The European Max-Planck Group on Conflict of Laws in Intellectual Property (CLIP) has recently published its final Draft Principles for Conflict of Laws in Intellectual Property (refered to by the Group as “the Draft”), which came after the the Third Preliminary Draft of the Principles we reported on here. The text of the Draft, available here, is supposed to remain substiantially the same in the 2012 commented version of the “Principles for Conflict of Laws in Intellectual Property” except for the editorial changes.

The main changes made in the newest Draft include: Article 2:206 (2) and (3) on multiple defendants, Article 3:401 on initial co-ownership, Article 3:604 on secondary infringement, Articles 3:801 and 3:802 (2) (e) on security rights, Article 4:201 on the verification of jurisdiction of foreign courts, and Article 4:501 (2) on other grounds for non-recognition of foreign judgements. As you can see, most of these changes were more of a fine-tuning nature.

I thank Thomas Petz for the tip off.

Giesela Rühl, who is a professor of law at the Friedrich-Schiller-University in Jena (Germany), has posted Consumer Protection in Choice of Law on SSRN. The abstract reads:

Consumer protection in choice of law is a fairly young concept. In fact, the idea that consumers might be as much in need of protection in choice of law as in other areas of law did not loom large before the second part of the 20th century. However, after the consumer protection movement gained pace in the 1960ies and 1970ies, academics, courts and legislators were quick to transfer the concept into choice of law. First legislative provisions were enacted in the 1970ies with § 41 of the Austrian Act of Private International Law as well as Article 5 of the European Convention on the Law Applicable to Contractual Obligations (Rome Convention). In the 1980ies Switzerland followed suit with the adoption of Art. 120 of the new Swiss Act on Private International Law.

Today, consumer protection in choice of law is an integral part of legal systems around the world. Thus, it comes as a surprise that up to now the pertaining rules and regulations have received very little attention from economic theory. Even though there is – by now – a substantial body of literature that deals with different aspects of conflict of laws from an economic perspective, the question of whether and – if so – how consumer should be protected in choice of law has been neglected.

In the paper at hand I fill this gap. More specifically, I analyse how choice of law rules should be designed in order to protect consumers in an efficient way. To this end, I proceed in three steps: In the first step I analyse the economic rationale for consumer protection in choice of law. I show that consumers are in need of protection because they suffer from information asymmetries. In the second step, I analyse how consumer protection can and should be afforded from an economic perspective. I focus on three mechanisms: first, self-healing powers of markets, second, duties of information, and, third, direct regulation of consumer contracts. I conclude that neither markets nor information duties are likely to limit the risks flowing from information asymmetries. As a result, I argue that the economically best way to protect consumers is to directly regulate consumer contracts. In the third and final step, I therefore analyse different models of consumer protection in view of their economic efficiency. I conclude that the European model of limiting party autonomy with the help of the so-called preferential law approach (Art. 6 Rome I-Regulation) is a good economic compromise. The same holds true for the – in practice very similar – American model of limiting party autonomy with the help of the fundamental public policy doctrine (§ 187 Restatement (Second) of Conflict of Laws). Both models trump all other ways of regulating choice of law in consumer contracts, most importantly the Swiss solution of excluding party autonomy in consumer contracts all together.

The paper is forthcoming in the Cornell International Law Journal.

A recent judgment of the New South Wales Court of Appeal contains a number of points of interest, even if the ultimate conclusion is routine and unsurprising: an Australian court refused an application for stay of proceedings on forum non conveniens grounds in a case concerning an Australian-resident plaintiff.

The facts in Fleming v Marshall [2011] NSWCA 86 were complex and multi-jurisdictional. An Australian man was killed in a plane crash in the State of South Australia. His dependent survivors, apparently based in the State of New South Wales, brought tort proceedings against the manufacturers of the aircraft and its engines who were located in the State of Pennsylvania, USA. To do so, the survivors engaged a New York firm of attorneys (who in turn engaged Pennsylvania agents) whose services were partly paid for by a litigation funder and partly by a contingency fee arrangement. The manufacturers ultimately reached a settlement with the claimants, out of which the New York attorneys claimed a success fee, and to which the attorneys attached conditions before they would pay the claimants in Australia.

The present litigation before the NSW courts was brought by the dependent survivors against the New York attorneys, as they were dissatisfied with the deductions and conditions attached to the settlement. They claimed that this amounted to breach of the contract of retainer, breach of duty of care in tort (a claim abandoned on appeal) and breach of fiduciary duty, as well as allegedly the tort of conspiracy. Significantly, the plaintiffs conceded that if New York law applied, their claim was time-barred by a now-expired 3 year limitation period, whether the claim was heard in New York or NSW.

The primary judge rejected the defendant’s application for a stay on forum non conveniens grounds [[2010] NSWSC 86]. His Honour observed that ‘there is no one cause and no one applicable law’, and that each of the laws of South Australia, NSW and New York might be implicated. He also placed some importance on the lex loci contractus of the contract of retainer, which he considered to be most likely to be that of NSW.

On appeal, the defendants submitted that the case ‘principally concerns the professional standards of lawyers practising in New York’ and that the trial judge was wrong to emphasise the importance of the place of contracting at the expense of the jurisdiction with which the contract had ‘the closest and most real connection’ [Bonython v Commonwealth of Australia (1950) 81 CLR 486; [1951] AC 201]. The plaintiffs resisted those contentions, and also emphasised the fact that (on their account of the facts) the New York attorneys had acted through Australian agents—therefore performing at least some of the retainer in Australia.

Macfarlan JA (with whom Spigelman CJ and Sackville AJA agreed) criticised the primary judge’s treatment of the lex loci contractus:

“The primary judge correctly treated the identification of the proper law of the contract of retainer as relevant to the question of whether New South Wales is a clearly inappropriate forum for determination of the disputes between the parties. However in determining what was the proper law of the contract (that is, that with which the transaction had “the closest and most real connection”: Bonython ) his Honour in my view placed undue emphasis upon the place where it was concluded. If read on its own, paragraph [38] of the primary judgment (see [43] above) would suggest that his Honour regarded the place of contracting as determining, rather than simply being relevant to, the identity of the proper law.”  [at [61]]

That being the case, the Court of Appeal proceeded to decide for itself the question of whether NSW was a clearly inappropriate forum, but ultimately reached the same view as the primary judge. Along the way, they emphasised:

• the unavailability of New York as an alternative forum because of the statute bar;
• the fact that it was ‘not appropriate that at this stage of the proceedings a final determination be made as to the identity of the proper law of the contract of retainer’, despite their Honours’ ‘provisional view’ that it was New York law;
• the fact that, even if foreign law applied, this was ‘not of itself a reason for granting a stay’;
• the irrelevance of the lawyers’ professional indemnity insurance cover being limited to proceedings brought in the US or Canada.

These conclusions are entirely within the mainstream of Australian private international law. As repeated decisions demonstrate, the practical reality is that Australian courts will never under any circumstances relinquish jurisdiction in a case concerning an Australian-resident natural plaintiff.

One topic referred to in the judgment which was not of direct importance to the case at hand is nonetheless likely to be of wider interest to non-Australian readers, namely the reference of questions of foreign law by the forum court to a court of that foreign jurisdiction. This was of potential future relevance to the case since the NSW forum was likely to end up applying New York law. The Supreme Court of NSW and the Supreme Court of New York have recently entered into a bilateral arrangement to facilitate such references, and Chief Justice Spigelman has recently published an article on the topic: J J Spigelman “Proof of Foreign Law by Reference to the Foreign Court” (2011) 127 Law Quarterly Review 208. More details of the NSW-New York bilateral arrangements can be found here on the NSW Supreme Court’s website.

In the context of the case at hand, the Chief Justice remarked that:

“It is by no means clear whether the present case is one in which this mechanism for deciding such an issue would be more cost effective than the customary means of determining a question of foreign law by expert evidence. However, the determination of an issue of professional practice is one of the kinds of legal issues for which there is unlikely to be a single correct answer. Advice from three serving appellate judges of the foreign jurisdiction is much more likely to be accurate than an Australian judge choosing between contesting expert reports.” [at [10]]

In a judgment of March 8^th, 2011, the French Supreme Court for private and criminal matters (Cour de cassation) confirmed that a Greek order refusing to authorize the pre-award attachment of a ship in Athens was to be recognized in France. As a consequence, the French court could not try again the dispute and authorize to attach the same ship in France a year later.

We had already reported on the decision of the Court of appeal of Rouen which had denied the application of the (alleged) creditor on the ground that a Greek court had already done so. The Cour de cassation dismissed an appeal against this decision.

Background

It should be underlined that freezing attachments are carried out in two stages both in France and, I understand, in Greece. First, a court authorizes an enforcement authority to carry out the attachment. Then, the said authority does. The issue in this case was whether the decision on whether to authorize to carry out the attachment issued in Greece had res judicata effect in France.

Territoriality Principle Irrelevant

The first argument put before the Court by the appellant was that freezing attachments belong to enforcement, and are thus unable to produce extra-territorial effect. The Greek order, it was argued, might not be recognized in France, since it could not possibly purport to produce effect outside of Greece.

The Cour de cassation answered to this argument by saying that Article 33 of the Brussels I Regulation demanded that the Greek order be recognized. The Court thus ruled that the Court of appeal was right to consider that the foreign order could produce effect extra-territorially. In passing, the Court explained that the Court of appeal had rightly refused to review the foreign order on the merits.

Res judicata

The appellant then raised a variety of arguments against the foreign order having res judicata in France. One of them was that, as the foreign court had applied the lex fori, the triple identity rule was not satisfied, since a French court would apply a different law. Another was that, as the ship had moved, there was a new fact which justified a new decision.

The Cour de cassation answered to these two arguments as follows. First, it ruled that there indeed was a triple identity between the two cases, and that the Court of appeal had verified that it was asked to rule on a point which had already been settled by the foreign order. Secondly, it had not been argued before the Court of appeal that there was any new fact which would justify not taking into consideration the foreign order.

Many thanks to Sebastien Lootgieter for the tip-off.

Michael Steven Green (William and Mary Law School) has posted Horizontal Erie and the Presumption of Forum Law on SSRN.

According to Erie Railroad v. Tompkins and its progeny, a federal court interpreting state law must decide as the state’s supreme court would. In this Article, I argue that a state court interpreting the law of a sister state is subject to the same obligation. It must decide as the sister state’s supreme court would.

Horizontal Erie is such a plausible idea that one might think it is already established law. But the Supreme Court has in fact given state courts significant freedom to misinterpret sister-state law. And state courts have taken advantage of this freedom, by routinely presuming that the law of a sister state is the same as their own—often in the face of substantial evidence that the sister state’s supreme court would decide differently. This presumption of similarity to forum law is particularly significant in nationwide class actions. A class will be certified, despite the fact that many states’ laws apply to the plaintiffs’ actions, on the ground that the defendant has failed to provide enough evidence to overcome the presumption that sister states’ laws are the same as the forum’s. I argue that this vestige of Swift v. Tyson needs to end.

Applying horizontal Erie to state courts is also essential to preserving federal courts’ obligations under vertical Erie. If New York state courts presume that unsettled Pennsylvania law is the same as their own while federal courts in New York do their best to decide as the Pennsylvania Supreme Court would, the result will be the forum shopping and inequitable administration of the laws that are forbidden under Erie and its progeny. As a result, federal courts have often held that they too must employ the presumption of similarity to forum-state law, despite its conflict with their obligations under vertical Erie. Applying horizontal Erie to state courts solves this puzzle.

The paper is forthcoming in the Michigan Law Review.

He had posted  few weeks before Erie’s Suppressed Premise .

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