Views
A Dangerous Chimera: Anti-Suit Injunctions Based on a “Right to be Sued” at the Place of Domicile under the Brussels Ia Regulation?
This post introduces my case note titled ‘A Dangerous Chimera: Anti-Suit Injunctions Based on a “Right to be Sued” at the Place of Domicile under the Brussels Ia Regulation?’ which appeared in the July 2020 issue of the Law Quarterly Review at page 379. An open access version of the case note is available here.
In Gray v Hurley [2019] EWCA Civ 2222, the Court of Appeal (Patten LJ, Hickinbottom LJ and Peter Jackson LJ), handed down the judgment on the claimant’s appeal in Gray v Hurley [2019] EWHC 1972 (QB). The appellant appealed against the refusal of an anti-suit injunction.
The appellant (Ms Gray) and respondent (Mr Hurley) had been in a relationship. They acquired property in various jurisdictions using the appellant’s money, but held it in either the respondent’s name or in corporate names. The relationship ended and a dispute commenced over ownership of some of the assets and properties. The appellant was domiciled in England; the respondent lived in New Zealand after the relationship ended and was no longer domiciled in England. He initiated proceedings there for a division of the property acquired by the couple during the relationship. The appellant issued proceedings in England seeking a declaration that she was entitled absolutely to the assets. She also applied for an anti-suit injunction to restrain the defendant from continuing with proceedings in the courts of New Zealand. Lavender J held that England was the appropriate forum for the trial of the appellant’s claims but that the respondent’s New Zealand claim could not be determined in England. He rejected her argument that Article 4(1) of the Brussels Ia Regulation obliged him to grant an anti-suit injunction to prevent the respondent from litigating against her in a non-EU state.
The appellant argued that Samengo-Turner v J&H Marsh & McLennan (Services) Ltd [2007] EWCA Civ 723, [2007] 2 All E.R. (Comm) 813 and Petter v EMC Europe Ltd [2015] EWCA Civ 828, [2015] C.P. Rep. 47 were binding authority that Article 4(1) provided her with a right not to be sued outside England, where she was domiciled, obliging the court to give effect to that right by granting an anti-suit injunction.
The Court of Appeal considered that the issue was not acte claire and sent a preliminary reference to the CJEU (pursuant to Article 267 TFEU) asking whether Article 4(1) of the Brussels Ia Regulation provided someone domiciled in England with a right not to be sued outside England so as to oblige the courts to give effect to that right by granting an anti-suit injunction.
The case note examines the Court of Appeal’s decision in Gray v Hurley [2019] EWCA Civ 2222. It offers a pervasive critique of the argument that the general rule of jurisdiction under the Brussels Ia Regulation gives rise to a substantive right to be sued only in England and that this right is capable of enforcement by an anti-suit injunction. It is argued that the previous decisions of the Court of Appeal in Samengo-Turner v J&H Marsh & McLennan (Services) Ltd [2007] EWCA Civ 723 and Petter v EMC Europe Ltd [2015] EWCA Civ 828 were themselves wrongly decided. In light of this, it will be even more difficult to justify the broader application of a similar result in the present case.
Indeed, the law would take a wrong turn if the present case is allowed to build on the aberrational foundations of the developing law on anti-suit injunctions based on rights derived from the Brussels Ia Regulation. Essentially, a chimerical remedy based on a fictitious right would not only infringe comity but would also deny the respondent access to justice in the only available forum. The note also anticipates the CJEU’s potential findings in this case.
An open access version of the case note is available here.
Uber Arbitration Clause Unconscionable
In 2017 drivers working under contract for Uber in Ontario launched a class action. They alleged that under Ontario law they were employees entitled to various benefits Uber was not providing. In response, Uber sought to stay the proceedings on the basis of an arbitration clause in the standard-form contract with each driver. Under its terms a driver is required to resolve any dispute with Uber through mediation and arbitration in the Netherlands. The mediation and arbitration process requires up-front administrative and filing fees of US$14,500. In response, the drivers argued that the arbitration clause was unenforceable.
The Supreme Court of Canada has held in Uber Technologies Inc. v. Heller, 2020 SCC 16 that the arbitration clause is unenforceable, paving the way for the class action to proceed in Ontario. A majority of seven judges held the clause was unconscionable. One judge held that unconscionability was not the proper framework for analysis but that the clause was contrary to public policy. One judge, in dissent, upheld the clause.
A threshold dispute was whether the motion to stay the proceedings was under the Arbitration Act, 1991, S.O. 1991, c. 17 or the International Commercial Arbitration Act, 2017, S.O. 2017, c. 2, Sch. 5. Eight judges held that as the dispute was fundamentally about labour and employment, the ICAA did not apply and the AA was the relevant statute (see paras. 18-28, 104). While s. 7(1) of the AA directs the court to stay proceedings in the face of an agreement to arbitration, s. 7(2) is an exception that applies, inter alia, if the arbitration agreement is “invalid”. That was accordingly the framework for the analysis. In dissent Justice Cote held that the ICAA was the applicable statute as the relationship was international and commercial in nature (paras. 210-18).
The majority (a decision written by Abella and Rowe JJ) offered two reasons for not leaving the issue of the validity of the clause to the arbitrator. First, although the issue involved a mixed question of law and fact, the question could be resolved by the court on only a “superficial review” of the record (para. 37). Second, the court was required to consider “whether there is a real prospect, in the circumstances, that the arbitrator may never decide the merits of the jurisdictional challenge” (para. 45). If so, the court is to decide the issue. This is rooted in concerns about access to justice (para. 38). In the majority’s view, the high fees required to commence the arbitration are a “brick wall” on any pathway to resolution of the drivers’ claims.
The majority then engaged in a detailed discussion of the doctrine of unconscionability. It requires both “an inequality of bargaining power and a resulting improvident bargain” (para. 65). On the former, the majority noted the standard form, take-it-or-leave-it nature of the contract and the “significant gulf in sophistication” between the parties (para. 93). On the latter, the majority stressed the high up-front costs and apparent necessity to travel to the Netherlands to raise any dispute (para. 94). In its view, “No reasonable person who had understood and appreciated the implications of the arbitration clause would have agreed to it” (para. 95). As a result, the clause is unconscionable and thus invalid.
Justice Brown instead relied on the public policy of favouring access to justice and precluding an ouster of the jurisdiction of the court. An arbitration clause that has the practical effect of precluding arbitration cannot be accepted (para. 119). Contractual stipulations that prohibit the resolution of disputes according to law, whether by express prohibition or simply by effect, are unenforceable as a matter of public policy (para. 121).
Justice Brown also set out at length his concerns about the majority’s reliance on unconscionability: “the doctrine of unconscionability is ill-suited here. Further, their approach is likely to introduce added uncertainty in the enforcement of contracts, where predictability is paramount” (para. 147). Indeed, he criticized the majority for significantly lowering the hurdle for unconscionability, suggesting that every standard-form contract would, on the majority’s view, meet the first element of an inequality of bargaining power and therefore open up an inquiry into the sufficiency of the bargain (paras. 162-63). Justice Brown concluded that “my colleagues’ approach drastically expands the scope of unconscionability, provides very little guidance for the doctrine’s application, and does all of this in the context of an appeal whose just disposition requires no such change” (para. 174).
In dissent, Justice Cote was critical of the other judges’ willingness, in the circumstances, to resolve the issue rather than refer it to the arbitrator for decision: “In my view, my colleagues’ efforts to avoid the operation of the rule of systematic referral to arbitration reflects the same historical hostility to arbitration which the legislature and this Court have sought to dispel. The simple fact is that the parties in this case have agreed to settle any disputes through arbitration; this Court should not hesitate to give effect to that arrangement. The ease with which my colleagues dispense with the Arbitration Clause on the basis of the thinnest of factual records causes me to fear that the doctrines of unconscionability and public policy are being converted into a form of ad hoc judicial moralism or “palm tree justice” that will sow uncertainty and invite endless litigation over the enforceability of arbitration agreements” (para. 237). Justice Cote also shared many of Justice Brown’s concerns about the majority’s use of unconscionability: “I am concerned that their threshold for a finding of inequality of bargaining power has been set so low as to be practically meaningless in the case of standard form contracts” (para. 257).
The decision is lengthy and several additional issues are canvassed, especially in the reasons of Justice Cote and Justice Brown. The ultimate result, with the drivers not being bound by the arbitration clause, is not that surprising. Perhaps the most significant questions moving forward will be the effect these reasons have on the doctrine of unconscionability more generally.
The end of fostering outdated injustice to children born outside marriage through reparation of Nazi-expatriation acts: Ruling of the German Constitutional Court of 20 May 2020 (2 BvR 2628/18)
Marie-Luisa Loheide is a doctoral candidate at the University of Freiburg who writes her dissertation about the relationship between the status of natural persons in public and private international law. She has kindly provided us with her thoughts on a recent ruling by the German Constitutional Court.
According to Article 116 para. 2 of the German Basic Law (Grundgesetz – GG), every descendant of former German citizens of Jewish faith who have been forcibly displaced and expatriated in a discriminatory manner by the Nazi-regime is entitled to attain German citizenship upon request. This rule has been incorporated in the Basic Law since 1949 as part of its confrontation with the systematic violations of human rights by the Nazi-regime and is therefore meant to provide reparation by restoring the status quo ante.
Descendants (“Abkömmlinge”) as referred to in Article 116 para. 2 are children, grandchildren and all future generations without any temporal constraint. Regardless of their parents’ choice of citizenship, they have a personal right to naturalisation which is exercised upon request by reactivation of the acquisition of citizenship iure sanguinis. This very wide scope is legitimated by the striking injustice done by the Nazi-regime. Yet, according to the settled case law of the Federal Administrative Court, it had been limited by a strict “but-for” test: in order to solely encompass those people affected by this specific injustice. This meant that the descendant must hypothetically have possessed German citizenship according to the applicable citizenship law at the time of its acquisition which is usually the person’s birth. To put it more clearly, one had to ask the following hypothetical question: Would the descendant be a German citizen if his or her ancestor had not been expatriated by the Nazis?
Exactly this limiting prerequisite was the crucial point of the matter decided upon by the German Constitutional Court on 20 May 2020. In the underlying case, the hypothetical question described above would have had to be answered in the negative: Until its revocation in 1993, German citizenship law stated that children of an unmarried German father and a mother of other citizenship did not acquire the German citizenship of their father but only that of their mother, contrary to today’s principle of ius sanguinis-acquisition. As in casu the daughter of a forcibly displaced and expatriated former German emigrant of Jewish faith and a US-American mother was born outside marriage in 1967, she was denied the acquisition of the German citizenship. Whereas this was not criticised by the administrative courts seised, the German Constitutional Court in its ruling classified the denial as an obvious violation of the principle of equal treatment of children born within and outside marriage underlying Article 6 para. 5 GG as well as the principle of equal treatment of women and men according to Article 3 para. 2 GG, as alleged by the plaintiff. In its reasoning, the Court emphasised that an exception from the principle of equal treatment of children born outside marriage could only be made if absolutely necessary. This corresponds to the case-law of the European Court of Human Rights on Article 14 of the ECHR that a difference in treatment requires “very weighty reasons”. The former non-recognition of the family relationship between an unmarried father and his child, however, did obviously contradict the stated constitutional notion without being justified by opposing constitutional law. Out of two possible interpretations of “descendant” as referred to in Article 116 para. 2 GG the court must have chosen the one that consorts best with the constitution. According to the Constitutional Court, the more generous interpretation of descendant also prevents a perpetuation of the outdated notion of inferiority of children born outside marriage through Article 116 para 2 GG and corresponds to its purpose of reparation.
As the notion of inferiority of children born outside marriage has fortunately vanished, a clarifying judgment was highly overdue and is therefore most welcome. It is not acceptable that outdated notions are carried to the present through a provision of the Basic Law that is meant to provide reparation of Nazi crimes. Especially in post-Brexit times, the question dealt with has become more and more urgent with respect to people reclaiming their German citizenship in order to maintain their Union citizenship and the rights pertaining to it (see here).
In regard to conflicts law, this clarification of a key question of citizenship law is relevant to the determination as a preliminary issue (incidental question or Vorfrage) when nationality is used as a connecting factor. The judgment is likely to lead to more cases of dual citizenship that are subject to the ambiguous conflicts rule of Art. 5 para. 1 sentence 2 EGBGB.
News
Out now: Second Edition of Conflict of Laws and the Internet
Edward Elgar has just published the second edition of Conflict of Laws and the Internet by Pedro De Miguel Asensio.
Prof. Diego P. Fernández Arroyo is appointed president of the Curatorium of the Hague Academy of International Law
This month Prof. Diego P. Fernández Arroyo, a renowned expert in Private International Law, has been appointed president of the Curatorium of the Hague Academy of International Law. He succeeded Prof. Yves Daudet. For more information, click here and here.
Prof. Fernández Arroyo is the first Latin American to ever hold that position.
Below is an image circulated by ASADIP. Many congratulations!
Book and webinar Financing Collective Actions
Collective actions and the financing of complex mass damage cases have been among the most debated and controversial topics in civil justice in Europe over the past decade. It doesn’t need much explanation that oftentimes these complex cases involving a multiplicity of parties and events or consequences taking place in different countries trigger private international law questions, as for instance the ongoing evaluation of the Brussels I-bis Regulation evidences (see among others the 2023 Study in support of the evaluation; a 2021 Working Paper by Burkhard Hess; a 2022 report by BEUC on PIL and Cross-border Collective Redress). Another key issue is the funding of these inherently costly litigations. The Representative Action Directive, applicable since June 2023, and the European Parliament Resolution on Responsible private funding of litigation, adopted in 2022, have proliferated discussions on the funding of collective actions. With the entry into force of the Dutch collective damages procedure (WAMCA) in 2020, enabling compensatory actions, the Netherlands has re-confirmed its reputation as one of the frontrunners in having a well-developed framework for collective actions and settlements in Europe. High stake cases involving privacy, environmental law, human rights and consumer law have found their way to the courts and have benefitted from third party funding.
These developments have triggered the Dutch Research and Documentation Centre of the Ministry of Justice and Security to commission a Study on the need for a procedural fund for collective actions, published in 2023 (in Dutch). The book Financing Collective Actions in the Netherlands: Towards a Litigation Fund?, based on this study and including updates, has just been published (Eleven International Publishing 2024) and is available open access. The book is authored by Xandra Kramer (Erasmus University Rotterdam/Utrecht University), Ianika Tzankova (Tilburg University), Jos Hoevenaars (Erasmus University Rotterdam, researcher Vici team) and Karlijn van Doorn (Tilburg University). It discusses developments in Dutch collective actions from a regulatory perspective, including the implementation of the RAD, and contains a quantitative and qualitative analysis of cases that have been brought under the WAMCA. It then examines funding aspects of collective actions from a regulatory, empirical and comparative perspective. It delves into different funding modes, including market developments in third party litigation funding, and addresses the question of the necessity, feasibility, and design of a (revolving) litigation fund for collective actions.
The hardcover version of the book can be ordered from the publisher’s website, which also provides access to the free digital open access version through the publisher’s portal.
A launch event and webinar on ‘Financing Collective Actions: Current Debates in Europe and Beyond’ will take place on 3 July from 15-17.15 CET. Confirmed speakers include Jasminka Kalajdzic (University of Windsor) and Rachael Mulheron (Queen Mary University London). Registration for free here.