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Grounds for Refusal of Recognition of (Quasi-) Annex Judgements in the Recast European Insolvency Regulation
Written by Zoltán Fabók, Fellow of INSOL International, Counsel at DLA Piper (Hungary) and PhD Candidate at Nottingham Trent University
Insolvency-related (annex) actions and judgements fall within the scope of the Recast European Insolvency Regulation (‘Recast EIR’). That instrument both determines international jurisdiction regarding annex actions and sets up a simplified recognition system for annex judgements. However, tension between the Recast EIR’s provisions on jurisdiction and recognition arises when a court of a state different from the state of insolvency erroneously assumes jurisdiction for annex actions. Such ‘quasi-annex’ judgements rendered by foreign courts erroneously assuming jurisdiction threaten the integrity of the insolvency proceedings. Besides, the quasi-annex judgements may violate the effectiveness and efficiency of the insolvency proceedings as well as the principle of legal certainty.
In my paper, it is argued that even the current legal framework may offer some ways to avoid the recognition of such quasi-annex judgements. First, the scope of the public policy exception may be extended in order to protect the integrity of the insolvency proceedings from the quasi-annex judgements rendered by foreign courts erroneously assuming jurisdiction. Second, it may be argued that quasi-annex judgements do not equal real annex judgements and therefore do not enjoy the automatic recognition system provided by the Recast EIR. At the same time, their close connection to the insolvency proceedings – disregarded by the forum erroneously assuming jurisdiction – may exclude quasi-annex judgements from the scope of the Brussels Ibis Regulation, as well. As a consequence, those quasi-annex judgements may fall within the gap between the two regulations, meaning that no European instrument instructs the courts of the member state addressed to recognise quasi-annex judgements.
My research article has been accepted for publication by International Insolvency Review. The paper can be accessed in the Early View section at http://onlinelibrary.wiley.com/doi/10.1002/iir.1284/full.
Egyptian Court of Cassation on the application of the Hague Service Convention
[The author wishes to thank Justice Hossam Hesham Sadek, Vice President of the Civil and Commercial Chamber of the Court of Cassation, and reporting judge in the case at hand, for granting access to the Supreme Court’s ruling].
1. Introduction
In a recent ruling (22/05/2017), the Egyptian Court of Cassation tackled with the issue of service of process abroad. The facts of the case were the following: The claimant (and appellant) was an Egyptian Medical Equipment company, situated in Cairo. The respondents and appellees were a Chinese company, with its seat in Nanshan district, Shenzen, the Egyptian General Organization for Import and Export Control, and an Egyptian company, with its seat in Heliopolis, Cairo.
2. Facts and instance ruling
The Appellant filed a lawsuit against the Chinese Company and the Second Appellee at Cairo Court of Appeal, requesting a judgment obliging the First Appellee to pay the amount of ten million Egyptian pounds as monetary and moral compensation resulting from the contract’s termination. The Appellant asserted that it had been assigned as the sole agent of the First Appellee in Egypt, for selling ultrasonic wave devices, and that it was unexpectedly notified by the First Appellee that the contract was terminated.
The first instance court ordered that the lawsuit be dismissed for lack of proper service to the Chinese company. The Appellant claimed that service had been effected through the Public Prosecution Office, following all necessary procedures through diplomatic channels in China, pursuant to article 13 (9) of the Egyptian Civil and Commercial Code of Procedure (CCCP), and by notification of the claim to the first Appellee’s legal representative (Commercial Agent) pursuant to article 13 (5) CCCP.
Article 13 (9) CCCP states that, if no international treaty or a specific provision of law is applicable, service shall be made by delivering the documents to the public prosecutor, who then forwards them to the Minister of Foreign Affairs, to be delivered through diplomatic channels to the country of destination. Art. 13 (5) CCCP stipulates that, if service is addressed to a foreign company that has a branch or agent in Egypt, domestic service shall be effected (i.e. to the branch or agent located in Egypt).
3. The Supreme Court ruling
The Court of Cassation referred initially to Art. 13 (5) & (9) CCCP. It then mentioned Articles 3 & 14 of the Judicial Cooperation Treaty on Civil, Commercial and Criminal Matters between the Arab Republic of Egypt and The People’s Republic of China, signed on 21/4/1994, which stipulates that: “For the purposes of requesting and providing judicial assistance, parties shall communicate through their central authorities unless otherwise provided for in this Treaty. Central authorities of both parties are represented by the Ministries of Justice. Both parties shall serve judicial documents in civil and commercial matters pursuant to Hague Convention on the service Abroad of Judicial and Extrajudicial Documents in civil or Commercial Matters concluded on 15/11/1965’’.
Based on the above, the Court of Cassation decided as follows: The Hague Convention exclusively stipulates methods, means and conditions for serving judicial documents unless agreed between the Parties on other methods pursuant to Article 11 of the same Convention, and obliges the judge to stay proceedings, save when a document was served by a method prescribed by the internal law of the State addressed, or when the document was actually served to the defendant in its residence under one of the methods prescribed in the Convention in sufficient time to enable him to arrange for his defence.
Since the legislator has permitted in Article 13(5) CCCP that foreign companies may be served by delivering a copy to its branch or agent in Egypt, their existence is considered a question of fact under the exclusive competence of the court. Accordingly, the Court of Cassation confirmed the instance decision, which ruled that service made to the first Appellee through the third appellee (Trade And Importing Company in Heliopolis), ostensibly being its commercial agent and representative, was improper, since the representative of the latter denied its relation with the first Appellee.
Finally, delivering the document to the Public Prosecution in order to take necessary actions towards service by diplomatic channels is not sufficient, because notice was not delivered / served to the first Appellee.
4. Conclusion
The judgment offers a valuable insight into the practice of Egyptian courts in regards to notification of documents abroad. It is noteworthy that the Court of Cassation examined carefully all legal regimes related to the subject matter: It referred to domestic law (CCCP), the Egyptian – Chinese bilateral treaty, and the multilateral convention, to which the bilateral convention refers. The question whether service of process abroad was necessary or not was decided on a substantive level: Given that the appellant failed to demonstrate that the third appellee was the representative of the Chinese company, the court rightfully considered that service solely to the local Transmission Authority through the Prosecutor’s Office does not suffice. Hence, whenever the Hague Service Convention applies, the Court of Cassation dismisses fictitious service (remise au parquet).
The Justice Initiative Frankfurt am Main 2017
Written by Prof. Dr. Dres. h.c. Burkhard Hess, Executive Director Max Planck Institute Luxembourg for Procedural Law
Against the backdrop of Brexit, an initiative has been launched to strengthen Frankfurt as a hot spot for commercial litigation in the European Judicial Area. On March 30, 2017, the Minister of Justice of the Federal State Hessen, Ms Kühne-Hörmann, organized a conference at which the Justice Initiative was presented. More than 120 stakeholders (lawyers, judges, businesses) attended the conference. The original paper was elaborated by Professors Burkhard Hess (Luxembourg), Thomas Pfeiffer (Heidelberg), Christian Duve (Heidelberg) and Roman Poseck (President of the Frankfurt Court of Appeal). Here, we are pleased to provide an English translation of the position paper with some additional information on German procedural law for an international audience. The proposal has, as a matter of principle, been endorsed by the Minister of Justice. Its proposals are now being discussed and shall be implemented in the next months to come. The paper reads as follows: Read more
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Praxis des Internationalen Privat- und Verfahrensrechts (IPRax) 2/2023: Abstracts
The latest issue of the „Praxis des Internationalen Privat- und Verfahrensrechts (IPRax)“ features the following articles:
(These abstracts can also be found at the IPRax-website under the following link: https://www.iprax.de/en/contents/)
H.-P. Mansel/K. Thorn/R. Wagner: Europäisches Kollisionsrecht 2022: Bewegung im internationalen Familienrecht
This article provides an overview of developments in Brussels in the field of judicial cooperation in civil and commercial matters from January 2022 until December 2022. It presents newly adopted legal instruments and summarizes current projects that are making their way through the EU legislative process. It also refers to the laws enacted at the national level in Germany as a result of new European instruments. Furthermore, the authors look at areas of law where the EU has made use of its external competence. They discuss important decisions and pending cases before the CJEU pertaining to the subject matter of the article. In addition, the article also looks at current projects and the latest developments at the Hague Conference of Private International Law.
N. Elsner/H. Deters: Of party requested service by post and courts as transmitting agencies under the EU Service Regulation
On 1 July 2022, the EU Regulation on the Service of Documents No. 1784/20 (Recast) (EU Service Regulation) took effect and changed the law on service by postal services in cross-border proceedings. This calls for a revisiting of the divergent opinions and ways of interpretation of service by postal services according to Art. 14 EU Service Regulation 2007 and its relation to Art. 15 EU Service Regulation 2007. Against this background, this article discusses a decision of the Higher Regional Court Frankfurt (OLG Frankfurt) holding that service by postal services pursuant to Art. 14 EU Service Regulation 2007 is in principle only open to a court when effecting service in cross-border proceedings. A party shall effect service according to Art. 15 EU Service Regulation 2007 by contacting directly the foreign authorities designated to effect service in the other member state.
Firstly, the reasoning of the court and the opinions in legal scholarship on the admissibility of service by postal services effected by parties are assessed critically. Subsequently, the authors propose a different application of Art. 14 and 15 EU Service Regulation 2007 in Germany. It will be argued that the OLG Frankfurt was indeed correct in stating that service by postal services must be effected through a transmitting agency according to Art. 2 EU Service Regulation 2007. Under German law, only courts are considered transmitting agencies. However, this does not preclude parties from effecting this type of service. When parties are required to effect service themselves under German law, they may send the documents to the court, inform the court of the address of the other party and apply for service in accordance with Art. 14 EU Service Regulation 2007. The court then acts as a mere transmitting agency on behalf of the party, and thus, in its administrative capacity.
S. Schwemmer: Direct tort claims of the creditors of an insolvent company against the foreign grandparent company
In its ruling of 10 March 2022 (Case C-498/20 – ZK ./. BMA Nederland), the ECJ had to deal with a so-called Peeters/Gatzen-claim under Dutch law brought by the insolvency administrator. The court had already ruled in an earlier judgement that these claims fall under the Brussels I Regulation (recast). So the main question was now where the harmful event occurred within the meaning of Art. 7 para. 2 of the Regulation. The ECJ opts for the seat of the insolvent company, basing its analysis on the differentiation between primary damage and consequential damage. The same analysis is also used to determine the applicable law under the Rome II Regulation. In this context, however, the ECJ examines more closely the specific breach of duty of care to determine whether the claim falls under the scope of the Rome II Regulation or under the rules of international company law.
A. Kronenberg: Disapproved overriding mandatory provisions and factual impossibility
Two years after the Higher Regional Court (Oberlandesgericht, OLG) of Frankfurt am Main, the OLG Munich also had to rule on a lawsuit filed by an Israeli against Kuwait Airways. The plaintiff had demanded to be flown from Munich to Sri Lanka with a stopover in Kuwait City in accordance with the contract the parties had concluded. The OLG Munich dismissed the claim with regard to a Kuwaiti Israel boycott law, which, although inapplicable, according to the court had the effect that it was factually impossible for the defendant airline to transport Israeli nationals with a stopover in Kuwait. The ruling shows that in cases of substantive law level consideration of disapproved foreign overriding mandatory provisions the legally required result can be undesirable. However, this result depends on the circumstances of the individual case as well as on certain prerequisites that must be observed when taking into consideration overriding mandatory provisions. The article sets out these prerequisites and shows why the OLG Munich probably should have ordered the defendant to perform its obligation. It also explains why, in cases in which factual impossibility indeed exists, the result of the dismissal of the action most likely cannot be changed even by enacting a blocking statute.
C. Thomale/C. Lukas: The pseudo-foreign British one man-LLC
The Higher Regional Court of Munich has decided that a Bristish one man-LLC, which has its real seat in Germany, under German conflict of laws and substantive rules lacks legal personality altogether. This case note analyzes this decision’s implications for the conflict of company laws, notably for the interpretation of the TCA and application of the so-called “modified real seat theory”.
M. Brinkmann: Discharge in England and subsequent declaratory judgement against debtor in Germany – Binding effects of judgement trump recognition of prior bankruptcy proceedings
The Higher Regional Court Düsseldorf (OLG Düsseldorf) had to decide upon an action for the payment of damages based on a declaratory judgement. The declaratory judgement had established the defendant’s liability and was, at the time, not challenged by the defendant. In his defense against the action for payment the defendant now tries to invoke a discharge, which he had already obtained in insolvency proceedings in the UK in March 2012, i.e. prior to the declaratory judgement.
The OLG argued that under the applicable EIR, the English insolvency proceedings were, in principle, subject to automatic recognition. Under Art. 17 EIR 2002, these proceedings produce the same effects in all Member States. The OLG Düsseldorf nevertheless precluded the defendant from invoking the discharge. As the English bankruptcy proceedings were concluded before the action for the declaratory judgement was initiated, the defendant should have invoked the discharge already in the proceedings that led to the declaratory judgement in March 2013.
The OLG correctly found that the declaratory judgement was procedurally binding between the parties and hence barred the defendant from invoking the discharge in subsequent proceedings.
M. Andrae: Modification or suspension of enforcement of a decision under Article 12 of the Hague Child Abduction Convention?
The article discusses which procedural options exist if, after a final decision pursuant to 12 Hague Convention on the Civil Aspects of International Child Abduction, circumstances arise which would justify the refusal of an application for the return of the child. A procedure to change the decision is only permissible if the international jurisdiction of the German courts exists. For child abduction from EU Member States, this is determined in principle according to Art. 9 of the Regulation (EU) n 1111/2019 and for child abduction from other Contracting States of The Hague Protection of Children Convention according to Art. 7 of the Convention. As long as jurisdiction thereafter lies with the courts of the state in which the child was habitually resident immediately before the removal or retention keep, the German courts are limited to ordering the temporary stay of enforcement.
J. Oster: Facebook dislikes: The taming of a data giant through private international data protection law
Just as the Data Protection Directive 95/46/EC, the General Data Protection Regulation (GDPR) suffers from a deficit concerning both its public and its private enforcement. Among other things, this deficit is owed to the fact that European data protection law still raises many questions regarding jurisdiction and the applicable law. In its interlocutory judgment that will be discussed in this article, the Rechtbank Amsterdam established its jurisdiction and declared the GDPR as well as Dutch data protection and tort law applicable to a lawsuit by the Dutch Data Protection Foundation for alleged violations of rules of data protection and unfair competition. This article agrees with the Rechtbank’s findings, but it also draws attention to weaknesses in its reasoning and to unresolved questions of European private international data protection law.
Repeal of the RECJA and transfer of countries to the REFJA
Singapore’s Reciprocal Enforcement of Commonwealth Judgments Act 1921 (‘RECJA’) is based on the UK Administration of Justice Act 1920 and its Reciprocal Enforcement of Foreign Judgments Act 1959 (‘REFJA’) is based on the UK Foreign Judgments (Reciprocal Enforcement) Act 1933. In 2019, the government amended the REFJA in significant ways (previously detailed here), expanding its scope to include the registration of judgments from non-superior courts of gazetted countries, judicial settlements, non-money judgments and interlocutory judgments. At the same time, the RECJA was repealed from a date to be determined by the government.
That date has now (very nearly) arrived. The RECJA will be repealed on 1 March 2023. When the REFJA was amended in 2019, the intention at that time was to transfer over the countries gazetted under the RECJA gradually to the newly amended REFJA, with negotiations conducted on a country-by-country basis to determine what reciprocal arrangements would be suitable in each case. Only HK SAR has ever been gazetted under the REFJA. On 1 March 2023, it will be joined by Brunei Darussalam, Australia, India, Malaysia, New Zealand, Pakistan, Papua New Guinea, Sri Lanka and the United Kingdom of Great Britain and Northern Ireland (see here). These countries were previously gazetted under the RECJA. An omission is the Windward Islands, which does not appear in the new list. The list now also includes all the States of India; previously the State of Jammu and Kashmir was excluded under the RECJA.
Of particular note, however, is that the terms of the reciprocal arrangements generally remain the same as under the RECJA. Only money judgments rendered by the listed courts of the gazetted countries which are final and conclusive between the parties can be registered under the REFJA. Clearly, the full promise of the REFJA – with its potential for a wider range of foreign judgments to be registered under its scope – will have to be realised another day.
Career Opportunities at the American Society of International Law
The American Society of International Law (ASIL) is looking for a Director of Programmes (responsible for the oversight of the Society’s Programs Department, including major conferences, educational programming, substantive Interest Group activities, international organization engagement, and international law career training) and a Director of Finance and Administration (leading all aspects of the Society’s financial and human resources operations and oversees its general administrative operations, in partnership with the Executive Director).
More information is available on their Career opportunities page.