to support the former. Most importantly, however, for the purposes of applying the test of validity under the Rome Regime, a determination of that issue is not required due to the Rome Regime replacing the traditional conflict rules of the Member States of the European Union. The crux of the matter is the characterisation of the test itself, i.e. that it is a rule of Swedish substantive law – not a conflict rule – and as such not displaced by the Rome Regime.

2.

The Validity of the Choice of Law Clause under the Rome Regime

The Rome Regime fully recognises the principle of party autonomy. Where the parties have made a choice of law, their choice is the exclusive connecting factor for determining the lex contractus in accordance with Article 3.28 Also the existence and validity of the parties’ consent to their choice of law is explicitly governed by the putative lex contractus. One important aspect of the latter principle is that, if the contract is invalid under the lex contractus, there is no implied choice for another governing law rendering the contract valid.29 Article 8(1)30 refers explicitly to the existence and validity of ‘any term of the contract’. The Report states that “[t]he word ‘term’ has been adopted to cover cases in which there is a dispute as to the validity of a term of the contract, such as a choice of law clause.”31 Accordingly, it is possible that a choice of law clause is It is not uncommon for Swedish courts to leave issues unanswered if the answer does not make any practical difference in the case at hand, such as in the present case where both choice of law rules lead to the application of Swedish law. See e.g. the District court in NJA 1985 p. 879, and NJA 1997 s 415; and BOGDAN M. (note 11), p. 46. 28 Article 3 of the Draft Rome I Regulation. 29 DICEY A.V./MORRIS J./COLLINS L. (note 11), § 32-168; PLENDER R./WILDERSPIN M., The European Contracts Convention, 2nd ed. London 2001, pp. 99–100; PÅLSSON L. (note 7), pp.50, 91–3; and STONE P. (note 7), pp. 275, 294–6. Cf. CLARKSON C.M.V./HILL J., Jaffey on the Conflict of Laws, 2nd ed. 2002, p. 240. 30 Article 9(1) of the Draft Rome I Regulation. 31 GIULIANO/LAGARDE REPORT, ‘Report on the Convention on the law applicable to contractual obligations’, O.J. 1980 C 282/1, p. 28. 27

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Carolina Saf invalid under its chosen law due to lack of consent, and therefore struck out of the contract, while the remainder of the contract is valid. This would be the case, for instance, if there is fraud specific to the clause, or if the clause is void for uncertainty.32 In the present case, the parties’ choice of Swedish law will lead to the prima facie application of Swedish substantive law to the Agreement as a whole under Article 3. By virtue of Articles 3(4) and 8(1),33 the question of whether the undertaken industrial action affects the material validity of the parties’ consent to the Swedish choice of law clause will be governed by Swedish law; more specifically by the Labour Court’s factual appropriateness test of actual consent as a Swedish substantive lex specialis rule governing the validity of consent to the choice of law. Since the Employer, as a matter of fact, was coerced by the blacking into signing the Agreement including the choice of law clause, at least the clause is invalid, and as such, struck out of the Agreement, whereas its substantive provisions presumably are valid under Swedish labour law. As a result, there is no valid choice of law as between the parties and Article 3 cannot be applied to determine the lex contractus of the substantive provisions of the Agreement. Instead the objective applicable law must be ascertained.34

3.

Determining the Objective Applicable Law under the Rome Regime

Under Article 4(1),35 the principle of the closest connection applies ‘[t]o the extent that the law applicable to the contract has not been chosen in accordance with Article 3.’ As was explained in the previous section, Article 3(4) explicitly regulates ‘[t]he existence and validity of the consent of the parties as to the choice of the applicable law’ – albeit by reference to, inter alia, Article 8. Thus, where there is no valid choice of law, the lex contractus has not been chosen in accordance with Article 3 and Article 4(1) will apply. That is to say, the provision is applicable both to where the parties have made no choice at all and, as in the present case, where the parties’ choice is invalid under their chosen law. Accordingly, the material validity of the substantive provisions of the contract will be governed by the putative applicable law as determined under Articles 4 and 8.36 PÅLSSON L. (note 7), p. 50; and STONE P. (note 7), pp. 272, 276. See e.g. Co Tunisienne de Navigation v. Co D’Armement Maritime [1971] AC 572. 33 Articles 3(6) and 9(1) of the Draft Rome I Regulation. 34 Article 4(1) in conjunction with Articles 3 and 8 of the Rome Convention. See also the GIULIANO/LAGARDE REPORT (note 31), p. 28; PÅLSSON L. (note 7), p. 50; and STONE P. (note 7), p. 272. 35 Article 4 of the Draft Rome I Regulation. 36 Article 4(1) in conjunction with Articles 3 and 8 of the Rome Convention, and Article 4(1) in conjunction with Articles 3 and 9 of the Draft Rome I Regulation, respectively. See also the GIULIANO/LAGARDE REPORT (note 31), p. 28; PLENDER R./WILDERSPIN M. (note 29), pp. 109 et seq., and 205–6; PÅLSSON L. (note 7), pp. 53 et seq., and 91–3; and STONE P. (note 7), pp. 282 et seq., 294–6. 32

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The Validity of a Collective Labour Agreement The present case concerns a collective labour agreement, which probably falls into the category of reciprocal contracts where no characteristic performance can be determined. The contract will then be governed by the law of the country with which it is most closely connected.37 In ascertaining the closest connection under Article 4(5),38 not only the law of the flag, but also other relevant connections must be taken into consideration, such as the relevant place of business of each party, the places between which the vessel usually trades, and perhaps even the place of the industrial action. Especially in the case of a flag of convenience, the flag cannot be treated as an exclusive connecting factor. The Rome Regime solution in Article 4(5) is similar to the Swedish ‘individualising method’ of weighing factors, which the Labour Court relied upon. Due to these similarities, it is quite plausible that the choice of law issue would be resolved in the same manner also under the Rome Regime. That is to say, Bahamian law, arguably, would still be applied as the lex contractus; whereas Swedish law most likely will not apply, since the vessel was not usually trading to and from Sweden and the only other connection to Sweden is the industrial action inducing the Agreement. Under Bahamian law, the prerequisites for a valid contract are not fulfilled, and thus there is no valid Agreement.

4.

Swedish Ordre Public

The Rome Regime also allows for the non-application of the applicable law on grounds of public policy of the forum state. Article 1639 contains a reference to member-state law, which of course – as a general obligation under the EC Treaty – also includes Community public policy. In the present case, the Labour Court is well within its powers of discretion conferred to it by Article 16, including the Community public policy. Accordingly, applying the Rome Regime will not alter the fact that the application of Bahamian law to the present case does not offend the public policy of Sweden.

5.

Swedish Internationally Mandatory Rules

Section 25 a of the Act on the Joint Regulation of Working Life (MBL) constitutes a so called internationally mandatory rule – or directly applicable rule – as defined 37 LIUKKUNEN U., The Role of Mandatory Rules in International Labour Law, Helsinki 2004, pp. 120–2; PLENDER R./WILDERSPIN M. (note 29), pp. 118–9; PÅLSSON L. (note 7), pp. 65–6; and STONE P. (note 7), p. 285–6. 38 Article 4(2) of the Draft Rome I Regulation. Strictly speaking Article 4(5) refers back to the main principle in Article 4(1), see the GIULIANO/LAGARDE REPORT (note 31), p. 22. 39 Article 20 of the Draft Rome I Regulation. PÅLSSON L. (note 7), pp. 128–9; and STONE P. (note 7), pp. 305 et seq.

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Carolina Saf in Article 7,40 i.e. it will be applied directly to a collective labour agreement regardless of – or without any recourse to – its lex contractus. Article 7(2) provides for the application of internationally mandatory rules of the lex fori, so that the Labour Court is free to apply § 25 a MBL to all foreign collective labour agreements. Naturally, the Court is free only insofar as its content complies with the requirements of Community law. That is to say, the prerequisite ‘lawful industrial actions’ includes lawfulness in accordance with, inter alia, the Community right to provide cross-border services and right of equal national treatment of other member-state nationals.41 Given the close relationship as between the factual appropriateness test of actual consent and § 25 a MBL, particularly since the test at least indirectly enforces the scope of the provision, it is argued that also the test should be construed as an internationally mandatory rule. That is to say, it should be applied not only to Swedish choice of law clauses as part of the lex contractus, but also to a (coercive) choice of a foreign law as an internationally mandatory rule of the lex fori under Article 7(2).

IV. Conclusion Based upon its true characterisation, the factual appropriateness test introduced by the Labour Court is a substantive rule of Swedish law which applies to the material validity of consent to the parties’ choice of law. Therefore, the test will stand the applicable law being determined in accordance with the Rome Regime. Since the two conflict regimes are similar, the Labour Court’s ruling that the Agreement was invalid will – at least presumably – also stand under the Rome Regime. The test is one of actual consent. Its purpose is to prevent a unilateral mala fide choice of Swedish law with the sole purpose of evading the protection against unlawful duress caused by industrial actions given under the objective applicable law. Thereby, the test provides a balance to, and further defines the scope of, the internationally mandatory rule of validation in § 25 a MBL. Whether the test itself will actually be applied as an internationally mandatory rule, and whether that test is limited to collective labour agreements, remains to be seen. The Labour court’s failure to apply the Rome Convention is of course very regretful. On the Swedish national level, it diminishes the future value of the ruling, as there will always be doubts whether the ruling will stand under the Rome

Article 8 of the Draft Rome I Regulation. See e.g. Cases C-341/05 Laval un Partneri Ltd, Judgment of the European Court of Justice (Grand Chamber) on 18 December 2007; and C-438/05 International Transport Workers’ Federation and Finnish Seamen’s Union, Judgment of the European Court of Justice (Grand Chamber) on 11 December 2007. PÅLSSON L. (note 7), pp. 114 et seq.; and STONE P. (note 7), pp. 308 et seq. 40 41

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The Validity of a Collective Labour Agreement Convention and the future Rome I Regulation. On the European level, it threatens the uniform application of the Rome Regime, thus encouraging forum shopping. Moreover, such failure prevents the Labour Court from asking the European Court of Justice for a preliminary ruling.42 Although this lost opportunity makes perhaps no real difference for the outcome in the present case, it is an important question to resolve how the closest connection under Article 4(5) should be ascertained with regard to international collective labour agreements. That is to say, the question is whether the principle of the law of the flag should remain a primary connecting factor for activities on board a vessel (on the high seas), or whether it should be transformed into a more general connecting factor for all collective labour agreements, to which the flag would function as a secondary, ancillary connection to determine the relevant territory.

42 The Brussels Protocols (consolidated version), O.J. 1998 C27/47 and 52. The Brussels Protocols entered into force in Sweden on 1 August 2004, see Ordinance 2004:650. Under Article 2 the Labour Court is a competent court to ask the ECJ for an interpretative ruling. Re. the Draft Rome I Regulation, as it is Community law strictu senso, the ECJ has jurisdiction directly under the EC Treaty, viz. Article 68. See also BERNITZ U., ‘The Duty of Supreme Courts to Refer Cases to the ECJ: The Commission’s Action Against Sweden’, in: WAHL N. and CRAMÉR P. (eds), Swedish Studies in European Law, Volume 1, 2006.

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CZECH REPUBLIC JURISDICTION OVER CONSUMER CONTRACTS UNDER ARTICLE 15(1) (B) OF THE BRUSSELS I REGULATION AND THE DEFINITION OF THE ‘CONSUMER’S DOMICILE’ - DE LEGE LATA AND DE LEGE EUROPAEA FERENDA Monika PAUKNEROVÁ*

I. II. III. IV.

Introductory Remarks Facts of the Case Resolution of the District Court in Cheb Conclusions

I.

Introductory Remarks

The Czech Republic became a Member State of the European Union on 1st May 2004; since that date it has been bound by the law of the EU. Czech law historically belonged to the Austrian family of continental law1 and the Czechoslovak Republic, established in 1918, also followed that tradition. Further development of Czech and Czechoslovak law was clearly affected by the totalitarian regime beginning with the communist coup d’état in 1948 and ending at the end of 1989; during this period, Czechoslovakia was part of the former Eastern Bloc. Since the early 1990s, when Czechoslovakia returned to being a democratic state, radical changes have been introduced in Czechoslovak law, which has partly reassumed its tradi* Professor of Private International Law and International Commercial Law at the Faculty of Law, Charles University in Prague, and at the Faculty of Law, University of West Bohemia, Pilsen; Researcher at Institute of State and Law, Academy of Sciences of the Czech Republic. 1 Compare, for example, KNAPP V., Velké právní systémy [Great Legal Systems], Praha 1996, at 118. Sometimes the Austrian circle is considered a part of German law family: compare, for example, ZWEIGERT K./KÖTZ H., Einführung in die Rechtsvergleichung auf dem Gebiete des Privatrechts, 3rd ed., Tübingen 1996, p. 130.

Yearbook of Private International Law, Volume 9 (2007), pp. 495-502 © sellier. european law publishers & Swiss Institute of Comparative Law

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Monika Pauknerová tional legal regulations and has partly adapted to new societal developments. In 1993 Czechoslovakia split into two states; today there are two legal systems existing side by side – Czech law and Slovak law, both still with many common features. Private international law has had a relatively long tradition in the Czech Republic: the first Private International Law Act dates back to as early as 1948. The current Act Concerning Private International Law and the Rules of Procedure Relating Thereto2 was adopted in 1963 and is still effective in both the Czech Republic and Slovakia. It is complemented by certain amendments reflecting changes to the political regime, which are quite minor. Unlike substantive private law, private international law preserved relative autonomy under the communist regime, therefore the return of the Czech state to democracy represented essentially no radical change to it. One significant fact can be seen in this context, namely the traditional participation of Czechoslovakia in many international conventions relating to private international law. Although the current Private International Law Act was passed in 1963, the only significant amendments deserving attention are so-called ‘Euro-amendments’ implementing conflict of law rules contained in some directives, as well as procedural rules resulting from the Brussels Regulations. Today, as part of a comprehensive re-codification of Czech law,3 there is a new Private International Law Act under preparation. The Draft of the Act corresponds, in particular, with a new Draft (Restatement) of the Civil Code which is to radically alter the substantive private law that was significantly affected by undemocratic developments between 1948 and 1989. There is no doubt that new aspects of legal thinking have been brought in by the accession of the Czech Republic to the European Union, particularly in the area of private international law where many special instruments take precedence over national Czech law. This article focuses on the application of Council Regulation (EC) No. 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (hereinafter the ‘Brussels I Regulation’) in connection with disputes over consumer contracts. The Brussels I Regulation takes precedence over Czech national law, which regulates international civil procedure through the Private International Law Act 1963 (s. 37-68c of the Act). Czech internal civil procedure law is contained in the Civil Procedure Code of 1963,4 which is used as a law subsidiary to the Private International Law Act. EC regulations as well as the mechanism of their application are rather new to Czech lawyers, as is the principle of the primacy of EU law. 2

The Act Concerning Private International Law and the Rules of Procedure Relating

Thereto No. 97/1963 Coll. (Collection of Laws), as amended.

In English cf. PAUKNEROVÁ M., ‘Some remarks on the recodification of Czech Private Law with special regard to Private International Law and European Law’, in: PAUKNEROVÁ M./PŘIBÁŇ J./KERNER A./YOUNG J. (eds.), Changes of Judicial Culture and Decision Making in Different Branches of Law, Prague 2007, p. 102-112. 4 The Civil Procedure Code No. 99/1963 Coll. (Collection of Laws), as amended. 3

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Jurisdiction over Consumer Contracts and Consumer’s Domicile

II.

Facts of the Case

The decision about which I shall be commenting is the resolution of the District Court (the Court of first instance) in Cheb, the Czech Republic, in a case brought by the plaintiff D.I., with its registered office in London, Great Britain, against the defendant F.H., with his last address at Cheb, the Czech Republic, but, at the time of suit, of unknown residence and represented by lawyer, V.P., acting as guardian. The action was for the payment of an amount of money equal to a loan payment in arrears; the original loan agreement being made on 12th December 2001 between the creditor K.B., the legal predecessor of the plaintiff, and the defendant as debtor. The action was filed on 10th June 2005; the Court issued a judicial payment order on 21st July 2005 imposing on the debtor a duty to repay to the plaintiff the amount claimed along with reimbursement of the costs of proceedings. The judicial payment order was cancelled by the Court by resolution of the District Court on 2nd January 2006 because it was unable to serve the decision on the defendant personally. Lawyer V.P. was appointed to act as guardian ad litem for the defendant as a person of unknown residence. In her application of 4th December 2006, the guardian claimed that the Court lacked international jurisdiction to hear the case. She stated that international jurisdiction in the case at issue must be considered under Article 16(1) of the Brussels I Regulation as the dispute had arisen from a consumer contract. Article 16(1) requires that the plaintiff as a contracting party other than a consumer should bring his alleged claim against the consumer before a court of a Member State where the defendant has his domicile. However, the Court’s findings proved that the defendant had no residence in the Czech Republic. Under Czech law a person’s domicile is his actual place of living, i.e. the place where a person stays with the intention to permanently reside. In the guardian’s opinion, it follows from the provisions of the Regulation that proceedings may not be conducted against persons of unknown residence considering the fact that the whole Regulation is based on the term ‘defendant’s domicile’, which is his actual place of living. Thus, the Regulation does not assume that an action may be brought against a person of unknown residence. The plaintiff said that such objection was raised on purpose; he claimed that if such an interpretation were accepted, no EU Member State court would have jurisdiction over the case until the defendant’s domicile was established beyond any doubt and that such an approach would deny a creditor protection of his rights. The plaintiff asserted that the Brussels I Regulation contained no explicit procedural provision governing the determination of jurisdiction over cases where a party is of unknown residence. He concluded there was a gap in the Regulation, which should be resolved under the procedural law of the forum (Section 48 of the Czech Private International Law Act), having jurisdiction according to the last known residence of the defendant.

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III. Resolution of the District Court in Cheb The District Court in Cheb decided that it lacked jurisdiction to hear and decide the case (see item I of the Resolution.). The proceedings were discontinued (see item II of the Resolution). First, the Court concluded that its international jurisdiction was subject to the regime introduced by the Brussels I Regulation covering temporal, territorial as well as subject-matter issues. Matters relating to a contract concluded by a consumer for a purpose which can be regarded as being outside his trade or profession are governed by Article 15(1)(b) of the Regulation, if it is a contract for a loan repayable by instalments or for any other form of credit made to finance the sale of goods. Article 16(2) of the Regulation provides that an action may be brought against a consumer by the other party to the contract only in the courts of the Member State in which the consumer is domiciled. In order to determine whether a party to proceedings is domiciled in the Member State before whose courts the action is brought, a court shall apply its national law (Article 59(1) of the Regulation). In this case, the contract indicated that the loan was provided to the defendant for the purchase of a car by the K. Bank. The contract did not indicate the debtor’s business registration number or any other designation suggesting the defendant was entering into the loan agreement in his capacity as a business person (within his trade or profession). The Court stated that Article 15(1) of the Regulation seemingly contained an autonomous definition of a consumer contract and that the case at issue was subject to subparagraph (b) of the Article since the subjectmatter of the contract was the provision of a loan to finance the purchase of a particular movable thing. Article 16(2) of the Regulation provides that the plaintiff, to whom the Bank transferred, by means of assignment of a debt contract, its claims against the defendant resulting from the loan agreement, may bring an action for those claims only before the courts of a Member State where the defendant is domiciled. It is the plaintiff who may assert and must prove that this requirement has been met. Unlike Czech procedural law, the Brussels I Regulation is based on the principle that parties to proceedings should exercise care about their procedural rights and duties, thus reducing the potentially paternalistic approach of a court examining the fulfilment of many requirements of proceedings from office (ex officio). Examples may be found in Articles 24 to 26 of the Regulation, which restrict a court’s examination of international jurisdiction to cases subject to the exclusive jurisdiction under Article 22 of the Regulation. In all other cases, it is the defendant who must accept the jurisdiction of the forum or raise objection to it. The issue of domicile is considered by the court seized under its own national law, i.e. Czech law in the case at issue. The Supreme Court of the Czech Republic states in its Resolution No. 30 Cdo 444/20045 that the content of the term ‘domicile’ as used by the Civil Proce5 Resolution of the Supreme Court of the Czech Republic of 2 June 2005, file No. 30 Cdo 444/2004, published (in Czech) at .

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Jurisdiction over Consumer Contracts and Consumer’s Domicile dure Code or the Private International Law Act is not synonymous with the concept of ‘permanent residence’ used in administrative law legislation regulating the Register of Citizens. Although these two concepts may usually overlap, entries in a person’s ID card (e.g. personal passport or other proof of identity) or in the Register of Citizens, recording the permanent residences of individuals need not correspond with his or her actual place of living. The domicile of an individual is understood as a community, or a metropolitan district, where the individual resides, intending to live there on a permanent basis. Domicile is usually the place where the individual has his or her flat, family or where he or she works if the work is performed at his or her home. The temporary circumstances, for example, of a hospital stay, a prison sentence, studies, compulsory military service, and so on, do not affect the domicile of the individual unless these circumstances are accompanied by others, suggesting that the individual intends to permanently reside in the otherwise temporary place of residence. The above-mentioned facts suggest that Czech law understands ‘domicile’ to be the actual place of living of an individual, linked with his or her intention to reside there permanently. The plaintiff was called to complement his allegations with information as to whether the defendant resides in the Czech Republic intending to stay there permanently and, if so, to prove his findings. The plaintiff responded to the call stating that he could not satisfy the requirement of the Court since he had no access to the central Register of Citizens. The plaintiff failed to satisfy the call and prove the defendant’s domicile in the Czech Republic; therefore, the requirement of Article 16(2) of the Regulation for granting international jurisdiction over a case to courts in the Czech Republic was not met. The Court, therefore, had to sustain the objection of the guardian and declared its own lack of international jurisdiction over the case, as is stated under Item I of the holding. The plaintiff’s assertion that he would be deprived of his right to judicial protection if the actual place of residence of the defendant in any Member State was not established was incorrect. It should be noted, in particular, that domicile as a place of actual residence is understood as such by Czech law and it does not mean that the legal doctrine of any other Member State may provide a definition which is more favourable to the plaintiff. In addition, it is apparent that the plaintiff, in his objection, puts the right to judicial protection of a creditor (in his capacity as plaintiff) above the right of a debtor (in his capacity as defendant) to defend himself effectively within proceedings, which is openly contrary to the Regulation. The European Court of Justice has emphasised in many of its decisions that the Regulation (at that time, the Brussels Convention) in all of its provisions, both those applicable to jurisdiction and those applicable to the recognition and enforcement of judgments, are aimed at preserving the right of a defendant to protect him or herself effectively in the course of proceedings. Only these guarantees provided to defendants make the recognition and enforcement of judgment so liberal within the regime established by the Regulation.6 The right to be sued 6 Compare 125/79 Denilauler v Couchet Frères, 166/80 Klomps v Michel, C-474/93 Hengst v Campese.

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Monika Pauknerová before a proper court is naturally a part of the right to effectively protect oneself. Under Article 2 of the Regulation, the proper court is the court of a Member State where the defendant has his domicile. This principle is strengthened by Article 16(2) of the Regulation such that courts of the Member State in question have exclusive jurisdiction over cases resulting from consumer contracts. Therefore, it is obvious that where the Brussels I Regulation applies the right of a defendant to protect him or herself effectively in proceedings prevails over the right of a plaintiff to judicial protection. The Brussels I Regulation makes it impossible to conduct proceedings against a person of unknown residence. Article 59 of the Regulation leaves to national law the issue of establishing the domicile of a party to a case. National law may, through the court seized, take this to be a place of actual residence of an individual, as is the situation in Czech law, or a place of his or her fictitious residence, taking into account the fact that the individual lives at another known place (e.g. members of military forces deployed temporarily in foreign countries, or members of ship crews). However, in the Court’s opinion the Regulation does not cover cases where the defendant has no domicile known to the Court. Additionally, Section 29(3) of the Czech Civil Procedure Code7 does not create a fiction of domicile of a party to proceedings; it takes into account that both the domicile and the residence of a defendant may be unknown to court. Therefore, conducting proceedings against a person of unknown residence does not constitute vagueness in the legislation, as suggested by the plaintiff, but it is deliberately left out of the legislation. It should also be noted that the judgment of a Czech court issued under Czech procedural law where the defendant is represented by a guardian would be found incompatible with public order in any other Member State and would not be recognised in the sense of Article 34(1) of the Regulation. Since the lack of jurisdiction (international jurisdiction) is an obstacle in proceedings which cannot be eliminated by any means, the Czech Court in the case under consideration could do nothing but discontinue the proceedings entirely according to Section 104(1) of the Civil Procedure Code, as stated under Item II of the holding. The resolution of the District Court in Cheb No. 15C 45/2006 of 10th May 2007 was affirmed by the resolution of the Regional Court in Pilsen No. 25Co 215/2007 of 29th October 2007 against which no appeal lies. The Appellate Court has agreed with both the issues of fact and law established by the Court of first instance.

Sec 29(3) of Civil Procedure Code provides that the judge may, unless other measures are taken, appoint a guardian for a party to proceedings whose residence is unknown. 7

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IV. Conclusions The resolution of the District Court attracts attention for several reasons. First, it points to the relationship between the Brussels I Regulation and the national law of a Member State: national law applies in establishing whether a party is domiciled in the Member State whose court is seized of a matter (Article 59(1) Regulation). Such finding is subject to the lex fori which protects, to a certain extent, the defendant, particularly when a default judgment is to be issued. On the other hand, we cannot avoid the situation whereby different conclusions can be made in different Member States. Czech law considers actual residence to be relevant with the burden of proof resting upon the plaintiff should the residence of the defendant be unknown. It could be argued that it would be more appropriate de lege ferenda to unify the interpretation of the concept of domicile in the sense of an autonomous uniform definition which would contribute to the legal certainty of parties and predictability of solutions. Rules contained in the Brussels I Regulation are of a mandatory nature;8 they take precedence over the rules of national civil procedure. The loan agreement between the K. Bank and the defendant is covered by the concept of consumer contracts in the sense of Article 15(1) (b) of the Regulation as is defined particularly by the Schlosser Report.9 A related provision is Article 16(2) of the Regulation, which restricts proceedings against a consumer domiciled in a Member State to courts within whose jurisdiction is the domicile of the defendant at the moment of the filing of the action. A positive shift in Czech procedure can be seen in the manner in which the case was treated by the Court: the case was heard by a young judge, Pavel Simon, who has studied European law intensively, delivered lectures and conducted workshops on procedural Regulations, and published several articles in law journals. The decision speaks for its author and brings new knowledge to Czech law, not only with respect to the definition of the ‘domicile of a defendant’ and its correlation with the establishment of international jurisdiction of a Czech court, but also with reference to the principle of protection of a plaintiff (creditor) contrary to the principle of protection of a defendant (debtor) as these are understood by the Regulation, as compared to the Czech Civil Procedure Code. It might be observed that the relationship between these two principles – the principle of protection of a plaintiff as creditor and the principle of protection of a defendant as debtor – is not necessarily straightforward. Another issue may play an important role: namely, that the debtor is in concreto a consumer, and the jurisdiction of a court under Article 16(1) of the Regulation is exclusive, as was also stated by the Court. Otherwise, a debtor is not protected as much. A consumer, as a weaker party to a consumer contract, has a specific position which is significantly 8 Compare, for example, KREUZER K./WAGNER R., ‘Europäisches Internationales Zivilverfahrensrecht’, in: DAUSES M. (Hrsg.), Handbuch des EU-Wirtschaftsrechts, Bd. 2, München 2007, Chapter Q, p. 95 with other references. 9 OJ 1979 C 59/71, p. 118.

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Monika Pauknerová strengthened in EU law. Professor Michael Bogdan, in connection with provisions in the Brussels I Regulation, speaks openly about ‘the privileged treatment given to consumers’.10 This is a brand new issue for Czech lawyers. Czech law, which has implemented EC consumer directives,11 has not become fully accustomed to the specific legal position of a consumer whether with respect to conflict of laws rules, which are not implemented in a fully desirable way, or with regard to issues of international civil procedure. Had the case discussed been considered only within Czech law, covered by the Czech Civil Procedure Code, the appointment of a guardian by a court would have been fully sufficient for the purposes of proceedings if the residence of the defendant was unknown; the case could have been heard and decided and the judgment delivered and served on the appointed guardian.12 However, in the case discussed, which is subject to the Brussels I Regulation, the proceedings were discontinued due to the lack of international jurisdiction, and the outcome of proceedings is totally different from what would otherwise have been. The outcome is a logical consequence of the primacy of European law, which generally seems simple and clear, but may be quite surprising in particular cases.

BOGDAN M., Concise Introduction to EU Private International Law, Groningen 2006, p. 57. 11 Rules of the conflict of laws contained in the consumer directives were partly implemented into the Czech Civil Code (Act No 40/1964 Coll., as amended), cf. especially Sec 55(2) and 64 of the Civil Code. 12 Under Sec 29(4) of the Civil Procedure Code, the guardian appointed by a court for a party whose residence is unknown, represents the defendant before a court of first instance, appellate court and before the Supreme Court hearing the appeal review. He is entitled to perform all acts which would otherwise be exercised by the party. 10

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FORUM THE RECOGNITION AND ENFORCEMENT OF INTERIM MEASURES ORDERED BY INTERNATIONAL ARBITRATORS Andrea CARLEVARIS∗

I. II.

III. IV.

V.

VI.

VII.

Introduction The Coercive Tools Available to Arbitrators A. Compensation for Damages B. The Power to Draw Adverse Inferences Against the Recalcitrant Party C. Arbitrators’ Power to Order ‘Astreintes’ Judicial Recognition and Enforcement The Different Legislative Models A. The Exequatur Model B. The Court Assistance Model 1. The Swiss System 2. The German System C. The Mixed Model: the English System Recognition and Enforcement of Foreign Interim Measures A. Recognition on the Basis of National Legislation and International Conventions Other Than the New York Convention B. The Applicability of the New York Convention to the Recognition of Foreign Interim Measures 1. The Thesis in Favour 2. The RCI v. Bolwell Case 3. The Applicability to Interim Measures of the Grounds for Refusal Provided by the Convention 4. The Incompatibility of Interim Relief with the Convention The New Text of the UNCITRAL Model Law on the Recognition and Enforcement of Arbitral Interim Measures A. General Aspects B. The Grounds for Refusal Conclusions: The Need for an International Uniform Instrument

∗ Doctor in International Law, Università di Roma ‘La Sapienza’; Lecturer, Università della Tuscia, Viterbo; Lawyer, Bonelli Erede Pappalardo Studio legale. This article summarizes and develops some of the topics dealt with in the author’s work La tutela cautelare nell’arbitrato internazionale, Padova 2006.

Yearbook of Private International Law, Volume 9 (2007), pp. 503-539 © sellier. european law publishers & Swiss Institute of Comparative Law

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Andrea Carlevaris

I.

Introduction

International arbitral tribunals’ jurisdiction to order provisional measures is, today, generally recognised in national legislations, international conventions, and arbitration rules, with only a few important exceptions. For example, in Italian law arbitrators are prevented from ordering attachments or other provisional measures, and interim relief is still reserved to the judiciary.1 Provisional and conservatory measures ordered by arbitrators must be implemented through either the parties’ conduct or the establishment of a new legal relationship between the parties. The fulfilment of provisional orders involves, as a matter of principle, the same problems as effectuating awards on the merits. However, the peculiar features of interim relief and orders – such as instability, temporariness, urgency, and the restrictions and adaptations of due process as a consequence thereof – prevent the enforcement regime of awards from being automatically applicable to interim and provisional measures.2 The first obvious form of implementation of arbitral orders consists in the parties’ wilful compliance with the arbitrators’ decision. However, whenever a party is not willing to immediately and voluntarily abide by the arbitral order, coercive mechanisms become available to either the other party or the arbitrators to ensure compliance. The general trend towards wilful compliance with arbitral decisions, which has been pointed out by commentators and is confirmed by several statistical surveys,3 should not be overestimated, since it largely depends on the parties’ inten1 See Art. 818 of the Italian Code of Civil Procedure: ‘Gli arbitri non possono concedere sequestri, né altri provvedimenti cautelari, salva diversa disposizione di legge’. The arbitrators’ lack of power to order interim measures has been confirmed, despite numerous contrary opinions, in the recent reform of Italian arbitration law (see d. lgs. No. 80/2006, which only added to the text of Art. 818 the last sentence ‘salva diversa disposizione di legge’, ‘except where otherwise provided by the law’). 2 For these observations, see POZZI V., ‘Arbitrato e tutela cautelare: profili comparatistici’, in: Riv. arb. 2005, p. 17 et seq. 3 A survey of arbitrations administered by the American Arbitration Association evidenced compliance with the arbitral orders in 90% of cases (45 out of 50 surveyed cases); see NAIMARK R./KEER S., ‘Analysis of UNCITRAL Questionnaires on Interim Relief’, in: Mealey’s, March 2001, p. 26; for a survey concerning arbitrations administered by the Cairo Regional Centre for International Arbitration, from which it emerges that all five provisional measures ordered in 2000 were spontaneously fulfilled by the parties, see ABOULENEIN M., ‘Issuing Interim Relief Measures in International Arbitration in the Arab States’, in: Journal of World Investment 2002, p. 81; for the observation that all five orders made by an ICC ‘pre-arbitral referee’ until 2004 were spontaneously complied with, see GAILLARD E./PINSOLLE P., ‘The ICC Pre-Arbitral Referee: First Practical Experiences’, in: Arb. Int. 2004, pp. 19-20. For the regular observance of arbitral provisional measures in general, see BOND S., ‘The Nature of conservatory and provisional measures’, in: ICC (ed.), Conservatory and Provisional Measures in International Arbitration, Paris 1993, p. 16; BERGER K.P., International Economic Arbitration, Deventer, Boston 1993, p. 334; REDFERN A., ‘Interim Measures’, in: NEWMANN L.W./HILL R.D. (ed.), The Leading Arbitrators’ Guide to Interna-

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Enforcement of Interim Measures in International Arbitration tions of avoiding negatively influencing the arbitrators, pending a decision on the merits. Furthermore, the existence of adequate sanctions for the case of non-compliance represents the most effective deterrent against non-compliance and the best guarantee of the measures’ effectiveness.4 If the parties do not voluntarily implement the arbitral decision, the involvement of State courts becomes necessary to obtain judicial recognition and enforcement. The distinction between the notions of recognition and enforcement reflects the difference in the effects of the judge’s intervention. As for all types of arbitral decisions, the concept of recognition applies when a party seeks to introduce the interim measure into the national legal order without actually having it enforced, such as for measures of a merely declaratory or constitutive nature or content or for measures that do not require any form of co-operation by the party against which they are issued, and are, so to say, ‘self-executing.’ The concept of enforcement (rectius, enforceability) comes into play when the order must be given the particular effect consisting of compulsory enforcement through the co-operation of State authorities.5 Enforcement is a broader concept than recognition, since it presupposes the latter.6 However, the distinction between recognition and enforcement does not have any specific consequence on the legal regime and can therefore be left in the background.7

II. The Coercive Tools Available to Arbitrators Before examining the judicial recognition and enforcement of arbitral provisional measures, we shall briefly examine the coercive mechanisms available to arbitrators to ensure compliance with their provisional measures, specifically those based on the law or on the parties’ will. tional Arbitration, New York 2004, p. 239; LEW J.D.M./MISTELIS L.A./KRÖLL S.M., Comparative International Commercial Arbitration, The Hague, London, New York 2003, p. 610; YESILIRMAK A., Provisional Measures in International Commercial Arbitration, The Hague 2005, p. 238. 4 See KOJOVIĆ T., ‘Court Enforcement of Arbitral Decisions on Provisional Relief – How Final Is Provisional’, in: J. Int. Arb. 2001, p. 512; TOMMASEO F., ‘Lex fori e tutela cautelare nell’arbitrato commerciale internazionale’, in: Riv. arb. 1999, p. 28. 5 On the distinction between recognition and enforcement of arbitral decisions in general, see FOUCHARD P./GAILLARD E./GOLDMAN B., On International Commercial Arbitration, The Hague, Boston, London 1999, p. 889 et seq. The authors refer, as examples of mere recognition, to the case in which a party is interested in introducing an award that simply rejects all claims made by a plaintiff and the situation where the arbitral decision is raised as an incidental claim. 6 See BRIGUGLIO A., L’arbitrato estero, Padova 1999, pp. 185-186. 7 The New York Convention distinguishes recognition and enforcement but does not differentiate the legal regime applicable.

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Andrea Carlevaris Unlike judges, arbitrators have no coercive powers to enforce their decisions by invoking the power of the State. Arbitral interim measures have therefore sometimes been described as leges imperfectae.8 As private judges, vested by the parties with the power to decide the dispute, arbitrators have sanctions at their disposal to pressure recalcitrant parties to abide by their provisional decisions. These are, however, sanctions aimed at obtaining voluntary compliance; they do not replace the intervention of State courts, an avenue of recourse available to the parties if these remedies prove unsuccessful.

A.

Compensation for Damages

Arbitral interim measures have an undeniable inter partes binding nature, derived from the power conferred on the arbitrators by the parties in the arbitration agreement. This contractual value is strengthened by the general obligation of good faith incumbent on all parties subscribing to an arbitration agreement, which includes the parties’ duty to abstain from frustrating the smooth settlement of the dispute through arbitration. As a consequence of a breach of this contractual obligation, the arbitrators may be empowered to sanction non-compliance by ordering the recalcitrant party to compensate the other party for any damage incurred as a result of the breach. However, this remedy is not an efficient solution for several reasons. First, an arbitral tribunal’s jurisdiction to award damages for non-compliance with an interim measure is far from certain and should be established on a case-by-case basis, having regard to the scope of the arbitration agreement and to the arbitration rules, if any, applicable on the basis thereof.9 Second, a breach of the arbitration 8 See BERTI S., ‘Article 183’, in: BERTI S. (ed.), International Arbitration in Switzerland – An Introduction to and a Commentary on Articles 176-194 of the Swiss Private International Law Statute, Basel, Geneva, Munich 2000, p. 431; WIRTH M., ‘Interim or Preventive Measures in Support of International Arbitration in Switzerland’, in: Bulletin ASA 2000, p. 31 et seq. 9 This situation is referred to, for example, in the ICC Pre-Arbitral Referee Rules, Art. 6 § 8.1, which provides as follows: ‘The competent jurisdiction may determine whether any party who refuses or fails to carry out an order of the Referee is liable to any other party for loss or damage caused by such refusal or failure.’ BESSON S., Arbitrage international et mesures provisoires, Zurich 1998, p. 314, is of the opinion that the arbitrators’ jurisdiction is in any case based on the mandatory nature of the measures, and that such jurisdiction is an inevitable corollary of the arbitrators’ jurisdiction to order provisional measures. For the contractual nature of the claim for compensation of damages, see SCHWARTZ E., The Practices and Experiences of the ICC Court, in ICC (ed.) (note 3), pp. 61-62; REINER A., Handbuch der ICC-Schiedsgerichtsbarkeit, Wien 1989, p. 227 (who identifies the basis of the claim in the contractual obligation to abstain from aggravating the dispute). For an intermediary solution as to the characterisation of the claim, see KARRER P., ‘Interim Measures Issued by Arbitral Tribunals and the Courts: Less Theory, Please’, in VAN DEN BERG A.J. (ed.): ICCA Congress Series No. 10, International Arbitration and Nationl Courts: The Never Ending Story, Deventer 2001, p. 103: ‘[t]he theoretical basis of the power to award damages is without practical importance.’

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Enforcement of Interim Measures in International Arbitration agreement through non-compliance with an order does not necessarily lead to compensable damages.10 In the absence of any such damages, the beneficiary could only obtain an award ordering specific performance of the obligation (which is often per se incompatible with the urgency that characterises most cases of interim relief). Finally, even when theoretically possible, compensation for damages is generally not an adequate remedy and is incompatible with the need to protect a party’s right against harm, which, by definition, is deemed irreparable.11

B.

The Power to Draw Adverse Inferences Against the Recalcitrant Party

A more effective remedy, which some commentators consider available to arbitrators, that enhances the efficiency of an arbitral provisional order, is the possibility of drawing an adverse inference against the non-compliant party concerning the merits of the dispute.12 The parties will obviously be reluctant to disregard such an order to avoid negatively influencing the arbitrators, pending a decision on the merits, and this psychological effect might prove decisive. However, arbitrators’ decisions on applications for interim measures and decisions on the merits have totally different bases and scope. A negative attitude from the arbitrators in their final decision would therefore be unjustified in most cases.13 Unless there is a causal link between a party’s failure to comply and the outcome of the arbitration (which is generally not the case), the tribunal may not penalise the recalcitrant party in the final award as a sanction for failure to respect procedural decisions. Several exceptions can be envisaged in this respect. First, the negative consequences for the non-compliant party might find their basis in a specific provision contained in either the law or in the arbitration rules.14 Second, See KARRER P. (note 9), p. 103. POZZI V. (note 2), pp. 32-33; BESSON S. (note 9), p. 315. 12 Under Swiss law, see LALIVE P./POUDRET J.-F./REYMOND C., Le droit de l’arbitrage interne et international en Suisse, Lausanne 1990, p. 365; on ICC practice, see CRAIG W.L./PARK W.W./PAULSSON J., International Chamber of Commerce Arbitration, New York 2000, p. 416. 13 See POUDRET J.-F./BESSON S., Comparative Law of International Arbitration, London 2007, p. 540; KNOEPFLER F., Les mesures provisoires et l’arbitrage international, in KELLERHALS F. (ed.), Schiedsgerichtsbarkeit, Zürich 1997, p. 324; REINER A., Les mesures provisoires et conservatoires et l’arbitrage international, notamment l’arbitrage CCI, in: Clunet 1998, p. 861; according to WALTER G./BOSCH W./BRÖNNIMANN C.J., Internationale Schiedsgerichtsbarkeit in der Schweiz, Berne 1991, p. 129, arbitrators might draw ‘adverse inferences’ from non-compliance with the provisional measure as an expression of the party’s general un-cooperative attitude; for analogous observations, see YESILIRMAK A. (note 3), p. 243. 14 See, for example, Sect. 41 § 6 of the English Arbitration Act, which provides for the dismissal of the claims of the party that does not comply with an order for security for costs, Sect. 41 § 6: ‘If a claimant fails to comply with a peremptory order of the tribunal to provide security for costs, the tribunal may make an award dismissing his claim.’ See also 10 11

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Andrea Carlevaris another exception concerns provisional measures relating to the administration of evidence.15 In this case, however, the tribunal’s finding on the merits will not be based on any autonomous power to penalise non-compliance, but in the normal mechanisms regarding the burden of proof.16 Nothing prevents the tribunal from sanctioning a party’s non-compliance with an order for provisional measures in its decision on the costs of the proceedings, where it is generally recognised that arbitrators can take circumstances other than the outcome of the case on the merits into account.17 This scenario is expressly contemplated in Sect. 41 § 7d of the English Arbitration Act and in several arbitral rules,18 which, however, only allow the recovery of the costs incurred as a consequence of non-compliance with the interim measure.19

C.

Arbitrators’ Power to Order ‘Astreintes’

The ‘astreinte’, or ‘penalty for non-compliance’, is a familiar concept in French,20 Belgian, and Dutch law and is another coercive remedy that might be available to arbitrators to ensure respect of their orders for interim measures. It consists of an ancillary and prospective order for payment of a pre-determined sum of money supplementing a principal order, if the principal order is not complied with within a specified time limit. The nature of this remedy has given rise to a large debate. According to certain commentators, it should be distinguished from both the compensation of

Sect. 41 § 7b of the same Act, which, less drastically, provides for the arbitrator’s general power to draw ‘such adverse inferences from the act of non-compliance as the circumstances justify.’ 15 KARRER P. (note 9), p. 103; BOND S. (note 3), p. 16; YESILIRMAK A. (note 3), p. 242. 16 BESSON S. (note 9), p. 313: ‘La perte ou le gain du procès sont liés au résultat de l’instruction mais ne sauraient se déduire directement d’une insoumission à une décision de l’arbitre.’ 17 POUDRET J.-F./BESSON S. (note 13), p. 540. 18 See Art. 21 § 4 of the AAA-ICDR International Rules: ‘The tribunal may in its discretion apportion costs associated with applications for interim relief in any interim award or in the final award.’ See also Art. 26 § 4 of the 2004 Swiss Rules. 19 Sect. 41 § 7 of the Arbitration Act: ‘If a party fails to comply with any other kind of peremptory order [other than security for costs], then, without prejudice to section 42 (enforcement by court of tribunal’s peremptory orders), the tribunal may do any of the following: … (d) make such order as it thinks fit as to the payment of costs of the arbitration incurred in consequence of the non-compliance.’ 20 For the general features of ‘astreinte’ under French law, see Arts. 33-37 of the Law of 9 July 1991, No. 650, on the reform of civil and enforcement decisions, and Art. 11 of the Nouveau Code de Procédure Civile; see TERRÉ F./SIMLER P./LEQUETTE Y., Droit civil, Les obligations, Paris 2005, p. 753 et seq.

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Enforcement of Interim Measures in International Arbitration damages and enforcement21 and would lie in a ‘grey area’ on the border between the merits and enforcement22 or between iurisdictio and imperium.23 Due to this uncertain nature, an arbitrator’s power to order astreintes is highly controversial.24 Several arbitration rules25 and national legal systems expressly provide for an arbitrator’s power to order astreintes,26 while others expressly exclude it.27 In France, where no express legislative solution exists, the majority of authors and State courts tend to approve allowing arbitrators the power to enforce both decisions on the merits and procedural orders by astreintes,28 defined as a ‘prolongement inhérent et nécessaire à la fonction de juger pour assurer une meilleure efficacité au pouvoir juridictionnel.’29 It has, however, been denied that arbitrators also have the power to ‘liquidate’ the penalty, i.e. to determine its precise amount, which would be reserved for State courts and would be subjected to the previous exequatur of an award incorporating the arbitral order.30 Swiss law also recognises

21 See DE BOISSESON M., Le droit français de l’arbitrage interne et international, Paris 1990, pp. 257-258. 22 JARROSSON C., ‘Réflexions sur l’imperium’, in: Etudes offertes à Pierre Bellet, Paris 1991, pp. 269-270, who refers the power to order astreintes to the category of ‘imperium mixtum’. 23 POUDRET J.-F./BESSON S. (note 13), p. 467. 24 For the various positions in the legal literature, see BESSON S. (note 9), pp. 317-319. 25 See, for example, Art. 19 § 1 of the new Rules of Arbitration of the Italian Association for Arbitration, which provides for arbitrators’ power to order ‘una penale in caso di inottemperanza’ (‘a penalty for the case of non-compliance’). 26 Art. 1056 of the Dutch Code of Civil Procedure: ‘The arbitral tribunal has the power to impose a penalty for non-compliance in cases where the court has such power’; Art. 1709-bis of the Belgian Code judiciaire: ‘Les arbitres peuvent condamner une partie au paiement d’une astreinte. Les articles 1385-bis à octies sont d’application mutatis mutandis.’ 27 See Sect. 25 § 4 of the 4 March 1999 Swedish law; for a critical comment, see JARVIN, ‘La nouvelle loi suédoise sur l’arbitrage’, in: Rev. arb. 2000, pp. 59-60. 28 In the legal literature, in favour of arbitrators’ power to order astreintes, see DE BOISSÉSON M. (note 21), pp. 260-261: JARROSSON C. (note 22), p. 273; JEULAND E., in obs. to Paris Court of Appeal, 7 October 2004, Otor Participations et autres c. Carlyle Holdings 1 et autre, in: Rev. arb. 2005, p. 737 et seq. The opposite position was in the past advocated by PERROT R., ‘L’application à l’arbitrage des règles du nouveau Code de procédure civile’, in: Rev. arb. 1980, p. 645 et seq.: ‘il serait inconcevable que des arbitres dépourvus d’imperium puissent manier une mesure qui en est imprégnée.’ 29 See Paris Court of Appeal, 7 October 2004 (note 28). 30 This power has been implicitly admitted by the Court of Appeal of Rennes, 26 September 1984, Société Auvinet S.A. c. S.A. Sacomi et Poirier, in: Rev. arb. 1986, p. 441, which has dismissed the request for liquidation of an astreinte, since the award in which it was contained had not been the object of exequatur. Expressly in this sense, see Paris Court of Appeal, 8 June 1990, Société Hoche Friedland c. Société Le Grand Livre du mois, in:

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Andrea Carlevaris an arbitrator’s power to order astreintes, but only on the basis of the parties’ agreement.31 Contrary to the traditional approach just mentioned, liquidation of the astreinte does not seem to entail the exercise of coercive powers denied to arbitrators, since it consists of assessing the quantum debeatur and not of an enforcement order addressed to the State organs. In other words, the liquidation of the astreinte must be distinguished from its enforcement: arbitrators vested with the power to decide the merits of the dispute have jurisdiction to liquidate the penalty, while its enforcement presupposes the judicial exequatur of an award incorporating it. The need for recourse to State courts for recognition of the award and, according to the majority view, for liquidation of the penalty32 is likely to reduce the coercive effectiveness of this remedy in a significant manner. This requirement, in fact, prevents the astreinte from being ordered in the form of a procedural order, since this form would prevent it from being declared enforceable. The need to obtain the previous declaration of enforceability may also limit its efficiency, which largely depends on its immediate coercive effect.

III. Judicial Recognition and Enforcement The above overview demonstrates that generally the coercive powers available to the arbitrators to ensure compliance with their provisional measures are rarely effective. Therefore, when a party does not comply voluntarily, State court intervention becomes indispensable in obtaining the coercive enforcement of the measures.33 Rev. arb., 1990, p. 917 et seq. See also KAPLAN N., ‘L’astreinte: un remède au défaut de pouvoir coercitif de l’arbitre ?’, in: Le juriste, June-July 2001, p. 43 et seq. 31 For an exhaustive analysis of this topic, see LEVY L., ‘Les astreintes et l’arbitrage international en Suisse’, in: Bulletin ASA 2001, p. 21 et seq., who considers that a tacit agreement would suffice; for the need of the written form for the granting of such power to the arbitrators, see POUDRET J.-F./BESSON S. (note 13), p. 468. 32 As observed by LEVY L. (note 31), p. 21 et seq., ‘payer l’astreinte ne dispense pas d’exécuter: bien au contraire, si celle-ci s’avère efficace, il faudra en venir à son exécution forcée et à celle de la décision arbitrale demeurée lettre morte.’ 33 Ecuador is probably the only jurisdiction that provides for no judicial intervention and allows the arbitrators, if so empowered by the arbitration agreement, to seek assistance of other State organs for the enforcement of the provisional order without any previous Court decision. This regime, which de facto assimilates the arbitral order to a provisional measure ordered by a judge, is even more favourable than the regime applicable to awards: see Art. 9 § 2 of the 1997 Arbitration and Mediation Law (English translation): ‘If the parties so provide in the arbitration agreement, the arbitrators may request the assistance of public and judicial officers, the police and administrative authorities if necessary to carry out the interim measures, without the need of resorting to the court of the place where the property is located or the measures are to be carried out’; see YESILIRMAK A. (note 3), p.

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Enforcement of Interim Measures in International Arbitration The mechanism available for the judicial enforcement of provisional orders is obviously governed by the law of the State where the order must be enforced. However, the scope of the national rules on recognition and enforcement is generally limited to domestic orders, rendered in arbitrations having their seat in the same State where enforcement is sought; only in a few cases are such rules also applicable to orders rendered in foreign proceedings. This circumstance represents a significant drawback of the efficiency and harmonization of the present system, since, in an international setting, provisional orders must frequently be implemented in a legal order other than the jurisdiction in which they are rendered. Recognition and enforcement of provisional measures are obviously outside the control of party autonomy and are only governed through public instruments. Therefore, most international arbitration rules restrict themselves to providing the form in which provisional measures can be taken (generally recognising an arbitrator’s discretion in this respect),34 but are silent on the enforcement stage.35

IV. The Different Legislative Models For a long time both national laws and international instruments were silent on the problem of enforcement, and priority was given to other aspects of the legal regime of arbitral provisional measures, such as jurisdiction and procedural issues. Only recently, after the jurisdiction of arbitrators was more or less universally recognised, has debate moved on to the question of enforcement, as also confirmed by the recent revision of the UNCITRAL Model Law, which will be examined below. Debate focused on the possible application of provisions regarding the recognition and enforcement of arbitral awards to provisional measures, but such rules were generally considered applicable only to final (or partial final) awards. Enforcement of provisional measures, due to their modifiability and revocability, was excluded from their scope, and uncertainty reigned as to the legal regime applica248, who holds that this approach ‘reflects what should be the ultimate goal for provisional measures issued by a tribunal,’ but admits that it is presently ‘unacceptable to the international community and to business persons.’ 34 See Art. 23 § 1 of the ICC Rules of Arbitration, Art. 26 § 2 of the UNCITRAL Rules, Art. 46c of the WIPO Rules, Art. 21 § 2 of the ICDR-AAA Rules. 35 The only arbitration rules that purport to regulate enforcement are the Rules for International Arbitration of the American Film Market Media Center, whose Art. 10, devoted to ‘Interim Measures of Protection,’ provides: ‘Further to the request of either party the arbitrator may make interim awards and orders where necessary to safeguard the subject matter of the arbitration or effectuate the proceedings and, in this regard, may grant any remedy or relief … Any interim award issued by the arbitrator shall be entitled to the same power of enforcement in appropriate courts of law as a final arbitration award.’ For the ineffectivity of this provision, see BARLETTA A., ‘L’exequatur dei provvedimenti cautelari arbitrali stranieri (tendenze e prospettive di riforma)’, in: Rivista di diritto processuale 2003, pp. 1198-1199.

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Andrea Carlevaris ble thereto. To fill this gap, numerous national legislatures have recently turned their attention to this issue, adopting specific rules. However, most legislation is still silent on this question and jurisprudential solutions have been sought to deal with it.36 There is an evident lack of uniformity among the countries that have adopted specific rules on the recognition of interim measures, largely due to the absence of both a virtually universal international instrument, such as the 1958 New York Convention, and a legislative model, such as the UNCITRAL Model Law. Recourse to State courts to obtain enforcement of a provisional measure ordered by an arbitral tribunal may take two main distinct forms, which correspond to two groups of substantially homogeneous legislation.37 The first, and more common, form consists of assimilating the provisional measure to an award and allowing its enforcement by a declaration of enforceability, as in the case of awards. By means of an exequatur, the arbitral measure is introduced in the national legal system and produces the same effects as a decision of a State authority. This approach, which can be named the ‘exequatur model,’ presupposes the characterisation of the arbitral decision as an award, but not necessarily its adoption in the form of an award: while certain jurisdictions provide that the measure must take the form of an award, others simply put provisional orders on the same footing as awards quoad effectum, irrespective of their form. The second form, generally named the ‘court assistance model,’ consists of a particular procedure leading to a State court order confirming the arbitrator’s decision, or forcing the recalcitrant party to comply with the decision. In jurisdictions following the exequatur model, the intervention of judges is limited to ensuring that the arbitral decision meets certain basic and peremptory requirements and to declaring it enforceable (or denying its enforceability), without reproduction or modification, while, in legal orders following the ‘court assistance model,’ the judge issues a self-standing order following the arbitral measure.38 When it intervenes in assistance, the court pursues the aim of the arbitral measure and ensures its effectiveness, but the content of its order may vary, and the judge generally has a limited power to adapt the measure to his own procedural law. While the exequatur model presupposes the characterisation of the order as an award, the assistance model is neutral with respect to both the characterisation and the form of the arbitral order. Two additional legislative models consist in the court’s (1) reformulation of the arbitral order aimed at making it compatible with the domestic procedural law and (2) in the issuance of an autonomous interim order based on the factual and legal assessment already made by the arbitrator. In the latter case, the court order is KOJOVIĆ T. (note 4), p. 512. See SANDERS P., Quo Vadis Arbitration ? – Sixty Years of Arbitration Practice, A Comparative Study, The Hague 1999, p. 272; BESSON S. (note 9), p. 285. 38 See REYMOND C., ‘La nouvelle loi suisse et le droit de l’arbitrage international’, in: Rev. arb. 1988, p. 404, according to whom the Swiss judicial authority ‘ne se borne pas à un simple exequatur, mais rend sa propre ordonnance.’ 36 37

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Enforcement of Interim Measures in International Arbitration based on the courts’ concurrent jurisdiction to adopt provisional measures in the presence of an arbitration agreement. These two approaches, which are per se extremely restrictive of arbitrators’ powers, are generally not adopted in isolation. Rather, they are adopted in combination with exequatur or assistance mechanisms, as alternative solutions available to obtain the coercive implementation of an arbitral measure when exequatur or assistance is not possible.39 The exequatur of the arbitral order only produces its effects in the jurisdiction in which it is made, while the court’s order in support of the arbitral measure is no different from any ordinary judicial decision and may circulate on the basis of the applicable rules on the recognition and enforcement of foreign judicial decisions.40

A.

The Exequatur Model

The recognition of arbitral provisional measures through a declaration of enforceability (exequatur) is increasingly common in recent national legislations, which, however, do not contemplate specific provisions in this respect, and generally extend the regime applicable to arbitral awards to cover interim decisions. One of the first laws adopting this approach was the Dutch Code of Civil Procedure, which declares that the rules applicable to awards are also fully applicable to arbitral decisions taken in ‘summary proceedings.’41 Dutch law does 39 The reformulation of the arbitral measure is generally adopted in jurisdictions following the court assistance model (for German law, see infra, paragraph B.2), while the making by the court of an autonomous measure on the basis of a previous arbitral order is often provided for in jurisdictions following the exequatur approach. For examples of legislative provisions allowing the adoption of a court order identical to the arbitral measure, see Art. 7 § 2 of the 1995 Arbitration Act of Kenya (‘If an arbitral tribunal has already ruled on an interim measure the court treats it as conclusive for the purpose of application’), Sect. 1-567 § 39 of North Carolina International Commercial Arbitration Act (‘… (d) In considering … the enforcement of interim measure, the court shall give preclusive effect to any finding of fact of the arbitral tribunal in the proceeding, including the probable validity of the claim that is the subject of … the interim measures granted’) and Art. 9 § 3 of the Arbitration Act of New Zealand (‘Where a party applies to a court for an interim injunction or other interim order and an arbitral tribunal has already ruled on any matter relevant to the application, the court shall treat the ruling or any findings of fact made in the course of the ruling as conclusive for the purposes of application’). 40 According to KOHL B.J., Vorläufiger Rechtsschutz in internationalen Handelsschiedsverfahren, Frankfurt am Main, New York, Paris 1990, pp. 185-186, the recognition of the powers of arbitrators to make provisional orders presupposes the recognition and enforcement of the measures adopted in the exercise of this power. This opinion, which is apparently isolated and has indeed a strong logic de lege ferenda, cannot be shared de lege lata. The implementation of an arbitral provisional measure can be assured through various mechanisms and does not necessarily presuppose the adoption of the exequatur model: see BESSON S. (note 9), pp. 287-288. 41 Art. 1051 § 3 of the Code of Civil Procedure (English translation): ‘A decision rendered in summary proceedings shall be regarded as an arbitral award to which the

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Andrea Carlevaris not require that the order be made in the form of an award and only puts arbitral awards and interim measures on the same footing quoad effectum. Numerous jurisdictions that have adopted the UNCITRAL Model Law have added specific provisions on the enforcement of provisional measures,42 in most cases by extending provisions dealing with the recognition and the enforcement of awards (Arts. 35 and 36 of the Model Law) to provisional measures.43 Legislation in Hong Kong and Sri Lanka follow a similar approach: in Hong Kong, judges are allowed to declare arbitral ‘orders’ and ‘directions’ enforceable the same as awards,44 while in Sri Lanka, provision is made for the recourse to State courts to enforce arbitral provisional ‘orders’, and this recourse is declared compatible with the arbitration agreement.45 The clearest declaration that the provisions on arbitral awards are applicable to interim measures and the form chosen by the arbitrators is irrelevant is provided in the Spanish Ley de Arbitraje,46 as well as in the legislation of a certain number of Canadian Provinces, such as British Columbia and Ontario, where the arbitral order ‘is treated as if it were an award’ irrespective of the form adopted by the arbitrators.47 Instead, a formalistic approach is followed in the legislation of other provisions of Sections Three to Five inclusive of this Title shall be applicable.’ The provisions referred to concern the formal and substantive requirements, enforcement, and challenges. 42 See BINDER P., International Commercial Arbitration and Conciliation in UNCITRAL Model Law Jurisdictions, London 2005, p. 154, according to whom 22 jurisdictions, among those that have adopted the UNCITRAL Model Law, have added specific provisions on the recognition and enforcement of interim measures. According to BERGER K.P. (note 3), p. 344, these would not be additions strictly speaking, since the Model Law ‘leaves the question of enforcement to the municipal procedural law of the state which has adopted the Law.’ 43 See the New Zealand Arbitration Act, which reproduces the Model Law in all other respects, but adds to Art. 17 § 2 a reference to Arts. 35 and 36. For similar provisions see Sect. 14 § 3 of the Irish Arbitration Act, Art. 62 of the Arbitration Act of Malta, Art. 23 of the Australian International Arbitration Act and Art. 26 of the International Conciliation and Arbitration Act of Bermuda; for a comment on these and other jurisdictions which have adopted the same approach, see BINDER P. (note 42), p. 154; YESILIRMAK A. (note 3), p. 247 et seq. Under Australian and Bermuda law (but not under the law of the other jurisdictions referred to above), the applicability of provisions regarding awards to provisional measures presupposes the parties’ express agreement: see SANDERS, ‘Unity and Diversity in the Adoption of the Model Law’, in: Arb. Int. 1995, p. 1 et seq. 44 See Sect. 2GG of the 2000 Arbitration (Amendment) Ordinance No. 2; see also Sect. 12 § 5 of Singapore International Arbitration Act. 45 Sri Lanka Arbitration Act, Sect. 13. 46 Art. 23 § 2 of the Ley de Arbitraje of 23 December 2003: ‘A las decisiones arbitrales sobre medidas cautelares, cualquiera que sea la forma que revistan, le serán de aplicación las normas sobre anulación y ejecución forzosa de laudos.’ 47 See Sect. 9 of the International Commercial Arbitration Law of Ontario and Sect. 2 of the International Commercial Arbitration Act of British Columbia.

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Enforcement of Interim Measures in International Arbitration States, which require the form of award in order for the corresponding legal regime to become applicable.48 In other cases, the adoption of the exequatur model is not the result of express legislative provisions, but of jurisprudential and doctrinal elaborations. In France, for example, the possibility of incorporating an interim measure into an enforceable award is admitted by most commentators, who also recognise the power of the arbitrators to declare the interim award provisionally enforceable under Art. 1479 of the Nouveau Code de Procédure Civile to ensure its immediate effectiveness.49 However, another segment of case law and commentators are sceptical in this respect, advocating a restrictive interpretation of the notion of award.50 Among the jurisdictions following the exequatur approach, only the Hong Kong legislation expressly provides that the legal regime of awards is also applicable to foreign provisional orders.51 When no similar solution is provided, the relevant rules only allow the recognition and enforcement of provisional orders made in arbitrations having their seat in the same State. The legislative assimilation of provisional orders and awards is an unsatisfactory solution from both a theoretical and a practical point of view. According to some commentators, applying the legal regime of arbitral awards to provisional measures would be an escamotage, which transforms them into ‘fictitious awards’, whose legal nature is recognised within the same legal order, but does not allow recognition and enforcement abroad.52 The territorially limited applicability of

48 See the Law Reform Act of Scotland, which introduced in Scotland the UNCITRAL Model Law with minor modifications; Art. 17 § 2 provides: ‘An order under paragraph 1 of this article shall take the form of an award’: see REDFERN A./ HUNTER M., Law and Practice of International Commercial Arbitration, London 2004, p. 335. 49 In the past see, on this topic, ROBERT J., Arbitrage civil et commercial (droit interne et droit international), Paris 1967, pp. 263 and 264, for the view that awards incorporating interim measures are automatically immediately enforceable without need for a specific declaration to that effect; see also BESSON S. (note 9), pp. 292-293. 50 See DE BOISSESON M. (note 21), p. 256. In the case law, contrary to the assimilation of provisional measures and awards, see, among others, Cour de Cassation, 25 March 1994, Société Sardisud et autre c. Société Technip et autre, in: Rev. arb. 1994, p. 391, obs. JARROSSON C.; Cour de Cassation, 6 December 2001, Petit Perrin et autre c. Dor-de SaintPulgent, in: Rev. arb. 2001, p. 932 et seq.; for the view that a final decision on interim measures, though limited to the duration of the arbitral procedure, would have res judicata effect and might be the object of a challenge before State courts (and would therefore also be enforceable), see Paris Court of Appeals, 7 October 2004 (note 28), p. 737 et seq. 51 MORGAN R., ‘Enforcement of Chinese Arbitral Awards Complete Once More – But with a Difference’, in: Hong Kong Law Journal 2000, p. 379; LEW J.D.M./MISTELIS L.A./KRÖLL S.M. (note 3), p. 611. 52 See BERGER K.P. (note 3), p. 345 et seq.; KARRER P. (note 9), p. 99, who describes the effect of the exequatur as a ‘limping res iudicata effect.’

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Andrea Carlevaris almost all of these provisions makes them unsuitable for ensuring trans-national recognition and enforcement.53 The inadequacy of the exequatur mechanism in ensuring the full enforceability of arbitral orders is also confirmed by the absence in those jurisdictions of specific rules governing the case where the measure is modified or terminated by the same arbitral tribunal. The power to declare the enforceability of the order should be accompanied by appropriate mechanisms for the modification or revocation of the exequatur, which are however totally absent in the observed jurisdictions.54

B.

The Court Assistance Model

1.

The Swiss System

The paradigm of the court assistance model is represented by Art. 183 § 2 of the Swiss Loi de Droit international privé, which provides: ‘Si la partie concernée ne s’y soumet pas volontairement, le tribunal arbitral peut requérir le concours du juge compétent. Celui-ci applique son propre droit.’ The judicial assistance provided by this norm is generally considered the only available mechanism available to obtain the implementation of an interim measure in Switzerland. A party seeking to enforce an order cannot avail itself of the possibility of obtaining the exequatur that Art. 193 of the same law reserves to awards on the merits.55 Unlike the analogous norm of German law, Art. 183 § 2 seems to reserve for arbitrators the possibility of having recourse to judges.56 However, most commentators are of the view that the role of arbitrators is strictly limited to initial recourse, excluding any active participation in contentious proceedings before the courts.57 POZZI V. (note 2), p. 35. BESSON S. (note 9), p. 298. 55 BERGER K.P. (note 3), p. 334; LALIVE P./POUDRET J.-F./REYMOND C. (note 12), p. 362. For the observation that the judicial practice of certain Cantons allows the simple declaration of enforceability of the arbitral order, see POUDRET J.-F./F., BESSON S. (note 13), p. 545. 56 BESSON S. (note 9), p. 303; KNOEPFLER F. (note 13), p. 318; BUCHER A., Le nouvel arbitrage international en Suisse, Bâle, Francfort-sur-le-Main 1988, p. 74; LALIVE P./POUDRET J.-F./REYMOND C. (note 12), p. 366; RÜEDE T./HADENFELDT R., Schweizerisches Schiedsgerichtsrecht, Zürich 1993, p. 254. Contra, for the observation that ‘[a]lthough the law is silent on this point, the same possibilities must be afforded to the parties’; WIRTH M. (note 8), p. 31 et seq.; MERKT O., Les mesures provisoires en droit international privé, Zurich 1993, p. 196; BERTI S. (note 8), p. 431. 57 MERKT O. (note 56), p. 195; BESSON S. (note 9), p. 308. For an intermediary solution, which recognises the arbitrators’ exclusive ius standi before courts, but allows the parties to request their intervention, see KOJOVIĆ T. (note 4), p. 515. 53 54

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Enforcement of Interim Measures in International Arbitration The obvious pre-condition for recourse to the court is a party’s failure to voluntarily comply with the arbitral measure, which materialises, in the event of a single act, upon expiration of the time limit, if any, granted by the order for that purpose, or in the first violation of the prescribed behaviour, in the event of continuous conduct.58 Commentators have also admitted that assistance proceedings could be commenced even before a formal act in breach of the order, whenever the circumstances of the case render non-compliance reasonably certain.59 According to the majority view, the court has no discretion in its intervention.60 Besides the case where the type of decision to be enforced is unknown to Swiss law, the judge can withhold the court’s assistance only in cases of manifest invalidity or inapplicability of the arbitration agreement, irregular constitution of the arbitral tribunal,61 or, according to some authors, non-conformity with public policy62 and breach of due process.63 Opinions in favour of a broader power of the court are isolated.64 The jurisdiction of the Swiss juge d’appui on the basis of Art. 183 § 2 is extremely controversial. Most commentators are in favour of the applicability of this provision even when the place of arbitration is outside Switzerland, on condition that Swiss jurisdiction can be established with ordinary criteria, the first of which being those set out in the Lugano Convention.65 This theory, which is aimed at ensuring the maximum effectiveness in Switzerland of provisional measures KOJOVIĆ T. (note 4), p. 515, refers to the deposit of funds in an escrow account, to the handing over of the assets which are the object of an attachment, and to the provision of security as examples of the former type of measure, and to the prohibition on aggravating the dispute as an example of the latter. 59 BUCHER A./TSCHANZ Y., International Arbitration in Switzerland, Basel, Frankfurt am Main 1989, p. 89; see also WALTER G./BOSCH W./BRÖNNIMANN C.J. (note 13), p. 148. 60 LALIVE P./POUDRET J.-F./REYMOND C. (note 12), p. 366, hold that the merits of the request for interim relief cannot be re-opened before the court; see also BESSON S. (note 9), p. 309. 61 WIRTH M. (note 8), p. 41 et seq.; WALTER G./BOSCH W./BRÖNNIMANN C.J. (note 13), p. 149. 62 WALTER G./BOSCH W./BRÖNNIMANN C.J. (note 13), p. 149. 63 MERKT O. (note 56), p. 194; BESSON S. (note 9), p. 309, who admits the power of the judge to assess whether the introductory act of the arbitral proceedings has been regularly notified to the defendant. 64 HABSCHEID W.J., ‘Einstweiliger Rechtsschutz durch Schiedsgerichte nach dem Schweizerischen Gesetz über das internationale Privatrecht’, in: IPRax 1989, p. 135 (for the court’s power to review the conditions for granting interim relief); SANGIORGIO D., Der vorsorgliche Rechtsschutz in der internationalen Schiedsgerichtsbarkeit nach Art. 183 IPRG, Zürich 1996, p. 90, holds that the court might sanction a manifest excess of power of the arbitrators in assessing the conditions for the granting of the measure. 65 BUCHER A. (note 56), p. 74; LALIVE P./POUDRET J.-F./REYMOND C. (note 12), p. 366; REINER A. (note 13), p. 868; RÜEDE T./HADENFELDT R. (note 56), p. 254; BESSON S. (note 9), pp. 306-307; MERKT O. (note 56), p. 193. 58

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Andrea Carlevaris adopted in the context of international arbitrations, is, however, contradicted by the language of Art. 176 § 1 LDIP, which notoriously limits the scope of the law to international arbitrations having their seat in Switzerland.66 Moreover, common rules of interpretation preclude the scope of the two paragraphs of Art. 183 from being different: since the first paragraph is unanimously considered applicable only to Swiss international arbitrations, the same scope must be recognised for the second paragraph, which is a continuation and a corollary of the first. The consequences of a court applying its own law (son propre droit) are not only the obvious applicability of the lex processus to assistance proceedings, but also the prohibition of introducing in the Swiss legal order measures which are unknown to it.67 In this event, the juge d’appui should therefore deny its assistance. According to a widespread view, however, whenever Swiss law contemplates measures having analogous effects, the court would be authorised to ‘convert’ the measure in one known to the lex fori, as expressly provided by German law.68

2.

The German System

The mechanism of judicial assistance provided by German law presents several peculiarities. Sect. 1041 § 2 of the Zivilprozeßordnung allows the party that has obtained an order from an arbitral tribunal to apply to the judge for its enforcement, provided that no similar request for interim measures has already been submitted to the courts.69 The rationale behind this provision is to avoid the risk of conflicting enforceable measures by according priority to the earlier judicial pro-

Contra, BESSON S. (note 9), p. 306, who refers to other provisions of the LDIP whose scope is necessarily extended to foreign arbitrations (Art. 194, on the recognition and enforcement of foreign awards; Art. 177, on arbitrability; Art. 179 § 3, on the appointment of arbitrators by the Swiss judicial authority). 67 BUCHER A. (note 56), p. 74; WALTER G./BOSCH W./BRÖNNIMANN C.J. (note 13), p. 144. Contra, for the opinion that reference to the law of the judge concerns only the procedure, see MERKT O. (note 56), pp. 194-195. 68 BUCHER A. (note 56), p. 74; LALIVE P./POUDRET J.-F./REYMOND C. (note 12), p. 366; WIRTH M. (note 8), p. 40 et seq.; POUDRET J.-F./BESSON S. (note 13), p. 575, who mentions the example of a Mareva Injunction, which would be converted in séquestre of the debtor’s assets. See also POZZI V. (note 2), p. 36. The requirement of a perfect identity between the arbitral measure and the judicial decision would prevent the granting of assistance to orders unknown to the applicable Swiss law, according to BUCHER A./TSCHANZ Y. (note 59), p. 89. 69 Sect. 1041 § 2 ZPO: ‘Das Gericht kann auf Antrag einer Partei die Vollziehung einer Maßname nach Absatz 1 zulassen, sofern nicht schon eine entsprechende Maßname des einstweiligen Rechtsschutzes bei einem Gericht beantragt worden ist. Es kann die Anordnung abweichend fassen, wenn dies zur Vollziehung der Maßname notwendig ist.’ 66

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Enforcement of Interim Measures in International Arbitration ceedings (autonomous request for interim measures or intervention in support of the arbitral order).70 The formulation of this provision might generate doubts as to its homogeneity with the assistance model. However, the court’s power to reclassify (abweichend fassen) the arbitral order to adapt its content to the types of measures available under German law leads to the exclusion of the idea that the norm establishes a regime of mere declaration of enforceability, in which the court would have no discretion as to the content of the order. German judges are not authorised to replace the arbitral order whenever the latter is capable of enforcement in its original formulation. However, they can deny their assistance whenever there is no corresponding measure in German law.71 Sect. 1041 § 3 ZPO, which is also an uncommon provision, allows the court, upon request of a party, to either revoke or modify its decision if there is a change in the circumstances.72 Pursuant to Sect. 1041 § 4, the arbitrators have jurisdiction over the compensation for damages caused by a measure that is subsequently found unjustified.73 This provision is applicable only when the party has obtained the enforcement of the arbitral measure or the other party has provided security to avoid enforcement; it does not cover cases of voluntary compliance or self-executing measures.74 The applicability of the above court assistance mechanism to foreign arbitrations has also given rise to a large debate. There is an apparent contradiction between Sect. 1025 ZPO, which provides that Book X is applicable only when the place of arbitration is in Germany (and does not include Sect. 1041 among the provisions exceptionally applicable even if the place of arbitration is abroad or has See DONOVAN D.F., ‘The Allocation of Authority between Courts and Arbitral Tribunals to Order Interim Measures: A Survey of Jurisdictions, the Work of UNCITRAL and a Model Proposal’, in: VAN DEN BERG A.J. (ed.), ICCA Congress Series No. 12, New Horizons in International Commercial Arbitration and Beyond, Deventer 2005, p. 210: ‘This provision has the effect of preventing the possibility of conflicting enforceable decisions ordered by a court and an arbitral tribunal with respect to interim measures.’ 71 NIGGEMANN F., ‘The New German Arbitration Law’, in: Revue du droit des affaires internationales 1998, p. 656. For a case in which an order similar to a Mareva Injunction has been reformulated as an injunction known to German law, see the decision of the Court of Appeal of Karlsruhe reported in KOJOVIĆ T. (note 4), p. 517. 72 Sect. 1041 § 3 ZPO: ‘Auf Antrag kann das Gericht den Beschluß nach Absatz 2 aufheben oder ändern.’ The court does of course not modify the arbitral order, but revises the previous judicial decision in support thereof. 73 Sect. 1041 § 4 ZPO: ‘Erweist sich die Anordnung einer Maßname nach Absatz 1 als von Anfang an ungerechtfertigt, so ist die Partei, welche ihre Vollziehung erwirkt hat, verpflichtet, dem Gegner den Schaden zu ersetzen, der ihm aus der Vollziehung der Maßname oder dadurch entsteht, daß er Sicherheit leistet, um die Vollziehung abzuwenden. Der Anspruch kann im anhängigen schiedsrichterlichen Verfahren geltend gemacht werden.’ 74 See RAESCHKE-KESSLER H./BERGER K.P., Rechts und Praxis des Schiedsverfahrens, Köln 1995, p. 145. 70

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Andrea Carlevaris not yet been fixed), and Sect. 1062 § 2, which provides for the jurisdiction of German courts, also on the basis of Sect. 1041, when the place of arbitration is not in Germany and sets out various criteria to identify the competent court.75 The unambiguous language of this provision allows for the extension of the assistance regime to foreign arbitrations.76 The extent of the discretion enjoyed by the German courts when acting in support of an arbitral proceeding is also controversial. Some authors are in favour of the court’s power to review the merits of the provisional measure regarding its proportionality.77 However, this solution would be incompatible with the limited scope of judicial review and would render such an intervention indiscernible from the adoption of an autonomous order.78

C.

The Mixed Model: The English System

A different enforcement mechanism for arbitral orders is provided under English law. It combines elements of the exequatur model with elements of court support mechanisms, yet contains certain aspects which are manifestly different from either model. Sect. 42 of the Arbitration Act, which regulates the enforcement of arbitral ‘orders’ in general, and therefore has a broader scope than interim orders stricto sensu,79 sets out a mixed model. English courts have no power to adopt a self-

Sect. 1062 § 2: ‘Besteht in den Fallen des Absatzes 1 Nr. 2 erste Alternative, Nr. 3 oder Nr. 4 kein deutscher Schiedsort, so ist für die Entscheidungen das Oberlandsgericht zuständig, in desen Bezirk der Antragsgegner seinen sitz oder gewöhnlichen Aufenthalt hat oder sich Vermögen des Antragsgegners oder der mit der Schiedsklage in Anspruch genommene oder von der Maßname betroffene Gegendstand befindet, hilfsweise das Kammersgericht.’ 76 BERGER K.P., ‘Germany Adopts the Uncitral Model Law’, in: International Arbitration Law Review 1998, p. 121 et seq.; KOJOVIĆ T. (note 4), p. 518; contra, see BESSON S. (note 9), p. 301. 77 BERGER K.P., The New German Arbitration Law in International Perspective, The Hague 2000, p. 11; POZZI V. (note 2), p. 35; KOJOVIĆ T. (note 4), p. 517. 78 POZZI V. (note 2), p. 35, holds that the court is empowered to proceed to a prima facie assessment of the existence of an arbitration agreement. 79 Sect. 42: ‘(1) Unless otherwise agreed by the parties, the court may make an order requiring a party to comply with a peremptory order made by the tribunal. (2) An application for an order under this section may be made: (a) by the tribunal (upon notice to the parties), or (b) by a party to the arbitral proceedings with the permission of the tribunal (and upon notice to the other parties), or (c) where the parties have agreed that the powers of the court under this section shall be available. (3) The court shall not act unless it is satisfied that the applicant has exhausted any available arbitral process in respect of failure to comply with the tribunal’s order. (4) No order shall be made under this section unless the court is satisfied that the person to whom the tribunal’s order was directed has failed to comply with it within the time prescribed in the order, or, if no time was prescribed, within a reasonable 75

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Enforcement of Interim Measures in International Arbitration standing decision on the basis of the arbitral order (as in court support mechanisms), but only the power to vest the arbitral order with the legal force it originally lacks. The courts are also totally deprived of any power to revise or modify the arbitral measure. However, unlike jurisdictions following the exequatur model, English law does not put orders on the same footing as awards (which benefit from the distinct legal regime set forth in Sect. 66 of the Act), but provides for a specific enforcement mechanism with different characteristics and effects. An additional feature that is different from systems providing for a simple declaration of enforceability is represented by the parties’ power to exclude the applicability of this mechanism (‘[u]nless otherwise agreed by the parties …’). The court issues an order requiring a party to comply with an arbitral ‘peremptory order,’80 which the arbitral tribunal is empowered to make only after the party has failed to comply with a previous order ‘without showing sufficient cause.’81 Therefore, in order for the interested party to seek recourse in the courts to obtain their assistance in enforcing the arbitral measure, a double refusal by the other party is necessary: first, with respect of the original order, and second, with respect to the more coercive ‘peremptory order.’ Seeking such court assistance is subject to a party’s exhaustion of all available remedies for non-compliance before the arbitrators (‘any available arbitral process’: Sect. 42 § 3) and to the expiration of any deadline set by the arbitrators to abide by the order.82 It is the intention of the English legislator that this provision represents an expression of the ‘subsidiarity principle,’ which largely inspires the present English arbitration legislation.83 However, it could create an obstacle to the full effectiveness of the arbitral measure whenever the beneficiary disposes of other available means to react against non-compliance with an order. As observed above, the only case in which arbitrators dispose of an effective means is when a security for costs is ordered by the tribunal, in respect of which a party’s refusal to abide by an arbitral ‘peremptory order’ might entail the dismissal of its claim on the merits (Sect. 41 § 6 of the Act). A further uncommon aspect of the mechanism at hand is represented by ius standi in the enforcement proceedings, which Sect. 42 § 2 reserves to either the arbitrators or a party authorised by the arbitrators. A party’s power to unilaterally time. (5) The leave of the court is required for any appeal from a decision of the court under this section.’ 80 See MERKIN R., Arbitration Act 1996, London, Singapore, p. 110: ‘The word ‘peremptory’ merely implies the inclusion of a sanction for non-compliance.’ 81 See Sect. 41 § 5 of the Arbitration Act: ‘If without showing sufficient cause a party fails to comply with any order or directions of the tribunal, the tribunal may make a peremptory order to the same effect, prescribing such time for compliance with it as the tribunal considers appropriate.’ 82 According to MERKIN R. (note 80), pp. 111-113, the deadline granted by the arbitrator should not be so short as to give rise to a violation of the ‘fair treatment principle’ under Sect. 33 of the Act, otherwise the courts may refuse their intervention. 83 See, in particular, Sect. 44 § 5 of the Act.

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Andrea Carlevaris seek recourse in the courts is recognised only where previously agreed by the parties.84 An extremely important difference between the above mentioned mechanism and the enforcement regime of awards under Sect. 66 lies in the fact that the former is applicable only to arbitrations having their seat in England (see Sect. 2 §§ 1 and 3). This situation is partially remedied by Sect. 2 § 4, which authorises the parties to seek recourse in the English courts when the place of arbitration has not been determined and the court deems it appropriate to provide its assistance ‘by reason of a connection with England and Wales or Northern Ireland.’

V.

Recognition and Enforcement of Foreign Interim Measures

A.

Recognition on the Basis of National Legislation and International Conventions Other Than the New York Convention

The recognition and enforcement of interim measures adopted in foreign arbitral proceedings is possible on the basis of either ordinary legislative provisions or conventional instruments applicable in the jurisdiction where enforcement is sought. As far as national legislations are concerned, the relevant regime is generally not extended to foreign orders.85 Of the jurisdictions observed above, only the enforcement mechanisms provided under Hong Kong law (among the jurisdictions following the exequatur model) and German law (among jurisdictions following the court support approach) are applicable when the seat of the arbitration is in a different country. In the above scenario, the amendment of the UNCITRAL Model law, which provides for the applicability of the new regime irrespective of the localisation of the arbitration, is indeed an important development. In the absence of a unitary legal regime, recognition and enforcement of foreign interim measures might occur on the basis of provisions governing the recognition of arbitral awards. The applicability of the New York Convention will be dealt with in the following paragraph, while possible recourse to other domestic or international instruments is briefly examined here. The large participation in the New York Convention does not render other instruments inapplicable even in relations between State parties, since Art. VII § 1 allows the parties to arbitral proceedings to obtain enforcement of foreign awards 84

MERKIN R. (note 80), p. 112: ‘the section is devised to assist the arbitrators them-

selves’. POZZI V. (note 2), p. 37. In a more drastic sense, see LEW J.D.M./MISTELIS L.A./KRÖLL S.M. (note 3), p. 612: ‘Where the tribunal has its seat in a different country these rules do not apply; nor do they cover the enforcement of an interim measure abroad.’ 85

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Enforcement of Interim Measures in International Arbitration on the basis of either domestic law or international provisions. However, in regulating the enforcement of foreign awards, numerous jurisdictions simply refer to the New York Convention and recourse to the domestic regime does not present any advantage.86 Jurisdictions that adopt the exequatur model allow the incorporation of interim measures in awards and provide for the applicability of the corresponding regime.87 For this purpose, however, it is not sufficient that this effect is admitted in the jurisdiction where enforcement is sought, but it has to be simultaneously provided in the jurisdiction from which the measure originates.88 Reference to other international instruments is practically irrelevant for our present purposes.89 The 1961 Geneva Convention does not deal with the recognition and enforcement of interim measures. Bilateral conventions on the enforcement of awards generally set out an enforcement regime similar to that of either the New York Convention or conventions on the enforcement of judicial decisions and expressly limit their scope to arbitral decisions that can be qualified as awards.90 Finally, it is worth mentioning that the privileged recognition and enforcement regime provided by the 1965 Washington Convention (Art. 54) is only applicable to arbitral decisions that the same Convention qualifies as ‘awards’ (‘sentences’). This excludes all decisions other than a final award on the merits and renders the Convention inapplicable to interim measures.

See, for example, Art. 194 LDIP: ‘[l]a reconnaissance et l’exécution des sentences arbitrales étrangères sont régies par la convention de New York du 10 juin 1958 pour la reconnaissance et l’exécution des sentences arbitrales étrangères.’ 87 REINER A. (note 13), p. 902. 88 BESSON S. (note 9), p. 353, refers to the case of the possible recognition in the Netherlands under Art. 1076 § 1 of the Code of Civil Procedure of an interim award that incorporates provisional measures rendered in France, or vice versa of the recognition in France under Art. 1498 et seq. of the Nouveau Code de Procédure Civile of an interim measure ordered in the Netherlands. In a doubting sense, see BERGER K.P. (note 3), p. 346. 89 LAUDISA L., ‘Arbitrato internazionale e tutela cautelare’, in: Riv. arb., p. 473: ‘le Convenzioni internazionali in materia di arbitrato non prendono in considerazione questo problema e pertanto non contengono norme che permettono di garantire il riconoscimento e l’esecuzione di misure cautelari disposte da un arbitro estero.’ 90 The few instruments which expressly contemplate interim measures exclude them from their scope: see the Bilateral Conventions between Italy and Switzerland (Art. 9) and between Belgium and Switzerland (Art. 1 § 2), which expressly exclude the exequatur of arbitral decisions ordering attachments and analogous measures. 86

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Andrea Carlevaris B.

The Applicability of the New York Convention to the Recognition of Foreign Interim Measures

1.

The Thesis in Favour

The question of the applicability of the New York Convention to foreign interim orders has given rise to wide theoretical debate. The limited effectiveness of the other available instruments referred to above renders this question all the more relevant.91 The Convention notoriously contains neither a provision specifically dealing with the recognition and enforcement of foreign provisional measures nor a definition of the notion of ‘arbitral award’ (‘sentence arbitrale’) that would allow a precise definition of its ratione materiae scope.92 The debate concerning the notion of award under the Convention is extremely complex and cannot be examined in a detailed manner in the context of the present paper.93 Irrespective of the methodological approach chosen, interim measures can prima facie hardly be qualified as awards, due to their provisional and instable character. However, due to the variety of the arbitral practice, this question

91 For a summary of the debate, see, among others, BESSON S. (note 9), p. 329 et seq.; CRAIG W.L./PARK W.W./PAULSSON J. (note 12), p. 465 et seq.; LAMM C.B./SPOORENBERG F., ‘The Enforcement of Foreign Arbitral Awards under the New York Convention, Recent Developments’, in: Stockholm Arbitration Report 2001, n. 2, p. 1 et seq. 92 The only reference to the notion of award is aimed at including in the scope of the Convention awards rendered in the framework of institutional arbitrations and is therefore irrelevant for our present purposes (see Art. I § 2 of the Convention); see BERNARDINI P., ‘Sentenze arbitrali e Convenzione di New York’, in: Rivista di diritto processuale 2006, p. 89; CARLEVARIS A., ‘La qualificazione delle decisioni arbitrali’, in: Riv. arb. 2002, p. 470 et seq. 93 Some commentators are of the opinion that this notion should be construed by reference to a specific legal order (according to the different opinions, this might be the law applicable to the arbitral proceedings, the law of the place of arbitration, or the law of the place of enforcement). Others advocate the need for an autonomous and unitary notion to be inferred from the text of the Convention. For an analysis of the different positions, see BESSON S. (note 9), p. 326 et seq.; VAN DEN BERG A.J., The New York Arbitration Convention of 1958, The Hague 1981, p. 44 et seq. (for a unitary notion to be inferred from the comparison of different legal orders); for an evolutive notion, see LALIVE P., ‘Assurer l’exécution des sentences arbitrales’, in: ICC (ed.), 60 ans après, Regard sur l’avenir, Paris 1991, p. 341: ‘La clé du problème doit être trouvée dans les besoins du commerce international d’aujourd’hui, tels que les révèle la pratique: elle n’est pas dans le texte, du reste muet, d’une convention international rédigée il y a un quart de siècle, et encore moins dans les définitions, les techniques et les concepts particuliers aux divers droits internes. S’il est un domaine où se justifie ce que Rabel appelait la qualification autonome en droit international privé, fondée sur le droit comparé, c’est bien celui de l’arbitrage international, où s’élabore aujourd’hui un véritable droit international privé matériel transnational voire universel.’ See also BRIGUGLIO A. (note 6), p. 78 et seq.; CARLEVARIS A. (note 92), p. 469 et seq.

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Enforcement of Interim Measures in International Arbitration deserves a more in-depth analysis on the basis of both the Convention’s specific provisions and its overall structure. Despite the opinion expressed by several authors,94 the form in which an arbitrator adopts an interim measure should be considered irrelevant for the purpose of determining whether it is capable of enforcement under the Convention. A court in which recourse is sought for the enforcement of a measure would, in fact, be free to characterise the measure as it deems appropriate, regardless of the form chosen by the arbitrator.95 Furthermore, it is not open to the parties to influence the enforceability of the order by jointly requesting that it be issued in the form of an award, or by seeking recourse in rules of arbitration that allow the issuance of a measure in such form.96 The applicability of the Convention is therefore independent of the form of the order. The theories in favour of the applicability of the New York Convention to interim measures are generally aimed at ensuring that measures be fully effective and circulate in the jurisdictions of all contracting States.97 Some commentators also rely on more specific arguments and theories, such as the ‘contractual basis’ of interim measures, which would allow characterising interim measures as decisions relating to an aspect of the contractual relationship covered by the arbitration agreement.98 Yet others highlight the final nature of provisional measures in respect of their object, although only for the limited duration of the arbitral proceedings, which would lead to their assimilation to awards, albeit sui generis.99 See KOJOVIC T. (note 4), p. 524 et seq. The enforceability of foreign interim measures adopted in the form of an award on the basis of the domestic legislation or of the New York Convention has been recognised also in jurisdictions which provide that the arbitrators have no power to order interim measures, such as Italy: see TOMMASEO F. (note 4), p. 14 et seq.; BERNARDINI P., ‘Arbitrato internazionale e misure cautelari’, in: Riv. arb. 1993, pp. 24-25. 95 KARRER P. (note 9), p. 108: ‘Calling an interim measure an award will not make it one for the purposes of the New York Convention.’ Contra, for the decisiveness of the choice of the arbitrators, if not contested by the parties, see, in France, Paris Court of Appeals, 7 October 2004 (note 28). 96 See CARLEVARIS A. (note 92), p. 469 et seq. (and arbitral practice and case law mentioned therein). 97 See, for example, the statement of VEEDER V.V., mentioned in KOJOVIĆ T. (note 4), p. 532: ‘If an award can be enforced under the New York Convention, then why not an interim order made by the same arbitral tribunal for the sole purpose of ensuring that its award is not ultimately rendered nugatory by the other party ? It defies logic and practical common sense’; YESILIRMAK A. (note 3), p. 265; for an estensive interpretation based on the spirit of the Convention, see DE BOISSÉSON M. (note 21), p. 750. 98 SCHLOSSER P., Das Recht der internationalen privaten Schiedsgerichtsbarkeit, Tübingen 1989, p. 566 et seq.; ID., ‘Einstweiliger Rechtsschutz durch staatliche Gerichte in Dienste der Schiedsgerichtsbarkeit’, in: Zeitschrift für Zivil Prozess 1986, p. 253. 99 VAN DEN BERG A.J., ‘The 1958 New York Arbitration Convention Revisited’, in: ASA Special Series No. 15, Arbitral Tribunals or State Courts: Who Must Defer to Whom ?, p. 141 et seq., (esp. p. 143); see also REINER A. (note 13), p. 899 et seq.: ‘Le fait que de telles décisions soient limitées dans le temps n’est pas incompatible avec la qualification de 94

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Andrea Carlevaris Under both of these theories, which present several common aspects, interim orders are ‘final’ even though their effectiveness is dependent on either the intervention of a subsequent decision on the merits or the expiration of the time limit provided for its effectiveness (which often corresponds to the duration of the arbitral proceedings). In both cases, the consequence of the final nature of the order would be its enforceability and the applicability of the legal regime established by the New York Convention. These theories have mostly been developed by commentators, but are also reflected in certain judicial decisions in which interim orders have been put on the same footing as arbitral awards. These decisions did not directly involve the New York Convention, but seem to imply its applicability to provisional measures.100

2.

The RCI v. Bolwell Case

In a widely known and thoroughly motivated ruling in the RCI v. Bolwell case101 (which is also one of the few reported cases on this topic), the Australian Supreme

‘sentence’ (au sens de la Convention de New York) … Il s’agirait alors d’une Sentence au sens de la Convention de New York, avec toutes les conséquences quant à son caractère exécutoire’; according to this author, the New York Convention could apply to ‘[u]ne décision provisoire arbitrale prise sur un fondement exclusivement contractuel après une procédure exhaustive, c’est-à-dire non-sommaire, c’est-à-dire qui n’est pas révisable sur la base de faits antérieurs (‘nova reperta’)’; KOJOVIC T. (note 4), p. 522; POZZI V. (note 2), pp. 3940. The nature of award has been recognised to ‘mesures des protection’ whose validity is limited to the duration of the proceedings by BESSON S. (note 9), p. 347, who, however, is of the opinion that ‘mesures provisoires’ are instead excluded from the scope of the Convention; see also POUDRET J.-F./BESSON S. (note 13), pp. 542-543, who distinguish awards on the parties’ ‘temporary rights,’ which are final and irrevocable, although they have a limited duration, and real interim measures. 100 See Sperry International Trade, Inc. v. The Government of Israel, 689 F. 2d 301 nd (2 Cir. 1982), which stressed the ‘finality’ of the order with respect to the duration of the procedure; Southern Seas Navigation Limited of Monrovia v. Petroleos Mexicanos of Mexico City, 606 F. Supp. 692 (S.D.N.Y 1985), reproduced in: Y. Comm. Arb. 1986, p. 209 et seq.; according to this ruling, which emphasised the severability of the object of the order from the object of the merits, an ‘interim award’ on ‘preliminary injunctive relief’ would be enforceable since ‘such an award is not ‘interim’ in the sense of being an ‘intermediate’ step toward a further end. Rather, it is an end in itself, for its very purpose is to clarify the parties’ respective rights in the ‘interim’ period pending a final decision on the merits.’ See BESSON S. (note 9), p. 348, for the observation that, although such ruling was not based on the New York Convention, ‘[l]’application de la Convention pouvait également être envisagée.’ 101 Supreme Court of Queensland, Resort Condominiums International, Inc. v. Ray Bolwell and Resort Condominiums (Australasia) Pty. Ltd., 29 October 1993, in: Y. Comm. Arb. 1995, p. 628 et seq. For an in-depth analysis, see PRYLES M., ‘Interlocutory Orders and Convention Awards: The Case of Resort Condominiums v. Bolwell’, in: Arb. Int. 1994, p. 385 et seq.; KOJOVIĆ T. (note 4), p. 526; BESSON S. (note 9), p. 340; BERNARDINI P. (note

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Enforcement of Interim Measures in International Arbitration Court of Queensland resolutely denied that the New York Convention is applicable to interim orders. The Court was requested to examine whether a decision labeled ‘Interim Arbitration Order and Award’ made by an arbitrator to protect the contractual rights of a party ‘until such time as the arbitrator enters a final award in this matter,’102 was capable of recognition and enforcement in Australia under the Convention. It separately examined the questions of the final nature of the order and its characterisation as an ‘award,’ on one hand and, on the other hand, the applicability of the New York Convention. On the first point, the Supreme Court found that the injunctions contained in the order were ‘liable to be rescinded, suspended, varied, or re-opened by the tribunal which pronounced them,’ and concluded that its nature was interlocutory rather than final.103 On the second point, the analysis was conducted in light of the regime of the Convention, and it attached decisive relevance to the Convention’s scope, which, under Art. I § 1, is limited to decisions ‘arising out of ‘differences’ between persons.’ According to the Australian judges, the term ‘differences’ would have a meaning only with respect to the merits of the subject matter referred to the arbitrators and would exclude merely procedural issues.104 The notion of award adopted by the Convention would therefore encompass only ‘an award that determines rights, and not an interlocutory or procedural order.’ Furthermore, Art. V § 1e would draw a parallel between the enforceability of interim orders and the possibility of challenging them and would, therefore, exclude from the scope of the Convention all decisions which are not capable of being challenged before State courts.105 In light of the regime of the Convention, the conclusion reached by the Australian court can certainly be shared and, in fact, has been approved by most 96), pp. 95-96; GUNTER P.-Y., ‘Enforcement of Arbitral Awards, Injunctions and Orders’, in: The Arbitration and Dispute Resolution Law Journal 1999, p. 275 et seq. 102 The decision of the sole arbitrator was based on a previous ‘preliminary injunction’ ordered by a U.S. court and regulated several aspects of the relationships between the parties pending an award on the merits. Under the order, the respondents were prevented from entering into agreements of the same type as the one in dispute with other parties in the same territory, from using information obtained on the basis of the contract in dispute for purposes other than those specified in the same contract, and from altering registrations made during the contractual relationship. The parties were further requested to open an escrow account in which the revenues of the activities carried out under the contract should have been deposited for the duration of the proceedings. 103 See Y. Comm. Arb. 1995, p. 630. 104 According to the Court, the term ‘differences’ ‘clearly refers to the subject matter of the dispute, rather than to some interlocutory or procedural direction or order which does not resolve the dispute submitted to arbitration’ (ibidem, p. 638). 105 Ibidem, p. 638: ‘The award referred to in article V(1)(e) of the Convention is a type of award that a foreign court may set aside or suspend viz. an award which has determined some or all of the issues submitted to the arbitrator for determination rather than an interlocutory order of an arbitrator of the kind referred to in this application.’

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Andrea Carlevaris commentators.106 However, its motivation is not as convincing and appears to be based on an incorrect reading of some of the Convention’s provisions.107

3.

The Applicability to Interim Measures of the Grounds for Refusal Provided by the Convention

The circumstances which allow a State court to refuse the exequatur of an arbitral decision under the Convention (Arts. V and VI) should be distinguished from the conditions of its applicability. However, an analysis of those conditions is certainly useful in interpreting the notion of ‘award’ under the Convention and, therefore, its scope. The reference to the notion of ‘difference’ in the Convention (Arts. I, II § 1 and V § 1) does not necessarily exclude its applicability to interim measures. This term could be referring to the particular aspect of the main dispute represented by the ‘difference on the request for interim measures.’108 Alternatively, this term might be referring to the main dispute itself, from which the interim measure undeniably originates. More generally, interim relief cannot be considered as mere administration of procedure, since it often results in measures with a relevant, even if temporary, impact on the parties’ substantive rights.109 The requirement of the award’s binding nature (Art. V § 1e: ‘binding on the parties,’ ‘obligatoire pour les parties’) also does not constitute an insurmontable obstacle. The precise meaning of this requirement is notoriously extremely controversial.110 Contrary to the finding in the RCI case, the New York Convention does 106 See, for example, BERGER K.P. (note 3), pp. 343-345; BESSON S. (note 9), p. 343 et seq.; CRAIG W.L./PARK W.W./PAULSSON J. (note 12), p. 466, observing that the ruling follows a ‘strong logic.’ 107 For a broad interpretation of the notion of arbitral award under the Convention, see the U.S. ruling in the well-known Publicis Communications v. True North Communications, Inc. case, 203 F. 3d 725 (7th Cir. 2000), reproduced in Rev. arb., 2000, p. 657 et seq., obs. PINSOLLE P.; this case did not concern a provisional measure stricto sensu. The Federal Court of Appeals recognised the enforceability under the New York Convention of an ‘order’ on the production of documents under Art. 26 of the UNCITRAL Rules. This ruling stressed the ‘final’ nature of the order and attached decisive importance to its ‘substance and impact’ for the purpose of its characterisation, irrespective of its denomination: ‘The content of a decision – not its nomenclature – determines finality.’ Since the order was considered ‘necessary to prevent the final award from becoming meaningless we decided that the order was final and thus could be immediately challenged.’ On the vast debate to which the ruling has given rise, see, inter alia, GOLDSTEIN M.J., ‘Interpreting the New York Convention: When Should an Interlocutory Arbitral ‘Order’ be Treated as an ‘Award’ ?’, in: Bull. ASA 2000, p. 830 et seq. 108 BESSON S. (note 9), p. 330. 109 On this aspect, see KOJOVIĆ T. (note 4), p. 522. 110 See ROBERT J., ‘La Convention de New York du 10 juin 1958 pour la reconnaissance et l’exécution des sentences arbitrales étrangères’, in: Rev. arb. 1958, p. 70 et seq.;

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Enforcement of Interim Measures in International Arbitration not presuppose the ‘final’ nature of the order, which would undoubtedly exclude decisions that are, by definition, provisional and susceptible to revocation or modification. The abandoning of the previous regime, which required that the arbitral dictum should be ‘final’ and enforceable in the jurisdiction of origin in order for its enforcement to be sought abroad,111 involves an intentional enlargement of the ratione materiae scope of the enforcement regime, which is one of the most relevant consequences of the adoption of the New York Convention.112 The requirement in question is not contradicted by the revocable and modifiable nature of interim orders, since they can be considered ‘binding’ according to their own content and within their temporal limits.113 Arguing otherwise, one would fail to see the difference between a mere power of recommendation and a power to order interim measures. Art. V § 1e and Art. VI prevent enforcement (or provide a suspension of enforcement proceedings) when the award has been annulled or suspended, or if the relevant proceedings are pending before a competent judge. These provisions seem to presuppose, as a condition for enforceability, that the decision to be enforced can be subject to judicial control and may be interpreted so as to exclude the applicability of the Convention to arbitral decisions that cannot be impugned.114 However, that an arbitral interim measure be challenged before State courts, although

BERNINI G., ‘The Enforcement of Foreign Arbitral Awards by National Judiciaries - A Trial of the New York Convention’s Ambit and Workability’, in: SCHULTSZ J.C./VAN DEN BERG A.J. (ed.), The Art of Arbitration, Essays on International Arbitration, Liber Amicorum Pieter Sanders, Deventer 1982, p. 53 et seq.; DESHPANDE V.S., ‘Article V.1(e) of the 1958 New York Convention: A Plea for Harmonious and Purposive Interpretation’, in: J. Int. Arb. 1991, p. 77 et seq.; TOMMASEO F. (note 4), p. 17, esp. note 28. 111 See Art. 1 § 2d of the 1927 Geneva Convention, which provided that to obtain the exequatur of an award, the interested party should have demonstrated that ‘the award has become final in the country where it has been made, in the sense that it will not be considered as such open to opposition, appeal, or pourvoi en cassation (in the countries where such form of procedure exists) or if it is proved that any proceedings for the purpose of contesting the validity of the award are pending.’ 112 This distinction does not exist in jurisdictions in which the domestic exequatur is still a requirement for the decision to become binding on the parties: see BRIGUGLIO A. (note 6), p. 218. 113 The award is binding inter partes on the basis of its contractual foundation; see, for example, Art. 28 § 6 of the ICC Rules: ‘Every award shall be binding on the parties.’ For the observation that under the New York Convention the final nature of the award is not a requirement for its enforcement any longer, see TOMMASEO F. (note 4), p. 17 and footnote 29; DERAINS Y., ‘Expertise technique et référé arbitral’, in: Rev. arb. 1982, p. 239 et seq.; contra, see POUDRET J.-F./BESSON S. (note 13), p. 546: ‘whatever interpretation is given to this term the authors [of the New York Convention] did not envisage that a decision of an arbitrator could be questioned by a subsequent decision, and this is precisely the essential characteristic of provisional measures.’ 114 See, for example, BESSON S. (note 9), p. 341.

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Andrea Carlevaris unlikely, cannot be excluded a priori.115 Moreover, even assuming that interim measures cannot be challenged before State courts, only the above provisions of the Convention would become inapplicable, not the Convention regime as a whole. The consequence would be that such orders would become more easily enforceable since the particular grounds for refusing enforcement under Art. V § 1e and Art. VI would be inoperable. The applicability of the Convention has been questioned also with reference to Art. V § 2b, which allows non-conformity with the public policy of the State in which the enforcement is sought as a ground for refusing enforcement that can be raised by the judge ex officio. The lack of conformity with public policy might depend on the content of the order, on its type (possibly unknown to the legal order in which enforcement is sought), or on the general attitude of the jurisdiction with regard to arbitral interim relief.116 However, conformity with public policy can only be assessed on a case-by-case basis, which per se excludes the Convention from being declared inapplicabile in this respect. Procedural public policy deserves specific attention and might exclude the applicability of the Convention to summary proceedings when due process is not strictly followed, as is often the case with interim measures. The guarantees of due process applicable in ordinary proceedings on the merits are subject to adjustments in proceedings leading to the making of interim measures, in which temporary and limited restrictions of the right of defence are admissible to ensure the rapidity of the procedure and the effectiveness of the measure. However, a specific bar to the application of the New York Convention to ex parte interim measures is found in Art. V § 1b of the Convention, which allows the State courts to refuse recognition of awards issued against parties that were not given proper notice of the appointment of the arbitrators or of the arbitral proceedings, or were ‘otherwise unable to present [their] case.’ The clarity of this provision does not allow its interpreters to either apply different standards or distinguish proceedings on the merits and proceedings leading to the adoption of interim measures.117 In any event, this obstacle 115 For the enforceability of only provisional measures that are subject to a limited judicial control in the country of origin, see BESSON S. (note 9), pp. 343-344; BERGER K.P. (note 3), p. 589. 116 Some commentators are of the opinion that arbitral interim measures are in any event contrary to the public policy of jurisdictions that prohibit arbitrators from ordering provisional measures. In this respect, one could think of the possible non-conformity with Italian public policy of the recognition of arbitral interim measures under Art. 818 of the Italian Code of Civil Procedure. The prohibition would thus prevent not only the making of the orders in arbitrations having their seat in the State but also the enforcement of foreign interim measures, on the assumption that the prohibition is based on an intrinsic lack of imperium of the arbitrators and constitutes a fundamental principle of these legal systems. For an illustration of, and a critical comment on, this theory, see BARLETTA A. (note 35), p. 1197. 117 KOJOVIĆ T. (note 4), p. 529; POZZI V. (note 2), p. 41. An exception to the principle of non-enforceability of measures ordered inaudita altera parte is provided by German law. Sect. 1063 § 3 ZPO provides for a mechanism of immediate enforcement of arbitral

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Enforcement of Interim Measures in International Arbitration prevents the application of the Convention to ex parte measures, which are extremely rare in practice, but not to arbitral interim measures in general.

4.

The Incompatibility of Interim Relief with the Convention

While an analysis of the specific provisions of the Convention does not lead to the exclusion of its application a priori, a systematic interpretation of the whole text reveals its inherent incompatibility with interim relief. When the New York Convention was adopted, arbitral interim relief was extremely rare in practice and was not regulated by domestic legislations. It is therefore not surprising that its drafters failed to consider the specific features of interim relief for the purpose of enforcement.118 The specific objects of the Convention are, on one hand, the recognition of the arbitration agreement, and, on the other hand, the recognition of arbitral awards made pursuant thereto. It would be inconsistent to consider interim measures excluded from the scope of the Convention with respect to the former, yet covered by it with respect to the latter.119 Admitting that interim measures can be recognised and enforced on the basis of the Convention would necessarily lead to admitting that arbitrators have exclusive jurisdiction to make provisional measures under Art. II § 3 of the Convention, which, on the contrary, is almost universally denied. Considering arbitrators’ power to terminate or modify provisional orders, the Convention should provide for adequate mechanisms for the corresponding

awards and orders made without giving proper notice to the other party; see LEW J.D.M./MISTELIS L.A./KRÖLL S.M. (note 3), p. 615. Non-enforceability of judicial interim measures ordered inaudita altera parte has been affirmed on the basis of the Brussels Convention by the European Court of Justice in the Denilauler case (ECJ, 21.5.1980, Denilauler, in: ECR 1980, p. 1553 et seq.) and subsequently confirmed by the Court on several occasions (ECJ, 17.11.1998, Van Uden, in: ECR 1998, p. 7122 et seq.; ECJ, 27.5.1999, Mietz, in: ECR 1999, p. 2300 et seq.). According to VAN HOUTTE H., ‘Ten Reasons against a Proposal for Ex Parte Interim Measures of Protection in Arbitration’, in: Arb. Int. 2004, pp. 90-91, enforcement of ex parte interim measures in international arbitration would be in any case excluded pursuant to the Denilauler ruling, even if provided by an amendment of the UNCITRAL Model Law, in a jurisdiction in which either the Brussels Convention (now Regulation 44/01) or the Lugano Convention are applicable: ‘Provisions from the Model Law that provide for such enforcement would thus simply be discarded and not become incorporated into domestic law.’ 118 See ALI-BAHMAEI M., L’intervention du juge étatique des mesures provisoires et conservatoires en présence d’une convention d’arbitrage – Droits français, anglais et suisse, Paris 2002, p. 249. 119 POUDRET J.-F./BESSON S. (note 13), p. 546; BESSON S. (note 9), pp. 346; KNOEPFLER F. (note 13), pp. 312 and 328; MERKT O. (note 56), p. 192; RAESCHKE-KESSLER H./BERGER K.P. (note 74), p. 144.

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Andrea Carlevaris revocation or modification of the exequatur, but no such mechanism presently exists in the Convention.120 Finally, an analysis of the requirements for the recognition of awards under the Convention leads to the conclusion that it is inadequate to regulate the enforcement of interim measures, as also recognised by some of the authors who are in favour of its applicability.121 The grounds for refusal set out in Arts. V and VI were clearly intended to regulate the recognition of final decisions on the merits, not interim measures, which would require the elaboration of a specific regime. This is particularly true with respect to Art. V § 1a, which allows the courts of the State in which recognition is sought to refuse the exequatur if the arbitration agreement is invalid, thus implying a previous and positive assessment of the arbitrator’s jurisdiction on the merits. However, due to urgency, which is typical of provisional relief, interim measures are frequently ordered before a full assessment of the tribunal’s jurisdiction. A suitable mechanism for recognising provisional measures should therefore take this circumstance into account, while the New York Convention does not allow any flexibility in this respect.122 Another ground for refusing enforcement under the Convention that is incompatible with the recognition and enforcement of provisional measures is the lack of conformity with the public policy of the State in which the enforcement is sought (Art. V § 2b). Public policy is a useful standard for the purpose of challenging the effectiveness of decisions on the merits when they are in conflict with fundamental principles of the legal order of the State in which recognition is sought. The same concept does not make sense with respect to provisional measures, which largely depend on a comparative assessment of the interests of the parties involved and are generally neutral with regard to public policy.123

BARLETTA A. (note 35), p. 1205. See, for example, KOJOVIĆ T. (note 4), p. 528: ‘Whereas, in many cases, the application of the New York Convention would enhance the effectiveness of arbitral awards on provisional relief, it would not solve all the problems related to the coercive enforcement of provisional measures. It must be borne in mind that the Convention was drafted with the intention of facilitating recognition and enforcement of awards on the merits. Some of its solutions, therefore, do not perfectly respond to the specific issues arising in the context of provisional relief.’ 122 BESSON S. (note 9), p. 345; KOJOVIĆ T. (note 4), pp. 528-529, who seems to accept that the exequatur of the interim order can be granted if the court ascertain the validity of the arbitration agreement on a prima facie basis. 123 BESSON S. (note 9), pp. 345-346. 120 121

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VI. The New Text of the UNCITRAL Model Law on the Recognition and Enforcement of Arbitral Interim Measures A.

General Aspects

The amendment of the Model Law achieved in 2006 resulted in the addition of two new provisions (Arts. 17H and 17I) specifically devoted to the recognition of arbitral provisional measures, which was not dealt with by the text in its original version.124 The lack of a satisfactory and harmonized enforcement regime makes this development particularly interesting.125 The need for an amendment of the uniform text in this respect, which the Commission found of crucial importance in order to ensure its effectiveness,126 is also demonstrated by the fact that no less than 22 States among those which have adopted the Model Law have integrated and amended it to provide for specific enforcement mechanisms. The decision to amend the Model Law prevailed over alternative projects which had previously been proposed, such as an amendment of the New York Convention aimed to extend its scope to also cover interim measures, or the adoption of a separate and complementary protocol.127 Art. 17H is drawn up on the basis of the enforcement regime of arbitral awards (Arts. 35 and 36).128 This approach, which follows the exequatur model, eventually prevailed over an alternative proposal, which provided for a succinct

See the approved text of Arts. 17H and 17I (still provisionally identified as Arts. 17-novies and 17-decies) in UN Doc. A/CN.9/605 and A/CN.9/WG.II/WP.141. On 7 July 2006 the Commission approved the new text of the Model Law incorporating the modifications. During the preparatory works of the Model Law the following succinct provision on the enforcement of interim measures, based on the court assistance model, had been proposed but was eventually not adopted: ‘If enforcement of any such interim measure becomes necessary, the arbitral tribunal may request [a competent court] [the court specified in article V] to render executory assistance’; see UN Doc. A/CN.9/WG.II/WP.40, Art. XIV (Art. 17 of the final text). For a comment of this draft and its preparatory works, see also BINDER P. (note 42), pp. 153-154 125 For an analysis of the preparatory works of the new text, see DONOVAN D.F. (note 70), p. 82 et seq. 126 See UN Doc. A/CN.9/460, for the observation that an amendment of this aspect was ‘desirable and feasible.’ 127 For the Working Group’s long hesitancy in determining the most appropriate instrument to achieve the reform, see KOJOVIĆ T. (note 4), p. 529. 128 Art. 17H § 1: ‘An interim measure of protection issued by an arbitral tribunal shall be recognized as binding and, unless otherwise provided by the arbitral tribunal, enforced upon application to the competent court, irrespective of the country in which it was issued, subject to the provisions of Article 17I.’ 124

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Andrea Carlevaris text adopting the court support mechanism.129 In deciding to follow this model, the Working Group that was in charge of the reform took into account the ‘distinctive temporary character’ of interim relief,130 by introducing specific grounds for refusing enforcement (in addition to those applicable to arbitral awards)131 and by recognising the discretion of the court in assessing those requirements. In this latter respect, the Working Group has, on the one hand, provided for the court’s duty to grant the exequatur unless any of the grounds for refusal occur (Art. 17H § 1: ‘An interim measure of protection … shall be recognized …’; Art. 17I § 1: ‘Recognition or enforcement of an interim measure may be refused only …’), and, on the other hand, recognised the limited discretion of the court with respect to the actual impact of those requirements in each specific case. This would allow the court to grant enforcement unless the refusal is absolutely necessary to pursue the objective of the new legislative regime.132 Just like most legal systems allowing the exequatur of interim orders, the new text recognizes the parties’ right to seek enforcement of the order in several jurisdictions simultaneously, and provides that an application made in one jurisdiction is not a bar to seeking enforcement in other States.133 Despite the opposite doctrinal opinion, the text also provides that the form of the measure is irrelevant for the purpose of its enforcement,134 and recognises that the new regime applies to both arbitral awards and orders. Among the most innovative aspects of the new provisions, it is worth mentioning their extension to all provisional measures, regardless of the place of origin (Art. 17H § 1: ‘irrespective of the country in which it was issued’), which is intended to overcome the difficulties that are presently being experienced with regard to the transnational circulation of measures. The irrelevance of the place of origin of the order can be interpreted as to allow not only the applicability of the new regime to both domestic and foreign proceedings but also the enforcement of orders which have not been declared enforceable in the jurisdiction of the place of arbitration.135 129 UN Doc. A/CN.9/WG.II/WP.110, § 55: ‘The court may, upon application by the interested party, order enforcement of an interim measure of protection referred to in Article 17, irrespective of the country in which it was made.’ For a comment on this variant (‘Variant 2’), see KOJOVIĆ T. (note 4), p. 530. 130 This expression is used in UN Doc. A/CN.9/547, § 27. 131 UN Doc. A/CN.9/524, § 20; UN Doc. A/CN.9/485, § 80. See also YESILIRMAK A. (note 3), p. 266. 132 See YESILIRMAK A. (note 3), p. 266. All references to the court’s discretion in the assessment of the ‘disproportionate’ nature of the order, which were foreseen in previous versions, have been deleted in the final text: see UN Doc. A/CN.9/468, § 70 et seq. 133 UN Doc. A/CN.9/524, § 21. For different proposals, see UN Doc. A/CN.9 /WG.II/WP.110, § 68. 134 According to SANDERS P. (note 37), pp. 275-276, had the Model Law provided that interim measures must be ordered in the form of awards in conformity with the common practice of arbitration rules, ‘this would have greatly contributed to harmonization.’ 135 See KOJOVIĆ T. (note 4), p. 530.

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Enforcement of Interim Measures in International Arbitration Art. 17H §§ 2 and 3 deals with procedural aspects. The former provision establishes a coordination between the arbitral proceedings and the enforcement proceedings by creating a duty on the party which has obtained the exequatur of the order to promptly inform the judge of its ‘termination, suspension or modification’ by the arbitrator.136 The latter empowers the State court to order the party seeking enforcement to provide appropriate security unless the arbitral tribunal has already made a similar determination or whenever it is ‘necessary to protect the rights of third parties.’137

B.

The Grounds for Refusal

The amended text provides for the mandatory nature of the specific grounds for refusing enforcement of the exequatur and does not allow the judges any discretion in elaborating additional requirements. It distinguishes grounds which have to be raised by a party (Art. 17I § 1a) and grounds which can be raised by the court on its own motion (Art. 17I § 1b). While some of these grounds for refusal correspond to those provided by the same Model Law and the New York Convention with respect to awards (violation of due process, invalidity of the arbitration agreement and contrast with public policy), others reflect the peculiarities of interim relief (termination, suspension, or modification of the measure by the arbitral tribunal or by a competent jurisdiction and incompatibility of the requested form of relief with the procedural law of the State in which enforcement is sought). Grounds which have to be raised by the party and are common to arbitral awards are defined by reference to the grounds for refusing the enforcement of awards under Art. 36 § 1a of the Model Law, with the only exclusion being the non-binding nature of the arbitral decision (Art. 36 § 1a-v).138 The approach of the Working Group in this respect is not free from criticism, since some of those requirements (for instance, the connection of the order with the arbitration agreement and the regular constitution of the arbitral tribunal) seem incompatible with the summary assessment leading to the granting of interim orders. Others, such as the validity of the arbitration agreement and the respect of due process, should be adapted to the specific characteristics of interim relief. Subordinating enforcement Art. 17H § 2: ‘The party who is seeking or has obtained recognition or enforcement of an interim measure shall promptly inform the court of any termination, suspension or modification of that interim measure.’ See BARLETTA A. (note 35), p. 1209, footnote 46. 137 Art. 17H § 3: ‘The court of the State where recognition or enforcement is sought may, if it considers it proper, order the requesting party to provide appropriate security if the arbitral tribunal has not already made a determination with respect to security or where such a decision is necessary to protect the rights of third parties.’ 138 Art. 17I § 1: ‘Recognition or enforcement of an interim measure may be refused only: (a) At the request of the party against whom it is invoked if the court is satisfied that: (i) Such refusal is warranted on the grounds set forth in article 36, paragraphs (1) (a)(i), (ii), (iii) or (iv).’ 136

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Andrea Carlevaris to the full assessment of the validity of the arbitration agreement entails the risk of encouraging the raising of dilatory objections by the party against which the interim measure is sought.139 It would have been preferable to make enforcement dependent on a prima facie assessment of the tribunal’s jurisdiction.140 The grounds for refusal set out in Art. 17I § 1a-ii and a-iii concerning noncompliance with the order to provide security and the termination, suspension, or modification of the measure by the arbitral tribunal, respectively, are peculiar to interim relief and do not correspond to any of the grounds for refusing enforcement of awards.141 The requirements set out in Art. 17I § 1b can be raised by the court on its own motion.142 The first hypothesis contemplated by this provision seems inspired by Sect. 1041 § 2 ZPO and allows the court to refuse enforcement if it is incompatible with its powers, or to ‘reformulate’ the interim measure to the extent necessary to adapt it to its procedural law, without, however, modifying its substance. These powers of the judges are certainly useful in the context of a court support mechanism, such as that provided by German law, but are much less comprehensible in a system following an exequatur model, in which the role of the court is limited to declaring the arbitral order enforceable. No particular problem is raised by the other cases of ex officio denial of the exequatur referred to by this provision, which correspond to those contemplated by Art. 36 § 1b-i and b-ii concerning non-arbitrability and non-conformity with public policy, respectively. Finally, it is worth mentioning Art. 17I § 2, which limits the effects of the court’s assessment to the recognition and enforcement of the order. This provision confirms that the denial of exequatur has no impact on the validity or on the effec-

KOJOVIĆ T. (note 4), p. 531. This defect is only partially remedied by the language adopted in the provision, which is intended to allow the denial of enforcement only in the exceptional circumstances where it is deemed necessary in the light of the interests protected by the provision at issue (‘such refusal is warranted …’). The court may declare the measure enforceable despite the lack of any of those requirements if, in the specific case, the denial of enforcement is not inevitable. For the debate within the Working Group in this respect, see UN Doc. A/CN.9/573, § 74. 141 Art. 17I § 1a: ‘(ii) The arbitral tribunal’s decision with respect to the provision of security in connection with the interim measure issued by the arbitral tribunal has not been complied with; or (iii) The interim measure has been terminated or suspended by the arbitral tribunal or, where so empowered, by the court of the State in which the arbitration takes place or under the law of which that interim measure was granted.’ 142 Art. 17I § 1b: ‘(i) The interim measure is incompatible with the powers conferred upon the court unless the court decides to reformulate the interim measure to the extent necessary to adapt it to its own powers and procedures for the purposes of enforcing that interim measure and without modifying its substance; or (ii) Any of the grounds set forth in article 36(1)(b)(i) or (ii), apply to the recognition and enforcement of the interim measure.’ 139 140

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Enforcement of Interim Measures in International Arbitration tiveness of the measure in the arbitral proceedings and prohibits any review of its substance by the court.143

VII. Conclusions: The Need for an International Uniform Instrument The almost universal recognition of arbitrators’ power to adopt interim measures is not sufficient to ensure their real effectiveness.144 The abstract recognition of such power might be seen as a ‘paper tiger’ unless satisfactory enforcement mechanisms are provided.145 The opinions of commentators concur on the need to elaborate an adequate regime, but no agreement exists as to the best instrument to obtain harmonization. Some authors support the adoption of an international convention146 while others are in favour of harmonization among the various legal systems, to be fostered through soft law instruments such as the Model Law.147 Among the former, differences of opinion also exist between the authors who advocate a revision of the New York Convention and the supporters of a separate protocol.148 A minority position is in favour of the direct applicability of the Convention in its present form. Until the recent amendment of the Model Law, an analogous difference of views divided the supporters of a flexible legislative model, among which a majorArt. 17I § 2: ‘Any determination made by the court on any ground in paragraph (1) of this article shall be effective only for the purposes of the application to recognize and enforce the interim measure. The court where recognition or enforcement is sought shall not, in making that determination, undertake a review of the substance of the interim measure.’ 144 See KOJOVIĆ T (note 4), p. 53; SANDERS P. (note 37), p. 275; REINER A. (note 13), p. 903. 145 BROGGINI G., ‘I provvedimenti cautelari nell’arbitrato internazionale: analogie e differenze delle soluzioni italiana e svizzera’, in: Riv. arb. 1991, p. 496; SANDROCK O./NÖCKER T., ‘Einstweilige Maßnahmen internationaler Schiedsgerichte: bloße Papiertiger ?’, in: Jahrbuch der Schiedsgerichtsbarkeit 1987, p. 74. 146 LEW J.D.M./MISTELIS L.A./KRÖLL S.M. (note 3), p. 614: ‘the real problem is the absence of an international convention to regulate the enforcement of interim or conservatory measures ordered by a tribunal which has its seat in another country.’ 147 SANDERS P., ‘The Making of the Convention’, in: UNITED NATIONS (ed.), Enforcing Arbitration Awards under the New York Convention – Experience and Prospects, New York 1999, pp. 3-4; VAN DEN BERG A.J., ‘Striving for Uniform Interpretation’, ibidem, p. 41 et seq.; POZZI V. (note 2), p. 43. 148 VEEDER V.V., ‘Provisional and Conservatory Measures’, in: UNITED NATIONS (ed.) (note 147), pp. 21-23; WANG W., ‘International Arbitration: The Need for Uniform Measures of Relief’, in: Brooklin Journal of International Law 2003, p. 1059 et seq.; YESILIRMAK A. (note 3), pp. 266-267. Apparently in favour of a revision of the New York Convention, KOJOVIĆ T. (note 4), p. 532, LAUDISA L. (note 89), pp. 473-474. 143

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Andrea Carlevaris ity underscored the need for a modification of the text, while others were in favour of an extension of the existing provisions concerning the enforcement of awards to interim measures.149 The lack of harmony among the various legal orders and the absence of an international instrument comparable to what the New York Convention is for arbitral awards render initiatives such as the text elaborated by UNCITRAL extremely useful and interesting. However, apart from the doubts as to the specific regime adopted, which have been highlighted above, the nature of this instrument seems inadequate to achieve the desired level or harmonization. First of all, this solution is not binding on States, which remain entirely free to disregard the uniform text. Furthermore, the reformed text is likely to be adopted in jurisdictions that have already adopted the Model Law, but will probably not be compatible with jurisdictions whose arbitration legislation follows different approaches. Finally, the newly adopted provisions are not even capable of immediate implementation in the legislation of all ‘Model Law countries,’ since many of them have already introduced modifications and amendments to the provisions on the recognition of interim measures following an approach very different from that chosen by the UNCITRAL Working Group and adopted by the Commission.150 The adoption of a new international binding instrument therefore seems the most adequate manner for achieving real harmonization. However, a revision of the New York Convention, aimed at covering also interim measures, does not seem to be an appropriate solution. First of all, the re-opening of negotiations on the Convention might jeopardize its success by inducing States who disagree with the revision to withdraw their participation from the Convention. Furthermore, a revision would inevitably result in a lengthy and burdensome process, during which no uniformity would be realized between States that have already ratified the revised text and States that have not yet done so.151 Finally, since the Convention was drafted in view of final decisions on the merits and is as such not applicable to interim measures, its extension would inevitably lead to numerous radical modifications and would result in the mere combination of different, non-homogeneous regimes. Therefore, the only viable solution seems to be the adoption of a distinct international instrument, drawn up on the basis of the experience of the New York Convention, but substantially different in its content. Considering the community of function, the regime to be established by the new instrument might be largely inspired by the Convention,152 but should be neutral to the form (award or order) of the interim measure. 149 In favour of an amendment of Art. 35 of the Model Law, BLESSING M., Introduction to Arbitration - Swiss and International Perspectives, Basel 1999, p. 281, footnote 6. 150 See YESILIRMAK A. (note 3), pp. 266-267: ‘[a] Model Law provision is likely to fail the desired harmonization.’ 151 REINER A. (note 13), p. 903. 152 KARRER P. (note 9), p. 108, who is in favour of the adoption of a ‘new additional New York Convention.’

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Enforcement of Interim Measures in International Arbitration The adoption of an instrument formally independent from the New York Convention would allow its scope to be extended to cover, not only foreign interim measures, but also orders made in domestic arbitrations. The principle underlying the new discipline should be a ‘pro-enforcement bias,’153 with a limited number of grounds for refusing enforcement and maximum procedural simplification. Arts. 35 and 36 of the Model Law might constitute, mutatis mutandis, a useful point of reference in this respect.154 Appropriate mechanisms of co-ordination between the arbitral proceedings and the enforcement proceedings should be provided in case the interim measure is terminated or modified by the arbitrators. These may result in a specific ground for refusal, when termination or modification occurs prior to the exequatur, and in the removal of its effects, when termination or modification occur thereafter. The adoption of such an instrument – which, in light of the difficulties experienced during the revision of the UNCITRAL Model Law, will most probably prove problematic – would not jeopardize the success of the Convention and would allow the peculiarity of interim relief to be fully taken into account. It would also represent a spur for jurisdictions in which arbitrators are still prevented from ordering interim relief to overcome this obsolete approach.155 A reasonable and effective mechanism of review by the State courts, such as the system summarily outlined, would strike a balance between respecting the intent of the parties to have the entire dispute decided by the arbitrators, on one hand, and the inevitable safeguard of State courts’ power to control arbitrators’ activity and decisions, on the other.

See YESILIRMAK A. (note 3), p. 267. In favour of limiting the grounds for refusal to non-conformity with public policy and irregular constitution of the arbitral tribunal, see LEW J.D.M./MISTELIS L.A./KRÖLL S.M. (note 3), p. 615. 155 BARLETTA A. (note 35), p. 1212. 153 154

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REGULATING THE JURISDICTION OF COURTS IN INTERNATIONAL LITIGATION: TOWARDS A GLOBAL ANSWER IN CIVIL AND COMMERCIAL MATTERS Laurence USUNIER∗

I.

II.

III.

Ascertaining the Jurisdiction of the Forum Court – The Relationship between the Forum Court and the Dispute A. The Goal: Assigning Reasonable Boundaries to the Jurisdiction of Courts 1. The Necessity of Assigning Reasonable Boundaries to the Jurisdiction of Courts 2. The Ability to Assign Reasonable Boundaries to the Jurisdiction of Courts B. The Means: Identifying the Legitimate Foundations of the Jurisdiction of Courts 1. The Localization of the Dispute in the Forum State 2. The Protection of Interests Deemed Fundamental by the Forum State a) The Protection of the Weaker Party b) The Protection of the Forum State’s Sovereignty Taking into Consideration the Jurisdiction of Foreign Courts – The Relationship between Foreign Courts and the Dispute A. The Forum Court Declining Jurisdiction 1. Declining Jurisdiction to Take into Consideration the Exclusive Jurisdiction of a Foreign Court 2. Declining Jurisdiction to Take into Consideration the Concurrent Jurisdiction of a Foreign Court 3. Declining Jurisdiction Based on Community Law B. The Forum Court Protecting its Jurisdiction Conclusion

The international jurisdiction of courts has traditionally raised less academic interest than choice of law. In France, in particular, a very substantial part of the text ∗ Assistant Professor, University of Luxembourg. This article summarizes the ideas developed in the author’s work La régulation de la compétence juridictionnelle en droit international privé, Etude de droit comparé en matière civile et commerciale, Paris 2006. Abbreviations: AC: Appeal Cases; All ER: All England Law Report; CLR: Commonwealth Law Reports; DLR: Dominion Law Reports; OJ: Official Journal of the European Union; QB: Law Reports, Queen’s Bench Division; US: United States Report; WLR: Weekly Law Reports.

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Laurence Usunier books on private international law are devoted to the long identified and highly refined ‘théorie générale des conflits de lois’, whereas barely a few lines, if any, of the same books are concerned with the theoretical background of jurisdictional issues.1 That shortage of doctrinal attention could be acceptable if the international jurisdiction of courts were defined properly. Unfortunately, this is far from always being the case. For a number of reasons, the choice of forum has a dramatic impact on the outcome of cases in international litigation. The plaintiff’s choice of forum may be extremely inconvenient for the defendant, for instance if the chosen forum is in a remote country. Moreover, the defendant might not speak the language of the forum country and he might know nothing about the legal culture of the forum state. Finally, the choice of forum largely determines which law is applicable to the dispute, since courts solve choice of law problems according to their own choice of law system. All these factors are a strong incentive for forum shopping, as they may induce the plaintiff to bring his action before a court having no connection to the controversy but providing the plaintiff with a higher prospect of success in his action. Consequently, the power to define the jurisdiction of courts over international disputes should always be exercised with extreme care. Turning to the actual practice of States, however, one is bound to acknowledge that this basic caution is not always respected. A number of States continue to grant to their courts jurisdiction over cases having no connection whatsoever to the forum state. In France, for instance, Article 14 of the Civil Code allows French courts to hear any dispute involving a French plaintiff, even if the dispute has no contact with France apart from the nationality of the plaintiff. In common law countries as well, courts still retain jurisdiction over any dispute, even one bearing no relation to the forum, as long as the writ has been served on the defendant while he was physically present in the territory of the forum State.2 The current state of 1 See for instance AUDIT B., Droit international privé, Paris 2006, p. 56 et seq. and p. 285 et seq.; MAYER P./HEUZÉ V., Droit international privé, Paris 2004, p. 59 et seq. and p. 199 et seq.; LOUSSOUARN Y./BOUREL P./DE VAREILLES-SOMMIÈRES P., Droit international privé, Paris 2007, p. 81 et seq. and p. 609 et seq. Comp. BUREAU D./MUIR WATT H., Droit international privé, Paris 2007, p. 73 et seq. (with a general part starting with jurisdiction issues). The same tendency can be observed in common law countries: see BELL A., Forum shopping and venue in transnational litigation, Oxford 2003, pp. 1-2; BRIGGS A., The Conflict of Laws, Oxford 2002, pp. 1-2; NORTH P., ‘Rethinking Jurisdiction and Recognition of Judgments’, in: Current Legal Problems 2002/55, p. 395. The most obvious demonstration might be that many text books on private international law are still entitled ‘The Conflict of Laws’, even though they deal not only with choice law of rules, but also with rules of jurisdiction: see for instance in England COLLINS L. (ed.), Dicey, Morris & Collins on the Conflict of Laws, London 2006; CLARKSON C. M. V./HILL J., The Conflict of Laws, Oxford 2006. Comp. NORTH P. M./FAWCETT J. J., Cheshire and North’s Private International Law, London 1999. For an American example, see BRILMAYER L./GOLDSMITH J., Conflict of Laws, New York 2002. 2 In England, see for instance Maharanee of Baroda v. Wildenstein, [1972] 2 QB 283, [1972] 2 All ER 689. Of course, the doctrine of forum non conveniens (on that doctrine,

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Regulating International Jurisdiction: Towards a Global Answer affairs concerning the regulation of judicial jurisdiction in international litigation is therefore far from entirely satisfactory. States sometimes try to improve that problematical situation by negotiating international conventions setting up uniform rules of jurisdiction. Whenever they do so, however, they face huge difficulties in carrying out the negotiations and reaching a satisfactory compromise. Individual States or groups of States may put up stiff resistance to a given proposal because jurisdictional rules are extremely different from one State to another. Basically, civil law countries favour rigid rules of jurisdiction, compelling the designated court to exercise its jurisdiction over the case, whereas common law countries favour flexible rules of jurisdiction, allowing their courts to decline jurisdiction each time they do not appear to be an appropriate forum for the trial.3 Jurisdictional rules may also rely on different heads of jurisdiction from one country to another. Doing business, for instance, is a basis of jurisdiction known in the United States but not in other countries.4 All these factors, along with others, explain the failure of the negotiations carried out in The Hague for the adoption of a global convention on jurisdiction and foreign judgments in civil and commercial matters.5 see BELL A. (note 1); KARAYANNI M., Forum non conveniens in the Modern Age, Ardsley, New York 2004; CHALAS C., L’exercice discrétionnaire de la compétence juridictionnelle en droit international privé, Aix-en-Provence 2000; NUYTS A., L’exception de forum non conveniens, Étude de droit international privé comparé, Bruxelles, Paris 2003) may prevent the unfair outcomes to which such a basis of jurisdiction may lead. But transient jurisdiction remains the ‘normal’ way to give jurisdiction to a common law court, especially in England, where it is the only basis conferring on English courts jurisdiction ‘as of right’ [see COLLINS L. (note 1), p. 348] – without the plaintiff having to ask the court for permission to serve the writ on the defendant. 3 VON MEHREN A. T., ‘Theory and Practice of Adjudicatory Authority in Private International Law: A Comparative Study of the Doctrine, Policies and Practices of Common and Civil Law Systems’, in: Recueil des Cours 2002, t. 295, p. 9 et seq., esp. pp. 306-307. 4 BUCHER A., ‘Vers une convention mondiale sur la compétence et les jugements étrangers’, in: La Semaine Judiciaire 2000, n° 2, p. 77 et seq., esp. pp. 101-102. 5 On these negotiations, see for instance VON MEHREN A. T., ‘La rédaction d’une convention universellement acceptable sur la compétence judiciaire internationale et les effets des jugements étrangers: Le projet de la Conférence de La Haye peut-il aboutir ?’, in: Rev. crit. dr. int. pr. 2001, p. 85 et seq. The failure of these negotiations was not complete, since a convention was finally entered into in June 2005. But the scope of that convention is considerably narrower than that of the initial project, since the convention eventually entered into deals only with exclusive choice of court agreements incorporated in B to B contracts [see DOGAUCHI M./HARTLEY T. C., Convention of 30 June 2005 on Choice of Court Agreements, Explanatory Report, Twentieth Session of the Hague Conference on Private International Law, p. 16 (available on the Internet: <www.hcch.net>], whereas the first proposal purported to cover all jurisdictional issues arising in civil and commercial matters [see Nygh P./Pocar F., Report on the preliminary draft Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters, Prel. Doc. No 11 of August 2000 (available on the Internet: <www.hcch.net>].

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Laurence Usunier The question raised by all these observations is therefore a fairly simple one: is it possible to develop a universal theory of jurisdiction that would, at the same time, assign proper limits to the jurisdiction of courts, enhance dialogue between States and fill the theoretical deficiencies of the law of jurisdiction? Answering this question implies taking a comparative approach to jurisdiction by studying both common law and civil law countries’ rules of jurisdiction. This article adopts such a comparative approach to jurisdiction, focusing especially on the jurisdiction of English and French courts. At first glance, the choice of these two systems may not appear to be the most relevant for the construction of a universal theory of jurisdiction. In the eyes of a continental lawyer, especially, it may seem that, since France and the United Kingdom both belong to the European Community, they already share a common system of jurisdictional rules, namely the system set up in the Brussels Convention 19686, recently converted into Regulation 44/2001.7 Yet, describing the rules of jurisdiction laid down in these acts as a compromise between the common law and civil law traditions would be a fundamental misrepresentation of these rules. These rules are indeed highly typical of civil law countries’ rules of jurisdiction. In 1968, that was only natural since the Brussels Convention was originally made among the founding States of the Community, all of which are civil law countries (Belgium, France, Germany, Italy, Luxembourg and the Netherlands). When Denmark, Ireland and the United Kingdom became members of the European Communities and adhered to the Brussels Convention, there was a real opportunity to adapt the Brussels Convention in order to make it a genuine compromise between the civil law and common law traditions. Nevertheless, the accession convention, signed in Luxembourg in 19788, made few amendments to the original text of the Brussels Convention. The Convention scheme thus remained wholly within the civil law tradition. Moreover, the case law of the European Court of Justice dramatically reinforced the civil law nature of the Brussels rules of jurisdiction. The ECJ has always rejected the attempts of English courts to provide these rules with some flexibility by importing the common law jurisdictional techniques into the Brussels scheme.9 6 For a general presentation, see JENARD P., ‘Rapport sur la convention concernant la compétence judiciaire et l’exécution des décisions en matière civile et commerciale (signée à Bruxelles le 27 septembre 1968)’, in: OJ n° C 59/1, 5 March 1979. 7 For a general presentation, see DROZ G. A. L./GAUDEMET-TALLON H., ‘La transformation de la Convention de Bruxelles du 27 septembre 1968 en Règlement du Conseil concernant la compétence judiciaire, la reconnaissance et l’exécution des décisions en matière civile et commerciale’, in: Rev. crit. dr. int. pr. 2001, p. 601 et seq. 8 SCHLOSSER P., ‘Rapport sur la convention relative à l’adhésion du Royaume de Danemark, de l’Irlande et du Royaume-Uni de Grande-Bretagne et d’Irlande du Nord à la convention concernant la compétence judiciaire et l’exécution des décisions en matière civile et commerciale (signée à Luxembourg le 9 octobre 1978)’, in: OJ n° C 59/71, 5 March 1979. 9 See e.g. ECJ, 27.04.2004, C-159/02, Turner v. Grovit, in: Rec. 2004, I-3565; ECJ, 01.03.2005, C-281/02, Owusu v. Jackson, in: Rec. 2005, p. 1383.

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Regulating International Jurisdiction: Towards a Global Answer The Court of Justice so systematically closed the door to the English private international law mechanisms that an author described it as a ‘systematic dismantling’ of English private international law.10 For all these reasons, the Brussels Convention rules cannot be regarded as a bridge between civil law countries and common law countries, fulfilling the need for a universal theory of jurisdiction, but rather as a typical illustration of the civil law systems of jurisdiction. Nevertheless, the study of the Brussels jurisdictional framework is valuable, not only because it provides an additional system of rules of jurisdiction to compare with French and English rules, but also because the difficulties raised by the implementation of the Brussels Convention and Regulation 44/2001 in France and England offer significant lessons concerning the specificities of these legal systems. Building a universal theory of jurisdiction capable of explaining the rules adopted both in civil law and in common law countries can be considered to be a very ambitious, if not unrealistic, project. To make this goal practicable, it seems wiser to focus on a limited field of the law. Accordingly, this study is mainly devoted to the jurisdiction of courts in civil and commercial matters. Among other reasons, studying these matters is particularly worthwhile because party autonomy is highly developed in this type of dispute, far more than, for instance, in family law disputes. This is critical given the importance of party autonomy in today’s private international law.11 Moreover, the search carried out in this article for a universal theory of jurisdiction is limited to jurisdictional issues arising before the forum judge when an action is brought directly before him. It is not concerned with jurisdictional issues arising in the context of recognition and enforcement of foreign judgments, because the controversies surrounding jurisdictional issues do not exist in the field of recognition of judgments. This was particularly obvious during the negotiations which took place at The Hague concerning the adoption of a global convention on jurisdiction and foreign judgments. Sharp debates arose as to the jurisdiction of courts, whereas a compromise was quickly reached on issues of recognition of foreign judgments.12 A further specification should be given before starting. Even if this article purports to identify a theory of jurisdiction that would be common to civil law and common law countries, its ultimate aim is not necessarily to call for the adoption of a worldwide convention on jurisdiction. Of course, most of the proposals put forward in this article could be implemented by means of an international convention. 10 HARTLEY T. C., ‘The European Union and the Systematic Dismantling of the Common Law of Conflict of Laws’, in: I.C.L.Q. 2005, vol. 54, p. 813 et seq. 11 NYGH P., Autonomy in International Contracts, Oxford, 1999. 12 GAUDEMET-TALLON H., ‘De quelques raisons de la difficulté d’une entente au niveau mondial sur les règles de compétence judiciaire internationale directe’, in: NAFZIGER J. A. R./SYMEONIDES S. C. (ed.), Law and Justice in a Multistate World, Essays in Honor of Arthur T. von Mehren, Ardsley (NY) 2002, p. 55.

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Laurence Usunier That said, adopting a convention is not necessarily the only way to properly regulate the international jurisdiction of courts. It would be enough, to attain such an end, that States exercise self-discipline when regulating the jurisdiction of their courts. First, States should systematically require that the forum court have a substantial connection to the action in order to retain jurisdiction over such action. Second, States should give their courts the power to take into consideration the jurisdiction that other courts may have over the dispute, thereby allowing them to decline jurisdiction in certain cases, notwithstanding the existence of a real connection between the forum court and the dispute. Such a process is likely to be workable both in civil law countries and in common law countries, because one of the main teachings of the comparison of the jurisdictional rules used in those countries is that, in all of them, there are two fundamental stages in the jurisdictional inquiry. The first stage, designed to establish the jurisdiction of the court before which the action has been brought, is focused on the connection between that court (the forum court) and the action brought before it (I). The second stage, allowing consideration of the jurisdiction that another court may have to hear the action, is focused on the connection between this foreign court and the dispute (II). Even though these two stages are not always distinguished by judges and scholars, it is meaningful to do so in order to evaluate more accurately the genuine differences between common law and civil law rules of jurisdiction and to perform a deeper analysis of the various issues raised by the regulation of judicial jurisdiction in international litigation.

I.

Ascertaining the Jurisdiction of the Forum Court – The Relationship between the Forum Court and the Dispute

Elaborating a general theory of jurisdiction shared by civil law and common law countries does not imply that those countries be provided with a uniform body of rules on jurisdiction, relying on the same heads of jurisdiction and assigning exactly the same boundaries to the jurisdiction of the courts of all those countries. Rather, it entails developing broader concepts which can explain the various mechanisms used to regulate the jurisdiction of courts in civil law and common law countries. To do so, it is necessary to find a starting point, i.e. a basis for the theory. That basis should be both solid enough to give clear guidance to courts when assessing their jurisdiction, and general enough to be understood and shared by both common law judges and civil law judges. To discover that basis, it is necessary to go back to the initial question that the purported theory is designed to answer: what are the appropriate boundaries of the jurisdiction of courts in international litigation? The aim of the theory is therefore to keep the international jurisdiction of courts within limits that are neither too restrictive, nor too wide. In other words, the 546

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Regulating International Jurisdiction: Towards a Global Answer goal of the theory developed in this article is to assign reasonable boundaries to the jurisdiction of courts (A). The reasonableness standard however has too broad and vague a meaning to be understood in the same way by all judges in all civil law and common law countries. In order to allow this theory to lead to predictable and homogeneous results, it is necessary to provide them with more precise guidance. The means used in order to help judges determine whether their jurisdiction is or is not reasonable in a given set of circumstances will be to identify the various foundations on which the jurisdiction of courts may rest (B).

A.

The Goal: Assigning Reasonable Boundaries to the Jurisdiction of Courts

In order to establish that ‘the quest for reasonableness’13 can serve as a basis of a jurisdictional theory common to civil law and common law countries, one could try to analyze the actual practice of courts to collect evidence that all those countries assign reasonable boundaries to the jurisdiction of their courts. As previously mentioned, however, a number of States still give their courts jurisdiction to hear cases having no substantial connection to them. The necessity of assigning reasonable limits to the jurisdiction of courts must therefore be established in theory rather than in practice. Nevertheless, an inquiry into the current practices of States in the field of jurisdiction remains essential in two respects. First, it is useful to spot the situations in which the jurisdiction of courts has not yet been given reasonable boundaries. Second, it is necessary to determine whether, in these situations, the failure of the legal systems concerned to assign reasonable boundaries to the jurisdiction of their courts is due only to an incorrect implementation of the jurisdictional mechanisms used in those legal systems or to the inherent incapacity of the said mechanisms to set reasonable limitations on the jurisdiction of courts. In other words, it is necessary to determine whether the legal systems that do not yet impose reasonable limits on the jurisdiction of their courts are nonetheless able to reach such a result without abandoning their traditional method of regulation of the jurisdiction of courts. For, if it appeared that some countries would be required to abandon their traditional approach to jurisdiction in order to be able to assign reasonable boundaries to the jurisdiction of their courts, the quest for these reasonable boundaries would not be the basis of a universal theory of jurisdiction, but rather a criterion to distinguish the ‘right’ methods from the ‘wrong’ methods of regulation of the jurisdiction of courts. Accordingly, it is not enough to show that it is necessary to assign reasonable boundaries to the jurisdiction of courts (1) in order to demonstrate that such a goal can be the basis of a universal theory of jurisdiction. To show this, it is also essential to make sure that all the legal systems, belonging either to the common LOWENFELD A., International Litigation and the Quest for Reasonableness, Oxford 1996. 13

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Laurence Usunier law tradition or to the civil law tradition, are able to give reasonable boundaries to the jurisdiction of their courts (2). 1.

The Necessity of Assigning Reasonable Boundaries to the Jurisdiction of Courts

Most legal scholars wishing to establish that it is necessary to assign reasonable boundaries to the jurisdiction of courts have based this requirement either on public international law or on human rights. Authors relying on public international law usually consider that a State that gives jurisdiction to its courts to hear disputes having no connection to the forum infringes the sovereignty of other States or comity requirements.14 Authors relying on human rights consider that a court hearing a dispute unrelated to the forum State violates the right of the defendant to a fair trial and, more precisely, his or her right of access to the courts.15 Unfortunately, these statements have often proved to be unconvincing. The sovereignty of the States is rarely at stake in private international law cases, which mainly involve individuals and companies. Moreover, the fact that a State gives jurisdiction to its courts to hear a dispute has no direct impact on other States, whatever the relationship of the forum with the dispute. It neither deprives other States of their jurisdiction, nor compels them to enforce the judgment that will be delivered by the court before which the action is brought.16 As a result, it is far from clear that public international law requires States to assign reasonable limits on the jurisdiction of courts. Turning to the fundamental right of access to the courts17, it is true that bringing an action before a forum that has no connection to the dispute can deprive See for instance MANN F. A., ‘The doctrine of jurisdiction in international law’, in: Recueil des Cours 1964-I, t. 111, p. 1 et seq.; BOWETT D. W., ‘Jurisdiction: Changing Patterns of Authority over Activities and Resources’, in: British Yearbook of International Law 1983, vol. 53, p. 1 et seq.; STRAUSS A. L., ‘Beyond National Law: The Neglected Role of the International Law of Personal Jurisdiction in Domestic Courts’, in: Harvard International Law Journal 1995, vol. 36, p. 373 et seq., esp. p. 406; LOWENFELD A. (note 13); AUDIT B. (note 1), § 43; KESSEDJIAN C., ‘International Jurisdiction and Foreign Judgments in Civil and Commercial Matters’, Prel. Doc. No 7 of April 1997, § 65 (available on the Internet: <www.hcch.net>). 15 See for instance LAGARDE P., ‘Le principe de proximité dans le droit international privé contemporain’, in: Recueil des Cours 1986-I, t. 196, p. 9 et seq., esp. pp. 156-157; SCHLOSSER P., ‘Jurisdiction in International Litigation, The Issue of Human Rights in Relation to National Law and to the Brussels Convention’, in: Riv. dir. int. 1991, p. 5 et seq., esp. p. 22; MATSCHER F., ‘Le droit international privé face à la convention européenne des droits de l’homme’, in: Travaux du comité français de droit international privé 1996-1997, p. 211 et seq., esp. § 3, p. 213; for a more cautious point of view see: SINOPOLI L., Le droit au procès équitable dans les rapports privés internationaux, Paris 2000. 16 MAYER P., ‘Droit international privé et droit international public sous l’angle de la notion de compétence’, in: Rev. crit. dr. int. pr. 1979, p. 1 et seq. 17 ECHR, 21.02.1975, n° 4451/70, Golder v. The United Kingdom, A 18, § 36. 14

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Regulating International Jurisdiction: Towards a Global Answer the defendant of his right of access to the courts, if the forum is so remote that the defendant cannot afford to plead in that forum and thus fails to appear in court. But, since the right of access to the courts must be effective18, a possible infringement must not be evaluated at an abstract and theoretical level, but rather by looking at the specific circumstances of each case.19 It is therefore always necessary to establish that the remoteness of the forum actually deprives the defendant of his or her right of access to the courts, given the specific situation of the litigant. A company or a wealthy individual, for example, may be able to face litigation in any forum, even the most remote, since that kind of defendant can always afford a lawyer to handle the case. It is thus not possible to derive from the right of access to courts a general requirement that the jurisdiction of courts be limited. This right only deprives courts of jurisdiction in specific instances, where the dispute has no connection to the forum and the defendant cannot appear in court because of the remoteness of the forum. The failure of these attempts to base the necessity of assigning reasonable boundaries to the jurisdiction of courts on public international law or human rights is not surprising. The idea underlying these two proposals is that rules with higher authority than private international law rules may impose a requirement with which private international rules must comply. In other words, both proposals rely on the Kelsenian conception of the law as a pyramid or hierarchy of norms.20 The difficulty with this type of reasoning is that it is not suitable for private international law. International litigation involves independent and equal States, free to regulate the jurisdiction of their courts in the way they see fit, without being controlled or supervised by any higher authority. The legal theory that is applicable to the jurisdiction of courts in international litigation thus seems to be the theory of the network rather than that of the pyramid of norms. The network model, recently put forward as an alternative to the pyramid model by two Belgian scholars21, corresponds perfectly to the structure formed by the courts of the various States of the world when dealing with international litigation.22 The hierarchical reasoning flowECHR, 9.10.1979, n° 6289/73, Airey v. Ireland, A 32, § 34. MATSCHER F. (note 15), § 3, p. 213. 20 KELSEN H., Théorie pure du droit (trad. Ch. Eisenmann), Paris 1962, p. 266. 21 OST F./VAN DE KERCHOVE M., De la pyramide au réseau? Pour une théorie dialectique du droit, Bruxelles 2002. 22 The network structure has three characteristics (see OST F./VAN DE KERCHOVE M. (note 21), pp. 24-26). It is complex, that is, made up of various distinct ‘points’ or elements, none of which is related to all the other elements of the network. Each element is related to only some of the other elements of the network. It is based on equality, since no element of the network has authority over the others. It is interactive, since the action of an element of the network has an impact on the other elements to which it is related. The structure composed of the various State courts throughout the world may thus be considered to be a network. First, courts are equal, since each one independently delineates its own jurisdiction. None can confer jurisdiction on another court or deprive it of its jurisdiction. Second, that structure is complex, since there is no action over which all courts of the world have juris18 19

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Laurence Usunier ing from the pyramid model is accordingly of little use to solve jurisdictional issues, and another type of reasoning must be used, i.e. teleological reasoning. In the absence of binding guidelines imposed from above, guidance should be found by looking at the goal rules of jurisdiction pursue, that is, ensuring the proper functioning of the network formed by all States’ courts throughout the world. This implies that rules of jurisdiction must protect all the interests at stake in the case: those of each litigant, those of the forum State and sometimes those of foreign States related to the dispute. All these interests will certainly conflict with each other. It is in the plaintiff’s interest that the jurisdiction of courts be extremely wide, if not unlimited; it is in the interest of the defendant that jurisdiction be very strictly limited. At the very least, jurisdictional rules must not obviously disregard any one of the interests at stake. In order to protect all of these interests, jurisdiction must fulfil contradicting requirements. Rules of jurisdiction must not be too restrictive, in order to protect the plaintiff’s right of access to the courts. There must be at least one forum for each action; more if possible. In order to protect the defendant’s right of access to the courts, however, jurisdictional rules must also be restrictive enough to grant jurisdiction to convenient and predictable fora. In order to promote the good administration of justice, especially in the forum State, jurisdiction should only be given to courts that are close enough to the action to provide an expedient trial of the claim. And, finally, rules of jurisdiction should comply with comity, which means that they should refrain from giving jurisdiction to the forum court if fundamental interests of a foreign State are involved. To summarize all these requirements in one general requirement, one might say that rules of jurisdiction should assign reasonable boundaries to the jurisdiction of courts, because ‘reasonable’ means precisely ‘not obviously disregarding one of the interests at stake’, i.e. not causing disadvantages to a person or community that are obviously disproportionate to the advantages conferred on the other persons or communities involved.23 Hence, assigning reasonable boundaries to the internadiction. For a given litigation, only the few courts that have jurisdiction over it interact. Third, there is a genuine interaction between these courts, even if they are free to decide on their own jurisdiction, because the fact that a court considers itself competent may affect the other courts. Forum non conveniens, for example, allows common law courts to decline jurisdiction if another court is a more appropriate forum for trial of the action. French courts may also decline jurisdiction if parallel proceedings are brought in another court (see for instance Cass. civ. 1ère, 26.11.1974, Soc. Miniera di Fragne, in: Rev. crit. dr. int. pr. 1975, p. 491 et seq., note HOLLEAUX D., Clunet 1975, p. 108 et seq., note PONSARD A.; Cass. civ. 1ère, 22.06.1999, in: Rev. crit. dr. int. pr. 2000, p. 42 et seq., note CUNIBERTI G., Dalloz Affaires 2000, p. 211 et seq., note AMMAR D.) 23 See CORTEN O., L’utilisation du ‘raisonnable’ par le juge international: Discours juridique, raison et contradictions, Bruxelles 1997, § 373. On the meaning of the reasonableness standard, see also PERELMAN C., Le raisonnable et le déraisonnable en droit, Paris 1984, p. 19: ‘reasonable’ means ‘within the limits of what is socially acceptable, not obviously unfair or absurd’. The United States Supreme Court, which has acknowledged the reasonableness requirement in the field of international jurisdiction and venue [see International Shoe v. Washington, 326 US 310 (1945)], gives the same meaning to that standard.

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Regulating International Jurisdiction: Towards a Global Answer tional jurisdiction of courts is not necessary because it is imposed by a superior rule, but because it is the only way to ensure the proper functioning of the network formed by all State courts in the world.

2.

The Ability to Assign Reasonable Boundaries to the Jurisdiction of Courts

One may wonder whether rules of jurisdiction as different as those of English and French courts can lead to homogeneous outcomes, even in the light of a standard as relaxed as that of reasonableness. Indeed, there is a sharp contrast between English and French law, and more generally common law and civil law countries, in the field of jurisdiction. French courts do not purport to have jurisdiction to hear a claim just because the writ was served on the defendant while he was in France, for instance. Conversely, inferring jurisdiction from the nationality of one of the litigants is completely unknown under English law.24 Yet it would be inaccurate to state that no basis of jurisdiction is known in both English and French law. Jurisdictional rules related to the place of performance, in cases of breach of contract25, to the locus delicti, in tort cases26, as well as choice of forum agreements27, for example, exist in both legal systems. See Worldwide Volkswagen Corp v. Woodson, 444 US 286 (1980), p. 292: the requirement that the jurisdiction of American courts be reasonable implies a comparison between the burden imposed on the defendant by the obligation to defend the suit brought in the forum court and the other interests at stake (those of the plaintiff and of the forum State, for instance). See also Burger King Corp v. Rudzewicz, 471 US 462 (1985): the reasonableness requirement deprives American courts of jurisdiction only in the few cases where their jurisdiction would be ‘fundamentally unfair’ and its goal is mainly to prevent rules of jurisdictional from being ‘employed in such a way as to make litigation ‘so gravely difficult and inconvenient’ that a party unfairly is at a ‘severe disadvantage’ in comparison to his opponent. Accordingly, reasonableness does not appear to be a highly demanding standard indicating the one and only path to follow, but is rather a boundary not to be crossed and within which a wide range of choices are open. To that extent, the reasonableness standard appears to be a perfect basis for a universal theory of jurisdiction, since it does not compel all States to impose exactly the same limits on the international jurisdiction of courts, but only prevents States from extending excessively the jurisdiction of courts. 24 NORTH P. M./FAWCETT J. J. (note 1), pp. 159-161. 25 See Civil Procedure Rules, Part 6, Section III, rule 6.20 (5) [England]; Nouveau Code de procédure civile, article 46 (France); Brussels Convention, Article 5 § 1, Regulation 44/2001, Article 5.1 (Community law). 26 See Civil Procedure Rules, Part 6, Section III, rule 6.20 (6) [England]; Nouveau Code de procédure civile, article 46 (France); Brussels Convention, Article 5 § 3, Regulation 44/2001, Article 5.3 (Community law). 27 See Civil Procedure Rules, Part 6, Section III, rule 6.20 (4) d [England]; Cass. civ. ère 1 , 17.12.1985, Cie de signaux et d’entreprises électriques, in: Dalloz 1986, IR/SC, p. 265, obs. AUDIT B., Rev. crit. dr. int. pr. 1986, p. 537 et seq., note GAUDEMET-TALLON H.

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Laurence Usunier The sharpest contrast between common law and civil law countries concerns the power of courts to decline jurisdiction notwithstanding the applicability of a rule conferring jurisdiction on the forum judge. In common law countries, on the one hand, jurisdictional rules are flexible. The doctrine of forum non conveniens allows the forum judge to decline jurisdiction if a foreign court is more appropriate to hear the dispute.28 In civil law countries, on the other hand, jurisdictional rules are rigid. Courts are generally compelled to exercise the jurisdiction conferred on them by the rules of jurisdiction.29 As typically civil law rules, the EC rules on jurisdiction, in particular, are extremely rigid and the ECJ has always strictly rejected the doctrine of forum non conveniens.30 These differences express dramatically different ways to conceive of jurisdiction. Common law countries share a concrete approach to jurisdiction issues. They ascertain the appropriateness of the forum to hear the dispute according to the specific circumstances of each case.31 Civil law countries, on the contrary, adopt an abstract approach to jurisdiction. Since their rules of jurisdiction are supposedly based upon criteria designed to confer jurisdiction on appropriate fora, they deprive their courts of the power to make sure they are really appropriate for trial in the specific circumstances of the case.32 This is not so because civil law countries do not care about the appropriateness of the forum chosen to hear a dispute, but because they think choosing the bases of jurisdiction carefully is enough to ensure the appropriateness of the forum judge. Nevertheless, it is hard to deny that this is not the easiest way to assign reasonable boundaries to the jurisdiction of courts. Does this mean that civil law courts should change their approach to jurisdiction to adopt that of the common law courts? The answer to this question is not necessarily affirmative. It seems possible for civil law countries to assign reasonable boundaries to the jurisdiction of courts without discarding their traditional approach to jurisdiction, as long as the bases of jurisdiction they choose actually ensure the appropriateness of the court on which (France); Brussels Convention, Article 17, Regulation 44/2001, Article 23 (Community law). 28 See e.g. in England Spiliada Maritime Corpn v. Cansulex Ltd, [1987] AC 460; in the United States: Gulf Oil Corp v. Gilbert, 330 US 501 (1947); in Canada: Anchem Products Inc v. British Columbia (Workers’ Compensation Board), (1993) 102 DLR (4th) 96. For a more restrictive approach to forum non conveniens, see in Australia: Voth v. Manildra Flour Mills Pty Ltd, (1990) 171 CLR 538. 29 In France, see GAUDEMET-TALLON H., ‘Les régimes relatifs au refus d’exercer la compétence juridictionnelle en matière civile et commerciale: forum non conveniens, lis pendens’, in: Revue internationale de droit comparé 1994, p. 423 et seq., esp. pp. 425-426; Cass. civ. 1ère, 18.12.1990, in: Rev. crit. dr. int. pr. 1991, p. 759 et seq., note ANCEL B.; Cass. civ. 1ère, 27.01.1993, in: Dalloz 1993, p. 602 et seq., note MASSIP J. 30 ECJ, 01.03.2005, C-281/02, Owusu v. Jackson (note 9). 31 LAGARDE P. (note 15), p. 135. 32 GAUDEMET-TALLON H. (note 29), p. 425.

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Regulating International Jurisdiction: Towards a Global Answer they confer jurisdiction. Clearly, it means that, if civil law countries want to keep strictly rigid rules of jurisdiction, their rules cannot be founded upon relaxed bases of jurisdiction. ‘Exorbitant’ rules of jurisdiction, in particular, must be discarded. Articles 14 and 15 of the French Civil Code, for instance, should be abandoned. But many other jurisdictional rules could be kept, provided they are based upon sensible heads of jurisdiction and wisely interpreted. Certainly, no basis of jurisdiction is able to guarantee that the court on which it confers jurisdiction is appropriate to hear all types of disputes that could possibly arise. But courts can prevent rules of jurisdiction from conferring jurisdiction on them when they are not appropriate to hear the dispute by adopting a reasonable interpretation of these rules. The importance of the interpretation given to jurisdictional rules is perfectly exemplified by comparing the interpretation given by the European Court of Justice to Articles 5 § 1 and 6 § 1 of the Brussels Convention. Article 5 § 1, on the one hand, allows the plaintiff to sue the defendant, in matters relating to a contract, in the courts of the place of performance of the obligation in question. This head of jurisdiction is supposed to be a sensible one, ensuring the existence of a close connection between the forum and the dispute. Unfortunately, the ECJ adopted an undesirable interpretation of that provision. As it is generally known, the Court stated first that Article 5 § 1 jurisdiction was limited to the obligation performed in the forum State, even if the disputes arose out of several obligations deriving from the same contract but performed in different countries.33 Second, the ECJ asserted that the place of performance had to be determined by the law applicable to the contract according to the choice of law rules of the forum.34 As a result, Article 5 § 1 is useless in all cases involving several obligations performed in different Member States and it is wholly unable to ensure the existence of a substantial connection between the forum and the dispute.35 Article 6 § 1 jurisdiction, on the other hand, is likely to lead to abuse, since it allows a plaintiff to sue a defendant, where there are several defendants, in the courts for the place where any one of them is domiciled. This basis of jurisdiction is indirect and does not ensure the existence of a close relationship between the defendant and the State where the other defendant is domiciled. Nevertheless, the European Court of Justice adopted a reasonable interpretation of that provision by stating that it did not allow the plaintiff to sue several defendants ‘with the sole object of ousting the jurisdiction of the courts of the State where one of the defendants is domiciled’ and that it required the existence of a connection between the actions brought against the various defendants making it ‘expedient to determine the actions together in order to avoid the risk of irreconcilable judgments resulting ECJ, 6.10.1976, 14/76, De Bloos v. Bouyer, in: Rec. 1976, 1497. ECJ, 6.10.1976, 12/76, Tessili v. Dunlop, in: Rec. 1976, 1473. 35 For very radical criticism of the ECJ case law, see DROZ G. A. L., ‘Delendum est forum contractus ?’, in: Dalloz 1997, p. 351 et seq.; HEUZÉ V., ‘De quelques infirmités congénitales du droit uniforme: l’exemple de l’article 5.1 de la Convention de Bruxelles du 27 septembre 1968’, in: Rev. crit. dr. int. pr. 2000, p. 595 et seq. 33 34

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Laurence Usunier from separate proceedings’.36 Thanks to that interpretation, Article 6 § 1 jurisdiction remained reasonable and uncontroversial. Consequently, both common law and civil law countries seem able to assign reasonable boundaries to the jurisdiction of their courts without abandoning their traditional approach to jurisdiction, provided the countries favouring rigid rules of jurisdiction choose only sensible heads of jurisdiction and give a sound interpretation to these rules. This confirms that the necessity of assigning reasonable boundaries to the jurisdiction of courts can be the basis of a jurisdictional theory shared by common law and civil law countries. Nonetheless, that basis is not enough to develop a workable theory, leading to homogeneous and foreseeable outcomes. The reasonableness requirement is too fuzzy to be given exactly the same meaning by all courts throughout the world. The meaning of this requirement should thus be clarified by identifying the various foundations of reasonable jurisdiction.

B.

The Means: Identifying the Legitimate Foundations of the Jurisdiction of Courts

To clarify the meaning of the reasonableness requirement in the field of jurisdiction, one may think about distinguishing reasonable bases of jurisdiction from unreasonable bases of jurisdiction. Proceeding this way however would not be meaningful since a given basis of jurisdiction may be reasonable in certain cases and unreasonable in others. Nationality, for instance, is likely to be an unreasonable head of jurisdiction in matters relating to a contract or to a tort, whereas it may be perfectly reasonable in matrimonial and family matters.37 It is therefore much more relevant to try to identify the legitimate foundations of jurisdiction, that is, the various principles that can be considered to determine the few fora that are appropriate to hear a given action. To discover these principles, helpful assistance may be found in the studies of the authors who have previously tried to identify the foundations of jurisdiction. A. T. Von Mehren, first, suggested that there were three foundations of jurisdiction: physical power, basing jurisdiction on the presence of the defendant itself or of its property within the territory of the forum state; allegiance, basing jurisdiction on a personal relationship between the defendant and the forum State (e.g. citizenship of the defendant); convenience, fairness and justice, basing jurisdiction on the

ECJ, 27.09.1988, 189/87, Kalfelis v. Bankhaus Schröder, in: Rec. 1988, 5565. GAUDEMET-TALLON H., ‘Nationalisme et compétence judiciaire: Déclin ou renouveau’, in: Travaux du comité français de droit international privé 1987-1988, p. 171 et seq.; DROZ G. A. L., ‘Réflexions pour une réforme des articles 14 et 15 du Code civil’, in: Rev. crit. dr. int. pr. 1975, p. 1 et seq. 36 37

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Regulating International Jurisdiction: Towards a Global Answer contacts between the litigants or the controversy, on the one hand, and the forum State, on the other hand.38 The proposals put forward by Arthur Taylor Von Mehren were reassessed a few years later by another learned author, Paul Lagarde.39 Building on Von Mehren’s ideas, Mr. Lagarde observes that physical power and allegiance can be put together into a wider foundation, which he calls State sovereignty, and that ideas of convenience, fairness and justice correspond to what Mr. Lagarde calls the principle of proximity. He then proposes to add two supplementary foundations: party autonomy and the protection of the weaker party. This classification appears accurate, with a slight reservation. Indeed, party autonomy and the protection of the weaker party also correspond to what Arthur Taylor Von Mehren called convenience, fairness and justice, along with the principle of proximity. The underlying idea of these foundations is to base jurisdiction on the private interests of the litigants, instead of basing it on the public interests of States. Mr. Lagarde’s classification of the foundations of jurisdiction is therefore preferable to that of Arthur Taylor Von Mehren, not because it is more comprehensive, but because it is more precise. In the light of this classification, two factors seem appropriate on which to base international jurisdiction. First, jurisdiction may rest on the localization of the dispute in the forum State (1), either natural, where jurisdiction is based on proximity, or artificial, where jurisdiction is based on party autonomy. Second, jurisdiction may rest on the protection of interests that appear fundamental to the forum State (2). These interests may either be those of one of the litigants, where jurisdiction is based on the protection of the weaker party, or those of the forum State itself, where jurisdiction is based on State sovereignty.

1.

The Localization of the Dispute in the Forum State

The most spontaneous way to deal with private international law issues is to look at the geographical localization of the case. This is the idea expressed by the principle of proximity. As Mr. Lagarde states it, the principle of proximity implies that a case must be governed by the law of the country with which it has the closest connection; that a case must be decided by a court with which it has at least a close connection, if not the closest connection; and that a foreign judgment should be enforced only if the court that delivered it had a close connection to the dispute.40 A number of rules of jurisdiction rely on that idea, such as forum contractus, forum delicti commissi, or the principle actor sequitur forum rei. Indeed, proximity is the normal foundation of jurisdiction in most civil law and common law countries. VON MEHREN A. T., ‘Adjudicatory jurisdiction: General Theories Compared and Evaluated’, in: Boston University Law Review 1983, vol. 63, p. 279 et seq. 39 LAGARDE P. (note 15), pp. 128-129. 40 LAGARDE P. (note 15), pp. 9-10. 38

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Laurence Usunier This is particularly obvious in England, and more generally in common law countries, since the doctrine of forum non conveniens allows courts to decline jurisdiction each time a foreign court is a more appropriate forum for trial.41 As the appropriateness of the forum court and of the foreign court is assessed prima facie by looking for the court which has the most real and substantial connection to the dispute42, this actually goes beyond the requirement of proximity strictly speaking, which only entails that the forum have a close connection (and not necessarily the closest connection) to the dispute. In civil law countries, it is less obvious that jurisdiction should, in principle, be based on proximity, since there is no equivalent to the doctrine of forum non conveniens. However proximity also appears as the normal foundation of jurisdiction. In France, for instance, the ordinary rules of international jurisdiction (as opposed to the exorbitant rules laid down in Articles 14 and 15 of the French Civil Code, applicable only where no ordinary rule gives jurisdiction to French courts43) are derived from the venue rules laid down in the Civil Procedure Code.44 These venue rules are themselves designed to protect the interests of the litigants and to promote the efficient administration of justice45, which implies that they are based on the existence of certain minimum contacts between the forum and the dispute. It is therefore possible to assert that French rules of jurisdiction are also based, in principle, on the idea of proximity. This wide recognition of proximity as the normal foundation of international jurisdiction is not surprising. The existence of a close connection between the forum court and the dispute is the best way to ensure that the jurisdiction of that court is reasonable. Proximity guarantees the convenience of the forum and the predictability of its jurisdiction for the defendant – at least if the requirement of proximity is read in the light of the reasonableness requirement. Indeed, the main problem raised by the principle of proximity is that its meaning is not clear in the field of jurisdiction. What does it mean that there must be a ‘close connection’ between the forum and the dispute? What is the degree of closeness required? The answer is that the connection between the forum and the action must be close enough to make the jurisdiction of the forum court reasonable.46 See the above references (note 28). See e.g. at English law MacShannon v. Rockware Glass Ltd, [1978] AC 795, p. 829; The Abidin Daver, [1984] AC 398, p. 415; Spiliada Maritime Corpn v. Cansulex Ltd (note 28), pp. 477-478. 43 Cass. civ. 1ère, 19.11.1985, Soc. Cognacs and Brandies from France v. Soc. Orliac, in: Dalloz 1986, IR/SC, p. 268, obs. AUDIT B., Rev. crit. dr. int. pr. 1986, p. 712 et seq., note LEQUETTE Y., Clunet 1986, p. 719 et seq., note HUET A., Semaine juridique 1987, II, n° 20810, note COURBE P. 44 Cass. civ., 30.10.1962, Scheffel, in: Rev. crit. dr. int. pr. 1963, p. 387 et seq., note FRANCESCAKIS Ph., Dalloz 1963, p. 109 et seq., note HOLLEAUX G. 45 GAUDEMET-TALLON H. (note 29), p. 425. 46 That is why forum actoris, for instance, is not a reasonable jurisdiction rule, at least where it is rigidly applied. Clearly, there is a relationship between the State of the plaintiff and the action brought by him, as much as there is a relationship between the State 41 42

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Regulating International Jurisdiction: Towards a Global Answer In civil law countries as well as in common law countries, therefore, proximity, that is, the natural, geographical localization of the dispute in the forum State, is the normal foundation of jurisdiction. In certain situations, however, localization of the dispute in the forum State may derive from the will of the parties. This is especially the case where parties to a contract agree upon a submission to jurisdiction clause. The validity of such a clause is recognized in most civil law and common law countries47, especially in France and in England.48 This is highly suitable, since the agreement of the parties undeniably ensures the reasonableness of the jurisdiction of the elected forum. Jurisdiction clauses, however, do not have the same authority in France and in England and, more generally, in civil law and common law countries. In most civil law countries, the chosen forum cannot refuse to enforce a jurisdiction clause on the ground that the connection of the chosen forum to the dispute is not close enough.49 In common law countries, on the contrary, courts have discretionary

of the defendant and the action brought against him. Nevertheless, that connection is not sufficient to guarantee the reasonableness of the jurisdiction of the forum actoris, since this forum may have no connection either with the defendant or with the cause of action. Its jurisdiction may hence be completely unforeseeable for the defendant and highly inconvenient for trial. Actor sequitur forum rei, on the contrary, may cause no injustice to the parties since it is perfectly foreseeable and convenient for the defendant. Clearly, it may not always be convenient for the plaintiff, and that is why actor sequitur forum rei must not be the one and only jurisdictional rule. There may be many other courts whose jurisdiction is convenient and foreseeable and these courts must be given jurisdiction. However, if the plaintiff wants to bring an action in the courts of the defendant’s domicile, there is no reason to deprive him of this opportunity. As a result, it seems perfectly reasonable that actor sequitur was adopted as an available jurisdiction rule in the Brussels Convention and Regulation, and that forum actoris was, on the contrary, rejected in these texts (see Brussels Convention, Article 2 § 1 and Article 3 § 2; Regulation 44/2001, Article 2.1, Article 3.2 and Annex I), since the Brussels scheme sets up rigid rules of jurisdiction. In common law countries, on the contrary, forum actoris could be accepted as a valid head of jurisdiction, since forum non conveniens allows the forum court to decline its jurisdiction if it is not reasonable. 47 See for instance in Community law: Brussels Convention, Article 17, Regulation 44/2001, Article 23; in France: Cass. civ. 1ère, 17.12.1985, Cie de signaux et d’entreprises électriques, in: Dalloz 1986, IR/SC, p. 265, obs. AUDIT B., Rev. crit. dr. int. pr. 1986, p. 537 et seq., note GAUDEMET-TALLON H.; in England The Eleftheria, [1970] P 94; in the United States: Bremen v. Zapata Off-shore Co, 407 US 1 (1972). 48 See for instance in England: Mackender v. Feldia, [1967] 2 QB 590; in France: Cass. civ., 19.02.1930, Mardelé, 27.01.1931, Dambricourt, in: Rev. crit. dr. int. pr. 1931, p. 514 et seq., Sirey 1933, 1, p. 41 et seq., note NIBOYET J.-P. 49 See for instance in Community law ECJ, 17.01.1980, 56/79, Zelger v. Salinitri, in: Rec. 1980, 89, § 4; in France, Cass. com., 19.12.1978, Europa-Carton, in: Rev. crit. dr. int. pr. 1979, p. 617 et seq., note HUET A., Clunet 1979, p. 366 et seq., note GAUDEMET-TALLON H. Contra, see in Belgium Code de droit international privé, Article 6 § 2; in Switzerland, Loi fédérale sur le droit international privé du 18 décembre 1987, Article 5 § 3.

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Laurence Usunier power to refuse to enforce a choice of forum agreement.50 The chosen forum may thus decline jurisdiction if another court has a closer connection to the dispute. Conversely, a court may retain jurisdiction in spite of the applicability of a forum selection clause conferring jurisdiction on a foreign court. This solution is undesirable, because there may be many reasons why the chosen forum is not the closest to the dispute. The parties may have wanted their dispute to be litigated in a neutral forum51 or in a forum having specific expertise in the field of the law with which they were concerned.52 Accordingly, it would be preferable that the doctrine of forum non conveniens be excluded in cases involving forum selection clauses. This shows that party autonomy is an independent foundation of jurisdiction, autonomous from proximity, since it is not necessary, where a submission to jurisdiction clause has been entered into, that the selected forum have a close connection to the dispute. The will of the parties is enough to make the jurisdiction deriving from it reasonable. Moreover, party autonomy has a higher authority than proximity, since forum selection clauses may be exclusive and deprive all alternative fora of jurisdiction.53 This seems suitable, because the main advantage of submission to jurisdiction clauses is for the parties to make clear which court will be able to decide on their dispute – which also secures the law that will be applicable to the dispute, since each court follows its own private international law system.

2.

The Protection of Interests Considered to Be Fundamental by the Forum State

In order to serve as a legitimate foundation of jurisdiction, the protection of interests considered to be fundamental by the forum State must fulfil certain requirements. First, the interests invoked must truly be involved in the case. Second, their protection must require that the forum courts have jurisdiction to hear the case. 50

See for instance The Eleftheria, [1970] P 94; The El Amria, [1981] 2 Lloyd’s Rep.

119. GAUDEMET-TALLON H., Compétence et exécution des jugements en Europe, Paris 2002, § 151. 52 KESSEDJIAN C., ‘La Convention de La Haye du 30 juin 2005 sur l’élection de for’, in: Clunet 2006, p. 813 et seq. 53 In most civil law countries, forum selection clauses are prima facie exclusive, unless the parties state otherwise (see e.g. Regulation 44/2001, Article 23.1). In common law countries, on the contrary, jurisdiction clauses are not necessarily exclusive (BRAND R. A., ‘Forum Selection and Forum Rejection in US Courts: One Rationale for a Global Choice of Court Convention’, in: Reform and Development of Private International Law, Essays in Honor of Sir Peter North, Oxford 2002, p. 51 et seq., esp. p. 78; COLLINS L. (note 1), p. 518.). The exclusive character of the clause must be asserted clearly by the parties (see for instance in the United States: Hull 753 Corp v. Flugzeugwerke, 58 F.Supp.2d 925 (N.D.Ill. 1999); in England: Hoerter v. Hanover, etc. Works, (1893) 10 TLR 103). 51

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Regulating International Jurisdiction: Towards a Global Answer Third, the interests involved must be truly fundamental. It would be too easy for a State to declare, for instance, that the interests of its citizens are fundamental and that its courts must therefore have jurisdiction to hear all cases involving its citizens. These conditions restrict the number of situations in which jurisdiction may be based on the protection of fundamental interests by the forum State. Basically, there are two of these situations. First, the interest protected might be that of the forum State itself. This is what Mr. Lagarde calls ‘sovereignty’ (b). Second, the interest protected might be that of a litigant whose situation, notably financial, restricts his ability to bring an action or to defend a suit in a foreign court. This is known as the protection of the weaker party (a).

a)

The Protection of the Weaker Party

The protection of the weaker party has long been recognized as a foundation of international jurisdiction in civil law countries. The Brussels Convention, especially, laid down jurisdictional rules specifically designed for insurance contracts and certain types of consumer contracts as early as 1968.54 The scheme, which was progressively extended to all types of consumer contracts and contracts of employment as well, is the same for all types of contracts. A specific set of rules, excluding the ordinary rules, provides the weaker party with an option as to the court in which he or she can bring his or her action, while depriving the stronger party of any option.55 If the weaker party is the defendant, the adversary must sue in the courts of the weaker party’s domicile.56 If the weaker party is the plaintiff, he or she can sue either in the courts of the adversary’s domicile, or in another court – that of his domicile in insurance and consumer contracts cases, that of the place where he habitually carries out his work in employment cases.57 Furthermore, exclusive jurisdiction clauses are extremely limited to prevent the stronger party from imposing on the weaker party a forum selection clause that would render the protective rules meaningless.58 The protection of the weaker party therefore has a higher authority than proximity and party autonomy, since it excludes heads of jurisdiction based on proximity and party autonomy. Similar rules exist under French law, though the protection is less systematic.59 GAUDEMET-TALLON H. (note 51), p. 213. GAUDEMET-TALLON H. (note 51), § 266. 56 Brussels Convention, Article 11 § 1, Article 14 § 2; Regulation 44/2001, Article 12.1, Article 16.2, Article 20.1. 57 Brussels Convention, Article 8 § 1, Article 14 § 1; Regulation 44/2001, Article 9.1, Article 16.1, Article 19. 58 Brussels Convention, Article 12, Article 15, Article 17 § 6; Regulation 44/2001, Article 13, Article 17, Article 21. 59 See for instance Code du travail, Article R. 517-1; Code des Assurances, Article R. 114-1. These venue rules, applicable to domestic actions, should be extended to interna54 55

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Laurence Usunier In common law countries, on the contrary, it is far from clear that jurisdiction can be based on the protection of the weaker party. No jurisdiction rule akin to the Brussels Convention rules protects weaker parties, and the doctrine of forum non conveniens does not explicitly allow the forum court to take into consideration the economic position of each party to decide whether it is appropriate to hear the claim. In American law, as well, the United States Supreme Court recognized the enforceability of an exclusive jurisdiction clause included in a cruise line’s passage contract ticket, which required litigation of all disputes in Florida, even though the plaintiffs passengers were living in Washington and the dispute had arisen because of an accident that had occurred in Mexico.60 The situation clearly involved a weaker party, since the passengers had no power to negotiate the terms of the contract, but the Supreme Court held that the clause was reasonable. Nonetheless, a few cases suggest that common law judges may sometimes consider the reduced capacity to litigate of a litigant. The doctrine of forum non conveniens, for instance, allows English courts to retain jurisdiction, although the natural forum of the action is abroad, if the legal aid available in England, but not abroad, is necessary for the plaintiff to be able to carry out his claim, given the complexity of the action.61 American courts, as well, refused to enforce exclusive jurisdiction clauses in international contracts of employment, where the forum chosen by the employer was so inconvenient for the employees that the clause would have deprived employees of their day in court, because the requirement of litigation in a foreign country was an excessive financial and physical burden for the employees.62 In a case involving an insurance contract, the Supreme Court also held that an insured could sue in his home court. The Court stated: ‘California has a manifest interest in providing effective means of redress for its residents when their insurers refuse to pay claims. These residents would be at a severe disadvantage if they were forced to follow the insurance company to a distant State in order to hold it legally accountable. When claims were small or moderate, individual claimants frequently could not afford the cost of bringing an action in a foreign forum – thus in effect making the company judgment proof’.63 These cases show that, even if the protection of the weaker party is not an explicitly recognized foundation of jurisdiction in common law countries, it sometimes influences jurisdictional litigation, according to the principle laid down in Cass. civ., 30.10.1962, Scheffel (note 44). Confirming this suggestion for contracts of employement, see e.g. Cass. soc., 26.01.1989, in: Rev. crit. dr. int. pr. 1989, p. 754 et seq., note GAUDEMET-TALLON H. No provision lays down a jurisdictional rule protecting consumers but Article 14 of the French Code civil allows French consumers to bring an action in France. Moreover, Article L. 1321 of the French Code de la consommation may allow judges to refuse to enforce a forum selection clause stipulated in a consumer contract as an unfair contract term. 60 Carnival Cruise Lines, Inc v. Shute, 499 US 585 (1991). 61 Lubbe v. Cape plc, [2000] 1 WLR 1545. 62 See e. g. Sudduth v. Occidental Peruana, 70 F.Supp.2d 691 (E.D.Tex. 1999). 63 McGee v. International Life Insurance Co, 355 US 220 (1957), p. 223.

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Regulating International Jurisdiction: Towards a Global Answer tion, since the reduced capacity of a party to litigate can be taken into account by a common law court to decide on its whether it has jurisdiction. This reveals the true foundation of jurisdictional rules based on the protection of the weaker party. The goal of these rules is not to restore the balance between the two parties as such, but rather to protect the right of access to the courts of the weaker party.64 Indeed, the problem raised by cases involving a weaker party is that the modest resources of that party and the small amount of money usually involved in this type of cases often deter the weaker party from litigating, thereby threatening his right of access to the courts. The identification of the real foundation of jurisdictional rules protecting the weaker party explains why this interest is fundamental, since the right in question is the right of access to the courts, which is undeniably a fundamental right.65 The link between rules of jurisdiction protecting the weaker party and the right of access to courts also explains why the protection of the weaker party is the only private interest whose protection may be the basis of international jurisdiction. No other right than the right of access to the courts can be protected by giving jurisdiction to the forum court, because the impact of jurisdiction on the outcome of a case is too indirect. Choice of law rules have a more direct impact on the outcome of cases, since they may be designed to select the law that is the most favourable in order to reach a certain goal. That is the reason why choice of law rules may protect a wide range of private interests (the formal validity of wills or contracts, the legitimization of a child, etc.), whereas rules of jurisdiction can protect no private interest, except the right of access to the courts of the litigants. This implies that the protection of the weaker party is but one example of a wider category of jurisdiction, whose foundation is the protection of the right of access to the courts. Jurisdiction granted by Article 5.2 of Regulation 44/2001 to the courts of the place where the maintenance creditor is domiciled, for instance, belongs to that category.66 Jurisdiction granted to French courts to prevent the denial of justice67 also belongs to this category. Universal jurisdiction conferred on

64 Sharing the same analysis, see VALENCIA F., ‘Parties faibles et accès à la justice en matière d’arbitrage’, in: Revue de l’arbitrage 2007, p. 45 et seq. 65 See in Europe ECHR, 21.02.1975, n° 4451/70, Golder v. The United Kingdom, A 18; ECHR, 9.10.1979, n° 6289/73, Airey v. Ireland, A 32 (protecting the right of access to courts under article 6 § 1 of the European Convention on Human Rights). 66 In favour of this idea, see ECJ, 15.01.2004, C-433/01, Freistaat Bayern v. Blijdenstein, in: Rec. 2004, I-981, §§ 29-31, describing the maintenance applicant as ‘the weaker party in [the] proceedings’. 67 See for recent instances Cass. soc., 25.01.2005, in: Dalloz 2005, p. 1540 et seq., note VIANGALLI F., Rev. crit. dr. int. pr. 2005, p. 477 et seq., note PINGEL I., Clunet 2005, p. 1142 et seq., note CORBION L.; Cass. civ. 1ère, 01.02.2005, in: Revue de l’arbitrage 2005, p. 693 et seq., note MUIR WATT H., Rev. crit. dr. int. pr. 2006, p. 140 et seq., note CLAY Th.

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Laurence Usunier some courts in cases involving a breach of human rights68, as well, can be seen as protecting the right of access to the courts of the victim of such a breach, since in most of these cases, the plaintiff must bring his or her action in a court that is unrelated to the dispute because the courts related to the dispute, e.g. the court of the defendant’s domicile, or that of the place where the breach occurred, refuse to hear the claim or will not grant a satisfactory remedy to the plaintiff.69 Heads of jurisdiction protecting the right of access to courts are reasonable, even though they do not always confer jurisdiction on a forum having a close connection to the case, because in most of these cases the defendant is a ‘strong’ party, such as a bank, an insurance company, or a company manufacturing consumer products, able to defend suits wherever the action is brought. Where this is not the case, for instance in forum necessitatis cases, the forum court must check that the defendant has access to it. This is why French law requires that there be a connection between the forum court and the dispute where the jurisdiction of French courts is based on the risk of denial of justice.70

b)

The Protection of the Forum State’s Sovereignty

In civil law countries, a number of jurisdictional rules are based on the protection of the interests or sovereignty of the forum State. Most of the exclusive rules of jurisdiction set forth in Article 22 of Regulation 44/2001, for example, belong to that category of jurisdiction.71 Article 22.5 jurisdiction, in particular, protects the sovereignty of the Member State in which the judgment is to be enforced, since it would be an infringement of that State’s sovereignty for another State to declare

See for instance in the United States: Filartiga v. Pena-Irala, 630 F.2d 876 (2d Cir. 1980); Marcos Estate II, 25 F.3d 1467 (9th Cir. 1994); Kadic v. Karadzic, 70 F.3d 232 (2d Cir. 1995); Sosa v. Alvarez-Machain, 542 US 692 (2004). 69 MUIR WATT H., ‘Privatisation du contentieux des droits de l’homme et vocation universelle du juge américain: Réflexions à partir des actions en justice des victimes de l’holocauste devant les tribunaux des Etats-Unis’, in: Revue internationale de droit comparé 2003, p. 883 et seq., § 21. Judges (see e.g. in the United States Wiwa v. Royal Dutch Petroleum Co, 226 F.3d 88 (2d Cir. 2000), p. 106) and organizations campaigning for human rights protection (BUCHER A. (note 4), pp. 102-103; KESSEDJIAN C., ‘Les actions civiles pour violation des droits de l’homme – Aspects de droit international privé’, in: Travaux du comité français de droit international privé 2002-2004, p. 151 et seq., esp. p. 162.) sometimes invoke the risk of denial of justice to demonstrate the necessity of universal jurisdiction. 70 See the cases referred to above, note 67. 71 Accord, e.g. LAGARDE P. (note 15), § 179, p. 173, n. 474; LOUSSOUARN Y./BOUREL P./DE VAREILLES-SOMMIÈRES P. (note 1), § 485-1, p. 673; AUDIT B., ‘Le critère d’application des conventions judiciaires multilatérales’, in: Le droit international privé: esprit et méthodes, Mélanges en l’honneur de Paul Lagarde, Paris 2005, p. 19 et seq., esp. p. 34. 68

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Regulating International Jurisdiction: Towards a Global Answer the judgment enforceable in the former State’s territory.72 Moreover, a similar rule has long existed under French law.73 Article 22.1 jurisdiction can also be considered to be a jurisdiction rule protecting the fundamental interests of the forum State74, as it ensures the applicability of the various mandatory rules of the forum State existing in the field of real property. Two different functions may thus be performed by this foundation of jurisdiction. In some situations, as in enforcement of judgments cases, the forum court’s jurisdiction is directly necessary to protect the sovereignty of the forum State. In other situations, as in immovable property cases, the forum court’s jurisdiction only ensures the applicability of certain mandatory provisions of the law of the forum State75, whose application is necessary because of the paramount importance of the goal achieved by these provisions. Yet, in all cases, the jurisdiction of the forum State’s courts must be exclusive, either because the court of another State would infringe the sovereignty of the forum State if it decided the dispute, or because if a foreign court heard the case, there would be a risk that this court would not apply the mandatory provisions of the law of the forum State. The protection of the fundamental interests of the forum State therefore has a higher authority than proximity and party autonomy, since jurisdiction based on it excludes jurisdiction based on proximity and party autonomy.76 It is worthwhile noting, however, that rules protecting the fundamental interests of the forum State never give jurisdiction to a court that is unrelated to the dispute. The fundamental interests of the forum State cannot be involved in a controversy that has no con-

MAYER P., ‘Droit international privé et droit international public sous l’angle de la notion de compétence’, in: Rev. crit. dr. int. pr. 1979, p. 1 et seq., esp. § 9, p. 12. 73 Cass. civ., 12.05.1931, Compagnie française de navigation Cyprien Favre, Sirey 1932, 1, p. 137 et seq., note NIBOYET J.-P., Dalloz 1933, 1, p. 60 et seq., note SILZ E., Clunet 1932, p. 387 et seq., note PERROUD J. 74 PERREAU-SAUSSINE L., L’immeuble et le droit international privé, Etude des méthodes, Paris 2006. Contra MUIR WATT H., note on ECJ, 13.10.2005, C-73/04, Epoux Klein v. Rhodos Management Ltd, in: Rev. crit. dr. int. pr. 2006, p. 183 et seq., esp. p. 192. Clearly, this rule could also be considered to be based on proximity, since the Member State in which the property is situated has the closest connection to the litigation involving the property: see MUIR WATT H. (note 74); GAUDEMET-TALLON H. (note 51), § 101. However, proximity cannot explain why this jurisdiction is exclusive. The jurisdiction of the defendant’s domicile, for instance, is barred by article 22.1 jurisdiction, even though it may have a very close connection to the litigation, especially if the plaintiff and the defendant are domiciled in the same State. The only explanation for this exclusivity, therefore, seems to be the will of the State to ensure the applicability of the various mandatory rules existing in the field of real property. 75 PATAUT E., Principe de souveraineté et conflits de juridictions, Paris 1999. 76 See e.g. in Community law Brussels Convention, Article 16, Article 28 § 1; Regulation 44/2001, Article 22, Article 35.1. 72

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Laurence Usunier nection whatsoever to the forum State.77 Nevertheless, the protection of the fundamental interests of the forum State is an autonomous foundation of jurisdiction, distinct from proximity, since jurisdiction deriving from the former has a different nature from jurisdiction deriving from the latter. Indeed, jurisdiction protecting fundamental State interests is exclusive, whereas jurisdiction based on proximity is only concurrent. It is less obvious that the protection of the fundamental interests of the forum State is a foundation of jurisdiction in common law countries, where exclusive jurisdiction protecting State sovereignty is unfamiliar.78 Nonetheless, the involvement of the fundamental interests of the forum State does have an impact on jurisdiction in these countries. This is particularly obvious in the United States, where courts have long been willing to protect American State interests, for instance in antitrust cases.79 English courts, as well, have from time to time refused to decline jurisdiction because the dispute raised an issue of English public policy which should be decided by English courts.80 The protection of the fundamental interests of the forum State is therefore a foundation of jurisdiction not only in civil law countries, but also in common law countries. The analysis carried out so far reveals that both common law and civil law judges should try to assign reasonable boundaries to their jurisdiction and that, to do so, they should check whether their jurisdiction can be based on one of the four legitimate foundations of jurisdiction, namely: proximity, party autonomy, the protection of the right of access to the courts of a litigant, and the protection of the fundamental interests of the forum State. If none of these foundations can justify the jurisdiction of the forum court, the forum court should decline jurisdiction. Conversely, if one foundation can justify the jurisdiction of the forum court, the court should normally exercise its jurisREMY B., Exception d’ordre public et mécanisme des lois de police en droit international privé, Paris 2006, § 558; FALLON M., ‘Le principe de proximité dans le droit de l’Union européenne’, in: Le droit international privé: esprit et méthodes, Mélanges en l’honneur de Paul Lagarde, Paris 2005, p. 241 et seq., esp. pp. 255-256 and p. 259; MUIR WATT H., ‘L’internationalité et le droit de la famille’, in: Revue Lamy Droit des affaires 2002, § 46, p. 51 et seq., esp. pp. 54-55. 78 BRAND R., ‘Current problems, Common Ground, and First Principles: Restructuring the Preliminary Draft Convention Text’, in: BARCELO J. J./CLERMONT K. M. (ed.), A Global Law of Jurisdiction and Judgments: Lessons from the Hague, The Hague 2002, p. 75 et seq., esp. pp. 103-104. 79 For instance, some American courts refuse to apply the doctrine of forum non conveniens in anti-trust cases: United States v. National City Lines, 334 US 573 (1948), p. 578; Industrial Inv. Development Corp v. Mitsui & Co, Ltd, 671 F.2d 876 (5th Cir. 1982), pp. 890 et seq. American courts may also refuse to enforce a jurisdiction clause ‘if enforcement would contravene a strong public policy of the forum’: see Bremen v. Zapata Off-shore Co, 407 US 1 (1972), p. 15. It is therefore more difficult for an American court to decline jurisdiction where American State interests are involved. 80 See for instance Du Pont v. Agnew, [1987] 2 Lloyd’s Rep. 585. 77

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Regulating International Jurisdiction: Towards a Global Answer diction, since it is prima facie reasonable. If several courts are appropriate to hear the case, the plaintiff should be allowed to choose the court in which he or she brings his or her action. Nevertheless, there may be circumstances in which the forum court should decline jurisdiction even though its jurisdiction seemed prima facie reasonable. First, another court may also have jurisdiction over the action and it may be suitable that the forum court decline jurisdiction in favour of the foreign court. Second, the action may have been brought by the plaintiff for the sole purpose of harassing the defendant. In this type of situations a further distinction should be made. Either the action itself was filed in order to harass the defendant or the court in which the action was brought was chosen by the plaintiff in order to harass the defendant. The problem raised in the former situation is not one of jurisdiction, since the action is unconscionable wherever it is brought. The forum court should dismiss the action, but not for lack of jurisdiction. Consequently, this problem will not be dealt with further. The issue raised in the latter situation, on the contrary, is one of jurisdiction, since the abusive nature of the action brought in the forum court is directly related to the existence of other courts having more appropriate jurisdiction over the dispute. In this type of case, as well, the forum court will thus decline jurisdiction because another court has jurisdiction to hear the case. In all cases, therefore, a court having prima facie reasonable jurisdiction may only decline to exercise such jurisdiction in order to take into consideration the jurisdiction of a foreign court over the case.

II.

Taking into Consideration the Jurisdiction of Foreign Courts – The Relationship between Foreign Courts and the Dispute

Even if all the courts throughout the world assigned reasonable boundaries to their jurisdiction, there would still be situations in which several courts have jurisdiction over the same case, since it is enough that a court have a close connection (and not necessarily the closest connection) to the dispute for its jurisdiction to be reasonable. This is not always problematic. Quite often, the action is brought in only one of the various competent courts, this court delivers a judgment and the judgment is enforced without any problem related to the existence of other competent courts arising. Sometimes, however, it may seem necessary for the forum court to take into consideration the jurisdiction conferred by a foreign State on its courts, for example where there are parallel proceedings in the forum court and abroad. Taking into consideration the jurisdiction of another court generally leads the forum court to decline its jurisdiction in favour of the foreign court (A). But the forum court may also decide to protect its jurisdiction and to oppose that of the foreign court, by enjoining the parties from litigating abroad (B).

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The Forum Court Declining Jurisdiction

When should the forum court decline its jurisdiction, even though it is prima facie reasonable, to take into consideration the jurisdiction of a foreign court? To answer this question, one should first compare the foundations of the jurisdiction of the competing courts, since these foundations determine the nature of the jurisdiction deriving from them. If the foreign court’s jurisdiction is based on an exclusive jurisdiction clause while the forum court’s jurisdiction is based on the existence of a close connection between the forum State and the dispute, the forum court should decline its jurisdiction because it is only concurrent whereas the jurisdiction of the foreign court is exclusive. If the foreign court’s jurisdiction is based on the protection of a consumer’s right of access to the courts, while the jurisdiction of the forum court is based on a forum selection clause requiring the consumer to sue in the court of the stronger party’s domicile, the forum court should decline its jurisdiction because the jurisdiction of the foreign court is mandatory and therefore cannot be excluded by contract. It may, however, also be desirable for the forum court to decline jurisdiction in favour of a foreign court whose jurisdiction is neither exclusive nor mandatory, but only concurrent. In this situation the comparison of the foundations of the competing courts’ jurisdiction is not helpful for the determination of whether the forum court should decline jurisdiction. Another criterion must then be found. It is therefore necessary to distinguish cases where the forum judge declines jurisdiction because of the exclusive jurisdiction of a foreign court (1) and cases in which the forum judge declines jurisdiction because of the concurrent jurisdiction of a foreign court (2). Moreover, specific problems arise where the jurisdiction of the forum court derives from community law (3).

1.

Declining Jurisdiction to Take Into Consideration the Exclusive Jurisdiction of a Foreign Court

The jurisdiction of a foreign court may be exclusive if it relies either on the protection of the fundamental interests of the foreign State, on the protection of the weaker party or on an exclusive jurisdiction clause. In all these situations, it is clear that the forum court should decline its jurisdiction, even if it is prima facie reasonable. Most States agree, for example that, in real property matters, the courts of the State in which the land is situated have exclusive jurisdiction.81 As a result, the forum court must decline jurisdiction, even if it has a connection to the action, if

81 AKEHURST M., ‘Jurisdiction in International Law’, in: British Yearbook of International Law 1972-1973, p. 145 et seq., esp. p. 238; KESSEDJIAN C., ‘Vers une convention à vocation mondiale en matière de compétence juridictionnelle internationale et d’effets des jugements étrangers’, in: Revue de droit uniforme 1997, p. 675 et seq., § 26.

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Regulating International Jurisdiction: Towards a Global Answer the disputed land is situated abroad.82 Indeed, courts are usually reluctant to interfere with matters involving the fundamental interests of another State. The forum judge may also fear that its decision will not be enforced in the foreign country and that it will therefore have no effect at all. Mutatis mutandis, the same may be said about foreign jurisdiction based on the protection of the weaker party.83 Most States also consider that, where an exclusive jurisdiction clause was entered into by the parties, other courts should decline jurisdiction if an action is brought before them in breach of the agreement.84 As is the case of any other contract, exclusive jurisdiction clauses must be enforced. Nonetheless, in common law countries, courts have discretionary power to refuse to enforce foreign jurisdiction clauses for reasons of appropriateness.85 This is undesirable, since the very justification of the validity of forum selection clauses in common law countries is the legal certainty they provide.86 It is thus quite irrational to deprive these clauses of their main virtue by giving courts discretionary power to disregard them. 82 See for instance in England: British South Africa Co v. Companhia de Moçambique, [1893] AC 602; in Community law: Brussels Convention, Article 16 § 1, Regulation 44/2001, Article 22.1. 83 For instance, the exclusive jurisdiction given by the Brussels Convention, Article 14 § 2, and Regulation 44/2001, Article 16.2, to the courts of the consumer’s domicile is necessary to protect the consumer’s right of access to the courts. If an action is brought against a consumer in another court, this court should therefore decline jurisdiction in favour of the courts of the consumer’s domicile, because doing otherwise could cause injustice to the consumer if he is not able to defend the suit brought outside his home country. The forum court may also fear that its judgment will be deprived of any effect if it is not enforced in the country of the consumer’s domicile (Brussels Convention, Art. 28 § 1; Regulation 44/2001, Art. 35.1). 84 See e.g. in Community law: Brussels Convention, Article 17, Regulation 44/2001, Article 23; in England: Gienar v. Meyer, (1796) 2 HBl 603; Law v. Garrett, (1878) LR 8 Ch D 26; Austrian Lloyd SS Co v. Gresham Life Assurance Society Ltd, [1903] 1 KB 249; The Sindh, [1975] 1 Lloyd’s Rep. 372; The Benarty (No 2), [1985] QB 325; in France: Cass. civ., 19.02.1930, Mardelé, 27.01.1931, Dambricourt, in: Rev. crit. dr. int. pr. 1931, p. 514 et seq., Sirey 1933, 1, p. 41 et seq., note NIBOYET J.-P.; Cass. soc., 8.07.1985, Allard, in: Rev. crit. dr. int. pr. 1986, p. 113 et seq., note GAUDEMET-TALLON H.; Cass. civ. 1ère, 17.12.1985, Cie de signaux et d’entreprises électriques, in: Dalloz 1986, IR/SC, p. 265, obs. AUDIT B., Rev. crit. dr. int. pr. 1986, p. 537 et seq., note GAUDEMET-TALLON H. 85 See e.g. in England: The Eleftheria, [1970] P 94; The El Amria, [1981] 2 Lloyd’s Rep. 119; in the United States: Bremen v. Zapata Off-shore Co, 407 US 1 (1972), allowing federal courts to refuse to enforce a jurisdiction clause if unreasonable. In most American State courts, the doctrine of forum non conveniens remains applicable where a forum selection agreement confers jurisdiction on a foreign court: see PARK W. W., ‘The Relative Reliability of Arbitration Agreements and Court Selection Clauses’, in: GOLDSMITH J. L. (ed.), International Dispute Resolution: The Regulation of Forum Selection, Irvington, New York 1997, p. 3 et seq., esp. p. 11. 86 See e.g. in the United States: MAIER H. G., ‘The U.S. Supreme Court and the ‘User-Friendly’ Forum Selection Clause: The Effect of Carnival Cruise Lines on Interna-

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Laurence Usunier There is hence no real difficulty in establishing the necessity of declining jurisdiction where a foreign court has exclusive jurisdiction over the dispute. There are however exceptional situations in which the forum court should retain jurisdiction notwithstanding the exclusive jurisdiction of a foreign court. The first one is due to the fact that, in many States, the forum court declines jurisdiction because a domestic rule of jurisdiction states that one or another court has exclusive jurisdiction to deal with the dispute. But the forum court does not check that the foreign court really considers its jurisdiction to be exclusive. Yet, although a number of exclusive rules of jurisdiction are almost universal87, there may be cases in which the foreign court does not consider that it has exclusive jurisdiction, even though the domestic rules of the forum court say it has. This might happen for example, in actions involving rights in rem over immovable property situated abroad, if the distinction between movable and immovable property differs in the forum State and abroad.88 The forum court should therefore retain jurisdiction, even though its domestic rules grant exclusive jurisdiction to a foreign court, where the jurisdictional rules followed by the foreign court do not grant exclusive jurisdiction to that court. Foreign jurisdiction clauses raise another problem, in so far as their enforceability depends on their validity. The problem, then, is to know when a foreign jurisdiction clause should be declared void. Unfortunately, that question is not always answered clearly. The Brussels Convention (Article 17) and Regulation 44/2001 (Article 23) only state the formal requirements the clause must fulfil in order to be enforceable. It says almost nothing however about the substantive validity of the agreement (consent, capacity...) This raises uncertainty, since some may think that the list of requirements set forth by these Articles is exhaustive89, whereas others argue that general requirements applicable to any type of contract, such as capacity and consent, must be fulfilled by forum selection clauses as well.90 tional Contracts’, in: GOLDSMITH J. L. (ed.), International Dispute Resolution: The Regulation of Forum Selection, Irvington, New York 1997, p. 53. 87 See e.g., on the exclusive jurisdiction given to the courts of the country where the land is situated in actions involving rights in rem over immovable property, the above references, notes 81-82. 88 D’AVOUT L., Sur les solutions du conflit de lois en droit des biens, Paris 2006, § 192. 89 Some judgments of the ECJ may be interpreted to mean that the requirements set forth in Article 17 of the Brussels Convention (or, today, Article 23 of Regulation 44/2001) are exhaustive: see especially ECJ, 03.07.1997, C-269/95, Francesco Benincasa v. Dentalkit, in: Rec. 1997, I-3767, stating (at § 25) that ‘a jurisdiction clause, which serves a procedural purpose, is governed by the provisions of the Convention, whose aim is to establish uniform rules of international jurisdiction. In contrast, the substantive provisions of the main contract in which that clause is incorporated, and likewise any dispute as to the validity of that contract, are governed by the lex causae determined by the private international law of the State of the court having jurisdiction’. 90 On that issue, see GAUDEMET-TALLON H. (note 51), § 152.

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Regulating International Jurisdiction: Towards a Global Answer In other legal systems, the validity of these clauses is determined by referring to the choice of law rules. In England, for instance, the law governing the validity of forum selection clauses is generally the lex contractus.91 In France, it seems that a distinction is made among the form of the clause, its legality and its ‘validity’ strictly speaking.92 The form of the clause follows the rule locus regit actum. The legality, i.e., determining whether the clause infringes the mandatory jurisdiction of the forum (French) courts, is determined by the lex fori (French law). And the validity of the clause, that is, whether an agreement has really been entered into, is governed by the lex causae – usually the lex contractus. As the choice of law rules and substantive rules determining whether a forum selection clause is enforceable differ from one State to another, a given clause may be declared enforceable in one country and void in another. This decreases the legal certainty provided for by these clauses. To solve this problem, one may think about elaborating an international convention unifying the substantive rules applicable to jurisdiction clauses.93 However, this may be difficult and unnecessary, since forum selection clauses are contracts and at least part of the requirements they must fulfil in order to be enforceable are common to all types of contracts.94 It may be enough, therefore, to harmonize the choice of law rules applicable to these clauses. Yet another solution was retained by the recent Hague Convention on choice of court agreements.95 Indeed, the drafters of that convention chose to harmonize only the formal requirements applicable to these clauses (Article 3.c) and to refer, for the rest, to the law of the chosen forum (Articles 5.1, 6.a, 9.a), ‘law’ meaning not only substantive rules, but also private international law rules of the chosen forum country.96 This is a good solution to ensure a uniform assessment of the validity of the clause in all countries. It may however be difficult to put into practice since, as we have seen, the choice of law rules applicable to forum selection clauses are not perfectly clear in all countries. A last solution would be to give priority to the chosen court to decide on the enforceability of the clause. If an action is brought in the forum court in breach of an exclusive jurisdiction clause, the forum judge should decline jurisdiction without verifying the validity of the clause, in order to let the selected forum decide on it, unless the clause is obviously invalid or unless it infringes the mandatory juris91 See for instance The Iran Vojdan, [1984] 2 Lloyd’s Rep. 380; The Frank Pais, [1986] 1 Lloyd’s Rep. 529. 92 Cass. civ. 1ère, 03.12.1991, in: Rev. crit. dr. int. pr. 1992, p. 340 et seq., note H. G.-T. 93 KESSEDJIAN C. (note 52), § 35. 94 For a development of that idea in the field of arbitration clauses, see BOLLÉE S., Les méthodes du droit international privé à l’épreuve des sentences arbitrales, Paris 2004, §§ 435 et seq. 95 On that Convention, see DOGAUCHI M./HARTLEY T. C. (note 5); KESSEDJIAN C. (note 52). 96 DOGAUCHI M./HARTLEY T. C. (note 5), § 125.

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Laurence Usunier diction of the forum court. This proposal is inspired by French rules in the field of arbitration.97 The solution is especially valuable where there are parallel proceedings concerning the contract containing the clause. In this case, it is not logical to give priority to the court in which the action was brought in breach of the jurisdiction clause to decide whether the clause is enforceable, even if the litigation before that court was commenced first.98 Apart from these issues, it is not disputed that the forum court should decline jurisdiction when a foreign court has exclusive jurisdiction. Declining jurisdiction in favour of a foreign court having concurrent jurisdiction is much more subject to debate.

2.

Declining Jurisdiction to Take into Consideration the Concurrent Jurisdiction of a Foreign Court

There is a very clear-cut distinction between common law and civil law countries concerning the situations in which the forum court should decline jurisdiction to take into consideration the concurrent jurisdiction of a foreign court. In common law countries, the forum judge can decline jurisdiction each time a foreign court is more appropriate to hear the case99, even if no action has yet been brought in the foreign court. In civil law countries, on the contrary, the forum judge can decline jurisdiction only if the same action or a closely related action is pending abroad.100 The criterion determining whether the concurrent jurisdiction of the foreign court shall prevail over that of the forum court also differs in common law and civil law countries. In common law countries, the forum judge declines jurisdiction if the foreign court is a more appropriate forum for trial.101 In civil law countries, the NCPC, art. 1458; see e.g.: Cass. civ. 1ère, 07.06.1989, Soc. Anhydro v. Soc. Caso Pillet, in: Revue de l’arbitrage 1992, p. 61 et seq., note DERAINS Y.; Cass. civ. 1ère, 28.06.1989, in: Revue de l’arbitrage 1989, p. 653 et seq., note FOUCHARD Ph., Clunet 1990, p. 1004 et seq., note OUAKRAT Ph.; Cass. civ. 1ère, 26.06.2001, Gazette du Palais novembredécembre 2001, Som. 3824; Cass. civ. 1ère, 23.05.2006, Alhinc v. Banque de France, in: Rev. crit. dr. int. pr. 2007, p. 128 et seq., note JAULT-SESEKE F.; Cass. civ. 1ère, 7.06.2006, Copropriété maritime Jules Verne v. American Bureau of shipping, in: Revue de l’arbitrage 2006, p. 945 et seq., note GAILLARD E., Clunet 2006, p. 1384 et seq., note MOURRE A.; Cass. civ. 1ère, 11.07.2006, Soc. NBC v. Bernadaux, in: Semaine juridique 2006, II, n° 10182, note CALLÉ P. 98 Contra, see, in Community law: ECJ, 09.12.2003, C-116/02, Erich Gasser GmbH v. MISAT Srl, in: Rec. 2003, I-14693. 99 See references above note 45. 100 See e.g. in France: Cass. civ. 1ère, 26.11.1974, Soc. Miniera di Fragne (note 22); Cass. civ. 1ère, 22.06.1999 (note 22); in Community law: Brussels Convention, Articles 2123; Regulation 44/2001, Articles 27-30. 101 See e.g. in England: De Dampierre v. De Dampierre, [1988] AC 92, p. 108, stating that the doctrine of forum non conveniens is applicable and driven by the same princi97

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Regulating International Jurisdiction: Towards a Global Answer forum judge declines jurisdiction if the action was brought first in the foreign court, before it was brought in the forum court.102 None of these solutions is perfectly satisfactory. Two situations must be distinguished: where there are no parallel proceedings abroad and the action is pending only before the forum court; and where there are parallel proceedings in the forum court and abroad. Where there are no parallel proceedings abroad, the only criterion able to decide whether the forum court should decline jurisdiction is the respective appropriateness of the forum court and of the foreign court. The issue, in this situation, is to know whether the forum court should always refuse to decline jurisdiction (as in civil law countries, rejecting the doctrine of forum non conveniens), whether the forum court should decline jurisdiction each time another forum seems more appropriate to hear the dispute (as in most common law countries103) or whether it should decline jurisdiction only where it is inappropriate for trial. The last solution, adopted in Australia104, seems more convincing than that of other common law countries, which is not procedurally rational and efficient. Jurisdiction is a procedural issue and it must be treated as such, that is, as a preliminary issue, to be solved quickly. Long debates on the most appropriate forum waste the time and money of the litigants and of the forum State.105 Moreover, it is unnecessary for an appropriate forum with reasonable jurisdiction to decline jurisdiction just because another forum is a little bit more appropriate. Requiring that the court hearing the action be the forum having the closest connection to the dispute is simply to confuse the logics of jurisdiction and of choice of law. Finally, it favours the defendant and disregards the interests of the plaintiff, whose right of access to the courts must also be protected.106 Why should the plaintiff be deprived of the jurisdiction of a court that is not inconvenient and inaccessible to the defendant each time another court is a little more appropriate? This is not to say that the Anglo-American version of the doctrine of forum non conveniens is unreasonable and should be discarded. At the very least, howples whether or not there are other relevant proceedings already pending in the alternative forum. 102 GAUDEMET-TALLON H., ‘Litispendance et connexité en droit européen et en droit international: la règle prior tempore…’, in: Dalloz Affaires 1996, p. 474 et seq. 103 See the references supra (note 28). 104 Voth v. Manildra Flour Mills Pty Ltd (note 28). A close solution was adopted in the former proposed Hague Convention on jurisdiction and foreign judgments in civil and commercial matters, Article 22 (on this provision, see BUCHER A. (note 4), pp. 107-108). 105 BURBANK S. B., ‘Jurisdictional Equilibration, the Proposed Hague Convention, and Progress in National Law’, in: BARCELO J. J./CLERMONT K. M. (ed.), A Global Law of Jurisdiction and Judgments: Lessons from the Hague, The Hague 2002, p. 117 et seq., esp. p. 131. 106 DROZ G. A. L., ‘Les droits de la demande dans les relations privées internationales’, in: Travaux du comité français de droit international privé 1993-1994, p. 97 et seq., esp. pp. 104 et seq.

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Laurence Usunier ever, it should be excluded where the forum court is that of the defendant’s domicile. Such a jurisdiction may cause no injustice to the defendant107 where there are no parallel proceedings abroad. Moreover, the protection of the plaintiff’s right of access to the courts implies that there be at least one forum that the plaintiff can easily identify and whose jurisdiction cannot be disputed. That court can only be that of the defendant’s domicile.108 On the contrary, it is absolutely necessary, even in civil law countries traditionally rejecting forum non conveniens, that the forum court be allowed to decline jurisdiction where it appears not only that a foreign court is more appropriate to decide the case, but also that the forum court itself is clearly inappropriate to hear the dispute. Even if there is no action simultaneously pending abroad, it is clear that the forum court must decline jurisdiction if it is obviously and grossly inconvenient for the defendant and a foreign court can try the action without inflicting on the plaintiff such an obvious and gross injustice. In practice, this amounts to saying that the forum court should decline jurisdiction if the choice of the plaintiff to bring the action before it was abusive.109 In civil law countries, that exception could therefore rely on the well known ‘théorie de l’abus de droit’ instead of relying on the doctrine of forum non conveniens. Where parallel proceedings are simultaneously pending in the forum court and in a foreign court, it is much more evident that one of the two courts must decline jurisdiction. Parallel proceedings not only waste the time and money of both the litigants and the States whose courts are involved, but they may also give rise to conflicting decisions. The issue here is therefore the criterion determining which court shall prevail. It may be either a spatial or a temporal criterion.110 The spatial criterion is used in common law countries, where the forum court declines jurisdiction if the foreign court is more appropriate to hear the dispute111; the chronological criterion is used in civil law countries, where the forum court declines juCHALAS C. (note 2), § 586; NUYTS A. (note 2), §§ 494 et seq. Contra, see e.g. WEINTRAUB R. J., ‘The United States as a Magnet Forum and What, if Anything, to Do about It’, in: GOLDSMITH J. L. (ed.), International Dispute Resolution: The Regulation of Forum Selection, Irvington, New York 1997, p. 213 et seq., esp. pp. 230-231. 108 NUYTS A. (note 2), § 496. The natural forum of the dispute is also a court whose jurisdiction may cause no injustice to the defendant and cannot therefore be disputed. However, it is far from always easy for the plaintiff to determine which court is the natural forum of the dispute. 109 On abuse of right in the field of international jurisdiction and the relationship between abusive forum shopping and appropriateness of the various courts having jurisdiction over the case, see NUYTS A., ‘Forum shopping et abus du forum shopping dans l’espace judiciaire européen’, in: Mélanges John Kirkpatrick, Bruxelles 2004, p. 745 et seq. 110 MOISSINAC MASSÉNAT V., Les conflits de procédures et de décisions en droit international privé, Paris 2007; NIBOYET M.-L./GEOUFFRE DE LA PRADELLE G., Droit international privé, Paris 2007, pp. 334 et seq. 111 FAWCETT J. J. (ed.), Declining Jurisdiction in Private International Law, Oxford 1995, pp. 29 et seq. 107

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Regulating International Jurisdiction: Towards a Global Answer risdiction if the action was first filed in the foreign court.112 In the author’s opinion, the chronological criterion is in principle preferable. First, it is clearer than the appropriateness criterion. The risk that both courts claim that the action was filed first with such court is smaller than the risk that both courts consider themselves to be the most appropriate forum for tria.l. Second, giving the court in which the action was commenced first priority to decide the case is quite logical – provided the jurisdiction of that court is reasonable – and, above all, it is the only means to deter litigants from bringing parallel proceedings. In countries rejecting the AngloAmerican version of forum non conveniens, especially, it would be an incentive for the defendant to bring parallel proceedings abroad to say, on the one hand, that the forum court cannot decline jurisdiction if a foreign court is more appropriate for trial but no action is yet pending in that court and, on the other hand, that the forum court will decline jurisdiction if a foreign court is more appropriate for trial and an action is pending in that court. Consequently, where parallel proceedings are brought in the forum State and abroad, the forum court should decline jurisdiction if the action was first brought in the foreign court before it was brought in the forum court. Nevertheless, there should be exceptions to that rule. The forum court may refuse to decline jurisdiction if the foreign court, in which the action was first filed, is obviously inappropriate to hear the action or if the action brought in that court is an abuse of process113. Where parallel proceedings do not involve the same action, but only related actions, it is also better to favour the most appropriate forum to hear simultaneously the two actions, since it is less certain that the two fora are interchangeable than in lis alibi pendens cases. Where the parallel actions are related to each other rather than identical, the chronological criterion should only play a subsidiary role, to determine which court should prevail if both courts are appropriate to hear the two actions at the same time.

3.

Declining Jurisdiction Based on Community Law

A specific problem arises where the forum court contemplates declining jurisdiction deriving from community law in favour of the courts of a State that is not a Member State of the European Community114. May a Member State’s court decline jurisdiction deriving from the Brussels Convention or Regulation 44/2001 if a choice of forum agreement confers jurisdiction on the courts of a third State, if the FAWCETT J. J. (note 111), pp. 31 et seq. Contra, see in Community law: ECJ, 6.12.1994, C-406/92, The ship Tatry v. The Ship Maciej Rataj, in: Rec. 1994, I-5439; ECJ, 09.12.2003, C-116/02, Erich Gasser GmbH v. MISAT Srl (note 98), depriving Member States’ courts from any power to refuse to decline jurisdiction even if the circumstances of the case make it likely that the action pending in the court in which the action was first filed was brought in bad faith. 114 On that issue, see NUYTS A., ‘La théorie de l’effet réflexe’, in: Le droit processuel et judiciaire européen, Bruges 2003, p. 73 et seq. 112 113

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Laurence Usunier subject-matter of the controversy is title to land situated in a third State, or if a third State is a more appropriate forum for trial? Community law says nothing about these issues. However, a case recently decided by the European Court of Justice shed light on them. In Owusu v. Jackson115, the ECJ had to decide whether a Member State’s court could decline the jurisdiction conferred on it by Article 2 of the Brussels Convention on the ground that a court of a non-Contracting State was a more appropriate forum for the trial of the action. The reference to the European Court of Justice had been made by the House of Lords, in order to make clear whether the doctrine of forum non conveniens allowed English courts to decline jurisdiction deriving from the Brussels Convention in favour of courts of third States.116 Since the issue raised by this case was not only that of the applicability of the doctrine of forum non conveniens in the European judicial area, but also that of the possibility for Member States’ courts to decline jurisdiction conferred on them by community law in favour of third States, the House of Lords asked the European Court of Justice whether declining jurisdiction conferred on the forum court by the Brussels Convention would be inconsistent with the Convention ‘in all circumstances or only in some’? The House of Lords thereby gave the ECJ the opportunity to decide whether a Member State’s court could decline jurisdiction because of the exclusive jurisdiction of a third State – related either to the subjectmatter of the dispute or to the existence of a forum selection clause – or because of the existence of parallel proceedings in a third State. Unfortunately, the European Court of Justice refused to deal with this type of situation, which did not correspond to the Owusu case. Nevertheless, the preliminary ruling delivered by the European Court of Justice gives some guidance concerning the way to deal with declining jurisdiction in favour of third States. The main argument invoked by the Court to forbid Member States’ courts to decline jurisdiction on the ground that a third State’s court is more appropriate for trial is that of legal certainty. The Court thinks that the discretionary power conferred by the doctrine of forum non conveniens on judges to decline jurisdiction would undermine the predictability of the rules laid down by the Brussels Convention. The ECJ also rejects forum non conveniens because this exception is not provided for by the Convention and because it is far from being accepted in all Member States. Allowing Member States’ courts to use that doctrine would therefore affect the uniform application of the Brussels Convention. In the light of these arguments, one may think that even though, on the one hand, the Court of Justice rejects the notion that an exception not provided for by the Brussels Convention may allow Member States’ courts to decline jurisdiction conferred on them by community law in favour of third States, on the other hand, the Court of Justice might agree to extend the Convention mechanisms allowing ECJ, 01.03.2005, C-281/02, Owusu v. Jackson (note 9). The leading case on that issue before the reference to the ECJ was made was Re Harrods (Buenos Aires) Ltd, [1992] Ch 72, stating that the doctrine of forum non conveniens allowed English courts to decline the jurisdiction conferred on them by the Brussels Convention in favour of the court of a third State. 115 116

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Regulating International Jurisdiction: Towards a Global Answer Member States’ courts to decline jurisdiction in favour of other Member States’ courts to relationships with third States. Such an extension would neither affect the uniform application of the Brussels Convention nor undermine legal certainty and the predictability of the rules set forth in the Convention, since these mechanisms are provided for by the Convention itself and are known in all Member States. Accordingly, a Member State’s court could decline jurisdiction conferred on it by community law in favour of the courts of a third State where these courts have exclusive jurisdiction, either because of the subject-matter of the dispute (rights in rem in immovable property, enforcement of judgments, etc.) or because of an exclusive jurisdiction clause, and where parallel proceedings are pending in the courts of a third State117. However, whereas it is possible to apply the Brussels Convention or Regulation 44/2001 to determine the types of situations in which a Member State’s court is allowed to decline jurisdiction conferred on it by one of these texts in favour of a third State, it is not possible to apply EC law to determine the various conditions that must be fulfilled in order to decide whether the relevant court should be permitted to decline jurisdiction in one of those situations. Article 21 of the Brussels Convention and Article 27 of Regulation 44/2001, for instance, compel the forum court to stay the proceedings in favour of the court in which the action is first filed as long as the parallel proceedings involve the same parties and cause of action. Outside the European judicial area, however, such a provision cannot be followed. There is no guarantee either of the reasonableness of the jurisdiction of the third State’s court in which the action was first filed nor of the enforceability of its judgment in the Member States of the European Community. Accordingly, the national laws of the Member States must apply to determine the conditions that must be fulfilled in order for a Member State’s court to decline its jurisdiction in favour of a third State.118 If proceedings are brought in France in breach of an agreement conferring jurisdiction on the courts of a third State, for example, the French court should decide whether or not to decline jurisdiction by verifying the validity of the clause according to French law.119 If parallel proceedings are brought in a third State and in England, the English court should decline jurisdiction if the foreign court can be considered to be a more appropriate forum for trial. Finally, there is are many of situations in which the forum judge can take into consideration the jurisdiction of a foreign court in order to decline a prima facie reasonable jurisdiction. More seldom, the forum judge may also decide to Accord NUYTS A. (note 116). Accord NUYTS A. (note 116); DROZ G. A. L., Compétence judiciaire et effets des jugements dans le Marché commun, Paris 1972, § 165, § 168, §§ 216 et seq., § 329; COIPELCORDONNIER N., Les conventions d’arbitrage et d’élection de for en droit international privé, Paris 1999, § 129, CHALAS C. (note 2), § 623. 119 In the same vein, see e.g. Cass. com., 19.12.1978, Europa-Carton, in: Rev. crit. dr. int. pr. 1979, p. 617 et seq., note HUET A., Clunet 1979, p. 366 et seq., note GAUDEMETTALLON H. Contra, Versailles, 26.09.1991, in: Rev. crit. dr. int. pr. 1992, p. 333 et seq., note H. G.-T. 117 118

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Laurence Usunier protect its own jurisdiction by enjoining the parties from litigating in a foreign court.

B.

The Forum Court Protecting Its Jurisdiction

Where the forum judge considers that his or her own jurisdiction should prevail over the jurisdiction of a foreign court, he or she may try to protect his or her own jurisdiction. To do so, he or she can first refuse to decline jurisdiction and to enforce the judgment of the foreign court. But these are not efficient means to protect the jurisdiction of the forum court where the foreign judgment is enforceable in its State of origin or in another State. In common law countries, however, the forum court may resort to a more drastic means of protection of its jurisdiction by issuing an injunction preventing the litigants from bringing or continuing proceedings abroad.120 This type of injunction is called ‘anti-suit injunction’.121 As is the case of other types of injunctions at English law, anti-suit injunctions are equitable remedies representing a very efficient sanction. If the enjoined litigant does not comply with the order, he or she is liable for contempt of court and may be fined or even sent to jail.122 This remedy is highly debated. Though anti-suit injunctions operate in personam, as they are directed at the litigant who initiated the foreign proceedings rather than at the foreign court itself123, they interfere, at least indirectly, with the process of the foreign court.124 In civil law countries, these injunctions are thus often rejected as an outrageous interference with the process of the foreign court125 or as an infringement of the exclusive jurisdiction conferred by public international law on the courts of each State to determine their own jurisdiction.126 Though serious, that criticism is not sufficient to rebut completely anti-suit injunctions, because these injunctions are not always based on the lack of jurisdiction of the foreign court. English judges, especially, can only grant anti-suit injunctions if the 120 See for instance in England: Société Nationale Industrielle Aérospatiale v. Lee Kui Jak, [1987] AC 871; in the United States: Laker Airways Ltd v. Sabena, Belgian World Airlines, 731 F.2d 909 (D.C. Cir. 1984). 121 For general presentations of these injunctions, see COLLINS L. (note 1), p. 501 et seq.; BRIGGS A./REES P., Civil Jurisdiction and Judgments, London 2005, p. 415 et seq. 122 CHESTERMAN M., ‘Contempt, in the common law, but not in the civil law’, I.C.L.Q. 1997, vol. 46, p. 521 et seq. 123 See for instance in England: Settlement Corp v. Hochschild, [1966] Ch 10, p. 15. 124 English judges and authors, for instance, do acknowledge this: British Airways Board v. Laker Airways Ltd, in [1985] AC 58, p. 95; COLLINS L. (note 1), p. 501; BRIGGS A./REES P. (note 124), p. 416. 125 GAUDEMET-TALLON H. (note 29), p. 434. 126 See for instance CLAVEL S., Le pouvoir d’injonction extraterritorial pour le règlement des litiges privés internationaux, Paris 1999, pp. 312-313.

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Regulating International Jurisdiction: Towards a Global Answer foreign proceedings are oppressive or vexatious.127 English decisions make it clear that the fact that England is the natural forum for the action or that concurrent proceedings were brought abroad whereas an action was already pending in England is not a sufficient basis for an injunction to be ordered.128 It must be the case that the foreign action will lead to a serious injustice and the injunction must be necessary to remedy that injustice. However, oppression or vexation is less strictly required where the injunction is based on the breach of an agreement conferring jurisdiction on English courts or providing for arbitration in England.129 In these cases, courts tend to grant the injunction automatically.130 This is undesirable. Granting an antisuit injunction on the sole ground that the foreign action was brought in breach of a jurisdiction or arbitration clause amounts to using the injunction as a means to deny the jurisdiction of the foreign court. Furthermore, the breach of a jurisdiction or arbitration clause is sometimes understandable, such as where the litigation involves several defendants, some which are not bound by the clause.131 It is therefore inaccurate to assert that anti-suit injunctions necessarily infringe the jurisdiction conferred by public international law on the courts of each State to determine their jurisdiction. These injunctions may be legal, provided they are meant to remedy the injustice suffered by the claimant because of the abusive character of the foreign action, rather than to deny the jurisdiction of the foreign court.132 Besides, it is inaccurate to state that anti-suit injunctions may only be used in common law countries, since the French Cour de cassation recently approved of

Société Nationale Industrielle Aérospatiale v. Lee Kui Jak (note 123); Airbus Industrie GIE v. Patel, [1999] 1 AC 119. 128 See for instance Peruvian Guano Company v. Bockwoldt, (1883) LR 23 Ch D 225, p. 230; Seismic Shipping Inc v. Total E&P UK plc (the « Western Regent »), [2005] 2 Lloyd’s Rep. 359, pp. 368-369; Société Nationale Industrielle Aérospatiale v. Lee Kui Jak (note 123), p. 894; Airbus Industrie GIE v. Patel (note 130), p. 133; Turner v. Grovit, [2002] 1 WLR 107, p. 118. 129 See for instance The Angelic Grace, [1995] 1 Lloyd’s Rep 87; DVA v. Voest Alpine, [1997] 2 Lloyd’s Rep. 279. 130 A number of decisions consider that it is inherently oppressive or vexatious to bring an action in breach of a jurisdiction or arbitration clause. See for instance Tracomin SA v. Suddan Oil Seeds Co (No 2), [1983] 2 Lloyd’s Rep. 624; Sohio Supply Co v. Gatoil (USA) Inc, [1989] 1 Lloyd’s Rep. 588, p. 592; Continental Bank NA v. Aekos Compania Naviera SA, [1994] 1 WLR 588. See also Shell v. Coral Oil [1999] 1 Lloyd’s Rep. 72, stating (at p. 78) that, where the foreign action was brought in breach of a jurisdiction or arbitration clause, the burden is on the litigant that initiated the foreign proceedings to show that the injunction must not be granted. 131 In this type of situation, the House of Lords acknowledged that the claim for an injunction could be dismissed in spite of the breach of a valid jurisdiction clause: see Donohue v. Armco, [2002] 1 Lloyd’s Rep. 425. 132 Accord NIBOYET M.-L./GEOUFFRE DE LA PRADELLE G. (note 110), § 489. 127

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Laurence Usunier an injunction issued by a French Court of appeal to put an end to Spanish proceedings interfering with French insolvency proceedings.133 However, it is not possible to issue anti-suit injunctions where the courts involved are those of Member States of the European Community and the Brussels Convention or Regulation 44/2001 applies. The European Court of Justice has decided, in the case of Turner v. Grovit, that the Brussels Convention precluded Member States’ courts from granting this type of order, even if the party who initiated the foreign proceedings acted in bad faith with a view to frustrating the proceedings pending in the forum court.134 The Court considered that anti-suit injunctions were inconsistent with the principle of mutual trust, which is one of the foundations of the Brussels Convention scheme. According to the ECJ, these injunctions are necessarily based on a review by the issuing court of the jurisdiction of the other court, which is forbidden by the principle of mutual trust.135 The reasoning of the Court is not very convincing, since it bases the refusal of anti-suit injunctions on the inaccurate argument that all anti-suit injunctions are designed to deny the jurisdiction of the foreign court. Nevertheless, the conclusion reached by the ECJ was probably unavoidable, since it is arguable that, within the European Community, Member States must trust each other and must let each Member State’s courts remedy the abuses of process occurring before them.136 Only where the anti-suit injunction is based on the breach of an arbitration clause could an exception be allowed. As arbitration is excluded from the scope of the Brussels Convention and Regulation 44/2001, it is possible to argue that English courts retain the power to issue injunctions to prevent litigants from bringing or continuing proceedings in another Member State in breach of an arbitration clause.137 A reference for a preliminary ruling of the ECJ on that issue has recently been made by the House of Lords.138 As a result, the last area of uncertainty concerning the Cass. civ. 1ère, 19.11.2002, Banque Worms v. Epoux Brachot, in: Semaine juridique 2002, II, n° 10201, note CHAILLÉ DE NÉRÉ S., Dalloz 2003, p. 797 et seq., note KHAIRALLAH G., Gazette du Palais mai-juin 2003, Som. 1758, note NIBOYET M.-L., Rev. crit. dr. int. pr. 2003, p. 631 et seq., note MUIR WATT H. On this decision, see also MUIR WATT H., ‘Injunctive Relief in the French Courts: A Case of Legal Borrowing’, in: Cambridge Law Journal 2003, p. 573 et seq. 134 ECJ, 27.04.2004, C-159/02, Turner v. Grovit (note 9). 135 ECJ, 27.04.2004, C-159/02, Turner v. Grovit (note 9), § 28. 136 NIBOYET M.-L./GEOUFFRE DE LA PRADELLE G. (note 110), § 490. 137 For judgments asserting that it is still possible, after the judgment of the ECJ in Turner v. Grovit, for English courts to issue anti-suit injunctions where proceedings are brought in another Member State in breach of an arbitration clause, see e.g.: Through Transport Mutual Insurance Assn (Eurasia) Ltd v. New India Assurance Assn Co Ltd, [2005] 1 Lloyd’s Rep. 67; West Tankers Inc v. Ras Riunione Adriatica di Sicurta, ‘the Front Comor’, [2005] 2 Lloyd's Rep. 257. 133

138 West Tankers Inc v. Ras Riunione Adriatica di Sicurta, ‘the Front Comor’, [2007] 1 Lloyd's Rep. 391. A reference had previously been made in Toepfer International GmbH

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Regulating International Jurisdiction: Towards a Global Answer legality of anti-suit injunctions within the European judicial area should be cleared up soon. Even in the rare cases where anti-suit injunctions can be considered to be legal, the grant of such an injunction may appear unsuitable. Anti-suit injunctions deprive the foreign court of the opportunity to consider the enjoined action, which is frustrating and offensive for that court. Accordingly, this remedy must be used with caution.139 First, the intervention of the forum court must be legitimate. The jurisdiction of the forum judge, in particular, must be indisputable. This requirement is usually fulfilled, since English courts are extremely demanding when they are asked to issue anti-suit injunctions. To grant such an injunction, an English court must not only have personal jurisdiction over the defendant, but it should also have jurisdiction over the substance of the dispute itself, and even be the natural forum for the action.140 Second, the utility of the injunction must be established. The injunction must first be necessary. There should be no alternative remedy for the injustice suffered by the claimant. Refusing to enforce the judgment delivered by the foreign court should be insufficient, because the foreign judgment might be enforceable either in the foreign country itself or in another country. It must also be the case that damages cannot provide the claimant with a satisfactory remedy. These factors are rarely carefully discussed by English courts141, but they ought to be. The injunc-

v. Société Cargill France SA, [1997] 2 Lloyd’s Rep. 98, but the case was settled before the ECJ issued a decision. 139 See e.g. in England: British Airways Board v. Laker Airways Ltd (note 127), p. 95; South Carolina Insurance Co v. Assurantie Maatschappij ‘De Zeven Provincien’ NV, [1987] AC 24, p. 40; Société Nationale Industrielle Aérospatiale v. Lee Kui Jak (note 123), p. 892; Airbus Industrie GIE v. Patel (note 130), p. 133; in the United States: Laker Airways Ltd v. Sabena, Belgian World Airlines (note 123), p. 927. 140 At least where the claim for injunctive relief is not based on the breach of an agreement providing for litigation or arbitration in England: see Société Nationale Industrielle Aérospatiale v. Lee Kui Jak (note 123), p. 896; Airbus Industrie GIE v. Patel (note 130), p. 134. For an interesting explanation of that requirement of ‘double jurisdiction’, see BRIGGS A., ‘The unrestrained reach of an anti-suit injunction: A Pause for Thought’, in: Lloyd’s Maritime and Commercial Law Quarterly 1997, p. 90 et seq.; comp. HARRIS J., ‘Anti-suit injunctions – a home comfort?’, in: Lloyd’s Maritime and Commercial Law Quarterly 1997, p. 413 et seq. 141 That issue is sometimes discussed in English cases involving the breach of a jurisdiction or arbitration clause. But the courts generally assert, without thorough analysis, that damages are not a satisfactory remedy in this type of situations. See for instance The Angelic Grace (note 132), p. 96; Charterers Mutual Assurance Assn Ltd v. British & Foreign, [1998] IL Pr 838, p. 853; Bankers Trust Co v. PT Jakarta International Hotels & Development, [1999] 1 Lloyd’s Rep. 910, p. 915. On that issue, see also JOSEPH D., Jurisdiction and Arbitration Agreements and their Enforcement, London 2005, pp. 400 et seq.; TAN D., ‘Damages for Breach of Forum Selection Clauses, Principled Remedies, and Control of

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Laurence Usunier tion should also be refused if it is likely that the foreign court itself will remedy the injustice sustained by the defendant in the foreign proceedings.142 Finally, the claim for an injunction must be dismissed if the injunction is not an efficient remedy, i.e. where it is clear that the injunction will not be enforceable. This is the case when the enjoined litigant is not domiciled, and has no property, in the country of the enjoining court because in such a case the injunction cannot be enforced in that country and it is almost impossible to enforce an anti-suit injunction in another State, especially that of the court where the abusive proceedings were brought.143 In this type of situation, it is better to dismiss the claim for injunctive relief than to issue an injunction that will have no effect apart from offending the foreign court. Unfortunately, this proposal is not always followed by English courts.144

III. Conclusion Despite the sharp contrast existing between common law and civil law approaches to international jurisdiction, it is possible to develop a theory of jurisdiction common to all of these legal systems. Indeed, in both common law and civil law countries, the jurisdictional inquiry is divided into two fundamental stages. First, the forum court must ascertain its own jurisdiction, by investigating its relationship with the controversy. Throughout that first phase, the forum court ought to pursue the goal of assigning reasonable boundaries to its international jurisdiction. In order to achieve that purpose, the forum court should make certain that its jurisdiction can rely on one of the four legitimate foundations of jurisdiction, namely, proximity, party autonomy, the protection of the right of access to the courts of one of the litigants, or the protection of the fundamental interests of the forum State. If the jurisdiction of the forum court can be based on none of them, the forum court must decline jurisdiction. If the jurisdiction of the forum court can be based on one of these foundations, the forum court should normally exercise jurisdiction, beInternational Civil Litigation’, in: Texas International Law Journal 2005, vol. 40, p. 623 et seq. 142 See for instance in England Seismic Shipping Inc v. Total E&P UK plc (the « Western Regent ») (note 131). 143 See for instance in Belgium Bruxelles, 18.12.1989, in: R. W. 1990-1991, p. 676; in Germany Re the Enforcement of an English anti-suit injunction, in: [1997] IL Pr 320; in France Cass. civ. 1ère, 30.06.2004, Stolzenberg v. CIBC Mellon Trust Company, in: Revue trimestrielle de droit civil 2004, p. 549 et seq., obs. THÉRY Ph., Rev. crit. dr. int. pr. 2004, p. 815 et seq., note MUIR WATT H., Clunet 2005, p. 112 et seq., note CUNIBERTI G., Gazette du Palais janvier-février 2005, Som. 398, note NIBOYET M.-L. (obiter dictum). 144 NORTH P. M./FAWCETT J. J. (note 1), p. 360; In re Liddell’s Settlement Trusts, [1936] Ch 365, p. 373 and p. 374; Castanho v. Brown and Root (UK) Ltd, [1981] AC 557, p. 574.

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Regulating International Jurisdiction: Towards a Global Answer cause it is prima facie reasonable. Nevertheless, at the second stage of the jurisdictional inquiry, the forum court may take into consideration the jurisdiction of a foreign court. The forum court should thus decline jurisdiction if a foreign court has exclusive jurisdiction over the action, either because of the subject-matter of the litigation or because of the existence of a valid forum selection clause. The forum court can also decline jurisdiction to take into consideration the concurrent jurisdiction of a foreign court, if it is a more appropriate forum for trial of the action or if parallel proceedings are pending abroad. In exceptional situations, the forum court may also protect its own jurisdiction by enjoining the litigants from bringing or continuing proceedings abroad, if the foreign proceedings represent an abuse of process and if the injunction is strictly necessary to remedy the injustice sustained by the claimant. Some of these proposals are already followed by States, some are not. To put them into practice, it would be possible to adopt an international convention unifying the rules of jurisdiction in civil and commercial matters. The elaboration of such an instrument is not necessary, however, since States could decide unilaterally to follow these recommendations. Moreover, the theory of jurisdiction put forward in this article leaves a certain margin of freedom to States. It is not necessary that all States adopt exactly the same jurisdictional rules to give reasonable boundaries to the jurisdiction of their courts. As a result, a good compromise could be to adopt a ‘mixed’ convention, following the pattern of the proposed Hague Convention on jurisdiction and foreign judgments in civil and commercial matters.145 It could be the path to follow to find a ‘third way’146 to deal with the jurisdiction of courts in international litigation.

145

On the concept of mixed convention, see DOGAUCHI M./HARTLEY T. C. (note 5),

p. 16. HILL J., ‘Jurisdiction in Civil Commercial Matters: Is There a Third Way?’, in: Current Legal Problems 2001, vol. 54, p. 439 et seq. 146

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TEXTS, MATERIALS AND RECENT DEVELOPMENTS ________________

TURKEY THE 2007 TURKISH CODE ON PRIVATE INTERNATIONAL LAW AND INTERNATIONAL CIVIL PROCEDURE1 LAW, NR.: 5718, ADOPTED 27 NOVEMBER 2007

PART ONE Private International Law CHAPTER ONE GENERAL PROVISIONS Scope Article 1 (1)

The law applicable to transactions and relations pertaining to private law that involve a foreign element, the international jurisdiction of Turkish courts, the recognition and enforcement of foreign judgments are stipulated by this Act.

(2)

The provisions of international conventions to which the Republic of Turkey is a party shall be reserved.

Translated by Asc. Prof. Dr. N. Ayşe Odman Boztosun, Erciyes University Faculty of Law, Kayseri, Turkey. The author would like to thank Professor Gülören Tekinalp for reviewing the text and making useful comments. 1

Yearbook of Private International Law, Volume 9 (2007), pp. 583-604 © sellier. european law publishers & Swiss Institute of Comparative Law

Printed in Germany

Texts, Materials and Recent Developments Application of Foreign Law Article 2 (1)

The judge shall ex officio apply the Turkish conflict of law rules and the applicable foreign law pursuant to these rules. The judge may demand the assistance of the parties in determining the content of the applicable foreign law.

(2)

Where the provisions of the foreign law relating to the case may not be determined despite all investigations, Turkish law shall apply.

(3)

The fact that the conflict of law rules of the applicable foreign law requires the application of another law shall be taken into account only with regard to disputes pertaining to the law of persons and family law and the substantive law provisions of this law shall apply.

(4)

Where the choice of applicable law is allowed, the substantive law provisions of the chosen law shall apply, unless it is clearly determined to the contrary by the parties.

(5)

Where the state whose law shall be applied comprises two or more regional units and has different legal regimes within these units, the law of the region to be applied shall be determined pursuant to the laws of that state. Where there are no determining provisions in the law of that state, the law of the region most closely connected with the dispute shall apply. Variable Disputes Article 3

(1)

Where the applicable law is determined pursuant to nationality, domicile or habitual residence, the nationality, domicile or habitual residence at the date of suit is taken into account, unless enacted otherwise. Applicable Law on the Basis of Nationality Article 4

(1)

Unless provided otherwise in this Act, where the applicable law pursuant to the provisions of this Act is determined on the basis of nationality: a)

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for the stateless and the refugees, the law of domicile, if they do not have a domicile, the law of habitual residence, and if they do not have a habitual residence, the law of the country where they are on the date of suit,

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Turkish Code on Private International Law and International Civil Procedure b)

for persons with more than one nationality, Turkish law, if they also have Turkish nationality,

c)

for persons with more than one nationality, but who do not have Turkish nationality at the same time, the law of the state with which they have closer connections, shall apply. Violation of Public Policy Article 5

(1)

Where a provision of foreign applicable law, applied to a specific case, is clearly contrary to Turkish public policy, this provision shall not apply; where deemed necessary, Turkish law shall apply. Overriding Mandatory Rules of Turkish Law Article 6

(1)

Where foreign law is applicable, overriding mandatory rules of Turkish law shall apply in cases within their scope as regards their particular purpose and sphere of application. Form in Legal Transactions Article 7

(1)

Legal transactions may be carried out in conformity with the form envisaged by the substantive law provisions of the law of the country where the transaction is carried out or of the law applicable to the substance of that legal transaction. Statute of Limitations Article 8

(1)

The statute of limitations shall be governed by the law applicable to the substance of the legal transaction and relationship.

CHAPTER TWO CONFLICT OF LAWS RULES Capacity Article 9 (1)

The capacity to have rights and duties and to act shall be governed by the national law of the person concerned.

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Texts, Materials and Recent Developments (2)

Any person who does not have capacity pursuant to her/his national law, shall be bound by the legal transaction she/he has carried out, provided that she/he has capacity to act pursuant to the law of the country where the transaction has been carried out. This provision shall not apply to transactions relating to family and inheritance law and to real rights on immovable property in another country.

(3)

Majority attained pursuant to the national law of the person shall not be terminated due to change of nationality.

(4)

The capacity to have rights and duties and to act of legal persons or of associations of persons or property shall be governed by the law of seat of administration in their statutes. Whereas, Turkish law may apply if the actual seat of administration is in Turkey. The capacity of legal persons without statutes and associations of persons or property without legal personality shall be governed by the law of actual seat of administration.

(5)

Guardianship, Placement under a Committee, Curatorship Article 10 (1)

The grounds for ordering or the termination of guardianship or placement under a committee shall be governed by the national law of the person regarding whom an order or termination of guardianship or placement under a commitee is demanded.

(2)

Where it is not possible to order guardianship or placement under a committee pursuant to the national law of the foreigner, guardianship or placement under a committee may be ordered or terminated pursuant to Turkish law provided that the habitual residence of this person is in Turkey. Turkish law shall also apply in cases where the person concerned is compulsorily situated in Turkey.

(3)

All other issues regarding placement under a committee or guardianship apart from the grounds for ordering or terminating guardianship or placement under a committee and curatorship shall be governed by Turkish law. Declaration of Absence or Presumption of Death Article 11

(1)

586

A decision to declare a person’s disappearance or presumption of death shall be governed by the national law of that person. Where this person’s property is in Turkey or where her/his spouse or one of her/his heirs has Turkish nationality, a decision to declare her/his disappearance or presump-

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Turkish Code on Private International Law and International Civil Procedure tion of death shall be rendered pursuant to Turkish law if such a decision may not be delivered pursuant to her/his national law. Betrothal Article 12 (1)

Betrothal capacity and conditions shall be governed by the national laws of each of the parties at the time of betrothal.

(2)

The common national law of the parties, and where the parties have different nationalities, Turkish law shall apply to the effects and consequences of betrothal. Marriage and Its General Provisions Article 13

(1)

Marriage capacity and conditions shall be governed by the national law of each of the parties at the time of marriage.

(2)

The law of the country of marriage shall apply to the form of marriage.

(3)

The general provisions of marriage shall be governed by the common national law of the spouses. Where the parties have different nationalities, the law of common habitual residence, and where there is no such law, Turkish law, shall apply. Divorce and Separation Article 14

(1)

The grounds for and the effects of divorce and separation shall be governed by the common national law of the parties. Where the parties have different nationalities, the law of common habitual residence, if this does not exist, Turkish law shall apply.

(2)

The provision of the first subparagraph shall apply to alimony claims between divorced spouses. This provision shall also apply regarding separation and void marriages.

(3)

Custody in divorce and issues relating to custody shall also be subject to the provision of the first subparagraph.

(4)

Turkish law shall apply to claims on provisional measures.

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Texts, Materials and Recent Developments Matrimonial Property Article 15 (1)

The spouses may explicitly choose the law of either one of their habitual residences or their national laws at the time of marriage regarding matrimonial property; where no such choice has been made, the common national law of the spouses at the time of marriage, where there is no such law, the law of common habitual residence, and where there is no such law either, Turkish law shall apply.

(2)

In the liquidation of property, the law of the country where the immovable property is situated shall apply.

(3)

The spouses who acquire a new common national law after marriage may be subject to this new law without prejudice to the prior rights of third parties. The Establishment of Descent Article 16

(1)

The establishment of descent shall be governed by the national law of the child at the time of birth, and where descent may not be established under this law, by the law of habitual residence of the child. Where descent may not be established under these laws, it shall be established under the law of the national law of either the mother or the father at the time of birth of the child, where it may not be established under these laws, pursuant to the law of common habitual residence of the mother and the father at the time of birth of the child, and where it may not be established under this law either, under the law of the birthplace of the child.

(2)

The cancellation of descent shall be governed by the law pursuant to which it has been established. The Effects of Descent Article 17

(1)

The effects of descent shall be governed by the law establishing the descent. However, where the mother, father and the child have a common national law, that law, and where there is no such law, the law of common habitual residence shall apply to the effects of descent. Adoption Article 18

(1)

588

The capacity for and the conditions of adoption shall be governed by the national law of each of the parties at the time of adoption.

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Turkish Code on Private International Law and International Civil Procedure (2)

The national laws of the spouses shall mutually apply regarding the consent of the other spouse to adoption and to being adopted.

(3)

The effects of adoption shall be governed by the national law of the adopting person and subject to the law applicable to the general provisions of marriage in the case of joint adoption of spouses. Maintenance Article 19

(1)

Claims to maintenance shall be governed by the law of the habitual residence of the creditor. Inheritance Article 20

(1)

Inheritance shall be governed by the national law of the deceased. Turkish law shall be applicable regarding immovable property situated in Turkey.

(2)

Provisions pertaining to the grounds for the opening of the succession, to its acquisition and partition shall be governed by the law of the country of estate.

(3)

Estate in Turkey without any heirs shall belong to the State.

(4)

The provision of article 7 shall apply to the form of testamentary dispositions. Testamentary dispositions made pursuant to the national law of the deceased shall also be valid.

(5)

Testamentary capacity shall be governed by the national law of the person making the disposition at the time of such disposition. Real Rights Article 21

(1)

The right of ownership on movable and immovable property and other real rights shall be governed by the law of the country where the property is situated at the time of transaction.

(2)

The law of destination shall apply to real rights in goods in transit.

(3)

Where there is a change of place, real rights which have not been acquired yet shall be governed by the law of the country where the property is finally situated.

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Texts, Materials and Recent Developments (4)

As regards form, legal transactions pertaining to real rights on immovable property shall be subject to the law of the country where such property is situated. Means of Transportation Article 22

(1)

Real rights on air, sea and rail transportation vehicles shall be governed by the law of the country of origin.

(2)

The country of origin is the place of registration of real rights regarding air and sea transportation vehicles or the home port regarding sea transportation vehicles if such a place of registration does not exist and the place of license regarding rail transportation vehicles. The Law Applicable to Rights on Intellectual Property Article 23

(1)

Rights on intellectual property shall be governed by the law of the country pursuant to whose law protection is sought.

(2)

The parties may determine that the law of the forum shall apply regarding claims arising from the violation of the intellectual property right, after such violation takes place. The Law Applicable to Obligations Arising from Contracts Article 24

(1)

Obligations arising from contracts shall be governed by the law explicitly chosen by parties. Choice of law that may be understood with reasonable certainty from the provisions of the contract or the relevant circumstances shall also be valid.

(2)

The parties may determine that the chosen law shall apply to the whole or part of the contract.

(3)

Choice of law may be made or modified by parties at any time. Choice of law after the conclusion of contract shall be valid with retroactive effect, without prejudice to the rights of third parties.

(4)

Where the parties have not made a choice of law, the law most closely connected with the contract shall be applicable to the relationship arising from that contract. This law shall be presumed as the law of the place of habitual residence of the characteristic performance obligor, the law of the place of business of the characteristic performance obligor in contracts

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Turkish Code on Private International Law and International Civil Procedure entered into due to commercial or occupational activities and where there is no such place of business, the law of her/his domicile, and where the characteristic performance obligor has more than one place of business, the law of the place of business most closely connected with the relevant contract. However, where there exists a law more closely connected with the contract under all existing circumstances, the contract shall be governed by this law. Contracts Relating to Immovable Property Article 25 (1)

Contracts relating to immovable property or their use shall be governed by the law of the country where such an immovable property is situated. Consumer Contracts Article 26

(1)

Consumer contracts relating to procurement of goods, services or loans for non-occupational or non-commercial purposes shall be governed by the law chosen by parties, without prejudice to the minimum protection that the consumer shall have pursuant to the mandatory provisions of the law of his/her habitual residence.

(2)

Where the parties have not made a choice of law, the law of the habitual residence of the consumer shall be applicable. In order for the law of the habitual residence of the consumer to be applied:

(3)

a)

The contract should have been entered into in the country of the habitual residence of the consumer upon a special invitation sent to him/her or an announcement and the legal acts required to be carried out by the consumer should have been carried out in this country or

b)

the other party or his/her representative should have taken the order of the consumer in this country or

c)

where the relationship constitutes a contract of sale, the seller should have organised a trip in order to convince the consumer to buy and the consumer should have travelled to a country other than the country where he/she is situated by taking this trip and should have placed his/her order there.

The law of the habitual residence of the consumer shall be applicable to the form of consumer contracts concluded under the conditions envisaged in the second paragraph.

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Texts, Materials and Recent Developments (4)

This article, excluding package tours, shall not apply to contracts of carriage and to contracts where the services to be offered to the consumer may only be provided in a country other than the country of his/her habitual residence. Employment Contracts Article 27

(1)

Employment contracts shall be governed by the law chosen by parties, without prejudice to the minimum protection the employee shall have pursuant to the mandatory provisions of the law of his/her habitual residence.

(2)

Where the parties have not made a choice of law, the law of the place of work where the employee habitually carries out his/her work shall be applicable to the employment contract. Where the employee temporarily carries out his/her work in another country, this place of work shall not be regarded as the habitual place of work.

(3)

Where the employee does not habitually carry out his/her work in a specific country but continuously carries out his/her work in more than one country, the employment contract shall be governed by the law of the country where the principal place of business of the employer is situated.

(4)

However, where there exists a law more closely connected with the employment contract under all existing circumstances, this law may be applied to the contract instead of the provisions of the second and third paragraphs. Contracts Relating to Intellectual Property Rights Article 28

(1)

Contracts relating to intellectual property rights shall be governed by the law chosen by parties.

(2)

Where the parties have not made a choice of law, the law of the place of business at the time of the conclusion of contract, of the party transferring the intellectual property right or assigning its use, and where this does not exist, the law of his/her habitual residence shall apply to the legal relationship arising from the contract. However, where there exists a law more closely connected with the contract under all existing circumstances, the contract shall be governed by this law.

(3)

The law applicable to the employment contract shall apply to contracts between the employee and the employer on intellectual products created within the scope and during the carrying out of the employee’s work.

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Contracts Relating to the Carriage of Goods Article 29 (1)

Contracts relating to the carriage of goods shall be governed by the law chosen by parties.

(2)

Where the parties have not made a choice of law, if the country where the principal place of business of the carrier is situated at the time of the conclusion contract is at the same time the country where the loading or the unloading is done or where the principal place of business of the consignor is situated, this country is regarded as most closely connected with the contract and this law shall apply to the contract. Single voyage charter parties and other contracts the main purpose of which is the carriage of goods shall also be subject to the provisions of this article. Where there exists a law more closely connected with the contract relating to the carriage of goods under all existing circumstances, this law shall apply to the contract.

(3)

Agency Article 30 (1)

The authority of the agent arising from the legal relationship between the agent and the principal shall be governed by the law applicable to the relationship arising from the contract between them.

(2)

The law of the place of business of the agent shall apply to the conditions required in order for his/her acts to bind the principal against a third party. In cases where the agent does not have a place of business or where this place may not be known by the third party or where the authority is exercised outside the place of business, the authority of the agent shall be governed by the law of the country where this authority is actually used. Regarding agency without authority, the provision of this paragraph shall also apply to the relationship between the agent and the third party.

(3)

Where there is an employment relationship between the agent and the principal and the agent does not have an independent place of business, the authority of the agent shall be governed by the law of the country where the place of business of the principal is situated. Overriding Mandatory Rules Article 31

(1)

When the law governing the relationship arising from the contract is being applied, the overriding mandatory rules of a third country may be given

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Texts, Materials and Recent Developments effect in the case where these rules are closely connected with the contract. Regarding giving effect to and applying or not applying the rules at issue, the purpose, nature, content and consequences of these rules shall be taken into consideration. The Existence of the Relationship Arising from a Contract and Its Material Validity Article 32 (1)

The existence and the material validity of a relationship arising from a contract, or of any term of a contract, shall be determined by the law which would govern it if the contract were valid.

(2)

Where, from the actual circumstances, it appears that holding the validity of one of the parties’ conduct subject to the applicable law shall not be reasonable, the law of the country of habitual residence of the party who claims lack of consent shall apply to the existence of the declaration of intent. Manner of Performance and Measures Article 33

(1)

In relation to the acts and transactions during performance and the measures to be taken relating to the safeguarding of goods, regard shall be had to the law of the country in which these acts or transactions take place or in which these measures are taken. Torts Article 34

(1)

Obligations arising from a tort shall be governed by the law of the country where the tort is committed.

(2)

Where the place the tort is committed and the place the damage occurs are in different countries, the law of the country where the damage occurs shall apply.

(3)

Where the obligational relationship arising from the tort is more closely connected with another country, the law of that country shall apply.

(4)

Where it is possible under the law applicable to the tort or to the insurance contract, the damaged party may assert his/her claim directly to the insurer of the liable party.

(5)

The parties may explicitly choose the applicable law after the tort occurs.

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Turkish Code on Private International Law and International Civil Procedure Liability Arising from the Violation of Personality Rights Article 35 (1)

The claims arising from the violation of personality rights via the media such as press, radio, television or via internet or other means of mass communication shall be governed by, pursuant to the choice of the damaged party: a)

the law of the habitual residence of the damaged party if the damaging party should have expected that the damage would occur in this country,

b)

the law of the country where the place of business or the habitual residence of the damaging party is situated or

c)

the law where the damage has occured if the damaging party should have expected that the damage would occur in this country.

(2)

The right of reply regarding the violation of personality rights shall be governed by the law of the country where the periodical is published or the program broadcasted.

(3)

The first paragraph of this article shall also apply to claims arising from the violation of personality by the processing of personal data or the restriction of the right to obtain information regarding personal data. Non-Contractual Liability of the Producer Article 36

(1)

The law of the habitual residence or the place of business of the damaging party or of the country where the product is acquired shall apply to the liability arising from damages caused by manufactured products, subject to the choice of the damaged party. The law of the country of acquisition may be applied in cases where the damaged party is unable to prove that the product has been entered into that country without his/her consent. Unfair Competition Article 37

(1)

Claims arising from unfair competition shall be governed by the law of the country whose market is directly affected from such unfair competition.

(2)

Where the interests relating solely to the enterprise of the damaged party have been violated, the law of the country where the place of business of the said enterprise is, shall be applicable.

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Texts, Materials and Recent Developments

Restraint of Competition Article 38 (1)

Claims arising from the restraint of competition shall be governed by the law of the country encompassing the market directly affected from such restraint.

(2)

Where foreign law is applicable to the restraint of competition in Turkey, no compensation exceeding the amount of compensation that would be awarded if Turkish law were applied, may be ordered. Unjust Enrichment Article 39

(1)

Claims arising from unjust enrichment shall be governed by the law applicable to the existing or reputated legal relationship on which the enrichment is based. In other cases, the law of the country where the unjust enrichment takes place shall apply to unjust enrichment.

(2)

The parties may explicitly choose the applicable law after the unjust enrichment has occured.

PART TWO International Civil Procedure Rules CHAPTER ONE INTERNATIONAL JURISDICTION OF TURKISH COURTS International Jurisdiction Article 40 (1)

The international jurisdiction of Turkish courts shall be determined by the rules of domestic law on local jurisdiction. Suits Relating to the Personal Status of Turkish Nationals Article 41

(1)

596

Suits relating to the personal status of Turkish nationals shall be heard before the court having local jurisdiction in Turkey, provided that these suits have not been or may not be brought before the courts of a foreign country, if there is no court having local jurisdiction in Turkey, before the court where the person concerned is resident, if he/she is not resident in

Yearbook of Private International Law, Volume 9 (2007)

Turkish Code on Private International Law and International Civil Procedure Turkey, before the court of last domicile in Turkey and if there is no court of last domicile, before one of the courts in Ankara, İstanbul or İzmir. Certain Suits Relating to the Personal Status of Foreigners Article 42 (1)

Regarding a foreigner who does not have a domicile, verdicts on guardianship, curatorship, placement under a committee, declaration of absence or presumption of death shall be given by the court in Turkey where the person concerned is resident, or if he/she is not resident in Turkey, at the court where his/her property is situated. Inheritance Suits Article 43

(1)

Suits relating to inheritance shall be heard at the court of last domicile in Turkey of the deceased, and at the court where the property belonging to the estate is situated if the last domicile was not in Turkey. Employment Contract and Employment Relationship Suits Article 44

(1)

The court of the workplace in Turkey where the employee habitually carries out her/his work shall have jurisdiction in conflicts arising from individual employment contracts or employment relationships. In suits filed by the employee, the Turkish courts where the domicile of the employer or where the domicile or the habitual residence of the employee is situated shall also have jurisdiction. Suits Relating to Consumer Contracts Article 45

(1)

In conflicts arising from contracts defined in article 26, Turkish courts where the domicile or the habitual residence of the consumer, or where the place of business, domicile or habitual residence of the opposing party is situated, shall have jurisdiction, subject to the choice of the consumer.

(2)

The court of habitual residence of the consumer in Turkey shall have jurisdiction regarding suits filed against the consumer pertaining to consumer contracts concluded under the first paragraph. Suits Relating to Insurance Contracts Article 46

(1)

The court of the principal place of business of the insurer or of the place where the branch concluding the insurance contract or its agency is situated

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Texts, Materials and Recent Developments in Turkey shall have jurisdiction in conflicts arising from insurance contracts. However, in suits filed against the policy owner, the insured and the beneficiary, the court having jurisdiction shall be the court of their domicile or habitual residence in Turkey. Agreement on Jurisdiction and its Limitations Article 47 (1)

In cases where the local jurisdiction is not determined on the basis of exclusive jurisdiction, the parties may agree on having a suit between them with a foreign element and arising from obligational legal relationships heard before the court of a foreign state. The agreement shall be valid on the condition that it may be proven by written evidence. The suit may be heard before the Turkish court having jurisdiction, only in cases where the foreign court considers itself as not having jurisdiction or where an objection on jurisdiction is not raised before Turkish courts.

(2)

The jurisdiction of the courts as determined in articles 44, 45 and 46 may not be set aside by the agreement of parties. Security Article 48

(1)

Foreign natural or legal persons filing or participating in suits or pursuing enforcement proceedings before Turkish courts shall be required to provide the security determined by the court in order to cover litigation and proceeding costs and the loss and damages of the opposing party.

(2)

The court shall exempt the plaintiff, the intervening party or the party pursuing enforcement proceedings from providing security on the basis of reciprocity. Limitations on the Judicial Immunity of Foreign States Article 49

(1)

No judicial immunity shall be granted to a foreign state in legal disputes arising from private law relationships.

(2)

A process may be served on the diplomatic representatives of the foreign state in such disputes.

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Turkish Code on Private International Law and International Civil Procedure CHAPTER TWO THE ENFORCEMENT AND RECOGNITION OF FOREIGN COURT JUDGMENTS AND ARBITRATION AWARDS The Judgment of Enforcement Article 50 (1)

The enforcement in Turkey of court judgments pertaining to civil suits given by foreign courts and having become final under the laws of that state shall be subject to a judgment of enforcement given by the Turkish court having jurisdiction.

(2)

A judgment of enforcement may be demanded regarding provisions on personal rights ordered within penal judgments of foreign courts as well. Jurisdiction and Venue Article 51

(1)

The basic court of first instance shall have jurisdiction regarding judgments of enforcement.

(2)

These judgments may be demanded from the court of domicile in Turkey of the person against whom enforcement is sought, if there is no such domicile, before the court of her/his habitual residence, and if she/he has no domicile or habitual residence in Turkey, before either one of the Ankara, İstanbul or İzmir courts. Demand for Enforcement Article 52

(1)

Any person who has a legal interest in the enforcement of a judgment may demand enforcement. Enforcement shall be demanded by petition. Copies equal in number to the number of the opposing parties shall be attached to the petition. The petition shall cover the following issues: a)

The first name, surname and address of the person demanding enforcement, of the opposing party and the legal representatives thereof, if any,

b)

The name of the state where the judgment subject to enforcement was given, the name of the court and the date, number and a summary of the judgment,

c)

where partial enforcement is sought, that part of the judgment.

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Texts, Materials and Recent Developments Documents to Be Attached to the Petition Article 53 (1)

The following documents shall be attached to the petition for enforcement: a)

The original text of the judgment duly authenticated by the authorities of that country or the copy of the judgment authenticated by the judicial authority giving the judgment and its authenticated translation,

b)

A statement or a document duly authenticated by the authorities of that country showing that the judgment has become final and its authenticated translation. Conditions for Enforcement Article 54

(1)

The court having jurisdiction shall give the enforcement judgment provided that: a)

there exists an agreement based on reciprocity between the Republic of Turkey and the state where the judgment was given or a provision of law or actual practice enabling the enforcement of judgments given in Turkish courts at that state,

b)

the judgment is given regarding an issue that is not within the exclusive jurisdiction of Turkish courts or not given by the court of a state granting itself jurisdiction although it does not have a genuine relationship with the subject of the case or the parties, on the condition that the defendant raises an objection to that effect,

c)

the judgment is not expressly contrary to ordre public,

ç)

although the person against whom enforcement is sought has, under the laws of that place, not been summoned properly to the court giving the judgment or represented properly at that court or a default judgment or a judgment in his absence has been given contrary to these laws and that person has not raised an objection based on these grounds before the Turkish court against the seeking of enforcement. Notice and Objection Article 55

(1)

600

The petition pertaining to the demand for enforcement shall be notified to the opposing party together with the hearing date. The recognition and enforcement of voluntary judgments shall also be subject to the same provi-

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Turkish Code on Private International Law and International Civil Procedure sion. The provision pertaining to notification shall not apply to ex-parte voluntary judgments. The demand is heard and adjudicated pursuant to simple proceeding provisions. (2)

The opposing party may raise an objection only by asserting that the conditions for enforcement pursuant to the provisions of this Chapter have not been fulfilled or that the foreign court judgment has been partially or wholly satisfied or that an event preventing its satisfaction has occured. Judgment Article 56

(1)

It may be decided by the court that the judgment is partially or wholly enforced or that the demand be rejected. This judgment shall be written underneath the foreign court judgment and sealed and signed by the judge. Execution and Appeal Article 57

(1)

Foreign judgments for which a judgment of enforcement has been given shall be executed as if they were judgments given by Turkish courts.

(2)

The appeal of judgments pertaining to the acceptance or the rejection of the demand for enforcement shall be subject to general provisions. The appeal shall stay the execution. Recognition Article 58

(1)

The acceptance of a foreign court judgment as conclusive evidence or as a final judgment shall be subject to the confirmation by the court that the foreign judgment fulfills the conditions for enforcement. Regarding recognition, subparagraph (a) of the first paragraph of article 54 shall not apply.

(2)

The recognition of voluntary judgments shall be subject to the same provision.

(3)

The same procedure shall apply in the case where an administrative transaction is carried out in Turkey based on a foreign court judgment. Effect of Final Judgment and Conclusive Evidence Article 59

(1)

A foreign judgment takes effect as conclusive evidence or as a final judgment starting from the moment that the foreign court judgment becomes final.

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Texts, Materials and Recent Developments The Enforcement of Foreign Arbitral Awards Article 60 (1)

Foreign arbitral awards that have become final and executable or that are binding for the parties may be enforced.

(2)

The enforcement of foreign arbitral awards shall be sought by petition before the basic court of instance at the place determined in writing by the parties. Where there is no such agreement between the parties, the court where the domicile in Turkey of the party against whom the award is given is, if there is none, where the person is resident, and if this does not exist either, where the property that may be subject to execution is situated, shall be considered as having jurisdiction. Petition and Assessment Procedure Article 61

(1)

(2)

The party demanding the enforcement of a foreign arbitral award shall attach to his/her petition the following documents together with copies equal in number to the number of the opposing party(ies): a)

The original or the duly authenticated copy of the arbitration agreement or the clause,

b)

The original or the duly authenticated copy of the arbitral award which has procedurally become final or which has become binding for the parties,

c)

the translated and duly authenticated copies of the documents listed in paragraphs (a) and (b).

The provisions of articles 55, 56 and 57 shall apply by analogy regarding the enforcement of arbitral awards by the court. Grounds for Refusal Article 62

(1)

602

The court may refuse the demand for the enforcement of a foreign arbitral award if, a)

the arbitration agreement has not been concluded or an arbitral clause has not been included in the basic contract,

b)

the arbitral award is contrary to boni mores or ordre public,

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Turkish Code on Private International Law and International Civil Procedure

(2)

c)

the dispute subject to the arbitral award may not be resolved by arbitration pursuant to Turkish law,

ç)

one of the parties has not been duly represented before the arbitrators and has not later on expressly accepted the actions carried out,

d)

the party against whom the enforcement of the arbitral award is sought has not been duly notified regarding the selection of the arbitrators or has been deprived of the opportunity to raise claims and defenses,

e)

the arbitration agreement or clause is not valid under the law it has been held subject to by the parties, if there is no agreement on this issue, under the law of the country where the arbitral award is given,

f)

the selection of the arbitrators or the procedure followed by the arbitrators is contrary to the agreement of the parties, if there is no such agreement, to the law of the country where the arbitral award is given,

g)

the arbitral award pertains to an issue that is not mentioned in the arbitration agreement or clause or where it exceeds the scope of the agreement or the clause, for the exceeding part,

h)

the arbitral award has not become final, executable or binding under the law of the country where the award is given or pursuant the provisions of the law it is governed by or where it has been cancelled by the competent authority of the place where it has been given.

The burden of proof shall rest on the party against whom enforcement is sought regarding the issues mentioned in subparagraphs (ç), (d), (e), (f), (g), and (h) of the first paragraph. Recognition of Foreign Arbitral Awards Article 63

(1)

The recognition of foreign arbitral awards shall be subject to the provisions relating to their enforcement.

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Texts, Materials and Recent Developments CHAPTER THREE FINAL PROVISIONS The Repealed Provisions Article 64 (1)

The Code on International Private Law and Civil Procedure dated 20/5/1982 and numbered 2675,

(2)

the second paragraph of article 866 of the Turkish Commercial Code dated 29/6/1956 and numbered 6762,

(3)

article 88 of the Code on Intellectual and Artistic Works dated 05/12/1951 and numbered 5846, are repealed. Entry into Force Article 65

(1)

This Code shall enter into force on the date of its publication. Execution Article 66

(1)

604

The provisions of this Code shall be executed by the Council of Ministers.

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BOOK REVIEWS ________________

Vorschläge und Berichte zur Reform des europäischen und deutschen internationalen Gesellschaftsrechts, hrgs. von HANS-JÜRGEN SONNENBERGER, Max PlanckInstitut für ausländisches und internationales Privatrecht, Mohr Siebeck 2007, IX + 625, pp. ISBN 978-3-16-149307-2 The two-step codification of German private international law has excluded the treatment of juristic persons and associations. Subsequently, the famous European Court of Justice rulings Centros, Überseering, and Inspire Art have prompted the German Council for private international law (Deutscher Rat für Internationales Privatrecht) to deal with the problems related to the aim of making proposals for both German national rules and an EC regulation. A special committee was established to deal with the issue. It held five meetings in 2004 and 2005, each lasting several days. In the course of the meetings, the committee discussed many working papers, which led to the final meeting on 9 February 2006. This meeting culminated in the adoption of a legislative proposal with an explanatory memorandum. The adoption was almost unanimous, with the one exception being the dissenting opinion of Professor Kindler that was based on a relatively secondary item. The proposal for a European regulation on the law applicable to companies (where companies include associations, foundations, and other private law legal persons) consisted of ten articles. The same text, renumbered and adapted so it could be inserted into the German Einführungsgesetz, formed the proposal for the German national legislation. Part one contains the text of the proposal with an explanatory memorandum. All documents are translated into English, French, and, in part, Italian. The translations are welcomed because of the declining knowledge of the German language, even in the academic world. Making the proposal available in more commonly used languages gives a larger scientific community access to the animated debate that has been going on in Germany since the above mentioned EC Court’s decisions. The following analysis will reference the articles numbers of the European regulation proposal that deal with the law applicable, the constitutions of companies, cross-border mergers and divisions, change of the law applicable, and so on. Pursuant to a string of questions enumerated in Art. 2, the law applicable to a particular company is the law of the state where the company is listed in the public register (state of registration). In accordance with ECJ’s Centros judgment, it is irrelevant whether the state of registration is also the location of the company’s principal place of business or whether the principal place of business is located in a

Yearbook of Private International Law, Volume 9 (2007), pp. 605-611 © sellier. european law publishers & Swiss Institute of Comparative Law

Printed in Germany

Book Reviews second state where a subsidiary branch is registered. If there is no registration, the company shall be subject to the law of the state under whose law it has been organized. However, if this method is unsuitable, the connecting factor will be provided by contract law. Among the issues ascribed to the company’s personal statute (this concept is used by the German federal Court: see judgment of 5th November 1980, VIII ZR 230/79, in IPRax 1981, p. 130), special attention must be given to the ‘organisational and financial constitution’ (arts. 3, 4). The proposal does not contain any special provision on voting agreements between company members (in Italian: patti parasociali, following Professor Oppo’s successful expression). It is, as we read in the Explanatory Memorandum, a question of classification to ascertain the permissibility of these agreements, and it is for the courts to clarify such matters on a case-by-case basis. Very careful rulings are provided for cross-border mergers (Art. 5) and divisions (Art. 6). Unlike other recent legislations, Art. 5 is concerned with only the conflict of laws. Its length is a product of the scruple of enumerating the different issues that form part of the merger proceedings. The leading principle is that requirements, procedures, and effects of international mergers are determined under the law applicable to each of the companies involved. The primacy of the state of registration is stressed in Art. 7, which regulates changes of the law applicable. Such a change is made possible without transferring the company’s actual seat. As I have already pointed out, Art. 7 takes into account the problems created in German corporation law by the above quoted judgments of EC Court of justice. The rulings are different for the proposed European regulation and for German municipal conflicts rules. For both cases, the Court has laid down a very accurate discipline on the critical acts of registration and deletion of registration. In addition to its merits as a contribution to law-making, the book is remarkable for not only its wealth of information and discussion, but also for the picture it provides of the dramatic expansion in the two last decades of the German scholarly literature on the conflict of laws concerning the international mobility of companies. Tito BALLARINO

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Book Reviews ALFONSO-LUIS CALVO CARAVACA, JAVIER CARRASCOSA GONZÁLEZ, Derecho internacional privado, 8th ed., Granada (Editorial Comares) 2007, vol. I, XXIV + 495 pp., vol. II, XVI + 736 pp. This two volume textbook is an outstanding treatise, its importance stretching far beyond the Spanish literature on private international law. It is also particularly rewarding to those who are committed to thinking about private international law in comparative terms. Over the last decades, private international law scholarship in Spain has seen a notable increase, mainly as a consequence of the autonomy over the discipline in university curricula. The Anuario de Derecho internacional privado, founded and directed by the celebrated professor Fernández Rozas (see book review in this volume) is another vivid example of this renaissance. Volume one deals with general problems and also embraces the law of international civil procedure. It covers a range of subjects, starting with the concept and character of private international law and the sources of the discipline in Spain. According to the Spanish constitution, the power to enact rules on conflict of laws and jurisdiction belongs to the central legislation (‘las Comunidades Autónomas no pueden dictar normas de DIPr’). Chapters III-V contain an excellent tour d’horizon on jurisdiction. After some introductory remarks dealing with State immunity, the authors lay down the system of the Brussels convention (ch. IV) and, separately, the municipal rules on jurisdiction. Since Spain did not enact any all-encompassing legislation on private international law in its comprehensive understanding, municipal rules are found in Spain’s statute on judicial power (Ley orgánica 6/1985 del Poder Judicial) in articles 21-25. An individual topic is the existence of cases where forum non conveniens atenuado (p. 156) is possible. Chapter VI deals with the essence and internal structure of the conflict of law rules. In the authors’opinion, private international law is mandatory (p. 215) and must treat both municipal and foreign law on an equal footing. The pluralism of methods is acknowledged, and the authors wisely conclude that all kinds of norms (normas de conflicto, normas de extensión y normas materiales especiales) are needed for the system to function optimally. In the context of the Problemas de aplicación de la norma de conflicto (ch. VII) there are three issues that deserve mentioning. We learn that the incidental question (cuestión previa) is suitable, in Spanish law, for a general solution founded on the lex formalis fori theory (exceptions are nevertheless possible in some cases). The same could be said for the fraude à la loi. Art. 12.4 of Spanish code rules out only fraud to mandatory Spanish law (p. 244), but implementation of this rule may give rise to problems in several cases. An accurate review is provided of the vexata quaestio of renvoi. In a rather contradictory manner (‘peor redactado, imposible’ stress the authors at p. 255), art. 12.2 of the Spanish Civil Code allows renvoi to Spanish law, but not for prescription: Spanish judges can take into account (tenir en cuenta) foreign conflict rules. It follows that a foreign system’s remission to Spanish law must comply with many

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Book Reviews conditions, ensuring, in their intertwining, that the principios inspiradores of Spanish conflict rules are not violated (p. 255 ss.). The final part of the volume one deals with the recognition and enforcement of foreign judgments. After some introductory remarks on the different ways to take into account foreign judgments and the meaning of this institution, the book explains the system established in EC Regulation 44/2001 and other bilateral treaties that Spain has signed. At the end, it describes the Spanish system of municipal rules on recognition that provides a dual system for having foreign judgments recognized and enforced: the system of reciprocity and the conditions system (sistema de condiciones). This last section provides a lively discussion that could be useful for any effort to build a general theory on recognition of foreign judgments. Volume two is a collection of essays, part of which was written jointly by the two authors and part of which contains contributions by other academics. The volume ends with intellectual property and the Internet, as well as additional items like consumers and labour contracts. The essays contain a wealth of information on the different topics and provide a significant contribution to the practice. Each chapter starts with an analysis of the relevant problems associated with jurisdiction, occasionally providing a review of the problem of recognition / enforcement of foreign judgments pertaining to the matter discussed. A noteworthy feature of both volumes is the inclusion, at the end of each, of a series of casos prácticos, which constitute an appropriate complement of the matter exposed in the text and an effective means for testing the readers’ apprenticeship. Tito BALLARINO

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Book Reviews Il diritto processuale civile internazionale visto da Int’l Lis dal 2002 ad oggi, C. CONSOLO and M. DE CRISTOFARO (general editors), Kluwer IPSOA 2006, 2114 pp. Int’t Lis started in 2002 as a quarterly supplement to Corriere giuridico, a monthly review dealing with legal problems principally, but not exclusively, on civil and procedural law. It is now becoming an independent periodical. The Int’t Lis’ editors are Claudio Consolo and Marco de Cristofaro, both professors of procedural law at Padua University. The interest of teachers of this discipline for international civil procedure has been increasing in the last three decades under the impact of the Brussels Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. Even before publishing Int’l Lis, Professor Consolo had already gained a solid reputation through his studies on international procedural law, which are now collected in his book Nuovi problemi di diritto processuale civile internazionale (Giuffré editore, Milan 2002, 538 pp.). This book is a massive collection of more than one hundred commentaries on Court decisions, up to 2005, and independent essays, most of which were published in Int’Lis. For editorial reasons, the sequence of articles in the volume reproduces the order in which each article appeared in publication. Their systematic disposition is provided to find in the Indice analitico (at pages XXXIII – LI). The catalogue of authors (more than sixty) follows at pages LIII – LXIII. Since the decisions under review were not published in full, the book provides their full text in the second part (pp. 1537 ss.). The choice of judgments is not limited to Italian Courts (where the Corte di Cassazione is dominant and trial judges are in a very small number) or to the European Court of Justice. A relevant number (about forty) of British (and American) court decisions are included, and Swiss and Dutch cases are represented as well. The only gap that could be remarked upon concerns French decisions. The number and the quality of the contributions make this volume an indispensable sourcebook and a guide for scholars and practitioners of international procedural law. It is hoped that a second volume covering the years from 2006 forward will follow. Tito BALLARINO

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Book Reviews Anuario Español de Derecho International Privado, ed. Iprolex, Madrid 2006, pp. 1405 The Yearbook founded by the distinguished Spanish Professor José Carlos Fernández Rozas has reached its sixth volume. Considering the multitude of periodicals dealing with PIL, it is not easy to gain a place of reference in the discipline, but professor Fernández Rozas has managed this feat. The newcomers in the field are professor Rozas’ Anuario and the present Yearbook, and the author of this review is honoured for having been appointed as a member of the Advisory board to both. The Anuario and the Yearbook aim at giving a comparative overview of conflict law, departing from the progressive municipalisation of the discipline brought about by the increasing trend to codify its rules. Moreover, the Anuario deals with a lot of issues related to Spanish law and court decisions, a particularity that explains the difference in the respective size of the two publications. It must be stressed that the Anuario and the Yearbook have the merit of enlarging IPR literature to include two ‘new’ languages (Spanish and English) beyond the French and German languages that have been dominant in the past. Through the mass of materials exhibited, the Anuario contributes furthermore to assess a Spanish identity in the theory of conflict of laws. Spanish legislation does not present a comprehensive set of rules for conflict of laws. This feature makes Spanish decisions attractive to foreign scholars. Moreover, the Spanish law system is characterized by the existence of distinct legal systems that give rise to interregional conflict of laws, which is of considerable interest mainly, but not only, because it is unusual in the present legal world. The architecture of vol. VI follows the lines adopted in the previous volumes. After a brief sequence of essays on subjects of general interest – sometimes handled in a comparative perspective (see the exhaustive contribution of Professor Pereznieto Castro El negocio jurídico en el Derecho internacional privado en Mexico, pp. 39-5) – the Anuario collects the contributions presented at an annual meeting called Seminario (or in similar ways). For 2007, the subject chosen was ‘Private international law in the European area of freedom, security and justice’ (pages 141-538). Twenty-two speakers have submitted their papers on topics ranging from harmonization of private law to regulation under Rome II, from unfair completion to the Brussels I regulation 44/2001, and many other topics too numerous to list. The last seminar was held at the University Complutense, whereas in the past years the Seminar’s seat included La Coruña (2005), Almagro (2003), and so on. The past editions generally had a more specific subject and did not offer the large participation of European scholars that it has attained in the 2007 edition, certifying the progressive affirmation of Professor Rozas’ offspring. Next, about sixty pages are devoted to Spanish statutes (in their different forms: ley, real decreto, and orden), and around the same space is given to international agreements.

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Book Reviews Many Spanish texts are surely interesting to foreign scholars not only for the rulings enacted, but also for being rather different from other countries’ legislation: see for instance the law on the Spanish nationality abroad (at p. 751). Some others offer an abstract of purely municipal law: for instance, for what in France is called la condition de l’étranger. Many EC decisions and regulations are included. A considerable part of the Anuario exposes Spanish and European court decisions, structured as a digest around the most significant topics, such as arbitration, contracts, international jurisdiction, and recognition and enforcement of foreign judgments. This section and the following, denominated Materiales de la practica española, covers the entire Spanish judicial practice, which is surely of interest to foreign scholars. Although each decision is often supplied with a detailed commentary, an adequate explanation on the details of Spain’s system of law, especially the role of the Dirección general de los Registros y del Notariado, would be welcome. The treatment of the material in a comparative viewpoint will surely enhance the Anuario’s contribution towards improving the discussion at an international niveau of private international law cases. Under the heading Foros internacionales, a further section of the Anuario supplies information on international and municipal codification. The authors of the essays are internationally recognized authorities, suffice it to mention professor Alegria Borrás, and the subjects are very practical, such as the EC participation in the Hague conference or the Hague convention on securities held with an intermediary. Tito BALLARINO

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INDEX ________________ Abduction of minors 373-383 Abus de droit and jurisdiction 559 Access rights in Spanish PIL 373-383 within the 1980 Hague Convention 378 Acquis communautaire and Turkey 303, 306 Acta iure imperii 15, 77 Administrative authorisation and environmental torts 70 Adoption and Portuguese PIL 260 and Turkish PIL 312 Africa PIL 213-245 Agency and Portuguese PIL 259 and Turkish PIL 320 Akzessorische Anknüpfung 170 American Law Institute and IPR rights 98, 102 American choice of law revolution 143 American PIL torts 165 Anti-suit injunctions 401-424, 563 Anti-trust law 59, 176 foreign anti-trust law 176 also see ‘Unfair competition’ Arbitral awards Recognition and enforcement in Turkey 307, 326 Arbitration and anti-suit injunctions 401424 Arbitration agreement 433-442 and the Brussels I Regulation 412-424 and African PIL 222 Astreintes

in arbitration 494 Argentinean PIL 189 Australian Law Reform Commission 196 Australian PIL and enforcement of interim measures in arbitration 513 and torts 193-211 Austrian PIL and IPR rights 92 and unfair competition 52 Balduinus, Jacobus 343 Beals 334 Belgian PIL 27 and succession 296 and the notion of habitual residence 461 and IPR rights 91 Berne Convention for Protection of Literary and Artistic Works of 1886 83, 94 Better law in torts 24 Bona fides and PIL 252 Boys v. Chaplin 204 Brazilian PIL 186 Breavington v Godleman 195 British Columbia and enforcement of interim measures in arbitration 501 Brussels Convention 66, 71, 97, 532 Art. 5(1) 541 Art. 6(1) 64, 541 Art. 17 555 Art. 21 562 Brussels I Regulation and anti-suit injunctions 412424

Yearbook of Private International Law, Volume 9 (2007), pp. 613-622 © sellier. european law publishers & Swiss Institute of Comparative Law

Printed in Germany

Index and Rome II Regulation 134 Art. 1(2) lit. d 417 Art. 2 65 Art. 5(3) 7, 65, 112, 404-409 Art. 16(1) 483 Art. 16(2) 487 Art. 59 486 Bulgarian PIL 343-353 accession to the EU 352-353 and Rome Convention 353 and the Hague Conventions 353 succession 296 Calimach Code 274 Capacity and Turkish PIL 310 Carriage of goods and Turkish PIL 319 Center of gravity 21 Certainty see ‘Legal certainty’ Characterization 205, 230, 450, 473 and Bulgarian PIL 345 tortious vs contractual 31 with respect to prescription 343-359 Choice of court 27, 556 and African PIL 220 and Singaporean PIL 448 and Turkish PIL 326 Choice of law validity 27, 467-479 and African PIL 233 by the victim 157 also see ‘Party autonomy’ Choice of law revolution 143 Civil Procedure Rules 1998 403 Clean-up costs and torts 72 Closest connection 21, 165 and Rome II 21 and Bulgarian PIL 346 and Portuguese PIL 261 Color Drack 401-409 Comity 407, 536 614

Common nationality see ‘Nationality’ Common residence see ‘Residence’ Community property 16 Compeçage 351, 354 Competition see ‘Unfair competition’ Complex torts 64 Conduct-regulating rules 143, 148, 168 Conflit de conventions 129 Conflit mobile 254 Consent in contractual matters 469 Consequential damages 10, 53 Constitution and PIL in Canada 332 and Portuguese PIL 260 Consumer contracts and jurisdiction 326 and Portuguese PIL 259 and Turkish PIL 317 Contractual obligations and Bulgarian PIL 349 and Turkish PIL 306, 315 Contradictory decisions and anti-suit injunctions 414 Convention for the Unification of Certain Rules Relating to International Carriage By Air 235 Cook, Walter Wheeler 346-347 Copyright see ‘IPRs’ Corporations and Turkish PIL 310, 316 Country of origin principle 17 and IPRs rights 87 Courage case 66 Cultural property 348 Cultural identity 260 Currie, Brainerd 165

Yearbook of Private International Law, Volume 9 (2007)

Index Culpa in contrahendo 67, 119-127, 200 Custody rights 373-383 Czech PIL 481-489 Denmark and Rome II Regulation 4, 18, 135 De Bloos 404 De minimis principle 63 Dépeçage 142, 179, 259 in Rome I Regulation 392 in succession matters 296, 297 Diplomatic immunity and African PIL 224 Displacement of minors 373-383 Divorce 20, 336 and Turkish PIL 311 Doing business as a basis for jurisdiction 531 Domicile 306, 143 as a basis for jurisdiction in Africa 228 in Czech PIL 483 in Slovakian PIL 460 Double actionability 452 and Japanese PIL 166, 174 Dutch PIL and enforcement of interim measures in arbitration 500 and IPR rights 92 and succession 298 EC and PIL 385-400 EC Treaty Art. 307 136 Art. 61 14 Art. 65 14, 97 Art. 82 60 Effects doctrine 62, 176 Ehrenzweig, Albert A. 155 Emissions 71 and German PIL 69 Employment contracts (see ‘Labour contracts’) Enforcement of foreign judgments jurisdiction 550

in Bulgaria 351 in Turkey 307, 326 English PIL anti-suit injunctions 402-412 and enforcement of interim measures in arbitration 506 Environmental damages 63-78, 157, 188 Equality and PIL 257 Erga omnes scope and Rome II Regulation 133 ERTA doctrine 138 Escape clause 7, 34, 149, 177 EU Directive on electronic ommerce and Bulgarian PIL 351 EU Directive on environmental liability 72 European Patent Convention 100 European Small Claims Procedure 395 Ex officio application of PIL and Bulgarian PIL 347 Exclusive jurisdiction 540, 544, 553 and IPR rights 95, 96 and Quebec PIL 337 Exclusive jurisdiction agreement and anti-suit injunction 405 Exorbitant rules of jurisdictions 540, 544 Expectations of the parties 253-256 External competence of the EC 133 Fakultatives Kollisionsrecht 250 Falconbridge, John 355 False conflicts 148 Favor laesi 146, 157, 187, 191 Favor principle 21 Fiduciary duties law governing 454 Financial contracts and Portuguese PIL 259 Forced heirship 16, 288 Foreign currency

Yearbook of Private International Law, Volume 9 (2007)

615

Index and African PIL 241 Foreseeability in tort cases 160, 168 also see ‘Legal certainty’ Form in legal transactions in Turkish PIL 309 Forum actoris 108, 408 Forum contractus 543 Forum delicti 13, 543 Forum necessitatis 549 Forum non conveniens 201, 216, 336, 539-540, 543 Forum shopping 134, 135, 257 and IPR rights 81, 91, 95 in prescription law 352 Free movement of judgments 82, 137 French PIL and IPR rights 92 and enforcement of interim measures in arbitration 501 Art. 14 of the Civil Code 530 Full-faith and credit in Canada 332 in Australia 203 German PIL 27 arbitration agreements 409 enforcement of interim measures in arbitration 504 environmental damages 68 IPR rights 94 succession 295 torts 23 Goods in transit and Turkish PIL 314 Greek PIL and IPR rights 92 Groupe européen de droit international privé 19, 121 Grouping of contacts technique 175 Habitual residence in tort cases 24, 34, 167, 169 and Bulgarian PIL 347 616

and Turkish PIL 306 and Slovakian PIL 455-465 Hague Conference and Slovak Republic 462 and the EC accession 386 Hague Convention of 1 August 1989 on the Law Applicable to Succession 298 Hague Convention of 14 March 1978 on the Law Applicable to Agency 130 Hague Convention of 15 June 1955 on the Law Applicable to International Sales of Goods 130 Hague Convention of 15 June 1955 Relating to the Settlement of the Conflicts between the Law of Nationality and the Law of Domicile 460 Hague Convention of 19 October 1996 on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in respect of Parental Responsibility and Measures for the Protection of Children and Slovak PIL 457 Hague Convention of 1973 of the Law Applicable to Maintenance Obligations and Bulgarian PIL 349 Hague Convention of 2 October 1973 on the Law Applicable to Maintenance Obligations and Turkish PIL 311 Hague Convention of 2 October 1973 on the Law Applicable to Products Liability 33, 46, 134 Hague Convention of 25 October 1980 on the Civil Aspects of International Child Abduction 375, 460

Yearbook of Private International Law, Volume 9 (2007)

Index Hague Convention of 4 May 1971 on the Law Applicable to Traffic Accidents 134 Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters 398 Homeward trend 172 Hong Kong PIL and enforcement of interim measures in arbitration 500 Hôrei 164 Human rights and jurisdiction 536, 549 Immovable property contracts relating to 316 jurisdiction 550 Immovables and succession PIL in Romania 274 Industrial actions and Rome II 25, 107 Inheritance see ‘succession’ 349 Institut de droit international 64 Intellectual property rights see ‘IPRs rights’ Interim relief see ‘Provisional measures’ Inter-American Convention on General Rules on Private International Law 184 International comity see ‘Comity’ International legal harmony 256257, 261 IPRs and Bulgarian PIL 348 and Japanese PIL 178 and Rome II Regulation 22, 23, 25-26, 79-105 and Turkish PIL 314, 318 Issue-by-issue analysis 142, 148 Italian PIL

and IPR rights 91 and succession 297 and unfair competition 52 Japanese PIL and torts 163-180 Juridical act 249 Jurisdiction General theory of 529-568 and African PIL 215 and Bulgarian PIL 350 and Turkish PIL 307, 325 Kegel, Gerhard 261 Kelsen, Hans 537 Labedan 278 Labour Contracts 28, 318, 326 and Portuguese PIL 259 and industrial actions 115 Lagarde, Paul 391, 542 Latin American PIL and Rome I Regulation 183191 Leathertex 409 Legal certainty 20, 22, 29, 35, 116, 121 with respect to jurisdiction 401-409 and Japanese PIL of tort 164 Legal persons and Bulgarian PIL 347 Legitimate expectations see ‘Parties expectations’ Lex arbitri 406 Lex contractus 27, 255 Lex domicilii in succession matters 249, 283 in Rome II Regluation 26 Lex fori 29, 195 and anti-suit injunctions 405407 and IPR rights 105 and prescription 345 Lex fori vs. lex causae in prescription law 343-359

Yearbook of Private International Law, Volume 9 (2007)

617

Index Lex loci acti 114 Lex loci commissi delicti 142 and IPR rights 90, 93 and Japanese PIL 164 and Latin American PIL 186 Lex loci damni 7, 202, 143, 144, 145 and Rome II Regluation 28 Lex loci protectionis and IPR rights 85, 86, 87, 93, 178 and Bulgarian PIL 348 and Rome II Regulation 25, 26 Lex patriae in succession matters 283 Lex posterior 137 Lex specialis 36, 137 Liechtenstein PIL and IPR rights 92 and unfair competition 52 Lis alibi pendens 339, 560 and anti-suit injunctions 414 and Bulgarian PIL 350 Lisbon Treaty 385, 389 Local data 155, 170 Locus damni 167, 202 Locus regit actum as to validity of choice of forum 556 in Turkish PIL 309 Locus solutionis 401-409 Lorenzen, Ernst 356 Loss-distribution rules 147, 179 Lugano Convention 5, 395 and IPR rights 95 Luxembourg Convention of 20 May 1980 on Recognition and Enforcement of Decisions Concerning Custody of Children and on Restoration of Custody of Children 375, 377 Maintenance and Turkish PIL 312 618

and EC activities 393 and party autonomy 20 Mandatory rules 21 and Bulgarian PIL 345 and Turkish PIL 309, 320 in recognition process 551 in Rome I Regulation 392 in Rome II Regulation 22, 23, 24, 157 in Swedish PIL 478 Marinari 53 Marital property and African PIL 239 and Turkish PIL 311 and Bulgarian PIL 345 Marriage and Bulgarian PIL 348 and Turkish PIL 310 Means of transportation and Turkish PIL 314 Party autonomy 20 Mediation 399 Mercosur 188 Mexican PIL 187, 189 Minors rights of access 373-383 Mobilia sequuntur personam 277 Moral rights and IPR rights 93 Morguard Investments 332, 333 Mutual Trust Principle of and anti-suit injunctions 413414 Nationality and jurisdiction 530 and Bulgarian PIL 347, 348 common nationality in torts 4 Negotiable instruments 16 Negotiorum gestio 13, 121, 190, 200 and Portuguese PIL 250 Netherlands v. Rüffer 74 Neutrality of PIL 263

Yearbook of Private International Law, Volume 9 (2007)

Index New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 307, 335, 404, 409, 498, 510520 Non-contractual obligations and Bulgarian PIL 349 Ontario and enforcement of interim measures in arbitration 501 Ordre public 163, 473, 476-477 also see ‘Public policy’ Parental responsibility in Slovak PIL 458 Parent-Child Relationships and Turkish PIL 312, 313 Paris Convention for the Protection of Industrial Property of 1883 68, 84 Parties’ expectations 145, 148, 157, 253-256 Party autonomy and IPR rights 99-101 and Japanese PIL of tort 172 and Portuguese PIL 249 and Singaporean PIL 447 as a basis for jurisdiction 545 in succession matters in Bulgaria 349 in substantive law 20 in Rome II 19-30, 19-30, 162, 185 Personal relationships of the spouses and Bulgarian PIL 348 Personality rights 10, 16 and Portuguese PIL 248 and Turkish PIL 323 Pfeiffer 197 Phillips v Eyre 194 Place of administration 11 Place of damage and Turkish PIL 322 Place of delivery 404-409

Place of acquisition of the product 25 Portuguese PIL 245-263 sources 245-246 human dignity 248 and IPR rights 92 Predictability 20, 29, 183, 401-409 Pre-existing relationships 29, 149, 153 Premium Nafta 433-442 Prescription 343-359 Pre-tort agreement 29, 101, 163, 172-173 also see ‘Party autonomy’ Principle of ubiquity in torts 176 Principles of European Contract Law 392 Procedural rights and recognition of foreign judgments 338 Product 43 Product liability and Turkish PIL 323 and Rome II Regulation 3147, 159 Professio iuris in succession matters 291-299 Prohibitory injunctions in environmental torts 68 Property and African PIL 238-239 Provisional measures in arbitration 489-526 Public policy and Bulgarian PIL 347 and IPR rights 93 in Singaporean PIL 450 recognition of foreign judgments 339 Public private international law 79, 82 Punitive damages 180

Yearbook of Private International Law, Volume 9 (2007)

619

Index Quebec PIL 331-343 Real and substantial connection test and Canadian PIL 334 Reasonableness test in jurisdiction 535 Recognition and enforcement of provision measures in arbitration 489-526 of judgments in Quebec PIL 331-343 in Bulgaria 351 in Turkey 307, 326 Refugees and Turkish PIL 309 Regie Nationale des Usines Renault 198 Registered rights validity of 96 also see ‘IPRs’ Regulation (EC) 1348/2000 on the service of documents 397 Regulation (EC) 1393/2007 on the service of documents 397 Regulation (EC) No. 2201/2003 of November 17, 2003 concerning jurisdiction and recognition and enforcement of judgments in matrimonial matters and matters of parental responsibility 375 Regulation (EC) Nr. 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters of parental responsibility 457 REIO 387 Reliance and PIL 251 Renvoi 257 and Australian PIL 208 and Bulgarian PIL 345, 346 and Romanian PIL 290, 294 and Turkish PIL 308 in torts 5, 208 620

Swiss PIL 5 Reserved portion and Bulgarian PIL 349 Residence common residence in torts 4, 11, 113, 147 Restatement (Second) of Conflict of Laws 165 Restraint of competition and Turkish PIL 324 Romanian PIL in succession matters 265-299 unfair competition 52 Rome I Regulation 391 Rome II Regulation 1-373 Rückverweisung see ‘renvoi’ Russian PIL 52 Safety rules 148, 154 Savigny, Friedrich Carl 137, 165, 261 Seat of the relationship 21 Separability in arbitration agreements 439 Service of process and African PIL 216 as a basis for jurisdiction 530 Shenavai 408 Slovak PIL 457-465 South African PIL and prescription 343-359 Spanish PIL and child abduction 374-378 and enforcement of interim measures in arbitration 501 and IPR rights 92 Spider-in-the-web principle 96 Sri Lankan PIL and enforcement of interim measures in arbitration 500 Stateless person 286, 309 Statute of limitations see ‘Prescription’ Statutentheorie 3 Subsidiary connecting factors 169

Yearbook of Private International Law, Volume 9 (2007)

Index Substance/procedure dichotomy and prescription law 357 Substantive law objectives of PIL 262 Succession 16 and African PIL 238-239 and Bulgarian PIL 349 and party autonomy 19 and Turkish PIL 313 Swedish PIL 67, 467-479 Swiss PIL 27, 52 and enforcement of interim measures in arbitration 503 and IPR rights 91, 99 and succession 298 and unfair competition 52, 56 Tacconi 121 Tessili 404 Théorie de l’abus de droit and jurisdiction 559 Theory of statutes 274 Time-share contracts and Portuguese PIL 259 Tod’s case 89 Torline 108 Torts and African PIL 237 and Singaporean PIL 451 and Rome I Regulation 1-327 and Turkish PIL 306, 322 Trade unions and PIL 116, 467479 Treaty of Lisbon see ‘Lisbon Treaty’ TRIPs 87, 88 Trusts 16 Turkey and acquis communautaire 302 and the Hague Conventions 305

Turkish PIL 299-327 Turner v. Grovit 401, 412-414, 565 Ubiquitätstheorie 24 Ubiquity rules 66-68 UK PIL 52, 201 Ulmer, Eugen 84 Unjust enrichment 190 UN Convention on the Rights of the Child 373 UNCITRAL Model Law 497, 509, 520-526 Unfair competition 177 and Rome II 23, 24-25, 49-69 and Turkish PIL 323 UNIDROIT Principles 392 Uniformity 29, 35 Unity of succession 283 Unjust enrichment and Portuguese PIL 250 and Australian PIL 200 Uruguayan PIL 187 U.S. and PIL in torts 141-165 and unfair competition 61 Validity of contracts in Turkish PIL 321 Van Uden 420, 422 Venezuelan PIL 187 Venire contra factum proprium 252 Visitation rights see ‘Access rights’ Von Mehren, Arthur Taylor 542 Warsaw Convention 235 Weaker party 21, 262 and Rome II 21, 29 and Turkish PIL 326 in jurisdictional matters 546 West Tankers 415-424 Will validity in African PIL 240 in Romania PIL 295 WIPO 8

Yearbook of Private International Law, Volume 9 (2007)

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Yearbook of Private International Law: Volume IX, 2007

Yearbook of Private International Law: 1999

Yearbook of Private International Law, 2000 Volume II

The Irish Yearbook of International Law 2007

Yearbook of Private International Law. Volume V: 2003

Yearbook of Private International Law: Volume III, 2001

Yearbook of Private International Law: Volume IV, 2002

Yearbook of Private International Law: Volume VIII, 2006

Yearbook of Private International Law: Volume X, 2008

Baltic Yearbook of International Law

Finnish Yearbook of International Law: Volume XV, 2004 (Finnish Yearbook of International Law) (v. 15)

Max Planck Yearbook of United Nations Law, Volume 11 (2007)

Spanish Yearbook Of International Law: 2001-2002 (Spanish Yearbook of International Law)

Spanish Yearbook of International Law, Volume 11 (2005)

Asian Yearbook of International Law 2005-2006 (Asian Yearbook of International Law)

The Italian Yearbook of International Law 2003 (Italian Yearbook of International Law)

Baltic Yearbook Of International Law 2004 (Baltic Yearbook of International Law)

Yearbook of International Humanitarian Law: Volume 9, 2006

Asian Yearbook of International Law 2001 (Asian Yearbook of International Law)

Finnish Yearbook of International Law (Volume XVI, 2005) (v. 16)

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Yearbook of International Humanitarian Law - 2010

Finnish Yearbook of International Law 2001 (Finnish Yearbook of International Law)

Finnish Yearbook of International Law, 14 (2003) (Finnish Yearbook of International Law)

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Asian Yearbook of International Law 2000 (Asian Yearbook of International Law)

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Volume IX

Yearbook of Private International Law: Volume IX, 2007

Yearbook of Private International Law: 1999

Yearbook of Private International Law, 2000 Volume II

The Irish Yearbook of International Law 2007

Yearbook of Private International Law. Volume V: 2003

Yearbook of Private International Law: Volume III, 2001

Yearbook of Private International Law: Volume IV, 2002

Yearbook of Private International Law: Volume VIII, 2006

Yearbook of Private International Law: Volume X, 2008

Baltic Yearbook of International Law

Finnish Yearbook of International Law: Volume XV, 2004 (Finnish Yearbook of International Law) (v. 15)

Max Planck Yearbook of United Nations Law, Volume 11 (2007)

Spanish Yearbook Of International Law: 2001-2002 (Spanish Yearbook of International Law)

Spanish Yearbook of International Law, Volume 11 (2005)

Asian Yearbook of International Law 2005-2006 (Asian Yearbook of International Law)

The Italian Yearbook of International Law 2003 (Italian Yearbook of International Law)

Baltic Yearbook Of International Law 2004 (Baltic Yearbook of International Law)

Yearbook of International Humanitarian Law: Volume 9, 2006

Asian Yearbook of International Law 2001 (Asian Yearbook of International Law)

Finnish Yearbook of International Law (Volume XVI, 2005) (v. 16)

Baltic Yearbook of International Law, Volume 6 (2006)

Yearbook of International Humanitarian Law - 2010

Finnish Yearbook of International Law 2001 (Finnish Yearbook of International Law)

Finnish Yearbook of International Law, 14 (2003) (Finnish Yearbook of International Law)

Yearbook of the International Law Commission 1997, Volume 1

Palestine Yearbook of International Law, 2002 2003 (Palestine Yearbook of International Law)

Asian Yearbook of International Law 2000 (Asian Yearbook of International Law)

European Yearbook of International Economic Law 2011

Netherlands Yearbook of International Law Volume 41, 2010: Necessity Across International Law

African Yearbook Of International Law 2003 Annuaire Africain De Droit International 2003 (African Yearbook of International Law)

Volume IX

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