Just launched: EU public consultation on modernising judicial cooperation between EU countries – use of digital technology

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The public consultation on the EU initiative modernising judicial cooperation between EU countries – use of digital technology is open from 16 February 2021 until 11 May 2021 (midnight Brussels time), click here. We have previously reported on the EU feedback period of this initiative here (which is a previous step and is part of the roadmap).

The public consultation consists of a questionnaire with 15 questions (mainly multiple-choice). An interesting question is the following:

“9) In case it is decided to propose a new EU legal instrument, what aspects of digitalisation should it regulate (Multiple choice – one or several replies are possible): – The mandatory or optional nature of electronic communication with and between competent national authorities – The legal validity of electronic documents and evidence – The conditions for the use of electronic signatures/seals – The responsibilities for data protection obligations – The architecture of the IT system to be used – Other (Please elaborate in the box below).”

With regard to the purpose of this initiative, the EU website states the following:

“This consultation concerns cross-border judicial cooperation in the European Union. It refers to civil, commercial and criminal cases and involves, for various reasons, more than one EU Member State. The European Commission is planning a new initiative aiming at digitalising cross-border judicial cooperation procedures. The purpose is to make use of new digital tools for electronic communication between courts, other competent authorities of the Member States and also to give the possibility to individuals and businesses to start proceedings and to communicate with the courts and the other competent authorities in other EU countries electronically, to be able to submit electronic documents from the comfort of their homes and offices. Currently, the communication from individuals/businesses to judicial authorities and between the public authorities themselves is carried out mainly on paper, which causes delays, involves more costs and is susceptible to crises such as COVID-19 pandemic. The European Commission seeks the views and opinions of stakeholders and all persons who could be impacted by the future initiative in order to take them into consideration when deciding on the possible options and the way forward.”

New edition: Hess’ Europäisches Zivilprozessrecht

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Burkhard Hess, Europäisches Zivilprozessrecht, De Gruyter 2021.

Just over ten years after the first edition of Europäisches Zivilprozessrecht (European Civil Procedure) by Burkhard Hess (director Max Planck Institute for Procedural Law, Luxembourg) a second –  even more voluminous and impressive – edition was published early 2021. While updating this book after a decade that marks not only the further expansion  but perhaps also the coming of age of European Civil Procedure is an immense task in itself, this new addition also expands in breadth. Particularly noteworthy is the new part on the interaction between European law and national civil procedure, including out-of-court procedures.

A must-read or even must-have for German readers having an interest in European Civil Procedure!

 

The blurb on the publisher’s website reads:

This book explores the European law of civil procedure from a systematic and dogmatic perspective by comprehensively assessing and providing a detailed explanation of all the instruments adopted in this area of the law. Based on the case law of the Court of Justice of the European Union, it expounds on the legislative powers of the Union, the different regulatory levels of European procedural law, its underlying concepts and legislative techniques. Against this background, it addresses the interfaces of the European law of civil procedure with the civil procedures of the EU Member States and the judicial cooperation with third States. The 2nd edition of this treatise also focusses on latest developments such as the protection the independence of the judiciary and of the rule of law in the Member States of the European Union. Moreover, it tackles alternative dispute resolution and arbitration, as well as the latest policy of the EU Commission in the digitization of national justice systems. To further contextualize the development of the European law of civil procedure, it also provides the reader with a thorough understanding of preliminary reference procedures before the Court of Justice. In its final chapter, it addresses the current policy debate towards a European code of civil procedure.

This reference book is an essential reading for academics, regulators, and practitioners seeking reliable and comprehensive information about the European law of civil procedure. It also addresses trainee lawyers and students interested in cross-border litigation and dispute resolution, as well as those who wish to specialize in European business law.

Corporate Due Diligence and Private International Law

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A webinar event on “Corporate Due Diligence and Private International Law” organized by the NOVA Centre for Business, Human Rights and the Environment, will hold on February 25, 2021 at 15:00 – 17:30 CET. For more information on the event and how to register see here

UK Supreme Court in Okpabi v Royal Dutch Shell (2021 UKSC 3): Jurisdiction, duty of care, and the new German “Lieferkettengesetz”

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by Professor Dr Eva-Maria Kieninger, Chair for German and European Private Law and Private International Law, University of Würzburg, Germany

The Supreme Court’s decision in Okpabi v Royal Dutch Shell (2021 UKSC 3) concerns the preliminary question whether English courts have jurisdiction over a joint claim brought by two Nigerian communities against Royal Dutch Shell (RSD), a UK parent company, as anchor defendant, and a Nigerian oil company (SPDC) in which RSD held 30 % of the shares. The jurisdictional decision depended (among other issues that still need to be resolved) on a question of substantive law: Was it “reasonably arguable” that RSD owed a common law duty of care to the Nigerian inhabitants whose health and property was damaged by the operations of the subsidiary in Nigeria?

In the lower instance, the Court of Appeal had not clearly differentiated between jurisdiction over the parent company and the Nigerian sub and had treated the “arguable case”-requirement as a prerequisite both for jurisdiction over the Nigerian sub (under English autonomous law) and for jurisdiction over RSD, although clearly, under Art. 4 (1) Brussels Ia Reg., there can be no such additional requirement pursuant to the CJEU’s jurisprudence in Owusu. In Vedanta, a case with large similarities to the present one, Lord Briggs, handing down the judgment for the Supreme Court,  had unhesitatingly acknowledged the unlimited jurisdiction of the courts at the domicile of the defendant company under the Brussels Regulation. In Okpabi, Lord Hamblen, with whom the other Justices concurred, did not come back to this issue. However, given that from a UK point of view, the Brussels model will soon become practically obsolete (unless the UK will still be able to join the Lugano Convention),  this may be a pardonable omission. It is to be expected that the English courts will return to the traditional common law restrictions on jurisdiction such as the “arguable case”-criterion and “forum non conveniens”.

Although the Supreme Court’s decision relates to jurisdiction, its importance lies in the potential consequences for a parent company’s liability on the level of substantive law: The Supreme Court affirms its previous considerations in Vedanta (2019) and rejects the majority opinion of the CoA which in 2018 still flatly ruled out the possibility of RDS owing a duty of care towards the Nigerian inhabitants. Following the appellants’ submissions, Lord Hamblen minutely sets out where the approach of the CoA deviated from Vedanta and therefore “erred in law”. The majority in the CoA started from the assumption that a duty of care can only arise where the parent company effectively “controls” the material operations of the sub, and furthermore, that the issuance of group wide policies or standards could never in itself give rise to a duty of care. These propositions have now been clearly rejected by the Supreme Court as not being a reliable limiting principle (para 145). In the present judgment, the SC affirms its view that “control” is not in itself a meaningful test, since in practice, it can take many different forms: Lord Hamblen cites with approval Lord Briggs’s statement in Vedanta, that “there is no limit to the models of management and control which may  be put in place within a multinational group of companies” (para 150). He equally approves of Lord Briggs’s considerations according to which “the parent  may incur the relevant responsibility to third parties if, in published materials, it holds itself out as exercising that degree of supervision and control of its subsidiaries, even if in fact it does not do so. In such circumstances its very omission may constitute the abdication of a responsibility which it has publicly undertaken” (para 148).

Whether or not the English courts will ultimately find a duty of care to have existed in either or both of the Vedanta and Okpabi sets of facts remains to be seen when the law suits have been moved to the trial of the substantive issues. Much will depend on the degree of influence that was either really exercised on the sub or publicly pretended to be exercised.

On the same day on which the SC’s judgment was given (12 February 2021), the German Federal Government publicly announced the key features of a future piece of legislation on corporate social resonsibility in supply chains (Sorgfaltspflichtengesetz) that is soon to be enacted. The government wants to pass legislation before the summer break and the general elections in September 2021, not the least because three years ago, it promised binding legislation if voluntary self-regulation according to the National Action Plan should fail. Yet, contrary to claims from civil society (see foremost the German “Initiative Lieferkettengesetz”) the government no longer plans to sanction infringements by tortious liability towards victims. Given the applicability of the law at the place where the damage occurred under Art. 4 (1) Rome II Regulation, and the fact that the UK Supreme Court in Vedanta and Okpabi held the law of Sambia and Nigeria to be identical with that of England, this could have the surprising effect that the German act, which the government proudly announced as being the strictest and most far-reaching supply chain legislation in Europe and the world (!!), would risk to fall behind the law in anglophone Africa or on the Indian sub-continent. This example demonstrates that an addition to the Rome II Regulation, as proposed by the European Parliament, which would give victims of human rights’ violations a choice between the law at the place of injury and that at the place of action, is in fact badly needed.

Prof. Lima Pinheiro’s “Last Class”

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Luís de Lima Pinheiro, Professor of Law at the University of Lisbon, has given his so-called “Last Class” earlier this week, thus putting an end to his activity as a Professor at the graduate level in this Law School (while remaining active in post-graduate courses).

The online lecture, in Portuguese, is available here.

United Kingdom Supreme Court rules on a jurisdictional issue against Shell

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In a landmark decision in the case of Okpabi and others v Royal Dutch Shell Plc and Another, the United Kingdom Supreme Court (“UKSC”) ruled on a jurisdictional issue on whether the claimants/appellants have an arguable case that the defendants/respondents – Royal Dutch Shell (an English domiciled company) – owed them a common law duty of care so as properly to found jurisdiction against a foreign subsidiary company (Shell Petroleum Development Corporation Limited, domiciled in Nigeria) as a necessary and proper party to the proceedings. This jurisdictional aspect was concerned with whether there was a real issue to be tried against the anchor defendant – Royal Dutch Shell (an English domiciled company).

The facts of the case was that the claimants/appellants, who are Nigerian citizens alleged that as a result of the negligence of  Shell Petroleum Development Corporation Limited, numerous oil spills have occurred from oil pipelines and associated infrastructure operated in the vicinity of the claimants’/appellants’ communities. It is said that these oil spills have caused widespread environmental damage, including serious water and ground contamination, and have not been adequately cleaned up or remediated. It is also alleged that as a result of the spills, the natural water sources in the claimants’/appellants’ communities cannot safely be used for drinking, fishing, agricultural, washing or recreational purposes.

The High Court and Court of Appeal resolved this jurisdictional issue against the claimants/appellants, but the UKSC found merit in their appeal.

Analyses and comments on this decision are most welcome!

Webb v Webb (PC) – the role of a foreign tax debt in the allocation of matrimonial property

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By Maria Hook (University of Otago, New Zealand) and Jack Wass (Stout Street Chambers, New Zealand)

When a couple divorce or separate, and the court is tasked with identifying what property is to be allocated between the parties, calculation of the net pool of assets usually takes into account certain debts. This includes matrimonial debts that that are in the sole name of one spouse, and even certain personal debts, ensuring that the debtor spouse receives credit for that liability in the division of matrimonial property.  However, where a spouse owes a liability that may not, in practice, be repaid, deduction of the debt from the pool of the couple’s property may result in the other spouse  receiving a lower share of the property than would be fair in the circumstances. For example, a spouse owes a debt to the Inland Revenue that is, in principle, deductible from the value of that spouse’s assets to be allocated between the parties. But the debtor spouse has no intention of repaying the debt and has rendered themselves judgment-proof. In such a case, deduction of the debt from the debtor spouse’s matrimonial property would leave the other spouse sharing the burden of a debt that will not be repaid.

This result is patently unfair, and courts have found a way to avoid it by concluding that, in order to be deductible, the debt must be one that is likely to be paid or recovered (see, eg, Livingstone v Livingstone (1980) 4 MPC 129 (NZHC)). This enquiry can give rise to conflict of laws issues: for example, there may be questions about the enforceability of a foreign judgment debt or the actionability of a foreign claim. Ultimately, the focus of the inquiry should be on the creditor’s practical chances of recovery.

In the relatively recent Cook Islands case of Webb v Webb, the Privy Council ([2020] UKPC 22) considered the relevance of a New Zealand tax debt to matrimonial property proceedings in the Cook Islands. The Board adopted a surprisingly narrow approach to this task. It concluded that the term “debts” only included debts that were enforceable against matrimonial property (which in this case was located in the Cook Islands), and that the debts in question were not so enforceable because they would be barred by the “foreign tax principle”.  Lord Wilson dissented on both points.

Background

The parties – Mr and Mrs Webb – lived in the Cook Islands when they separated. Upon separation, Mr Webb returned to New Zealand. Mrs Webb commenced proceedings against Mr Webb in the Cook Islands under the Matrimonial Property Act 1976 (a New Zealand statute incorporated into Cook Islands law), claiming her share of the couple’s matrimonial property that was located in the Cook Islands.

Mr Webb, however, owed a judgment debt of NZ$ 26m to the New Zealand Inland Revenue. He argued that, under s 20(5) of the Act, this debt had to be deducted from any matrimonial property owned by him. Under s 20(5)(b), (unsecured) personal debts had to be deducted from “the value of the matrimonial property owned by” the debtor spouse to the extent that they “exceed the value of any separate property of that spouse”. Given the size of Mr Webb’s debt, the effect of s 20(5)(b) would have been to leave Mrs Webb with nothing.  She argued that the debt fell outside of s 20(5)(b) because it was not enforceable in the Cook Islands and Mr Webb was unlikely to pay it voluntarily.

Whether the debt had to be enforceable against the matrimonial property in the Cook Islands

Lord Kitchin, with whom the majority agreed, concluded that s 20(5)(b) only applied to debts that were either enforceable against the matrimonial assets or likely to be paid out of those assets. Debts that were not so enforceable were not to be taken into account when dividing the matrimonial assets (unless the debtor spouse intended to pay them by using those assets in his name). A different interpretation would lead to “manifest injustice”, because if the Inland Revenue “cannot enforce its judgment against those assets, Mr Webb can keep them all for himself” (at [41]). If the Inland Revenue could not execute its judgment against the assets, and Mr Webb did not pay the debt, the reason for applying s 20(5)(b) – which was to protect a debtor spouse’s unsecured creditors – disappeared.

Lord Kitchin considered that this conclusion found support in Government of India v Taylor, where Viscount Simonds (at 508) had explained that the meaning of “liabilities” in s 302 of the Companies Act 1948 excluded obligations that were not enforceable in the English courts. The result in that case was that a foreign government could not prove in the liquidation of an English company in respect of tax owed by that company (at [42]).

In Webb, the judgment debt in question was a personal debt incurred by Mr Webb. However, Lord Kitchin seemed to suggest that the outcome would have been no different if the debt had been a debt incurred in the course of the relationship under s 20(5)(a) (at [46]). The word “debts” had the same meaning in s 20(5)(a) and (b), as referring to debts which are enforceable against the matrimonial property or which the debtor spouse intends to pay.

Lord Wilson did not agree with the Board’s interpretation. He considered that it put a gloss on the word “debts” (at [118]), and that it had “the curious and inconvenient consequence of requiring a court … to determine … whether the debt is enforceable against specified assets” (at [120]). Rather, a debt was a liability that was “likely to be satisfied by the debtor-spouse” or that was “actionable with a real prospect of recovery on the part of the creditor” (citing Fisher on Matrimonial Property (2nd ed, 1984) at para 15.6) – regardless of whether recovery would be against matrimonial or other assets (at [123]).

Applying this interpretation to the tax liability in question, Lord Wilson concluded that the liability was clearly actionable (because it had already been the subject of proceedings) and that the Inland Revenue did have a real prospect of recovery in New Zealand (at [126]-[127]). Mr Webb was living in New Zealand and was presumably generating income there, and the Commissioner had applied for the appointment of receivers of his property. This was sufficient to conclude that the debt was enforceable in New Zealand, “including on a practical level” (at [131]).  The facts were different from the case of Livingstone v Livingstone (1980) 4 MPC 129, where the New Zealand Court had concluded that a Canadian tax debt could “for practical purposes” be disregarded because the debtor had already left the country at the time the demand was issued, he had no intention of returning and he had removed his assets from the jurisdiction. In such a case, if the debtor spouse were permitted to deduct the foreign tax debt without ever actually repaying it, they could take the benefit of the entire pool of matrimonial assets and thus undermine the policy and operation of the whole regime.

In our view, Lord Wilson’s interpretation is to be preferred. The relevant question should be whether the debt is one that will be practically recoverable (whether in the forum or overseas). A debt may still be practically recoverable even if it is not enforceable against the matrimonial assets and is unlikely to be paid out of those assets. It is true that, in many cases under s 25(1)(b), the chances of recovery would be slim if the matrimonial assets are out of reach and the debtor spouse has no intention of paying the debt voluntarily (which seemed to be the case for Mr Webb: at [62]). By definition, personal debts are only relevant “to the extent that they exceed the value of any separate property of that spouse”, so in practice their recoverability would depend on future or matrimonial assets. Lord Wilson’s assessment of the evidence – as allowing a finding that there was a real likelihood that Mr Webb would have to repay the debt in New Zealand – is open to question on that basis. But that doesn’t mean that the debts must be enforceable against the matrimonial assets. While this interpretation would lead to fairer outcomes under s 25(1)(b) – because it avoids the situation of the debtor spouse not having to share their matrimonial assets even though the debt is recoverable elsewhere – it could lead to strange results under s 25(1)(a), which provides for the deduction of matrimonial debts that are owed by a spouse individually. It would be unfair, under s 25(1)(a), if such debts were not deductible from the value of matrimonial property owned by the spouse by virtue of being unenforceable against that property, in circumstances where the debts are enforceable against the spouse’s personal property.

The Board’s reliance on Government of India v Taylor [1955] AC 491 (HL) in this context is unhelpful. The question before the House of Lords was whether a creditor could claim in a liquidation for a debt that would not be enforceable in the English courts (regardless of whether the debt would be enforceable over certain – or any – assets). Under the Matrimonial Property Act, on the other hand, the court is not directly engaged in satisfying the claims of creditors, so the debt need not be an obligation enforceable in the forum court.  Neither need it be an obligation enforceable against matrimonial property, wherever located. It simply needs to be practically recoverable.

Whether the debt was enforceable against the matrimonial property in the Cook Islands

As we have noted, Lord Wilson argued that there was a real prospect of the debt being paid – the implication being that this was not a case about a foreign tax debt at all. Mr and Mrs Webb were New Zealanders, and Mr Webb had relocated to New Zealand before the proceedings were commenced in 2016 and had stayed there. The practical reality was that unless he found a way to meet his revenue obligations he would be bankrupted again. Lord Kitchin noted Mr Webb’s apparent determination to avoid satisfying his liabilities to the IRD. Nevertheless, there was no suggestion that Mr Webb would leave New Zealand permanently to live in the Cook Islands and there enjoy the benefits of the matrimonial property.

Nevertheless, the majority’s analytical framework required it to consider whether the tax debt was enforceable against the matrimonial property in the Cook Islands. The majority found that for the purpose of the foreign tax principle, the Cook Islands should be treated relative to New Zealand as a foreign sovereign state, despite their close historical and constitutional ties (and found that the statutory mechanism for the enforcement of judgments by lodging a memorial, cognate to the historical mechanism for the enforcement of Commonwealth judgments, did not exclude the foreign tax principle).

It was obvious that bankruptcy was a serious prospect, the IRD having appointed a receiver over Mr Webb’s assets shortly before the hearing before the Board. That begged the question whether the IRD could have recourse to the Cook Islands assets, but on this point the case proceeded in a peculiar way. The Board observed that it had been given no details of the steps that a receiver or the Official Assignee might be able to take to collect Cook Islands assets, going so far as to doubt whether the Official Assignee would even be recognized in the Cook Islands “for the Board was informed that there was no personal bankruptcy in the Cook Islands and the position of Official Assignee does not exist in that jurisdiction.” Section 655(1) of the Cook Islands Act 1915 states that “Bankruptcy in New Zealand shall have the same effect in respect to property situated in the Cook Islands as if that property was situated in New Zealand”, but the Board was not prepared to take any account of it, the provision having been introduced for the first time at the final appeal and there being some doubt about whether it was even in force.

The unfortunate consequence was that the Board gave no detailed consideration to the question of how the foreign tax principle operates in the context of cross-border insolvency, a point of considerable interest and practical significance.

The common law courts have been prepared to recognise (and in appropriate cases, defer to) foreign insolvency procedures for over 250 years, since at least the time of Solomons v Ross (1764) 1 H Bl 131, 126 ER 79 where the Court of Chancery allowed funds to be paid over to the curators of a debtor who had been adjudicated bankrupt in the Netherlands. But the relationship between this principle and the foreign tax principle has never been clear.

The UNCITRAL Model Law on Cross-Border Insolvency 1997 preserves states’ ability to exclude foreign tax claims from an insolvency proceeding. As to the common law, the New Zealand Law Commission (expressing what may be the best guide to the content of Cook Islands law) observed in 1999 that the policy justification for refusing enforcement of foreign tax judgments may not apply in the same way in the context of cross-border insolvency where the collective interests of debtors are concerned. It noted that a number of countries (including Australia, the Isle of Man and South Africa) had moved past an absolute forbidding of foreign tax claims where such claims form part of the debts of an insolvent debtor subject to an insolvency regime. It thus concluded that “foreign taxation claims may sometimes be admitted to proof in a New Zealand bankruptcy or liquidation.” While the Privy Council had a number of difficult issues to confront, it is perhaps unfortunate that they did not take the opportunity to bring clarity to this important issue.

 

 

 

First Issue of 2021’s Lloyd’s Maritime and Commercial Law Quarterly

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The first issue of Lloyd’s Maritime and Commercial Law Quarterly for 2021 features the following private international law articles:

Adrian Briggs, “A Conflict of Comity in the Enforcement of Judgments”

Patrick Dunn-Walsh, “Insurance Litigation under the Recast Brussels Regulation”

Anthony Kennedy, “A Place to Start”

Myron Phua and Serena Seo Yeon Lee, “Taxonomising “Quasi-Contractual” Anti-suit Injunctions” 

UK notifies that it considers the Brussels and Rome Convention to no longer apply to it

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Steve Peers (University of Essex) has just published a series of Brexit-related documents on Twitter, two of which appear to confirm that by leaving the European Union, the UK also (believes to have) ceased to be a party to the 1968 Brussels Convention and the 1980 Rome Convention – which many have argued might revive between the UK and those EU Member States who are parties to them.

The two letters, sent by the UK Government to the Council of the EU, both contain the following paragraph:

The Government of the United Kingdom hereby notifies the Secretary-General of the Council of the European Union that it considers that the [Brussels Convention] / [Rome Convention] ceased to apply to the United Kingdom and Gibraltar from 1 January 2021, as a consequence of the United Kingdom ceasing to be a Member State of the European Union and of the end of the Transition Period.