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Netherlands Commercial Court: English proceedings in The Netherlands
By Friederike Henke, Advocaat & Rechtsanwältin at Buren in Amsterdam
The international demand for English language dispute resolution is increasing as the English language is commonly used in international trade and contracts as well as correspondence, not only between the trading partners themselves, but also by international parties, their legal departments and their advisors. Use of the English language in legal proceedings is expected to save time and money for translations and language barriers in general. Read more
Alexander Vik v Deutsche Bank AG: the powers of the English court outside of the jurisdiction in contempt of court proceedings
By Diana Kostina
The recent Court of Appeal judgment in Alexander Vik and Deutsche Bank AG [2018] EWCA Civ 2011confirmedthat contempt of court applications for alleged non-compliance with a court order can be served on a party outside the jurisdiction of England and Wales. The Court of Appeal’s judgment also contains a useful reminder of the key principles governing the powers of English courts to serve defendants outside of the jurisdiction.
Background
This Court of Appeal’s judgment is the latest development in the litigation saga which has been ongoing between Deutsche Bank (‘the Bank’) and Alexander Vik, the Norwegian billionaire residing in Monaco (‘Mr Vik’) and his company, Sebastian Holdings Inc (‘the Company’). The Bank has been trying to enforce a 2013 judgment debt, which is now estimated to be around US $ 320 million.
Within the enforcement proceedings, the English court made an order under CPR 71.2 requiring Mr Vik to appear before the court to provide relevant information and documents regarding the assets of the Company. This information would have assisted the Bank in its efforts to enforce the judgment against him. Although Mr Vik did appear in court, the Bank argued that he had deliberately failed to disclose important documents and lied under oath. Accordingly, the Bank argued that Mr Vik should be held in contempt of court by way of a committal order.
To obtain a committal order, the Bank could have applied under either CPR 71.8 or CPR 81.4. The difference is that the former rule provides for a simple and streamlined committal procedure, while the latter is more rigorous, slow, and — as accepted by courts — possibly extra-territorial. The Bank filed an application under CPR 81.4, and the court granted a suspended committal order. The Bank then sought to serve the order on Mr Vik in Monaco.
High Court decision
The Judge at first instance, Teare J, carefully considered the multi-faceted arguments. Teare J concluded that permission should not be required to serve the committal order on Mr Vik, because the debtor was already subject to the incidental jurisdiction of the English courts to enforce CPR 71 order. A similar conclusion could be reached by relying on Article 24(5) of the Brussels Recast Regulation (which provides that in proceedings concerned with the enforcement of judgments, the courts of the member state shall have exclusive jurisdiction regardless of the domicile of the parties). However, if the Bank had needed permission to serve the committal order outside the jurisdiction, then his Lordship concluded that the Bank could not rely on the gateway set out in PD 6B 3.1(10) (which provides that a claim may be served out of the jurisdiction with the permission of the court where such claim is made to enforce a judgment or an arbitral award). Both parties appealed against this judgment.
Court of Appeal decision
The Court of Appeal, largely agreeing with Teare J, made five principal findings.
(1) The court found it ironic that Mr Vik argued that CPR 71.8 (specific ground), rather CPR 81.4 (generic ground) applied to the alleged breach of CPR 71.2, since CPR 81.4 offered greater protections to the alleged contemnor. The likely reason for this “counter-intuitive” step was that the latter provision was extra-territorial. The Court of Appeal confirmed that CPR 71.8 is not a mandatory lex specialis for committal applications relating to a breach of CPR 71.2, and that the Bank was perfectly entitled to rely on CPR 81.4.
(2) The Court of Appeal agreed with the findings of Teare J that the court’s power to commit contemnors to prison is derived from its inherent jurisdiction. The CPR rules only provide the technical steps to be followed when this common law power is to be exercised. It followed that it did not make much difference which rule to apply – either the broader CPR 81.4 or the narrower CPR 71.8. Thus, if the Bank had made the committal application under CPR 71.8, the application would have had an extra-territorial effect.
(3) Mr Vik sought to challenge Teare J’s finding that he should be deemed to be within the jurisdiction in the contempt of court proceedings, because they are incidental to the CPR 71.2 order in which he participated. Instead, he argued, such proceedings were distinguishably “new”, and would require permission to serve outside the jurisdiction. The Court of Appeal disagreed and confirmed that the committal order was incidental as the means to enforce the CPR 71.2 order. Therefore, in the light of the strong public interest in the enforcement of English court orders, it was not necessary for the Bank to obtain permission to serve the committal order outside the jurisdiction.
(4) Teare J observed that Article 24(5) of the Brussels Recast Regulation meant that that permission to serve Mr Vik outside of the jurisdiction was not required. Article 24(5) confers exclusive jurisdiction on the courts of the Member State in which the judgment was made and to be enforced by, regardless of the domicile of the parties. The Court of Appeal (in obiter) was generally supportive of this approach, opining that the committal application in the case at hand was likely to fall within Article 24(5) of the Brussels Recast Regulation. However, the careful and subtle wording of Article 24(5) implied that this conclusion might be subject to further consideration on a future occasion.
(5) Under CPR 6.36, a claimant may serve a claim form out of the jurisdiction with the permission of the court where the claim comes within one of the “gateways” contained in PD 6B. The relevant gateway in the Mr Vik’s case was to be found at PD 6B, para 3.1(1), as a claim made to enforce a judgment. Teare J was of the view that the Bank could not rely on this gateway to enforce the committal order. The Court of Appeal was reluctant to give a definitive answer on this point, even though “there may well be considerable force” in the Teare J’s approach. Thus, it remains unclear whether the CPR rules regulating service outside the jurisdiction would apply to the CPR 71 order and the committal order.
The importance of the judgment
This Court of Appeal’s judgment serves as an important reminder for parties who are involved in the enforcement of English judgment debts. Rather than giving a short answer to a narrow point of civil procedure, the judgment contains an extensive analysis of English and EU law. The judgment highlights the tension between important Rule of Law issues such as “enforcing court orders on the one hand” and “keeping within the jurisdictional limits of the Court, especially as individual liberty is at risk, on the other” (Court of Appeal judgment, at para. 1).
The judgment demonstrates the broad extra-territorial reach of the English courts. It also confirms the English court’s creditor-friendly reputation. The findings on the issues of principle may be relevant to applications to serve orders on defendants out of the jurisdiction in other proceedings, for instance worldwide freezing orders or cross-border anti-suit injunctions.
Nevertheless, the judgment demonstrates the need for clear guidance on the jurisdictional getaways to serve out of the jurisdiction for contempt of court. In giving judgment, Lord Justice Gross carefully suggested that the Rules Committee should consider implementing a specific rule permitting such service on an officer of a company, where the fact that he is out of the jurisdiction is no bar to the making of a committal application.
Another issue that seems subject to further clarification is whether a committal order or a provisional CPR 71 order are covered by the Brussels Recast Regulation. A definitive answer to this question becomes particularly intriguing in the light of Brexit.
Legal parentage of children born of a surrogate mother: what about the intended mother?
On October 5th, The Cour de Cassation, the highest court in France for private law matters, requested an advisory opinion of the ECtHR (Ass. plén. 5 octobre 2018, n°10-19053). It is the first time a Contracting State applies to the ECtHR for an advisory opinion on the basis of Protocol n° 16 which entered into force on August 1st, 2018. The request relates to the legal parentage of children born to a surrogate mother. More specifically, it concerns the intended mother’s legal relationship with the child.
The Mennesson case is again under the spotlight, after 18 years of judicial proceedings. Previous developments will be briefly recalled, before the Advisory opinion request is summarized.
Previous developments in the Mennesson case:
A French couple, Mr and Mrs Mennesson, went to California to conclude a surrogacy agreement. Thanks to the surrogate mother, twins were born en 2000. They were conceived with genetic material from the intended father and eggs from a friend of the couple. The Californian Supreme Court issued a judgment referring to the couple as genetic father and legal mother of the children. Birth certificates were issued and the couple asked for their transcription into the French civil status register.
French authorities refused the transcription, arguing that it would be contrary to public policy. Surrogate motherhood, in particular, is forbidden under article 16-7 of the Civil Code. Such agreements are then considered void and resulting foreign birth certificates establishing parentage are considered contrary to public policy (Cass. Civ. 1ère, 6 avril 2011, n°10-19053).
As a last resort, The Mennesson family brought a claim before the ECtHR. They claimed that the refusal to transcribe the birth certificate violated their right to respect for private and family life. While the Court considered that the parent’s right to family life was not infringed, it ruled that the refusal to transcribe the birth certificates violated the children’s right to identity and was not in their best interest. As a consequence, it ruled that the refusal to establish the legal parentage of the indented parents was a violation of the children’s right to private life, particularly so if the indented father was also the biological father.
After the ECtHR ruling: the French landscape
After the ECtHR ruling, the Cour de Cassation softened its position. In 2015, sitting in Assemblée plénière, it ruled that the mere fact that a child was born of a surrogate mother did not in itself justify the refusal to transcribe the birth certificate, as long as that certificate was neither unlawful nor forged, nor did it contain facts that did not correspond to reality (Ass. plén., 3 juillet 2015, n° 14-21323 et n°15-50002).
As a consequence, the Court only accepted the transcription of foreign birth certificate when the intended father is also the biological father. When it came to the other intended parent, the Cour de Cassation refused the transcription. By so doing, the Cour de Cassation reiterates its commitment to the Mater semper certa principle as the sole basis of its conception of motherhood. Meanwhile, in 2017, the Cour de Cassation signalled that the genetic father’s spouse could adopt the child if all the requirements for adoption were met and if it was in the best interest of the child (Cass. Civ. 1ère, 5 juillet, 2017, n°15-28597, n°16-16455, and n°16-16901 ; 16-50025 and the press release)
However, the Mennessons’ fight was not over yet. Although according to the latest decisions, it looked like both Mr and Mrs Mennesson could finally establish their kinship with the twins, they still had to overcome procedural obstacles. As the Cour de Cassation had refused the transcription in its 2011 judgment which had become final, the parents were barred from applying for it again. As pointed out by the ECtHR in the Foulon and Bouvet v. France case (21/07/2016, Application n°9063/14 and 10410/14), French authorities failed to provide an avenue for the parties involved in cases adjudicated before 2014 to have them re-examined in the light of the subsequent changes in the law. Thus, France was again held to be in violation of its obligations under the Convention. (See also Laborie v. France, 19/01/2017, Application n°44024/13).
In 2016, the legislator adopted a new procedure to allow for the review of final decisions in matter of personal status in cases where the ECtHR had ruled that a violation of the ECHR had occurred. The review is possible when it appears that the consequences of the violation of the Convention are serious and that the just satisfaction awarded on the basis of article 41 ECHR cannot put an end to the violation (see articles L.452-1 to L.452-6 of the Code de l’organisation judiciaire).
Current situation:
Taking advantage of this new procedure, the Mennesson family asked for a review of their situation. They claimed that the refusal to transcribe the birth certificates was contrary to the best interest of the children. They also argued that, as it obstructed the establishment of parentage, it amounted to a violation of article 8 ECHR. Moreover, they argued that the refusal to transcribe the birth certificates on the ground that the children were born of a surrogate mother was discriminatory and infringed article 14 ECHR.
Sitting again in Assemblée plénière, the Cour de Cassation summarized its previous case law. It concluded that while the issue of the transcription of the father biological parentage is settled, the answer is less certain regarding the intended mother. The Court wondered if its refusal to transcribe the birth certificate as far as the intended mother is concerned is consistent with the State margin of appreciation under article 8. It also wondered whether it should distinguish between cases where the child is conceived with the genetic material of the intended mother and cases where it is not. Finally, it raised the issue of whether its approach of allowing the intended mother to adopt her husband’s biological child was compatible with article 8 ECHR.
After pointing out the uncertain compatibility of its reasoning with ECtHR case law, the Court chose to request an advisory opinion from the ECtHR. Protocol 16 allows Contracting States to apply to the ECtHR for its advisory opinion “on questions of principles relating to the interpretation or application of the rights and freedom defined in the Convention or the protocols thereto” (Protocol 16 art.1).
Thus, the Cour de Cassation asked the ECtHR the two following questions:
- By refusing to transcribe into civil status registers the birth certificate of a child born abroad from a surrogate mother inasmuch as it refers to the intended mother as the “legal mother”, while the transcription has been accepted when the intended father is the biological father of the child, does a State Party exceed its margin of appreciation under article 8 ECHR? In this respect, is it necessary to distinguish between whether or not the child is conceived with the gametes of the intended mother?
- If the answer to one of the two preceding questions is in the affirmative, does the possibility for the intended mother to adopt her husband’s biological child, which constitutes a mean of establishing parentage open to her, comply with the requirements of article 8 of the Convention?
As the Cour de Cassation indicates on the press release accompanying the request of an advisory opinion, it seized the opportunity of initiating a judicial dialogue between national jurisdictions and the ECtHR. However, it looks more like a sign of caution on the part of the French court, in a particularly sensitive case. Depending on the answer it receives, the Cour de Cassation will adapt its case law.
Although Protocol n°16 does not refer to a specific deadline, the Explanatory report indicates that it would be appropriate for the ECtHR to give high priority to advisory opinion proceedings.
Thus, it looks like the Mennesson saga will be continued soon…
News
“Law in the Age of Modern Technologies”, 10 February 2023, University of Milan (hybrid)
The University of Milan, on behalf of the DIGinLaw consortium (consisting of partners: the Josip Juraj Strossmayer University of Osijek, the University of Aberdeen, and the University of Zagreb – University Computing Centre (SRCE)), is organising an international conference on Law in the Age of Modern Technologies, taking place in Milan on 10 February 2023.
Digitalization strongly affects society, science, and the transfer of knowledge. While taking advantage of modern technologies, the DIGinLaw Project aims to raise awareness of digital demands in higher education and research in law and fosters the creation of digital literacy and digital competence that is needed in the law labour market. The Project aims to create an open and inclusive society of legal knowledge and to open access to the scientific areas dealing with the effects of digitalization on law and legal education.
The Conference is the culmination of scientific research on the digitalization of legal education and the digitalization of law. It provides a venue for the presentation and discussion of scientific research focusing on such and related themes. The full program of the event is available here.
The conference will be held in a hybrid format. Participation is free of charge, but registration is required.
Yegiazaryan v. Smagin, Civil RICO, and the Enforcement of Foreign Awards in the United States
Thanks to Alberto Pomari, JD Candidate at the University of Pittsburgh School of Law, for his assistance with this post.
Two cases slated for Supreme Court’s 2024 term could boost the enforcement of foreign arbitral awards in the United States. On Friday January 13, 2023, the U.S. Supreme Court granted certiorari and consolidated the cases of Yegiazaryan v. Smagin and CMB Monaco v. Smagin. Both present the question of when an injury is foreign or domestic for purposes of RICO civil applicability. Beyond this statutory issue, however, the Supreme Court’s decision will have consequences for the enforcement of foreign arbitral awards too.
The Racketeer Influenced and Corrupt Organizations Act (“RICO”) enables private individuals injured by a racketeering violation to bring a civil suit and recover treble damages if he was “injured in his business or property.” In RJR Nabisco, Inc. v. European Cmty., the U.S. Supreme Court upheld the federal presumption against extraterritoriality to limit RICO’s private right of action to only those injuries that are “domestic” in their nature. However, no definition or test was provided to draw a bright line between domestic and foreign injuries.
In Yegiazaryan v. Smagin, the defendant (Yegiazaryan) is a Russian businessman living in California. The plaintiff (Smagin) commenced arbitration proceedings against him in London and was awarded $84 million. In 2014, Smagin successfully filed to recognize and enforce the award against Yegiazaryan in the U.S. district court where Yegiazaryan now resides. In 2020, Smagin filed a RICO action against Yegiazaryan alleging that he and various associates attempted to conceal $198 million from Smagin, which inevitably “injured in his business or property.” Specifically, Smagin alleged that his U.S. judgment confirming this prior foreign arbitral award against Yegiazaryan is intangible property located in the United States, thus making any injury thereto eligible for a RICO civil claim even though he lives abroad.
As to the location of intangible property for purposes of RICO injuries, circuits have split. The Seventh Circuit adopted the residency test, according to which an injury to intangible property must occur in the place where the plaintiff has its residence. Accordingly, a foreign-resident plaintiff like Smagin always suffers foreign injuries to intangible property and cannot recover under RICO. The Third Circuit rejected the residency test in favor of a holistic, six-factor test, with particular emphasis on where the plaintiff suffers the effect of the injurious activity. The Ninth Circuit in the Smagin cases adopted a totality-of-the-circumstances test similar to the Third Circuit’s one, yet with a particular emphasis on the defendant’s conduct. Indeed, the court concluded that Smagin had pleaded a domestic injury because much of the defendant’s alleged misconduct took place in California and the U.S. judgment confirming the foreign award could be executed against the defendant only in California.
The case also has implications for the enforcement of foreign judgments and arbitral awards in the United States. If a U.S. judgment recognizing a foreign judgment or confirming a foreign arbitral award are considered property in the United States, then RICO violations committed in the process of trying to avoid enforcement of the U.S. judgment may give rise to civil liability.
Ferrari, Rosenfeld & Kotuby, Recognition and Enforcement of Foreign Arbitral Awards: A Concise Guide to the New York Convention’s Uniform Regime
With my co-authors Professor Franco Ferrari and Friedrich Rosenfeld, I am pleased to announce the publication of my newest work, “Recognition and Enforcement of Foreign Arbitral Awards: A Concise Guide to the New York Convention’s Uniform Regime.” It is available for order here.
This incisive book is an indispensable guide to the New York Convention’s uniform regime on recognition and enforcement of foreign arbitral awards. Framing the Convention as a uniform law instrument, the book analyses case law from major arbitration jurisdictions to explain its scope of application, the duty to recognize arbitral agreements and awards as well as their limitations, and the procedure and formal requirements for enforcing arbitral awards.
Combining insight from arbitration practice with perspectives from private international law, the book underlines the importance of the Convention’s foundation in a treaty of international law, arguing that this entails a requirement to interpret the key concepts it sets forth based on international law rules of interpretation. However, it also demonstrates where municipal laws are relevant and discusses the private international law principles through which these instances can be identified.
Addressing one of the core treaties of international arbitration, this will be crucial reading for legal practitioners and judges working in the field. It will also prove valuable to scholars and students of commercial and private international law, particularly those focused on cross-border disputes and arbitration.