While the Corona Crisis is still alarmingly growing globally, first movers are apparently preparing for mass litigation of ski tourists from all over Europe and beyond against the Austrian Federal State of Tyrol and local businesses. The Austrian Consumer Protection Association (Österreichischer Verbraucherschutzverein, VSV, https://www.verbraucherschutzverein.at/) is inviting tourists damaged from infections with the Corona virus after passing their ski holidays in Tyrol, in particular in and around the Corona super-hotspot of Ischgl, to enrol for collective redress against Tyrol, its Governor, local authorities as well as against private operators of ski lifts, hotels, bars etc., see https://www.verbraucherschutzverein.at/Corona-Virus-Tirol/.

In Austria, no real “class action” is available. Rather, the individual claimants need to assign their claims to a lead claimant, often a special purpose vehicle (in this case the Association) which then institutes joint proceedings for all the claims. For foreign claimants who consider assigning their claims to the Association, the Rome I Regulation will be of relevance.

According to Article 14 (1) Rome I Regulation the relationship between assignor and assignee shall be governed by the law that applies to the contract between the assignor and assignee under the Regulation. So far, however, there seem to be only pre-contractual relationships between the Austrian Association inviting “European Citizens only” (see website) to register for updates by newsletters. These pre-contractual relationships will be governed by Article 12 (1) Rome II Regulation. “[T]he contract” in the sense of that provision will be the one between the Association and the claimant on the latter’s participation in the collective action which may, but does not necessarily, include the contract on the assignment of the claim and its modalities. It is the Association that is the “service provider” in the sense of Article 4 (1) lit. b Rome I Regulation. Its habitual residence is obviously in Austria, therefore the prospective contract as well as the pre-contractual relations to this contract will be governed (all but surprisingly) by Austrian law. Art. 6 does not come into play, since the service is to be supplied to the consumer exclusively in Austria, Article 6 (4) lit. a Rome I Regulation.

According to Article 14 (2) Rome I Regulation, the law governing the assigned claim shall determine its assignability, the relationship between the assignee and the debtor, the conditions under which the assignment can be invoked against the debtor and whether the debtor’s obligations have been discharged. As far as the Rome II Regulation is applicable ratione materiae, i.e. for claims against the businesses, its Article 4 will select (again all but surprisingly) Austrian law – no “distance delict” as the potentially delictual act and its harmful effects on the claimant’s health both took place in Austria. Follow-up damages in other states are irrelevant for the law-selecting process.

In respect to delictual claims against Tyrol and its public entities and authorities, Recital 9 of the Rome II Regulation reminds us that, with a view to Article 1 (1) Sentence 2 of the Regulation (no applicability to “acta iure imperii”), “[c]laims arising out of acta iure imperii should include claims against officials who act on behalf of the State and liability for acts of public authorities, including liability of publicly appointed office-holders. Therefore, these matters should be excluded from the scope of this Regulation.” Rather, an autonomous rule of choice of law for liability of Austrian public entities will apply, and this rule will certainly select Austrian law.

There are certain advantages in bundling a multitude of claims in the “Austrian” way: First, the high amount of damages from the collection of claims allows seeking third-party funding. Second, costs for both the court and the lawyers are structured on a diminishing scale. While the collective proceedings are pending, prescription periods do not proceed in respect to claims participating in the joint action. And of course, the “class” of these active claimants has much more weight for negiations than an individual would have.

On the other hand, the jurisdiction at the consumer’s domicile under Art. 18 Brussels Ibis Regulation will no longer be available, once the consumer has assigned his or her claim to another, e.g. a lead claimant. However, this is only relevant in respect to the contractual claims of consumers and only as long as the conditions for directing one’s business at the consumer’s domicile under Article 17 (1) lit. c Brussels Ibis Regulation are fulfilled. The claims in question here mainly ground in non-contractual claims against public entities and private businesses, and they seem to be envisaged as independent civil follow-on proceeding after successful criminal proceedings – if these should ever result in convictions.

The allegation is that the respective public agencies and officers did not shut down the area immediately despite having gained knowledge about first Corona infections in the region, in order to let the tourism businesses go on undisturbed. These allegations are extended to local businesses such as ski lifts, hotels and bars etc., once they gained knowledge about the Corona risk. It will be an interesting question (of the applicable Austrian law of public and private liability for torts) amongst many others (such as those on causality) in this setting to what extent there is a responsibility of the tourist to independently react adequately to the risk, of course depending on the time of getting him/herself knowledge about the Corona risk. If there is such responsibility on the part of the damaged, the next question will be whether this could affect or reduce any tortious liability on the part of the potential defendants. Overall, all of that appears to be an uphill battle for the claimants.

Speaking of responsibilities, a more pressing concern these days is certainly how the European states, in particular the EU Member States and the EU itself, might organise a more effective mutual support and solidarity for those regions and states that are most strongly affected by the Corona Pandemic, in particular in Italy, Spain and France, these days. Humanitarian and moral reasons compel us to help, both medically and financially. Some EU Member States have started taking over patients from neighbouring countries while they are still disposing of capacities in their hospitals, but there could perhaps be more support (and there could have perhaps been quicker support). The EU has a number of tools and has already taken some measures such as the Pandemic Epidemic Purchase Programme (PEPP) by the European Central Bank (ECB). The European Stability Mechanism (ESM) could make (better?) use of its precautionary financial assistance via a Precautionary Conditioned Credit Line (PCCL) or via an Enhanced Conditions Credit Line (ECCL). Further, the means of Article 122 TFEU should be explored, likewise the possibilities for ad hoc-funds under Article 175 (3) TFEU. The European Commission should think about loosening restrictions for state aids.

All of these considerations go beyond Conflict of Laws, and this is why they are not mine but were kindly provided (all mistakes and misunderstandings remain my own) in a quick email by my colleague and expert on European monetary law, Associate Professor Dr. René Repasi, Erasmus University of Rotterdam, https://www.eur.nl/people/rene-repasi (thanks!).

However, cross-border solidarity is a concern for all of us, perhaps in particular for CoL experts and readers. Otherwise, a “European Union” does not make sense and will have no future.

If a defendant is not present in Australia, Uniform Civil Procedure Rules (“UCPR”) of New South Wales provides that service outside of Australia is permitted if the plaintiff’s claim falls within UCPR Schedule 6 or if a leave is granted under UCPR rule 11.5. If a defendant does not respond within 42 days after being served successfully (rule 11.8), the plaintiff must apply for leave to proceed (rule 11.8AA). A defendant can challenge the jurisdiction of the court and apply to set aside service (rule 12.11). The court has discretion to decide whether to assume jurisdiction (rule 11.6). AGC Capital Securities v Jaijaifu Modern Agriculture (HK) Limited [2019] NSWSC 62, a case decided by NSW Supreme Court in 2019 provides a test to determine a plaintiff’s application for leave to proceed when no appearance by defendant. The test includes four components: 1.      Whether the defendant has been properly served; 2.      Whether the claim in the originating process falls within UCPR Schedule 6; 3.      Whether it be demonstrated that there is a real issue to be determined (this requirement as being that the plaintiff has an arguable case being one that would be sufficient to survive an application for summary judgment); and 4.      Whether this Court is not a clearly inappropriate forum. The same test is adopted by Yoon v Lee [2017] NSWSC 1338 and Rossiter v. Core Mining [2015] NSWSC 360. The application for leave in AGC Capital Securities, Yoon, and Rossiter is not related to UCPR r 11.5.  r 11.5 is to determine whether a leave to serve outside of Australia should be granted. However, these three cases are cases where service outside of Australia has been completed. They are concerned with leaves under r 11.8AA, which provides: UCPR 11.8AA   Leave to proceed where no appearance by person (1)  If an originating process is served on a person outside Australia and the person does not enter an appearance, the party serving the document may not proceed against the person served except by leave of the court. (2)  An application for leave under subrule (1) may be made without serving notice of the application on the person served with the originating process. R11.8AA does not specify a test. In Australia, the leading case for leave to proceed where no appearance by defendant is Agar v Hyde [2000] HCA 41. In Agar, two rugby players at the NSW brought a personal injury claim against the International Rugby Football Board and several national representatives at the Board, alleging that the Board and its representatives own a duty of care for the plaintiffs. The defendants were served outside of Australia and applied to set aside the service. Agar holds that different tests should be adopted for the plaintiff’s application for leave to proceed where no appearance by defendant and for the defendant’s application to set aside the service. According to Agar, the test for the plaintiff’s application for leave to proceed when no appearance by defendant should focus on the jurisdictional nexus between the plaintiff’s pleading and the forum and should not consider the merits of the case. The High Court considers: “is the claim a claim in which the plaintiff alleges that he has a cause of action which, according to those allegations, is a cause of action arising in the State? The inquiry just described neither requires nor permits an assessment of the strength (in the sense of the likelihood of success) of the plaintiff’s claim.” (Agar, para 50) The Court of Appeal required the plaintiff to establish a good arguable case. However, the High Court held that “[t]he Court of Appeal was wrong to make such an assessment in deciding whether the Rules permitted service out.” (Agar, para 51) Instead, the High Court only requires the plaintiff to establish a prima facie case, saying “[t]he application of these paragraphs of r1A depends on the nature of the allegations which the plaintiff makes, not on whether those allegations will be made good at trial. Once a claim is seen to be of the requisite kind, the proceeding falls within the relevant paragraph or paragraphs of PT 10 r 1A, service outside Australia is permitted, and prima facie the plaintiff should have leave to proceed.” (Agar, para 51) PT 10 r 1A is functionally equivalent to the current UCPR Sch 6 although their contents differ to some extent. In contrast, the test of “real issue to be determined” held in AGC Capital Securities, Yoon, and Rossiter is on the merits of the case, which is excluded by Agar. Regarding the defendant’s application to set aside the service, Agar adopts three common grounds: Service is not authorized by the rules (ie, does not fall within UCPR Sch 6 and not otherwise authorised), The Court is an inappropriate forum, The claim has “insufficient prospects of the success to warrant putting an overseas defendant to the time, expense and trouble of defending the claims.” This requires the Court to assess the strength of the claim and the test is the same for summary judgment lodged by a defendant served locally. These grounds are not exhaustive. For example, the defendant can apply to set aside the service based on an exclusive jurisdiction clause favouring a foreign court. However, AGC Capital Securities, Yoon, and Rossiter do not concern the defendant’s application to set aside the service. Further, the test of “real issue to be determined” in AGC Capital Securities, Yoon, and Rossiter is not the same as the “insufficient prospects of the success” in Agar. The test of “insufficient prospects of the success” has been embedded in UCPR 11.6(2)(c), while AGC Capital Securities, Yoon, and Rossiter are not concerned with this provision. They are brought on r11.8AA. Comparing Agar on one hand and AGC Capital Securities, Yoon, and Rossiter on the other, the latter cases consider forum non conveniens when determining the plaintiff’s application to proceed where no appearance by defendant. Is this consistent with Agar? This issue should be discussed from two aspects. First, Agar did not consider forum non conveniens under a clearly inappropriate forum doctrine because parties did not raise this issue. Therefore, it may argue that this issue was not considered by High Court in Agar. Second, Agar limits courts’ consideration to jurisdictional nexus with the forum when determining the plaintiff’s application to proceed where no appearance by defendant. Jurisdictional nexus refers to whether the service is authorized by the UCPR. However, broadly, jurisdictional nexus may cover forum non conveniens considerations. Further, AGC Capital Securities, Yoon, and Rossiter seem to confuse the test for the plaintiff’s application for leave to proceed where no appearance by defendant with the test for the defendant’s application to set aside the service. The test of “real issue to be determined” requires the court to examine the merits of the plaintiff’s claim. This is permitted when determining the defendant’s application to set aside the service. However, when determining the plaintiff’s application for leave to proceed where no appearance by defendant, Agar says the court should not assess the strength of the plaintiff’s claim. Further, the test of “real issue to be determined” is not equivalent to the test of “insufficient prospects of the success” decided by Agar and embedded in UCPR r 11.6. Could AGC Capital Securities, Yoon, and Rossiter be justified on policy grounds? A proposed argument is that leave to proceed involves leave, which requires an exercise of discretion; and providing leave to proceed in circumstances where there is “no real issue” would be a waste of limited court resources. However, the difficulty of this argument is that it conflates the leave to proceed with the motion for a summary judgment. If the plaintiff only asks a leave to proceed without applying for a summary judgment, there is no ground for the court to consider the test of “no real issue” sua sponte. Could AGC Capital Securities, Yoon, and Rossiter be distinguished from Agar? In both Yoon and Rossiter, the court issued a summary judgment for the plaintiff. In AGC Capital Securities, the court directed the plaintiff to apply for a default judgment. AGC Capital Securities, Yoon, and Rossiter are proceedings where the defendants make no appearance. However, Agar is a proceeding where the defendant applied to set aside the service. Although Agar considered the test for the plaintiff’s application to proceed where no appearance by defendant, it did so for the purpose of distinguishing this test from the test for the defendant’s application to set aside the service. Therefore, in this aspect, it may argue that AGC Capital Securities, Yoon, and Rossiter are distinguishable from Agar, because they are the cases where the plaintiff applied for both a leave and a summary judgment. Therefore, the real issue for AGC Capital Securities, Yoon, and Rossiter is that the court conflated the test for the plaintiff’s application to proceed where no appearance by defendant and the test for summary judgment. AGC Capital Securities, Yoon, Rossiter, and Agar also bring up another question: why is the test for a plaintiff’s application for leave when no appearance by defendant and the test for a defendant’s application to set aside the service are different? Or should the tests be the same? In the plaintiff’s application for leave to proceed, is the court supposed to take care of the non-responding defendant? The answer is negative partly because the common-law court is not an inquisitorial court in civil-law countries. More important, if the plaintiff only asks a leave to proceed without applying for a summary judgment, there is no ground for the court to consider whether there is real issue to be determined in the plaintiff’s claim.

By Ennio Piovesani. The author is a PhD Student at the Università degli Studi di Torino and at the Universität zu Köln.

1. Summary

The Italian Government has adopted a series of Decree-Laws [1] introducing measures to fight the emergency caused by the “new” Coronavirus.

These measures include “self-proclaimed” overriding mandatory provisions on the reimbursement of prices paid under transport, package travel and accommodation contracts by specified persons affected by the Coronavirus.

2. Arts. 28 of Decree-Law No. 9/2020 and 88 of Decree-Law No. 18/2020

In particular, on 2.4.3020, the Italian Government adopted Decree-Law No. 9, titled “Urgent measures to support families, workers and businesses, in connection with the epidemiological emergency by COVID-19” [2].

Article 28 of Decree-Law No. 9/2020 provides for “Reimbursement of Travel Tickets and Travel Packages”.

The first paragraph of Article 28 stipulates that, obligations arising from transport and package travel contracts, concluded by specified persons affected by the Coronavirus [3], are to be considered as impossible under Article 1463 of the Italian Civil Code [4].

Paragraphs 2 to 7 of Article 28 establish a specific procedure for obtaining and making the reimbursement of the price paid under the transport or package travel contract covered by the same Article.

The following paragraph 8 “proclaims”:

“The provisions of the present article constitute overriding mandatory provisions within the meaning of Article 17 of Law of 31 May 1995, No. 218 [“Italian PIL Act”] [5, 6] and of Article 9 of Regulation (EU) No. 593/2008 of the European Parliament and of the Council, of 17 June 2008 [“Rome 1 Regulation”]”.

On 17.3.2020, the Italian Government has adopted a new Decree-Law (dubbed “Heal Italy”), introducing new measures to fight the emergency caused by the Coronavirus [7].

Art. 88(1) of new Decree-Law No. 18/2020 extends the provisions of Art. 28 of Decree-Law No. 9/2020 to accommodation contracts.

3. Short Comment

As a short comment to the above, I note that it is not the first time that the Italian legislator enacts “self-proclaimed” overriding mandatory provisions [8].

However, as known, it is questionable whether, EU Member States can freely enact similar provisions when they fall within the material scope of Union private international law instruments, such as the Rome 1 Regulation.

In fact, this practice appears to be particularly questionable in cases such as that at issue, where the self-proclaimed overriding mandatory provisions do not appear to be “crucial” for safeguarding public interests within the meaning of Article 9(1) of the Rome 1 Regulation, but rather appear to be exclusively purported to protect private interests (for however widespread they may be).

Notes

[1] In the Italian legal order, a Decree-Law is a provisional act having force of law, adopted in extraordinary cases of necessity and urgency by the Government. A Decree-Law must be “converted” into a Law within a period of 60 days from its publication, or otherwise it loses its effects. See, in particular, Art. 77 of the Costituzione della Repubblica Italiana, Gazzetta Ufficiale No. 298 of 27.12.1947, www.gazzettaufficiale.it/eli/id/1947/12/27/047U0001/sg.

[2] Decree-Law of 2.3.2020, No. 9, Misure urgenti di sostegno per famiglie, lavoratori e imprese connesse all’emergenza epidemiologica da COVID-19, Gazzetta Ufficiale, Serie Generale No. 53 of 2.3.2020, www.gazzettaufficiale.it/eli/id/2020/03/02/20G00026/sg.

[3] See Art. 28(1)(a) to (f) of Decree-Law No. 9/2020.

[4] Article 1463 of the Italian Civil Code, headed “Total Impossibility”, can be translated as follows: “In [case of] contracts with reciprocal performances, the party that is freed due to supervening impossibility of the performance owed cannot demand counter-performance, and must return that which he has already received, in accordance with the rules on undue payment”. See, Royal Decree of 16.3.1942, No. 262, Approvazione del testo del Codice civile, Gazzetta Ufficiale, Serie Generale No. 79 of 4.4.1942, www.gazzettaufficiale.it/eli/id/1942/04/04/042U0262/sg.

[5] Law of 31.5.1995, No. 218, Riforma del sistema italiano di diritto internazionale privato, Gazzetta Ufficiale, Serie Generale No. 128 of 3.6.1995, Supplemento Ordinario No. 68, https://www.gazzettaufficiale.it/eli/id/1995/06/03/095G0256/sg.

[6] Article 17 of the Italian PIL Act, is the Italian (autonomous) private international law provision governing overriding mandatory provisions. Article 17, headed “Norms of necessary application”, can be translated as follows: “Norms of necessary application. 1. Italian norms which, considering their object and their objective, must be applied notwithstanding reference to foreign law, prevail over the following provisions”.

[7] Decree-Law of 17.3.2020, No. 18, Misure di potenziamento del Servizio sanitario nazionale e di sostegno economico per famiglie, lavoratori e imprese connesse all’emergenza epidemiologica da COVID-19, Gazzetta Ufficiale, Serie Generale No. 70 del 17.3.2020, https://www.gazzettaufficiale.it/eli/id/2020/03/17/20G00034/sg.

[8] See, e.g., Article 32-ter of the Italian PIL Act.

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Comment by Pietro Franzina

States occasionally declare in their legislation that a particular provision ought to be treated as an overriding mandatory provision. The author of this post submits that this practice is ‘questionable’. The post is short, and few hints are provided as to what would make this practice questionable, and in which way this should matter. The question raised by the practice described is, in my view, whether States are permitted to make this kind of statements, and what the legal effects of such statements are. I would be interested in knowing the author’s views on this. There is little doubt that domestic legislators are entirely free to label a given provision in their legislation as ‘overriding’ insofar as this characterisation affects the operation of domestic conflict-of-laws rules. The provision so characterised will then trump the operation of the latter rules as lex specialis. Truly enough, as the author of the post observes, the picture is different when it comest to conflict-of-laws provisions enacted by the EU, because Member States are not permitted to derogate from such provisions. Treating a domestic provision of substantive private law as an overriding mandatory provision amounts, in fact, to derogating from the applicable conflict-of-laws rules (or altering their effects). Article 9 of the Rome I Regulation sets forth the conditions subject to which such a derogation (or alteration) is permitted: no mandatory provision may override the conflict-of-laws rules in that Regulation, unless it fits in the definition in Article 9(1). Things being so, I guess the only real issue is whether a given provision, no matter how labelled by the enacting legislator, fits in the said definition. If it does, then it will lawfully interfere with the relevant EU provisions on conflicts of laws in the way provided for under Article 9 of the Rome I Regulation (or under the pertinent provisions in other EU texts, depending on the circumstances). I don’t see how this would be questionable. Instead, if the substantive provision concerned does not fit in the Article 9(1) definition, then the non-application (or the altered application) of the applicable EU conflict-of-laws rules will simply amount to an infringement of EU law, and would bring about the consequences that such an infringement entails (the opening of an infringement procedure, the award of damages etc.). Here, too, I wouldn’t speak of a ‘questionable’ practice: it’d be a violation of EU law. Domestic courts have authority to assess whether a given provision fits in the Article 9(1) definition. If they consider that it does not, they have the power to disregard any legislative statements to the contrary and enforce the relevant EU rules instead. Domestic courts may even ask the Court of Justice to take a stance on the matter by a request for a preliminary ruling. The rulings in Dieter Krombach (Case C-7/98) and Unamar (C?184/12) indicate that a similar course of action is indeed possible. The preceding remarks are of a general nature. It is not the purpose of this comment to discuss whether the particular measures that have been recently adopted in Italy to tackle the coronavirus crisis represent genuine overriding mandatory provisions within the meaning of Article 9(1), or not. On this point, too, however, I have strong reservations about the author’s approach and findings.

Comment by Caterina Benini (PhD Student at the Università Cattolica del Sacro Cuore di Milano)

March 27, 2020, 3:47 pm

Ennio Piovesani contends that neither Article 28 of the Italian Decree-Law 9/2020 nor Article 88 of the Decree-Law 18/2020 are genuine overriding mandatory provisions for the purposes of the Rome I Regulation. He argues that the two provisions do not appear to be crucial for safeguarding public interests, since they exclusively protect private interests. I do not share his view.

Pursuant to Article 9(1) of the Rome I Regulation, overriding mandatory provisions are provisions that are regarded by the enacting State as crucial for the protection of public interests.

The test appears to have two prongs. One is subjective in nature, in the sense that it rests on a finding by the enacting State that the provision concerned is crucial. The other is objective, and requires assessing whether the provision pursues a public interest.

As to the first prong, one must arguably content itself with determining whether the provision ranks among those that the enacting State considers to be particularly important for the community it governs. By labelling the provision as an overriding mandatory rule, the enacting State shows precisely that it considers that provision to be crucial for its interests. Where this occurs, the first prong of the test is satisfied. Otherwise stated, self-characterisation by the enacting State, while not being enough for a provision to be regarded as an overriding mandatory provision for the purposes of Article 9(1), simplifies the task of courts and interpreters which consists in assessing whether the enacting State considers the provision to be crucial.

As to the second prong, one should assess whether, irrespective of any self-characterisation, the provision objectively pursues the protection of a public interest. This prong of the test is essential to preserve the effectiveness of the normally applicable EU conflict-of-laws rules. It is at this stage of the test that the nature of the interests protected by the provision comes into play. In this connection, contrary to Ennio Piovesani, I do not consider that the above Italian provisions are merely concerned with private interests, that is, the interests of the parties to the contracts concerned. By declaring that the spread of the epidemic makes the performance of obligations impossible within the meaning of Article 1463 of the Italian Civil Code, the legislator aimed at fostering the compliance with the governmental measures adopted to fight the coronavirus. It did so by exempting the parties from their obligations under transport and accommodation contracts, arguably on the assumption that this would reduce the risk that the concern for the unfettered performance of those obligations could undermine the strict compliance of the measures taken by the government to restrict the movement of people. Seen from this angle, the above provisions, while affecting as such the individual rights and obligations of the parties, are meant to safeguard the public health by reducing the movement of people and lowering the risk of any further spread of the virus.

Based on the foregoing, my view is that the above provisions should be labelled as overriding mandatory rules within the meaning of Article 9(1) of the Rome I Regulation.

Comment by Margherita Salvadori

March 27, 2020, 7:46 pm

I would first like to thank Mr Piovesani for having signalled the newly adopted Italian provisions and for having raised this very interesting point.

A huge number of emergency rules have been enacted by the Italian government (v., a collection of this rules: https://www.gazzettaufficiale.it/dettaglioArea/12).

From a non-Italian perspective, it should be underlined, as already noted, that all the rules found in the Decree-Laws will need to be “converted” into Law by the Parliament. This is an aspect of particular importance, since in that moment the Italian Parliament will have the chance to consider all the emergency rules with perhaps greater attention.

However, it is necessary to immediately consider whether these rules are compatible within the EU framework.

This is particularly important for all the provisions that have an impact on fundamental freedoms of the European Union, including freedom of services and goods, and an impact on the intra-EU instruments. Furthermore, uniform EU law exists in the fields covered by the emergency rules and even if each Member State may be allowed to take emergency rules, the following provisions should be consistent with EU law

Some of the matters covered by the emergency rules are already governed by EU law protecting companies and families. In my view, what should be truly “overriding mandatory” is that, in the current emergency, EU Member States take shared solutions in said matters of EU law, including transport, travel package and accommodation contracts.

Comment by Ennio Piovesani

March 27, 2020, 8:36 pm

My comment was perhaps too short and I would like to: 1. provide some more information on the refund procedure introduced by the self-proclaimed overriding mandatory provisions; 2. clarify the reasons why I consider the practice of self-proclaiming questionable; 3. add some remarks as to the compatibility of the provisions at issue with Union law; 4. share my views on the possible interests underlying the same provisions.

1. As mentioned, the self-proclaimed overriding mandatory provisions introduce a procedure for the refund of prices paid under transport (namely, carriage of persons), package travel and accommodation contracts. This newly introduced procedure is more favourable to the carrier, travel organiser or innkeeper, for the reasons that follow: Arts. 28(2) and 88(1) introduce a time-limit within which the passenger/guest must notify his request of refund to the carrier/innkeeper; Arts. 28(3) and 88(1) leave to the carrier/innkeeper the choice of refunding either by returning the price paid or by issuing a credit note (referred to as “voucher”) to be used within one year; Art. 28(4) introduces the possibility for the travel organiser to refund the traveller through a voucher to be used within one year. Incidentally, “Corona-vouchers” (as dubbed by certain companies) have been implemented also in the legislation of other EU Member States to support tour operators who are suffering “strains on liquidity […] because of missing new bookings coupled with reimbursement claims” (EU Commission, Information on the Package Travel Directive in Connection With the Covid-19, 19.3.2020, revised version, replaces the version of 5.3.2020 – see further on the point below).
2. I question the practice of self-proclaiming for the following reasons. In the first place, as noted, self-proclaiming provisions which do not fit within the definition of Art. 9(1) may lead to an infringement of Union law . In particular, in the case of the Rome 1 Regulation, the infringement would concern the conflict rules contained in the Regulation discarded by the alleged overriding mandatory provision. The risk of infringing Union law which the national legislator takes when self-proclaiming seems to me sufficient to consider the practice questionable. That said, it is understood that Art. 9(1) also covers provisions that protect individual/private interests, as far as the main objective is to promote a collective/public interest. Therefore, in the second place, I share Mankowski’s fear that self-proclaiming entails the “theoretical-dogmatic danger” that individual/private interests be “par ordre du mufti” transformed into super-individual/public interests (Bar/Mankowski, IPR, Vol. I,2nd edn. 2003, mn. 99). Thirdly, still from a broader perspective, I might beover-pessimistic, but I also fear that self-proclaiming may trigger a race to the bottom and a proliferation of overriding mandatory provisions, which should instead remain a limited number. In my eyes these are the reasons why this practice may be referred to as questionable, or, at best as risky.
3. Apart from the compatibility with Art. 9 Rome 1 Regulation, the self-proclaimed provisions could be incompatible with other provisions of Union law, namely those contained in the Regulations on passengers’ rights and inthe Package Travel Directive. In particular, as concerns transport contracts, I note what follows. If I understand correctly, Art. 28(1) provides that the carrier’s obligation is impossible under Art. 1463 Italian Civil Code, when the passenger cannot travel because self-isolated, quarantined, hospitalized, or otherwise confined due to the coronavirus (and the containment measures taken by the Italian authorities to fight the pandemic). Termination of contract under Art. 1463 Italian Civil Code occurs ex lege, without the need for any activity by the parties or the judge. Accordingly, the judge merely ascertains that total impossibility occurred, with a decision having ex tunc (retroactive) effects. Take for instance the case where a passenger was quarantined and later the flight company, for independent reasons, cancelled the flight. Considering that, following Art. 28(1), the carrier’s obligation became impossible under Art. 1463 before the flight’s cancellation, I wonder whether the passenger will be able to rely on Regulation (EC) No. 261/2004.Therefore, I fear that the self-proclaimed overriding mandatory provisions may by incompatible with the Regulations on passengers’ rights, in particular to the extent that they seem to prevent passengers from resorting to the more-favourable refund procedures provided for in the same Regulations. Moreover, as concerns package travel contracts, I note what follows. The Package Travel Directive is a full harmonization directive (see Art. 4 thereof). Following AG Wahl’s opinion delivered in the cited Unamar case (see, particularly, points 40-43 thereof), I doubt as to the validity of self-proclaiming overriding mandatory provisions in matters governed by full harmonisation directives such as the Package Travel Directive. That said, by allowing refund through a voucher in cases referred to in Art. 12(2) Package Travel Directive, Art. 28(4) appears to be less favourable to the traveller. In fact, with reference to the Corona-vouchers implemented in Belgium in the field of package travel contracts, Mr. Didier Reynders (European Commissioner for Justice) has recently underlined the measure’s incompatibility with Union law (Un voucherplutôt qu’un remboursement? Didier Reynders recadre la Belgique sur lesvoyages organisés annulés, http://www.rtbf.be, 25.3.20120). For the record, Belgium has not felt the need of self-proclaiming the provisions in question overriding mandatory (see 19 MARS 2020. – Arrêté ministériel relatif auremboursement des voyages à forfait annulés, Publié le 2020-03-20, Numac2020040676, http://www.ejustice.just.fgov.be/eli/arrete/2020/03/19/2020040676/moniteur).
4. Finally, some thoughts on the public interests which the self-proclaimed overriding mandatory provisions allegedly promote. I’m not convinced that the provisions are aimed at promoting the containment measures adopted by the Italian Government. If this were the case, then I would doubt that said provisions could be considered as “crucial” for the purpose of safeguarding the relevant public interest (here: limiting the circulation of persons). In fact, that public interest appears to be sufficiently and well-protected by the containment measures alone. Incidentally, infringing the containment measures leads to a criminal (now administrative) sanction. Rather, considering that the self-proclaimed overriding mandatory provisions allow for refund with Corona-vouchers (rather than in money), in my view, the interest underlying the provisions may be that of supporting companies belonging to the tourism sector, which — as noted above — are suffering strains on liquidity due to the coronavirus emergency. Perhaps I might have been once more too concise. In any case, given the large number of issues involved, I refer any other consideration to a separate article.

In Bi Xiaoqing v China Medical Technologies [2019] SGCA 50, the Singapore Court of Appeal provided clarity on the extent of the court’s power to grant Mareva relief in support of foreign proceedings.

The first and second respondents were companies incorporated in the Cayman Islands and the British Virgin Islands. The action was pursued by the liquidators of the first respondent against the appellant, a Singapore citizen, who was formerly involved in the management of the respondents and allegedly misappropriated funds from them.

Hong Kong proceedings were commenced first and a worldwide Mareva injunction was granted against, inter alia, the appellant. The terms of the Hong Kong injunction specifically identified assets in Singapore.

Two days after the Hong Kong injunction was obtained, the respondents commenced action in Singapore and applied for a Mareva injunction to prevent the defendants from disposing of assets in Singapore. The action in Singapore covered substantially the same claims and causes of action as those pursued in Hong Kong. After the grant of a Mareva injunction on an ex parte basis, the respondents applied to stay the Singapore proceedings pending the final determination of the Hong Kong proceedings on the basis that Hong Kong was the most appropriate forum for the dispute. The High Court granted the stay and confirmed the Mareva injunction in inter partes proceedings.

The issues before the Court of Appeal were: (1) whether the court had the power to grant a Mareva injunction and (2) whether it should grant the Mareva injunction. In other words, the first question dealt with the existence of the court’s power to grant a Mareva injunction and the second question dealt with the exercise of the power.

The Singapore court’s power to grant an injunction can be traced back to section 4(10) of the Civil Law Act which is in these terms: “A Mandatory Order or an injunction may be granted or a receiver appointed by an interlocutory order of the court, either unconditionally or upon such terms and conditions as the court thinks just, either unconditionally or upon such terms and conditions as the court thinks just, in all cases in which it appears to the court to be just or convenient that such order should be made.” The Court of Appeal clarified that section 4(10) of the Civil Law Act should be read as conferring on the court the power to grant Mareva injunctions, even when sought in support of foreign proceedings. Two conditions had to be satisfied: (1) the court must have in personam jurisdiction over the defendant; and (2) the plaintiff must have a reasonable accrued cause of action against the defendant in Singapore.

Given the stay of the Singapore proceedings, the Court of Appeal had to consider if the Singapore court still retained the power to grant Mareva relief. There had been conflicting first instance decisions on this point: see Petroval SA v Stainsby Overseas Ltd [2008] 3 SLR(R) 856 cf Multi-Code Electronics Industries (M) Bhd v Toh Chun Toh Gordon [2009] 1 SLR(R) 1000. The Court of Appeal preferred the Multi-Code approach, taking the view that the court retains a residual jurisdiction over the underlying cause of action even when the action is stayed. This residual jurisdiction grounds the court’s power to grant a Mareva injunction in aid of foreign proceedings. Further, a party’s intentions on what it would do with the injunction had no bearing on the existence of the court’s power to grant the Mareva injunction.

Party intentions, however, was a consideration under the second question of whether the court should exercise its power to grant the injunction. Traditionally, a Mareva injunction is granted to safeguard the integrity of the Singapore court’s jurisdiction over the defendant so that, if judgment is rendered against the defendant, that jurisdiction is not rendered toothless. The court commented that where it appears that the plaintiff is requesting the court to assume jurisdiction over the defendant for the collateral purpose of securing and safeguarding the exercise of jurisdiction by a foreign court, the court should not exercise its power to grant Mareva relief. On the facts, the court held that it could not be said that the respondents had such a collateral purpose as there was nothing on the facts to dispel the possibility that the respondents may later request for the stay to be lifted. This conclusion suggests that the court would generally take a generous view of litigation strategy and lean towards exercising its power in aid of foreign proceedings.

Given the requirement that the plaintiff must have a reasonable accrued cause of action against the defendant in Singapore, a Mareva injunction is not free-standing relief under Singapore law. The court emphasized that a Mareva injunction in aid of foreign court proceedings is still ultimately premised on, and in support of, Singapore proceedings. This stance means that service in and service out cases may end up being treated differently. If the defendant has been served outside of jurisdiction and successfully sets aside service of the writ, there would no longer be an accrued cause of action in Singapore on which to base the application for a Mareva injunction. See for example, PT Gunung Madu Plantations v Muhammad Jimmy Goh Mashun [2018] SGHC 64, [2018] 4 SLR 1420 (see previous post http://conflictoflaws.net/2018/mareva-injunctions-under-singapore-law/). On the other hand, if the defendant had been served as of right within jurisdiction and the action is stayed (as in the present case), the court retains residual jurisdiction to grant a Mareva injunction.

After a restrictive court ruling in relation to the court’s power to grant free-standing Mareva relief in aid of foreign arbitrations, the legislature amended the International Arbitration Act to confer that power to the courts. It remains to be seen if the legislature would act similarly in relation to the court’s power to grant free-standing Mareva relief in aid of foreign proceedings.

To a certain extent, this lacuna is plugged by the recent amendments to the Reciprocal Enforcement of Foreign Judgments Act (“REFJA”) (see previous post http://conflictoflaws.net/2019/reform-of-singapores-foreign-judgment-rules/). Under the amended REFJA, a judgment includes a non-monetary judgment and an interlocutory judgment need not be “final and conclusive”. In the Parliamentary Debates, the minister in charge made the point that these specific amendments were intended to enable the court to enforce foreign orders such as Mareva injunctions. Only judgments from certain gazetted territories qualify for registration under the REFJA. To date, HK SAR is the sole listed gazetted territory although it is anticipated that the list of gazetted territories will expand in the near future. While the respondents had in hand a Hong Kong worldwide Mareva injunction, the amendments to REFJA only came into force after the case was decided.

The judgment may be found at: https://www.supremecourt.gov.sg/docs/default-source/module-document/judgement/ca-188-2018-j—bi-xiaoqiong-pdf.pdf