Views
New book on International Negotiable Instruments by Benjamin Geva & Sagi Peari
(published by Oxford University Press, 2020)
The authors kindly provided the following summary:
The book marries two fields of law: negotiable instruments and choice-of-law. Bills of exchange, cheques and promissory notes are the main classical negotiable instruments. For centuries, these instruments have played a vital role in the smooth operation of domestic and international commerce, including in transactions between distantly located parties. Through their evolution, fusion, and sophistication, they have remained one of the primary tools for everyday commercial activity, serving as one of the primary methods of payment and credit and one of the cornerstones of the contemporary bank-centred system. The rapid technological progress of payment mechanisms has embraced the traditional institution of negotiable instruments leading to their further adaptation and sophistication in order to meet the challenges of the contemporary reality of frequent mobility of people, goods, and high daily volumes of cross-border transactions and international commerce.
The cross-disciplinary partnership between the authors, one specializing in negotiable instruments and the other in choice-of-law, aims to offer a comprehensive and thorough analysis of the choice-of-law rules applicable to negotiable instruments. The internal structure of negotiable instruments’ law is complex, which has given rise to a popular view favouring the mythological ‘law merchant’,[1] the exclusion of negotiable instruments from the scope of general contract and property law doctrines, and their subsequent exclusion from ordinary choice-of-law analysis.
The central thesis of the book is to challenge this common view. Indeed, the complex structure of negotiable instruments creates a significant challenge for traditional contract and property doctrine and the choice-of-law analysis applicable to them. Yet, in contrast to the common view, the authors argue that the complex case of international negotiable instruments should be analyzed through the lens of traditional contract & property choice-of-law doctrines rather than by crafting new specially designed rules for negotiable instruments.
In order to illustrate this point, consider the – well-known in choice-of-law literature – Giuliano & Lagarde Report (‘The Report’),[2] which has served as a basis for contemporary European Rome Regulations[3] on the question of applicable law. The Report excludes negotiable instruments law from the scope of ordinary choice-of-law analysis.[4]However, one can reassess the three rationales mentioned in the Report to justify negotiable instruments’ law exclusion. First, it makes a point that a negotiable instrument is not a contract.[5] In this book, the authors argue the opposite – from their very origin to their present-day doctrinal analysis, negotiable instruments are very much contracts and carefully follow the essentials of contract law doctrine, alongside the basic elements of tangible property law.[6]
Second, the Report characterizes a negotiable instrument as a ‘complex contract’.[7] Indeed, in their study the authors provide a precise demarcation of the special nature of the negotiable instrument as a ‘special’ contract to delineate its divergence from the ‘ordinary’ contract; its relation to basic elements of tangible property transfer; and how this divergence affects (if at all) the choice- of- law rules of negotiable instruments, comparatively to choice-of-law rules of ‘ordinary’ contracts and tangible property. While throughout their book the authors show that negotiable instruments present ‘complicated special rules’ that should be analyzed, modified and distinguished from ‘ordinary’ contract law/property law rules, they are very much based on them.
Finally, the Report makes a reference to the existing harmonization processes.[8] In this book, the authors provide a detailed comparative analysis of the various rules in diverse legal systems and they show that they are far from uniform.[9] The authors discuss the various harmonization processes of negotiable instruments,[10] and make some suggestions for possible reforms within the process of international harmonization of the choice-of-law rules,[11] which would capture the challenges of the digital age.[12] In contrast to the Report, the authors argue that the traditional choice-of-law rules in the areas of contract law and tangible property can serve as a model for such reform of choice-of-law rules of negotiable instruments.
In effect, authors’ call for a redesign of the present choice-of-law rules relating to negotiable instruments finds traces in contemporary literature. The commentators of one of the leading textbooks in the field have framed the need for a reconsideration of the choice-of-law rules of negotiable instruments in the following terms:
…it must be noted that the Bills of Exchange Act 1882 and much of the case referred to in the following paragraphs is now more than a century old. In that time, the role and significance of bills of exchange in commercial intercourse and the approach of the conflict of laws to freely incurred obligations such as these has changed radically. As the following commentary makes clear, the rules contained in the 1882 Act are neither comprehensive nor easy to understand and apply. A radical overhaul of the law in this area, whether by legislation or international convention, seems long overdue.[13]
In this book, the authors are indeed willing to take up the challenge of a ‘radical overhaul’. In line with the above-stated quotation, they suggest a radical reorientation of choice-of-law rules. They argue that choice-of-law rules in the area of international negotiable instruments need to be dramatically amended and harmonized.
The contemporary choice-of-law rules within this area of law have originated from flawed premises about the nature of the subject. Further, contemporary rules have left behind the modern development of choice-of-law doctrine. Relying on the foundation of negotiable instruments’ law within the traditional ordinary doctrines of contract and movable property and invoking developments within modern choice-of-law thought, the authors endeavour to challenge the traditional orthodoxy and offer a complete re-examination of the choice-of-law rules of negotiable instruments.
[2] Report on the Convention on the law applicable to contractual obligations by Mario Giuliano, Professor, University of Milan, and Paul Lagarde, Professor, University of Paris I, Official Journal C 282, 31/10/1980 P. 0001 – 0050.
[3] Commission Regulation (EC) 593/2008 of the European Parliament and of the Council of 17 June 2008 on the Law Applicable to Contractual Obligations (Rome I), 2008 O.J. (L 177) 6 (EU); Commission Regulation 864/2007, on the Law Applicable to Non-Contractual Obligations (Rome II), 2007 O.J. (L 199) 40 (EC)
[4] Giuliano & Lagarde Report, sec. 4.
[6] See Chapter I & Chapter II.
[10] See Chapter I & Chapter III.
[13] Lawrence Collins (ed) Dicey, Morris and Collins on the Conflict of Laws (15th edn Sweet & Maxwell 2012) 2077.
Foreign law illegality and non-contractual claims
Written by Marcus Teo (Sheridan Fellow (Incoming), National University of Singapore)
Since Foster v Driscoll [1929] 1 KB 470, common law courts have recognised that contracts made with the intention to commit a criminal offence in a foreign state are unenforceable, even if the contract contemplated an alternative mode or place of performance. However, recent developments in domestic law illegality have sparked debate on whether foreign law illegality too should be reformed in a similar light (see Ryder Industries Ltd v Chan Shui Woo [2016] 1 HKC 323, [36], [52]-[55]; cf Magdeev v Tsvetkov [2020] EWHC 887 (Comm), [331]-[332]). The debate, however, has thus far not considered whether foreign law illegality should expand to bar certain non-contractual claims – a question which the Singapore Court of Appeal’s recent decision in Jonathan Ang v Lyu Yan [2021] SGCA 12 raises.
Lyu Yan wanted to transfer money from China to Singapore. Her bank in Singapore introduced her to Joseph Lim for assistance. Joseph proposed that Lyu transfer Renminbi from Lyu’s Chinese bank account to the Chinese bank accounts of two other individuals, Jonathan Ang and Derek Lim. Jonathan and Derek would then transfer an equivalent sum in Singapore Dollars from their Singapore bank accounts to Lyu’s Singapore bank account. Lyu performed the transfer in China, but received no money in Singapore. She then sued Joseph for breach of contract; and sued Joseph, Jonathan and Derek in tort and unjust enrichment. At first instance, the Singapore High Court ruled against all three defendants. Joseph did not appeal, but Jonathan and Derek did, arguing, inter alia, that Foster barred Lyu’s non-contractual claims against them because Chinese law prohibited their transaction.
Andrew Phang JCA, who delivered the Court’s judgment, dismissed Jonathan and Derek’s appeal. It was undisputed that the transaction, if performed, would have violated Chinese law (See Lyu Yan v Lim Tien Chiang [2020] SGHC 145, [15]-[16]). However, Lyu did not intend to break Chinese law – the facts at their “highest” showed that she thought the transaction contravened Singapore law rather than Chinese law (Jonathan Ang, [18], [20]). Thus, since Foster does not apply if the claimant does not intend to contravene a specific foreign law, it was inapplicable.
Of interest, though, were Phang JCA’s obiter comments: if Lyu had known the transaction contravened Chinese law, would her non-contractual claims be barred? Foster, he noted, was “not applicable in relation to non-contractual claims” ([26]). This was contrasted with the position in domestic law illegality, where an illegality affecting a contract could sometimes also bar other non-contractual claims arising from the contractual relationship ([27]-[28]). Here, Phang JCA referenced Ochroid Trading Ltd v Chua Siok Lui [2018] 1 SLR 363, where the Court of Appeal had held that claims in unjust enrichment (and, potentially, tort) arising from a contractual relationship would be barred if it stultified the policy underlying the law which rendered the contract unenforceable (Ochroid Trading [145]-[159], [168])
Phang JCA then considered whether Foster and Ochroid Trading could be “read together” (Jonathan Ang, [30]) – i.e., whether foreign and domestic law illegality, as separate doctrines, could apply on the same facts. This could only happen when Singapore law was the lex contractus, because, while Foster barred contract claims “regardless of their governing laws”, Ochroid Trading barred only claims governed by Singapore law. If indeed Foster and Ochroid Trading were “read together”, however, “possible difficulties” arose, because it would put a plaintiff with a Singapore law contract in a worse position than a plaintiff with a foreign law contract: the former would potentially have both his contractual and non-contractual claims barred, while the latter would have only his contractual claim barred ([33]). To Phang JCA, this was undesirable, because there was “no principled reason” for this distinction ([34]). While Phang JCA did not attempt to resolve these “difficulties”, he concluded by noting that for both foreign law and domestic law illegality “the concept of policy serves as a limiting factor to ensure that the illegality involved does not inflexibly defeat recovery where such recovery is justified” ([34]) – presumably, then, Phang JCA was noting tentatively that recourse to public policy arguments might help ameliorate the differences between the two classes of plaintiffs he identified.
Phang JCA’s comments in Jonathan Ang raise more questions than answers; this was of course by design, given their tentative and exploratory nature. However, with respect, the correctness of some of the assumptions Phang JCA relied on may be doubted. First, one may only conclude that there is no “principled reason” for treating plaintiffs with Singapore law contracts differently from plaintiffs with foreign law contracts if one accepts that domestic and foreign law illegality share the same “principled” basis. However, Foster’s principled basis remains shrouded in uncertainty: courts and commentators have variously called it a doctrine of public policy, comity and international jurisdiction, but only the first conception of Foster aligns it with domestic law illegality. Second, while it is true that the public policies of the forum limit both domestic and foreign law illegality, those public policies perform that function in different ways in those two contexts. In domestic law illegality, courts ask whether barring the plaintiff’s claim would give effect to the forum’s public policies; but in foreign law illegality, courts ask whether denying recognition of the relevant foreign law, and thus allowing the plaintiff’s claim, would give effect to the forum’s public policies. It follows that public policy arguments may not consistently resolve differences between the two classes of plaintiffs identified by Phang JCA.
At base, the questions posed in Jonathan Ang (and the assumptions they relied on) were only relevant because of Phang JCA’s continued acceptance of one central proposition: that foreign law illegality bars only contractual claims. Yet, this proposition is doubtful; in Brooks Exim Pte Ltd v Bhagwandas Naraindas [1995] 1 SLR(R) 543, Singapore’s Court of Appeal considered Foster in relation to a claim for “money had and received”, and found it inapplicable only because parties there did not intend to breach foreign law (Brooks Exim, [1], [14]). Moreover, the justification for limiting Foster’s rule to contractual claims remains unclear: in Jonathan Ang Phang JCA cited the English High Court’s decision in Lilly Icos LLC v 8PM Chemists Ltd [2010] FSR 4 for it, but there that proposition was simply accepted without argument (Lilly Icos, [266]). A possible justification might be that only in contract claims may parties, by virtue of their ability to choose the governing law, avoid the applicability of the (criminal) law of a foreign state objectively connected to their relationship. This, however, would be a poor justification, since parties have the autonomy to choose the governing law for various non-contractual claims as well. An expressly chosen law, for example, may govern not just parties’ contract, but also claims in unjust enrichment arising from that contractual relationship by virtue of a characterization sub-rule, and potentially also tort claims under an exception to the lex loci delicti rule (or, in Singapore’s context, the double actionability rule). If foreign law illegality exists to prevent parties from avoiding the law of a state objectively connected to their contractual relationship, it should bar all claims arising from that contractual relationship governed by parties’ chosen law, regardless of whether those claims are “contractual” or “non-contractual”.
Just released: Opinion of the US Supreme Court regarding the consolidated Ford Motor cases – A victory for consumers in two defective-product cases
Written by Mayela Celis
On 25 March 2021, the US Supreme Court rendered its opinion on the consolidated Ford Motor cases, which deals with personal jurisdiction (in particular, specific jurisdiction) over Ford Motor Company. These cases deal with a malfunctioning 1996 Ford Explorer and a defective 1994 Crown Victoria vehicles, which caused the death of a passenger in Montana and the injury of another passenger in Minnesota, respectively. The consolidated cases are: Ford Motor Co. v. Montana Eighth Judicial District Court et al. and Ford Motor Co. v. Bandemer.
The opinion is available here. We have previously reported on this case here.
The question presented was:
The Due Process Clause permits a state court to exercise specific personal jurisdiction over a nonresident defendant only when the plaintiff’s claims “arise out of or relate to” the defendant’s forum activities. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (internal quotation marks omitted). The question presented is: Whether the “arise out of or relate to” requirement is met when none of the defendant’s forum contacts caused the plaintiff’s claims, such that the plaintiff’s claims would be the same even if the defendant had no forum contacts.
As noted in our previous post, it can be argued that besides jurisdictional matters relating to the defendant, these cases deal with fundamental notions of access to justice for consumers. Fortunately, the US Supreme Court sided with the victims of the car accidents. As a result, buyers of Ford vehicles are able to sue in their home State / the place of injury (instead of chasing up the defendant). Undoubtedly, this promotes access to justice as it decreases the litigation costs of suing a giant company elsewhere, as well as it avoids the hardship of suing in a remote place.
For a summary of the facts, see the syllabus of the opinion. We also include the facts here:
“Ford Motor Company is a global auto company, incorporated in Delaware and headquartered in Michigan. Ford markets, sells, and services its products across the United States and overseas. The company also encourages a resale market for its vehicles. In each of these two cases, a state court exercised jurisdiction over Ford in a products-liability suit stemming from a car accident that injured a resident in the State. The first suit alleged that a 1996 Ford Explorer had malfunctioned, killing Markkaya Gullett near her home in Montana. In the second suit, Adam Bandemer claimed that he was injured in a collision on a Minnesota road involving a defective 1994 Crown Victoria. Ford moved to dismiss both suits for lack of personal jurisdiction. It argued that each state court had jurisdiction only if the company’s conduct in the State had given rise to the plaintiff’s claims. And that causal link existed, according to Ford, only if the company had designed, manufactured, or sold in the State the particular vehicle involved in the accident. In neither suit could the plaintiff make that showing. The vehicles were designed and manufactured elsewhere, and the company had originally sold the cars at issue outside the forum States. Only later resales and relocations by consumers had brought the vehicles to Montana and Minnesota. Both States’ supreme courts rejected Ford’s argument. Each held that the company’s activities in the State had the needed connection to the plaintiff’s allegations that a defective Ford caused instate injury” (Our emphasis).
Ford alleged that the Court should follow a causation-only approach. That means that as stated in the syllabus of the opinion that “In Ford’s view, due process requires a causal link locating jurisdiction only in the State where Ford sold the car in question, or the States where Ford designed and manufactured the vehicle. And because none of these things occurred in Montana or Minnesota, those States’ courts have no power over these cases.”
Fortunately, the Court did not follow that interpretation and stated that:
“To see why Ford is subject to jurisdiction in these cases (as Audi, Volkswagen, and Daimler were in their analogues), consider first the business that the company regularly conducts in Montana and Minnesota. See generally 395 Mont., at 488, 443 P. 3d, at 414; 931 N. W. 2d, at 748; supra, at 3?4. Small wonder that Ford has here conceded “purposeful availment” of the two States’ markets. See supra, at 7-8. By every means imaginable—among them, billboards, TV and radio spots, print ads, and direct mail— Ford urges Montanans and Minnesotans to buy its vehicles, including (at all relevant times) Explorers and Crown Victorias. Ford cars—again including those two models—are available for sale, whether new or used, throughout the States, at 36 dealerships in Montana and 84 in Minnesota. And apart from sales, Ford works hard to foster ongoing connections to its cars’ owners. The company’s dealers in Montana and Minnesota (as elsewhere) regularly maintain and repair Ford cars, including those whose warranties have long since expired. And the company distributes replacement parts both to its own dealers and to independent auto shops in the two States. Those activities, too, make Ford money. And by making it easier to own a Ford, they encourage Montanans and Minnesotans to become lifelong Ford drivers” (our emphasis).
[…]
“Here, resident-plaintiffs allege that they suffered in-state injury because of defective products that Ford extensively promoted, sold, and serviced in Montana and Minnesota. For all the reasons we have given, the connection between the plaintiffs’ claims and Ford’s activities in those States— or otherwise said, the “relationship among the defendant, the forum[s], and the litigation”—is close enough to support specific jurisdiction. Walden, 571 U. S., at 284 (internal quotation marks omitted). The judgments of the Montana and Minnesota Supreme Courts are therefore affirmed.”
In sum, in this David and Goliath scenario, the US Supreme Court sided with the consumers and promoted access to justice.
News
HCCH Monthly Update: April 2024
Meetings & Events
From 8 to 12 April 2024, the Working Group on Parentage / Surrogacy met for the second time. Pursuant to its mandate, the Working Group continued its consideration of draft provisions for one new instrument on legal parentage generally, including legal parentage resulting from an international surrogacy agreement. More information is available here.
Vacancies
Applications are now open for a Communications and Outreach Internship at the Permanent Bureau of the HCCH. The deadline for the submission of applications is 20 May 2024 (18:00 CEST). More information is available here.
These monthly updates are published by the Permanent Bureau of the Hague Conference on Private International Law (HCCH), providing an overview of the latest developments. More information and materials are available on the HCCH website.
The European Parliament’s last plenary session & Private International Law
This post was written by Begüm Kilimcio?lu (PhD researcher), Thalia Kruger (Professor) and Tine Van Hof (Guest professor and postdoctoral researcher), all of the University of Antwerp.
During the last plenary meeting of the current composition of the European Parliament (before the elections of June 2024), which took place from Monday 22 until Thursday 24 April, several proposals relevant to private international law were put to a vote (see the full agenda of votes and debates). All of the regulations discussed here still have to be formally approved by the Council of the European Union before they become binding law, in accordance with the ordinary legislative procedure.
It is interesting to note that, while many pieces of new legislation have a clear cross-border impact in civil matters, not all of them explicitly address private international law. While readers of this blog are probably used to the discrepancies this has led to in various fields of the law, it is still worth our consideration.
First, the European Parliament voted on and adopted the proposal for a Directive on Corporate Sustainability Due Diligence (CSDDD) with 374 votes in favour, 235 against and 19 abstentions (see also the European Parliament’s Press Release). The text adopted is the result of fierce battles between the Commission, Parliament and the Council and also other stakeholders such as civil society, academics and practitioners. This necessitated compromise and resulted in a watered-down version of the Commission’s initial proposal of 23 February 2022 and does not go as far as envisaged in the European Parliament’s Resolution of 10 March 2021 (see also earlier blog pieces by Jan von Hein, Chris Tomale, Giesela Rühl, Eduardo Álvarez-Armas and Geert van Calster).
The Directive is one of the few instruments worldwide that put legally-binding obligations on multinational enterprises. It lays down obligations for companies regarding their adverse actual and potential human rights and environmental impacts, with respect to their own operation, the operations of their subsidiaries, and the operations carried out by their business partners in the chains of activities. The Directive further stipulates specific measures that companies have to take to prevent, mitigate or bring an end to their actual or potential adverse human rights impacts. Besides national supervisory authorities for the oversight of the implementation of the obligations, the Directive enacts civil liability for victims of corporate harm.
The adopted Directive is more or less silent on private international law. The closest it gets to addressing our field of the law is Article 29(7), placing the duty on Member States to ensure the mandatory nature of civil remedies:
Member States shall ensure that the provisions of national law transposing this Article are of overriding mandatory application in cases where the law applicable to claims to that effect is not the national law of a Member State.
and Recital 90, which is more general:
In order to ensure that victims of human rights and environmental harm can bring an action for damages and claim compensation for damage caused when the company intentionally or negligently failed to comply with the due diligence obligations stemming from this Directive, this Directive should require Member States to ensure that the provisions of national law transposing the civil liability regime provided for in this Directive are of overriding mandatory application in cases where the law applicable to such claims is not the national law of a Member State, as could for instance be the case in accordance with international private law rules when the damage occurs in a third country. This means that the Member States should also ensure that the requirements in respect of which natural or legal persons can bring the claim, the statute of limitations and the disclosure of evidence are of overriding mandatory application. When transposing the civil liability regime provided for in this Directive and choosing the methods to achieve such results, Member States should also be able to take into account all related national rules to the extent they are necessary to ensure the protection of victims and crucial for safeguarding the Member States’ public interests, such as its political, social or economic organisation.
While the text contains references to numerous existing Regulations, Brussels I and Rome I are not among them; not even a precursory or confusing reference as in Recital 147 of the GDRP.
Second, the European Parliament voted on two other proposals that build on and implement the objectives of the European Green Deal and the EU Circular Economy Action Plan. The first is a proposal for a Regulation establishing a framework for setting eco-design requirements for sustainable products with 455 votes in favour, 99 against and 54 abstentions (see also the European Parliament’s Press Release). The Regulation aims to reduce the negative life cycle environmental impacts of products by improving the products’ durability, reusability, upgradability, reparability etc. It sets design requirements for products that will be placed on the market, and establishes a digital product certificate to inform consumers.
This Regulation does not contain a private-international-law type connecting factor for contracts or products. Neither does it expressly elevate its provisions to overriding rules of mandatory law (to at least give us some private international law clue). Its scope is determined by the EU’s internal market. All products that enter the European market have to be in conformity with the requirements of both regulations, also those that are produced in third countries and subsequently imported on the European market (Art. 3(1)). “Products that enter the market” is the connecting factor, or the basis for applying the Regulation as overriding mandatory law. The Regulation is silent on products that exit the market. Hopefully the result will not be that products that were still in the production cycle at the time of entry into force will simply be exported out of the EU.
The third adopted proposal is the Regulation on packaging and packaging waste with 476 votes in favour, 129 against and 24 abstentions (see also the European Parliament’s Press Release). This Regulation aims to reduce the amount of packaging placed on the Union market, ensuring the environmental sustainability of the packaging that is placed on the market, preventing the generation of packaging waste, and the collection and treatment of packaging waste that has been generated. To reach these aims, the regulation’s key measures include phasing out certain single-use plastics by 2030, minimizing so called “forever chemicals” chemicals in food packaging, promoting reuse and refill options, and implementing separate collection and recycling systems for beverage containers by 2029.
Like the Eco-design Regulation, no word on Private International Law, no references. The Regulation refers to packaging “placed on the market” in various provisions (most notably Art. 4(1)) and recitals (e.g. Recitals 10 and 14).
Lastly, the European Parliament approved the proposal for a regulation on prohibiting products made with forced labour on the Union market with an overwhelming majority of 555 votes in favour, 6 against and 45 abstentions (see also the European Parliament’s Press Release). The purpose of this Regulation is to improve the functioning of the internal market while also contributing to the fight against forced labour (including forced child labour). Economic operators are to eliminate forced labour from their operations through the pre-existing due diligence obligations under Union law. It introduces responsible authorities and a database of forced labour risk areas or products.
Just as is the case for the other Regulations, this Regulation does not contain references to private international law instruments, and no explicit reference to instruments in this field, even though the implementation of the Regulation requires vigilance throughout the value chain. It would be correct to assume that this provides overriding mandatory law, as the ban on forced labour is generally accepted to be jus cogens even though the extent of this ban is contentious (see Franklin).
Other proposals that are more clearly in the domain of private international law have not (yet?) reached the finish line. First, in the procedure on the dual proposals in the field of the protection of adults of 31 May 2023, the European Parliament could either adopt them or introduce amendments at first reading. However, these proposals have not reached the plenary level before the end of term and it will thus be for the Conference of Presidents to decide at the beginning of the new parliamentary term whether the consideration of this ‘unfinished business’ can be resumed or continued (Art. 240 Rules of Procedure of the European Parliament).
In the second file, the proposal for a Regulation in matters of parenthood and on the creation of a European Certificate of Parenthood of 7 December 2022 the European Parliament was already consulted and submitted its opinion in a Resolution of 14 December 2023. It is now up to the Council of the European Union to decide unanimously (according to the procedure in Art. 81(3) of the Treaty on the Functioning of the European Union). It can either adopt the amended proposal or amend the proposal once again. In the latter case the Council has to notify or consult (in case of substantial amendments) the European Parliament again.
Ficticious service still active outside Europe
With the EU Service Regulation being active for more than 20 years, and the Hague Service Convention being ratified by almost all European countries, there is little space for practicing fictitious service of proceedings in Europe. However, for service to third countries outside Europe, and especially to continents, such as Africa, Asia, and the Middle East, remise au parquet is still the ground rule for many European countries. A recent judgment issued by the Piraeus Court of Appeal provides a clear picture of how the mechanism operates in Greece [Piraeus Court of Appeal, judgment nr. 142/2024, available here].
I. THE FACTS:
The parties are two companies active in the international maritime sector. The claimant, a Greek company with its seat in Piraeus, filed an action before the Piraeus Court of First Instance, seeking the award of the total sum of $29,163,200. The defendant, an Iranian company with its seat in Tehran, did not appear in the hearing. The action was upheld as being well founded in substance by the Piraeus Court of 1st Instance. The defendant was ordered to pay the equivalent of $28. 663,200.
Both the action and the first instance judgment were duly served on the Piraeus District Attorney, in accordance with the provisions of Articles 134 §§ 1 and 2, and 136 § 1 Code of Greek Civil Procedure (henceforth CCP), due to the defendant’s domicile in a non-member state of the European Union, thus excluding the application of EU law, and because Iran has not acceded to the Hague Convention of 15 November 1965, which requires actual service of documents by one of the methods provided for therein. Finally, the court underlined the absence of a bilateral agreement between Iran and Greece, which would possibly regulate the issues of service in a different manner.
The defendant lodged an appeal. The appeal was however untimely filed, because it was brought after the expiry of the sixty [60] days period following service of the judgment, provided for in Article 518 § 1 CCP, which began with the fictitious service of the judgment on the Public Prosecutor, to be sent to the Minister of Foreign Affairs, in order to be transmitted through diplomatic channels to the addressee, as provided for by Article 134 §§ 1 and 3 CCP.
The Iranian company acknowledged that the time-limit had expired without effect. For this reason, it filed a request for restitutio in integrum in accordance with Article 152 CCP, requesting that the appeal be considered as timely lodged, claiming that the delay in lodging the appeal was due to force majeure. In particular, it is asserted that the Iranian company did not receive notification of both the claim, which resulted in a default judgment without its participation in the trial at first instance, and of the judgment given in default of appearance, due to the service method selected, i.e., ficticious service to the Public Prosecutor, which sets the time-limit for the appeal. Secondly, the appellant asserts that that it acted within the time-limit laid down in Article 153 CCP, that is to say, immediately after real service.
The appellant invokes the delay caused by the Piraeus Prosecutor’s Office and the diplomatic services of the Country, which did not take care to complete service within two months. In other words, it relies on the omission of third parties, which it could not prevent, and which prevented the appellant from being aware of the fictitious service and the commencement of the time-limit for lodging an appeal in Greece.
II.THE JUDGMENT OF THE PIRAEUS COURT OF APPEAL
The appellate court ruled as follows: The lawsuit was forwarded by the Piraeus Prosecutor’s Office to the Minister of Foreign Affairs, in order to be served at the defendant’s headquarters in Tehran. The diplomatic authorities of Greece did indeed send and their counterparts in Iran did receive and forward the statement of claim to its addressee. However, the Iranian company’s agents, namely the secretariat and the clerk in the Legal Affairs Department, refused to receive it. This is evident from the “Letter of confirmation for declaration of received documents from foreign countries” issued by the International Affairs Department of the Judiciary of the Islamic Republic of Iran. This document states that the defendant, through its aforementioned nominees, refused to receive the disputed “document”.
The reason for that refusal is not specified. However, from the document of the Consular Office of the Embassy of Greece in Iran, and the attached document of the Ministry of Foreign Affairs of the Islamic Republic of Iran, it can be inferred that the refusal was made because the document to be served was not accompanied by an official translation into Farsi. Iranian law does indeed appear to permit refusal to accept service of a foreigner’s statement of claim against an Iranian national on that ground (a legal opinion of Mr., a lawyer at the Central Iranian Bar Association was submitted to the CoA by the appellant). Still, domestic Greek law does not make the validity of service of an action dependent on the attachment of a translated copy of the action in the language of the State of destination. Therefore, service of the action, if it had been completed, would always be valid under Greek law.
In addition, the mere attempt to serve the action made it clear to the defendant in any event, irrespective of whether it had been aware of its content from the outset, that a claim has being brought against it in a Greek court and triggered its obligation under Article 116 CCP to monitor the progress of the proceedings from that time onwards, even if it chose not to participate in the proceedings, which the defendant was able to do, by behaving in a prudent and diligent manner, and by following the fate of the action brought in Greece.
To that end, it was sufficient simply to appoint a lawyer in Greece, who would arrange for the translation of the documents, and would attend the ongoing proceedings at first instance. Such an action was made by the appellant only after actual service of the judgment.
Similarly, the applicant does not explain the reason why it did not act by appointing a lawyer in Greece, after the refusal to receive the summons of the claimant, even though it was also sent to it accompanied by a translation of the summons in English. That omission gives the impression that the refusal to receive the summons was made in order to prolong the proceedings, and to prepare for the lodging of the appeal and the application for restitutio in integrum, which on the whole is considered to be abusive.
Consequently, the application for restitutio in integrum was dismissed as unfounded and the appeal, which was nevertheless brought out of time, was dismissed as inadmissible.
III. COMMENT
The judgment of the Piraeus CoA is interesting because it goes a step further in the examination of fictitious service: It did not simply reiterate the wording of the domestic rules; moreover, it scrutinized the facts, and avoided a stringent application of Article 134 CCP. Due process and right to be heard were included in the court’s analysis. Finally, the court dismissed the legal remedies of the appellant due to its reluctance to demonstrate proactivity, and its intention to bring the Greek proceedings to a stalemate.