By Matthias Weller

Prof. Dr. Matthias Weller, Mag.rer.publ., Chair for Civil Law, Civil Procedure and Private International Law, EBS University of Economics and Law; Director of the Research Center for Transnational Commercial Dispute Resolution, EBS Law School 

On 11 March 2014 the European Commission presented its vision for the future EU justice policy until 2020. In its Press Release “Towards a true European area of Justice: Strengthening trust, mobility and growth”, the Commission identifies three key challenges after the forthcoming end of the European Council’s Stockholm Programme on 1 December 2014: Enhancing mutual trust, facilitating mobility and contributing to economic growth. Against the background of the “Assises de la Justice” held in Brussels in November 2013 the Commission, by outlining its own vision of the future EU justice policy, intends to further feed the discussion on the way to the European Council on 24 June 2014. The most comprehensive document is the Communication on the EU Justice Agenda for 2020 – Strengthening Trust, Mobility and Growth within the Union (COM [2014] 144 final of 11 March 2014.

In this document the Commission, after summarizing the development of the European area of freedom, security and justice from Maastricht via Amsterdam and Nice to Lisbon as well as from the European Councils at Tampere via The Hague to Stockholm, further substantiates what it means by the three key challenges identified in its press release:
Firstly, “mutual trust” is evoked as the “bedrock upon which EU justice policy should be built”, namely by “building bridges between the different justice systems”, in particular by mutual recognition. Whereas the European legislator has so far simply postulated a sufficient degree of mutual trust amongst the Member States in order to justify obligations for mutual recognition in respect to the judicial cooperation in civil matters, the European Commission now is acknowledging that mutual trust must be strengthened or even built in the first place – a view that has up to now been taken only in respect to criminal matters. But with only 24% of people trusting their own national justice system for example in Slovenia, or 25% in Slovakia, it appears hardly possible to continue presuming a sufficient level of trust, let alone mutual trust.

In this context, the Commission suggests a new framework to safeguard the rule of law in the European Union. In its Communication to this proposal, the Commission explains that this framework is to operate as a “pre-Article 7 TEU procedure” addressing “systemic threats” to the rule of law consisting of three stages, namely a “rule of law warning” to be issued by the Commission to the respective Member State, a “rule of law recommendation” and on the third level a monitoring of the implementation of the recommendations before resorting to the “nuclear option” of Article 7 TEU that allows under certain conditions the suspension of (mainly voting) rights of Member States under the Treaties. The Commission makes crystal clear that its initiative is not meant to deal with individual breaches of fundamental rights or any miscarriage of justice in a particular case. Infringements of the rule of law other than “systemic” ones are to be taken care of – as before – by the national judicial systems including those provided for by the European Convention on Human Rights.

However, if some national judicial systems are perceived by the public or even evaluated by the Commission under its proposed pre Article 7 TEU procedure not to be sufficiently trustworthy, there is a problem both conceptually for building bridges through mutual recognition to the judicial system of such a Member State as well as for the individual suffering or threatened to suffer from a (non-systemic) violation of the rule of law in his / her particular case. One answer to the individual’s problem obviously is allowing exceptions to mutual recognition, i.e. public policy-clauses. Therefore, if the Commission is now acknowledging that there may be the need to strengthen mutual trust in respect to certain Member States, it would be contradictory to further pursue at the same time limitations or even deletions of public policy clauses as it was proposed for the Brussels I Recast. Rather, the Commission itself should trust the Member States that they do not misuse public policy exceptions. Mutual trust does not only operate horizontally but also vertically. It is difficult enough for the aggrieved party to argue and prove a case of violation of public policy. An obvious question not raised by the Commission in this context would be whether initiating pre Article 7 proceedings should affect in any way obligations of other Member States to recognize judicial acts from the Member State addressed by the Commission (possibly depending on the nature of observations made by the Commission), for example by reducing the degree of probability for public policy violations that must be shown in order to benefit from this exception of recognition.

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By Vincent Richard

Vincent Richard is a research fellow at the Max Planck Institute Luxembourg

On March, 5th, 2014, the French Supreme Court for private and criminal matters (Cour de Cassation) set aside an enforcement measure carried out by a Swiss company (Romak SA Geneva) against the Republic of Uzbekistan (here).

Facts

In 1996, an Uzbek company (Uzdon) signed a contract with Romak for the delivery of wheat to Uzbekistan. The price agreed was never paid by the Uzbek company and Romak initiated arbitral proceedings in front of the GAFTA. In August 1997, a GAFTA arbitral award ordered Uzdon to pay approximately 10 million dollars to Romak SA Geneva. This award was declared enforceable in France and in November 2009 Romak proceeded to attach a bank account opened by the Republic of Uzbekistan at the Paris branch of HSBC Bank. The Republic of Uzbekistan challenged this attachment in front of a French enforcement court.

Personal Scope of Waiver of Immunity

Uzbekistan claimed that the HSBC bank account under the name Uzbekistan Airways was supplied by air navigation charges and thus covered by enforcement immunity as resulting from public powers activities. The Swiss Company did not contest the origin of the funds but argued that they were not covered by State immunity. This argument was based on the fact that these funds were escrowed in favour of a lending Japanese company in order to guarantee a loan where Uzbekistan clearly waived its immunity.

Unsurprisingly, the enforcement court declared that the waiver of immunity was made solely in favour of the Japanese company for the purpose of the loan and could not be extended to all creditors of Uzbekistan. The Court considered that the funds were covered by Uzbekistan enforcement immunity and the attachment was thus annulled. This decision was confirmed by the Court of Appeal and by the French Supreme Court.

“Business, Human Rights And Children: The Developing International Agenda”, by O. Martin-Ortega and R. Wallace, has been published in The Denning Law Journal 2013, vol 25, pp 105 – 127. The following excerpt illustrates the contents:

“The instruments analysed in this article are part of an important trend: the development of a comprehensive response to the risks children’s rights face from business activities. Until recently international focus has been somewhat ad hoc and sector-specific. This has been evidenced by the concentration on the regulation of child labour and economic exploitation of children and the consequences of the privatisation of public services on their rights. The international legal instruments regulating these spheres placed the responsibility in the fulfilment of the rights of the child exclusively on states. However, both the CRB Principles and General Comment 16 acknowledge a responsibility of business vis-à-vis children’s rights beyond that of the state (…). Whilst only states have direct obligations with regards to children’s rights, increased recognition of business responsibilities in instruments such as the ones analysed here, contribute to (…) the creation of fertile ground for increased demands on business. This may lead to indirect obligations in international law and the development of direct obligations in national systems.

The CRB Principles and General Comment 16 are also important because they are based on the conception of children as rights bearers. This goes beyond the traditional perception, in the context of business activities, that children are mainly objects of protection from economic exploitation and abuse as members of the labour force or recipients of welfare services.”

Still in the domain of business and human rights, another recent (and critical) publication of Prof. Zamora Cabot is worth mentioning – this time on the USSC Daimler decision: “Decisión del Tribunal Supremo de los Estados Unidos en el caso Daimler Ag v. Bauman et al.: Closing the Golden Door” (Papeles El tiempo de los derechos, 2014, 2).

To download click here (in Spanish).

Gregory Shill (Denver Sturm College of Law) has posted Boilerplate Shock on SSRN.

No nation was spared in the recent global downturn, but several Eurozone countries arguably took the hardest punch, and they are still down. Doubts about the solvency of Greece, Spain, and some of their neighbors are making it more likely that the euro will break up. Observers fear a single departure and sovereign debt default might set off a “bank run” on the common European currency, with devastating regional and global consequences. What mechanisms are available to address — or ideally, to prevent — such a disaster?

One unlikely candidate is boilerplate language in the contracts that govern sovereign bonds. As suggested by the term “boilerplate,” these are provisions that have not been given a great deal of thought. And yet they have the potential to be a powerful tool in confronting the threat of a global economic conflagration — or in fanning the flames.

Scholars currently believe that a country departing the Eurozone could convert its debt obligations to a new currency, thereby rendering its debt burden manageable and staving off default. However, this Article argues that these boilerplate terms — specifically, clauses specifying the law that governs the bond and the currency in which it will be paid — would likely prevent such a result. Instead, the courts most likely to interpret these terms would probably declare a departing country’s effort to repay a sovereign bond in its new currency a default.

A default would inflict damage far beyond the immediate parties. Not only would it surprise the market, it would be taken to predict the future of other struggling European countries’ debt obligations, because they are largely governed by the same boilerplate terms. The possibility of such a result therefore increases the risk that a single nation’s departure from the euro will bring down the currency and trigger a global meltdown.

To mitigate this risk, this Article proposes a new rule of contract interpretation that would allow a sovereign bond to be paid in the borrower’s new currency under certain circumstances. It also introduces the phrase “boilerplate shock” to describe the potential for standardized contract terms drafted by lawyers — when they come to dominate the entire market for a given security — to transform an isolated default on a single contract into a threat to the broader economy. Beyond the immediate crisis in the Eurozone, the Article urges scholars, policymakers, and practitioners to address the potential for boilerplate shock in securities markets to damage the global economy.

On February 27th, 2014, the Court of Justice of the EU delivered its ruling in Cartier Parfums Lunettes v. Ziegler (case 1/13).

The issue before the court was whether the lis pendens rule in the Brussels I Regulation also applies when the jurisdiction of the court first seized was founded in a submission to its jurisdiction.

The court held that it does.
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