Written by Michiel Poesen

Less than a year after its decision in Case C-337/17 Feniks (discussed here), the Court of Justice had another opportunity to consider the extent to which the Brussels Ia Regulation provides a head of special jurisdiction for an actio pauliana. In Case C-722/17 Reitbauer (decided last Wednesday but still not available in English), the Court confirmed its decision in Feniks, according to which such an action falls under Art 7(1) Brussels Ia if it is based on a contractual right. Michiel Poesen, PhD candidate at KU Leuven, has been so kind as to share his thoughts on the decision with us in the following post.

Earlier this week, the Court of Justice of the European Union found that an actio pauliana is subject to jurisdiction in matters relating to a contract, contained in Article 7(1) Brussels Ia (Case C-722/17 Reitbauer).

In general terms, the actio pauliana is a remedy that allows a creditor to have an act declared ineffective, because said act was carried out by a debtor with the purpose of diminishing its assets by passing them on to a third party (see Opinion of AG Bobek, C-337/17 Feniks, [35]). This blogpost will briefly summarise the Court’s ruling and its wider impact.

Facts

The facts leading to the ruling are quite complex. Mr Casamassima and Ms Isabel C., both resident in Rome, lived together at least until the spring of 2014. In 2010, they purchased a house in Villach, Austria. While Mr Casamassima apparently funded the transaction, Isabel C. was registered in the land register as the sole owner.

Ms Isabel C. – with the ‘participation’ of Mr Casamassima – entered into contracts for extensive renovation works of the house with Reitbauer and others (the applicants in the preliminary reference proceedings, hereinafter referred to as ‘Reitbauer’). Because the costs of the renovation far exceeded the original budget, payments to Reitbauer were suspended. From 2013 onwards, Reitbauer were therefore involved in judicial proceedings in Austria against Ms Isabel C. Early 2014, the first of a series of judgments was entered in favour of Reitbauer. Ms Isabel C. appealed against those judgments.

On 7 May 2014 before a court in Rome, Ms Isabel C. acknowledged Mr Casamassima’s claim against her with respect to a loan agreement which was granted by the latter in order to finance the acquisition of the house in Villach. Ms Isabel C. undertook to pay this amount to the latter under a court settlement. In addition, she agreed to have a mortgage registered on the house in Villach in order to secure Mr Casamassima’s claim.

On 13 June 2014 a (further) certificate of indebtedness and pledge certificate was drawn up in Vienna by a notary to guarantee the above settlement (‘the pledge’). With this certificate, the pledge on the house in Villach was created on 18 June 2014.

The judgments in favour of Reitbauer did not become enforceable until after this date. The pledges on the house of Ms Isabel C. held by Reitbauer, obtained by way of legal enforcement proceedings, therefore ranked behind the pledge in favour of Ms Casamassima.

In order to realise the pledge, Mr Casamassima applied in February 2016 to the referring court (the District Court in Villach, Austria) for an order against Ms Isabel C., requiring a compulsory auction of the house in Villach. The house was auctioned off in the autumn of 2016. The order of entries in the land register shows that the proceeds would go more or less entirely to Mr Casamassima because of the pledge.

With a view to preventing this, Reitbauer brought an action for avoidance (‘Anfechtungsklage’) in June 2016 before the Regional Court in Klagenfurt, Austria, against Mr Casamassima and Ms Isabel C. The action was dismissed by that court due to a lack of international jurisdiction, given Casamassima’s and Isabel C’s domicile outside of Austria.

At the same time, Reitbauer filed an opposition before the district court of Villach, Austria, in the course of the proceedings regarding distribution of the proceeds from the compulsory auction, and subsequently brought opposition proceedings against Mr Casamassima. In these opposition proceedings, Reitbauer sought a declaration 1) that the decision regarding the distribution to Mr Casamassima of the proceeds of the action was not legally valid for reasons of compensation between Ms Isabel C.’s claims and those of Mr Casamassima, and 2) that the pledge certificate was drawn up to frustrate Reitbauer’s enforcement proceedings with regard to the house in Villach. Essentially, the second part of Reitbauer’s action was based on the allegation that Ms Isabel C. had acted with fraudulent intent, therefore being a form of actio pauliana.

Decision

The Court of Justice had to consider first whether jurisdiction in proceedings that have as their object rights in rem in immovable property or tenancies of immovable property, provided in Article 24(1) Brussels Ia, was applicable. To trigger this ground of jurisdiction, Reitbauer and others alleged that their action was closely related to the house in Villach.

In reaching its conclusion, the Court reiterated that Article 24(1) Brussels Ia does not encompass all actions concerning rights in rem in immovable property, but only those which both come within the scope of th Regulation and are actions which seek to determine the extent, content, ownership or possession of immovable property or the existence of other rights in rem therein and to provide the holders of those rights with protection for the powers which attach to their interest (Case C-722 Reitbauer, [44]; see also Case C?417/15 Schmidt, [30])

This definition implies that an action was based on rights in rem, not on rights in personam. The part of the action alleging compensation between Casamassima’s and Isabel C.’s claims does not satisfy this requirement, as it aims at contesting the existence of the Mr Casamassima’s right in personam that was the cause of the enforcement proceedings.

The second part of the action, the actio pauliana, does not fit within in rem jurisdiction either. The Court found that such an action does not involve the assessment of facts or the application of rules and practices of the locus rei sitae in such a way as to justify conferring jurisdiction on a court of the State in which the property is situated (Case C-722 Reitbauer, [48]; see also C-115/88 Reichert I, [12]).

Having come to this conclusion, the Court decided that jurisdiction over the actions brought by Reitbauer and others was not subject to Article 24(5) Brussels Ia either – which contains a special ground of jurisdiction “in proceedings concerned with the enforcement of judgments”. According to the Court, this bespoke ground of jurisdiction is to be understood as englobing proceedings that may arise from “recourse to force, constraint or distraint on movable or immovable property in order to ensure the effective implementation of judgments and authentic instruments” (Case C-722 Reitbauer, [52]; see also Case C?261/90 Reichert II, [28]) .

Reitbauer and others’ actions were clearly not related to the enforcement of the judgment but to the substantive rights underlying the pledge which was being enforced. For that reason, enforcement jurisdiction was to remain inapplicable.

Having reached the conclusion that no exclusive ground of jurisdiction could apply, the Court went on to consider Art 7(1) Brussels Ia – jurisdiction in matters relating to a contract. Following a short motivation (Case C-722 Reitbauer, [56]–[62]) the Court confirmed that the part of Reitbauer and others’ action amounting to an actio pauliana was a matter relating to a contract. As in the Feniks ruling, the reason cited is that the action aims at preserving Reitbauer and others’ contractual rights by setting aside the creditor’s allegedly fraudulent acts (Case C-722 Reitbauer, [58]–[59]; Case C-337/17 Feniks, [43]–[44]).

As a consequence, Art 7(1)(b) Brussels Ia allocates jurisdiction to the place of performance of the allegedly defrauded contract, being Villach since Reitbauer and others delivered their renovation services in that location (see Case C-337/17 Feniks, [46]).

The Purpose and Role of Art 7(1) Brussels Ia

As far as the exclusive grounds of jurisdiction in Art 24(1) and 24(5) Brussels Ia are concerned, the decision can hardly be considered surprising. Reitbauer and others tried to plead their actions as relating to a matter covered by exclusive jurisdiction, with the aim of suing the Italian domiciled defendants in Austria instead of Italy (which would be the outcome of the default rule of jurisdiction of Art 4(1) Brussels Ia). This attempt was bound to fail.

More interestingly, the Court confirmed that an action pauliana can be a matter relating to a contract. This emerging line of case law is met with criticism. One of the points raised was that a defendant may be ignorant of the contract it allegedly helped to defraud. In such a situation, applying contract jurisdiction would trigger a forum that is unforeseeable for the defendant (an outcome that the Court rightly attempted to avoid in Case C-26/91 Handte, [19]). A response to this criticism would be not to apply contract jurisdiction to an actio pauliana altogether, as suggested earlier by AG Bobek (Opinion of AG Bobek, C-337/17 Feniks, [62]–[72]). There, the AG opined that an actio pauliana is too tenuously and too remotely linked to a contract to be a matter relating to a contract for the purpose of Art 7(1) Brussels Ia. Alternatively, AG Tanchev opined that the defendant’s knowledge should be taken into account (Opinion in Case C-722/17):

[84] … knowledge of a third party should act as a limiting factor: … the third party needs to know that the legal act binds the defendant to the debtor and that that causes harm to the contractual rights of another creditor of the debtor (the applicants).

[92] … the defendant’s knowledge of the existence of the contract(s) at issue is important.

Instead of realigning the Feniks ruling with the principle of foreseeability, the decision in Reitbauer confirmed that an actio pauliana fits squarely within jurisdiction in matters relating to a contract, the driving factor seemingly being the hope to offer the claimant an additional forum that presumably has a close connection to the dispute (Case C-722 Reitbauer, [60]: Case C-337/17 Feniks, [44]–[45]).

Looking beyond the actio pauliana, the case law begs the question what other types of remedies – however remotely linked to a contract – could be subject to Art 7(1) Brussels Ia. An action for wrongful interference with contract, for example, regarded to be tortious in nature (e.g. Tesam Distribution Ltd v Schuh Mode Team GmbH and Commerzbank AG [1990] I.L.Pr. 149), would be a matter relating to a contract by the standard applied in Feniks and Reitbauer. It is doubtful whether such a broad construction of jurisdiction in matters relating to a contract complies with the limited role of Art 7(1) Brussels Ia within the Regulation (Recital (15) Brussels Ia).

Written by Anna Bizer

Anna Bizer, doctoral candidate at the University of Freiburg, has kindly provided us with her thoughts on AG Szpunar’s opinion in the case of Glawischnig-Piesczek v Facebook Ireland (C-18/18).

Since the EP-proposal from 2012, the European Union has not shown any efforts to fill the gap still existing in the Rome II Regulation regarding violations of personality rights (Article 1(2)(g)). However, Advocate General Szpunar has just offered some thoughts on the issue in his opinion on the case of Eva Glawischnig-Piesczek v Facebook Ireland Limited (C-18/18) from 18 June 2019.

Eva Glawischnig-Piesczek, an Austrian politician, claimed that a Facebook user had violated her personality right by posting a defamatory comment on the social network. She sued Facebook Ireland for the removal of the publication in question as well as other identical and/or equivalent publications. The commercial court in Vienna granted a corresponding injunction and Facebook Ireland did indeed disable access to the publication – but only in Austria by means of geo-blocking. Hereafter, the Austrian Supreme Court referred various questions to the CJEU regarding the interpretation of Article 15(1) of the e-Commerce Directive (Directive 2000/31) which prohibits the imposition of a general monitoring obligation on host providers. While the details of the responsibility of host providers regarding their users’ activities are certainly interesting, this comment focuses on the territorial dimension of the provider’s obligation to delete certain online content. So, the crucial question is whether an Austrian court may oblige Facebook Ireland to make a user’s comment globally inaccessible or whether the injunction is limited to the respective state of the court.

First of all, the AG addresses the issue of jurisdiction by referring to the CJEU’s eDate decision (C-509/09, C-161/10): „the court of a Member State may, as a general rule, adjudicate on the removal of content outside the territory of that Member State, as the territorial extent of its jurisdiction is universal. A court of a Member State may be prevented from adjudicating on a removal worldwide not because of a question of jurisdiction but, possibly, because of a question of substance.” (para. 86) This statement is, in fact, convincing as the CJEU decided in Bolagsupplysningen (C-194/16, para. 48) that the removal of content is a single and indivisible application which can only be made by a court with “universal” jurisdiction (see our earlier posts here and here).

AG Szpunar further states that the territorial dimension of an injunction cannot be determined by Articles 1, 7 and 8 of the Charter of Fundamental Rights because the original claim was not based on EU law and was therefore outside the scope of the Charter (para. 89). In addition, neither did the claimant invoke the European law on data protection (para. 90) nor does the Brussels Ibis Regulation require that an injunction issued by the court of a Member State also has effects in third states (para. 91). Thus, the AG’s – convincing – result is that EU law does not regulate the question of the territorial scope of an injunction regarding the violation of personality rights (para. 93).

However – and now the interesting part begins – AG Szpunar elaborates on the question of assessing cross-border violations of personality rights in case the CJEU did not agree with the inapplicability of EU law (para. 94-103). These considerations are not based on any legal text as, according to the AG, the question is not regulated by EU law.

Generally, AG Szpunar is not comfortable with a worldwide obligation to remove an online publication, “because of the illegality of that information established under an applicable law, [such an obligation] would have the consequence that the finding of its illegality would have effects in other States. In other words, the finding of the illegal nature of the information in question would extend to the territories of those other States” (para. 80). To avoid this effect, a worldwide obligation of removal could only be justified when all potentially applicable laws agree. Of course, this leads to disadvantages: “should a claimant be required, in spite of the practical difficulties, to prove that the information characterised as illegal according to the law designated as applicable under the conflict rules of the Member State in which he brought the action is illegal according to all the potentially applicable laws?” (para. 97). AG Szpunar leaves this question unanswered and continues to focus on the freedom of information: „the legitimate public interest in having access to information will necessarily vary, depending on its geographic location, from one third State to another. Thus, as regards removal worldwide, there is a danger that its implementation will prevent persons established in States other than that of the court seised from having access to the information.” (para. 99)

To avoid this conflict between the freedom of information and personality rights, AG Szpunar recommends the following: “However, owing to the differences between, on the one hand, national laws and, on the other, the protection of the private life and personality rights provided for in those laws, and in order to respect the widely recognised fundamental rights, such a court must, rather, adopt an approach of self-limitation. Therefore, in the interest of international comity […] that court should, as far as possible, limit the extraterritorial effects of its junctions concerning harm to private life and personality rights. The implementation of a removal obligation should not go beyond what is necessary to achieve the protection of the injured person. Thus, instead of removing the content, that court might, in an appropriate case, order that access to that information be disabled with the help of geo-blocking.” (para. 100) “Those considerations cannot be called into question by the applicant’s argument that the geo-blocking of the illegal information could be easily circumvented by a proxy server or by other means.” (Rz. 101)

First, it is noteworthy that the AG strongly emphasizes the freedom of information. So far, this aspect has been rather neglected in the discussion on violations of personality rights compared to freedom of speech and freedom of the press. However, including freedom of information in the balancing of interest reflects that a publication necessarily requires to be noted by at least one other person to have defamatory effects.

Second, the AG sees the solution in geo-blocking. This solution can of course be considered worthy to be debated further as geo-blocking is already a popular means used amongst host providers. However, it is not clear from the AG’s statement why the risk of circumvention should not be considered, although any order by a court to protect personality rights ought to be effective. In any case, this approach conflicts with the efforts of the European Union to restrict geo-blocking within the internal market (Regulation (EU) 2018/302) and should thus not be supported.

Third, the AG’s approach leads to a rather unsatisfactory result for the claimant. One should not forget how the internet generally and social media especially operate: interesting content will be shared and disseminated again and again. These new publications, however, will not be restricted by geo-blocking unless the host provider actively intervenes.

Fourth, it is doubtful if the AG’s approach is fit for reality: the idea of an approach of self-limitation for the courts based on the question “What is really necessary?” appears rather vague and not helpful for the deciding judges. This question is of a fundamental nature and requires an evaluative assessment. In order to achieve legal certainty, this crucial question of necessity should be answered by the legislature or at least the CJEU and should not be decided on a case-by-case-basis.

Fifth, one has to consider the effects of this proposal in the context of conflict of laws in a technical sense: if a claimant wanted Facebook to delete a publication globally and a court had “universal” jurisdiction according to eDate and Bolagsupplysningen, the court – in accordance with the suggestion of the AG – would have to apply the laws of each state from which the publication is still accessible. To make a long story short: Adopting the AG’s proposal means resurrecting the mosaic approach in conflict of laws! This appears to be a step backwards. Not only are the disadvantages of the mosaic principle in times of the internet commonly known, but also this approach contradicts the CJEU’s rejection of the mosaic principle regarding the question of jurisdiction in actions for the removal of publications (Bolagsupplysningen).

Finally, the question of the direct consequences of this opinion remains. It is likely that the CJEU will follow the first proposal of AG Szpunar that the question of the territorial dimension of an injunction for the violation of personality rights is not regulated by EU law and can thus not be decided by the CJEU. However, the AG’s opinion offers a new and interesting perspective on the issue of cross-border violations of personality rights which might give a boost to achieve international harmonisation.

Prepared by Cara North, external consultant to the Permanent Bureau of the Hague Conference on Private International Law (HCCH). This post reflects only personal views.

Today marks a momentous occasion (in the private international law world at least): the conclusion of the Diplomatic Session on the HCCH Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (“Judgments Convention”). A Convention that, as noted by the Secretary General of the Hague Conference on Private International Law (“HCCH”) during his opening remarks for the Session, will be a “gamechanger for cross-border dispute settlement and an apex stone for global efforts to improve real and effective access to justice.”

The origins of the Judgments Convention date back to the early 1990s with a proposal from the United States of America for a mixed convention dealing with the exercise of jurisdiction and the recognition and enforcement of foreign judgments. After many years of hard work on a draft instrument, it was decided that such an instrument was indeed too ambitious, and it was preferable for the HCCH to focus on more specific projects that fell within the remit of that work. The HCCH refocussed its energies on an instrument concerning exclusive choice of court agreements and, with the benefit of the hard work undertaken in the early 1990s, the  Convention on Choice of Court Agreements (“Choice of Court Convention”) was concluded in 2005. That Convention entered in to force in 2015 with Mexico and the European Union becoming Contracting Parties. Since then, Singapore and Montenegro have followed suit and a few other States have either signed the Convention or otherwise indicated their intention to become party to the Convention.

Following the successful conclusion of the Choice of Court Convention, the HCCH once again took stock of potential future projects. In 2012, the train was set in motion for work and negotiations on the Judgments Convention to commence. At first it was decided that the work on the recognition and enforcement of foreign judgments would be undertaken alongside work on regulating international jurisdiction in civil or commercial matters. However, it was then decided that work would first proceed on drafting an instrument on the recognition and enforcement of judgments, with work on international jurisdiction to follow thereafter.

Some seven years and many meetings later, the Judgments Convention has been concluded. Sharing in the enthusiasm for this long-standing project Uruguay signed the Convention today.

The Objectives and Architecture of the Judgments Convention

Broadly speaking, like the Choice of Court Convention, the objectives of the Judgments Convention are (i) enhancing access to justice and (ii) facilitating cross-border trade and investment by reducing the costs and risks associated with cross-border dealings.

Building on the hard work undertaken in the early 2000s to complete the Choice of Court Convention and with the intention of the Judgments Convention operating as a sister instrument to the Choice of Court Convention, the Judgments Convention took, where appropriate, the basic structure and provisions of the Choice of Court Convention as its starting point. The working method adopted was to depart from the provisions of the Choice of Court Convention only where there was good reason to do so.

With that basic structure and working method in mind, work then focussed on the circumstances in which it would be largely uncontroversial for a civil or commercial judgment rendered in the courts of one Contracting State to be recognised and enforced in the courts of another Contracting State.

A comprehensive overview of the provisions in the Judgments Convention will be found in the forthcoming Explanatory Report to the Judgments Convention. This blog post serves to highlight just some of the key provisions.

A Brief Overview of Some Key Provisions

The Convention is separated into four chapters. Chapter I concerns the scope and definitions. Articles 1 and 2 provide the scope of the Convention (i.e., civil or commercial matters) and Article 2 of the Convention provides a number of exclusions from scope. In some respects, these exclusions mirror the exclusions found in the Choice of Court Convention. There are, however, some notable differences including the exclusion of privacy matters and the exclusion of intellectual property matters (a topic which was the subject of a considerable amount of consultation and discussion), as well as some notable inclusions such as certain tort matters, judgments ruling on rights in rem in immovable property and tenancies of immovable property as well as a very limited number of anti-trust (competition) law matters (emphasis added). Article 3 provides a number of important definitions, including the definition of “judgment”. The Convention provides for the circulation of final judgments, this includes both money and non-money judgments. This is of particular importance because while some jurisdictions recognise and enforce money judgments under national law, the traditional approach under others (e.g., under the common law system) is to decline to enforce non-money judgments.

Chapter II contains several core provisions. Most importantly, it identifies the judgments that are eligible for recognition and enforcement and sets out the process for the recognition and enforcement of those judgments.  In this respect, Article 4 contains the core obligation under the Convention. It provides that “a judgment given by a court of a Contracting State shall be recognised and enforced in another Contracting State in accordance with [Chapter 2 of the Convention].” Article 5 then sets out the categories of judgments that are eligible for recognition and enforcement. It contains an exhaustive list of indirect grounds of jurisdiction. These grounds fall into three broad categories based on (i) the connection between the State of origin and the defendant (e.g., habitual residence in the State of origin), (ii) jurisdiction based on consent (e.g., express consent to the court of origin in the course of proceedings) or (iii) a connection between the claim and the State of origin (e.g., place of performance of the contract).  Some of these grounds are commonly found in regional instruments concerning the recognition and enforcement of judgments in civil or commercial matters and/or are under the national law of many jurisdictions, for other jurisdictions the provisions will significantly broaden the basis on which courts will be obliged to recognise and enforce foreign judgments. At this juncture, it should be noted that the Convention, with one exception, does not limit recognition and enforcement under national law in any way. Article 15 of the Convention provides that, subject to Article 6, the Convention does not prevent the recognition or enforcement of judgments under national law. Article 6 contains one exclusive basis of jurisdiction concerning rights in rem in immovable property. It provides that where a judgment ruled on rights in rem in immovable property, that judgment will be recognised and enforced under the Convention if and only if the State of origin is the State in which the property is situated. Article 7(1) contains the specific grounds on which recognition or enforcement may be refused.  There are two categories of grounds (i) based on the way the proceedings took place in the State of origin (e.g., improper notice); or (ii) based on the nature and content of the judgment (e.g., where the judgment is inconsistent with a judgment given by a court of the State in which enforcement is sought).

Articles 8 to 11 provide for specific issues concerning the interpretation and application of the Convention and Articles 12 to 14 concern the process for recognition and enforcement of judgments under the Convention and largely mirror the relevant Choice of Court Convention provisions. As noted above, Article 15 – the last Article in Chapter II – is an important provision in that it cements the basic premise of the Judgments Convention i.e., that it sets the minimum standards for the recognition and enforcement of judgments among Contracting States.

Chapter III deals with general clauses and importantly includes a number of permissible declarations such as (i) declarations with respect to specific matters (Article 18) which enables a State to declare that it will not apply the Convention to a specific matter where that State has a strong interest in doing so (the same provision is found in Article 21 of the Choice of Court Convention); and (ii) declarations with respect to judgments pertaining to States (Article 19). Article 19 enables a State to make a declaration excluding the application of the Convention to judgments which arose from proceedings to which a State was a party, even where the judgment relates to civil or commercial matters.

Finally, Chapter IV of the Convention deals with final clauses, which concern important matters such as the process for ratification of the Convention and the establishment of treaty relations between Contracting States.

What’s next?

With the successful conclusion of the Judgments Convention, the HCCH can once again look to future projects in the area of international civil and commercial litigation. So, what’s next for the work programme of the HCCH in this space?

First, the HCCH is set to resume work on matters relating to jurisdiction. The 2019 Conclusions and Recommendations following the meeting of the Council on General Affairs and Policy (the governing body that sets the work programme of the HCCH) provide that in February 2020 the Experts’ Group will resume its work “addressing matters relating to jurisdiction with a view to preparing an additional instrument”.

Second, as a decision was made to exclude intellectual property matters from the scope of the Convention, the Diplomatic Session invited “the Council on General Affairs and Policy to consider, at its 2020 meeting, what, if any, further work it wishes the HCCH to undertake on the intersection between private international law and intellectual property”. This decision was recorded in the Final Act of the Judgments Convention.

Decades since work commenced in this area, the conclusion of the Judgments Convention is a significant milestone for the HCCH. But more importantly, with the exponential growth in international trade since the commencement of the Judgments Project, and the consequential corresponding increase in the number of transnational commercial disputes, it is now more important than ever for parties engaged in cross-border disputes to have effective access to justice. Once widely ratified, the Convention will go a long way toward enhancing access to justice and facilitating cross-border trade and investment.

Posted for the Permanent Bureau of the Hague Conference on Private International Law (HCCH)

Today, the delegates of the 22^nd Diplomatic Session of the HCCH signed the Final Act of the 2019 Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters – the birth of new treaty and an important day for global justice as well as for the HCCH.

The signing of the Final Act took place during a ceremony in the Great Hall of Justice in the Peace Palace in the presence of the Minister of Foreign Affairs of the Kingdom of the Netherlands, Mr Stef Blok.

The Minister emphasised that the new Convention: “enhances the legal certainty and predictability that is so important in international legal matters…”.

This new Convention will be essential to reducing transactional and litigation costs in cross-border dealings and to promoting international access to justice. It will increase certainty and predictability, promote the better management of transaction and litigation risks, and shorten timeframes for the recognition and enforcement of a judgement in other jurisdictions, providing better, more effective, and cheaper justice for individuals and businesses alike. A true gamechanger in international dispute resolution.

The Secretary General of the HCCH, Dr Christophe Bernasconi, stressed that the 2019 Judgments Convention fills an important gap in private international law. He also reminded delegates that with the signing of the Final Act, the work of promoting the 2019 Judgments Convention has only just begun. Professor Paul Vlas, President of the 22nd Diplomatic Session, echoed this sentiment and reiterated that the fast, wide and effective uptake of the Convention by the international community is its next milestone.

After the signing of the Final Act, Uruguay signed as first State the new 2019 Judgments Convention.

The text of the 2019 Judgments Convention, the HCCH’s 40th global instrument, will be available shortly on www.hcch.net.

Posted for the Permanent Bureau of the Hague Conference on Private International Law:

Today, the HCCH finalised the text for a new multilateral treaty: the 2019 HCCH Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters.

The 2019 HCCH Judgments Convention will be a single global framework, enabling the free circulation of judgments in civil or commercial matters across borders. It will be essential to reducing the transactional and litigation costs in cross-border dealings and to promoting international access to justice. It will provide a legal regime that further increases certainty and predictability in cross-border dealings, promotes the better management of transaction and litigation risks, and which shortens timeframes for the recognition and enforcement of a judgement in other jurisdictions.

The 2019 HCCH Judgments Convention will provide better, more effective, and cheaper justice for individuals and businesses alike – a gamechanger in international dispute resolution.

The Final Act will be signed during a ceremony which will take place tomorrow, 2 July 2019, in the Great Hall of Justice in the Peace Palace.

Follow the HCCH on this journey with #2019HCCHDS and #2019HCCHJudgments

In a dispute between two Cypriot citizens and the Republic of Turkey concerning the enforcement of a European Enforcement Order issued by a Cypriot court, the Thessaloniki CoA was confronted with the question, whether the refusal of the Thessaloniki Land Registry to register a writ of control against property of the Turkish State located in Thessaloniki was in line with the EEO Regulation.

I. THE FACTS

The dispute began in 2013, when two Cypriot citizens filed a claim for damages against the Republic of Turkey before the Nicosia Disctrict Court. The request concerned compensation  for deprivation of enjoyment of  their property since July 1974 in Kyrenia, a city occupied by the Turkish military forces during the 1974 invasion on the island. The Kyrenia District Court (Eparchiakó Dikastírio Kerýneias), which operates since July 1974 in Nicosia, issued in May 2014 its ruling, granting damages to the claimants in the altitude of 9 million €. Almost a year later, the latter requested the same court to issue a certificate of European Enforcement Order. The application was granted. Within the same year, the claimants filed an application before the Athens Court of first Instance for the recognition and enforcement of the Cypriot judgment. Prima facie it seems to be a useless step, however there was a rationale behind it; I will come back to the matter later on. The Athens court granted exequatur (Athens CFI 2407/2015, unreported).

Following almost a year of  inactivity, the claimants decided to proceed to the execution of their title by attaching property of the Turkish State in Thessaloniki. Pursuant to domestic rules, the enforcement agent serves the distraint order to the debtor; afterwards, (s)he requests the order to be registered at the territorially competent land registry. Both actions are imperative by law. At this point, the chief officer of the land registry refused to proceed to registration, invoking Article 923 Greek Code of Civil Procedure (CCP) which reads as follows: Compulsory enforcement against a foreign State may not take place without a prior leave of the Minister of Justice. The claimants challenged the registrar’s refusal by filing an application pursuant to Article 791 CCP, which aims at the obligation of the registrar to proceed to registration by virtue of a court order. The Thessaloniki 1. Instance court dismissed the application (Thessaloniki CFI 8363/2017, unreported). The claimants appealed.

II. THE RULING

The Thessaloniki CoA dismissed the appeal, confirming the first instance ruling in its entirety. It began from the right of the land registrar to a review of legality, thus the right to examine the request beyond possible formality gaps. It then referred to Articles 6.1 ECHR, 1 of the 1. Additional Protocol to the ECHR, and Articles 2.3 (c) and 14 of the 1966 International Covenant on Civil and Political Rights, in order to support the right to enforcement against a foreign State. The appellate court continued by analyzing Article 923 CCP and its importance in the domestic legal order. It emphasized the objective of the provision, i.e. to estimate potential repercussions and to avoid possible tensions with the foreign State in case of execution. The court founded its analysis on two ECHR rulings, i.e. the judgments in the Kalogeropoulou and Others v. Greece and Germany (59021/00), and Vlastos v. Greece (28803/07) cases, adding two rulings of the Full Bench of the Greek Supreme Court from 2002. Finally, the court concluded that there has not been a violation of the EEO Regulation, stating that the process under Article 923 CCP is not to be considered as part of intermediate proceedings needed to be brought in the Member State of enforcement prior ro recognition and enforcement; hence, the rule in Article 1 of the EEO Regulation is not violated.

III. COMMENTS

In general terms, one has to agree with the outcome of the case. Nevertheless, there are a number of issues to be underlined, so that the reader gets the full picture of the dispute.

• The claim before the Kyrenia District Court bears some similarities with the ruling of the ECJ in the Apostolidis/Orams case: The Court decided then that: The suspension of the application of the acquis communautaire in those areas of the Republic of Cyprus in which the Government of that Member State does not exercise effective control, provided for by Article 1(1) of Protocol No 10 on Cyprus to the Act concerning the conditions of accession [to the European Union] … does not preclude the application of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters to a judgment which is given by a Cypriot court sitting in the area of the island effectively controlled by the Cypriot Government, but concerns land situated in areas not so controlled. In both cases, the property under dispute was located in the Kyrenia district. The difference lies in the defendants: Unlike the Orams case, the respondent here was a foreign State. Article 4 Brussels I Regulation grants the right to claimants to avail themselves of domestic rules of jurisdiction, which is presumably what the claimants did in the case at hand.
• The issue of the EEO certificate seems to run contrary to Article 2.1 EEO Regulation. The matter was not examined by the Thessaloniki courts, which focused on the subject matter, i.e. the refusal of the land registrar on the grounds of Article 923 CCP.
• The exequatur proceedings in Greece seem to be superfluous, given that a EEO may be enforced without the need for a declaration of enforceability (Article 5 EEO Regulation). One reason which possibly triggered additional exequatur proceedings might have been the fact that, unlike the EEO Regulation, the acta iure imperii clause was not included in the Brussels I Regulation (see Article 1.1). Still, the matter was examined in the Lechouritou case even before the entry into force of the Brussels I bis Regulation. Hence, it would not have made a difference in the first place.
• The appellate court focused on the compatibility of Article 923 CCP with the EEO Regulation. However, the claimants carried out the execution in Greece on the grounds of the Cypriot judgment, not the EEO certificate.

Finally, two more points which should not be left without a comment.

• Throughout the proceedings, the Turkish State demonstrated buddhistic apathy. There was not a single remedy brought forward, neither in Cyprus nor in Greece. It was a victory in absentia. A reason for this stance was surely the following: The property of the Turkish state in Thessaloniki hosts one of its General Consulates in Greece. This is not just another Turkish Consulate around the globe: It is built upon the place where the father of the Turkish Republic (Mustafa Kemal Atatürk) was born. It also includes the house where he was raised.
• The Thessaloniki CoA emphasized that a potential refusal of the Greek Minister of Justice to grant leave for execution would not harm the essence of the Cypriot judgment: Enforceability and res iudicata remain untouched; hence, the claimants may seek enforcement of the judgment in the foreign country, i.e. Turkey… The argument was ‘borrowed’ by the ruling of the ECJ in the Krombach case (which is cited in the text of the decision); therefore, it is totally alien to the case at hand. Even if the claimants were to find any assets of the Turkish Republic in the EU, like the Villa Vigoni in Italy, the ruling of the ICJ in the case Germany v. Italy: Greece intervening) would serve as a tool to grant jurisdictional immunity to the Turkish state.

IV. CONCLUSION

Article 923 CCP is the first line of defence for foreign states in Greece. In the unlikely event that the Greek Minister of Justice grants leave for execution, a judgment creditor will be confronted with a second hurdle, if (s)he’s aiming at the seizure of property similar to the case discussed here: the maxim ne impediatur legatio (ad hoc see Greek Supreme Court, 29 November 2017, decision no. 1937/2017, reported in English here). Hence, the chances to capitalize on the enforceable title are close to zero.

Written by Renato Mangano, Professor of Commercial Law at the University of Palermo (Italy).

Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings failed to provide a definition of COMI (centre of main interests), either in Article 2, which was specifically devoted to definitions, or in Article 3, which regulated international jurisdiction.

For its part, Article 3(1) merely provided that “the courts of the Member State within the territory of which the centre of a debtor’s main interests is situated shall have jurisdiction to open insolvency proceedings”. Article 3(1) further stipulated that “in the case of a company or legal person, the place of the registered office shall be presumed to be the centre of its main interests in the absence of proof to the contrary.”

Recital 13 specified that “the ‘centre of main interests’ should correspond to the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties”, but different views have been expressed as regards, in particular, the relation between the concept of ‘administration’ and the concept of ‘ascertainability by third parties’.

As a result, Article 3 of Regulation No 1346/2000 gave rise a number of disputes and was the object of several requests to the European Court of Justice (ECJ) for preliminary rulings, with Eurofood being the first case in point.

Eventually, Regulation (EU) 2015/848 of 20 May 2015 on insolvency proceedings (Recast) laid down new rules on COMI — a definition of COMI was introduced; the presumption aiming at better ascertaining COMI was extended to individuals as well; the judicial rule of thumb that evaluated negatively a debtor who had moved his/her/its COMI shortly before the request to open insolvency proceedings was incorporated into a mandatory rule; and eleven recitals, aiming at making this framework clearer and more easily applicable, were introduced (Recitals 25 to 34, and 53).

However, one may doubt whether these efforts have succeeded. The many disputes involving NIKI Luftfahrt GmbH are illuminating. NIKI was an insolvent company under Austrian law incorporated in Austria. However, NIKI was also a subsidiary of the Air Berlin PLC & Co. Luftverkehrs KG, better known as Air Berlin. This is a company under German law incorporated in Germany.

Therefore, the crucial question was: which Member State had jurisdiction to open main insolvency proceedings against NIKI? Did Austria or Germany have jurisdiction? The question was clear-cut but the answers to this question were various and contradictory. The NIKI dispute has at long last been settled, but the dynamic of the NIKI case is intriguing because it demonstrates that the new COMI rules still give rise to doubts as regards both the relation between the two elements constituting the COMI definition (i.e.between “the place where the debtor conducts the administration of its interests on a regular basis” and the place “which is ascertainable by third parties”), and the relation between the definition of COMI and the presumptions that are provided to make it easier to apply this definition.

Moreover, some legal counsels maintain that the new COMI rules could facilitate fraudulent COMI relocations. A company could move its registered office to another Member State which is less favourable towards its creditors; make the transfer public,e.g.by using the new address in correspondence; await the expiration of the three-month period laid down by the time limit to the presumption; and apply for a fraudulent, but a ‘legally authorized’ opening of insolvency proceedings in the new jurisdiction.

Mutatis mutandis, a similar idea is proposed as regards individuals. To our knowledge there is no evidence of cases where these proposals have facilitated fraudulent COMI relocations. However, the proposal to circumvent the new COMI rules deserves attention because it leverages some prescriptions which were conceived precisely to prevent a debtor from circumventing the COMI rules.

The problems with the new COMI rules do not end here, as I have demonstrated in a recent paper titled The Puzzle of the New European COMI Rules: Rethinking COMI in the Age of Multinational, Digital and Glocal Enterprises.

In fact, sometimes the investigation about ‘ascertainability by third parties’ could prove problematic. The more complex a business organization is, the more often this situation arises. This is because the more complex a business organization is, the easier it becomes for a firm to be split into many ‘units’ (the term is intentionally non-technical) which, on the one hand, are located in different countries and, on the other hand, are in contact with different groups of creditors: case by case, these groups of creditors may have differing perceptions as to where the firm is located.

Undoubtedly, problems of this nature may arise when insolvency occurs within a group of companies – Recital 53 of Regulation 2015/848 allows one single court to open one single set of insolvency proceedings concerning several companies belonging to the same group. But the investigation about ‘ascertainability by third parties’ could prove equally challenging when a firm conducts its relationships with suppliers and customers through digital networks, and even more so if this firm runs a business which is glocal, in the sense that it is characterized by both global and local considerations. The domain name “.com” gives no indication as to where a business is located and, even where the domain name uses a country code such as “.de” or “.fr”, there is no guarantee that the firm is established in that country, since it is relatively common practice to keep web servers geographically separated from the actual location of the enterprise.

It is highly probable that these shortcomings will result again in requests for preliminary rulings; it is also highly desirable that the ECJ provide an interpretation of the COMI rules which would prove crucial in resolving those specific issues that gave rise to such requests.

Arguably, this situation is less serious as regards the flaw affecting the rules which lay down the time limits to the applicability of the COMI presumptions – this flaw could probably be fixed by means of interpretation. However – as regards the flaw concerning the prerequisite of ‘ascertainability by third parties’– it is highly improbable that the ECJ will be able to solve this problem at the roots and, consequently, prevent subsequent litigation.

Even the most enthusiastic supporters of ECJ activism must admit that the European Court is not allowed to interpret the new COMI rules in a way that proves to be against both the letter and the spirit of the legal framework, for this power belongs to the regulator alone. To be more precise, this statement implies that the ECJ will be unable either to rule that the prerequisite ‘ascertainability by third parties’ would be unnecessary whenever this presence was de facto incompatible with that of ‘administration on a regular basis’, or to rule that the application of the COMI presumptions might disregard the COMI definition. Both rulings would infringe not only the letter of the new COMI rules but also the clearly traceable intention of the regulator.

Further, the ECJ might certainly rule that the COMI of a company X is located in a country Y by putting the COMI of that company into a system of relations with some elements which are considered as relevant to the case. However, since ascertainment of the COMI is case-sensitive and since the one-to-one relation between these factors and the debtor’s exact location cannot be established in a universal way, this ruling will not provide the interpreter with a general criterion that would hold good for any future cases.

On 10 June 2019, the US Supreme Court granted certiorari in the case of Monasky v. Taglieri. By doing so, the US Supreme Court will finally resolve the split in the US Circuits regarding the standard of review and the best approach to follow in determining the habitual residence of a child under the HCCH Convention of 25 October 1980 on the Civil Aspects of International Child Abduction (Child Abduction Convention).

The questions presented are:

1. Whether a district court’s determination of habitual residence under the Hague Convention should be reviewed de novo, as seven circuits have held, under a deferential version of de novo review, as the First Circuit has held, or under clear-error review, as the Fourth and Sixth Circuits have held.
2. Where an infant is too young to acclimate to her surroundings, whether a subjective agreement between the infant’s parents is necessary to establish her habitual residence under the Hague Convention.

Regarding the first question, it is important to note that findings of facts are reviewed for clear error and issues of law are reviewed de novo. This is of crucial importance as this would determine the extent to which the decision of the US district court can be reviewed by the US court of appeals, as these standards confer greater deference for findings of fact. The question then arises as to whether the determination of habitual residence is a mixed question of law and fact or only a question of fact.

The second question deals with the case of newborn or young infants and whether a subjective agreement between the parents is necessary to establish a habitual residence under the Child Abduction Convention. Despite its simplicity, the Court may also take the opportunity to address the current split in the US circuits regarding the extent to which courts can rely on the parents’ last shared intent or the child’s acclimatization or both in determining the habitual residence of a child.

This is well summed up by the Seventh Circuit Court of Appeals in Redmond v. Redmond (2013): “In substance, all circuits – ours included – consider both parental intent and the child’s acclimatization, differing only in their emphasis. The crux of disagreement is how much weight to give one or the other, especially where the evidence conflicts.”

In my personal opinion, the hybrid approach, that is relying on both shared parental intent and the child’s acclimatization (without placing more emphasis on one or the other, except perhaps for the case of newborns or very young infants), as well as looking to all other relevant considerations arising from the facts of the particular case, is the right approach to follow. This would avoid that parents create artificial jurisdictional links in a State and thus engage in forum shopping. The flip side of this argument is that this would necessarily mean less party autonomy in these matters. By following this approach, the United States would align itself to case law in Canada (Balev case – Canadian Supreme Court, see our previous post here), the European Union (Mercredi v. Chaffe, confirmed in O.L.v. P.Q.) and the United Kingdom (A. v. A. (Children: Habitual Residence)).

To conclude with the words of the Balev case: “[…] the hybrid approach to habitual residence best conforms to the text, structure, and purpose of the Hague Convention. There is no reason to decline to follow the dominant trend in Hague Convention jurisprudence. The hybrid approach should be adopted in Canada”.

Professor Yeo Tiong Min, SC (honoris causa), Yong Pung How Professor of Law at Singapore Management University, has kindly provided the following report:

“The Singapore Court of Appeal has recently affirmed the significance of giving effect to party autonomy in the enforcement of choice of court agreements under the common law in three important decisions handed down in quick succession, on different aspects of the matter: the legal effect of exclusive choice of court agreements, the interpretation and effect of non-exclusive choice of court agreements, and the effect of exclusive choice of court agreements on anti-suit injunctions.

In Vinmar Overseas (Singapore) Pte Ltd v PTT International Trading Pte Ltd [2018] SGCA 65, proceedings were commenced in Singapore in respect of an alleged breach of a commercial sale contract containing an exclusive choice of English court agreement. The agreement was dated before the Hague Convention on Choice of Court Agreements took effect in English law, so the Convention was not engaged. Like many other common law countries, the Singapore courts would give effect to the agreement unless strong cause can be demonstrated by the party seeking to breach the agreement. A complication arose because there had been four previous decisions of the Court of Appeal in the shipping context where proceedings had been allowed to continue in Singapore in the face of an exclusive choice of foreign court agreement because the court had found that the defence was devoid of merits. The claimant’s argument that based on these decisions the Singapore court should hear the case because there was no valid defence to its claim succeeded before the High Court.

Sitting as a coram of five on the basis of the significance of the issue, the Court of Appeal unanimously reversed the decision. It decided that the merits of the case were not a relevant consideration at the stage where the court was determining whether to exercise its jurisdiction, and departed from its previous decisions to the extent that they stood to the contrary. While affirming the continuing validity of the strong cause test, the court placed considerable emphasis on the element of contractual enforcement. Thus, factors that were reasonably foreseeable at the time of contracting would generally carry little or no weight. In particular, the court recast one of the traditional factors in the strong cause test, “whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages”, as an inquiry into whether the party seeking to enforce the choice of court agreement was acting abusively in the context of cross-border litigation. In the view of the court, the genuine desire for trial in the contractual forum has been adequately expressed in the choice of court agreement itself, and it is legitimate to seek the procedural advantages in the contractual forum. The court considered that strong cause would generally need to be established by either proof that the party seeking trial in the contractual forum was acting in an abusive manner (which is said to be a very high threshold), or that the party evading the contractual forum will be denied justice in that forum (ignoring the foreseeable factors), for example if war had broken out in that jurisdiction.

The court left open the question whether the same approach would be taken if the choice of court agreement had not been freely negotiated, taking cognisance of situations, especially in the shipping context, where contracting parties may find themselves bound by clauses the contents of which they have had no prior notice. The court expressed the tentative view that as a matter of consistency, the same approach should be adopted.

In Shanghai Turbo Enterprises Ltd v Liu Ming [2019] SGCA 11, the Court of Appeal was faced with an unusual clause: “This Agreement shall be governed by the laws of Singapore/or People’s Republic of China and each of the parties hereto submits to the non-exclusive jurisdiction of the Courts of Singapore/or People’s Republic of China.” The High Court found the choice of law agreement to be meaningless as a purported floating choice of law, and that the choice of court agreement was invalid as it could not be severed from the choice of law agreement. The court then applied the natural forum test and declined to exercise jurisdiction on the basis that China was the clearly more appropriate forum for the dispute. On appeal, the Court of Appeal agreed with the finding that the choice of law agreement was invalid, but held that the choice of court agreement could be severed from the choice of law agreement.

In a prior decision, the Court of Appeal in Orchard Capital I Ltd v Ravindra Kumar Jhunjhunwala [2012] SGCA 16, had considered a non-exclusive choice of court clause to be relevant at the very least as a factor in the natural forum test, and that the weight to be accorded to the factor depended on the circumstances of each case. It also considered that there was another possible approach to such clauses based on contractual enforcement principles, which it did not fully endorse as the parties had not raised arguments based on contractual intentions.

In Shanghai Turbo, the Court of Appeal had to face this issue squarely, and affirmed that if there is a contractual promise in the non-exclusive choice of court clause, the party seeking to breach the agreement had to demonstrate strong cause why it should be allowed to do so. The court went on to hold that, generally, where Singapore contract law is applicable, the “most commercially sensible and reasonable” construction of an agreement to submit, albeit non-exclusively, to a court is that the parties have agreed not to object to the exercise of jurisdiction by the chosen court. This inference does not depend on there being an independent basis for the chosen court to assume jurisdiction (eg, by way of choice of law agreement), or on the number of courts named in the clause. Conversely, there is generally no inference that the parties have agreed that the chosen court is the most appropriate forum to hear the case.

Thus, practically, where there is a non-exclusive choice of Singapore court clause, in general the Singapore will hear the case unless strong cause (the same test elucidated in Vinmar) is demonstrated by the party objecting to the exercise of jurisdiction by the Singapore court, but where there is a non-exclusive choice of foreign court clause, this is merely a factor in the natural forum test, as the party seeking trial in Singapore is not in breach of any agreement. On the facts, the court held that jurisdiction should be exercised because the defendant could not demonstrate strong cause.

It is to be noted these are canons of construction under Singapore law. Under Singapore private international law, the choice of court agreement is governed by the law that governs the main contract unless the parties have indicated otherwise. However, Singapore law will apply in default of proof of foreign law. Moreover, canons of construction may be displaced by evidence of contrary intention. The court left open the question – expressing no tentative view – whether the same approach would be taken for contracts which are not freely negotiated. However, as this is a question of interpretation, the context of negotiation could be a relevant indication of the true meaning of contractual terms.

The third case is on arbitration, but the Court of Appeal also made comments relevant to choice of court agreements. In Sun Travels & Tours Pvt Ltd v Hilton International (Maldives) Pvt Ltd [2019] SGCA 10, an injunction was sought to prevent reliance on a foreign judgment obtained in proceedings commenced in breach of an arbitration agreement. The court correctly identified the remedy sought as an anti-enforcement injunction, but nevertheless also discussed the anti-suit injunction because the case was argued on the basis that the injunction sought followed from an entitlement to an anti-suit injunction. The court clarified that an anti-suit injunction would generally be granted to enforce a choice of court agreement unless strong cause is demonstrated why it should be denied, and that there is no need to demonstrate vexatious or oppressive conduct independently. Thus, the law in this area is the mirror image of Vinmar. This case is particularly significant for Singapore because statements in the previous Court of Appeal decision in John Reginald Stott Kirkham v Trane US Inc [2009] SGCA 32 could be read as suggesting that the breach of contract is merely one factor to consider in determining whether the conduct of foreign proceedings abroad was vexatious.

These common law developments are highly significant in bringing greater consistency with developments elsewhere where party autonomy has come to assume tremendous significance. One is the Hague Convention on Choice of Court Agreements which took effect in Singapore law on 1 October 2016. Two critical aspects of this Convention are that a choice of the court of a Contracting State is deemed to be exclusive unless there are express provisions to the contrary, and that the chosen court should assume jurisdiction unless the choice of court clause is invalid. The second is the Singapore International Commercial Court (SICC) established in 2015. Where there is a choice (whether exclusive or not) of SICC clause, the SICC will assume jurisdiction unless the case is not an appropriate one having regard to the court’s character as an international commercial court. In addition, under the Rules of Court, a choice of the Singapore High Court made on or after 1 October 2016 is presumed to include the SICC unless expressly indicated otherwise. In both situations, the common law is not relevant, and to that extent, the practical effects of Vinmar and Shanghai Turbo will be limited. However, the extent to which anti-suit injunctions will be consistent with the Hague Convention on Choice of Court Agreements remains an open question, and it is certainly an area for watch for further developments.”

A more detailed discussion of the cases mentioned above can be found at: https://cebcla.smu.edu.sg/sites/cebcla.smu.edu.sg/files/Paper2019.pdf

Dr Haris P. Meidanis – FCIArb, Meidanis, Seremetakis & Associates Law Firm, Athens, Greece

A recent judgment of the Mytilene Court of First Instance raised a very topical issue, related to the acceptance of international jurisdiction by Greek Courts in the case of hotel contracts, nothwistanding the prorogation clause in favour of the court of some other member state (in this case the courts of the Netherlands).

The guarantee contracts

The position of the court was that such a contract (a so-called guarantee) that essentially guarantees the payment of a certain number of hotel rooms by the tour operator, irrespective of the actual use of the reserved rooms, can be characterised as a lease contract for immovable property under the meaning of art. 24 of the Brussels Ia Regulation. The underlying idea is that such a contract is predominantly a lease contract regarding immovable property and the services aspect that coexists with the lease character of the same contract is diluted into the latter. Under this line of arguments, the court found that, nothwistanding the prorogation clause in favour of the courts of the Netherlands, the court of the place of the immovable property (Greece and in particular Mytilene) should be the only competent to hear the case (art. 24 of Brussels Ia Regulation).

The allotment contracts

Interestingly, similar judgments of other courts of touristic destinations in Greece (Dodecanese islands, like Kos and Rhodes or of the Ionian island of Corfu) have issued similar judgments in the past, also in relation to the so-called allotment hotel contracts. Under them, the tour operator reserves rooms spanning from a minimum to a maximum pre-agreed number and agrees to use as many of them as it can and at the same time to lift by an agreed d-day, the reservation for the ones that are not to be used. Therefore, under the allotment contract, the reservation is not “guaranteed” for the totality of the rooms in question, as is the case with the “guarantee” contract. This point is generally downplayed by Greek courts who seem to be in favour of the application of art. 24 par. 1 of the Brussels I Regulation in every hotel contract, by emphasising on the fact that the primary character of such contracts is the lease.

Critique

This approach, although it does generally make sense, it also merits some qualification. To start with, the prorogation clause is a clause to be preserved by the parties. As is well known, one of the two ways to depart from such a clause in the context of Brussels Ia Regulation (the other is the tacit prorogation), is the case of the so-called exclusive jurisdiction of art. 24, the case of immovable property being one of them: This is the case among others “in proceedings which have as their object …tenancies of immovable property”. As explained, under Greek case law, it is admitted that this is the case and such contracts are predominantly lease of property contracts. Essentially, the question of pinpointing the legal nature of the guarantee and the allotment hotel contracts, is one of characterisation of private international law. It is  generally submitted that characterisation should not be made lege fori and it should take into account the meaning of the relevant juridical categories in a wider/ international environment. This been said, it looks that Greek courts tend to do the characterisation lege fori in relation to hotel contracts, presumably in order to feel more comfortable with an argumentation made in the context of Greek law only. To be noted that this approach in relation to art. 24 of the Brussels Ia Regulation has a strong support also by the doctrine, which at least partly, supports the lege situs interpretation,[1] which in our case coincides with the lex fori. Nevertheless, the suggestion of approaching the matter without a strict lege situs or lege fori approach, that is under the so-called autonomous interpretation, widely used under the various EU PIL Regulations, should not be underplayed. The Hacker case (C-280/90) is also relevant, to the extent that it excludes the application of art. 24 par. 1 in the case of package holidays. Therefore, the predominantly lease dimension of the hotel contracts under Greek law, should not always be taken for granted. The main question is whether the above described hotel contracts are contracts for lease of property under the above points. As a matter of fact, in hotel contracts, the counter signatory of the hotel owner is not the actual user of the property, but a tour operator who then “sells” a package to the end user. On the other hand, from the hotel owner point of view, the contract is predominantly a lease contract. Another critical point is that in real life, the imbalance of powers between a north European tour operator and a local 25 rooms family hotel can be enormous. Especially In the case that the tour operator simply reserves the totality of the hotel rooms and cancels the reservation without good cause, it puts the hotel owner in the extremely burdensome situation to have to file an action somewhere in Europe, usually in “unknown territory” and under generally uncomfortable conditions. If, therefore the totality of the hotel rooms (or almost the totality) is involved, it can be said that the lease dimension of the agreement should indeed always prevail, and this should generally be the case in guarantee hotel contracts. This should be so no matter if the autonomous or the lege situs characterisation is followed. This is not necessarily the case if a small number of the rooms of hotels are reserved or in the case of allotment. In the latter case, perhaps the reservation of the totality of the rooms should again direct us towards the application of art. 24 par. 1, but following a closer examination of the terms of the hotel agreement in order for us to be able to examine if in casu the lease dimension again prevails and if the cancellation of the agreement should end up to a damage to the owner, similar to the one it would suffer in the case of cancellation of a guarantee contract. In this context, the rest of the facts of the case, i.e percentage of the rooms in relation to overall number of rooms of the hotel in question, the degree of power imbalance of the parties, the rest of the services involved (see for example Pammer case C-585/08) cannot be ignored.

[1] De Lima Pinheiro, in Magnus/ Mankowski Brussels I Regulation 2nd ed. Seller 2012, art. 22 par. 25.