Views
Third-party liability of classification and certification societies in the context of conflict of laws and public international law – a comment on the CJEU’s recent ‘Rina judgement’
Written by Yannick Morath
Yannick Morath, doctoral candidate at the University of Freiburg, has kindly provided us with his thoughts on the CJEU’s judgement in the case of LG and Others v Rina SpA, Ente Registro Italiano Navale (C-641/18 – ECLI:EU:C:2020:349)
(See also the earlier post by Matthias Weller concerning the CJEU’s judgement).
- Introduction
Private-law classification and certification societies play a vital role in modern economies. Especially in the maritime sector, external auditors issue certificates dealing with public tasks such as the seaworthiness and safety of vessels. Not only their contractual partners but also third parties rely on the accuracy of such certificates. Due to cross-border mobility of certificates and certified items, issues of Private International Law have to be taken into account when dealing with a certifiers’ liability.
When not applying the appropriate level of care, classification and certification agencies can – according to the CJEU – be sued in the courts of the Member State where the agency is seated. By finding this ruling, the CJEU had to deal with two interesting questions: Firstly, it had to establish whether an action for damages, brought against private certifiers falls within the concept of ‘civil and commercial matters’, and therefore, within the scope of the Regulation 44/2001 (Brussels I). Secondly, the CJEU had to examine the legitimacy of the certifier’s plea based on the principle of customary international law concerning immunity from state jurisdiction.
2. Facts of the ‘Rina-case’
In 2006, the Al Salam Boccaccio ’98, a ship sailing under the flag of the Republic of Panama, sunk in the Red Sea, tragically causing the loss of more than 1,000 lives. Relatives of the victims and survivors have brought an action under Italian law before the Tribunale di Genova (District Court, Genoa, Italy) against two private law corporations (the Rina companies), that are seated in Genoa and were responsible for the classification and certification of the ship.
The applicants argue that the defendants’ operations, carried out under a contract concluded with the Republic of Panama, are to blame for the ship’s lack of stability and its lack of safety at sea, which are the causes of its sinking. Therefore, they claim compensation from the Rina companies for the losses they suffered.
The Rina companies counter that the referring court lacks jurisdiction, relying on the international-law principle of immunity from jurisdiction of foreign States. They state that they are being sued in respect of activities, which they carried out as delegates of the Republic of Panama. The activities in question were a manifestation of the sovereign power of a foreign State and the defendants carried them out on behalf of and in the interests of that State.
The applicants, however, argue in favour of the case’s civil law nature, within the meaning of Article 1 (1) of Regulation 44/2001. As the Rina companies are seated in Genoa, the Italian courts should have jurisdiction under Article 2 (1) of that regulation. They submit that the plea of immunity from jurisdiction does not cover activities that are governed by non-discretionary technical rules, which are, in any event, unrelated to the political decisions and prerogatives of a State.
The Tribunale di Genova decided to stay the proceedings and consult the CJEU for further clarification under Article 267 TFEU.
3. Background: The dual role of classification and certification societies
When dealing with the classification and certification of ships it is important to be aware of the dual role private-law societies play in this area. Traditionally they are hired by a shipowner to attest that a ship is built in accordance with the standards of a specific ship class. Those ‘class rules’ are developed by the classification societies themselves. The maritime industry depends on these services, as the classification of a ship is necessary to evaluate its insurability and marketability. Therefore, these voluntary classifications are mainly prompted by private interest. This is referred to as the ‘private function’ of classification.
On the other hand, the same societies fulfil a ‘public function’ as well. Under international maritime law, states have a duty to take appropriate measures for ships flying under their flag to ensure safety at sea (Article 94 (3) of the United Nations Convention of the Law of the Sea). For this purpose ships have to be surveyed by a qualified personnel to make sure it meets all relevant safety and environmental standards. Flag states can perform these tasks themselves; however, most of them delegate executive powers to classification societies. Pursuant to Article 3 (2) of Directive 2009/15 this is also possible under EU law. When executing these powers classification agencies are subject to two contracts: The first one is the agreement on the delegation of powers with the flag state, the second contract is the actual certification agreement with the owner of the ship that is about to be surveyed. Whereas shipowners are free to choose one of the recognized classification societies, the certification itself is compulsory.
It must be noted that the classification according to class rules (private function) is a prerequisite for the statutory inspection and certification (public function). In the case at hand, the Rina companies were responsible for both aspects. They classified the ship in accordance with their class rules and then issued the statutory certificate on behalf of and upon delegation from the Republic of Panama. This public law background caused the need for clarification by the CJEU.
4. The CJEU on the interpretation of ‘civil and commercial matters’
Under Article 1(1) of Regulation 44/2001, the scope of that regulation is limited to ‘civil and commercial matters’. It does not extend, in particular, to revenue, customs or administrative matters. In order to ascertain whether Italian courts have jurisdiction pursuant to Article 2 (1) of that regulation it is necessary to interpret the concept of ‘civil and commercial matters’. This concept is subject to an autonomous European interpretation. By determining whether a matter falls within the scope of the Regulation, the nature of the legal relationships between the parties to the dispute is crucial. It must be noted that the mere fact that one of the parties might be a public authority does not exclude the case from the scope of the Regulation. It is, however, essential whether the party exercises public powers (acta iure imperii). These powers are ‘falling outside the scope of the ordinary legal rules applicable to relationships between private individuals’ (para. 34).
Following the Advocate General’s opinion and the CJEU’s judgement in Pula Parking (C-551/15 – ECLI:EU:C:2017:193), the Court notes that ‘it is irrelevant that certain activities were carried out upon delegation from a State’ (para. 39). The fact that the operations were carried out on behalf of and in the interest of the Republic of Panama and that they fulfil a public purpose, do not, in themselves, ‘constitute sufficient evidence to classify them as being carried out iure imperii’ (para. 41.).
In fact it must be taken into account that ‘the classification and certification operations were carried out for remuneration under a commercial contract governed by private law concluded directly with the shipowner of the Al Salam Boccaccio ’98’ (para. 45). Moreover, it is the responsibility of the flag state to interpret and choose the applicable technical requirements for the certification necessary to fly their flag.
The CJEU continues to examine the agency’s decision-making power. If the agency decides to withdraw a certificate, the respective ship is no longer able to sail. It argues, however, that this effect does not originate from the decision of the agency but rather from the sanction which is imposed by law (para. 47). The role of the certifier simply ‘consists in conducting checks of the ship in accordance with the requirements laid down by the applicable legislative provisions.’ As it is for the States to fix those provisions, it is ultimately their power to decide on a ship’s permission to sail.
Whereas the general remarks on the interpretation of ‘civil and commercial matters’ are convincing and based on settled case law, the findings about the ‘decision making power’ of recognised organisations give rise to further questions. If a ship does not comply with the relevant requirements, the statutory certificate must not be issued and the shipowner is not allowed to sail under the flag of the respective state. Even though this legal consequence is finally imposed by law, it is the certifier’s application of that law that leads to this effect. Whenever a certification agency refuses to issue a certificate, the ship is initially not able to sail. The CJEU’s technical perspective in paragraph 47 does not sufficiently appreciate the factual decision making of the certifier. The judgement does unfortunately not explicitly address the issue of legal discretion and its consequences on the concept of ‘civil and commercial matters’.
However, there are other grounds to qualify the case a ‘civil matter’. As the CJEU pointed out as well, it follows from Regulation 6 (c) and (d) of Chapter I of the International Convention for the Safety of Life at Sea, that the final responsibility is allocated to the flag state (para. 48). Therefore, the state is subject to far-reaching supervisory duties. Even though this is not expressively regulated by international or EU law, it appears like the flag state can at any time overrule an agency’s decision to issue or withdraw the certificate. This would result in a limitation to the finality of the agency’s powers and prepare the ground for a civil law qualification. Some further remarks by the CJEU about this aspect would have been interesting.
5. The CJEU on state immunity from jurisdiction
Doubts regarding the jurisdiction of the Italian courts arose from the Rina companies’ plea based on the principle of customary international law concerning immunity from jurisdiction. Pursuant to the principle par in parem non habet imperium, a State cannot be subjected to the jurisdiction of another State. ‘However, in the present state of international law, that immunity is not absolute, but is generally recognised where the dispute concerns sovereign acts performed iure imperii. By contrast, it may be excluded if the legal proceedings relate to acts which do not fall within the exercise of public powers’ (para. 56).
The CJEU held that this principle does not preclude the application of the Regulation in this case, although it is the referring court that has to examine whether the Rina companies had recourse to public powers within in the meaning of international law. It must be noted that a rule of customary international law will only exist where a given practice actually exists that is supported by a firm legal view (opinio iuris). Following the Advocate General, the CJEU finds that the case-law cited by the defendants ‘does not support the unequivocal conclusion that a body carrying out classification and certification operations may rely on immunity from jurisdiction in circumstances such as those of the present case` (c.f. para. 109 of his opinion).
In regard of state immunity, the CJEU changes its perspective on the case. Whereas the interpretation of ‘civil and commercial matters’ was driven by EU law, the doctrine of state immunity requires a different methodological approach, as it originates from international law. Nevertheless, the CJEU’s overall convincing remarks are in line with its earlier findings, setting a high bar for statutory certification societies to plead for state immunity.
6. Final remarks
The CJEU established legal security for the victims of maritime disasters such as the sinking of the Al Salam Boccaccio ’98. The judgement indirectly clarified the applicability of the Brussels I Regulation in cases where maritime certifiers operate only in their private function. When statutory certifications are a civil matter, this must a fortiori be the case for voluntary classifications. Having consistent results when establishing jurisdiction in such cases, also meets with the principle of foreseeability. The remarks on the applicability of the Brussels I regulation are also of significant relevance when dealing with the Brussels Ibis and the Rome I and II Regulations, as all of them apply the concept of ‘civil and commercial matters’.
Moreover, the judgement underlines the responsibility of private-law certifiers and recognises their vital role as regulators that operate in the public interest. Even though the CJEU’ findings on the interpretation of ‘civil matters’ are consistent with its earlier developed broad understanding of the concept, further clarification regarding privatised decision making powers would have been desirable.
Corporate responsibility in (public) international law
Written by Oliver Dörr, University of Osnabrück
Note: This blogpost is part of a series on „Corporate social responsibility and international law“ that presents the main findings of the contributions published in August Reinisch, Stephan Hobe, Eva-Maria Kieninger & Anne Peters (eds), Unternehmensverantwortung und Internationales Recht, C.F. Müller, 2020.
I. Companies – responsibility
1. As for commercial entities, international law is concerned, above all, with transnational or multinational companies. The term basically describes the conglomerate of commercial entities that are acting separately in at least two different countries and which are tied together by a regime of hierarchical coordination.
2. In times of „global governance“ the international legal concept of responsibility is undergoing a process of de-formalization and, thus, encompasses the violation of social behavioural expectations, which for companies may result from international standards that are not legally binding. The resulting responsibility is a legal one insofar as the law adopts those standards and attaches negative consequences to their violation.
II. Private persons and the law of international responsibility
3. Private companies may be held responsible under international law to the extent that they are either themselves bound by primary legal obligations (direct responsibility), or their business activities are regulated by States which, in doing so, are fulfilling their own international legal obligations (indirect responsibility). A State may just as well impose such regulation without actually being under an obligation to do so (e.g. the US Alien Tort Statute).
Private persons as subjects of international legal obligations
4. Private persons being themselves bound by international legal obligations pertain to the process of de-medatization, which established the legal personality of the individual under international law.
5. Sovereign States can, by concluding international treaties, create legal obligations for private persons, including private companies, directly under international law. The personal scope of this comprehensive law-creating power of States is delimitated by their personal jurisdiction under international law. Whether an individual treaty itself gives rise to legal obligations for private persons, is, just as the creation of individual rights, a matter of treaty interpretation.
6. Genuine legal obligations have evolved for private persons under international criminal law: Here, detailed primary obligations of private persons have developed that are linked to a specific regime of individual responsibility, in particular under the Statute of the International Criminal Court.
7. In contrast, the extension of international human rights obligations to apply directly between private persons is not yet part of the international lex lata. Individual texts pointing in that direction (such as art. 29 para. 1 of the Universal Declaration of Human Rights) are merely of a programmatic nature.
8. Genuine international legal obligations of companies can today be found in the rules regulating deep sea-bed activities (arts. 137, 153 para. 2 UN Convention on the Law of the Sea) and in various treaties establishing regimes of civil liability.
9. Obligations of private persons under international law, including those having direct effect within UN Member States, may also be created by the UN Security Council through resolutions under arts. 39, 41 of the UN Charter.
10. It is fairly uncertain whether the initiative, currently being undertaken within the UN Human Rights Council, to adopt a „legally binding instrument“ encompassing direct human rights liability of private companies, will ever have a chance of becoming binding law.
11. To the extent that there actually are primary obligations of private persons under international law, a general principle of law requires their violation to result in a duty to make reparation. Only in exceptional circumstances could the rules of State responsibility be transferred to private persons.
Obligations to establish the responsibility of private persons
12. An indirect responsibility under international law applies to undertakings via the international legal obligation of States to criminalize certain activities, e.g. in respect of waste disposal, bribery in foreign countries, organized crime and corruption.
Responsibility of private persons under autonomous national law
13. Provisions in national law that autonomously sanction private acts for international law violations bridge with their own binding effect the fact that the private person is not itself bound by the international legal norm.
14. The French Law No. 399-2017 on the plan de vigilance is far too general and vague to serve as an example for an (indirect) international legal reporting responsibility. The same applies to the CSR directive of the European Union of 2014.
III. Responsibility on the basis of non-binding rules of conduct
Behavioural governance without legally binding effects
15. The values contained in certain international law principles shape some social behavioural expectations that are summarized today in concepts of corporate social responsibility (CSR). As a matter of substance, those expectations relate to human rights, the environment, conditions of labour and fighting corruption.
Processes of rule-making
16. The discussion is mainly focused on certain international, cross-sector corporate codes of conduct, such as the OECD Guidelines for Multinational Enterprises (1976), die ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (1977), the UN Global Compact (2000) and the UN Guiding Principles on Business and Human Rights (2011).
17. In particular, with regard to human rights and environment, those rules are extremely unspecific, which means that here, law merely serves as a backdrop in order to endow social behavioural expectations with moral authority.
Responsibility by reception
18. In order to adopt and implement those business-related standards, basically all instruments of law-making and application can be used, as long as they impose normative requirements on companies and their activities. Legal certainty standards under the rule of law, as well as the rules of international law on the jurisdiction of States, can limit the reception.
19. Non-binding standards could be implemented, for example, via the legal regimes of State aid (in particular with respect to export finance), public procurement, investment protection and the rules on civil liability. So far, however, the international standards on business conduct are rarely being implemented in a legally binding manner.
IV. Conclusion
20. If the distinction of law and non-law is to be maintained, responsibility of companies in international law is a theoretical possibility, but of little practical relevance: Only in very specific circumstances are private companies themselves subjected to international legal obligations; moreover, it is similarly rare that „soft“ international standards of conduct are being adopted by „hard“ law and thereby made into specific legal duties of companies.
21. Behavioural standards that determine the international debate on CSR assign a mere „backdrop function“ to the law, as they neither identify concretely the international legal norms referred to, nor differentiate them properly. In that context, companies are simply required to publicly declare their commitment to „the good cause“, which results in duties to take precautionary measures, to exercise transparency and to publish reports.
22. That is why environmental protection, human rights etc. in relation to the activities of private companies is still mainly the responsibility of States. Tools that exist in international law in this respect, such as the rules of attribution or protective duties, must be adapted and enhanced, in order to achieve adequate solutions for detrimental business conduct on the basis of State responsibility.
Full (German) version: Oliver Dörr, Unternehmensverantwortlichkeit im Völkerrecht, in: August Reinisch, Stephan Hobe, Eva-Maria Kieninger & Anne Peters (eds), Unternehmensverantwortung und Internationales Recht, C.F. Müller, 2020, pp. 133 et seq.
The Private International Law of Virtual Zoom Backgrounds
Written by Tobias Lutzi, University of Cologne
One of the biggest winners of the current pandemic (other than toilet paper producers, conspiracy theorists, and the climate) seems to be the former Silicon Valley startup Zoom, whose videoconferencing solutions have seen its number of daily users increase about thirtyfold since the end of 2019. While the company’s success in a market otherwise dominated by some of the world’s wealthiest corporations has taken many people – including investors – by surprise, it can be attributed to a number of factors – arguably including its software’s highly popular virtual-background feature.
With more and more people using the cockpit of the Millennium Falcon, the couch from The Simpsons, and other iconic stills from movies or TV series as virtual backgrounds in their private and professional Zoom meetings and webinars, the question arises as to whether this may not constitute an infringement of copyright.
Unsurprisingly, this depends on the applicable law. Whereas using a single frame from a movie as a virtual background may often qualify as ‘fair use’ under US copyright law even in a professional setting (and thus require no permission from the copyright holder), no such limitation to copyright will be available in many European legal systems, with any ‘communication to the public’ in the sense of Art 3 of the Information Society Directive 2001/29/EC potentially constituting a copyright infringement under the domestic copyright laws of an EU Member State.
As far as copyright infringements are concerned, the rules of private international law differ significantly less than the rules of substantive law. Under the influence of the Berne Convention, the so-called lex loci protectionis principle has long become the leading approach in most legal systems, allowing copyright holders to seek protection under any domestic law under which they can establish a copyright infringement. For infringements committed through the internet, national courts have given the principle a notoriously wide application, under which the mere accessibility of content from a given country constitutes a sufficient basis for a copyright holder to seek protection under its domestic law. Accordingly, using an image on Zoom without the copyright holder’s permission in a webinar that is streamed to users in numerous countries exposes the user to just as many copyright laws – regardless of whether the image is used by the host or by someone else sharing their video with the other participants.
Interestingly, the fact that the image is only displayed to other users of the same software is unlikely to mitigate this risk. While Zoom’s (confusingly numbered) terms & conditions unsurprisingly prohibit infringements of intellectual property (clause 2.d.(vi)) and – equally unsurprisingly – subject the company’s legal relationship with its users to the laws of California (clause 22/20.1), courts have so far been slow to attach significance to such platform choices of law as with regard to the relationship between individual users. In fact, the EU Court of Justice held in Case C-191/15 Verein für Konsumenteninformation v Amazon (paras. 46–47) that even with regard to a platform host’s own liability in tort,
the fact that [the platform host] provides in its general terms and conditions that the law of the country in which it is established is to apply to the contracts it concludes cannot legitimately constitute […] a manifestly closer connection [in the sense of Art. 4(3) Rome II].
If it were otherwise, a professional […] would de facto be able, by means of such a term, to choose the law to which a non-contractual obligation is subject, and could thereby evade the conditions set out in that respect in Article 14(1)(a) of the Rome II Regulation.
While the escape clause of Art. 4(3) Rome II is not directly applicable to copyright infringements anyway, the decision illustrates how courts will be hesitant to give effect to a platform host’s choice of law as far as the relationship between users – let alone between users and third parties – is concerned. This arguably also applies to other avenues such as Art. 17 Rome II and the concept of ‘local data’.
The liability risks described above are, of course, likely to remain purely theoretic. But they are also easily avoidable by not using images without permission from the copyright holder in any Zoom meeting or webinar that cannot safely be described as private under the copyright laws of all countries from where the meeting can be joined.
News
Out Now: Treatment of Foreign Law in Asia
A book edited by Kazuaki Nishioka on Treatment of Foreign Law in Asia has just been published in the Hart Studies in Private International Law -Asia.
The blurb read as follows:
How do Asian courts ascertain, interpret, and apply a foreign law as the law governing the merits of the case? What should judges do if parties do not raise or disagree on the content of foreign law? This thematic volume in the Studies in Private International Law – Asia series analyses the treatment of foreign law before judicial authorities, that is, how the courts of Asian states deal with the proof of foreign law in court litigation involving cross-border elements.
The individual chapters cover 15 Asian jurisdictions: Mainland China, Hong Kong, Taiwan, Japan, South Korea, Singapore, Malaysia, Vietnam, Cambodia, Myanmar, the Philippines, Indonesia, Thailand, Sri Lanka, and India.
The Introduction and Conclusion examine similarities and differences in the approaches taken by the 15 Asian states with a view to assessing the extent to which those approaches are consistent or different from each other. The book also puts forward suggestions for harmonising differing approaches, especially between Asian common law and civil law states.
The book is a one-stop reference guide on the treatment of foreign law in Asia and will be indispensable to judges, practitioners, and scholars not just in Asia, but worldwide.
Out Now: Internationales Privat- und Prozessrecht in Lateinamerika by Jürgen Samtleben
Jürgen Samtleben just published a collection of his work on the PIL of Latin America; he kindly shared the following announcement with us:
Jürgen Samtleben has authored numerous articles over the years on private international law and international civil procedure in Latin America. These contributions have now been updated and systematically organized into a single volume, thereby offering a unique overview of the conflict of laws in Latin American countries. The collection of articles in German, Spanish and English is supplemented by a comprehensive volume containing the relevant statutory materials in their original language as well as in German translation.
The indices of volume I (‘Rechtsordnungen’) and volume II (‘Gesetzestexte’) can be found here and here. More information is available here.
New article published in African Journal of International and Comparative Law
A new conflict of laws article was just published today on the African Journal of International and Comparative Law. It is titled: CSA Okoli, A Yekini & P Oamen, “The Igiogbe Custom as a Mandatory Norm in Conflict of Laws: An Exploration of Nigerian Appellate Court Decisions.”
The abstract reads as follows:
Under the Igiogbe custom of the Bini Kingdom of Edo State Nigeria, the eldest surviving son exclusively inherits the ancestral home of his deceased father. This custom is a mandatory norm in conflict of laws. Litigation on the custom has been described as a matter of life and death. There is a widely shared view among academic writers, practitioners, and judges that this customary law is absolute. Contrary to this popular view, this work argues that the Igiogbe custom can be displaced by statute and other customary or religious laws. To substantiate this position, this article examines all the reported appellate court decisions on the Igiogbe custom and other connected principles. It is often taken for granted that every Bini man is subject to customary law, thereby leading to the overriding application of the Igiogbe custom. Recent developments in case law suggest otherwise. There is a conflict of personal law question that is often ignored in most litigation concerning the Igiogbe. Careful consideration of this question can potentially lead to the application of other systems of succession law (statutory, religious, and other customary laws) other than the Igiogbe custom. Besides, these conflict of laws techniques and constitutional human rights norms can be used to strike the appropriate balance between competing interests and reasonable legitimate expectations of the deceased and their heirs.