The first issue of French Journal du Droit International (also known as Clunet) will shortly be released. It contains several articles dealing with conflict issues.

The topic of the first two is the 2008 Rome I Regulation on the law governing contractual obligations. First, Hughes Kenfack, a professor at Toulouse University, wonders whether the Regulation will function like a steady vessel or will be unable to avoid the reefs (Le règlement Rome I, navire stable aux instruments efficaces de navigation ?). The English abstact reads:

The Regulation on the Law Applicable to Contractual Obligations (« Rome I ») was adopted after five years of preparatory work. It supersedes the Rome Convention for contracts concluded after the 17th of September 2009, and works harmoniously within a framework of other Regulations including « Brussels I » and « Rome II ». Its purpose is to reinforce predictability and security in legal solutions to disputes while safeguarding a measure of flexibility. While upholding certain solutions imposed by the Rome Convention, the new text introduces some well met changes, notably regarding the determination of the applicable law in the absence of choice by the parties. The outcome will now be more predictable for most international commercial contracts.
In the main, as a metaphor in the maritime field, the « Rome I » Regulation functions like a steady vessel with effective instruments of navigation. With the guiding light of the Court of justice of the European Communities, it should allow to avoid the reefs and lead to safe harbour.

In the second article, Stephanie Francq, a professor of law at the Catholic University of Louvain (Belgium), presents the changes introduced by the new legislation (Le Règlement Rome I. De quelques changements…). The abstract reads:

EU Regulation n° 593/2008 (« Rome I ») harmonises conflicts-of-law rules in the area of contract law. The Regulation, which replaces the Rome Convention, applies to contracts entered into as from December 17, 2009. This article analyses in details the main changes brought about by the Regulation and reflects on the consequences of its adoption at EU level. In turn, it inquires into the existence of a logical and theoretical underpinning for the new rules. Finally, it highlights the particular influence exercised by certain Member States in the process leading to the adoption of the Regulation because of their opt-out from title IV of the EC Treaty.

The third article is a short report by Hélène Péroz (Caen University) on Certifying Authorities for European Enforcement Orders after a recent French Decree (Les autorités certificatrices de titre exécutoire européen. A propos du Décret n°2008-484 du 22 mai 2008). Here is the English abstract:

Decree n° 2008-484 regarding proceedings before the French Cour de cassation amends the list of authorities in charge of certifying European Enforcement Orders. French notarial acts will from now on be certified by the notary keeping the original document.
Decisions will also henceforward be certified by the chief registrar of the Court, choice which seems in contradiction with Regulation (EC) N° 805/2004 the decree is supposed to implement and therefore contrary to law.

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 Many thanks to Professor Laura Carballo (Santiago de Compostela University, Spain), who has asked me to upload this brief comment on the ECJ judgment following Veronika Gaertner‘s post  ECJ: Judgment on International Jurisdiction in Respect of Actions to set a Transaction aside by Virtue of Insolvency.

By Judgement of 12th of February 2009, the ECJ has addressed the issue of international jurisdiction for claims “which are delivered directly on the basis of the insolvency proceedings and are closely connected with such proceedings”. These terms are contained in Recital 6 of Regulation (EC) Nr. 1346/2000, on insolvency proceedings; its Article 25.1 repeats the same definition, stating that judgments delivered in such kind of claims are to be recognized according to Articles 31 to 51, with the exception of Article 34(2), of the Brussels I Convention (now Articles 32 to 52, with the exception of Article 45.1, of the Brussels I Regulation). But Regulation (EC) Nr. 1346/2000 does not say anything about international jurisdiction rules for such claims, i.e. about a rule on vis attractiva concursus.

The issue was directly addressed by 1970 and 1980 Drafts of an European instrument on insolvency proceedings, both setting out which claims closely connected with insolvency proceedings must be concentrated before the forum concursus. Because of these statements, the silence of Regulation (EC) Nr. 1346/2000 was understood as an acknowledgment of the application of national jurisdiction rules. But this resulted to be a dangerous interpretation, because, as mentioned, Article 25 of this Regulation grants a privileged recognition system, without examination on the grounds of international jurisdiction; therefore, Member States should enforce all judgements, even when delivered by an exorbitant forum. Besides, application of national jurisdiction rules gives rise to negative conflicts of jurisdiction, because of the many understandings of the vis attractiva concursus rule by Member States. This is the outcome in the case underlying the recent EJC Judgement: On 14 March 2002, Frick Teppichboden Supermärkte GmbH, which has its seat in Germany, transferred EUR 50 000 to Deko Marty Belgium NV, a company with its seat in Belgium. Frick made an application for opening an insolvency proceeding the 15th March of 2002 and the named liquidator brought an action to set the transaction aside. He tried it first in Belgium, but Belgian Law establishes a vis attractiva concursus for avoidance proceedings and sent the matter to Germany. On the contrary, Germany places this action by the courts of the defendant’s domicile, in this case Belgium. In the end, the German Bundesgerichtshof posed the two following questions to the ECJ, framing the issue in terms of European Regulations’ scope of application:

“(1)      Do the courts of the Member State within the territory of which insolvency proceedings regarding the debtor’s assets have been opened have international jurisdiction under Regulation [No 1346/2000] in respect of an action in the context of the insolvency to set a transaction aside that is brought against a person whose registered office is in another Member State?

(2)      If the first question is to be answered in the negative:

Does an action in the context of the insolvency to set a transaction aside fall within Article 1(2)(b) of Regulation [No 44/2001]?”

The EJC gives a positive answer to the first question:

“Article 3(1) of Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings must be interpreted as meaning that the courts of the Member State within the territory of which insolvency proceedings have been opened have jurisdiction to decide an action to set a transaction aside by virtue of insolvency that is brought against a person whose registered office is in another Member State”.

The EJC’s answer is a logic one, given the fact that the definition stated by Recital 6 and Article 25.1,II of  Regulation (EC) Nr. 1346/2000 comes from Case 133/78 Gourdain [1979] ECR 733, paragraph 4, a judgement delivered on the interpretation of Article 1(2)(b) of the Brussels I Convention, where it was decided that the so defined claims do not fall within the scope of application of the Convention, now Brussels I Regulation, in the case a French action against the de facto manager of an insolvent company. Therefore, this judgement is not a surprise, but a step forward in bringing juridical security to insolvency proceedings in the European Union. As a result of this answer, the question of which claims “are delivered directly on the basis of the insolvency proceedings and are closely connected with such proceedings” and, therefore, are to be located before the courts where insolvency proceedings are conducted, is now open and should give rise to an autonomous interpretation by the ECJ. Gourdain and Deko Marty Belgium give just some clues, but the issue is far from being closed. For now, this judgement makes it clear that avoidance proceedings are one of them, but it is going to be more difficult to decide other claims, such as liability claims against managers and administrators, or claims arising from the impact of insolvency in running contracts.

Practitioners in Australia should be aware that, pursuant to Practice Note No 13 (4 September 2008), the Federal Court requires a party applying for leave to serve originating process or other documents outside Australia to support the application with evidence of information obtained from the Private International Law Section of the Commonwealth Attorney-General’s Department in relation to the appropriate method of transmitting documents for service, including certain specified information.  See the Practice Note for further details.

Rafael Arenas is Professor of Private International Law at the University of Barcelona (Universidad Autónoma). He has numerous publications in the field of international commercial law. He is author of several monograph works, such as Registro Mercantil y Derecho del Comercio Internacional, and co-author of Derecho de los negocios internacionales

Regulation 44/2001 also applies to arbitral proceedings

The key words of the decision are clear enough: “recognition and enforcement of foreign arbitral awards”, “Regulation (EC) No 44/2001” “scope of application” “Jurisdiction of a court of a Member State to issue an order restraining a party from commencing or continuing proceedings before a court of another Member State on the ground that those proceedings would be contrary to an arbitration agreement”, “New York Convention”. It is obvious that the ECJ is dealing with an arbitral case, and it is also obvious that Regulation 44/2001 does not apply to arbitration. These are obvious statements, but the final conclusion of the Court is that the English proceeding (which falls outside the scope of Regulation 44/2001, see number 23 of the decision) is not compatible with the Regulation. How can this be possible?

The reasoning of the ECJ is based on two facts. First, there is an Italian proceeding that falls within the scope of Regulation 44/2001; second, this Italian proceeding could be affected by the English proceeding. The conclusion is that the English proceeding is not compatible with Regulation 44/2001. Obviously, there is some kind of gap in the reasoning: if the proceeding is not compatible with Regulation 44/2001, this means that Regulation has an influence of some kind on the English proceeding, but this influence does not fit with the assertion that “proceedings, such as those in the main proceedings (…) cannot, therefore, come within the scope of Regulation No 44/2001” (number 23 of the decision).

The conclusion of the ECJ is not problem-free. The reasoning is not strong enough to justify the extension of Regulation 44/2001 to arbitral proceedings, which are excluded of the Regulation expresis verbis (art. 1). From my point of view it is also a dangerous decision. The reasoning of the Court implies that every proceeding that could affect a proceeding within the scope of Regulation 44/2001 must be examined in order to determine if it is compatible with the Regulation. This is new and shocking. Let’s think about proceedings before an arbitral court. They obviously fall outside the Regulation scope but this is not a justification for not applying Regulation 44/2001 anymore. If the proceeding affects another proceeding falling within the scope of Regulation 44/2001, then we must analyse the compatibility of the first proceeding with the Regulation; and it is obvious that a proceeding before an arbitral court could affect proceedings falling within the scope of the Regulation. How about a court decision designating an arbitrator? Is this decision compatible with the Regulation in the case that a judicial proceeding involving the same cause of action has already started in a member State? I think that Regulation 44/2001 has nothing to say in this case, but following the “West Tanker doctrine” the answer to these questions could be a different one. I can imagine a decision of the Luxembourg Court establishing something like this: “In the light of the foregoing considerations the answer to the question referred is that a court of a Member State cannot help a proceeding that could limit the application of a judgment that falls within the scope of Regulation 44/2001” In this sense, the Opinion of the Court 1/03 (Lugano Convention) must also be considered.

Finally, I would like to point out that this decision can only be understood if we consider the supremacy of the Community legal order. The “useful effect” doctrine implies that in conflicts between Community Law and other legal sources Community Law always prevails; even when the case is not ruled directly by Community Law. The consequence of this is that the “indirect” effect of Community Law expands the scope of the Community competences more and more; in the same way that a black hole becomes bigger and bigger thanks to the matter that it soaks up. In the end, nevertheless, bigger does not necessarily mean greater or better.

Thomas Pfeiffer is professor of law and director of the Institute for Comparative Law, Conflict of Laws and International Business Law of Heidelberg University. He has published intensively in the areas of contract law, private international law and international dispute resolution.

1) For those who have read the famous opinion of Lord Ellenborough in Buchanan v. Rucker (Court of King’s Bench 1808), the following may sound familiar:

Can the island of Britannia render a judgment to bind the rights of the whole world? Would the world submit to such an assumed jurisdiction? – For EC Member States, according to Allianz v. West Tankers, the answer is “not any more”, not only with regard to anti-suit injunctions in general but also with regard to injunctions meant to protect arbitration agreements.

2) The exception for “arbitration” in Art. 1 II lit. d) Regulation 44/2001 applies if the subject matter of the case falls within its scope. Based on this criterion, it seems correct to say that the London High Court proceedings fall under the arbitration exception whereas the Syracuse proceedings do not. My only objection against the Court’s reasoning on this issue relates to the statement that, in Syracuse, where the defendant raised the arbitration agreement as a defence, the validity of the agreement only formed a “preliminary question”. In Private International Law, the term “preliminary question” or “incidental question” refers to situations where one legal relationship (e.g. succession) depends on the existence of another legal relationship (e.g. marriage). The arbitration issue raised in Syracuse was relevant for the admissibility of the proceedings. Procedural admissibility is a separate issue of its own, not a mere preliminary question for the subject matter (insofar I agree with Andrew Dickinson). However, even if it is not a mere preliminary issue, the arbitration agreement still is only a defence so that it is correct to say that it is outside the scope of the subject matter of the Syracuse proceedings. In other words: the Syracuse proceedings fall under the regulation whereas the London proceedings do not.

3) Under these circumstances, the legal situation is the following: An English injunction can in no way at all touch the Syracuse Court’s legal competence to determine its international jurisdiction (governed by the Brussels I Regulation) on its own. Instead, such an injunction would have affected the court’s ability to effectively make use of this competence as a matter of fact. According to the ECJ, such a factual effect constitutes an infringement of EC law, and this view can indeed be based on the general principle of practical effectiveness of EC-law and the principle of loyalty under Art. 10 EC-Treaty. No Member State must conceive its law in a way so that EC law is deprived of its practical effectiveness.

4) In West Tankers, it was argued that the court at the seat of the arbitral tribunal is best able to protect the arbitration agreement by supportive measures so that there is a conflict between the principle of effectiveness of community law on the one hand and of effectiveness of the procedural system on the other hand. The ECJ gives a formal answer to that: The formal answer is that, in the European area of Freedom, Justice and Security under Art. 65 EC-Treaty, both the London and the Syracuse Court are Courts of the same system and of equal quality. That is both legally correct and fiction with regard to reality.

5) Despite of these reservations, there are good reasons why the result of the ECJ deserves support. According to the logic of anti-suit injunctions, the outcome of jurisdictional conflicts depends on the effectiveness of enforcement proceedings available on both sides and on other accidental factors such as the localisation of assets that can be seized to enforce court decisions. Letting the outcome of cases depend on factors like these is a concept that is essentially unjust, unless one claims that the stronger system is automatically better. International cooperation between legal systems is possible only on the basis of equality and the mutual respect. Trying to impose the view of one country’s courts on the court system of another country is a concept which might have been appropriate in the times of hegemony. And although I admire many of the superb qualities of the English legal system and profession, there should be no space for such a one-sided concept in the context of international co-operation.

6) English lawyers will certainly come up with other ideas of how to protect English arbitration proceedings such as e.g. penalty clauses and other contractual constructions, the validity of which will raise interesting new questions.

7) Instead of a conclusion: Why is everybody talking about the “West Tankers” and not of “Allianz”? It seems that Britannia, despite of the outcome of this case, does not only still rule the waves but also the names. Be that a comfort for all my English friends.