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Israeli Requirement of Good Faith Conduct in Enforcement of Foreign Judgments
Written by Haggai Carmon, Carmon & Carmon, an international law firm with offices in Tel Aviv and a front office in New York.
The requirement of parties’ good faith conduct is fundamental in Israeli law and jurisprudence. However, only recently the Supreme Court has applied that doctrine to enforcement of foreign judgments as thus far, only lower courts have followed that doctrine.
In Civil Appeal X [Name removed upon request of Claimant, General Editors of CoL, 26 October 2022] v. Bankruptcy Office Geneva, the Supreme Court (per Esther Hayut, Chief Justice,) on August 27, 2019, unanimously denied an appeal over a District Court’s earlier finding that procedural bad faith is independently sufficient grounds to rule against a party whose conduct during proceedings to enforce a Swiss judgment, was so egregious that it warranted such extreme measure.
“In the course of the proceedings in the case, the appellant demonstrated contempt for the court’s proceedings, the counterclaimant’s rights and the duties imposed on him under the Rules of Civil Procedure and the judicial decisions given in his case. In doing so, the appellant violated his duty to act fairly and reasonably to enable proper judicial proceeding. In light of all the foregoing, there is no escaping of the conclusion that the appeal before us is one of those rare instances where the appellant’s bad faith conduct, who has taken practical measures to thwart the enforcement of the judgment rises to an abuse of court proceedings. Under these exceptional circumstances, in my opinion, it is justified to use the authority given to us and order the appeal be denied in limine.”
Although lack of good faith or unacceptable conduct do not, pursuant to the Israeli Foreign Judgments Enforcement Law, provide independent cause to refuse recognition or enforcement of a foreign judgment, “however certainly this carries weight in the court’s considerations together with all other conditions”[1] for such recognition or enforcement. [Judge Keret-Meir’s ruling in Bankruptcy File (T.A.) 2193/08 First International Bank of Israel Ltd. v. Gold & Honey (1995) L.P. et al.
Earlier, the Jerusalem District Court’s judgment in D.C.C. (Jm.) 3137/04 Ahava (USA) Inc. v. J.W.G. Ltd (Ahava)[2]concerned whether a U.S. judgment precluding an Israeli company from marketing Israeli products in the United States through a website was a foreign judgment enforceable pursuant to the Enforcement Law. The court held that “the filter of ‘public policy’ allows us to uproot unjust outcomes that may arise from the application of a foreign law,”[3] and addressed at length the essence of public policy:[4]
What is public policy? It is a broad term, “flexible and not entirely definable” …. Some will emphasize the local nature of public policy… but it seems that the basic requirements of law, including good faith, equity, and human rights, do not carry national identities, nor do they evaporate at international borders. Recognition of this approach grew with the erosion of “the archaic definition of the sovereignty doctrine, and as territorial sovereignty boundaries between legal systems blurred” (I. Canor, Private International Law and the Decay of Sovereignty in the Globalization Age: The Application of Foreign Public Law on International Contracts… p. 491). This process expanded the definition of public policy and imparted it with a quality of tikkun olam (bettering society) in its literal sense, such that appropriate applications are made from the public and private law of foreign legal systems to a domestic forum. In this context, we can even identify certain international rules which obligate even the parties of a purely domestic contract (Canor, id. 513). The inclination to apply rules of global public policy will increase as the link between the contract and local law weakens. A component of this global public policy is the very need to enforce foreign judgments.
The District Court held essentially that the protection of intellectual property does not in and of itself violate public policy in Israel, as this includes as well the principle that prohibits taking another’s work or basing one’s work on it, and this principle also applies to trademark law and other protections related to the appearance of the product. In these circumstances, the court ruled that the prohibition placed by the U.S. court, on the basis of internal U.S. trademark law, did not conflict with public policy in Israel.
In D.C.C. (T.A.) 22673-07-10 Nader & Sons LLC et al v. Homayon Antony Namvar (Nader),[5] the District Court rejected arguments that a summary judgment by the Supreme Court of the state of New York was unenforceable in Israel as having been rendered in unjust and improper proceedings, so that it conflicted with the public policy of Israel. The respondent argued that the choice of such proceedings in a suit of such broad scope constituted lack of good faith and an attempt to evade thorough investigation of the claims, as well as that significant details and facts withheld from the New York court might have affected the outcome of the proceedings.
The court dismissed these arguments:[6]
As stated, external public policy, in the sense of Article 3(3) of the Foreign Judgments Enforcement Law, refers to conformance with the basic principles of Israeli law, and the argument of the respondent regarding the flaws that, in his opinion, characterize the proceedings in New York, as decisive as they may be, do not testify to any conflict with these basic principles (regardless of the validity of these claims) and are not directly connected to the content of the judgment.
In Justice Procaccia commented in C.A. 5793/05 The Great Synagogue Shone Halachot Association v. Netanya Municipality:[7]
It is true that the Arbitration Law, 5728-1968 does not set a binding deadline on the prevailing party in an arbitration award to file a motion for its confirmation.… Nevertheless, this does not signify that there exists no limit whatsoever for filing a motion for the confirmation of an arbitration award and that the procedural rights of the holder of such an award are everlasting. A party who prevailed in arbitration is required by procedural good faith to submit the award for confirmation within a reasonable time period, given the special circumstances of the relevant incident. A party who for years ignored the award, did not act on it, and appeared to no longer have any intention of enforcing it, is liable to face a procedural estoppel claim (Ottolenghi, Arbitration: Law and Procedure, 4th ed., 2005, 914-916). Like any other complaint filed with a court, a motion for confirmation of an arbitration award is also subject to the rules of procedural good faith and reasonability regarding the timing, form, and content of the filing. The civil rules of laches apply to the timing of filing, as they apply to civil suits in the framework of statutory periods of limitations.
The question of whether this judgment, which deals with a 30-year delay in filing a motion for the confirmation of an Israeli arbitration award, will also apply to an arbitral award issued abroad under the New York Convention, remains open and has not been addressed. Because the New York Convention and the regulations for its execution make no mention of laches, it is unclear if the application of the Convention should be restricted and subjected to those principles, thus bypassing the absence of deadline for filing for confirmation under the Convention. In general, foreign arbitration takes place between commercial entities or countries, and at times, the difficulty in enforcing arbitration awards for various reasons is universal. There are many cases in which enforcement in one country encounters protracted difficulties, and then, upon locating debtor’s assets in another country, the award holder applies for enforcement of the award in that country. This may be many years after the award was issued. Blocking the procedural path of the holder through laches is unjust, at least under such circumstances, and it appears that the New York Convention’s silence in this context is not for naught. Presumably for the same reason, the Convention does not list laches among the grounds for refusal to recognize or enforce an award, nor does it impose a time limit for filing a motion for the confirmation of an arbitration award under the Convention.
For more informaiton, see Haggai, Foreign Judgements in Israel — Recognition and Enforcement, published in Hebrew by the Israeli Bar Association. Springer published an English translation.
[1] See Judge Keret-Meir’s ruling in Bankruptcy File (T.A.) 2193/08 First International Bank of Israel Ltd. v. Gold & Honey (1995) L.P. et al.
Arbitration in Smart Contracts – Code Naïve v Code-Savvy
Written by Hetal Doshi & Sankalp Udgata
Combining law, computer science and finance in unprecedented ways, “Smart Contract” is the latest addition to the unending list of Internet of Things. Unlike a traditional contract, which only lays out the terms of agreement for subsequent execution, a smart contract autonomously executes some or all of the terms of the agreement as it are usually based on Block-chain. It has the potential to reshape our understanding of contract and technology law. The shift from the code naïve to the code-savvy, has surfaced problems in dispute resolution beyond the existing legal perception which this article aims at analysing and resolving.
Working of the Smart Contract
By removing the need for direct human involvement, a smart contract is deployed on to a distributed Trustless Public Ledger. However, in order for the smart contract to work efficiently, exactly specified conditions for the execution of the contract are necessary, otherwise, it will be impossible to automate the process. Also, smart contracts receive information from outside block-chain platform through the use of Oracle programs that mediate with external databases and are entered into the block-chain technology.
A Hornet’s Nest
Smart contract come with their own sets of limitation and drawbacks. Following are few of the many problems, inevitable in resolving disputes over smart contracts. Interestingly however, although these problems may be encountered by an Arbitral Tribunal, arbitration (with requisite checks) is the most efficient mechanism to deal with such problems.
Enforceability Quandary
- A) Formal Enforcement
A very fundamental and critical impediment, Courts and Tribunals are consistently skeptical in enforcing such unconventional contracts. Although the use of automated communication or system to conclude contracts or make it binding on the parties has been long accepted by the business community, a Tribunal is often troubled with disparity in validity of smart contracts over conflicting jurisdictions.
Secondly, Article 2.1.1 of UNIDROIT (PICC) undoubtedly includes automated contracting. However, problems may arise in relation to codes meeting the in writing requirement of UNCITRAL and the New York Convention.
- B) Substantive Enforcement
The artificial nature of contracting deprives actions of the human touch. Complexities arise when there a subsequent smart contracts. For example, if there is a supplementary smart contract, consent for which is sought from the parent contract. Since it is the codes in the parent smart contract that initiate the subsequent contracts and transactions and the performance, can consent be said to have been given by a mere code and is such consent valid and enforceable against such code.
A Hitch in the Seat
Given the distributed nature of block-chain i.e. a ledger which is spread across the network among all peers in the network and the operation of Smart Contracts, it is important to agree a seat for the arbitration to avoid satellite disputes about the applicable seat and/or procedural law.
Problems in Execution- Irreversibility and Irremediability
Since they are theorized to be complete contract by focusing on ex ante rather than ex post, they eliminate the act of remediation, by admitting no possibility of breach. However, the DAO case was incomplete as it failed to anticipate the possibility that coding errors could result in unexpected wealth transfers. In addition, smart contract may deal with commercial scenarios so complex and unpredictable that the code will fail to embed all possible answers to all possible questions.
Further, if the smart contract contains a mistake, security flaw, or does not accurately capture the parties’ intent, the smart contracts will be difficult to modify or change, due to a block-chain’s resilient and tamper resistant nature. The program will continue to blindly execute its code, regardless of the intent of the parties or changed circumstances. When the transaction is more complex, involving multiple players (humans or machines), multi-component assets and diverse jurisdictions, computer code smartness may easily turn into plain dumbness.
Needless to mention, a Tribunal or a Court will encounter several problems in executing a decision vis-à-vis a smart contract such as:
- Lack of in-rem jurisdiction- Reversing a transaction on a decentralised ledger with several contributors that may not even be parties before the Tribunal.
- Excusing future performance or specific performance- Since they operate automatically and are not flexible.
The Truth about Consent
Contracting also has issues such as duress, fraud, forgery, lack of legal capacity and unconscionability which require human judgement and cannot be scrutinised by a smart contract which simply functions on a series of binary inputs. Moreover, though it provides guarantee of execution to certain extent, it cannot verify whether the contracting parties have the legal capacity to get into legal relationships or business capacity to make an agreement.
It also does not care whether there truly exists consensus as idem between contractual parties, there is no possibility for the contract to be void or voidable. However, although codes are not natural language that might be vague or ambiguous, leaving space for interpretation. For a consensual dispute resolution mechanism like arbitration, the indispensable requirement of free consent and the evaluation of intention of parties cannot be comprehended by a smart contract that stands deprived of reason and morale.
This may be an issue in circumstances where the Smart Contract is entered into by a computer, is in code and/or and does not create legally binding contractual obligations under the applicable law. The solution to this can be that the Arbitration clause can become part of the Ricardian contract which like any other similar contract is a hybrid form of smart contract which is partly in human readable form.
The Catch in Imputing Liability in a Dispute
The code smart is sadly not insusceptible to security vulnerabilities and exploits like forking, which could cause a smart contract to operate unexpectedly and invalidate transactions, or worse, enable a third-party to siphon digital currency or other assets from contracting parties accounts. Scary, isn’t it?
However, since a Tribunal is only an in personam jurisdiction, it can barely inspect or issue directions against such third parties. Such vulnerabilities might also jeopardise the secrecy that arbitration aims to achieve.
It is not unjust to say that such a contract is dangerous enough to attract strict liability in case of any harm caused due to an error in coding. That, juxtaposed with the existence of foreseeable risk in execution of smart contracts poses a potentially huge hurdle to the exponentially growing use of block-chain technology.
Furthermore, disputes, to summarize, may arise:
- between the parties of a smart contract, or
- between two conflicting smart contracts.
Since the code smart is a form of artificial intelligence replacing human involvement, it is the second set of disputes where a Tribunal or Court will be troubled with the attachment of liability.
Cutting the Gordian knot – checks and suggestions
Given our shift from not so smart contracts, we must keep an eye for the following checklist while dealing with dispute resolution in smart contracts.
Formality requirements
Parties should therefore ensure the arbitration agreement meets any formality requirements under the governing law of the arbitration agreement and Smart Contract, the law of the seat and wherever the award is likely to be enforced.
Choice of seat
Parties should base check whether in their chosen seat,
- Domestic law does not render a Smart Contract illegal or unenforceable
- The disputes likely to arise are arbitrable
- The codified arbitration agreement in question will be upheld and enforced by the supervisory courts.
Tribunal with specialist technical knowledge
Some Smart Contract disputes will be fairly vanilla contract law disputes, but others will be of a highly technical nature, for example, where the code does not operate as expected. Pursuant to the novel nature of the smart contract the importance of having a tribunal familiar with the technology against the importance of having the dispute decided by experienced arbitrators becomes crucial.
Severable arbitration clause
Although the doctrine of separability protects the validity of an arbitration clause, the dispute resolution clause should always be kept independent of any smart codes.
Localised Termination Clause
Given the automated and perpetual nature of smart contracts, there should be an option to terminate the contract. Although non-amenability is an essential feature of a smart contract, the option to cede away from the distributed ledger (terminate the contract) should be sole switch available the each of the contributors. The code may prescribe conditions for pulling the plug, i.e. create joint switches. Therefore, a party shall not be able to terminate its obligations without assent from any of its debtor on the ledger. As a result, once the debt is settled either by payment of dues or by an award of a Tribunal, the parties may pull the plug.
Power of Pardon
Each party to a smart contract should be at liberty to excuse payment by a debtor in under a direction by a tribunal or a Court in case of a force majeure or any other scenario where performance is liable to be excused.
This list, although non-exhaustive, will certainly sustain best practices in arbitration until the next great invention in the sphere of technology and business will live to fight another day.
Three Tickets, One Seat – A Methodological Anatomy Of The Indian Practice Of Determination Of Seat Of Arbitration
Written by Sankalp Udgata & Hetal Doshi, National Law University (NUSRL), Ranchi
The choice of arbitration as the default system of resolution of commercial disputes, which was initially restricted to the foreign parties is now being reciprocated by even the Indian parties, thus setting the stage for India being a global hub for commercial arbitration. Surprising as it is, commercial agreements worth billions have but a succinct recording of a seat of arbitration. Sloppy as they are, these poorly drafted dispute resolution clauses open the doors to a tsunami of litigation which simply intervene and delay the entire resolution process thereby defeating the very virtue arbitrations proclaim to instil.
Since arbitrations are out-of-court proceedings, they do not by themselves command the authority of the sovereign. Therefore, every arbitration must be guided and overseen by a Court that has supervisory jurisdiction over it. This Court is the Juridical Seat of the arbitration as determined by the parties and the most important concept that the territorial situs of the Seat denotes. In absence of a positive determination by the parties in the arbitration agreement, the Tribunal or a Court whose supervisory jurisdiction is sought must first determine the Seat and consequently whether it has the jurisdiction, as the Juridical Seat, to hear the matter.
However, arbitration in India has been a Hornet’s nest if not a Pandora’s box to say the least. Admittedly, the vast majority of problems associated with international commercial arbitrations taking place in India revolve around the uncertainty in the Courts’ approach to determination of the seat when the parties have failed to choose one. The Indian Courts, much rather the Supreme Court of India (“SCI”) has shown a consistent disparity in applying any particular method for determination of the Seat in such situations. This article aims to reconcile the various tests that the Supreme Court of India has applied over the years and attempts to plot their reasoning into three distinct methods for determination of a seat when the arbitration agreement fails to explicitly document one. This article also discusses the various factors relevant in each method with examples and can therefore serve as a catalogue for practitioners as well as valuable literature to the academia.
I. Seat <=> Venue Method
Representing the most widely accepted view, this method is applicable when parties have at least chosen a particular geographic location as the venue for the arbitration to take place without specifically designating a Seat. Finally, setting the clock straight and reconciling to the globally accepted rules, the SCI in Soma JV case held that the venue of arbitration shall be the default Seat in absence of any contrary indica. (¶63)
For it to be the default Seat, the venue must exist in absence of any of the following factors that, over the years, the Court has found to be contrary indications to venue being the Seat.
- Designation of an alternate place as Seat
When there is an express designation of the arbitration venue, combined with a supranational body of rules governing the arbitration the venue shall be the seat unless the parties have designated any alternative place as the seat. (Shashoua, ¶34,42)
- Existence of a national set of lex arbitri or proper law
Despite having designated London as the venue of arbitration, the SCI held Bombay to be the Seat in the 2014 Enercon Case. In making this determination, the Court was heavily swayed by the fact that the laws specifically chosen by the parties in the contract to apply to different aspects of the dispute were Indian laws.
- Existence of an alternate place of making of award
Since it is necessary for the arbitral award to be made and signed at the place of arbitration as determined by Section 20 of the 1996 Arbitration Act (“Act”), an award made at one of the two designated venues resulted in the venue where the award was not signed was not the Seat in the Soma JV case.
- Venue of an arbitration proceeding
The Court has on several occasions differentiated between the venue of arbitration proceedings from the venue of an arbitration proceeding for the later cannot be construed as anything but a convenient location for the conduction of a meeting. (2012 Enercon case)
II. Inverse Closest & Most Real Connection Method (“Inverse-CMRC”)
The globally acclaimed CMRC test is used to determine either lex arbitri or the proper law governing the arbitration agreement when the place of arbitration has been decided as the same would be the law most closely connected to the choice of place. While the English Courts in Peruvian Insurance Case applied the law of the place of arbitration as the lex arbitri, in the Sulamerica Case, applied it to the proper law governing the arbitration agreement as they had the most real connection to the place chosen by the parties. India has also used the test in a peculiar way to apply the lex arbitri to the whole of the agreement. This proximity is essentially based on the legal localisation of the place.
However, India has been applying the above test somewhat inversely based on the geographic localisation of the law instead. Bemusing everyone, the SCI in Enercon Case applied the Inverse CMRC Method to determine the Seat to be India as it was most closely and intimately connected to the lex arbitri and the proper law of the contract, both of which were Indian. The Indian model seems to presume that the parties could not have contemplated a delocalised lex arbitri or proper law. Be that as it may, where a supranational set lex arbitri or proper law exists, the first method will prevail as these laws will not be sufficient contrary indications.
III. Cause of Action Method
This is an unsuitable method of determination of seat. In this case, if the arbitration agreement does not reveal a Seat then the Courts of the place where the cause of action arose will be considered as the Juridical Seat of the arbitration. This is derived from the definition of ‘Court’ under Section 2(1)(e) of the Act which also includes the Court that would have jurisdiction over the question if it formed the subject matter of a suit.
Understanding this to mean that the legislature has intended to give jurisdiction to both the Court of arbitration and the Court having territorial jurisdiction over the place where the cause of action arose, concurrently, the SCI has caused tremendous controversy by in Paragraph 96 of BALCO judgment. However, when read wholly and not in isolation, BALCO judgment very distinctly states that if concurrent jurisdiction were to be the order of the day, despite the seat having been located and specifically chosen by the parties, party autonomy would suffer and therefore Courts were intended to exercise supervisory jurisdiction to the exclusion of other Courts as provided under Section 42. (Soma JV case, ¶51)
Therefore, since the application referred to under Section 42 can only be legitimately made to the Court of the Seat, this method is only useful where seat could not be determined by any of the above methods maybe owing to lack of any territorial nexus.
Conclusion
The contradictory judgments of the English and Indian Courts over the determination of Seat in the Enercon case caused a delay of two years and has painted a Medusa of how the incongruous views of Courts across jurisdictions terrorise the development of international commercial arbitration. Therefore, arbitrations anchored in India or involving Indian parties must be planned in a manner eliding with the recent set of “pro-arbitration” trends in determination of Seat.
Although there is no specific order of precedence for application of these methods, their very nature and the manner of their application till date suggest that the Seat-Venue method takes precedence over the other two owing to its strong territorial nexus. Ideally thus, upon failure of this method owing to the presence of a sufficient contrary indica, should the Inverse-CMRC method be applied followed by the Cause of Action method as the last resort in this three-fold method for determination of Seat.
News
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.
[Out Now!] New Open Access Book on Corruption and Investment Arbitration: Nobumichi Teramura, Luke Nottage and Bruno Jetin (eds), Corruption and Illegality in Asian Investment Arbitration (Springer, 2024)
Nobumichi TERAMURA (Assistant Professor, Universiti Brunei Darussalam; Affiliate, Centre for Asian and Pacific Law in the University of Sydney), Luke Nottage (Professor of Comparative and Transnational Business Law, Sydney Law School) and Bruno Jetin (Associate Professor of Economics, Universiti Brunei Darussalam) published an edited volume entitled “Corruption and Illegality in Asian Investment Arbitration” from Springer on 20 April 2024. The book is an open access title, so it is freely available to any states and organisations, including less well-resourced institutions in transitioning economies. Corrupt behaviour by foreign investors, like bribery to local government officials, faces wide condemnation in any society. Nevertheless, there remains a paucity of research appraising the consequences of corruption and illegality affecting international investment in Asia, especially investment arbitration involving East and South Asian jurisdictions. This book intends to fill the gap from an interdisciplinary (legal-economic) perspective.
The volume’s description reads as follows:
This open access book explores Asian approaches towards investment arbitration—a transnational procedure to resolve disputes between a foreign investor and a host state—setting it in the wider political economy and within domestic law contexts. It considers the extent to which significant states in Asia are, or could become, “rule makers” rather than “rule takers” regarding corruption and serious illegality in investor-state arbitration. Corruption and illegality in international investment are widely condemned in any society, but there remains a lack of consensus on the consequences, especially in investment arbitration. A core issue addressed is whether a foreign investor violating a host state’s law should be awarded protection of its investment, as per its contract with the host state and/or the applicable investment or trade agreement between the home state and the host state. Some suggest such protection would be unnecessary as the investor committed a crime in the host state, while others attempt to establish an equilibrium between the investor and the host state. Others claim to protect investment, invoking the sanctity of promises made. The book starts with a deep dive into economic and legal issues in corruption and investment arbitration and then explores the situation and issues in major countries in the region in detail. It is a useful reference point for lawyers, economists, investors, and government officials who are seeking comprehensive and up-to-date information on anti-bribery rules in Asian investment treaties. It is of particular interest to students and researchers in economics, finance, and law, who are undertaking new research relating to the multifaceted impacts of corruption.
The book’s table of contents is as follows:
Chapter 1 – “Bribery and Other Serious Investor Misconduct in Asian International Arbitration” by Nobumichi Teramura, Luke Nottage and Bruno Jetin;
Chapter 2 – “Does Corruption Hinder Foreign Direct Investment and Growth in Asia and Beyond? The Grabbing Versus the Helping Hand Revisited” by Ahmed M Khalid (Professor of Economics, Universiti Brunei Darussalam);
Chapter 3 – “The Effect of Corruption on Foreign Direct Investment at the Regional Level: A Positive or Negative Relationship?” By Bruno Jetin, Jamel Saadaoui (Senior Lecturer of Economics, The University of Strasbourg), Haingo Ratiarison (The University of Strasbourg);
Chapter 4 – “Anti-Corruption Laws and Investment Treaty Arbitration: An Asian Perspective” by Anselmo Reyes (International Judge, Singapore International Commercial Court) and Till Haechler (Associate, Lenz & Staehelin);
Chapter 5 – “Multi-Tiered International Anti-Corruption Cooperation in Asia: A Review of Treaties and Prospects” by Yueming Yan (Assistant Professor, Chinese University of Hong Kong) and Tianyu Liu (ADR Case Manager, Hong Kong International Arbitration Centre);
Chapter 6 – “Corruption in International Investment Arbitration” by Michael Hwang SC (Arbitrator, Michael Hwang Chambers) and Aloysius Chang (Michael Hwang Chambers);
Chapter 7 – “Rebalancing Asymmetries Between Host States and Investors in Asian Investor–State Dispute Settlement: An Exception for Systemic Corruption” by Martin Jarrett (Senior Research Fellow, Max Planck Institute for Comparative Public Law and International Law);
Chapter 8 – “Foreign Investment, Investment Treaties and Corruption in China and Hong Kong” by Vivienne Bath (Professor of Chinese Law, Sydney Law School) and Tianqi Gu (Sydney Law School);
Chapter 9 – “Corruption and Investment Treaty Arbitration in India” by Prabhash Ranjan (Professor and Vice Dean, Jindal Global Law School);
Chapter 10 – “Corruption and Illegality in Asian Investment Disputes: Indonesia” by Simon Butt (Professor of Indonesian Law, Sydney Law School), Antony Crockett (Partner, Herbert Smith Freehills Hong Kong) and Tim Lindsey (Malcolm Smith Chair of Asian Law and Redmond Barry Distinguished Professor, Melbourne Law School);
Chapter 11 – “Foreign Investment, Treaties, Arbitration and Corruption: Comparing Japan” by Luke Nottage and Nobumichi Teramura;
Chapter 12 – “Corruption and Investment Arbitration in the Lao People’s Democratic Republic: Corruptio Incognito” by Romesh Weeramantry (Special Counsel, Clifford Chance Perth) and Uma Sharma (Associate, Jones Day Singapore);
Chapter 13 – “Corruption and Illegality in Asian Investment Arbitration: The Philippines” by Thomas Elliot A Mondez (Faculty Member, De La Salle University, Philippines) and Jocelyn P Cruz (Associate Professor, De La Salle University, Philippines);
Chapter 14 – “Investment Arbitration, Corruption and Illegality: South Korea” by Joongi Kim (Professor Yonsei Law School);
Chapter 15 – “Foreign Investment, Corruption, Investment Treaties and Arbitration in Thailand” by Sirilaksana Khoman (Professor, Thammasat University, Thailand), Luke Nottage and Sakda Thanitcul (Professor, Chulalongkorn University); and
Chapter 16 – “Towards a More Harmonised Asian Approach to Corruption and Illegality in Investment Arbitration” by Nobumichi Teramura, Luke Nottage and Bruno Jetin.