Earlier in the year, Associate Professor Jeanne Huang reported on the Australian Information Commission’s action against Facebook Inc in the Federal Court of Australia. In particular, Huang covered Australian Information Commission v Facebook Inc [2020] FCA 531, which concerned an ex parte application for service outside of the jurisdiction and an application for substituted service.

In April, Thawley J granted the Commission leave to serve the first respondent (Facebook Inc) in the United States, and the second respondent (Facebook Ireland Ltd) in the Republic of Ireland. Through orders for substituted service, the Commission was also granted leave to serve the relevant documents by email (with respect to Facebook Inc) and by mail (with respect to Facebook Ireland Ltd).

Facebook Inc applied to set aside the orders for its service in the United States, among other things. Facebook Ireland appeared at the hearing of Facebook Inc’s application seeking equivalent orders, although it did not make submissions.

On 14 September, Thawley J refused that application: Australian Information Commissioner v Facebook Inc (No 2) [2020] FCA 1307. The foreign manifestations of Facebook are subject to the Federal Court’s long-arm jurisdiction.

The decision involves an orthodox application of Australian procedure and private international law. The policy represented by the decision is best understood by brief consideration of the context for this litigation.

Background

The Australian Information Commission is Australia’s ‘independent national regulator for privacy and freedom of information’, which promotes and upholds Australians’ rights to access government-held information and to have their personal information protected.

Those legal rights are not as extensive as equivalent rights enjoyed in other places, like the European Union. Australian law offers minimal constitutional or statutory human rights protection at a federal level. Unlike other common law jurisdictions, Australian courts have been reluctant to recognise a right to privacy. Australians’ ‘privacy rights’, in a positivist sense, exist within a rough patchwork of various domestic sources of law.

One of the few clear protections is the Privacy Act 1988 (Cth), (‘Privacy Act’), which (among other things) requires large-ish companies to deal with personal information in certain careful ways, consistent with the ‘Australian Privacy Principles’.

In recent years, attitudes towards privacy and data protection seem to have changed within Australian society. To oversimplify: in some quarters at least, sympathies are becoming less American (ie, less concerned with ‘free speech’ above all else), and more European (ie, more concerned about privacy et al). If that description has any merit, then it would be due to events like the notorious Cambridge Analytica scandal, which is the focus of this litigation.

Various manifestations of Australian governments have responded to changing societal attitudes by initiating law reform inquiries. Notably, in 2019, the Australian Competition and Consumer Commission (‘ACCC’) delivered its final report on its Digital Platforms Inquiry, recommending that Australian law be reformed to better address ‘the implications and consequences of the business models of digital platforms for competition, consumers, and society’. The broad-ranging inquiry considered overlapping issues in data protection, competition and consumer protection—including reform of the Privacy Act. The Australian Government agreed with the ACCC that Australian privacy laws ought to be strengthened ‘to ensure they are fit for purpose in the digital age’. A theme of this report is that the foreign companies behind platforms like Facebook should be better regulated to serve the interests of Australian society.

Another important part of the context for this Facebook case is Australia’s media environment. Australia’s ‘traditional’ media companies—those that produce newspapers and television—are having a hard time. Their business models have been undercut by ‘digital platforms’ like Facebook and Google. Many such traditional media companies are owned by News Corp, the conglomerate driven by sometime-Australian Rupert Murdoch (who is responsible for Fox News. On behalf of Australia: sorry everyone). These companies enjoy tremendous power in the Australian political system. They have successfully lobbied the Australian government to force the foreign companies behind digital platforms like Google to pay Australian companies for news.

All of this is to say: now more than ever, there is regulatory appetite and political will in Australia to hold Facebook et al accountable.

Procedural history

Against that backdrop, in March 2020, the Commission commenced proceedings against each of the respondents in the Federal Court, alleging ‘that the personal information of Australian Facebook users was disclosed to the This is Your Digital Life app for a purpose other than the purpose for which the information was collected, in breach of the Privacy Act’.

The Commissioner alleges that:

1. Facebook disclosed the users’ personal information for a purpose other than that for which it was collected, in breach Australian Privacy Principle (‘APP’) 6;
2. Facebook failed to take reasonable steps to protect the users’ personal information from unauthorised disclosure in breach of APP 11.1(b); and
3. these breaches amounted to serious and/or repeated interferences with the privacy of the users, in contravention of s 13G of the Privacy Act.

In April, the service orders reported by Huang were made. Facebook Inc and Facebook Ireland were then served outside of the jurisdiction.

Facebook’s challenge to the orders for service outside of the jurisdiction: ‘no prima facie case’

Facebook Inc contended that service should be set aside because the Court should not be satisfied that there was a prima facie case for the relief claimed by the Commissioner as required by r 10.43(4)(c) of the Federal Court Rules 2011 (Cth).

The Court summarised the principles applicable to setting aside an order as to service as follows (at [23]):

• An application for an order discharging an earlier order granting leave to serve out of the jurisdiction, or for an order setting aside such service, is in the nature of a review by way of rehearing of the original decision to grant leave to serve out of the jurisdiction.
• It is open to the party who sought and obtained an order for service out of the jurisdiction to adduce additional evidence, and make additional submissions.
• The onus remains on the applicant in the proceedings to satisfy the Court in light of the material relied upon, including any additional material relied upon, that leave ought to have been granted.

Facebook Inc accepted that although demonstrating a prima facie case is ‘not particularly onerous’, the Commissioner had failed to establish an arguable case; she had merely posited ‘inferences’ which did not reasonably arise from the material tendered: [28]-[29].

As noted above, the underlying ‘case’ that was the subject of that argument is in relation to the Cambridge Analytica scandal and alleged breaches of the Privacy Act.

The case thus turns on application of an Australian statute to seemingly cross-border circumstances. Rather than having regard to forum choice-of-law rules, the parties seemingly accepted that the case turns on statutory interpretation. The extra-territorial application of the Privacy Act depends on an organisation having an ‘Australian Link’. Section 5B(3) relevantly provides:

(3) An organisation or small business operator also has an Australian link if all of the following apply: …

(b) the organisation or operator carries on business in Australia or an external Territory;

(c) the personal information was collected or held by the organisation or operator in Australia or an external Territory, either before or at the time of the act or practice.

Facebook Inc argued that the Commissioner failed to establish a prima facie case that, at the relevant time, Facebook Inc:

• carried on business in Australia within the meaning of s 5B(3)(b) of the Privacy Act; or
• collected or held personal information in Australia within the meaning of s 5B(3)(c) of the Privacy Act.

Facebook Inc carries on business in Australia

In Tiger Yacht Management Ltd v Morris (2019) 268 FCR 548 (noted here), the Full Court of the Federal Court of Australia ‘observed that the expression “carrying on business” may have a different meaning in different contexts and that, where used to ensure jurisdictional nexus, the meaning will be informed by the requirement for there to be sufficient connection with the country asserting jurisdiction’: [40].

The Court considered the statutory context of the Commissioner’s case, being the application of Australian privacy laws to foreign entities. The Court had regard to the objects of the Privacy Act, which include promotion of the protection of privacy of individuals and responsible and transparent handling of personal information by entities: Privacy Act s 2A(b), (d). Whether Facebook Inc ‘carries on business in Australia’ for the purposes of the Privacy Act is a factual inquiry that should be determined with reference to those broader statutory purposes.

The Commissioner advanced several arguments in support of the proposition that Facebook Inc carries on business in Australia.

One argument advanced by the Commissioner was that Facebook Inc had financial control of foreign subsidiaries carrying on business in Australia, suggesting that the parent company was carrying on business in Australia. (Cf Tiger Yacht, above.) That argument was rejected: [155].

Another argument turned on agency more explicitly. Essentially, the Commissioner sought to pierce the corporate veil by arguing Facebook is ‘a single worldwide business operated by multiple entities’: [75]. Those entities contract with one another so that different aspects of the worldwide business are attributed to different entities, but the court ought to pierce the jurisdictional veil. The Commissioner submitted that ‘the performance pursuant to the contractual arrangements by Facebook Inc of functions necessary for Facebook Ireland to provide the Facebook service…, including in Australia, indicated that Facebook Ireland was a convenient entity through which Facebook Inc carried on business in Australia during the relevant period’: [115].

Facebook Inc appealed to cases like Adams v Cape Industries [1990] 1 Ch 433, where the English Court of Appeal explained that, typically, a company would not be considered to be carrying on business within the forum unless: ‘(a) it has a fixed place of business of its own in this country from which it has carried on business through servants or agents, or (b) it has had a representative here who has had the power to bind it by contract and who has carried on business at or from a fixed place of business in this country’ (at 529). (See also Lucasfilm Ltd v Ainsworth [2008] EWHC 1878 (Ch).)

Ultimately, the Court was not satisfied that Facebook Inc carried on business within Australia on the basis that Facebook Ireland conducted Facebook Inc’s business in Australia: [117]. More accurately, the Commissioner had not established a prima facie case to that effect.

But the Commissioner had established a prima facie case that Facebook Inc directly carried on business within Australia.

Facebook Inc is responsible for various ‘processing operations’ in relation to the Facebook platform, which includes responsibility for installing, operating and removing cookies on the devices of Australian users. Facebook Inc appealed to case authority to argue that this activity did not amount to carrying on business in Australia. The Court thus considered cases like Dow Jones v Gutnick (2002) 210 CLR 575 and Valve Corporation v Australian Competition and Consumer Commission (2017) 258 FCR 190, which each addressed the territorial aspects of businesses that depend on communication on the internet.

The Court rejected Facebook Inc’s argument that ‘installing’ cookies is to be regarding as equivalent to uploading and downloading a document (cf Gutnick). At the interlocutory stage of the proceeding, there was not enough evidence to accept Facebook Inc’s claim; but there was enough to draw the inference that the installation and operation of cookies within Australia involves activity in Australia.

The Court concluded: ‘the Commissioner has discharged her onus of establishing that it is arguable, and the inference is open to be drawn, that some of the data processing activities carried on by Facebook Inc can be regarded as having occurred in Australia, notwithstanding that the evidence did not establish that any employee of Facebook Inc was physically located in Australia’: [137]. It was thus concluded that the Commissioner had established a prima facie case that Facebook Inc carried on business within Australia: [156]. (Cf the reasoning of Canadian courts that led to Google Inc v Equustek Solutions Inc [2017] 1 SCR 824, noted here.)

Facebook Inc collected or held personal information in Australia

The Court was assisted by responses provided by Facebook Inc to questions of the Commissioner  made pursuant to her statutory powers of investigation. One question concerned the location and ownership of servers used to provide the Facebook service. Although Facebook Inc’s answer was somewhat equivocal, it suggested that the platform depends on servers located in Australia (including network equipment and caching servers) to improve connection and delivery time. This was enough for the Court to make the relevant inference as to collection and holding of personal information within Australia: [170].

The Court had regard to the purposes manifested by the Explanatory Memorandum to the Privacy Act in concluding that ‘the fact that the personal information is uploaded in Australia and stored on Australian users’ devices and browser caches and on caching servers arguably owned or operated by Facebook Inc in Australia, it is arguable that Facebook Inc collected the personal information in Australia’: [185].

Combined with the findings as to carrying on business, this was enough to establish a prima facie case that the extra-territorial application of the Privacy Act was engaged. The Court’s orders as to service were not disturbed.

Concluding remarks

The interlocutory character of this decision should be emphasised. The Court’s findings on the territorial aspects of ‘carrying on business’ and data collection were each subject to the ‘prima facie case’ qualification. These are issues of fact; the Court may find differently after a thorough ventilation of evidence yet to be adduced.

This decision is not anomalous. The assertion of long-arm jurisdiction over Facebook Inc indicates Australian courts’ increasing willingness to pierce the jurisdictional veil for pragmatic ends. In my experience, most Australian lawyers do not really care about the multilateralist ideals of many private international law enthusiasts. The text of the Australian statutes that engage the case before them is paramount. Lawyers are directed to consider the text of the statute in light of its context and purpose: Australian Securities and Investments Commission v King (2020) 94 ALJR 293, [23]; Acts Interpretation Act 1901 (Cth) s 15AA. Essentially, in the case of a forum statute with putative extraterritorial operation, a form of interest analysis is mandated.

I am OK with this. If the policy of the Privacy Act is to have any chance of success, it depends on its application to internet intermediaries comprised of corporate groups with operations outside of Australia. As an island continent in a technologically interconnected world, the policy of Australian substantive law will increasingly determine the policy of Australian private international law.

Michael Douglas is Senior Lecturer at UWA Law School and Consultant at Bennett + Co, Perth.

By Michael Douglas and Mhairi Stewart

Andrew Bell is a leader of private international law in Australia. His scholarly work includes Forum Shopping and Venue in Transnational Litigation (Oxford Private International Law Series, 2003) and several editions of Nygh’s Conflict of Laws in Australia (see LexisNexis, 10^th ed, 2019). As a leading silk, he was counsel on many of Australia’s leading private international law cases. In February 2019, his Honour was appointed President of the New South Wales Court of Appeal.

Recently, in Inghams Enterprises Pty Ltd v Hannigan [2020] NSWCA 82, his Honour provided a helpful exposition of the principles applicable to dispute resolution agreements, including arbitration and choice of court agreements. His Honour dissented from the majority of Justices of Appeal Meagher and Gleeson.

Background

Inghams Enterprises, the Australian poultry supplier, entered a contract with Gregory Hannigan by which Hannigan would raise and feed chickens provided by Inghams.

The contract was to continue until 2021 but in 2017 Inghams purported to terminate the contract for alleged breaches by Hannigan. Hannigan successfully sought a declaration that the contract had been wrongfully terminated; see Francis Gregory Hannigan v Inghams Enterprises Pty Limited [2019] NSWSC 321.

In May 2019 Hannigan issued a notice of dispute to Inghams seeking unliquidated damages for losses he incurred between 8 August 2017 and 17 June 2019 while the contract was wrongfully terminated.  Following an unsuccessful mediation in August 2019, Hannigan considered that clause 23.6 of the contract—extracted below—entitled him to refer the dispute to arbitration.

Hannigan’s referral to arbitration was premised by a complex and tiered dispute resolution clause: clause 23. Compliance with clause 23 was a precondition to commencing court proceedings. The clause also contained a requirement to provide notice of a dispute; to use ‘best efforts’ to resolve the dispute in an initial period; and to then go to mediation. If mediation were unsuccessful, then the clause provided that certain disputes must be referred to arbitration. Relevantly, clause 23 included the following:

‘23.1  A party must not commence court proceedings in respect of a dispute arising out of this agreement (“Dispute”), including without limitation a dispute regarding any breach or purported breach of this agreement, interpretation of any of its provisions, any matters concerning of parties’ performance or observance of its obligations under this agreement, or the termination or the right of a party to terminate this agreement) until it has complied with this clause 23.’

‘23.6  If:

23.6.1  the dispute concerns any monetary amount payable and/or owed by either party to the other under this agreement, including without limitation, matters relating to determination, adjustment or renegotiation of the Fee under Annexure 1 under clauses 9.4, 10, 11, 12, 13 and 15.3.3 …   

23.6.2 the parties fail to resolve the dispute in accordance with clause 23.4 within twenty eight (28) days of the appointment of the mediator

then the parties must (unless otherwise agreed) submit the dispute to arbitration using an external arbitrator (who must not be the same person as the mediator) agreed by the parties or, in the absence of agreement, appointed by the Institute Chairman.’ (Emphasis added.)

Inghams sought to restrain the referral to arbitration and failed at first instance; see Inghams Enterprises Pty Ltd v Hannigan [2019] NSWSC 1186.

Inghams sought leave to appeal. In hearing the question of leave together with the appeal, then granting leave, the two key issues for determination by the Court of Appeal were:

• Whether a claim for unliquidated damages could fall within the scope of the arbitration clause which required claims to be concerning monetary amounts ‘under this agreement’ (the construction issue); and
• Whether Hannigan had waived his entitlement to arbitrate by bringing the proceedings in 2017 (the waiver issue).

The construction issue

Meagher JA, with whom Gleeson JA agreed, determined Hannigan’s claim for unliquidated damages for breach of contract was not a claim ‘under’ the contract and therefore did not fall within the terms of the arbitration clause in clause 23.

The phrase ‘monetary amount payable and/or owed’ referred to a payment obligation by one party to another. Read with the phrase ‘under this agreement’, the clauses required that the contract must be the source of the payment obligation to invoke the requirement to arbitrate. A claim for unliquidated damages was beyond the scope of the clause.

The majority and Bell P thus disagreed on whether an assessment for unliquidated damages for breach of contract is ‘governed or controlled’ by a contract because the common law quantum of damages considers the benefits which would have been received under the contract. The majority found that liquidated damages are a right of recovery created by the contract itself and occur as a result of a breach; unliquidated damages for a breach are compensation determined by the Court.

Bell P included provided a detailed discussion of the interpretation of dispute resolution clauses and considered the orthodox process of construction is to be applied to the construction of dispute resolution clauses. That discussion is extracted below. Bell P’s liberal approach was not followed by the majority.

The waiver issue

The Court found that Hannigan did not unequivocally abandon his right to utilise the arbitration clause by initiating the breach of contract proceedings against Inghams for the following reasons:

1. Hannigan did not abandon his right to arbitration by failing to bring a damages claim in the 2017 proceedings.
2. In 2017 Hannigan enforced his rights under clause 23.11 by seeking declaratory relief.
3. The contract explicitly required that waiver of rights be waived by written notice.
4. The bringing of proceedings did not constitute a written agreement not to bring a damages claim to arbitration.

It was noted that if Hannigan had sought damages in 2017 then Ingham’s waiver argument may have had some force.

President Bell’s  dicta on dispute resolution clauses

In his dissenting reasons, Bell P provided the following gift to private international law teachers and anyone trying to understand dispute resolution clauses:

Dispute resolution clauses may be crafted and drafted in an almost infinite variety of ways and styles. The range and diversity of such clauses may be seen in the non-exhaustive digest of dispute resolution clauses considered by Australian courts over the last thirty years, which is appended to these reasons. [The Appendix, below, sets out a table of example clauses drawn from leading cases.]

Dispute resolution clauses may be short form or far more elaborate, as illustrated by the cases referred to in the Appendix. They may be expressed as service of suit clauses… They may provide for arbitration… They may be standard form… They may be bespoke… They may be asymmetric… They may and often will be coupled with choice of law clauses… They may be multi-tiered, providing first for a process of mediation, whether informal or formal, or informal and then formal, before providing for arbitral or judicial dispute resolution…

Dispute resolution clauses are just as capable of generating litigation as any other contractual clause, and the law reports are replete with cases concerned with the construction of such clauses. The cases referred to in the Appendix supply a sample.

Such clauses have also spawned specialist texts and monographs…

The question raised by this appeal is purely one of construction. It is accordingly desirable to begin by identifying the principles applicable to the construction of a dispute resolution clause. …

It has been rightly observed that “the starting point is that the clause should be construed, just as any other contract term should be construed, to seek to discover what the parties actually wanted and intended to agree to”…

In short, the orthodox process of construction is to be followed…

In the context of dispute resolution clauses, whether they be arbitration or exclusive jurisdiction clauses, much authority can be found in support of affording such clauses a broad and liberal construction…

In Australia, unlike other jurisdictions, the process of contractual construction of dispute resolution clauses has not been overlaid by presumptions cf [some other jurisdictions]. Thus, in [Rinehart v Welker (2012) 95 NSWLR 221] at [122], Bathurst CJ, although not eschewing the liberal approach that had been adumbrated in both Francis Travel and Comandate to the construction of arbitration clauses, rejected the adoption of a presumption … the presumption was that the court should, in the construction of arbitration clauses, “start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal”, and that the clause should be construed in accordance with that presumption, “unless the language makes it clear that certain questions were intended to be excluded from the arbitrator’s jurisdiction…

In [Rinehart v Hancock Prospecting Pty Ltd (2019) 93 ALJR 582], the plurality indicated that the appeals could be resolved with the application of orthodox principles of construction, which required consideration of the context and purpose of the Deeds there under consideration… In his separate judgment, Edelman J described as a “usual consideration of context” the fact that “reasonable persons in the position of the parties would wish to minimise the fragmentation across different tribunals of their future disputes by establishing ‘one-stop adjudication’ as far as possible”… This may have been to treat the considerations underpinning [leading] cases… as stating a commercially commonsensical assumption…

The proper contemporary approach was eloquently articulated in the following passage in [Hancock Prospecting Pty Ltd v Rinehart (2017) 257 FCR 442] (at [167]) which I would endorse:

 “The existence of a ‘correct general approach to problems of this kind’ does not imply some legal rule outside the orthodox process of construction; nor does it deny the necessity to construe the words of any particular agreement. But part of the assumed legal context is this correct general approach which is to give expression to the rational assumption of reasonable people by giving liberal width and flexibility where possible to elastic and general words of the contractual submission to arbitration, unless the words in their context should be read more narrowly. One aspect of this is not to approach relational prepositions with fine shades of difference in the legal character of issues, or by ingenuity in legal argument… another is not to choose or be constrained by narrow metaphor when giving meaning to words of relationship, such as ‘under’ or ‘arising out of’ or ‘arising from’. None of that, however, is to say that the process is rule-based rather than concerned with the construction of the words in question. Further, there is no particular reason to limit such a sensible assumption to international commerce. There is no reason why parties in domestic arrangements (subject to contextual circumstances) would not be taken to make the very same common-sense assumption. Thus, where one has relational phrases capable of liberal width, it is a mistake to ascribe to such words a narrow meaning, unless some aspect of the constructional process, such as context, requires it.” (Citations omitted.)

Bell P’s appendix

Conclusion

Respectfully, Bell P’s dissenting reasons are to be preferred to those of Meagher JA, with whom Gleeson JA agreed. Bell P’s reasons are more consistent the weight of authority on construction of arbitration and choice of court agreements in Australia and abroad. On the other hand, the majority approach shows that Australian courts often do not feel bound to follow the solutions offered by foreign courts to common private international law problems.

Michael Douglas co-authored this post with Mhairi Stewart. This post is based on their short article first published by Bennett + Co.

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.

Written by Jonathan Fitchen.

‘The time has come’; a common enough phrase which may, depending on the reader’s mood and temperament, be attributed variously to Lewis Carroll’s discursive Walrus, to Richard Wagner’s villainous Klingsor, or to the conclusion of Victor Hugo’s epigrammatic comment      to the effect that nothing is as powerful as an idea whose time has come. In the present context however ‘the time has come’ refers more prosaically to another step in the process described as ‘Brexit’ by which the UK continues to disentangle itself from the EU.

On the 31^st
of January 2020 at 24.00 CET (23.00 UK time) the UK ceases to be an EU Member
State. This event is one that some plan to celebrate and other to mourn. For those
interested in private international law and the conflict of laws in the EU or in
the legal systems of the UK, celebration is unlikely to seem apt. Whether for
the mundane reason that the transition period of the Withdrawal Agreement
preserves the practical application and operation of most EU law concerning our
subject in the UK and within the EU27 until the projected end point of 31^st
December 2020, or for deeper reasons connected with the losses to the subject
that the EU and the UK must each experience due to the departure of the UK from
the EU. If celebration is not appropriate must we therefore opt to mourn? This
post suggests that mourning is not the only option (nor if overindulged is it a
useful option) and sets out some thoughts on the wider implications for the
private international laws of the UK’s legal systems and the legal systems that
will comprise the EU27 consequent on the UK’s departure.

This exercise is
necessarily speculative and very much a matter of what one wishes to include in
or omit from the equation under construction. If too little is included, the
result may be of only abstract relevance; if too much is included, the equation
may be incapable of solution and hence useless for the intended purpose of
calculation. Such difficulties, albeit expressed in a non-mathematical form,
are familiar to private international lawyers who while engaging with their
subject routinely consider the macroscopic, the microscopic and many points in
between. In what remains of this post I will offer some thoughts that hopefully
will provoke further thoughts while avoiding useless abstraction and (at least
for present purposes) ‘useless’ incalculability.

The loudest
calls for the UK to leave the EU did not arise from UK private international
law, nor from its practitioners; few UK private international lawyers appear to
have wished for Brexit as a means of reforming private international law.
Whatever appeals to nostalgia may have swayed opinions in other sectors of the UK
and may have induced those within them to vote to leave, they were not
expressed with reference to matters of private international law. Few who
remember or know the law as it stood in any of the UK’s legal systems prior to
the implementation of the UK’s accession to the Brussels Convention of 1968
would willingly journey back to the law as it then stood and regard it as an
upgrade. Mercifully, aspects of this view are, at present, apparently shared by
the UK Government and account for its wish, after ‘copying and pasting’ most EU
law and private international law into the novel domestic category of ‘retained
EU Law’, to then amend and allow that which does not depend on reciprocity to be
re-presented as a domestic private international law to be applied within and
by the UK’s legal systems: thus the Rome I and Rome II Regulations will be eventually
so ‘imitated’ within the legal systems of the UK. Unfortunately, many other EU
provisions do require reciprocity, and thus cannot be ‘saved’ in this manner;
for these provisions the news in the UK is less good.  

There are however
other available means of salvage. Because the UK will no longer be an EU Member
State at 24.00 Brussels Time it may, but for the Withdrawal Agreement,
thereafter participate more fully in proceedings and projects at the Hague
Conference on Private International Law. The UK plans to domestically clarify
the domestic understanding of certain existing Hague conventions, e.g. 1996
Parental Responsibility Convention, via the recently announced Private
International Law (Implementation of Agreements) Bill 2019. Earlier in 2018 the
UK deposited instruments of accession concerning conventions it plans to ratify
at the end of the Withdrawal Agreement’s transition period to attempt to retain
prospectively the salvageable aspects of certain reciprocity requiring EU
private international law Regulations lost via Brexit: thus, the UK plans to
ratify the 2005 Choice of Court Convention and the 2007 Maintenance Convention.
After these ratifications it may be that the UK will also consider the
ratification of the 2019 judgment enforcement convention, particularly it the
EU takes this option too. In the medium and long term however, the UK, assuming
it wishes to participate in an active sense, will have to accept the practical
limitations of the HCCH as it (the UK) becomes accustomed to the differences,
difficulties and frustrations of private international law reform via optional
instruments that all the intended parties are entitled to refuse to
opt-in to or ratify.

Over the medium term
and longer term, it should additionally be noted that though the UK has left the
EU it has not cast-off and sailed away from continental Europe at a speed in
excess of normal tectonic progress: there may therefore eventually be further
developments between the two. It may be that the UK can be induced at some
point in the future, when Brexit has become more mundane and less politically
volatile within the UK, to cooperate in relation to private international law
in a deeper sense with the EU27; whether by negotiating to join the 2007 Lugano
Convention or a new convention pertaining to aspects of private international
law. If this last idea seems too controversial then maybe it would be possible
for the UK to eventually negotiate with an existing EU Member State as a third
country via Regulation 664/2009 or Regulation 662/2009 or perhaps via another
yet to be produced Regulation with a somewhat analogous effect? Brexit,
considered in terms of private international law, may well re-focus a number of
existing questions for the EU27 pertaining to the interaction of its private
international law with third States, whether former Member States or not.   

What is however
unavoidably lost by Brexit is the UK’s direct influence on the development and
particularly the periodic recasting of the EU’s private international law: this
loss cuts both ways. For the EU27 the UK will no longer be at the negotiating
table to offer suggestions, criticisms and improvements to the texts of new and
recast Regulations. For the EU27 this loss is somewhat greater than it might
appear from the list of Regulations that the UK did not opt-in to as the terms
of the UK’s involvement in these matters permitted it to so participate without
having opted-in to the draft Regulation.   

The suggested loss
of influence will however probably be felt most acutely by the private international
lawyers in the UK. Despite the momentary impetus and excitement of salvaging
that which may be salvaged and ratifying that which may be ratified to mitigate
the effect of Brexit on private international law, the reality is that we in
the UK will have lost two of the motive forces that have seen our subject
develop and flourish over decades: viz. the European Commission and the
domestic political reaction thereunto. Post-Brexit, once the salvaging (etc.) is
done, it seems unlikely that the UK Government will continue to regard a private
international law now no longer affected by Commission initiatives or
re-casting procedures as retaining its former importance or meriting any
greater legislative relevance than other areas of potential law reform. The
position may be otherwise in Scotland as private international law is a
devolved competence that devolution entrusted to the Scottish Government. It
may be that once the dust has settled and the returning UK competence related
reforms have been applied that the comparatively EU-friendly Scottish
Government may seek to domestically align aspects of Scots private
international law with EU law equivalents.

For he who would
mourn for the effect of Brexit on the subject of private international law, it
is the abovementioned loss of influence of the subject at both the EU level and
particularly at the domestic level that most merits a brief period of mourning.
After this, the natural but presently unanswerable question of, ‘What now?’ occurs.
Though speculation is offered above, all in the short term will depend on the progress
in negotiations over an unfortunately already shortened but technically still
extendable transition period during which the EU and UK are to attempt to
negotiate a Free Trade Agreement: thereafter for the medium term and long term all
depends on the future political relationship of the EU and the UK.

This post was written by Ms Martina Mantovani, Research Fellow at the Max Planck Institute Luxembourg. The author is grateful to her colleague, Ms Adriani Dori, for pointing out the tweet.

On 26^th September 2019, Dutch MEP Sophie in ‘t Veld announced through her Twitter account the lodging of a question for written answer to the EU Commission, prompting the opening of an investigation (and, eventually, of infringement proceedings) in relation to a commercial use of the European Criminal Record Information System (ECRIS). A cornerstone of judicial cooperation in criminal matters, this network is allegedly being exploited by a commercial company operating on the European market (hereinafter name, for the purposes of this entry, The Company), in order to provide, against payment, a speedy and efficient service to actual or prospective employers, wishing to access the criminal records of current employees or prospect hires.

Commercial activities of this kind raise a number of questions concerning, first and foremost, the lawfulness of the use of the ECRIS network beyond its institutional purpose, as well as the potential liability under EU law of the national authorities which are (more or less knowingly) fostering such practices. Moreover, as specifically concerns the topic of interest of this blog, such commercial practices exemplify how law shopping, stemming from the lack of coordination of Member States’ data protection laws, can be turned into a veritable profit-seeking commercial endeavor. As it is, these commercial practices are made possible not only by the specific legislation instituting the ECRIS, but also due to the legal uncertainty and fragmentation fostered by the GDPR. In fact, this Regulation leaves rooms for maneuver for Member States’ legislators to specify its provisions in relation to, inter alia, the processing of personal data in the context of employment (art 88), without nonetheless providing for either a guiding criterion or an explicit uniform rule to delimit or coordinate the geographical scope of application of national provisions enacted on this basis. This contributes to creating a situation whereby advantage might be taken of the uncertainty relating to the applicable data protection regime, to the detriment of the fundamental right to data protection of actual or prospective employees.

The ECRIS: institutional mission and open concerns.

The ECRIS is based on two separate but related pieces of legislation, Council Framework Decision 2009/315/JHA and Council Decision 2009/316/JHA, as well as on a separate data protection framework, previously set out by Council Framework Decision 2008/977/JHA, now repealed and replaced by Directive (EU) 2016/680. The intuitional mission of the ECRIS consists in providing competent public authorities from one Member States with access to information from the criminal records of nationals of other Member States. By facilitating the exchange of information from criminal records, this network aims at informing the authorities responsible for the criminal justice system of the background of a person subject to legal proceedings, so that his/her previous convictions can be taken into account to adapt the decision to the individual situation (Recital 15 of Council Framework Decision 2009/315/JHA). The ECRIS additionally aims at ensuring that a person convicted of a sexual offence against children will no longer be able to conceal this conviction or disqualification with a view to performing professional activity related to supervision of children in another Member State (Recital 12 of Council Framework Decision 2009/315/JHA, in conjunction with article 10(3) of Directive 2011/93/EU). In current law, ECRIS applications for accessing extracts from criminal records can be filed by judicial or competent administrative authorities, such as bodies authorized to vet persons for sensitive employment or firearms ownership. In such cases, these applications must be submitted with the central authority of the Member State to which the applicant authority belongs. This central authority may (and not shall) submit the request to the central authority of another Member State in accordance with its national law. In addition, access requests can also be filed by the person concerned for information on own criminal records. In this case, the central authority of the Member State in which the request is made may, in accordance with its national law, submit a request to the central authority of another Member State for information and related data to be extracted from its criminal record, provided the person concerned is or was a resident or a national of either the requesting or the requested Member State. In relation to information extracted via the ECRIS for any purposes other than that of criminal proceedings, a Statewatch Report of 2011 already expressed serious concerns, noting that while the European Data Protection Supervisor recommended that requests of this kind should have only be allowed “under exceptional circumstances”, the Council Framework Decision did not finally introduce such a stringent limitation. Moreover, since, under current article 7, the requested central authority shall reply to such requests in accordance with its national law, this piece of legislation provides “an opportunity for the widespread cross-border exchange of information extracted from criminal records for a variety of purposes unrelated to criminal proceedings”. That same Report additionally stresses the huge potential for “information shopping” that may thus arise, insofar as applicants who are not able to obtain information on an individual from that person’s home Member State, may access it via another Member State which also holds the information and has less stringent data protection legislation.

New commercial practices.

It is within this framework that the new commercial practices lying at the heart of Ms Sophie in ‘t Veld’s question must be understood. The commercial services in question are provided by The Company, expressly identified in the MEP’s interrogation. On its website, The Company takes great care to specify that, while it may have a name which closely echoes the EU system, it remains a private company offering commercial services and that “the purpose of this similarity is to highlight [it uses] the EU structures to access information on criminal records”. According to the same source, the services provided aim at addressing a widespread need of employers from Europe and rest of the world, who wish to ensure that their employees have no criminal background. Having remarked that said employers often struggle to perform background checks in a compliant manner, with legislation varying across the European Union rendering such a check “complicated, time consuming or impossible”, The Company proposes an innovative solution. According to its website, it “discovered” that by resorting to a EU program called European Criminal Records Information System, it is “able to address all of those concerns and offer easy and compliant access to state-issued EU criminal records certificates”. The FAQs further specify how this procedure works in practice. They confirm that all certificates are obtained from central criminal registers of EU Member States. What makes the service provided “unique” is that The Company is declaredly streamlining all access requests through the ECRIS central authority of just one Member State, who requests criminal information from its European counterparts on The Company’s behalf. According to both The Company’s website and MEP Sophie in ‘t Veld’s interrogation, the National Criminal Register of this Country “play[s] a role of a middleman in the flow of documentation and requests the information from the central register of the destined country”. While The Company claims that “the application is made with the applicant’s full awareness and explicit consent”, the MEP stresses “it is not clear whether the person whose records are obtained has given explicit consent”. In fact, it must be acknowledged that the website’s wording is rather ambiguous, being unclear whether the expression “the applicant” refers to the employer seeking the company’s services, or to the persons whose criminal records are being accessed.  The way in which The Company (which, incidentally, has UK phone number and which, according its website’s FAQ’s, seems to direct its services primarily to employers operating in the UK and Ireland) is effectively resorting to a foreign National Criminal Register for accessing the ECRIS remains a mystery. In fact, The Company cannot certainly be counted among either the administrative or the judicial authorities admitted to filing a request under Council Framework Decision 2009/315/JHA. Two highly speculative guesses might be made. A first possibility might be that the National Criminal Register allegedly playing the role of middleman might be misapplying the Framework Decision by submitting requests filed by non-legitimate applicants (as MEP in ‘t Veld seems to imply, by appealing to the principle of mutual trust and by envisioning the possibility of opening infringement proceedings). As it is, the form for access requests used by said National Criminal Register does not strictly require, according to its letter, that person filing the request shall be the same person whose criminal records need to be obtained, although it contains the explicit warning that “obtaining unauthorized information about a person from the National Criminal Register is punishable by a fine, restriction of liberty or imprisonment up to 2 years”.  A second possibility is that the company might be exploiting individual access requests, which – it must be stressed – could concern only “residents or nationals of the requesting or requested Member State” (article 6§2 of Council Framework Decision 2009/315/JHA). In such cases, one might imagine that, after being approached by the employer, The Company would transmit the aforementioned form to the employee/prospect hire, who would personally sign the form, thus explicitly consenting to the procedure. From the standpoint of data protection law, however, such an approach would not be less problematic. As repeatedly confirmed by the Article 29 Working Party, an employer which processes personal data (even within the framework of a recruitment process) qualifies as a controller of the employee/prospect hire personal data, having moreover very limited possibilities to rely on the employee’s express consent as a lawful basis for their processing.  Furthermore, such approach remains even more controversial if account is taken of the fact that it may be purposefully used to circumvent the more restrictive data protection provisions in matters of employment enacted by another Member State.

The Member State’s law applicable to the processing of personal data in the context of employment.

Albeit having been promoted by the EU Commission as “a single, pan-European law for data protection”, the new GDPR fails to level out all legislative differences in the Member States’ data protection laws. As mentioned above, it provides in fact a margin of maneuver for Member States to specify its rules, including for the processing of special categories of personal data. To that extent, it does not exclude Member State law that sets out the circumstances for specific processing situations, including determining more precisely the conditions under which the processing of personal data is lawful (recital 10). In this vein, its article 88 provides that “Member States may, by law or by collective agreements, provide for more specific rules to ensure the protection of the rights and freedoms in respect of the processing of employees’ personal data in the employment context, in particular for the purposes of recruitment […]”. Commercial practices such as those signaled by Ms in ‘t Veld seem to thrive on this situation of persisting legal uncertainty and fragmentation. In fact, some Member States’ data protection legislation expressly prohibits the use of individual access requests to criminal record in connection with the recruitment of an employee, except for very exceptional circumstances. Nonetheless, such legislative measures are often rendered toothless at the international level, either because the legislator limited – more or less willingly – their reach to the domestic domain, or because their geographical scope of application, left undefined by the relevant GDPR- complementing law, remains highly ambiguous. This is precisely what happens in relation to the British and the Irish Data Protection Acts, expressly mentioned by The Company’s website.

• The UK Data Protection Act 2018

This law, meant to adapt the UK data protection regime to the GDPR, provides, under its Section 184, that:

 “it is an offence for a person (“P1”) to require another person to provide P1 with, or give P1 access to, a relevant record in connection with— (a)the recruitment of an employee by P1; (b)the continued employment of a person by P1; or (c)a contract for the provision of services to P1.” According to Schedule 18 of the same law,  “relevant record” means— […] (b)a relevant record relating to a conviction or caution …[which] (a)has been or is to be obtained by a data subject in the exercise of a data subject access right from a person listed in sub-paragraph (2), and (b)contains information relating to a conviction or caution. The Company is well aware of these restrictions, which are expressly reported on its website (reference is made to Section 56 of the Data Protection Act (DPA) 2015, corresponding to Section 184 of the new DPA 2018). Nonetheless, it is further clarified that “[The Company] do[es] not make any requests under section [184] of the DPA, therefore [being] not limited by [it]” and that, consequently, it might even be “safer”, as a UK-based employer, to resort to its services. And this might admittedly be true, since the prohibition set out by Section 184 solely concerns records obtained by a data subject in the exercise his/her access right from one of the UK-based authorities listed in §3(2) of Schedule 18, and not by a foreign Criminal Register. Nonetheless, despite the apparent lawfulness of the whole process, the fact remains that the use (or abuse?) of an EU system, established to address specific needs of the judicial cooperation in criminal matters, becomes, in practice, the tool for enabling a UK-established employer to access employees’ personal data which he could not lawfully access domestically. This goes explicitly against the declared ratio and aim of Section 184 of the UK Data Protection Act. As clarified by the Explanatory Notes, this provision aims at thwarting conducts which may give the employer access to records which they would not otherwise have been entitled. There are, in fact, established legal routes for employers and public service providers to carry out background checks, which do not rely on them obtaining information via subject access requests. Disclosure and Barring Service (DBS) checks can in fact be performed locally only by one responsible organizations registered with DBS and according to the procedure and guarantees set out by British law.

• The Irish Data Protection Act 2018

The other relevant national GDPR-complementing provision is Section 4 of this law, entitled “obligation not to require data subject to exercise right of access under Data Protection Regulation and Directive in certain circumstances”. This provision prohibits a person from requiring, in connection with the recruitment of an individual as an employee or his continued employment, that individual to exercise his rights of access to own criminal records, or to supply the employer with data obtained as a result of such a request. Again, The Company’s website specifies that the services provided are not based on requests under Section 4 of the Irish law, and that this provision does not consequently constitute a limitation, thus making the use of their services “safer” for employers. It must be noted, however, that as opposed to the British provision, Section 4 does not limit the scope of the prohibition to records obtained by requesting access to Irish authorities. Therefore, the extent to which the processing of employees’ personal data, including their criminal records,  will be covered by Section 4 of the Irish Data Protection Act will finally depend on the identification of the scope of application of this Act as a whole. The problem with the Irish Data Protection Act (and with many other national GDPR-complementing laws, such as, inter alia, the Italian and the Spanish legislations) is that it does not explicitly define its geographical reach, thus fostering uncertainty as to the range of factual situations effectively covered and governed by its complementing provisions. This omission has been maintained in the final text of the Irish Data Protection Act despite the contrary advice given, during the drafting process, by the Irish Law Society. This pointed to such a lacuna as a potential source of ambiguity, for both individuals and controllers/processors, with regard to the remit and applicability of that piece of legislation. In particular, clarity as to what entities the Data Protection Act 2018 applies would have been especially desirous “given the number of corporations processing personal data on a large scale in Ireland and the likely queries that might otherwise arise and require judicial clarification”.

The need for better coordination of national data protection laws in the context of employment.

Following Ms in ‘t Veld’s question, the EU Commission will eventually investigate whether such a use of the ECRIS system is compliant with EU law, and whether the National Criminal Register in question is lawfully taking action on the basis of applications filed by/or with the help of The Company. In any event, the objective difficulties that may be encountered, in current law, in deciding over the lawfulness of commercial practices this kind, which might be merely taking advantage of pre-existing legislative loopholes and gaps, are a clear cry for better coordination of the Member States’ data protection laws enacted on the basis of the opening clauses enshrined in the GDPR. In a related paper, which is forthcoming in the Rivista italiana di diritto internazionale privato e processuale, this author tries and demonstrate that this problem is of an overarching nature, not being limited to the rather specific issues of, on the one side, the parochial approach adopted by the UK Parliament in defining the reach of its provision on forced access to criminal records for employment purposes and, on the other side, the silence kept by many national legislators concerning the geographical reach of their domestic data protection law. As it is, the entire European regime on data protection is deeply and adversely affected by a generalized lack of coordination of the spatial reach of domestic GDPR-complementing provisions. Lacking any uniform solution at EU level (set out either by the GDPR itself or by other existing instruments) the delimitation of the scope of application of national GDPR-complementing provisions is in fact left to unilateral and uncoordinated initiatives of domestic legislators. The review of existing national legislation evidences the variety of techniques and connecting factors employed for these purposes by the several Member States, which is liable to generate endemic risks of over- and under-regulations, and, above all, gaps of legal protection which are perfectly exemplified by, but not limited to, the commercial practices arisen in relation to the use of the ECRIS.

Written by Alexia Pato, Senior Research Fellow at the University of Bonn
On 10 September 2019, I had the immense pleasure to attend a Conference on the role of private international law (PIL) academia in Latin America (LATAM), which took place in the fast-paced environment of the Max Planck Institute for Comparative and International Private Law (MPI) in Hamburg. The Conference was organised and chaired by Ralf Michaels and Verónica Ruiz Abou-Nigm. I thank them both for their warm welcome and congratulate them for the success of the Conference, which honours the long-standing PIL tradition in LATAM and encourages collaborative learning beyond borders.

This well-structured event encompassed two roundtables: whereas the first one dealt with PIL culture in LATAM, the second one discussed the impact of PIL schools of thought. Speakers of both roundtables prepared short handouts and submitted research questions to the audience, which created a fertile ground for interactions. The following paragraphs summarise the content of the presentations, as well as the follow-up discussions.

The PIL Culture in LATAM

The first roundtable discussed the specific features of academia in LATAM. In particular, María Mercedes Albornoz highlighted that many PIL scholars cumulate academic and professional positions. This might be unfortunate, as the time dedicated to research tends to decrease. A call for more interactions between PIL scholars around the world was made, in order to foster the exchange of ideas and the search for solutions to global concerns. This could be achieved through, e.g. the introduction of double university degrees or visiting programs for professors.

In that respect, the specific role of both the MPI and the Uruguayan Institute of Private International Law (IUDIP) was emphasised by Gonzalo Lorenzo Idiarte and Jan Peter Schmidt. First, Gonzalo Lorenzo Idiarte explained the key role of law Institutes in promoting scientific activities. Additionally, they help universities to deal with the increasingly higher number of students and the corresponding teaching workload. In particular, the IUDIP is active in organising academic events – such as conferences and reports – and regularly drafts PIL texts. The IUDIP is trying to acquire more visibility and encourage scholars to visit.

As for the MPI, Jan Peter Schmidt pointed out that the Institute has contributed to fruitful academic exchanges. On the one hand, many PIL scholars in LATAM visited the MPI and hence, participated to the diffusion of Latin American PIL in Europe. They often helped the MPI in its role of providing legal opinions to German courts on the application of foreign, Latin American law. Indeed, scholars are of utmost importance, as they provide access to “remote” literature and court decisions. On the other hand, renown PIL experts, such as Jürgen Samtleben, Paul Heinrich Neuhaus and Jürgen Basedow, reinforced the links of the MPI with LATAM countries.

Finally, Inez Lopes insisted on the role of ASADIP (Asociación Americana de Derecho Internacional Privado), which gives LATAM countries a voice at the global level. The influence of such an association is potentially huge. Vertically, it can assist LATAM countries in implementing international conventions and advise governments. Horizontally, since ASADIP takes part in several international organisations – such as the HCCH, UNIDROIT, UNCITRAL and OAS – it has a chance to participate in the decision-making process.

The language in which scientific works should be written was extensively discussed with the audience. In particular, should LATAM scholars publish in English? On the one hand, it was highlighted that English is a language that enables Latin American PIL to gain a global dimension. Indeed, the diffusion of knowledge in a globalised setting mainly takes place in that language. On the other hand, legal English describes the law of common law countries. Therefore, using English to describe PIL in LATAM could be perceived as a cultural mismatch.

The Impact of PIL Schools of Thought in LATAM

The second roundtable highlighted the fundamental role of scholars in drafting PIL acts and conventions. In Argentina, Ramírez, Vargas Guillemette and Alfonsín fostered the development of PIL, thanks to their rather avant-gardist ideas, as Cecilia Fresnedo de Aguirre explained. More recently, outstanding scholars contributed to the elaboration of PIL rules within the framework of international organisations, such as the HCCH, UNIDROIT and the OAS.

Although academia boosts the creation of PIL, parliaments tend to blatantly disregard PIL issues and texts. For example, Gonzalo Lorenzo Idiarte and Cecilia Fresnedo de Aguirre explained the challenging legislative path of the Uruguayan General Private International Law Bill. Academics drafted this text and presented it to the parliament, which rejected it three times (!). Its approval is still pending at the time I write those lines.

In Venezuela, the same trend is observable, as Javier Ochoa Muñoz explained. The Venezuelan Private International Law Bill was first drafted in 1965 but only approved in 1999, thanks to the work and energy of Tatiana Maekelt. Here too, an academic supported the development of PIL. Additionally, Tatiana Maekelt encouraged the creation of the ASADIP in 2007 and set up a successful Master Program in Private International and Comparative Law.

At the regional level, the Inter-American Specialized Conferences on Private International Law (CIDIP), organised under the auspices of the OAS, played an important role in the codification and harmonisation of PIL in LATAM. Today, however, this process stalls and, as a consequence, Valesca Raizer Borges Moschen asked if and how the role of the OAS should be redefined. She noted the increasing role of the Inter-American Juridical Committee and the preference for the creation of flexible PIL instruments.

Since international codifications came to a standstill, Sebastián Paredes explained that, in the recent years, LATAM countries have engaged in individual, uncoordinated efforts to codify and modernise their PIL rules. This certainly created coordination issues and further complicated the quest for harmonised solutions to collective problems.

Finally, in his closing speech, Jürgen Samtleben talked about his first steps as a PIL academic in LATAM. He delighted the audience with many anecdotes and a touch of humour.

The latest issue of the „Praxis des Internationalen Privat- und Verfahrensrechts (IPRax)“ features the following articles:

E. Jayme: On the Legal Status of Indigenous Peoples in German Cultural Property Proceedings

The Nama Traditional Leaders Association asked the Constitutional Court of the federal state Baden-Wurttemberg to issue an interim order to prevent its government from returning certain pieces of cultural property to the Republic of Namibia. These cultural goods had been taken by Germans during the colonial period and have been displayed in the Linden-Museum in Stuttgart since 1902. The Nama Association relied on the argument that these goods belonged to the Witbooi family and were part of the Nama cultural heritage. The Constitutional Court dismissed the action on procedural grounds. According to the Court, an interim order required a main action which lacked in that case. In addition, the Court remarked that the litigation was such to be better handled within Namibia. The restitution of colonial goods from European museums to the territories of their origin has been discussed widely since President Macron, in 2017, gave a speech in Ouagadougou (Burkina Faso) asking for the return of colonial goods to African countries. This idea throws up many questions of law and particularly of conflict of laws, as is evident in the Nama-case, which centres around the legal status of indigenous people in German court proceedings concerning cultural goods. The author also discusses problems of private international law, such as the law applicable to the question of property regarding such colonial goods.

M. Drehsen: Service of judicial documents within the context of the EuMahnVO

The intersection of the Regulation (EC) No 1896/2006 and the Regulation (EC) No 1393/2007 is the service of the European order for payment. Even if Art. 12 (5), 13 to 15 Regulation (EC) No 1896/2006 contain provisions on the service of the same, these are not complete upon closer examination, so that according to the decision of the ECJ of 6.9.2018 worthy of approval, recourse may be had to the Regulation (EC) No 1393/2007 and in particular to Art. 8 Regulation (EC) No 1393/2007 and the case-law of the ECJ issued in this regard. Even if the same legal consequences as for the absence of a corresponding translation are to apply to the non-addition of the form under Annex II of the Regulation (EC) No 1393/2007, the period for statement of opposition under Art. 16 (2) Regulation (EC) No 1896/2006 can begin differenthy for these two service defects to be distinguished.

S. Arnold/T. Garber: A Pyrrhic victory for Greece: International Procedure and the limits of state sovereignty

In 2012, Greek government bonds were restructured which caused enormous losses to private investors. Many of them sued the Hellenic Republic, especially in German and Austrian courts. Following a referral of the Austrian Supreme Court (OGH) the ECJ decided that actions brought by private investors against the Hellenic Republic are not covered by the scope of application of the Brussels Ibis Regulation. After the ECJ’s decision, the OGH even denied international jurisdiction of Austrian courts according to the national (Austrian) rules of civil procedure. Both decisions are flawed as regards their outcomes and their reasonings. The following lines will explore these flaws and shed some light on the decisions’ consequences.

Q.C. Lobach: International jurisdiction of the courts at the place of performance of a contract of carriage for air passengers’ claims under the Flight Compensation Reg. against a third-party operating carrier

In the Rehder/Air Baltic case, the CJEU held that the places of performance of a contract of carriage pursuant to art. 7 (1) (b) second indent Brussels I Recast Reg. are both the place of departure as well as the place of arrival of a flight. Consequently, air passengers’ claims for compensation on the basis of the Flight Compensation Reg. can be pursued before a court at either place at the election of the claimant. However, divergent opinions existed on whether these principles were accordingly applicable in cases in which a journey by air consists of various legs, while the contracting air carrier on the basis of code sharing has engaged an operating air carrier for one of the legs. In such a situation, the question is whether merely the courts at the places of departure and arrival of that particular leg or rather the courts at these places of the air travel in its totality are competent to hear the passenger’s claims against the operating air carrier. In the case at hand, the CJEU answers these as well as various other questions on international jurisdiction in relation to air passengers’ compensation claims under the Flight Compensation Reg.

H. Roth: Agreement of jurisdiction according to Art. 25 Brussels Ia Reg. and ex officio review by national courts

According to German Civil Procedure law, jurisdiction is always reviewed ex officio. Hereby, the Brussels Ia Reg. leaves room for the application of the respective national civil procedure law. According to German Civil Procedure law, the plaintiff has to conclusively present the relevant facts of the case, which are sufficient to establish the international jurisdiction of the court seized. In case of an effective objection by the defendant, the court has to take evidence. The same is true in case of an international trade custom (Art. 25 par. 1 s. 3 lit. c Brussels Ia Reg.). The German Federal Supreme Court’s decision is therefore persuasive not only by its legal outcome but also by its legal reasoning.

V. Lipp: Applicable law to child support when child changes habitual residence

The ECJ case KP./. LO is its very first case on the interpretation of the “Protocol of 23 November 2007 on the Law Applicable to Maintenance Obligations”. This “Protocol”, in fact an international convention drafted by the Hague Conference on Private International Law, contains the rules on applicable law to maintenance obligations for all member states of the European Union except Denmark and the UK. The ECJ thus first clarifies the status of the Protocol as secondary law of the EU and its competence to interpret it. It then deals with Art. 4 para. 2 of the Protocol when a child changes its habitual residence and now claims support from a parent for the period before that change took place. The following article discusses these issues in the context of the new regime for international maintenance, both within the EU and outside of it.

J. Antomo: International child abduction or homecoming: HCA caught between the best interests of the child and general prevention

In cases of child abduction, the HCA intends to restore the status quo ante by requiring the return of the child to be ordered forthwith. Judicial authorities in the state where the child is located must order the child’s return, and can only refuse to do so in strictly limited exceptional situations. This principle is based on the assumption that, as a general matter, returning the child to his or her familiar environment is in the child’s best interest. In addition, establishing an expectation that return orders will swiftly issue aims to minimize any incentives for abducting children across borders. However, in cases where the child’s habitual residence frequently changes, it is doubtful whether a return order actually serves the child’s best interests. Nevertheless, the Higher Regional Court of Stuttgart recently ordered the return of two children to Slovakia in a case where the children had only spent six months there, then moved back to their former home country Germany together with their mother. This article evaluates whether in such cases of removal to the former home country the interest of the individual child should take priority over the general preventive objectives of the Convention. The author shows that the stress that HCA procedures impose on children could particularly be reduced by promoting mediation and amicable settlements.

B. Hess: Not a simple footnote: 9/11 litigation in the civil courts of Luxembourg

On 27/3/2019, the Tribunal d’Arrondissement de Luxembourg refused to recognise two default judgments rendered by the U.S. District Court for the Southern District of New York amounting to 2.1 billion USD.2 These judgments had been given in favour of 92 victims of the 9/11 terrorist attacks. The 16 defendants included inter alia the Islamic Republic of Iran, its former heads of state and of government as well as several governmental entities and state enterprises. In a 160 pages judgment, the Luxemburg court held that recognition of the American judgment against the state defendants would amount to a violation of state immunity under customary international law. Referring to the 2012 ICJ’s judgment on state immunity3 the Luxemburg court expressly stated that neither a “terrorists exception” nor a non-commercial tort exception from immunity were applicable to the case at hand. Therefore, state immunity barred the recognition of the judgment. Besides, the court declined recognition with regard to the non-state defendants because their rights of defence had not been sufficiently respected in the original proceedings as (substantial) amendments of the lawsuit had not been served on the defendants. The judgment carefully assesses the current developments of state immunity under customary international law. It is also important for the private international law of the Grand Duchy.

I. Schneider: EIR: The reach of the lex fori concursus in lease agreements for companies with real estate property

In its decision in case 1 Ob 24/18p (21 March 2018) the Supreme Court of Austria dealt with various questions regarding the European Insolvency Regulation (EIR). Unfortunately, the court did not make a final statement on these questions since it was not essential to decide the case. The article attempts to reach a solution for the issues raised in the judgement which still remain unsolved by applying the EIR. That is the interpretation of the term “immoveable property” in Art. 11 para. 1 EIR, the relevance of the choice of law and the scope of the public policy-clause in Art. 33 EIR.

P.A. Nielsen: EU PIL and Denmark 2019

The author explains the reasons for Denmark’s reservation from 1992 towards EU cooperation in civil and commercial matters and its “opt-out” nature as well as the failed attempt in 2015 to change it to an opt-in mechanism identical to the British and Irish reservations. Furthermore, the author examines the existing parallel agreements from 2005 between the EU and Denmark in respect of originally the Brussels I Regulation and the Service Regulation and gives an account of which EU instruments Denmark is bound by.

A. Wohlgemuth: On the International Family Law of Indonesia

Indonesia, domestically equipped with a diversity of laws, that needs internal law allocation, nearly a century after independence, has not yet even codified its Private International Law, the last project of which dates from 2015. Concerning conflict of laws Indonesia is still relying on a handful of rules mostly inherited from the Dutch colonial period. These provisions, for their part, are rooted in the French Civil Code of 1804. International family law, especially on mixed marriages, is covered by the Marriage Law No. 1/1974. The following is a review of the scarce published case law of Indonesian courts and the more comprehensive legal Indonesian literature on the matter.

Written by Gustavo Becker*  

During the 26th Willem C. Vis Moot, Dr. Gustavo Moser, counsel at the London Court of International Arbitration and Ph.D. in international commercial law from the University of Basel, coordinated the organization of a seminar regarding choice of law in international contracts and international arbitration. The seminar’s topics revolved around Dr. Moser’s recent book Rethinking Choice of Law in Cross-Border Sales (Eleven, 2018) which has been globally recognized as one of the most useful books for international commercial lawyers.

On April 15th, taking place at Hotel Regina, in Vienna, the afternoon seminar involved a panel organized and moderated by Dr. Moser and composed of Prof. Ingeborg Schwenzer, Prof. Petra Butler, Prof. Andrea Bjorklund, and Dr. Lisa Spagnolo.The panel addressed three core topics in the current scenario of cross-border sales contracts: Choice of law and Brexit, drafting choice of law clauses, and CISG status and prospects.

The conference started with a video presentation in which Michael Mcllwrath (Baker Hughes, GE) addressed his perspectives on how Brexit might impact decisions from companies regarding choice of law clauses in international contracts, its effects on the recognition of London as the leading seat for dispute resolution, and the position of English law as the most applicable law in international contracts.

In Mr. Mcllwrath’s perspective, in spite of Brexit, London will still remain a significant place for international dispute resolution as it adoptsglobally recognized commercial law principles, is an arbitration friendly state and enjoys a highly praised image as a safe seat for international cases. However, in order to try to predict the impact of Brexit in international dispute resolution, Mr. Mcllwrath collected data released by arbitral institutions and found that in the years leading up to the Brexit vote, London did not grow as a seat of arbitration significantly. Considerable growth nonetheless has been seen outside the traditional centers of international arbitration. Therefore, the big issue involving Brexit, in Mr. Mcllwrath’s view, is the uncertainty that companies will face with the UK’s unsettled political future. For this reason, the revision of contract policies is now likely to be undertaken and the choice of English law in international contracts might be affected.

Prof. Schwenzer pointed out that the whole discussion about Brexit and its effects on international dispute resolution depends primarily on the type of Brexit that will be chosen and the agreements between Europe and Great Britain. In her point of view, one of the main questions is whether the UK will join the Lugano Convention, which would make the enforcement of English court decisions easier in European State-members. Prof. Schwenzer also highlighted that, in terms of choice of law, there will be uncertainty issues regarding the regulations that have been imported from Europe and are now part of the English legal system. The problem might be how these rules will be developed further as the Court of Justice of the European Union will no longer be responsible for interpreting this part of English law.

Furthermore, Prof. Bjorklund stated that, whilst the choice of English law will require more caution after Brexit, the well-recognized security related to arbitration in the UK is likely to continue as long as the New York Convention, the English Arbitration Act, and the arbitration friendly character of English commercial courts will not likely change. However, in the point of view of an international arbitration counsel, certainly, the “risks of arbitrating in the UK” will leave some room for parties to choose arbitration in other places rather than in London or – at least – to start rethinking the classic choice for English-seated arbitration.

Concerning the choice of English law, Prof. Butler reminded the audience of two important regulations which should be analyzed in the context of Brexit: Rome I for deciding which contract law is applicable in international cases, and the Brussels Regulation to define which court is entitled to decide a case and how to enforce and recognize foreign decisions within the EU. According to Prof. Butler, under the first Brexit bill, the statutes signed within the EU regime would still apply. However, subject to confirmation from the English government, the development of these laws might no longer be applicable.

Dr. Spagnolo added that whether a country joins an international instrument sometimes has little to do with rational factors and are often “emotional”. In this sense, one of the arguments that the political environment seems to emphasize nowadays under the notion of nationalism is the maintenance of sovereignty. According to Dr. Spagnolo, this is a dangerous consideration to be emphasized in an environment that relies on commercial sense and needs basic guarantees of international harmonization, such as the enforcement of foreign awards or the application of a uniform law.

Regarding the topic “drafting choice of law clauses”, Mr. Mcllwrath highlighted the “emotional” features involving the choice of law. In his opinion, as Dr. Moser has demonstrated in his book, many choices of law decisions are driven by factors such as how many times a specific law had already been applied by a law firm or what law the attorneys involved in that contract were already familiar with. Considering this, Mr. Mcllwrath understands that Brexit can make lawyers rethink the application of English law, even though this might be dependant upon whether financial institutions and companies currently based in London will or will not move away from the UK.

Prof. Schwenzer highlighted that what Dr. Moser has found in his research regarding the emotional aspect of the choice of law is a proving fact of what she has experienced in practice: choice of law decisions are mostly emotionally charged and seldom rational. One example is that even though Swiss law is arguably the second most chosen law in international contracts, in Prof. Schwenzer’s view, Swiss law is not predictable: in core areas of contract law, such as limitation of liability, Swiss law is not advantageous for commercial contracts in her opinion. Prof. Schwenzer added that this shows that lawyers seldom analyze the pros and cons of laws deeply before applying them in international commercial contracts.

Concluding the panel discussions, Dr. Moser brought up the topic “CISG status and prospects”.  While discussing this matter, all the panelists agreed upon the urgent need of global initiatives to increase awareness and improve knowledge of the CISG for both young lawyers who are sitting for the bar exam, and for judges who will face international commercial cases and might not be familiar with the CISG or even prepared to apply its set of provisions.

*With contributions from Gustavo Moser

Written by Leonhard Huebner, Institute for Comparative Law, Conflict of Laws and International Business Law (Heidelberg University)

The third-party effects of the assignment are one of the “most discussed questions of international contract law” as it concerns the “most important gap of the Rome I Regulation”. This gap is regrettable not only for dogmatic reasons, but above all for practical reasons. The factoring industry has provided more than 217 billion euros of working capital to finance more than 200,000 companies in the EU in 2017 alone. After a long struggle in March of 2018, the European Commission, therefore, published a corresponding draft regulation (COM(2018)0096; in the following Draft Regulation). Based on a recent article (ZEuP 2019, 41) the following post explores whether the Draft Regulation creates the necessary legal certainty in this economically important area of law and thus contributes to the further development of European private international law (see also this post by Robert Freitag).

Legal background and recent case law

Although Article 14 of the Rome I Regulation provides for a rule governing the question regarding which law is applicable to the voluntary assignments of claims, it is the prevailing opinion that the third party effects of assignments are not addressed within the Rome I Regulation. According to Article 27 (2) of the Rome II Regulation, the European Commission was under the obligation to submit a report concerning the question of the effectiveness of an assignment or subrogation of a claim against third parties and the priority of the assigned or subrogated claim over a right of another person. Said report should have been published no later than 17 June 2013. In March 2018, almost nine years after the Rome I Regulation came into force, the Commission finally presented said report in form of the Draft Regulation subject to this article. The practical importance and the need for a harmonized European approach have also been demonstrated by recent case law proving the rather unsatisfactory status quo in European PIL. Two recent decisions of the Higher Regional Court of Saarbrücken (dated 8 August 2018 – 4 U 109/17) and of the Norwegian Supreme Court (see IPRax 2018, 539) gave striking examples of how the diverging requirements for the effectiveness of the assignment vis-à-vis third parties lead to different solutions within the respective PIL rules of the member states. The preliminary reference to the ECJ of the Higher Regional Court of Saarbrücken concerns a multiple assignment, while the ruling of the Norwegian Court of Justice deals with the question whether unsecured creditors of the assignor can seize the allegedly assigned claims of the assignor in insolvency (see also this post by Peter Mankowski).

The material scope of the proposed regulation

Art. 5 of the Draft Regulation determines the material scope of application of said Draft Regulation with regard to the effectiveness of an assignment as well as its priority vis-à-vis third parties. The effectiveness vis-à-vis third parties is regularly determined by registration or publication formalities (lit. a), while priority conflicts for the assignee arise vis-à-vis various persons. Lit. b) concerns multiple assignments, while lit. c) regulates the priority over the rights of the assignor’s creditors. In addition, lit. d) and e) assign priority conflicts between the assignee and the rights of the beneficiary of a contract transfer/contract assumption and a contract for the conversion of debts to the Draft Regulation.

In essence, Art. 5 of the Draft Regulation covers notification requirements to the assignee. Most legal systems require a publicity act for binding effects vis-à-vis third parties and the debtor, such as a notice of assignment to the debtor or a registration in a public register. Whereas under German law the assignment becomes effective immediately between the assignor and the assignee as well as against third parties, in other jurisdictions this only applies once the debtor has been notified of the assignment (signification in French law pursuant to former Art. 1690 of the Code civil or within the framework of legal assignment in the UK).

Connecting factor: habitual residence of the assignor combined with sectorial exceptions

The connecting factors employed by current national PIL rules considerably vary between the member states. In principle, three connecting factors compete with each other: the habitual residence of the assignor, the law applicable to the transfer agreement (assignment ground statute) and the law applicable to the transferred claim. Furthermore, the law at the debtor’s domicile might also be considered an important factor.

Art. 4 (1) of the Draft Regulation unties this gordic knot as it specifies the law of the country in which the assignor has his habitual residence “at the relevant time” as the primary connecting factor. The goal of the European Commission is to create legal certainty and, above all, to promote cross-border trade in claims. By way of sectoral exceptions, the law of the transferred claim is to be applied if either (i) “cash collateral” credited to an account or (ii) claims from financial instruments are transferred (Art. 4 (2) of the Draft Regulation).

A downside of the link to the law of habitual residence is its changeability, which may lead to a conflit mobile. By altering the connecting factor, the applicable law may also change leading to legal uncertainty. To overcome such conflict, so called meta conflict of laws rules are also provided for in the Draft Regulation. In this case, it is a matter of determining the relevant point in time in order to make a viable connection. This rule has been implemented in Art. 4 (2) of the Draft Regulation.

An unsolved problem is the determination of the “material point in time” cited in Art. 4 (1) of the Draft Regulation. Accordingly, the third parties’ effects are determined by the assignor’s habitual residence at the relevant time. However, neither a recital nor the catalogue of Art. 2 of the Draft Regulation give an adequate definition of this relevant point in time so far. It is therefore advisable to replace the term “at the relevant time” with “at the time of conclusion of the assignment contract” in the final regulation. This is also reflected in the EP’s legislative resolution of 13 February 2019 (P8_TA-PROV(2019)0086, p. 12). The advantage of this clarification would be that the same point in time would be relevant in the legal systems of the member states which follow the principle of separation as well as those which follow the principle of unity.

A step forward?

The Draft Regulation would represent a major step forward in the trade of cross-border receivables in the EU. It closes a large gap within European PIL, while at the same time aiding EU member states to partly adapt their domestic legal system accordingly. Even if the European Commission did not comply with the (unrealistic) deadline for the review cited in Art. 27 (2) of the Rome I Regulation, the legal debate made this essential progress possible demonstrating the EU’s ability to reach compromises. Although the Draft Regulation solves many problems, it may also raise new ones. That is again good news for lawyers interested in PIL. Nevertheless, the enactment of the Draft Regulation would eventually answer “one of the most frequently discussed questions of international contract law”. The old saying “patience is a virtue” would be proven right again.

This blog post is a condensed version of the author’s article in ZEuP 2019, 41 et seqq. which explores the new Draft Regulation in more detail and contains comprehensive references to the relevant literature.

By Prof. Dr. Peter Mankowski, University of Hamburg

Sometimes the unexpected simply happens.  Rome I aficionados will remember that the entire Rome I project was on the brink of failure since Member States could not agree on the only seemingly technical and arcane issue of the law applicable to the third-party effects of assignments of claims. An agreement to disagree saved the project in the last minute, back then. Of course, this did not make the issue vanish – and this issues concerns billion euro-markets in the financial industry.In the spring of this year the Commission finally ventured to table a Proposal COM (2018) 96 final for a separate Regulation. This was the result of extensive preparation – and does yet deviate in important respects from the majority results reached in a very prominently staffed expert commission. The Commission proposes a compromise and combined model. Regardless of the degree to which one agrees or disagrees with this proposal (for discussion see Peter Mankowski, Recht der Internationalen Wirtschaft [RIW] 2018, 488; Andrew Dickinson, IPRax 2018, 337; Michael F. Müller, Zeitschrift für Europäisches Wirtschaftsrecht [EuZW] 2018, 522; Leplat, Petites Affiches n° 155, 3 août 2018, 3), one thing should be clear: The proposed model does definitely not form part of the still lex lata.

And now enter the surprise guest. Astonishingly, for ten years after the implementation of Rome I not a single reference to the CJEU had been made on the relevance which Art. 14 Rome I might have in the said regard. But once the Proposal is out, the Oberlandesgericht Saarbrücken (decision of 8 August 2018, case 4 U 109/17) simply did it. The decision is excellently structured and well researched. The questions submitted to the CJEU are pin-point accurate. They follow a strict line. In the author’s translation they read:

1. Is Art. 14 Rome I Regulation applicable to the third-party effects of multiple assignments of the same claim by the same assignor?
2. If the first question is to be answered in the affirmative: Which law is applicable to such third-party effects?
3. If the first question is to be answered in the negative: Is Art. 14 Rome I Regulation to be applied per analogiam?
4. If the third question is to be answered in the affirmative: Which law is applicable to such third-party effects?

Multiple assignments of the same claim by the same assignor are particularly a field where applying the law of the assignor’s habitual residence scores and applying the lex causae of the claim assigned fares not too badly whereas applying the law governing the relation between assignor and assignee fails.

But the more interesting question of course is whether the recent reference will interfere with the progress which the Commission Proposal might make. Will Council and Parliament wait for the CJEU to point into any direction for the lex lata? And if the CJEU will utter an opinion as to substance, which influence will it exert on the substance of a possible lex ferenda?

If one dares to employ the crystal maze and to conduct some Kirchberg astrology the most likely outcome of the reference procedure might be that the CJEU will answer the first and third questions submitted in the negative thus rendering any answer to the second and fourth questions obsolete. In the light of the drafting history how Art. 14 Rome I Regulation was rescued in the last minute (see the dramatic account by the Dutch delegate, Pauline van der Grinten, in: Westrik/van der Weide (eds.), Party Autonomy in International Property Law [2011] p. 145, 154-161) this would be a sound way out for the CJEU leaving all liberty and leeway possible for Commission, Council and Parliament.