March 2014 – Conflict of Laws

French Supreme Court Denies Effect to Foreign Surrogacies On the Ground of Fraude a la Loi

March 31, 2014/in /by Gilles Cuniberti

On 19 March 2014, the French Supreme Court for civil and criminal matters (Cour de cassation) ruled that an Indian surrogacy would be denied effect in France on the ground that it aimed at strategically avoiding the application of French law (fraude à la loi), which forbids surrogacy.

A French male had entered into a surrogacy agreement with an Indian woman in Mumbai. After a child was born, the man attempted to register the child as his (and hers) on French status registries. A French prosecutor challenged the registration. A court of appeal rejected the challenge on the grounds that it was not alleged that the applicant was not the father, and that the birth certificate was legal.

The Cour de cassation allowed the appeal of the French prosecution service and ruled that the behaviour of the French national and resident aimed at avoiding the application of French law. The Court held:

Attendu qu’en l’état du droit positif, est justifié le refus de transcription d’un acte de naissance fait en pays étranger et rédigé dans les formes usitées dans ce pays lorsque la naissance est l’aboutissement, en fraude à la loi française, d’un processus d’ensemble comportant une convention de gestation pour le compte d’autrui, convention qui, fût-elle licite à l’étranger, est nulle d’une nullité d’ordre public selon les termes des deux premiers textes susvisés

In 2011, the Cour de cassation had denied effect to foreign surrogacies on the ground that they violated public policy. Since September 2013, the Court has founded its rulings on the strategic behaviour doctrine.

Paech on Close Out Netting and Insolvency

March 30, 2014/in /by Gilles Cuniberti

Philipp Paech (LSE Law) has posted Close-Out Netting, Conflict of Laws and Insolvency on SSRN.

Close-out netting is a risk mitigation tool globally employed by financial market participants. It affords a special protection to those being able to use it and is remotely comparable to a super-priority or a security interest. It therefore potentially conflicts with the pari passu principle and its emanations. A number of jurisdictions, often called ‘netting-friendly’, have solved that conflict more or less comprehensively. As a consequence, close-out netting agreements are generally enforceable in these jurisdictions, even in the event of insolvency of one of the parties.

However, the financial market is global and the parties, their branches and assets might be located in different jurisdictions. Even if all relevant jurisdictions are netting friendly they differ in their approach to solving the conflict between granting the privilege of close-out netting on the one hand, and preserving the core of pari passu on the other hand. At the core of the issue is the question of whether and to what extent the lex contractus, ie. law governing the close-out netting agreement determines the limits of enforceability in insolvency — or whether the lex fori concursus alone is relevant.

Countries failed to agree on an international standard for conflict-of laws rules and did not include a relevant principle in the 2013 Unidroit Principles on the operation of of close-out netting provisions. As a result, legal uncertainty will persist in this area despite the fact that the EU is currently improving its regime in this regard.

This paper shows that it is a fallacy to believe that maintaining ambiguity in the conflict-of-laws regime governing cross-jurisdictional insolvencies of financial institutions is necessary for the sake of preventing the erosion of national mandatory law. States must acknowledge that globalised financial markets cannot work properly and safely against a backdrop of heterogeneous and thus potentially conflicting national frameworks. They should relax their insistence on the primacy of their own insolvency law in cross-jurisdictional situations, at least to some small extent, in exchange for a comprehensive and consistent international framework better able to serve the aims of certainty and stability. Such framework is to be provided by EU law or, ideally, by a global standard.

Fourth Issue of 2013’s Rivista di diritto internazionale privato e processuale

March 28, 2014/in /by Giorgio Buono

(I am grateful to Prof. Francesca Villata – University of Milan – for the following presentation of the latest issue of the RDIPP)

The fourth issue of 2013 of the Rivista di diritto internazionale privato e processuale (RDIPP, published by CEDAM) was just released. It features two articles and one comment.

Paola Ivaldi, Professor at the University of Genoa, examines the issue of environmental protection in the context of European Union law and private international law in “Unione europea, tutela ambientale e diritto internazionale privato: l’art. 7 del regolamento Roma II” (European Union, Environmental Protection and Private International Law: Article 7 of the Rome II Regulation; in Italian).

Art. 7 of Regulation No 864/2007 (so called Rome II Regulation) provides for a specific conflict of law rule concerning liability for environmental damage, which empowers the person sustaining the damage to choose between the application of the lex loci damni and the application of the lex loci actus. The present article analyses the rationale underpinning the attribution to only one of the parties concerned (the person sustaining the damage) of the unilateral right to choose the law applicable to their relationship, and it concludes that the provision at issue does not purport to alter the equal balance between such parties, as it rather aims at ensuring a high level of environmental protection, both by preventing a race to the bottom of the relevant national legal standards and by discouraging the phenomenon known as environmental dumping. Furthermore, the article compares the specific provision laid down by Art. 7 of the Rome II Regulation with the general conflict of laws rule provided by Art. 4 and Art. 14 of the same instrument, with particular reference to the role played – in the peculiar context of environmental liability – by party autonomy and to the different relevance attributed by such rules to the lex loci damni and to the lex loci actus.

Anne Röthel, Professor at the Brucerius Law School in Hamburg, discusses party autonomy under the Rome III Regulation in “Il regolamento Roma III: spunti per una materializzazione dell’autonomia delle parti” (The Rome III Regulation: Inputs for Concretizing Party Autonomy; in Italian).

Regulation (EU) No 1259/2010 of December 20th 2010, the so-called “Rome III” Regulation, lays down uniform conflict-of-laws rules on divorce and legal separation. It represents the first case of enhanced cooperation between (part of) the Member States of the European Union, and it became applicable on June 21st 2012. After reporting the criticism of German legal literature, the author points out that the Regulation, although at first sight only aiming at international private law, finally covers substantial matters such as the scope of autonomy when it comes to divorce and legal separation. Her analysis comprises as a first step a comparative view which underlines the existence of deeply rooted legal and cultural differences in the field of divorce. She also presents statistical data regarding the situation in Germany. In this context she highlights the meaning of the “availability” of divorce in the “conservative” legal systems and in the “liberal” ones, that basically depends on whether marriage is conceived entirely as a legal institution or as well as a contract depending on the autonomy of the parties. Secondly, she focuses on Art. 5 of Regulation No 1259/2010 that allows the spouses to determine the law applicable to divorce and legal separation. In this respect, the Regulation goes farther than the existing national rules of international private law. The author questions therefore the legitimacy of party autonomy within private international law. Finally, she examines the conditions for a valid choice of law. The German legislator decided to impose the form of a public (notarial) act for the choice-of-law agreement. The author questions whether the fulfillment of the formal requirements can sufficiently guarantee by itself that the parties are aware of the impact of their decision. She therefore suggests a further judicial control to take place in order to guarantee autonomous decisions in the light of the fundamental rights and the jurisprudence of German Federal Constitutional Court on agreements in matters of matrimonial property regimes.

In addition to the foregoing, the following comment is also featured:

Ester Di Napoli, PhD in Law, “A Place Called Home: il principio di territorialità e la localizzazione dei rapporti familiari nel diritto internazionale privato post-moderno” (A Place Called Home: The Principle of Territoriality and the Localization of Family Relations in Post-Modern Private International Law: in Italian).

The way in which space is conceived and represented in private international law is changing. This development reflects, on the one hand, the emergence of non-territorial spaces in the legal discourse (the market, the Internet etc.) and, on the other, the acknowledgment, in various forms and subject to different limitations, of the individual’s “right to mobility”. The interests of States and those of social groups are gradually losing ground to the interests of the individual, the freedom and self-determination of whom is now often likely to be exercised in the form of a choice of law. In the field of family law, European private international law shapes its rules by taking into account the “fluidity” of postmodern society: conflict-of-laws rules become more flexible and “horizontal”, while the “myth” of abstract certainty is outweighed by the quest for adaptability and effectiveness.

Indexes and archives of RDIPP since its establishment (1965) are available on the website of the Rivista di diritto internazionale privato e processuale. This issue is available for download on the publisher’s website.

Van Den Eeckhout on International Employment Law and European Fundamental Freedoms

March 27, 2014/in /by Gilles Cuniberti

Veerle Van Den Eeckhout (Leiden University and University of Antwerp) has posted on SSRN an English version of a paper on international employment law previously published in Dutch in “Tijdschrift Recht en Arbeid” (“TRA”, Kluwer, 2009, issue 4).

The paper discusses the relationship between International labour law and European fundamental freedoms, including an analysis from a PIL-perspective of the cases Viking, Laval, Rüffert and C./Luxembourg, and an analysis of the relationship between the Rome Convention, the Rome I Regulation and the Posting Directive. The paper is entitled “International Employment Law Mangled between European Fundamental Freedoms”. An extended version (not yet translated into English) of this paper can be found on SSRN (also available here and here) – in this extended version, the relationship between the Rome convention, the Rome I regulation and the Posting Directive is analysed in a more profound way, including also aspects such as: the relationship between the Posting Directive on the one hand, the applicability of the law of the host State on the other hand, the consequences – seen from the perspective of the protection of the employee – of the non-applicability of the Posting Directive etc.

The author is grateful to Ms. Emanuela Rotella for the English translation of the paper.

French Book on PIL Legislation Applicable in France

March 26, 2014/in /by Gilles Cuniberti

Dean Sandrine Clavel (University of Versailles Saint Quentin en Yvelines) and Estelle Galland (Paris I University) have published a book gathering the essentials of applicable legislation in the field of private international law in France.

The materials include national legislation, European regulations and directives and international conventions.

Traditionnellement d’origine nationale et jurisprudentielle, le droit international privé français s’est enrichi, au cours des dernières décennies, de sources supranationales et textuelles ; ce phénomène s’est encore récemment accentué sous l’influence de l’Union européenne. La transformation des sources s’est accompagnée d’une inflation de celles-ci. Et la multiplication des textes, alliée à la diversité de leurs origines, a rendu l’accès aux sources du droit international privé particulièrement complexe.

L’objectif de cet ouvrage est, pour simplifier la tâche des « usagers » du droit international privé, qu’ils soient universitaires, étudiants ou praticiens du droit, de leur offrir un « portail » des sources textuelles du droit international privé français contemporain, tendant à l’exhaustivité sans toutefois y prétendre.

Le lecteur y trouvera, le plus souvent en texte intégral, l’essentiel des règles de conflit de lois et de juridiction, mais aussi des règles matérielles de droit international privé d’origine supranationale et des règles de procédure internationale et d’arbitrage international, ce aussi bien en matière civile et commerciale qu’en matière familiale, patrimoniale et extrapatrimoniale (à l’exclusion notable des règles régissant la nationalité et la condition des étrangers). L’usage de cet ouvrage se veut simplifié par la mise à disposition d’un index thématique qui permet au lecteur d’embrasser, d’un seul coup d’oeil, l’ensemble des textes régissant une question de droit spécifique (par exemple, l’adoption, le transport aérien ou la propriété industrielle, etc.).

More information can be found here.

ECJ upholds National Law Precluding Intervention of Consumer Associations in Enforcement Proceedings of an Arbitration Award

March 25, 2014/in /by Gilles Cuniberti

By Anthi Beka, University of Luxembourg

On February 27^th, 2014 the Court delivered its ruling in Case C-470/12 Pohotovost’ s.r.o. v Miroslav Vasuta. The case forms part of the jurisprudential line of the Court on the procedural implications of the Unfair Terms Directive.

The legal issue raised was whether the important role assigned to consumer associations by the Unfair Terms Directive for the protection of consumers should be understood, in conjunction with articles 38 and 47 of the Charter, as precluding national procedural law which does not give standing to consumer associations to intervene in individual disputes involving consumers for the enforcement of a final arbitration award. The Court upholds the compatibility of Slovak procedural law. One more case is currently pending involving the same credit professional, Pohotovost’, on the same legal issue (Case C-153/13 Pohotovost’ s.r.o. v Jan Soroka). In 2010 the Court had also delivered its Order in Case C-76/10 Pohotovost’ s.r.o. v Iveta Korckovska .

Facts and questions referred

Pohotovost’ applied for authorization to enforce a final arbitration award against the consumer. Its application was partially rejected, as far as the default interest and the costs on the recovery of the debt were concerned and upheld for the remaining debt. While the consumer did not appear in the proceedings, a Slovak consumer association sought leave to intervene. It claimed that the enforcement proceedings should be suspended, on grounds of lack of impartiality of the bailiff appointed by the company, but also, on the reason that the court did not properly apply its ex officio obligation to protect the consumer, in accordance with the Pohotovost’ Order (Case C-76/10) and the ruling in Case C-40/08 Asturcom. However, intervention of consumer associations at the stage of enforcement was not admissible under national procedural law. It was in this context, that the referring court asked for an interpretation of the Unfair Terms Directive in light also of articles 38 and 47 of the Charter.

The decision of the Court

Admissibility of the request

French Court Rules Court of the Child’s Initial Habitual Residence Retains Jurisdiction

March 24, 2014/in /by Gilles Cuniberti

By Céline Camara

Céline Camara is a research fellow at the Max Planck Institute Luxembourg.

On 5 March 2014 the French Supreme Court for Private and Criminal Matters (Cour de cassation) ruled that in child abduction cases, the Court of the initial habitual residence of the child retains jurisdiction to decide over parental responsibility matters pursuant to Article 10 of Regulation 2201/2003 of 27 November 2003 (Brussels IIbis). The decision is available here.

In June 2011, Mr. Y (the French father) filed a request for sole custody of his daughter H (born in France) and for the suspension of Ms. X’s (the Belgian mother) right of access in France. The French courts rendered a favourable outcome in July 2011. In the meantime, Mrs. X left France and abducted the child to Belgium after having brought a claim for sole custody before Belgian courts. In August 2011, Mr. Y submitted a request for the child’s return under the 1980 Hague Convention. In the absence of any return order, he took it on himself to bring his daughter to France in October 2011. H. was 8 months old and her mother was still breastfeeding her at that time. One month later, Belgian courts granted sole custody to the mother.

In June 2012, Ms. X lodged an appeal to contest the jurisdiction of French courts concerning parental responsibility matters, claiming that French courts do not have jurisdiction because H’s habitual residence is in Belgium and that Court of Appeal did not take into consideration the impact of the child’s removal from Belgium by the father.

The Court of Appeal dismissed the appeal although mentioning that the child’s removal from Belgium by the left behind parent was “brutal” and “unfortunate”.

The Cour de cassation decision revolves around Article 10 of Regulation 2201/2003, which holds that the courts of the child’s habitual residence before the abduction should retain jurisdiction until the child has acquired a new habitual residence in another Member State and either (a) the (other) person having custodial rights gives their consent or (b) the child has resided in that Member State for at least one year.

CJEU Rules on Relationship between 5 No. 1 and 3 Brussels I

March 21, 2014/in /by Giesela Ruehl

By Matthias Lehmann, Professor at Martin Luther University, Halle-Wittenberg

On 13 March 2014, the ECJ has rendered a significant decision on the Brussels I Regulation. Brogsitter (Case C-548/12) concerns the complex relationship between contractual and tort claims under Article 5 No 1 and 3 of the Regulation. The new key phrases coined by the ECJ in this regard are the following (emphasis is mine):

“However, the mere fact that one contracting party brings a civil liability claim against the other is not sufficient to consider that the claim concerns ‘matters relating to a contract’ within the meaning of Article 5(1)(a) of Regulation No 44/2001.

That is the case only where the conduct complained of may be considered a breach of contract, which may be established by taking into account the purpose of the contract.

That will a priori be the case where the interpretation of the contract which links the defendant to the applicant is indispensable to establish the lawful or, on the contrary, unlawful nature of the conduct complained of against the former by the latter.

It is therefore for the referring court to determine whether the purpose of the claims brought by the applicant in the case in the main proceedings is to seek damages, the legal basis for which can reasonably be regarded as a breach of the rights and obligations set out in the contract which binds the parties in the main proceedings, which would make its taking into account indispensable in deciding the action.”

The facts of the underlying case are as follows: Brogsitter, a German watch manufacturer, entered into a contract with a Swiss resident whereby the latter undertook to design watches on his behalf. The Swiss resident and his French company also developed other watches, which they marketed independently. Brogsitter sued them both in Germany alleging that they had agreed to work exclusively for him. The peculiarity of the case rests on the fact that he did not base his claim on contract law, but rather on the law of torts. Specifically, he invoked a violation of § 18 of the German Act against Unfair Competition (Gesetz gegen unlauteren Wettbewerb – UWG), which prohibits the use of models provided by other persons. In addition, he also claimed that the defendants had disrupted his business and committed fraud and breach of trust. All of these grounds lead to tortuous liability under German law (§ 823 para. 1, 2, § 826 BGB). Nevertheless, the German court wondered whether the claim would fall under Article 5 No 1 Brussels I Regulation given the existence of a contract between the parties.

The ECJ responded cautiously by choosing to leave the ultimate decision concerning the proper categorisation to the national court. It did however offer some insight into the relationship between Article 5 No 1 and 3 of the Regulation. After the usual repetitions about the principle of autonomous interpretation, it made clear that the court must take the purpose of the contract into account. Moreover, it held that a claim must be considered contractual if an interpretation of the agreement is “indispensable” to establishing the legality or illegality of the act and to deciding on the action. It used the term “reasonably” to circumscribe how the national court must carry out the autonomous categorisation. It remains to be seen how these guidelines will be applied by the referring court and in future cases.

European conference on international child abduction, The Hague 7-10 May 2014

March 20, 2014/2 Comments/in /by Thalia Kruger

On 7-10 May the International Child Abduction Center of the Netherlands (Centre IKO) will host a conference for family lawyers who work in the field of in international parental child abduction. The event will take place in the Peace Palace in The Hague.

The conference is part of LEPCA (Lawyers in Europe on Parental Child Abduction), a project funded by the European Commission.

Speakers include mr Fred Teeven (Dutch Secretary of State for Security and Justice), mr Christophe Bernasconi (Secretary General of the Hague Conference on Private International Law), mrs Joanna Serdynska (European Commission DG Justice), and mr Lo Voi (Eurojust).

The remainder of the conference will take the form of interactive seminars on various topics of international child abduction by parents.

For further information and the programme see http://www.lepca.eu.

ECHR Rules on Enforcement of Judgments under Brussels I

March 20, 2014/in /by Gilles Cuniberti

On 25 February 2014, the European Court of Human Rights ruled in the case of Avotinš v. Latvia (application no. 17502/07) that the Brussels I Regulation imposes on Member States a duty to enforce judgments in civil and commercial matters, which triggers the Bosphorus presomption of compatibility of the actions of the enforcing state with the European Convention.

The judgment, which is only available in French, reveals a lack of knowledge of European private intenational law instruments by the members of the court.

The Court rules that the foundation of the Brussels I Regulation is mutual trust. That’s of course correct. It then insists that under the Brussels I Regime, declarations of enforceability are granted almost automatically, after mere formal verification of documents. It thus concludes that under the Regulation, Member States are obliged to enforce foreign judgments, and should thus benefit as requested states from the Bosphorus presumption.

49. La Cour relève que, selon le préambule du Règlement de Bruxelles I, ce texte se fonde sur le principe de « confiance réciproque dans la justice » au sein de l’Union, ce qui implique que « la déclaration relative à la force exécutoire d’une décision devrait être délivrée de manière quasi automatique, après un simple contrôle formel des documents fournis, sans qu’il soit possible pour la juridiction de soulever d’office un des motifs de non-exécution prévus par le présent règlement » (paragraphe 24 ci-dessus). À cet égard, la Cour rappelle que l’exécution par l’État de ses obligations juridiques découlant de son adhésion à l’Union européenne relève de l’intérêt général (Bosphorus Hava Yollar Turizm ve Ticaret Anonim irketi précité, §§ 150-151, et Michaud c. France, no 12323/11, § 100, CEDH 2012) ; le sénat de la Cour suprême lettonne se devait donc d’assurer la reconnaissance et l’exécution rapide et effective du jugement chypriote en Lettonie.

50. Devant les juridictions lettonnes, le requérant soutenait que la citation de comparaître devant le tribunal de district de Limassol et la demande de la société F.H.Ltd. ne lui avaient pas été correctement communiquées en temps utile, de sorte qu’il n’avait pas pu se défendre ; par conséquent, selon lui, la reconnaissance de ce jugement devait être refusée sur la base de l’article 34, point 2, du Règlement. Dans son arrêt du 31 janvier 2007, le sénat de la Cour suprême a écarté tous ses moyens – et, donc, l’application de l’article 34, point 2, du Règlement – en déclarant que, le requérant « n’ayant pas fait appel du jugement, les arguments de son avocat selon lesquels [il] ne se serait pas vu dûment notifier l’examen de l’affaire par un tribunal étranger, n’ont aucune importance ». Cela correspond en substance à l’interprétation donnée à la disposition susmentionnée par la Cour de justice des Communautés européennes dans l’arrêt Apostolides c. Orams, aux termes duquel « la reconnaissance ou l’exécution d’une décision prononcée par défaut ne peuvent pas être refusées au titre de l’article 34, point 2, du règlement no 44/2001 lorsque le défendeur a pu exercer un recours contre la décision rendue par défaut et que ce recours lui a permis de faire valoir que l’acte introductif d’instance ou l’acte équivalent ne lui avait pas été signifié ou notifié en temps utile et de telle manière qu’il puisse se défendre » (paragraphe 28 ci-dessus).

This is the part of the reasoning of the court which is plainly wrong. It fails to discuss the relevance of the public policy exception and the margin of appreciation that it offers to requested states to verify whether the state of origin respected fundamental rights.

PRESS RELEASE

The case concerned the enforcement in Latvia of a judgment delivered in Cyprus concerning the repayment of a debt. The applicant, an investment consultant who had borrowed money from a Cypriot company, complained that the Cypriot court had ordered him to repay his debt under a contract without summoning him properly and without guaranteeing his defence rights.

Like the Senate of the Latvian Supreme Court, the Court noted that the applicant should have appealed against the Cypriot court’s judgment. It took the view that the Latvian authorities, which had correctly fulfilled the legal obligations arising from Latvia’s status as a member State of the European Union, had sufficiently taken account of Mr Avotinš’

PRINCIPAL FACTS

The applicant, Peteris Avotinš, is a Latvian national who was born in 1954 and lives in the district of Riga (Latvia).

On 4 May 1999 Mr Avotinš and F.H.Ltd., a commercial company registered in Cyprus, signed before a notary a formal acknowledgement of his obligation to repay a debt. Mr Avotinš declared that he had borrowed 100,000 United States dollars from F.H.Ltd. and undertook to repay that amount with interest before 30 June 1999. The document stated that it would be governed “in all respects” by the laws of Cyprus and that Cypriot courts would have jurisdiction to hear all disputes arising from it.