Views
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.
‘Force majeure certificates’ issued by the Russian Chamber of Commerce and Industry
The Russian Chamber of Commerce and Industry is issuing ‘force majeure certificates’, like some of their homologues in other countries, as discussed earlier in this blog. Although this practice has existed in Russia since 1993, the number of requests for the certificates has recently increased. The requests come not only from Russian companies but also from foreign entities. While the increase is understandable in these times of the coronavirus pandemic, under Russian law, the ‘force majeure certificate’ can (only) form a part of evidence in possible future disputes, as its impact on the outcome of the dispute is ultimately defined by the (Russian or foreign) courts or arbitration tribunals.
The Russian Chamber of Commerce and Industry (CCI) is issuing ‘force majeure certificates’, like some of their homologues in other countries. Although this practice exists in Russia since 1993, the CCI has recently noticed an increase in the number of requests for the certificates, due to the coronavirus pandemic. The requests come not only from Russian companies but also from foreign entities. What could be the practical value of the certificate in a contractual dispute relating to the consequences of the pandemic?
The legal basis for the CCI’s competence to issue the ‘force majeure certificates’ is laid down in the law ‘On the chambers of commerce and industry in the Russian Federation’ of 7 July 1993. Article 1 of the law defines the CCI as a non-state non-governmental organisation created to foster business and international trade. Along with other competences, the CCI may act as an ‘independent expert’ (art. 12) and may provide information services (art. 2) in matters relating to international trade. One of the services is the issuing of ‘force majeure certificates’. The Rules for issuing the certificates are defined by the CCI’s governing council. These Rules entrust the CCI’s legal department with assessing requests and advising whether the certificate should be issued. The advice is given on the basis of the documents that a party submits to substantiate their request, following the Rules.
Notably, the list of documents includes (a copy of) the contract, ‘which contains a clause on force majeure’ (point 3.3.2 of the Rules). This requirement is not accidental; it has to do with the non-mandatory character of the legal provision on force majeure. Article 401(3) of the Russian Civil Code provides for exoneration of liability for non-performance of a contractual obligation, if the party proves that the non-performance was due to the force majeure. This provision applies by default, if ‘the law or the contract does not provide otherwise’ (art. 401(3)). The parties may provide otherwise by including a clause about unforeseen circumstances, hardship, frustration, force majeure, or similar circumstances in the contract. This is, at least, the way Russian courts have applied art. 401(3) up to the present time. The Russian CCI does not appear to deviate from this approach. More than 95% of the requests submitted to the Russian CCI for ‘force majeure certificates’ have so far been rejected, according to the head of the Russian CCI (even though some decrees deliberately label the COVID-19 pandemic ‘force majeure’ as, for example, the Decree of 14 March 2020 does, this decree is adopted by the municipality of Moscow to prevent the spread of the virus by various measures of social distancing).
Thus, the legal basis of the CCI’s competence to issue a ‘force majeure certificate’ implies that the certificate is the result of a service provided by a non-state non-governmental organisation. The application of Article 401(3) implies the need to interpret the contract, more specifically, the provision on force majeure it possibly includes. If the parties disagree on the interpretation, a dispute may arise. The competence to resolve the dispute lies with the courts or arbitration tribunals. In this way, the ICC’s decision (taken upon the advice of the CCI’s legal department) to confirm by issuing a certificate that a particular event represents a force majeure in the context of the execution of a specific contract can have persuasive authority in the context of the application of Art. 401 (3). However, it remains the competence of the courts or arbitration tribunals to apply art. 401(3) to the possible dispute and to establish the ultimate impact of the relevant events on the outcome of the dispute. Under Russian law, one would treat the ‘force majeure certificates’ issued by the CCI (and possibly a refusal to issue the certificate) as a part of evidence in possible future disputes. A (Russian or foreign) court or arbitration tribunal considering this evidence is free to make a different conclusion than that of the Russian CCI or may consider other evidence.
Child abduction in times of corona
By Nadia Rusinova
Currently large increases in COVID-19 cases and deaths continue to be reported from the EU/EEA countries and the UK. In addition, in recent weeks, the European all-cause mortality monitoring system showed increases above the expected rate in Belgium, France, Italy, Malta, Spain, Switzerland and the United Kingdom.
It is not unreasonable to predict that COVID-19 will be used increasingly as a justification in law for issuing non-return order by the Court in international child abduction proceedings, return being seen as a “grave risk” for the child and raised as an assertion under Article 13(b) of the Hague Convention.
What would be the correct response to these challenging circumstances, when the best interest of the child in child abduction proceedings calls for restoration of status quo ante under the Hague convention on the Civil Aspects of International Child Abduction (hereinafter: the Convention)? This post will focus on the recent judgment [2020] EWHC 834 (Fam), issued on 31 March 2020 by the High Court of England and Wales (Family Division) seen in the light of the ECtHR case law on the child abduction, providing brief analysis and suggesting answer to the question if the return of the child to the state of its habitual residence in the outbreak of COVID-19 can constitute grave risk for the child under Article 13(b) of the Convention, and how the practitioners and the Court should approach these assertions in the present pandemic situation.
The facts of Re PT [2020] EWHC 834 (Fam)
PT (the abducted child) and both of her parents are all Spanish nationals. PT was born in 2008 and had lived all of her life in Spain, until she was brought to England by her mother, HH, in February 2020. She is the only child of the parents’ relationship. They separated in 2009. Following the parents’ separation, legal proceedings were brought in Spain by the mother concerning PT’s welfare. A judgment was issued in these proceedings by the Spanish Courts on 25 May 2012, providing for the mother to have custody and for parental responsibility for the child to be shared by both parties. The order provided for the father to have contact with PT on alternate weekends from after school on Friday until Sunday evening. In addition, she was to spend half of each school holiday with each parent. The order also required that the parents should inform each other of any change in address thirty days in advance.
On or about 13 February 2020, the mother travelled to England with PT. The mother’s partner (with whom she is expecting a child the following month) lives in the South East of England, and they have moved in with him. The evidence on behalf of the father is that the child was removed from Spain by the mother without his knowledge or consent.
The father asked the mother to return PT to Spain, but she refused to do so. The father travelled to the UK and met with the mother and PT at a shopping centre. However, the mother again refused to permit the child to return to Spain. She did however permit PT (and S) to spend a night with the father at his hotel in England.
The case first came before the Court on 10 March 2020 on a “without notice” basis. At that hearing the mother attended in person, and indicated that she would be seeking to defend the application on the basis of (1) the father’s consent and / or acquiescence and (2) Article 13(b) of the Hague convention – claiming existence of a grave risk that a return would expose the child to physical or psychological harm or otherwise place the child in an intolerable situation.
On that occasion PT was, as directed by the judge, present in the Court vicinity to be interviewed by the CAFCASS (Children and Family Court Advisory and Support Service) Officer. She told CAFCASS that she had not wanted to come to England, and that she wanted to be with her father, although she did not want to be separated from her mother either. PT’s clear wish was that she wanted to return to Spain with her father rather than stay in England.
The judgment
The Court is entirely satisfied on the evidence that PT is habitually resident in Spain as she had lived there all of her life until she was recently brought to the UK. In this case the Court ruled that PT has been wrongfully removed from Spain within the terms of Article 3 of the Convention and that none of the Article 13 defences have been made out. Therefore, return order for the summary return of PT to Spain has been made.
Comments
First of all, in such cases the Court should unavoidably take the challenge to identify the risks for the child in case of return in the context of the pandemic situation. Indeed, in the present case the formulation is rather simplified. Therefore and due to the lack of case law on this issue, and in order to be able to answer the question if the return of the child would pose a grave risk, we should take a look also at the recently published Guide to Good Practice on Article 13(1)(b) (hereinafter: the Guide) by the Hague Conference On Private International Law (HCCH) and the concept of “grave risk” in child abduction proceedings in general, as set by the ECtHR in its case law.
In general, the grave risk exception in child abduction cases is based on “the primary interest of any person in not being exposed to physical or psychological danger or being placed in an intolerable situation”, as stated in the § 29 of the Explanatory report to the Hague Convention. The general assumption that a prompt return is in the best interests of the child can therefore be rebutted in the individual case where an exception is established. It is important to note that the exception provided for in Article 13(b) concerns only situations which go beyond what a child might reasonably be expected to bear (Ushakov v. Russia § 97, X v. Latvia § 116, Maumousseau and Washington v. France §§ 69 and 73, K.J. v. Poland §§ 64 and 67)
In § 46-48 of the discussed judgment the Court points final argument relates to the risk of physical harm that is presented by the current coronavirus pandemic in the following way:
“…This risk presents itself in two ways:
(1) The pandemic is more advanced in Spain than in the UK. As at the date of the preparation of this judgment (29 March) the official death toll stood at 1,228 in the UK and 6,528 in Spain. It could therefore be argued that PT would be at greater risk of contracting the virus in Spain than in the UK.
(2) The increased risk of infection that is posed by international travel at this time.”
Did the Court explore all possible harm that the return order can bring, and since it is recognized that the risk is present, what specific kind of risk the return of the child would constitute in the context of the pandemic situation – physical or psychological danger, or being placed in an intolerable situation?
The way the Court approached this issue is a very basic attempt to identify the risks that a return order in the outbreak of COVID-19 can bring to the child. As the Guide points in § 31, although separate, the three types of risk are often employed together, and Courts have not always clearly distinguished among them in their decisions. It is clear that the return could bring physical danger of contamination with COVID-19 together with all possible complications, despite the fact that child is not in the at-risk groups as are the elderly or other chronically ill people. But we should not underestimate the psychological aspect of the pandemic situation. As the coronavirus pandemic rapidly sweeps across the world, the World Health Organisation has already, a month earlier, stated that it is inducing a considerable degree of fear, worry, and concern in the population. It is therefore out-of-the-question that for a relatively mature child (in this case of 12 years old), whether the ability to watch, read or listen to news about COVID-19 can make the child feel anxious or distressed and therefore can, and most likely will, bring also psychological harm to it. In this sense the potential psychological harm is inevitable and whilst the physical harm can or cannot happen, and indeed the contamination cannot be foreseen, in any case with the return order (especially to a state with significant risk of increasing community transmission of COVID-19) the psychological integrity of the child will be put at immediate risk.
In order to explore how this risk can be adequately assessed in child abduction proceedings in the context of the COVID-19, we should look at § 62 of the Guide, where HCCH explicitly discusses risks associated with the child’s health, stating that “In cases involving assertions associated with the child’s health, the grave risk analysis must focus on the availability of treatment in the State of habitual residence, and not on a comparison between the relative quality of care in each State”. How is this applicable to the pandemic situation, if at all? It seems like the only adequate response in these fast-changing unprecedented circumstances would be that the Court should indeed not compare the situations in both states, but still having in mind the nature of the COVID-19, to try to foresee the developments, relying on the general and country-specific health organizations reports, accessible nowadays online in a relatively easy way.
As a first step the Court should consider whether the assertions are of such a nature, with sufficient detail and substance that they could constitute a grave risk, as overly broad or general assertions are unlikely to be sufficient. In this situation, without precedent in the history of the Convention’s application, holding that “Although the course of the pandemic is clearly more advanced in Spain than in the UK, I do not have any evidence from which I can draw a conclusion that either country is any more or less safe than the other… I am simply not in a possession to make any findings as to the relative likelihood of contracting the virus in each country. On the material before me, all that I can conclude is that there is a genuine risk that PT could contract the virus whether she remains in England or returns to Spain.” does not fulfil the obligation of the Court to assess the risk in full, in all its possible implications. The Court is obliged to conduct the step-by-step analysis, prescribed by and explained in the Guide, and to examine the types of risk for the child, assessing it separately and in the context of their deep interrelation in these specific circumstances.
Secondly, the wording of Article 13(b) also indicates that the exception is “forward-looking” in that it focuses on the circumstances of the child upon return and on whether those circumstances would expose the child to a grave risk. Therefore, ECtHR is clear that in any case (regardless the context and for sure not only in cases with history of domestic violence), where such assertions have been raised, the Courts should satisfy themselves that adequate safeguards and tangible measures are available in the country of return (Andersena v. Latvia §118, Blaga v. Romania §71).
In addition, as the Guide points in § 53, Article 13(b) analysis should be always be highly factually specific. Each Court determination as to the application or non-application of the exception is therefore unique, based on the particular circumstances of the case. A careful step-by-step analysis of an asserted grave risk is therefore always required, in accordance with the legal framework of the Hague convention, including the exception as explained in the Guide. When we discuss this issue, not only the Convention, but also Article 11(4) of Brussels IIa applies in answering the question of, what in the case of COVID-19 are “adequate safeguards”. This is, without a doubt, a question difficult to answer to with certainty, as the case law of the ECtHR and the Guides do not contain any directions or good practices on the behaviour of the domestic authorities in times of pandemic.
In the present case the judge estimated as “tangible safeguards” the following “number of undertakings”, offered by the father, effective until the matter could be brought before the Spanish Court, and intended to support PT’s return to Spain. They include: (1) Lodging the final order in Spain; (2) Not pursuing any criminal charges against the mother for her wrongful removal of PT from Spain to England; (3) Seeking to mediate with the mother on PT’s return in relation to the mother’s access; (4) Agreeing to unrestricted indirect contact between PT and her maternal family (especially with the mother and S):(5) Agreeing to direct contact for PT with her mother in Spain and England, to the extent that is possible or appropriate from a public health perspective given the current global pandemic;(6) Meeting with the mother only at neutral and/or public places when picking or dropping PT off;(7) To pay PT’s maintenance and school fees pending any further determination about maintenance by the Spanish Courts; and (8) To pay all the travelling costs (flights) for PT of travelling to and from England for the purposes of contact with the mother.”
It looks like the Court is indeed satisfied with the undertakings, but unfortunately, these examples are far from adequate protective measures when we consider the grave risk induced by return in the current pandemic situation. None are directed to prevention of the grave risk as raised by the mother, and none are related to the child’s health. Better examples remain to be seen from the upcoming case law of the Courts, but in the current situation, a strong focus should remain on comprehensive testing and surveillance strategies (including contact tracing), community measures (including physical distancing), strengthening of healthcare systems and informing the public and health community. Therefore, following the Guide, such measures should at the minimum include rapid risk assessment upon arrival at the state of habitual residence, application of different types of available COVID-19 Rapid Tests, ensuring social distance and exploring online education possibilities, providing guarantees that the child will be isolated and distanced from potentially infected people (through evidence for appropriate living conditions upon return), etc. Strong focus should also be put on the possibilities for mental support for the child, bearing in mind the extremely stressful situation, related not only the COVID-19 but also to additional factors such as the separation from the other parent and the mental consequences from the forced social isolation which, as pointed above, would inevitably affect the mental wellbeing of the child.
The next question is who should prove the risk, and its gravity in this specific situation? Following the ECtHR case law, the burden of proof traditionally lies with the party opposing the child’s return (Ushakov v. Russia, § 97). In this case the abducting parent indeed shall prove the grave risk, but it is true that the COVID-19 situation itself and the wide-spread precautions and information contribute a lot to proving this risk. Yet, what in the current pandemic circumstances is still to be proved by the abducting parent?
According to § 49 of the Guide, even if a Court ex officio gathers information or evidence (in accordance with domestic procedures), or if the person or body which has lodged the return application is not actively involved in the proceedings, the Court must be satisfied that the burden of proof to establish the exception has been met by the party objecting to return. However, in these specific circumstances, the national and international situation is developing at such speed that any evidence that could be gathered would be likely to be immediately outdated. Something very convenient for the abducting parent, it would be almost enough if the Court ex officio conducts check on the actual COVID-19 information regarding the state of habitual residence of the child, ensuring it is current when issuing the return or non-return order. However, this does not relieve the opposing party from the procedural obligation to present evidence as accurately as possible, and it remains important that arrangements regarding the “tangible safeguards”, discussed above, are offered and supported by evidence by the party which claims the return order.
There is a further discretionary ground in the Convention which permits a refusal of a return in certain circumstances where the child objects. According to Article 12 UNCRC, the child has the right to express its views freely, these views to be given due weight in accordance with age and maturity, and the Court should carefully examine them together with the other evidence (and not to provide stereotyped reasoning). The COVID-19 limitations raise the question should the child still be heard in this context and, if yes, how this should happen such that the risk for is minimised? Obviously, this right cannot and should not be waived in times when many procedural actions can take place online. It is worth to note that next to the existing legislation, Brussels IIa recast (Regulation 1111/2019, in force as of August 2022) pays special attention to the strengthening of the right of the child to express his or her view, reinforcing it with special provision – Article 26 in Chapter III “International child abduction”, in compliance with a detailed Recital 39. No minimum age is prescribed, but also no rules who can conduct the hearing of the child, how it must happen and where it should be conducted are set. Therefore, the hearing of the child should take place following the general conditions, and while the personal impression will indeed be reduced, and the possibilities to manipulate the child could potentially increase, the unlimited online tools to conduct the hearing eliminate the risk of contamination and offers acceptable solution for this emergency situation.
To get back to the discussed case – Re PT [2020] EWHC 834 (Fam), the Court is satisfied that the Art 13(b) defence has not been made out in this case. Many more comments could be made on the Courts assessment – the best interest of the child is not touched upon, the domestic violence is not discussed at all as an additional assertion, etc. One positive conclusion from procedural point of view is that the urgency has been taken into account, and that the Court made full use of the opportunities to conduct the proceedings online. Of course we cannot say that the return of a child during the COVID-19 pandemic constitutes a grave risk in all child abduction cases– but we can at least begin to build the good practices in this unprecedented time, when the “lockdown” will bring brand new meaning to the notion of “grave risk” under the Convention.
Nadia Rusinova is an attorney-at-law and lecturer in International and European private law at The Hague University, Netherlands. Next to her teaching and research activities, she is a regular ERA speaker and judicial trainer in children’s rights and international family law, delivering multidisciplinary trainings for legal professionals on international child abduction, children’s rights, ECtHR case law in family matters, LGBTQ rights, gender-inclusive language and trafficking of children. She is appointed as an expert in these areas of law in various projects, involving countries of broad geographic range. Originally Bulgarian, she holds an LL.M. degree from Sofia University, and for more than 15 years she has been successfully managing a specialized international family law office in Sofia, Bulgaria.
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.