Written by Shubh Jaiswal, student, Jindal Global Law School, Sonipat (India) and Professor Saloni Khanderia, JGLS. 

In the landmark case of TransAsia Private Capital vs Gaurav Dhawan, the Delhi High Court clarified that Indian Courts are not automatically required to determine and apply the governing law of a dispute unless the involved parties introduce expert evidence to that effect. This clarification came during the court’s examination of an execution petition stemming from a judgment by the High Court of Justice Business and Property Courts of England and Wales Commercial Court. The Division Bench of the Delhi High Court invoked the precedent set by the United Kingdom Supreme Court in Brownlie v. FS Cairo, shedding light on a contentious issue: the governing law of a dispute when parties do not sufficiently prove the applicability of foreign law.

The Delhi High Court has established that in the absence of evidence proving the applicability of a foreign law identified as the ‘proper law of the contract’, Indian law will be applied as the default jurisdiction. This decision empowers Indian courts to apply Indian law by ‘default’ in adjudicating international civil and commercial disputes, even in instances where an explicit governing law has been selected by the parties, unless there is a clear insistence on applying the law of a specified country. This approach aligns with the adversarial system common to most common law jurisdictions, where courts are not expected to determine the applicable law proactively. Instead, the legal representatives must argue and prove the content of foreign law.

This ruling has significant implications for the handling of foreign-related civil and commercial matters in India, highlighting a critical issue: the lack of private international law expertise among legal practitioners. Without adequate knowledge of the choice of law rules, there’s a risk that international disputes could always lead to the default application of Indian law, exacerbated by the absence of codified private international law norms in India. This situation underscores the need for specialized training in private international law to navigate the complexities of international litigation effectively.

Facts in brief

As such, the dispute in Transasia concerned an execution petition filed under Section 44A of the Indian Civil Procedure Code, 1908, for the enforcement of a foreign judgment passed by the High Court of Justice Business and Property Courts of England and Wales Commercial Court. The execution petitioner had brought a suit against the judgment debtor before the aforementioned court for default under two personal guarantees with respect to two revolving facility loan agreements. While these guarantee deeds contained choice of law clauses and required the disputes to be governed by the ‘Laws of the Dubai International Finance Centre’ and ‘Singapore Law’ respectively, the English Court had applied English law to the dispute and decided the dispute in favour of the execution petitioner. Accordingly, the judgment debtor opposed the execution of the petition before the Delhi HC for the application of incorrect law by the Court in England.

It is in this regard that the Delhi HC invoked the ‘default rule’ and negated the contention of the judgment debtor. The Bench relied on the decision rendered by the Supreme Court of the United Kingdom in Brownlie v. FS Cairo, which postulated that “if a party does not rely on a particular rule of law even though it would be entitled to do so, it is not generally for the court to apply the rule of its own motion.”

The HC confirmed that foreign law is conceived as a question of fact in India. Thus, it was for each party to choose whether to plead a case that a foreign system of law was applicable to the claim, but neither party was obliged to do so, and if neither party did, the court would apply its own law to the issues in dispute. To that effect, the HC also relied on Aluminium Industrie Vaassen BV, wherein the English Court had applied English law to a sales contract even when a provision expressly stipulated the application of Dutch law—only because neither party pleaded Dutch law.

Thus, in essence, the HC observed that courts would only be mandated to apply the chosen law if either party had pleaded its application and the case was ‘well-founded’. In the present dispute, the judgment debtor had failed to either plead or establish that English law would not be applicable before the Court in England and had merely challenged jurisdiction, and thus, the Delhi HC held that the judgment could not be challenged at the execution stage.

Choosing the Proper Law

The mechanism employed to ascertain the applicable law under Indian private international law depends on whether the parties have opted to resolve their dispute before a court or an arbitral tribunal. In arbitration matters, the identification of the applicable law similarly depends on the express and implied choice of the parties. Similarly, in matters of litigation, courts rely on the common law doctrine of the ‘proper law of the contract’ to discern the applicable law while adjudicating such disputes on such obligations. Accordingly, the proper law depends on the express and implied choice of the parties. When it comes to the determination of the applicable law through the express choice of the parties, Indian law, despite being uncodified, is coherent and conforms to the practices of several major legal systems, such as the UK, the EU’s 27 Member States, and its BRICS partners, Russia and China – insofar as it similarly empowers the parties to choose the law of any country with which they desire their disputes to be settled. Thus, it is always advised that parties keen on being governed by the law of a particular country must ensure to include a clause to this effect in their agreement if they intend to adjudicate any disputes that might arise by litigation because it is unlikely for the court to regard any other factor, such as previous contractual relationships between them, to identify their implied choice.

Questioning the Assumed: Manoeuvring through the Intricate Terrain of Private International Law and Party Autonomy in the Indian Judicial System

By reiterating the ‘default rule’ in India and presenting Indian courts with another opportunity to apply Indian law, this judgment has demonstrated the general tendency on the part of the courts across India to invariably invoke Indian law – albeit in an implicit manner – without any (actual) examination as to the country with which the contract has its closest and most real connection. Further, the lack of expertise by the members of the Bar in private international law-related matters and choice of law rules implies that most, if not all, foreign-related civil and commercial matters would be governed by Indian law in its capacity as the lex fori. Therefore, legal representatives should actively advocate for disputes to be resolved according to the law specified in their dispute resolution clause rather than assuming that the court will automatically apply the law of the designated country in adjudicating the dispute.

Foreign parties may not want Indian law to apply to their commercial contracts, especially when they have an express provision against the same. Apart from being unclear and uncertain, the present state of India’s practice and policy debilitates justice and fails to meet the commercial expectations of the parties by compelling litigants to be governed by Indian law regardless of the circumstance and the nature of the dispute—merely because they failed to plead the application of their chosen law.

This would inevitably lead to foreign parties opting out of the jurisdiction of the Indian courts by concluding choice of court agreements in favour of other forums so as to avoid the application of the Republic’s ambiguous approach towards the law that would govern their commercial contracts. Consequently, Indian courts may rarely find themselves chosen as the preferred forum through a choice of court agreement for the adjudication of such disputes when they have no connection to the transaction. In circumstances where parties are unable to opt out of the jurisdiction of Indian courts – perhaps because of the lack of agreement to this effect, the inconsistencies would hamper international trade and commerce in India, with parties from other jurisdictions wanting to avoid concluding contracts with Indian businessmen and traders so as to avert plausible disputes being adjudicated before Indian courts (and consequently being governed by Indian law).

Therefore, Indian courts should certainly reconsider the application of the ‘default rule’, and limit the application of the lex fori in order to respect party autonomy.

Written by Tarasha Gupta, student, Jindal Global Law School, Sonipat (India) and Saloni Khanderia, Professor, Jindal Global Law School

In its recent judgment in Shiju Jacob Varghese v. Tower Vision Limited,[1] the Delhi High Court (“HC”) held that an appeal before an Indian civil court was infructuous due to a consent order passed by the Tel Aviv District Court in a matter arising out of the same cause of action. The Court deemed the suit before Indian courts an attempt to re-litigate the same cause of action, thus an abuse of process violative of the principle of comity of courts.

In doing so, the Court appears to have clarified confusions arising in light of the explanation to Section 10 of the Civil Procedure Code, 1908 (“CPC”), on one side, and parties’ right to choice of court agreements and forum non conveniens on the other. The result is that, as per the Delhi HC, Indian courts now ought to stay proceedings before them if the same cause of action has already been litigated before foreign courts.

The Indian Position on Concurrent Proceedings in Foreign and Domestic Courts

In the European Union, Article 33 of the Brussels Recast gives European courts the power to stay proceedings if concurrent proceedings based on the same cause of action are pending before a foreign court. The European court may exercise this right if the foreign court will give a judgment capable of recognition, and such a stay is necessary for the proper administration of justice. By contrast, in India, the Explanation to Section 10 of the CPC provides that the pendency of a suit in a foreign Court does not preclude Indian courts from trying a suit founded on the same cause of action.

The Indian Supreme Court in Modi Entertainment v. WSG Cricket[2] upheld parties’ right to oust the jurisdiction of Indian courts in favour of a foreign forum through choice of court agreements. Where parties have agreed to approach a foreign forum by a non-exclusive jurisdiction clause, they would have considered convenience and other relevant factors. Therefore an anti-suit injunction cannot be granted.

Notwithstanding this judgment, however, when it came to situations where parties did not confer jurisdiction upon a foreign court through a choice of court agreement, the explanation to Section 10 of the CPC would still apply. Therefore, a party could initiate proceedings before both foreign and domestic courts on the same cause of action, resulting in the possibility of conflicting judgements and creating a nightmare for their enforcement. It would also increase the costs of resolving any dispute, as multiple litigation proceedings may occur simultaneously.

Courts in India tried to mitigate the impacts that could arise from these conflicting judgements through the doctrine of ‘forum non conveniens’. The doctrine permits courts to stay proceedings on the ground that another forum would be more appropriate or convenient to adjudicate the matter. There are no fixed criteria in considering whether to invoke the doctrine. However, courts may consider, inter alia, the existence of a more appropriate forum, the expenses involved, the law governing the transaction, the plausibility of multiple proceedings and conflicting judgements.

The doctrine of forum non conveniens, however, is only a discretionary power and can only be invoked if the defendant is able to prove that the current proceedings would be vexatious or oppressive to them and the foreign forum is “clearly or distinctly more appropriate than the Indian courts” (clarified by the Indian Supreme Court in Mayar (HK) Ltd. v. Owners and Parties, Vessels MV Fortune Ltd.[3]). Thus, it would not be mandatory in every situation for an Indian court to stay a suit pending before it, even if proceedings on the same cause of action are pending or completed in a foreign court.

Dismissal of the Appeal before Indian courts in Shiju Jacob

The dispute concerned a Share Entitlement executed in favour of the present Appellant, based on which the Appellant had filed a civil suit before the Tel Aviv District Court. More than two years later, they filed a suit for interim relief that was partially allowed by the Tel Aviv District Court but set aside by the Supreme Court of Israel. After that, the Appellant filed a suit before the Indian court, which was dismissed as a re-litigation and violative of the principle of comity. Consent terms were then filed in the Tel Aviv suit, and the suit was disposed of as settled. Shortly after that, the appellant moved an application to rescind the order to dispose of the suit, which the Tel Aviv District Court dismissed.

The Respondents now claimed, before the Indian court, that the appeal against the previous order by the Indian court was infructuous in view of the consent order passed by the Tel Aviv District Court. The Appellants, on the other hand, argued that the explanation to Section 10 of the CPC allowed them to file a suit in India, even if it was on the same cause of action as the suit before the Israeli courts.

The Delhi High Court held that allowing the appeal to continue would violate the principle of comity of courts, as it could result in conflicting decisions between the Israeli and Indian courts. It would also constitute re-litigation, which, although may not in every case be barred as res judicata, depending on the facts and circumstances, could be an ‘abuse of process’. The concept of ‘abuse of process’ is thus more comprehensive than the concept of res judicata or issue estoppel. The Court therefore held that a suit or appeal must be struck down as an abuse of process even if the party is not bound by res judicata if it is shown that the new proceeding is manifestly unfair or would bring the administration of justice into disrepute.

Implications of the Judgment  

The judgment thus provides that Indian courts must dismiss suits which have already been litigated before foreign courts. This is a welcome change, considering that the explanation to Section 10 of the CPC allows such proceedings to occur at the same time.

However, given that this is a High Court judgement, it will not be binding on Courts outside of Delhi and would simply have persuasive value. This difficulty is compounded by the fact that as per the facts of Shiju Jacob, the suit had been dismissed by the Tel Aviv District Court by the time the appeal was heard. Thus, it is unclear whether Indian courts will be able to follow the same approach where proceedings in the foreign court haven’t been completed yet. In fact, the HC had observed that the effect of the explanation to Section 10 of the CPC did not even arise for consideration in the present case, as the settlement in question was not being executed or enforced in the proceedings before the Indian Court.

That said, the judgment of the Single Judge (which was being challenged in the present appeal) dismissed the suit even before the consent terms were passed because it was violative of the principle of comity of courts and amounted to re-litigation. The judgment signals that the Delhi HC intended for courts to apply the same principle where proceedings on the same cause of action are ongoing in a foreign court.

Ultimately, however, it is unfortunate that this intervention had to come from the judiciary and not the legislature. India still does not have comprehensive legislation governing transnational disputes, and its position on private international law has been gauged by extending domestic rules by analogy. In the absence of legislation, uncertainty continues to reign as parties must piece together the position of law from hundreds of judgements. Regardless, the judgment in Shiju Jacob is an encouraging precedent for improving the finality of transnational litigation in India and ending the difficulties created by the explanation to Section 10 of the CPC.

[1] 2023 SCC OnLine Del 6630.

[2] (2003) 4 SCC 341.

[3] AIR [2006] SC 1828.

The rules regarding service outside the jurisdiction are about to change for the Supreme Court of Western Australia.

In a March notice to practitioners, the Chief Justice informed the profession that the Supreme Court Amendment Rules 2024 (WA) (Amendment Rules) were published on the WA legislation website on 26 March 2024.

The Amendment Rules amend the Rules of the Supreme Court 1971 (WA) (RSC). The primary change is the replacement of the current RSC Order 10 (Service outside the jurisdiction) while amending other relevant rules, including some within Order 11 (Service of foreign process) and Order 11A (Service under the Hague Convention).

The combined effect of the changes is to align the Court’s approach to that which has been applicable in the other State Supreme Courts for some years.

The changes will take effect on 9 April 2024.

Background

The rules as to service outside the jurisdiction are important to cross-border litigation in Australian courts. Among other things, the rules on service provide the limits to the court’s jurisdiction in personam: Laurie v Carroll (1957) 98 CLR 310, 323.

Whether a litigant has a judicial remedy before a court with respect to a person located outside of that court’s territorial jurisdiction will depend on that court’s rules as to service, among other things.

‘[C]ivil jurisdiction is territorial’: Gosper v Sawyer (1985) 160 CLR 548, 564 (Mason and Deane JJ). So historically, the rules on service would authorise ‘service out’ when there was an appropriate connection between the subject matter of the claim and the court’s territory. For example, a court would have the requisite connection to a contract dispute where the contract was made in the forum jurisdiction, even though the defendant in breach was located outside the jurisdiction.

The requisite connection to forum territory sufficient to justify a court’s extra-territorial jurisdiction over a person not within the forum would depend on the rules of that particular court.

State Supreme Courts’ approaches to ‘long-arm jurisdiction’ depend on where the defendant is located. If within Australia, the rules are effected by the Service and Execution of Process Act 1992 (Cth) as modified by the rules of the forum court. Within New Zealand, the rules are in the Trans-Tasman Proceedings Act 2010 (Cth)—legislation in the spirit of the Hague Conference on Private International Law—as modified by the rules of the forum court. Defendants in any other foreign country are captured by the rules of the forum court. The same goes for the Federal Court of Australia via the Federal Court Rules 2011 (Cth); see Overseas Service and Evidence Practice Note (GPN-OSE).

In characteristically Western Australian fashion, the Supreme Court of Western Australia has historically taken a unique approach to service out as compared to other State Supreme Courts of the Federation. As Edelman J explained in Crawley Investments Pty Ltd v Elman [2014] WASC 233, [45], the Western Australian rules have derived from Chancery practice, whereas the approach under the historical Supreme Court Rules 1970 (NSW) pt 10—underpinning leading authorities like Agar v Hyde (2000) 201 CLR 552—was quite different. See Agar v Hyde, CLR 572 [16].

The key difference was that the Supreme Court of WA had retained a need for leave to serve outside of the jurisdiction in advance, together with leave to have the writ issued, for persons outside Australia and not in New Zealand: see historical RSC O r 9 and O 10 r 4. Previously, the Federal Court was somewhat similar by also requiring leave, until it took a new approach from January 2023.

Some years ago, the Council of Chief Justices’ Rules Harmonisation Committee agreed to harmonise the rules as to service out as between Australia’s superior courts. New South Wales took the step of giving effect to what were then ‘new rules’ back in 2016. I discussed those changes with Professor Vivienne Bath: Michael Douglas and Vivienne Bath, ‘A New Approach to Service Outside the Jurisdiction and Outside Australia under the Uniform Civil Procedure Rules’ (2017) 44(2) Australian Bar Review 160. Other States took the same approach.

In comparison to WA, the ‘new approach’ of the eastern States’ courts required very little connection between the forum jurisdiction and the subject matter of the dispute. For example, the Supreme Court of NSW could claim jurisdiction over a claim involving a tort occurring outside Australia provided there was just some damage occurring in Australia (not occurring in New South Wales—occurring in Australia): see Uniform Civil Procedure Rules 2005 (NSW) sch 6(a). Damage in the forum was not enough in the Supreme Court of WA: the tort had to occur in Western Australia (not just occurring in Australia): see historical RSC O 10 r 1(1)(k).

Through the Amendment Rules, the Supreme Court of WA is finally giving effect to what was agreed by the Rules Harmonisation Committee.

The changes

The changes for practice in the Supreme Court of Western Australia are significant in a number of respects. The full impact of the changes will require further pondering. The following is immediately apparent.

First, RSC Order 10 has been replaced with most significant impact for cases where the person to be served is outside Australia and not in New Zealand: see the new RSC O 10 div 3.

Second, service outside Australia is now possible without leave in the same circumstances that service would be permitted without leave in other ‘harmonised’ jurisdictions, like the Supreme Court of NSW. See the new RSC O 10 r 5.

Third, even if the circumstances do not satisfy the very broad pigeonholes of connection specified by the new RSC O 10 r 5, service outside Australia is still permissible with leave if the claim has a real and substantial connection with Australia, and Australia is an appropriate forum (which oddly means not a clearly inappropriate forum per the Australian doctrine of forum non conveniens—a whole other conundrum), among other things: see the new RSC O 10 r 6(5).

A remaining issue is the interaction between the new RSC O 10 and RSC OO 11 and 11A, particularly as regards service in accordance with the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. The latter order deals with service under the Hague Convention, but it is not clear if the Hague Convention procedure for service out displaces the autochthonous procedure for service out under RSC O 10, or merely prescribes the manner or mode of service in convention countries as opposed to impacting substantive bases for whether long-arm jurisdiction is warranted.

The relationship between the historical OO 10, 11 and 11A has been one for debate, as recognised by my co-author Bell CJ in chapter 3 of the latest edition of Nygh’s Conflict of Laws in Australia: see [3.27]. The situation remains confusing. I am still confused. I look forward to becoming less confused after conferring with more learned colleagues.

Comment

The changes will likely be welcomed by the profession. They make cross-border litigation easier in Western Australia. They will make life easier for ‘foreign’ east-coast practitioners trying to dabble at practice in WA.

But I expect they will be lamented by many in the private international law community. Most academics I know subscribe to the Savigny orthodoxy that forum shopping is bad, and courts should only seize themselves of jurisdiction when they have a genuine, or real and substantive, territorial connection to the subject matter of the dispute. I know Professor Reid Mortensen will criticise these changes as ‘exorbitant’ and contrary to principle. I disagree with Reid (to hell with multilateralism—Australia first!) but I respect the arguments to the contrary. We can all agree: these changes reaffirm Australia’s unique willingness to exercise jurisdiction in a way that many foreign courts would consider exorbitant.

Written by Xandra Kramer (Erasmus University Rotterdam/Utrecht University) & Eduardo Silva de Freitas (Erasmus University Rotterdam), members of the Vici project Affordable Access to Justice, financed by the Dutch Research Council (NWO), www.euciviljustice.eu.

Introduction

We have reported on the Dutch WAMCA procedure for collective actions in a number of previous blogposts. This collective action procedure was introduced on 1 January 2020, enabling claims for damages, and has since resulted in a stream of (interim) judgments addressing different aspects in the preliminary stages of the procedure. This includes questions on the admissibility and funding requirements, some of which are also of importance as examples for the rolling out of the Representative Action Directive for consumers in other Member States. It also poses very interesting questions of private international law, as in particular the collective actions for damages against tech giants are usually international cases. We refer in particular to earlier blogposts on international jurisdiction in the privacy case against TikTok and the referral to the CJEU regarding international jurisdiction under the Brussels I-bis Regulation in the competition case against Apple.

In this blogpost we focus on two follow-up interim judgments: one in the collective action against TikTok entities and the other against Google. The latter case is being discussed due to its striking similarity to the case against Apple.

The next steps in the TikTok collective action

The collective action against TikTok that was brought before the Amsterdam District Court under the Dutch WAMCA in 2021. Three representative organisations brought the claim against seven TikTok entities located in different countries, on the basis of violation of the Code of Conduct of the Dutch Media Act and the EU General Data Protection Regulation (GDPR). The series of claims include, among others, the destruction of unlawfully obtained personal data, the implementation of an effective system for age registration, parental permission and control, measures to ensure compliance with the Dutch Media Act and the GDPR as well as the compensation of material and immaterial damages.

In an earlier blogpost we reported that the Amsterdam District Court ruled that it had international jurisdiction under the Brussels I-bis Regulation and the GDPR. In the follow-up of this case, the court reviewed the admissibility requirements, one of which concerns the funding and securing that there is not conflict of interest (see Tzankova and Kramer, 2021). This has led to another interim judgment focusing on the assessment of the third party funding agreement as two out of the three claimant organisations had concluded such agreement, as reported on this blog here. In short, the court conditioned the admissibility of the representative claimant organisations on amendments of the agreement with the commercial funder due to concerns related to the control of the procedure and the potential excessiveness of the fee. The court provided as a guideline that the percentage should be determined in such a way that it is expected that, in total, the financers can receive a maximum of five times the amount invested.

On 10 January 2024 the latest interim judgment was rendered. Without providing further details the Amsterdam District Court concluded that the required adjustments to the funding agreement had been made and that the clauses that had raised concern had been deleted or amended. It considered that the independence of the claimants in taking procedural decisions was sufficiently guaranteed. The court declared the representative organisations admissible, appointing two of them as Exclusive Representative (one for minors and the other for adults) based on their experience, the number of represented people they represent, their collaboration and support. The court confirmed its statement made in a previous interim judgment that the claim for immaterial damages is inadmissible as that would require an assessment per victim, which it considered impossible in a collective action. This is admittedly a setback for the collective protection of privacy rights, notably similar to the one following the 2021 United Kingdom Supreme Court ruling in Lloyd v Google.

With this last interim judgment the preliminary hurdles have been overcome, and the court proceeded to provide further guidelines as to the opt-out and opt-in as the next step. The WAMCA is an opt-out procedure, but to foreign parties in principle an opt-in regime applies. The collective action was aimed representing people in the Netherlands, but was extended to people who have moved abroad during the procedure, and these are under the opt-in rule. The information on opt-out and opt-in will be widely published.

It remains to be seen how the case will progress considering the further procedural decisions and the assessment on the merits.

The claim against Google and its private international law implications

Another case with an international dimension is the collective action for damages against Google that was filed under the WAMCA, alleging anticompetitive practices concerning the handling of the app store (DC Amsterdam, 27 December 2023, ECLI:NL:RBAMS:2023:8425; in Dutch). This development comes amidst a landscape marked by high-profile antitrust collective actions with international dimensions, such as the one filed against Apple, in which there is an ongoing legal battle regarding Apple’s alleged anticompetitive behavior in the market for app distribution and in-app products on iOS devices. Cases like these are either pending before courts or under investigation by competition authorities worldwide, reflecting a broader global trend towards increased scrutiny of antitrust practices in the digital marketplace.

In the present case, the claimant organisation argues that the anticompetitive nature of Google’s business stems from a collection of practices rather than an isolated practice. Such a collection of practices would shield Google from nearly all possible competition and allow it to charge excessive fees due to its dominance in the market. The practices that, taken together, form this anticompetitive behaviour are essentially:

(i) The bundling of pre-installed apps, including Google’s Play Store, with the licensing of the Android operating system to the manufacturers of smartphones;

(ii) The imposition that transactions related to the Play Store be undertaken only within Google’s own payment system;

(iii) The charging of a fee of 30% from the app’s developer, which the claimant organisation deems abusive and only possible due to Google’s dominant position created by the abovementioned practices.

Based on these allegations, the claimant organisation accuses Google of engaging in mutually exclusive and exploitative practices, thereby abusing a dominant position in a manner contrary to Article 102 TFEU. This case unfolds within a broader global context where antitrust actions against Google’s Play Store, its payment system, and the bundling with the Android operating system have gained significant momentum. Just last December, Google reached a settlement in a multidistrict litigation involving all 50 states of the United States, the District of Columbia, Puerto Rico, and the Virgin Islands. The settlement addressed issues very similar to those raised in this case, as explicitly outlined in the agreement. The Competition and Markets Authority in the United Kingdom is also conducting an antitrust investigation into these aspects of Google’s operations. Furthermore, the practice of pre-installing Google apps as a requirement for obtaining a license to use their app store is under investigation by the Brazilian Competition Authority.

From a private international law perspective, this case closely resembles another one against Apple referred to the CJEU by the District Court of Amsterdam and discussed earlier in this blog, in which similar antitrust claims were raised due to the handling of the app store and the exclusionary design of the respective payment system. However, unlike the collective action against Apple, in this case the District Court of Amsterdam clearly did not refer the case to the CJEU and instead decided by itself whether it had jurisdiction to hear the claim. And again, like the Apple case, the court was called upon to decide on both international jurisdiction and its territorial jurisdiction within the Netherlands.

International jurisdiction

The collective action under the Dutch WAMCA in the Google case was filed against a total of eight defendants. Two of the defendants (Google Netherlands B.V. and Google Netherlands Holdings B.V.) against whom the claim was filed are established in the Netherlands, and for them the standard rule of Article 4 Brussels I-bis Regulation applies. There are also three other defendants (Google Ireland Limited, Google Commerce Limited, and Google Payment Ireland Limited) established in another EU Member State, namely Ireland. With regards to these defendants, the court also assessed whether it had jurisdiction based on the Brussels I-bis Regulation. Finally, there are three defendants based outside of the EU – Alphabet Inc. and Google LLC in the United States and Google Payment Limited in the United Kingdom. Jurisdiction with regards to these defendants based outside of the EU was established under the pertinent rules contained in the Dutch Code of Civil Procedure (DCCP).

The court initiated its assessment by recognizing that, due to the lack of jurisdiction rules specifically addressing collective actions in both the Brussels I-bis Regulation and the Dutch Code of Civil Procedure, the standard rules within these frameworks should be applied. The court’s reasoning was based on the established principle that no differentiation exists between individual and collective actions when determining jurisdiction. The court primarily conducted its assessment regarding whether the Netherlands could be considered the Erfolgsort under Article 7(2) of the Brussels I-bis Regulation, mostly ex officio, as this was not a point of contention between the parties.

The court’s view is that the criteria from Case C-27/17 flyLAL-Lithuanian Airlines (ECLI:EU:C:2018:533) should be applied, according to which the location of the market affected by the anticompetitive practice is the Erfolgsort. The location of the damage is where the initial and direct harm occurred, which primarily involves users overpaying for purchases made on the Play Store. In the present case the court, applying such criteria, decided that the Netherlands can be considered the Erfolgsort, given that the claimant organisation represents users that make purchases and reside in the Netherlands. This reasoning is very similar to the one used by the District Court of Amsterdam in deciding to refer the Apple case to the CJEU.

Territorial jurisdiction within the Netherlands

With regards to the jurisdiction of the District Court of Amsterdam to hear this collective action in which the claimant organisation sues on behalf of all the users residing in the Netherlands, the decision contains an assessment starting from the CJEU ruling in Case C-30/20 Volvo (ECLI:EU:C:2021:604). Such ruling states that Article 7(2) Brussels I-bis Regulation grants jurisdiction over claims for damages due to infringement of Article 101 TFEU to the court where the goods were purchased. If purchases were made in multiple locations, jurisdiction lies with the court where the alleged victim’s registered office is located.

In the case at hand, given the mobile nature of the purchases, it is not possible to pinpoint a specific location. However, under the criteria just mentioned, the District Court of Amsterdam has jurisdiction over the victims’ registered offices for those residing in Amsterdam in accordance with both Article 7(2) Brussels I-bis Regulation (Google Ireland Limited, Google Commerce Limited, and Google Payment Ireland Limited) and the similar provision in Article 102 DCCP (Alphabet Inc., Google LLC, and Google Payment Limited).

For users residing elsewhere in the Netherlands, the parties agreed that the District Court of Amsterdam would serve as the chosen forum for users who are not based in Amsterdam. The court decided that, with regards to Alphabet Inc., Google LLC, and Google Payment Limited, this is possible under Article 108(1) DCCP on choice of court. As to Google Ireland Limited, Google Commerce Limited, and Google Payment Ireland Limited, the court interpreted Article 7(2) Brussels I-bis Regulation in light of the principle of party autonomy (see Kramer and Themeli, 2016) as enshrined in Recitals 15 and 19, as well as Article 25 Brussels I-bis Regulation. The court also noted that no issues concerning exclusive jurisdiction arise in the present case and made a reference to the rule contained in Article 19(1) Brussels I-bis Regulation according to which the protective rule of Article 18 Brussels I-bis Regulation can be set aside by mutual agreement during pending proceedings.

Finally, the court decided that centralising this claim under its jurisdiction is justified under the principle of sound administration of justice and the prevention of parallel proceedings. In the court’s understanding, the goal of Article 7 Brussels I-bis Regulation is to place the claim before the court that is better suited to process it given the connection between the two and, given that the mobile nature of the purchases gives rise to damages all over the Netherlands, such a court would be difficult to designate. Hence the need for respecting the choice of court agreement.

Applicable law

The court established the law applicable to the present dispute under Article 6(3)(a) Rome II Regulation. The court used the same reasoning it had laid out to establish jurisdiction in the Netherlands as the Erfolgsort, since it is the market affected by the alleged anticompetitive practices where the users concerned reside and made their purchases. The court also considered the claimant organization’s argument that, according to Article 10(1) of the Rome II Regulation, the Dutch law of unjust enrichment could govern the claim. Although the court did not provide extensive elaboration, it agreed with this view.

Funding aspects of the claim against Google

Lastly, in a naturally similar way as regarding the TikTok claim explained above, the court assessed the funding arrangements of the claim against Google under the requirements set by the WAMCA. The court took issue with the fact that the funding arrangement entered by the claimant organisation is somewhat indirect, since it is apparent that the funder itself relies on another funder which is not a part of the agreement presented to the court. Under these circumstances, the court deems itself unable to properly assess the claimant organisation’s independence from the “actual” funder and its relationship with the remuneration structure.

For this reason, the court ordered the claimant organisation to resubmit the agreement, which it is allowed to do in two versions. One version of the agreement will be presented in full and will be available to the court only, to assess it in its entirety. The other version, also available to Google, will have the parts concerning the overall budget for the claim concealed. However, the parts concerning the funder’s compensation share must remain legible for discussion around the organisation’s independence from the funder, and confirmation that such agreement reflects the whole funding arrangement of the claim was also required.

This post is written by Guodong Du and Meng Yu and published at China Justice Observer. It is reproduced here by kind permission of the authors. 

Key takeaways:

• In September 2023, the Shanghai Third Intermediate People’s Court ruled to recognize the Tokyo District Court’s decision to commence civil rehabilitation proceedings and the order appointing the supervisor ((2021) Hu 03 Xie Wai Ren No.1).
• This marks not only the first time that China has recognized a Japanese court’s decision in a bankruptcy procedure, but also the first time that China has recognized a Japanese judgment.
• The case establishes a legal precedent for cross-border bankruptcy decisions, demonstrating that prior non-recognition patterns between China and Japan in civil and commercial judgments may not apply in such cross-border scenarios.
• While not resolving the broader recognition challenges between the two nations, this acknowledgment sends a positive signal from the Chinese court, hinting at potential future breakthroughs and fostering hope for improved legal cooperation.

This marks not only the first time that China has recognized a Japanese court’s decision in a bankruptcy procedure, but also the first time that China has recognized a Japanese judgment (See the Chinese Court Ruling (2021) Hu 03 Xie Wai Ren No.1 ( (2021)?03???1)).

Related Posts:

• China Recognizes Another German Bankruptcy Judgment in 2023
• How Chinese Judges Recognize Foreign Bankruptcy Judgments
• The First Time Chinese Court Recognizes Singapore Bankruptcy Judgment

The Japanese law firm Nagashima Ohno & Tsunematsu, representing a Japanese company, applied to the Tokyo District Court to initiate civil rehabilitation proceedings (a type of restructuring-type bankruptcy procedure under Japanese bankruptcy law). According to the application, the Tokyo District Court decided to commence civil rehabilitation proceedings and appointed a supervisor to monitor the debtor’s activities.

As the Japanese company had certain assets in Shanghai, to facilitate the smooth progress of the civil rehabilitation proceedings in Japan, the company filed an application with the Shanghai Third Intermediate People’s Court (the “Shanghai Court”), requesting recognition of the Tokyo District Court’s to commence civil rehabilitation proceedings and the order appointing the supervisor. Nagashima Ohno & Tsunematsu provided legal opinions on relevant Japanese laws during the recognition process.

On 6 Sept. 2023, the Shanghai Court made a ruling recognizing the Japanese company’s civil rehabilitation proceedings and the identity of the supervisor, and allowing the supervisor to monitor the company’s self-management of property and business affairs within China under certain conditions.

In reviewing whether there was a reciprocal relationship between China and Japan in recognizing bankruptcy decisions, the Shanghai Court found that:

(1) Both sides have precedents of refusing to recognize each other’s civil and commercial judgments, but these precedents do not necessarily apply to cross-border bankruptcy cases;

(2) According to Japanese laws, there are no legal obstacles to the recognition of Chinese bankruptcy decisions by Japanese courts, which confirms the existence of a reciprocal relationship between China and Japan in the recognition of cross-border bankruptcy cases.

This is the first time that China has recognized a decision made by a Japanese court in bankruptcy proceedings.

China and Japan have been at an impasse regarding the mutual recognition and enforcement of judgments. For more details, please read our earlier post How to Start the Recognition and Enforcement of Court Judgments between China and Japan?.

Related Posts:

• Some Thoughts on the Sino-Japanese Reciprocal Recognition Dilemma in Light of the Recent Developments in the Recognition and Enforcement of Foreign Judgments in China
• How to Start the Recognition and Enforcement of Court Judgments between China and Japan?

According to the Shanghai Court’s statement, this case does not mean that the impasse between China and Japan has been broken, but it does send a positive signal from the Chinese court regarding Japanese judgments. We look forward to further breakthroughs between the two sides.

We have not yet obtained the original text of the judgment made by the Shanghai Court in this case. The above case information is from the website of Fangda Partners, the Chinese law firm representing the Japanese company in this case.

Another case commentary can be found here on the website of the Asian Business Law Institute (ABLI).

Written by Muhammad Zubair Abbasi, Lecturer at School of Law, Oxford Brookes University (mabbasi@brookes.ac.uk)

Introduction:

In a recent judgment Tousi v Gaydukova [2024] EWCA Civ 203, the Court of Appeal dealt with the issue of the relevance of foreign law to the remedy available under English law in respect of an overseas ceremony of marriage. Earlier the High Court had held that the foreign law determines not only the validity or invalidity of the ceremony of marriage but also the ramifications of the validity or invalidity of the ceremony. The Court of Appeal disagreed and reiterated the rule that lex loci celebrationis is limited to the determination of the validity or invalidity of the ceremony of marriage. Therefore, English law will apply to provide a remedy or relief upon the breakdown of the relationship of the parties to a marriage ceremony that took place abroad.

In this comment, I argue that the judgment of the Court of Appeal conflates the distinction between the formal recognition of the relationship under the foreign law and the relief available thereto. The judgment of the Court of Appeal does not appreciate this distinction along with the distinction between the void marriage and ‘non-qualifying ceremony’ of marriage, which does not entitle the parties to any remedy or financial relief under the law in England and Wales.

The Facts:

The ceremony of marriage between the parties, an Iranian husband and a Ukrainian wife, took place at the Iranian Embassy in Kyiv on 12 December 1997 in the presence of two official witnesses. The marriage was not registered with the state authorities in Ukraine. The parties knew about the requirement of the registration of their marriage for its validity, but the husband refused to cooperate with the wife when she attempted to register the marriage. In 2000, the parties moved to the UK for the husband to study for a PhD. The Home Office granted entry clearance to the wife as the spouse of the husband. In 2010, the parties were granted the tenancy of a property in their joint names, but they separated in December 2019. In April 2020, the wife applied for non-molestation and occupation orders. The court granted a non-molestation order ex parte but refused an occupation order and observed that the wife could apply for the transfer of the tenancy. Therefore, the wife applied for the transfer of tenancy of the former matrimonial home into her sole name.

The wife made the application under section 53 and Schedule 7 of the Family Law Act 1996 which empowers the court to transfer a tenancy to cohabitants. Paragraph 3 of Schedule 7 of the Act authorises the court to make such orders when cohabitants cease to cohabit. It is a curious aspect of this Act, that it puts a cohabitant applicant in a better position than a married applicant, who must wait until the court terminates their marriage, before their application can be heard. The court granted a transfer of tenancy to the wife by regarding her as a cohabitee because the marriage of the parties was not registered under Ukrainian law and hence it was not recognised under English law, not even as a void marriage.

The husband filed an appeal on the ground that the parties had entered into a marriage which was capable of recognition under English law. The wife argued that the court should regard the unregistered marriage as a ‘non-marriage’ which does not entitle the parties even to a nullity order under the Matrimonial Causes Act 1973 (MCA). Mostyn J addressed this single point of appeal in his detailed judgment at the High Court Family Division. He rejected the appeal after holding that the marriage ceremony did not qualify even as a void marriage and therefore, the couple were unmarried cohabitants because Ukrainian law did not recognise their marriage ceremony.

In his judgment, Mostyn J criticised the judicial creation of ‘non-qualifying ceremony’ (NQC) by the Court of Appeal in AG v Akhter and Others [2020] EWCA Civ 122 for its direct conflict with that statute [s. 11 of the MCA 1973]’ which extends financial relief even to void marriages to protect the rights of spouse. In highlighting the impact of the category of the NQC on the legal recognition of foreign marriages under English law, he held that foreign law determines not only the validity of a ceremony of marriage, but also the ramifications of the validity or invalidity of the ceremony.

Ruling and Comments:

Earlier, Mostyn J had observed that it is “well established under our rules of private international law that the formal validity of a marriage celebrated overseas (forma) is governed by the lex loci celebrationis” [para 65]. He held that “If the foreign law not only determines the question of validity, but also determines the ramifications of invalidity (if found), then in my judgment that corollary should also be binding, provided that it is not obviously contrary to justice.” [para 68]

At the Court of Appeal, Moylan LJ observed, “The effect of the judge’s approach … was that the relief available under the foreign law should determine … the relief available under English law.” [para 29]. This, according to Moylan LJ was wrong because “the relief available, or not available, is determined by the law governing the dissolution and annulment of marriages, not the law governing the formation of marriages.” [para 35]. In this case however the issue was not related to “the dissolution and annulment of marriages” because both Mostyn J and Moylan LJ agreed that the ceremony of marriage of the parties did not “qualify” as a marriage and hence did not require to be dissolved or annulled because it did not have any legal effect at all. Therefore, the main issue in this case was whether Ukrainian law recognised the marriage ceremony that took place at the Iranian embassy in Kyiv. Both judges found that Ukrainian law did not recognise the marriage ceremony, not even as a void marriage and hence did not provide any remedy or relief.

It is important to note that the judges of the Court of Appeal did not appreciate that there is a third stage between the validity of marriage and relief on breakdown of marriage, and it is the stage of legal recognition or non-recognition of a marriage as valid, void or non-marriage. For instance, in Hudson v Leigh [2009] EWHC 1306, South African law recognised the ceremony as a void marriage; and in Asaad v Kurter [2013] EWHC 3852, the ceremony could be subsequently ratified, but a similar option was not available under Ukrainian law. Ukrainian law however recognised since 2002 a “so-called in-fact marriage relations” which provided the parties with rights and remedies in respect of property acquired during their cohabitation. Similar provisions are available for the transfer of tenancy but not for the provision of other financial relief under English law.

Moylan LJ highlighted that “there is a fundamental distinction between the law governing the formation of marriages and the law governing the dissolution and annulment of marriages. The remedies or relief which might be available under the latter are distinct from former.” [para 73]. This binary distinction however does not cater to the situations where “the law governing the formation of marriages” regards the marriage ceremony as “non-qualifying ceremony” and hence “the law governing the dissolution and annulment of marriages” does not provide any “remedies or relief”. In Hudson v Leigh, the former category of the law regarded the marriage as void and the latter category provided financial relief. In the case at hand, “the law governing the formation of marriages” regarded the marriage ceremony as “non-marriage” and hence “the law governing the dissolution and annulment of marriages” did not apply and could not provide any remedy or relief.

As the category of “non-qualifying ceremony” which was previously described as “non-marriage” is relatively new under English law, the case law is unclear about their treatment especially in cases involving conflict of laws. Mostyn J argued that the category of “non-qualifying ceremony” would be treated under the foreign law as the governing law both for the determination of such ceremonies and their consequent legal ramifications while Moylan LJ has favoured limiting the foreign law to the question of validity or invalidity of marriage ceremonies. I submit that the tension between these two conflicting views can be resolved by appreciating a third stage between the formation and dissolution/annulment of marriage, which is the legal recognition or non-recognition of the marital relationship by taking into account the possibilities of subsequent ratification or registration of marriages. In this way, the governing law of marriage regulates both the formation of the marriage and its subsequent treatment as legally recognised or not while the remedy or relief is determined under lex fori when the relationship breaks down.

I . Introduction

Egypt and its legal system occupy a unique position within the MENA region. Egyptian law and scholarship exert a significant influence on many countries in the region. Scholars, lawyers, and judges from Egypt are actively involved in teaching and practicing law in many countries in the region, particularly in the Gulf States. Consequently, it is no exaggeration to say that developments in Egyptian law are likely to have a profound impact on neighboring countries and beyond, and warrant special attention.

The cases presented here were recently released by the Egyptian Supreme Court (mahkamat al-naqdh). They are of particular interest because they illustrate the complex nature of legal sources, particularly with respect to the enforcement of foreign judgments (on this topic, see Béligh Elbalti, “Perspective of Arab Countries”, in M. Weller et al. (eds.), The 2019 HCCH Judgments Convention – Cornerstones, Prospects, Outlook (Hart, 2023), pp. 195 ff). These cases also provide a good opportunity to elucidate the basic principles regarding the service requirement, which, as the cases discussed here and the comments that follow show, can pose particular challenges.

II. Facts

Two cases are presented here. Both involve the enforcement of judgments from neighboring countries (Kuwait in the first case and Saudi Arabia in the second) with which Egypt has concluded conventions on the enforcement of foreign judgments. In both cases, enforcement was granted by lower courts.  The parties challenging the enforcement then appealed to the Supreme Court. The main grounds of appeal in both cases revolve around the issue of proper service of process. Ultimately, the Supreme Court ruled in favor of the appellants in both cases.

III. Summary of the Rulings

• Case 1: Appeal No. 2765 of 25 June 2023 (Enforcement of a Kuwaiti Monetary Judgment)

 Proper service is a prerequisite to be verified by the enforcing court before declaring a foreign judgment enforceable, as stipulated in Article 298 of the Code of Civil Procedure (hereinafter CCP). Enforcement should be refused unless it is established that the parties were duly served and represented. This is in line with the provisions of the Convention on the Enforcement of Judgments concluded between States of the Arab League, in particular Article 2(b), as well as Article 30 of the Riyadh Convention on Judicial Cooperation, which was ratified by Egypt by Presidential Decree No. 278 of 2014, and according to which foreign default judgments rendered in a contracting state shall not be recognized if the defendant has not been properly served with the proceedings or the judgment. […] [The record indicates that the appellant challenged the enforcement of the foreign judgment on the basis of insufficient service. The enforcing court admitted the regularity of the service, but without stating the basis for its conclusion. As a result, the appealed decision is flawed and requires reversal with remand].

• Case 2: Appeal No. 17383 of 14 November 2023 (Enforcement of a Saudi custody judgment)

 According to Article 301 of the CCP, conventions signed by Egypt take precedence over domestic law. Egypt ratified the Convention on the Enforcement of Judgments issued by the Council of the League of Arab States by Law No. 29 of 1954 and deposited the instruments of ratification with the General Secretariat of the League on July 25, 1954. The Kingdom of Saudi Arabia also signed the Convention on May 23, 1953. Consequently, the provisions of this Convention are applicable to the present case. […] The appellant argued that he had not been properly served with the summons because he had left the Kingdom of Saudi Arabia before the trial, which led to the foreign judgment. However, the judgment under appeal did not contain any valid response to the appellant’s defense or any indication that the enforcing court had reviewed the procedures for serving the appellant. Furthermore, it did not examine whether the service of the appellant was in accordance with the procedures laid down by the law of the rendering State. Consequently, the appealed decision is vitiated by an error of law which requires it to be quashed.

Comments

The enforcement of foreign judgments in Egypt is regulated by Articles 296 to 301 of the CCP (for an English translation of these provisions, see J. Basedow et al. (eds.), Encyclopedia of Private International Law – Vol. IV (Elgar Editions, 2017), pages 3163-4). It is also governed by the conventions on the enforcement of foreign judgments ratified by Egypt (for a detailed overview in English of the enforcement of foreign judgments in Egypt under the applicable conventions and domestic law, see Karim El Chazli, “Recognition and Enforcement of Foreign Decisions in Egypt”, Yearbook of Private International Law, Vol. 15 (2013/2014), pp. 387). The two cases presented above concern enforcement under these conventions.

In this regard, it is noteworthy that Egypt has established an extensive network of bilateral and regional multilateral conventions (for a detailed list, see Elbalti, op. cit. pp. 196, 199). With regard to multilateral conventions, Egypt has ratified two conventions adopted under the auspices of the League of Arab States: (1) The Arab League Convention on the Enforcement of Foreign Judgments and Arbitral Award of 1952 (hereinafter referred to as the “1952 Arab Judgments Convention”. On this Convention, see eg, El Chazli, op. cit. pp. 395-399) and (2) The Riyadh Convention on Judicial Cooperation of 1983 (hereinafter referred to as the “1983 Riyadh Convention”. On this Convention, see eg, Elbalti, op. cit. pp. 197-198). It is important to note that the 1983 Riyadh Convention is intended to replace the 1952 Arab Judgments Convention in relations between the States Parties to both Conventions (see Article 72).

Bilateral conventions include a convention concluded with Kuwait in 1977. This convention was replaced by a new one in 2017.

1. With regard to the first case, the following observations can be made:

a. This case appears to be the first case in which the Supreme Court has referred to the 1983 Riyadh Convention since its ratification in 2014. This is noteworthy in light of the numerous missed opportunities for the Court to apply the Convention (see eg., Supreme Court Appeal No. 5182 of 16 September 2018. In the Appeal No. 16894 of June 6, 2015, the Riyadh Convention was invoked by the parties, but the Court did not refer to it. See also 2(b) below).

b. It is also noteworthy, and somewhat surprising, that the Supreme Court referred to the 1983 Riyadh Convention in a case concerning the enforcement of a Kuwaiti judgment. This is because, contrary to what is widely acknowledged, Kuwait has only signed but did not ratify the Riyadh Convention (on this point see Elbalti, op. cit., page 197 fn (118)). Since Kuwait is a party only to the 1952 Arab Judgments Convention, the Supreme Court’s reference to the 1983 Riyadh Convention was inaccurate. Moreover, if the 1983 Riyadh Convention had been applicable, there would have been no need to refer to the 1952 Arab Judgments Convention, since the former is intended to replace the latter (Article 72 of the Riyadh Convention).

c. Conversely, the Supreme Court completely overlooked the application of the 2017 bilateral convention with Kuwait, which, as noted above, superseded the 1977 bilateral convention between the two countries. This case provided another missed opportunity for the Court to address the so-called problem of conflict of conventions, as both the 1952 Arab Convention and the 2017 bilateral convention were applicable with overlapping scopes. In the absence of special guidance in the text of the conventions, such a conflict could have been solved on the basis of one of the two generally admitted principles: lex posteriori derogat priori or lex specialis derogat generali (for an example of a case adopting the latter solution from the UAE, see Abu Dhabi Supreme Court, Appeal No. 950 of 26 December 2022).

d. This is not the first time the Egyptian Supreme Court has dealt with the enforcement of Kuwaiti judgments (there are 10 cases, by my count). In all of these cases, the court referred to the 1952 Arab Judgments Convention in addition to domestic law. It is only in two cases that the Court referred to the 1977 Kuwait-Egypt bilateral convention in addition to the 1952 Arab Judgments Convention (Supreme Court Appeal No. 3804 of 23 June 2010 and Appeal No. 15207 of 11 April 2017). In the majority of cases (8 out of 10), the Court refused to enforce Kuwaiti judgments. The main ground of refusal was mainly due to, or including, lack of proper service.

2. With regard to the second case, the following observations can be made:

a. Egypt does not have a bilateral convention with Saudi Arabia. However, both Egypt and Saudi Arabia are parties to the 1952 Arab Judgments Convention and the 1983 Riyadh Convention. As noted above, the 1983 Riyadh Convention replaces the 1952 Arab Judgments Convention for all States that have ratified it (Article 72). Therefore, the Supreme Court’s affirmation that “the provisions of the [1952 Arab Judgments] Convention are therefore applicable to the present case” is incorrect. It is also surprising that the court made such a statement, especially considering that the party seeking enforcement relied on the 1983 Riyadh Convention, and given its erroneous application in Case 1.

b. This is not the first time that the Supreme Court has overlooked the application of the 1983 Riyadh Convention in a case involving the enforcement of a Saudi judgment. In a case decided in 2016, almost two years after the Convention entered into force in Egypt, the Supreme Court referred to the 1952 Arab Judgments Convention to reject the enforceability of a Saudi judgment, again citing the lack of proper service (Supreme Court, Appeal No. 11540 of 24 February 2016).

3. Enforcement of Foreign Judgments and Service Requirement in Egypt

As a general rule, service of process under Egyptian law is considered a procedural matter that should be governed by the lex fori (Article 22 of the Civil Code. For an English translation, see Basedow et al, op. cit.; see also El Chazli, pp. 397, 402). In the context of foreign judgments, this means that the service of process or judgment is, in principle, governed by the law of the state of origin, subject, however, to considerations of public policy (see eg., Supreme Court, Appeal No. 2014 of 20 March 2003). Based on the case law of the Supreme Court, the following features are noteworthy:

• Service by publication was considered sufficient for enforcement purposes if the court could confirm that it had been duly carried out in accordance with the law of the State of origin (Supreme Court, Appeal No. 232 of 2 July 1964).
• However, if it appears that the service by publication did not comply with the requirements of the foreign law, the regularity of the service will be denied (Supreme Court of, Appeal No. 14777 of 15 December 2016 [service of summons]; Appeal No. 1441 of 20 April 1999 [notification of judgment]).
• Conversely, the Court held that the service irregularities may be cured if the defendant voluntarily appears before the foreign court and presents arguments on the merits of the case (Supreme Court, Appeal No. 18249 of April 13, 2008).
• Merely asserting that service was made in accordance with the law of the country of origin is not sufficient. Egyptian courts are required to verify that the judgment debtor has been properly served in accordance with the law of the country of origin and that such service is not contrary to Egyptian public policy (Supreme Court of Cassation, Appeal No. 558 of 29 June 1988). This aspect can be particularly important when it appears that the judgment debtor had permanently left the State of origin at the time when the service was made (Supreme Court, Appeal No. 8376 of 4 March 2010; Appeal No. 14235 of 1 January 2014; Appeal No. 1671 of 18 February 2016).
• With regard to ensuring that the defendant has been duly served, the courts are not bound by any specific method imposed by Egyptian law; therefore, the conclusions made by the enforcing court as to the regularity of the service based on the findings of the foreign judgment and not disputed by the appellant may be accepted (Supreme Court, Appeal No. 1136 of 28 November 1990).
• Where an international convention applies, the rules for service set out in the convention must be complied with, even if they differ from the rules of domestic law. Failure to comply with the methods of service prescribed by the applicable convention would render the foreign judgment unenforceable (Supreme Court, Appeal No. 137 of 8 March 1952).
• The rules provided for by the conventions prevail, including the method of determining whether proper service has been made (eg., the submission of a certificate that the parties were duly served with summons to appear before the proper authorities). Therefore, failure to comply with this rule would result in the rejection of the application for enforcement by the party seeking enforcement (Supreme Court, Appeal No. 5039 of 15 November 2001; Appeal No. 3804 of 23 June 2010).

4. Service under Conventions

Most of the bilateral and regional conventions ratified by Egypt contain provisions on the service of judicial documents. The Riyadh Convention is particularly noteworthy in this regard, as 18 of the 22 members of the League of Arab States are parties to it (see Elbalti, op. cit., pp. 196-197). In addition, Egypt has been a party to the HCCH 1965 Service Convention since 1968.

The proliferation of these international instruments inevitably leads to the problem of conflict of conventions. This problem can be particularly acute in some cases, where as many as three competing instruments may come into play. This scenario often arises with some Arab countries, such as Tunisia or Morocco, with which Egypt is bound by (1) bilateral conventions, (2) a regional convention (namely the Riyadh Convention), and (3) a global convention (namely the HCCH Hague Service Convention).

In this context, the solution adopted by the Hague Convention deserves attention. Article 25 of the Convention provides that “[…] this Convention shall not derogate from conventions containing provisions on matters governed by this Convention to which the Contracting States are or will become Parties“. However, the evaluation of this solution deserves a separate comment (for analyses on a similar issue regarding the HCCH 2019 Judgments Convention, see Elbalti, op. cit., p. 206).

I would like to thank Prof. Lotfi Chedly for providing me with the text of the decision on which this post is based.

I. Introduction

Scholars of private international law are well familiar with the classic debate on nationality and domicile as connecting factors in the choice of applicable law (see, for example, L. I. de Winter, “Nationality or Domicile? The Present State of Affairs” 128 Collected Courses III (1969) pp. 357 ff). In Tunisian private international law, this controversy has been particularly pronounced with regard to the role of nationality as a ground for the international jurisdiction of Tunisian courts. Since the enactment of the Tunisian Private International Law Code (“PILC”) in 1998 (for an English translation, see J. Basedow et al. (eds.) Encyclopedia of Private International Law – Vol. IV (Elgar Editions, 2017) 3895 and my own translation of the provisions dealing with international jurisdiction and the enforcement of foreign judgments in 8 Journal of Private International Law 2 (2012) pp. 221 ff)), the debate between opponents and proponents of nationality as a ground for international jurisdiction, especially in family law matters, has never ceased to be intense (for detailed analyses, see eg. Salma Triki, “La compétence internationale tunisienne et le critère de nationalité” in Ben Achour/Triki (eds.), Le Code de droit international privé – Vingt ans d’application (1998-2018) (Latrach edition, 2020) 119ff). This divergence in academic opinion is also reflected in the judicial practice of the courts, with the emergence of two opposing trends: one extends the international jurisdiction of the Tunisian courts when the dispute involves a Tunisian party, in particular as a defendant even when domiciled abroad. The other firmly rejects nationality as a ground for international jurisdiction.

The case commented here illustrates the culmination of this disagreement within the courts. The Supreme Court (mahkamat al-ta’qib – cour de cassation), in a second appeal, strongly denied the existence of such a privilege and emphasized the primacy of domicile over nationality as a basis for international jurisdiction in Tunisia. The Court of Appeal, acting as a court of remand, explicitly recognized that the jurisdiction of the Tunisian courts could be based on what is commonly referred to as “privilege of jurisdiction”. The Court of Appeal went even further by describing the decision of the Supreme Court, from which the case had been remanded, as “legally incorrect”. This stark contrast between the two courts prompted the intervention of the Joint Chambers (chambres réunies) of the Supreme Court, which issued what appears to be the first decision of its kind in the field of private international law in Tunisia (Ruling No. 36665 of 15 June 2023), signed by 62 judges of the Supreme Court (including the Chief Justice (President of the Court), 21 Presidents of Chambers and 40 other judges as counsellors).

II. Facts

The case concerns a divorce action brought in Tunisia by X (plaintiff husband and appellee in subsequent appeals) against his wife, Y (defendant and appellant in subsequent appeals). The text of the decision indicates that X and Y were married in 2012 and had a child. Moreover, while X’s Tunisian nationality appears to be undisputed, there may surprisingly be some doubts about Y’s Tunisian nationality, as emerged later in the parties’ arguments before the Joint Chambers.

In 2017, the Court of First Instance of Sousse (a city located about 150 km south of the capital Tunis) declared the parties divorced and ordered some measures regarding maintenance, custody and visitation. Dissatisfied, Y appealed to the Court of Appeal of Sousse. In 2018, the court overturned the appealed decision, considering that the Tunisian courts did not have jurisdiction over the dispute. X appealed to the Supreme Court (1st appeal). In its decision issued later in 2018, the Supreme Court overturned the appealed decision with remand, holding that the Court of Appeal did not correctly examine the existence (or not) of a foreign element in the dispute in order to decline jurisdiction on the grounds that X claimed that the spouses’ matrimonial domicile was in Tunisia, where Y lived and worked.

In 2019, the Court of Appeal of Sousse, as the court of remand, accepted jurisdiction and confirmed the decision of the court of first instance with some modifications. Y appealed to the Supreme Court (2nd appeal). Y argued, inter alia, that the rules of international jurisdiction laid down in the PILC had been violated, since the spouses’ matrimonial domicile was in France and that the couple had only returned to Tunisia during the summer vacations. In 2020, the Supreme Court ruled in favor of Y, stating, inter alia, that the Tunisian legislator had made from “the domicile of the defendant the decisive ground for the international jurisdiction of the Tunisian courts”. The Court also held that the Court of Appeal had reached an erroneous conclusion based on a misapplication of the facts and a misinterpretation of the law. The case was referred back again to the Court of Appeal.

In 2021, the Court of Appeal, in a frontal opposition, declared that the decision of the Supreme Court, according to which the domicile of the defendant was the ground based on which Tunisian courts could assume international jurisdiction, “cannot be followed” and is “legally incorrect”. Then the court affirmed that Tunisian nationals enjoy a “privilege of jurisdiction”, and this “means that Tunisian defendants should be subject to their national courts, even if they are domiciled abroad, since the purpose of granting jurisdiction to Tunisian courts in this category of disputes is to ensure better protection of their interests”.

Y challenged the decision of the Court of Appeal again before the Supreme Court (3rd appeal). As this was a disagreement between the Court of Appeal and the Supreme Court on a second appeal, the jurisdiction of the Joint Chambers was justified (articles 176 and 177 of the Code of Civil and Commercial Procedure, hereafter “CCCP”).

Before the Joint Chambers, Y argued, inter alia, that (1) that she was not a Tunisian national but a holder of dual Algerian/French nationality; (2) that the court had also based its decision on the fact that she was resident in Tunisia, ignoring the fact that she had returned to Tunisia only to spend her summer vacation; (3) that she had left Tunisia for France.

On the other hand, X argued that the Court of Appeal was right to hold that disputes in which one of the parties is Tunisian and in which the subject matter concerns matters of personal status fall within the jurisdiction of the Tunisian courts, since matters concerning the family and its protection concern public policy, especially when the dispute also involves a Tunisian minor.

III. Ruling

The Joint Chamber of the Supreme Court held that the Tunisian courts did not have jurisdiction and decided to overturn the decision of the Court of Appeal without further remand. The court ruled as follows (only relevant parts are reproduced here. The gendered style reflects the language used in the text of the Court’s decision):

“The dispute concerns the question whether the international jurisdiction of the Tunisian courts should be determined on the basis of the defendant’s domicile (maqarr), in accordance with Article 3 of the PILC, or on the basis of the privilege of jurisdiction, according to which a Tunisian national is subject to the jurisdiction of his national courts even if he is domiciled abroad.

It goes without saying that in Articles 3 to 10 of the PILC, the legislator has sought to confer jurisdiction on the Tunisian courts on the basis of close connections between the Tunisian legal system and the legal relationship, thereby abolishing the exceptional grounds such as nationality, representation or reciprocity. The reason for the abolition of these exceptional grounds lies in the fact that they do not constitute a genuine connection between the dispute and the Tunisian legal system […].

[…]

As appears from the files of the case, the residence (iqama) of Y in France is established either on the basis of the service of the summons […] on her domicile (maqarr) in France […] or the judicial admission made by X […] [in which he] admitted that his wife had moved to France where she had settled with their daughter and refused to return to Tunisia.

[However], by considering that the privilege of jurisdiction entails subjecting the Tunisian defendant to the jurisdiction of his or her national courts, even if he resides (muqim) abroad, the remand court misjudged the facts and drew erroneous conclusion, leading to a misunderstanding and misapplication of article 3 of the PILC […].”

IV. Comments

The principle established by the Joint Chamber regarding the role of the defendant’s Tunisian nationality as a ground for international jurisdiction can be considered a welcome clarification of the interpretation and application of Tunisian law. However, it must also be said that the decision commented on here contains some intriguing and to some extent confusing features, particularly in the parts of the decision not reproduced above relating to the meaning of and the distinction between “domicile (maqarr)” and “residence (iqama)”. For the sake of brevity, only the issue of nationality as a ground of international jurisdiction will be commented on here.

1. Prior to the Enactment of the PILC

Prior to the enactment of a PILC, nationality – especially that of the defendant – was used as a general ground for international jurisdiction in all disputes brought against Tunisians, even if they were domiciled abroad (former art. 2 of the CCPC). This rule is common in the MENA region and is generally followed even if it is not explicitly stated in the law (For the case of Bahrain, see here, for the case of Morocco, where a new draft code of civil procedure proposes to introduce a similar rule ex lege, see here).

2. Nationality as a ground for international jurisdiction under the PILC

The PILC, adopted in 1998, introduced a radical change in this regard by completely excluding nationality as a ground for international jurisdiction (see eg. Imen Gallala-Arndt, “Tunisia”, in J. Basedow et al. (eds.) Encyclopedia of Private International Law – Vol. III (Elgar Editions, 2017) p. 2586). Henceforth, the PILC recognizes only one legitimate ground of general  jurisdiction over any civil or commercial dispute (including family law disputes) arising between persons regardless of their nationality, if the defendant has its “residence (iqama)” in Tunisia, although the semi-official French version of the PILC (as officially published in the Official Gazette) refers to “domicile” (maqarr in Arabic). In literature, there is a general consensus among Tunisian scholars that the word iqama (residence) in the Arabic version of article 3 actually means “maqarr (domicile)”. Case law is, however, quite inconsistent on this issue, with Tunisian courts, including the Supreme Court itself, reaching contradictory decisions on the interpretation and application these basic notions. This issue was addressed in the decision commented here (although in a quite unsatisfactory manner as the Joint Chambers, while distinguishing between “residence” and “domicile”, used both notions interchangeably in a particularly intriguing manner). However, this aspect of the decision will not be discussed here.

It is worth mentioning that the solutions introduced in the PILC have attracted the attention of renowned foreign scholars, who have highlighted the peculiarity of the Tunisian solutions in this regard, describing the Tunisian solutions as “interesting” and the exclusion of nationality as ground for international jurisdiction in all matters, including family law disputes, as “courageous”  (see eg., Diego P. Fernando Arroyo, “Compétence exclusive et compétence exorbitantes dans les relations privées internationales” 323 Collected Courses 2006, pp. 140-141).

3. Judicial Application

However, as soon as the PILC entered into force, a trend developed in judicial practice whereby Tunisian courts at all levels showed a willingness to extend their jurisdiction when the dispute involved Tunisian nationals. At the same time, there has been a parallel trend whereby some courts, also at all levels, have strictly adhered to the new policy of international jurisdiction and have refused to assume jurisdiction whenever it appeared that the defendant (whether a a Tunisian national or not) was domiciled abroad. (For a detailed analysis with different scenarios and cases, see Souhayma Ben Achour, “L’accès à la justice tunisienne en droit international privé tunisien” in Ben Achour/Ben Jemia (dir.), Droit fondamentaux & droit international privé (La Maison du Livre, 2016) pp. 11 ff).

a. Regarding the former, Tunisian judges have used various approaches and methods to circumvent the law and extend their jurisdiction beyond the limits set by the PILC. For example:

• In some cases, the courts have simply denied the international nature of the dispute on the grounds that all the parties were Tunisian, even though it was established that all or some of the parties (particularly the defendant) were domiciled abroad (see eg. Supreme Court, Ruling No. 12295 of 14 February 2002).
• In other cases, the courts have inferred a tacit submission to the jurisdiction of the Tunisian courts, even in the absence of the appearance of the defendant (often a foreign wife) (see eg. First Instance Court of Tunis, Ruling No. 30605 of 18 January 2000).
• In some other cases, the courts have confirmed their jurisdiction either on the basis of
  • the choice-of-law rules, according to which personal status shall be governed by the lex patriae of the parties (Supreme Court, Ruling No. 3181 of 22 October 2004), or,
  • on the basis of the rules of indirect jurisdiction laid down in bilateral conventions on mutual judicial assistance, knowing that these conventions do not contain rules of direct jurisdiction (see eg., Supreme Court, Ruling No. 6238 of 23 December 2004).
• More problematically, some courts have relied on the “place of performance” as a ground for international jurisdiction in contractual matters, considering the marriage to be a “contract” and its “performance” to have taken place in Tunisia when the parties consummated the marriage or established their matrimonial residence/domicile there (see eg. First Instance Court of Tunis, Ruling No. 77280 of 12 July 2010).
• In some cases, the courts have invoked forum necessitatis to extend their jurisdiction without indicating whether the requirements of its invocation were met (see eg. First Instance Court of Tunis, Ruling No. 75738 of 22 February 2010).
• Last but not least, in some cases, and in direct violation of the law, the courts have declared themselves to be the “natural” courts in family law disputes involving Tunisians, and that their jurisdiction could be based on the idea of “jurisdictional privilege” based on the Tunisian nationality of the defendant (see eg., Tunis Court of Appeal, Ruling No. 76011 of 12 November 2008) (interestingly, the grounds invoked here are similar to those invoked by the Bahraini courts here).

All these cases, and many others (see eg., Ben Achour op. cit.), have given the impression that Tunisian courts would go to any lengths to assume jurisdiction over disputes involving Tunisians in family law matters (cf., eg., Sami Bostanji, “Brefs propos sur un traité maltraité” Revue tunisienne de droit, 2005, p. 347).

b. This trend should not, however, be allowed to overshadow another that has also developed in parallel as mentioned above. The Supreme Court itself, despite some inconsistencies in its case law, has reaffirmed on several occasions that the jurisdiction of the Tunisian courts can be established only on the basis of the rules laid down in the CPIL, thereby rejecting the idea of nationality as an additional ground of jurisdiction in disputes involving Tunisian nationals (see eg., Supreme Court, Ruling No. 32684 of 4 June 2009).

c. In this respect, the decision of the Joint Chambers is likely to bring some order to the judicial cacophony on this issue, although it may not put an end to the ongoing debate and divergence of opinions among legal practitioners and scholars on the relevance of nationality as a criterion of international jurisdiction. Moreover, the tendency of some judges – sometimes described as “conservative” (cf. Arroyo op. cit.) – to continue to assume jurisdiction in disputes involving Tunisians (particularly in family law disputes) seems to be so entrenched that some scholars in Tunisia have described it as a “movement of resistance” against the legislative policy of the State (cf. eg. Lotfi Chedly, “Droit d’accès à la justice tunisienne dans les relations internationales de famille et for nationalité” in Mélanges offerts à Dali Jazi (Centre de Publication Universitaire, 2010) p. 264). This state of affairs has led some leading authors in Tunisia to question the state’s policy of excluding nationality altogether, even in family law disputes. One of the arguments put forward is that nationality in family law disputes is not an excessive ground for jurisdiction and is widely used in other legal systems (for the various arguments in favor of nationality, see Triki, op. cit.).

4. Legislative amendment?

These voices found their way into two legislative proposals in 2010 and 2019 to amend the PILC and introduce nationality as a ground for international jurisdiction in divorce cases (on the 2019 proposal, its background and peculiarities, see Triki, op. cit.). However, these attempts were unsuccessful, mainly due to the unstable political situation in Tunisia (the outbreak of the Tunisian revolution at the end of 2010 and the political crisis that led to the dissolution of the parliament and the suspension of the post-revolutionary constitution of 2014 in 2021). In this general context, and despite the decision of the Joint Chambers, it would not be surprising if some courts persisted in extending their jurisdiction in a disguised manner, based on the methods they themselves have developed to circumvent the constraint imposed by the PILC, when the dispute – particularly in matters of family law – involves Tunisians.

On February 20, 2024, the New York Court of Appeals handed down its opinion in Petróleos de Venezuela S.A. v. MUFG Union Bank, N.A. The issue presented—which I described in a previous post as the billion-dollar choice-of-law question—was whether a court sitting in New York should apply the law of New York or the law of Venezuela to determine the validity of certain bonds issued by a state-owned oil company in Venezuela. The bondholders, represented by MUFG Union Bank, argued for New York law. The oil company, Petróleos de Venezuela, S.A. (“PDVSA”), argued for Venezuelan law.

In a victory for PDVSA, the New York Court of Appeals unanimously held that the validity of the bonds was governed by the law of Venezuela. It then sent the case back to the federal courts to determine whether the bonds are, in fact, invalid under Venezuelan law.

Facts

In 2016, PDVSA approved a bond exchange whereby holders of notes with principal due in 2017 (the “2017 Notes”) could exchange them for notes with principal due in 2020 (the “2020 Notes”). Unlike the 2017 Notes, the 2020 Notes were secured by a pledge of a 50.1% equity interest in CITGO Holding, Inc. (“CITGO”). CITGO is owned by PDVSA through a series of subsidiaries and is considered by many to be the “crown jewel” of Venezuela’s strategic assets abroad.

The PDVSA board formally approved the exchange of notes in 2016. The exchange was also approved by the company’s sole shareholder—the Venezuelan government—and by the boards of the PDVSA’s subsidiaries with oversight and control of CITGO.

The National Assembly of Venezuela refused to support the exchange. It passed two resolutions—one in May 2016 and one in September 2016—challenging the power of the executive branch to proceed with the transaction and expressly rejecting the pledge of CITGO assets in the 2020 Notes. The National Assembly took the position that these notes were “contracts of public interest” that required legislative approval pursuant to Article 150 of the Venezuelan Constitution. These legislative objections notwithstanding, PDVSA followed through with the exchange. Creditors holding roughly $2.8 billion in 2017 Notes decided to participate and exchanged their notes for 2020 Notes.

In 2019, the United States recognized Venezuela’s Interim President Juan Guaidó as the lawful head of state. Guaidó appointed a new PDVSA board of directors, which was recognized as the legitimate board by the United States even though it does not control the company’s operations inside Venezuela. The new board of directors filed a lawsuit in the Southern District of New York (SDNY) against the trustee and the collateral agent for the 2020 Notes. It sought a declaration that the entire bond transaction was void and unenforceable because it was never approved by the National Assembly. It also sought a declaration that the creditors were prohibited from executing against the CITGO collateral.

The choice-of-law issue at the heart of the case related to the validity of the 2020 Notes. Whether the Notes were validly issued depended on whether the court applied New York law or Venezuelan law. The SDNY (Judge Katherine Polk Failla) ruled in favor of the bondholders after concluding that the issue was governed by the laws of New York. On appeal, the Second Circuit certified the choice-of-law question to the New York Court of Appeals. The Court of Appeals reformulated this question to read as follows:

Given the presence of New York choice-of-law clauses in the Governing Documents, does UCC 8-110(a)(1), which provides that the validity of securities is determined by the local law of the issuer’s jurisdiction, require the application of Venezuela’s law to determine whether the 2020 Notes are invalid due to a defect in the process by which the securities were issued?

In a decision rendered on February 20, 2024, the Court of Appeals unanimously concluded that the answer was yes.

Section 8-110

The court began with the New York choice-of-law clauses in the Indenture, the Note, and the Pledge Agreement. Under ordinary circumstances, it observed, New York courts will enforce New York choice-of-law clauses by operation of Section 5-1401 of the New York General Obligations Law. That statute provides that the parties to any commercial contract arising out of a transaction worth more than $250,000 may select New York law to govern their agreement even if the transaction has no connection to New York. In this particular case, however, a different part of Section 5-1401 dictated a different result.

Section 5-1401 also states that even when parties choose New York law, that law “shall not apply . . . to the extent provided to the contrary in subsection (c) of section 1-301 of the uniform commercial code.” UCC 1-301(c)(6) states, in turn, that if UCC 8-110 “specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted.” Finally, UCC 8-110(a)(1) states that “[t]he local law of the issuer’s jurisdiction . . . governs . . . the validity of a security.”

After following the chain of choice-of-law rules from Section 5-1401 to UCC 1-301(c) to UCC 8-110, the court observed that the validity of a security is governed by the law of the issuer’s jurisdiction. The court further observed, based on the statutory text, that Section 8-110 was a mandatory rule that could not be altered by a choice-of-law clause. Against this backdrop, the court held that “because UCC 8-110 is applicable here, any issue of the validity of a security issued pursuant to the Governing Documents is determined by the law of the issuer’s jurisdiction. In this case, the issuer is a Venezuelan entity, so the law of Venezuela is determinative of the issue of validity.”

Validity

The court next addressed the meaning of “validity” as used in Section 8-110. The bondholders argued that this term did not sweep broadly enough to encompass the requirement in Article 150 of the Venezuelan Constitution, which provides that the National Assembly must approve all “contracts of public interest.” They argued that the word encompassed only the usual corporate formalities for issuing a security. PDVSA argued that “validity” could be interpreted to include constitutional provisions that bear on the issue of whether a security was duly authorized. The Court of Appeals agreed.

In reaching this conclusion, the court first observed that the issue of “validity” had to be distinguished from the issue of “enforceability.” The first term refers to the “nature of the obligor and its internal processes.” The second term refers to “requirements of general applicability as going to the nature of the rights and obligations purportedly created, irrespective of the nature of the obligor and its processes.”  The court cited usury laws and anti-fraud laws as examples of laws that dealt with enforceability rather than validity. Although these laws may prohibit a court from enforcing a contract, they do not bear on the validity of that same contract because they do not address the procedures that must be followed for the contract to be duly authorized.

The court then distinguished between (1) validity and (2) the consequences of invalidity. While Section 8-110 stated the controlling choice-of-law rule with respect to the validity, it was not controlling with respect to the consequences stemming from that invalidity. “Even if a court determines that a security is invalid under the local law of the issuer’s jurisdiction,” the court held, “the effects of that determination will depend on New York law.”

With these distinctions in mind, the court held that “Article 150 and its related constitutional provisions could potentially implicate validity because they speak to whether an entity has the power or authority to issue a security, and relatedly, what procedures are required to exercise such authority.” In particular, the court observed that this constitutional provision required the approval of the National Assembly before certain contracts could be executed. Since Article 150 identified procedural requirements rather than substantive ones, the court reasoned, it spoke to the issue of validity rather than enforceability. In so holding, the court reasoned that the term “validity,” as used in Section 8-110, could implicate constitutional provisions of the issuer’s jurisdiction that speak to whether a security is duly authorized.

Caveats

After holding that the issue of validity was governed by the law of the issuer’s jurisdiction, and that Section 150 of the Venezuelan Constitution might be relevant to the issue of validity, the court went on to announce several important caveats.

First, the court stated that the application of Venezuelan law on these facts must be “narrowly confined.” It held that the “exception provided by UCC 8-110 provides no opportunity for the application of foreign laws going to the enforceability of a security, nor does it affect the adjudication of any question under the contract other than whether a security issued by a foreign entity is valid when issued.”

Second, the court emphasized that “none of this is to say that plaintiffs will ultimately be victorious.” It noted that the federal courts would still have to determine whether the securities were, in fact, invalid under the laws of Venezuela.

Third, the court went out of its way to emphasize the fact that—issues of validity notwithstanding—New York law governs the transaction in all other respects, including the consequences if a security was issued with a defect going to its validity.

Conclusion

This long list of caveats suggests that the Court of Appeals wanted to apply to New York law in this case to the maximum extent possible. Enforcing New York choice-of-law clauses, after all, generates business for New York lawyers, and the generation of such business ultimately benefits the State of New York. The Court was, however, unable to find an interpretive path that permitted it to apply New York law in light of the text of Section 8-110.

In the days following the court’s decision, several news outlets reported that the value of the PDVSA bonds at issue had fallen precipitously. This decline in price presumably reflects the market’s perception that the bondholders are less likely to gain access to the CITGO assets anytime soon (if at all) if Venezuelan law governs the validity issue. TLB will report on developments in this case going forward.

[This post is cross-posted at Transnational Litigation Blog.]

Author: Martina Ticic, assistant at the University of Rijeka, Faculty of Law and doctoral student funded by the Croatian Science Foundation (Hrvatska zaklada za znanost – HRZZ)

On 13 December 2023, two years after the first legislative proposal has been published, the new Regulation (EU) 2023/2844 of the European
Parliament and of the Council of 13 December 2023 on the digitalisation of judicial cooperation and access to justice in cross-border civil, commercial and criminal matters, and amending certain acts in the field of judicial cooperation (Digitalisation Regulation) has been adopted. While the process of digitalisation of judicial cooperation and cross-border procedures in the EU has been ongoing for some time already, the new Digitalisation Regulation represents a major step for advancing digitalisation practices in the EU.

Main features
The Digitalisation Regulation establishes a uniform legal framework for the use of electronic communication and digital tools in cross-border legal proceedings. Particularly, it lays down rules on:
– communication between competent authorities/natural or legal persons and competent authorities
– the use of videoconferencing or other distance communication technology
– the application of electronic signatures and electronic seals
-the legal effects of electronic documents
– electronic payment of fees.
The Regulation establishes that communication between competent authorities of different EU Member States, as well as communication between competent authorities of different Member States and between a national competent authority and EU body or agency, shall be carried out through a decentralised IT system whenever possible. On the other hand, for communication between natural or legal persons and competent authorities in civil and commercial matters, a European electronic access point shall be established on the European e-Justice Portal. The Regulation also provides for the possibility of participating in a hearing through videoconference or other distance communication technology, depending on certain circumstances, e.g., the availability of such technology, parties’ opinion on the use of such technology, or appropriateness of the use of technology. Moreover, the Regulation makes a reference to the eIDAS Regulation in terms of electronic signatures and electronic seals, equates the legal effects of electronic documents with effects of non-electronic ones, and provides for the possibility of electronic payment of fees. Finally, it also amends relevant provisions of other legal instruments, including European Enforcement Order Regulation, European Order for Payment Regulation, European Small Claims Procedure Regulation, European Account Preservation Order Regulation, Regulation on mutual recognition of protection measures in civil matters, Insolvency Regulation, Service of Documents Regulation, and Regulation on the mutual recognition of freezing orders and confiscation orders.

Entry into force
The entire legal framework set by the Regulation, however, will not be fully operational until quite some time. The Regulation will apply from 1 May 2025 – with some exceptions. The Regulation requires the adoption of certain implementing acts by the European Commission, which would mainly set out various technical specifications and requirements. Article 10(3) of the Regulation sets out a timetable for the adoption of different implementing acts, ranging from January 2026 to January 2029.
Articles 3 and 4 of the Digitalisation Regulation, which regulate electronic communication (both between competent authorities and between natural or legal persons and competent authorities in civil and commercial matters) will only apply after two-year period has passed from entry into force of the corresponding implementing acts. These Articles will also only apply to proceedings initiated from that same day. It could be concluded that the Regulation will not be applicable in its entirety for the next seven years, until 2031. However, this only holds true in relation to the provisions on electronic communication. The other regulated aspects, i.e., the provisions on the use of videoconferencing, electronic signatures and seals, legal effects of electronic documents and electronic payment of fees, will all be applicable from May 2025.

Remaining challenges
While certainly a big step forward for the e-Justice developments in the EU, some challenges still remain even after the Digitalisation Regulation becomes fully applicable. Perhaps the biggest issue is fragmentation – both at the EU level and at the national level.
At the EU level, fragmentation is reflected in a complex EU framework and a number of different regulatory sources on different aspects of digitalisation of justice. There are multiple legal acts that address various aspects relevant for the process of digitalisation in the EU, including eIDAS Regulation, e-CODEX Regulation, Directive on Digitalisation of Judicial Cooperation, General Data Protection Regulation, Regulation on processing of data by EU institutions, etc. Moreover, a number of regulations offer specific provisions on digitalisation aspects in a particular procedure, such as European Order for Payment Procedure Regulation, Service Regulation, Evidence Regulation, etc. It is therefore expected that the new Digitalisation Regulation will add to already existing legal framework as an ‘umbrella regulation’, given that it covers a wide range of issues in various steps of legal proceedings in civil, commercial and criminal matters. It should, however, be noted that it will not apply to two crucial procedural aspects of the intra-EU cross-border relations: the service of documents pursuant to the Service Regulation (despite introducing certain amendments to it) nor to the taking of evidence pursuant to the Evidence Regulation, as highlighted in the Recital 17 of the Preamble.
At the national level, while COVID-19 pandemic certainly urged all of the EU Member States to accelerate the usage of digital tools in all aspects of society, there are still varying levels of digital developments in different jurisdictions. This can clearly be seen from the EU Justice Scoreboard, which includes a specific section on digitalisation developments in the Member States. It must be highlighted, however, that a significant improvement over the years is visible when comparing the yearly reports. With the new Digitalisation Regulation, in addition to all the other work that the EU is currently doing to promote digitalisation, the digital tools and digitalisation practices of the Member States will surely only be getting more advanced.
This having been said, diversity of national procedural rules, different e-justice domestic solutions and different levels of the development and usage of digital tools in the proceedings all may still pose problems. It can be expected that the period of the next few years will be especially difficult, as EU Member States will have a lot of work to do – national access points to the e-CODEX will have to be established; harmonised technical standards adopted; and all participants will have to get accustomed to the functionalities of new digital tools and practices. The Digitalisation Regulation partly touches upon this problem by providing that EU Member States must also offer necessary training to competent authorities and professionals concerned in order to ensure efficient use of the IT system and distance communication technology.
In order to ensure that adequate information on national particularities is available for all potential parties, the EU Member States are bound to communicate relevant information to the European Commission, including details of national IT portals, description of national laws and procedure on videoconferencing, information on fees, details on electronic payment methods, etc. Such information will be made available on the e-Justice Portal. On the assumption that the relevant information is regularly updated, the e-Justice Portal will be of great help with the smooth functioning of digital legal framework set by the Digitalisation Regulation.
Thus, while challenging period may be ahead, the result will surely be worthwhile.

What about the parties outside of the EU?
While the Digitalisation Regulation definitely brings important changes to the justice system of the EU and its Member States, potential implications for parties and countries outside of the EU should not be overlooked. Member States are now obliged to work on their national IT portals and digital tools, to train legal staff, and to generally provide for the usage of digital tools in the course of the procedure. Such national developments may then also assist in all cross-border cases, including those with countries outside of the EU. This means that the obligations that the Digitalisation Regulation sets for the Member States can also indirectly allow for better usage of IT tools in the course of cross-border procedures with all of the other countries that make use of such tools as well. On the other hand, for those countries that still lack in the department of digitalisation in law and legal system, this may serve as an incentive for further development in order to make cross-border procedure easier for all. After all, promotion of best practices and cooperation with international partners is one of the EU’s aims, as highlighted in the 2020 Communication from the Commission on the Digitalisation of Justice in the EU.