Petronas Lubricants: ECJ confirms that Art 20(2) Brussels I can be used by employer for assigned counter-claim

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Last Thursday, the ECJ rendered a short (and rather unsurprising) decision on the interpretation of Art 20(2) Brussels I (= 22(2) of the Recast Regulation). In Petronas Lubricants (Case C 1/17), the Court held that an employer can rely on the provision to bring a counter-claim in the courts chosen by the employee even where said claim has been assigned to the employer after the employee had initiated proceedings.

The question had been referred to the ECJ in the context of a dispute between an employee, Mr Guida, and his two former employers, Petronas Lubricants Italy and Petronas Lubricants Poland. Mr Guida’s parallel employment contracts with these two companies had been terminated among allegations of wrongly claimed reimbursements. Mr Guida, who is domiciled in Poland, had sued his Italian employer in Italy for wrongful dismissal and his employer had brought a counter-claim for repayment of the sums Mr Guida had allegedly wrongfully received, which had been assigned by the Polish employer.

Art 20(2) Brussels I contains an exception to the rule in Art 20(1), according to which an employee can only be sued in the courts of their country of domicile, to allow the employer to bring a counter-claim in the courts chosen by the employee. Similar exceptions can be found in Art 12(2) Brussels I (= Art 14(2) of the Recast; for insurance contracts) and Art 16(3) Brussels I (= Art 18(3) of the Recast; for consumer contracts), all of which incorporate the ground for special jurisdiction provided in Art 6 No 3 Brussels I (= Art 8(3) of the Recast). In the present case, the ECJ had to decide whether this exception would also be available for counter-claims that had been assigned to the employer after the employee had initiated proceedings.

The Court answered this question in the affirmative, pointing out that

[28] … provided that the choice by the employee of the court having jurisdiction to examine his application is respected, the objective of favouring that employee is achieved and there is no reason to limit the possibility of examining that claim together with a counter-claim within the meaning of Article 20(2) [Brussels I].

At the same time, the Court emphasised that a counter-claim can only be brought in the court chosen by the employee if it fulfils the more specific requirements of Art 6 No 3 Brussels I, according to which the counter-claim must have arisen ‘from the same contract or facts on which the original claim was based’. This has recently been interpreted by the ECJ (in Case C-185/15 Kostanjevec) as requiring that both claims have ‘a common origin’ (see [29]–[30] of the decision). Where this is the case – as it was here (see [31]–[32]) –, it does not matter that the relevant claims have only been assigned to the employer after the employee had initiated proceedings (see [33]).

Tort Litigation against TNCs in the English Courts

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Ekaterina Aristova, a PhD in Law Candidate at the University of Cambridge, has made available on SSRN her article “Tort Litigation against TNCs in the English Courts: The Challenge of Jurisdiction”. Published earlier this month in the Utrecht Law Review the article discusses a recent trend of private claims alleging direct liability of parent companies for overseas human rights abuses (‘Tort Liability Claims’) focusing on the rules of civil jurisdiction applied by the English courts. It demonstrates how jurisdictional issues arising in Tort Liability Claims challenge the traditional value-neutralism paradigm of private international law as an abstract and technical disciplineby necessitating increasing involvement of domestic courts in the regulation of transnational corporations (‘TNCs’).

The author has kindly provided us with a brief summary of her key findings:

1) Tort Liability Claims are typically initiated in England by private partiesaffected by the activities of TNCs in the host (foreign) state.These arecivil liability cases in which the cause of actionagainst English-domiciled parent companiesis framed through the tort law concept of duty of carerather than the corporate law doctrine of piercing the corporate veil or customary international law on human rights. The allegations are based on the common law principles which provide that in certain circumstances the parent company may be found to have assumed a duty of care, owed to the claimants, to ensure their safety.The article explainsthat duty of care is invoked by the claimants in order to: (1) attribute liability for the overseas abuse to the parent company; (2) establish the necessaryterritorialconnection between the alleged tort and England; and (3) weaken the extraterritoriality concerns raised by the judgment of the English courtswith respect to the events occurred on the territory of the host(foreign)state.

2) To date, the application of Brussels I and English common law by English courts to Tort Liability Claims has resulted in the development of a jurisdictional solution for claims brought against English-domiciled parent companies and their foreign subsidiaries as co-defendants. The concept of duty of care allows claimants to bring claims against English-domiciled parent companies as anchor defendants so as to allow the joinder of the foreign subsidiary as a necessary or proper party under common law. Following the CJEU’s decision in Owusuthe general rule of domicile under Article 4 of Brussels I has a mandatory effect in the proceedings against English-domiciled parent company and claimants cannot rely onthe doctrine of forum non conveniens under English traditional rules. As a result, claims brought against foreign subsidiaries are also likely to survive the forum convenienscontrol. The overall analysis of the rules of jurisdiction in this article suggests that: (1) claims against the English-domiciled parent company in relation to the overseas operations of its foreign subsidiary can be heard in the English courts; and (2) the existence of an arguable claim against an English-domiciled parent company also establishes jurisdiction of the English courts over the connected claims against the subsidiary even if the factual basis of the case occur almost exclusively in the foreign state.

3) One of the most recent successful attempts of foreign citizens to establish English jurisdiction over legal entities of TNC is litigation against English-based mining corporation Vedanta Resources Plc (‘Vedanta’) and its Zambian subsidiary Konkola Copper Mines (‘KCM’) in relation to the environmental pollution in Zambia resulting from the KCM’s operations. Both the High Court (discussed by the author earlier on this blog) and the Court of Appeal (also refer to author’s earlier post) confirmed that Zambian citizens can pursue in England claims against Vedanta and KCM. Decisions of the English courts inVedanta allow making few important observations. Firstly, if the parent company merely held shares in the capital of a foreign subsidiary this would not lead to the establishment of a duty of care and additional circumstances are required to conclude whether the parent company could be held responsible. Second, the parent’s direct and substantial oversight of the subsidiary’s operations in question, including specific environmental and technical deficiencies of the infrastructure in the host state, is likely to give rise to the duty of care. Third, engagement in a mini-trial on the substantive liability issues is not appropriate at the early jurisdictional stage of proceedings, before full disclosure of the relevant documents. Fourth, in the context of applying the ‘necessary or proper party’ gateway, the practical objectives of avoiding two trials on similar facts and events in different parts of the world outweigh the need for the existence of a territorial connection between England and the claim against a foreign subsidiary of the English-domiciled parent company.

4) Unlike in Vedanta, the foreign claimants in Okpabi v Shellfailed to establish jurisdiction of the English courts over claims against Royal Dutch Shell, an English-domiciled parent company (‘RDS’), and its Nigerian operating subsidiary Shell Petroleum Development Company of Nigeria Ltd (‘SPDC’) for the ongoing pollution and environmental damage caused by the oil spills in Nigeria. In 2018, the Court of Appeal in a split decision concluded that the claimants had not established an arguable duty of care assumed by RDS in relation to SPDC’s operations and that, hence, there was no real issue to be tried by RDS and the claimants. As a result, claims against RDS and SPDC were dismissed. The article criticises the Court of Appeal decision for two major shortcomings. First of all, it is submitted that the court took a highly restrictive approach for the imposition of the duty of care on English-domiciled parent companies in relation to the overseas activities of their subsidiaries. The second serious shortcoming of the Court of Appeal’s majority decision in Okpabiis an unreasonably high burden on the claimants to establish an arguable case on the duty of care at the jurisdictional stage of proceedings. Arguably, such approach blurs the boundary between jurisdictional inquiry and resolution of the case on the merits.

5) Finally, the article also discusses the Anglo American Group litigation, where the South African claimants contended that they had suffered from silicosis and silico-tuberculosis in the course of their employment by AASA, the South African company. The claimants argued that the central administration of AASA was in London, since this was the location of Anglo American plc, its English-based parent company, and that it followed that AASA was domiciled in England under the meaning of Brussels I. The Court of Appeal, who defined ‘central administration’ as the place ‘where the company concerned, through its relevant organs according to its own constitutional provisions, takes the decisions that are essential for that company’s operations’, declined to find that decisions of the English-domiciled parent company with respect to the operations of the group had any relevance in determining the domicile of the foreign subsidiary. As a result, it is challenging for the claimants in the Tort Liability Claims, if not impossible, to assert jurisdiction over a foreign subsidiary directly without also commencing proceedings against an English-domiciled parent company. The article further criticised Court of Appeal decision for the lack of jurisdictional analysis of the integrated nature of TNCs and their managerial organisation.

6) The overall conclusion of the article is that Tort Liability Claims offer the discipline an opportunity to reconsider its role of the neutral mediator in international litigation and contribute to the debate on international corporate accountability. Itis notargued that private international law should close the gap in group liability through unilateral transformation of judges into agents of justice by substituting the norms of public international law and substantive domestic law governing overseas operations of business actors. Rather,the disciplinemay engage where appropriate and the uniform rules of jurisdiction are capable of balancing the regulatory impact of these jurisdictional rules with its potential to cause inter-state jurisdictional conflicts.

Newcastle University PhD Studentship in Law (including private international law)

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Value of award: 100% of UK/EU tuition fees for 3 years and an annual stipend at the UKRI postgraduate rate, currently £14,777.

Start date and duration: 1 September 2018 for 3 years.

Application closing date: 12 July 2018.

Overview: Applications are invited from candidates with an interest in pursuing a PhD in any area of Law in which the School offers supervision. See our list of staff members to find an appropriate supervisor for your research topic.

Eligibility Criteria: Candidates are expected to hold at a minimum either a first class, or a very good upper second class undergraduate degree in Law.

Applications will be considered on their merits, including further education at Masters level, a publication record, professional qualifications, or relevant work experience.

The successful candidate must take up their scholarship at the commencement of the 2018/19 academic year, studying full-time.

It is a condition of the award that the successful candidate undertake some undergraduate teaching and academic support activities within the Law School, normally from the second year of their PhD studies, to a maximum not normally exceeding an average of 6 hours per week during semester 1 and 2 of the academic year.

How to apply: You must apply through the University’s online postgraduate application system. To do this please ‘Create a new account’.

All relevant fields should be completed, but fields marked with a red asterisk must to be completed. The following information will help us to process your application. You will need to:

  • insert the programme code 8230F in the programme of study section;
  • select ‘PhD Newcastle Law School (full-time)’ as the programme of study;
  • insert the studentship code LAW007 in the studentship/partnership reference field;
  • attach a covering letter and  CV. The covering letter must state the title of the studentship, quote reference code LAW007, and state how your interests and experience relate to the project;
  • attach degree transcripts* and certificates and, if English is not your first language, a copy of your English language qualification.

*You will not be able to submit your application until you have submitted your degree transcript/s.

Candidates who have already applied for a place on the Law PhD programme from September 2018 will be considered and need not reapply.

Contact: Professor Sophia Tang

Mareva injunctions under Singapore law

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Whether the Singapore court has the jurisdiction or power to grant a Mareva injunction in aid of foreign court proceedings was recently considered by the Singapore High Court in PT Gunung Madu Plantations v Muhammad Jimmy Goh Mashun [2018] SGHC 64. Both plaintiff and defendant were Indonesian and the claim related to alleged breaches of duties which the defendant owed to the plaintiff. The plaintiff had obtained leave to serve the writ in Indonesia on the defendant. The defendant thereupon applied, inter alia, to set aside service of the writ and for a declaration that the court has no jurisdiction over him. In response, the plaintiff applied for a Mareva injunction against the defendant in respect of the defendant’s assets in Singapore. The plaintiff had, after the Singapore action was filed, commenced actions in Malaysia and Indonesia covering much the same allegations against the defendant.

Under Singapore law (excluding actions commenced in the Singapore International Commercial Court where different rules apply), leave to serve the writ on the defendant abroad may be granted at the court’s discretion if the plaintiff is able to show: (i) a good arguable case that the claim falls within one of the heads of Order 11 of the Rules of court; (ii) a serious issue to be tried on the merits; and (iii) Singapore is forum conveniens. On the facts, the parties were Indonesian and the alleged misconduct occurred in Indonesia. As the plaintiff was unable to satisfy the third requirement, the court discharged the order for service out the writ out of the jurisdiction. Other orders made in pursuant of the order for service out were also set aside.

On the Mareva injunction, the Singapore High Court adopted the majority approach in the Privy Council decision of Mercedes Benz v Leiduck [1996] 1 AC 284. Lord Mustill had distinguished between two questions, to be approached sequentially: first, the question of whether the court has in personam jurisdiction over the defendant; secondly, the question of whether the court has a power to grant a Mareva injunction to restrain the defendant from disposing of his local assets pending the conclusion of foreign court proceedings. Valid service is required to found in personam jurisdiction under Singapore law. In PT Gunung Madu Plantations, as in Mercedes Benz itself, as the answer to the first question was in the negative, the second question did not arise.

Justice Woo was cognisant of the difficulties caused by hewing to the traditional approach of viewing Mareva relief as strictly ancillary to local proceedings but stated ‘that is a matter that has to be left to a higher court or to the legislature’ (para 54). His Honour referenced developments in the UK and Australia, where freestanding asset freezing orders in aid of foreign proceedings are permitted. Further, the Singapore International Arbitration Act was amended in 2010 to give the court the power to grant an interim injunction in aid of a foreign arbitration. It is likely that legislative intervention will be required to develop Singapore law on this issue.

The judgment may be found here: http://www.singaporelaw.sg/sglaw/laws-of-singapore/case-law/free-law/high-court-judgments/23135-pt-gunung-madu-plantations-v-muhammad-jimmy-goh-mashun

“Recognition of Foreign Judgments in China: The Liu Case and the ‘Belt and Road’ Initiative,” a New Article by Professor Ronald Brand

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Professor Ronald Brand has recently posted a paper titled “Recognition of Foreign Judgments in China: The Liu Case and the ‘Belt and Road’ Initiative.” The posting includes an English translation of the first Chinese case to recognize and enforce a U.S. judgment, prepared by Yuting Xu. The combined paper and case translation are available here.

By way of a brief summary, in June, 2017, the Wuhan Intermediate People’s Court became the first Chinese court to recognize a U.S. judgment in the case of Liu Li v. Tao Li & Tong Wu. The Liu case is a significant development in Chinese private international law, but represents more than a single decision in a single case. It is one piece of a developing puzzle in which the law on the recognition and enforcement of foreign judgments in China is a part of a larger set of developments. These developments are inextricably tied to the “One Belt and One Road,” or “Belt and Road” Initiative first announced by Chinese President Xi Jinping on a visit to Kazakhstan in 2013. This article traces the development of the Liu case, from the first judgment in California to the decision to recognize and enforce that judgment in Wuhan, China. It then provides the context within which the decision on recognition and enforcement was made, and the way the decision fits within President Xi’s “Belt and Road” Initiative and the pronouncements of the Chinese People’s Supreme Court which have encouraged the recognition and enforcement of foreign judgments as part of that Initiative.

The UM Macao Distinguished Visiting Scholar (MDS)

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The UM Macao Distinguished Visiting Scholar (MDS), established by University of Macau (UM) under the UM Macao Talent Program, aims to attract established scholars to conduct inter/multi-disciplinary research activities with UM faculty members or to promote joint research projects/publications. Read more

The UM Macao Post-doctoral Fellowship (MPF)

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The UM Macao Post-doctoral Fellowship (MPF), established by University of Macau (UM) under the UM Macao Talent Program, aims to attract high-calibre PhD graduates for faculties to sustain and strengthen their research capabilities and build up areas of expertise. Read more

UM (University of Macao) Macao PhD Scholarship

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The UM Macao PhD Scholarship (MPDS) was established by the University of Macau (UM) in 2018, which aims at attracting excellent students in the world to pursue their PhD programmes in the UM. Read more

26 June 2018: Colloquium on CJEU Achmea Judgment at the University of Amsterdam

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On 26 June 2018 the International Council for Commercial Arbitration (ICCA) together with the Amsterdam Center for International Law (ACIL) will host a colloquium on the CJEU’s recent Achmea judgment. The event will take place from 10.30 am through 5 pm at the University of Amsterdam, Faculty of Law, Room A.3.15, Nieuwe Achtergracht 166, 1018 WV Amsterdam. Read more

Out now: Zeitschrift für Vergleichende Rechtswissenschaft (ZvglRWiss) 117 (2018) No. 2

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The most recent issue of the German Journal of Comparative Law (Zeitschrift für Vergleichende Rechtswissenschaft) features four articles on private international law. Read more