Views
Special Commission on the Hague Adults Convention: Five Takeaways from its First Meeting
This post was written by Pietro Franzina and Thalia Kruger, and is being published simultaneously on Conflictoflaws.net and on the EAPIL blog.
The delegations of more than thirty Member States of the Hague Conference on Private International Law attended the first meeting of the Special Commission charged with reviewing the operation of the Hague Hague Convention of 13 January 2000 on the international protection of adults of 13 January 2000 on the international protection of adults. The meeting took place in The Hague and online from 9 to 11 November 2022 (for a presentation of the meeting, see this post on Conflictsoflaw.net and this one on the EAPIL blog). A dozen organisations, governmental and non-governmental (including the Council of the Notariats of the European Union, the Groupe Européen de Droit International Privé and the European Association of Private International Law), were also in attendance.
The discussion covered a broad range of topics, leading to the conclusions and recommendations that can be found on the website of the Hague Conference. The main takeaways from the meeting, as the authors of this post see them, are as follows.
The Hague Adults Convention Works Well in Practice
To begin with, the Special Commission affirmed that the Convention works well in practice. No major difficulties have been reported either by central authorities instituted under the Convention itself or by practitioners.
Doubts occasionally appear with respect to some provisions. Article 22 for example provides that measures of protection taken by the authorities of a Contracting State “shall be recognised by operation of law in all other Contracting States”, unless a ground for refusal among those listed in the same provisions arises. A declaration of enforceability, as stipulated in Article 25, is only necessary where measures “require enforcement” in a Contracting State other than the State of origin.
Apparently, some authorities and private entities (e.g., banks) are reluctant to give effect to measures of protection that clearly do not require enforcement, such as a judicial measure under which a person is appointed to assist and represent the adult, unless that measure has been declared enforceable in the State where the powers of the appointed person are relied upon. The Special Commission’s conclusions and recommendations address some of these hesitations, so that they should now prove easier to overcome. Regarding exequatur, see para. 33, noting that “measures for the protection of an adult only exceptionally require enforcement under Article 25”, adding that this may occur, for instance, “where a decision is taken by a competent authority to place the adult in an establishment or to authorise a specific intervention by health care practitioners or medical staff”, such as tests or treatments. Other doubts are dealt with in the practical handbook prepared by the Working Group created within the Hague Conference in view of the meeting of the Special Commission. The draft handbook (first version publicly available), which the Special Commission has approved “in principle”, will be reviewed in the coming weeks in light of the exchanges that occurred at the meeting, and submitted to the Council on the General Affairs and Policy of the Conference for endorsement in March 2023).
Situations Exist in the Field of Adults’ Protection that Are Not (Fully) Regulated by the Convention
The Convention deals with measures of protection taken by judicial and administrative authorities, and with powers of representation conferred by an adult, either by contract or by a unilateral act, in contemplation of incapacity. By contrast, nothing is said in the Convention concerning ex lege powers of representation. These are powers of representation that the law of some States (Germany, Austria and Switzerland, for example) confers on the spouse of the adult or a close relative or family member, for the purpose of protecting the adult. Their operation is generally confined to situations for which no measures have been taken and no powers of representation have been conferred by the adult.
The Special Commission acknowledged that ex lege powers of representation fall under the general scope of the Convention, but noted that no provision is found in the Convention that deals specifically with such powers. In practice, ex lege powers of representation may be the subject of cooperation between the authorities of Contracting Parties (notably as provided for under Chapter V), but, where the issue arises of the existence, the extent and the exercise of such powers, the courts and other authorities of Contracting States will rely on their own law, including, where appropriate, their conflict-of-laws rules.
There is yet another gap that the Special Commission discussed. The Commission observed that instructions given and wishes made by an adult in anticipation of a future impairment of their personal faculties (e.g., in the form of advance directives), similarly fall within the general scope of the Convention and are subject, as such, to the cooperation provisions in Chapter V. Whether or not a particular anticipatory act constitutes a power of representation for the purposes of Articles 15 and 16, on powers of representation conferred by the adult, is to be determined on a case-by-case basis. Some unilateral acts plainly come within the purview of Articles 15 and 16, as they actually include a conferral of powers on other persons. Others do not, and may accordingly be dealt with by each Contracting State in conformity with their own law.
States Do Not Currently See an Interest in Modifying the Convention
The question has been raised in preparation of the Special Commission whether the Convention ought to be amended, namely by a protocol to be negotiated and adopted in the framework of the Hague Conference on Private International Law. In principle, a protocol would have provided the States with the opportunity to fill the gaps described above, and address other concerns. However, under international law only those Contracting States that ratify the protocol would be bound by the modifications.
The Special Commission witnessed that, at this stage, no State appears to see an amendment as necessary.
Only one issue remains to be decided in this respect, namely whether the Convention should be modified in such a way as to include a REIO clause, that is, a clause aimed at enabling organisations of regional economic integration, such as the European Union, to join the Convention in their own right. The matter will be discussed at the Council on the General Affairs and Policy of the Conference of March 2023.
The decision lies, in fact, in the hands of the Union and its Member States, as this is currently the only Regional Economic Integration Organisation concerned by such a clause. Their decision will likely be affected by the approach that should be taken in the coming weeks concerning the proposal for a regulation on the protection of adults that the Commission is expected to present in the first half of 2023.
Efforts Should Now Be Deployed Towards Increasing the Number of Contracting Parties
The main problem with the Convention lies in the fact that only relatively few States (fourteen, to be precise) have joined it, so far. Several States stressed the importance of further promoting ratification of, or accession to, the Convention.
It is worth emphasising in this respect that the Hague Adults Convention builds, to a very large extent, on cooperation between Contracting States. This means that a State cannot fully benefit from the advantages of the Convention by simply copying the rules of the Convention into its own legislation, or by relying on such rules on grounds of judicial discretion (as it occurs in the Netherlands and to a large extent in England and Wales), but should rather become a party to it.
Various States expressed an interest in the Convention. The responses to the questionnaires circulated in preparation of the meeting of the Special Commission suggest that at least five States are actively contemplating ratification (Hungary, Italy, Luxembourg, Mexico and Sweden), and that others have considered ratification (Slovakia) or are considering it (Argentina). For its part, Malta signed the Convention on the occasion of the meeting of the Special Commission, and will likely ratify it in the not too distant future.
Tools to Enhance the Successful Operation of the Convention
Some of the practitioners present drew the participants’ attention to practical difficulties in the cross-border protection of adults. To minimise practical difficulties, the Permanent Bureau, in some instances together with the Working Group on the Adults Convention, developed a number of tools.
The first is an extensive country profile, to be completed by Contracting States and made available on the website of the Hague Conference. This profile includes various matters of national law, such as names and content of measures of protection, jurisdiction of courts or other authorities to issue these measures, transfer of jurisdiction, and names, forms and extent of powers of representation.
The second is a toolkit on powers of representation, which contains detailed information about the national laws of States that provided responses, on for instance who can be granted powers of representation, how this granting must take place, and the permitted extent of the representation.
Concluding remarks
All in all, the issue of the cross-border protection of Adults has rightly gained attention over the past ten years. While States amend their domestic legislation to be in conformity with the UN Convention on the Rights of Persons with Disabilities, they seem to be increasingly aware of the importance of ensuring cross-border continuity. This includes continuity of measures of protection issued by authorities such as courts, as well as the powers of representation granted by adults themselves. These matters of private international law require dialogue on the international and European Union level, more States to join the Convention, and tools to assist practice.
Report from the 2022 Hague Academy Summer Course in PIL
Written by Martina Ticic, University of Rijeka, Faculty of Law; Croatian Science Foundation (HRZZ) doctoral student
For anyone interested in the area of private international law, the Hague Academy of International Law and its Summer Courses on Private International Law have been one of the must-do’s ever since the Academy opened its doors in 1923. Each year, hundreds of students, academics and practitioners attend the courses given by renowned lecturers, while the Academy also offers multiple social and embassy visits, an access to the famous Peace Palace Library, as well as ample opportunities for discussion between the attendees who all come from different backgrounds. It seems that this report comes in quite timely as the programme for the 2023 Summer Course has just been announced.
The 2022 edition once again proved the immense value that the Summer Courses offer. From 1 to 19 August, the Academy hosted the attendees of over 60 different nationalities, providing them with lectures and seminars on various relevant topics, some time for research and visits to many of the Hague’s international organisations, but also an opportunity for exchange of ideas, networking and creating friendships. As such, the Academy was truly a place to be this summer for everyone wanting to learn more on the matters of private international law, as well as to connect with others who share the same or similar interests.
After the welcome speech by prof. Jean-Marc Thouvenin, Secretary-General of the Academy, this year’s inaugural lecture was given by Dominique Hascher, judge at the Supreme Judicial Court of France. Judge Hascher opened the Summer Courses with the lecture on ‘The Role of International Law in the Review of Awards’.
The General Course was given by Louis d’Avout, a professor of private international law at the Université Paris II Panthéon-Assas. Titled ‘Towards Worldwide Law Consistency’, the course provided the attendees with an overview of the core idea on which the discipline of conflict of laws was built upon: the coherence of rules of individual conduct on the global level. By analysing the sole definition of private international law, coordination mechanisms, the concept of legal relativity, connecting rules and factors, transnational cooperation and vertical disciplines in the regional context, prof. d’Avout offered a holistic view on the discipline of private international law itself, making the course a necessity for anyone wishing to excel in this area of law, either as a practitioner or as an academic. Through his lecture, prof. d’Avout invited all of the participants, particularly the younger generation of lawyers, to work towards the global coherence of law, as the desirable state of the system of law in general is that of a ‘social construction’ which guarantees predictability and security for its subjects that are faced with various sources of law and modes of conflict resolution. The course lasted for two weeks, which meant that there was plenty of time for participants to acquaint themselves with the matter at hand. Two of the seminars on the chosen topics were also held in the course of the two weeks.
Prof. Arnaud Nuyts, from the Université Libre de Bruxelles, held a Special Course on ‘The Forum for Cyber-Torts’, which is an excellent topic in today’s day and age. He highlighted the diversity of civil cyber-torts, as well as the challenges of locating the torts that are committed on-line. The course also touched particularly upon European legal framework and the guiding principles of its case law, while also analysing the ‘trichotomy’ of the forum for cyber-torts: the forum for the place of the causal event, the forum for the place of accessibility of the website and the forum for the centre of interests of the victim.
Prof. Ulla Liukkunen, from the University of Helsinki, presented her Special Course on ‘Mandatory Rules in International Labour Law’, another important topic considering the rising number of cross-border workers. As labour law is often connected to domestic rules, it is interesting to observe more closely the relationship between labour law and private international law. Throughout the course, the special nature of cross-border employment was acknowledged and the participants were acquainted with the concepts of triangular contracts, weaker-party protection, International Labour Organisation, the ‘decent work’ objective, etc. Prof. Liukkunen particularly highlighted the pluralism of regulatory sources in international labour law, and pointed to the fact that labour rights-based approach to decent work in developing regulatory private international law would advance the necessary protection for workers and ensure decent work for all.
Prof. Tiong Min Yeo, from the Singapore Management University, held a Special Course titled ‘Common Law, Equity, and Statute: Effect of Juridical Sources on Choice of Law Methodology’. The course offered insight into the topic of choice of law methodology and the analysis that must be done in order to select the applicable law rules. It presented three juridical sources in hierarchy: statute, equity and common law. The analysis of various case law served to explain the effects that these sources have on the choice of law methodology.
Prof. Kermit Roosevelt III, from the University of Pennsylvania Carey Law School, presented the topic of ‘The Third Restatement of Conflict of Laws’. Throughout this Special Course, the history of American choice of law was examined so as to better understand the context of the Third Restatement of Conflict of Laws, a current project of the American Law Institute. From the beginnings of American choice of law characterised by territorialist approach in the First Restatement and the Second Restatement as a ‘transitional document’, to the goals and framework of the Third Restatement, the course portrayed the full picture of the American choice of law rules. One of the core ideas that prof. Roosevelt developed throughout the course is that there are two different sets of values that a choice of law system should promote: so-called ‘right answer’ values and ‘systemic’ values. While the former one relates to selecting the law of the state with the best claim to regulatory authority, the latter relates to the certainty, predictability, uniformity and ease of application of the system.
Prof. João Bosco Lee, from the Universidade Positivo Brazil, presented an arbitration-related topic titled ‘The Application of International Conventions by Arbitrators in International Trade Disputes’. On the one hand, this Special Course examined the application of international conventions pertaining to the law applicable to the merits of the dispute in international commercial arbitration, either according to the choice of the parties or by the effect of determination of the lex cause by the arbitrator(s). On the other hand, the participants got the chance to study the cases in which international conventions could intervene in the resolution of international commercial arbitration without being the applicable law on the merits.
Prof. Marco Frigessi di Rattalma, from the Brescia University, held a Special Course on the ‘New Trends in the Private International Law of Insurance Contracts’. By focusing on the specific cases that emerged in the recent years in the field of private insurance, the attendees of the course were immersed in diversity of topics relating to jurisdiction and applicable law in the matters of insurance contracts, the specific types of insurance contracts, compulsory insurance against civil liability in respect of the use of motor vehicles, as well as the impact of fundamental rights on such matters. Prof. Frigessi di Rattalma posed various important questions during his analysis of the relevant issues, e.g. what can characterise as an insurance contract; whether EU law may permit derogation from the equal treatment of men and women provided by insurance contracts in accordance with the applicable national law to persist indefinitely; what exactly falls under the notion of ‘use of vehicles’ in regards to Directive 2009/103 on the insurance against civil liability in respect of the use of motor vehicles; etc.
Additionally, special lectures were given in tribute to the late Professor Emmanuel Gaillard who was originally meant to hold the General Course at the 2022 Summer Courses. These lectures were held by Yas Banifatemi, Diego P. Fernandez Arroyo, Dominique Hascher, Horatia Muir Watt and Luca Radicati di Brozolo respectively, each of them focusing on a particular issue related to arbitration, the topic most dear to prof. Gaillard, as well as familiarising the attendees with the persona of Emmanuel Gaillard.
In the afternoons, participants could attend seminars and some of the lectures on specific topics which were organised each week, e.g. Lecture on the Permanent Court of Arbitration by Brooks Daly, Lecture on the use of the Library by Candice Alihusain, Lecture on the International Court of Justice by Florence Zaoui, Lecture on ‘Fighting Human Trafficking: the Dutch Approach’ by Warner ten Kate, Lecture on the Hague Conference on Private International Law by Philippe Lortie, and ‘International Commercial Arbitration: the Role of Private International Law in the Lifespan of an Arbitral Procedure’ by Gerard Meijer and Camilla Perera-de Wit. For those eager to learn more, two extra short courses were held in addition: one on the law of the European Union held in the span of the first week and given by dr. Thomas Vandamme, and the other on the matters of Comparative Law, held on Saturday of the first week and given by dr. Brooke Marshall.
The participants were also given an opportunity of visiting some of the international organisations that are stationed in the Hague. For this year’s session, the Academy planned visits to the Hague Conference on Private International Law, the International Criminal Court, the Kosovo Specialist Chambers, the Organisation for the Prohibition of Chemical Weapons and the Residual Special Court for Sierra Leone. By visiting various organisations that deal with such variety of matters, the attendees got a truly immersive experience. Besides the international organisations, visits to multiple embassies were organised, so the participants also got the feel of diplomacy. Various other activities were also held, e.g. a reception at the City Hall, Beach Party, Grotius Peace Palace Library Tour and a visit of the extraordinary Peace Palace itself.
During the Courses, the most advanced attendees had the opportunity to attend the Directed Studies sessions which delved deep into many intricate questions of private international law. An even smaller fraction of those students in the end got the chance to participate in the prestigious Diploma Exam of the Academy. In this year’s Private International Law session, one Diploma by the Academy was awarded to Ms. Madeleine Elisabeth Petersen Weiner.
As it is obvious from the overview presented above, the 2022 Summer Courses on Private International Law were, as always, a huge success. Over 200 participants from all over the world and from various professional backgrounds got the experience of a lifetime thanks to the Academy, its Summer Courses and all the additional benefits that come with it. For anyone still doubting whether the Summer Courses, or perhaps the newer addition of the Winter Courses, are worth to attend, this post can serve as a clear answer and affirmative one at that.
More on the Validity of the PDVSA 2020 Bonds
Written by Mark Weidemaier, the Ralph M. Stockton, Jr. Distinguished Professor at the University of North Carolina School of Law, and Mitu Gulati, the Perre Bowen Professor of Law at the University of Virginia School of Law.
Governments with no realistic prospect of paying their debts often gamble for redemption, trying desperately to avoid default. Political leaders, with good reason, fear that a debt default will get them thrown out of office. But in trying to hold power, sometimes by borrowing even more, they often make matters worse for the country and its people. A prime example involves the collateralized bonds issued by Venezuelan state oil company, PDVSA.
Venezuela’s Gamble
In 2016, PDVSA was about to default on its debt, as was the Venezuelan state itself. At that stage, it was already well beyond the point where the debt should have been restructured, given worsening domestic conditions. Instead, the Maduro government gambled. It conducted a debt swap in which investors exchanged unsecured PDVSA bonds for new ones due in 2020. To sweeten the deal, the PDVSA 2020s were backed by collateral in the form of a 50.1% interest in CITGO Holding, the parent company of U.S. oil refiner CITGO Petroleum. The deal bought a few extra years but put at risk the country’s primary asset in the United States.
Even at the time, it was uncertain whether Venezuelan law authorized the transaction. The Venezuelan Constitution requires legislative approval for contracts in the national public interest. Maduro did not seek approval because opposition lawmakers controlled the National Assembly and had made clear they would not grant it. The deal went ahead anyway.
Times have changed. The United States recognizes Juan Guaidó as Venezuela’s interim president (for now). The PDVSA 2020 bonds are in default. The bondholders want their collateral. PDVSA has challenged the validity of the bonds. But the bonds include a choice-of-law clause designating the law of New York. Does this mean that validity is to be determined under New York law? John Coyle recently wrote a terrific post about the case and its significance on this blog. We write to provide some broader context, drawing from our article, Unlawfully Issued Sovereign Debt.
Sovereign Debt and Choice-of-Law Clauses
The story of the PDVSA 2020 bonds is a common one in government debt markets. A government borrows money in dodgy ways or at a time of financial distress. Arguably, the debt contravenes domestic law, although the government may obtain legal opinions affirming its validity. The debt also includes a choice of law clause providing for the application of foreign law, typically that of New York or England. Later, a new government comes to power and disputes the validity of the debt. We have seen this pattern in Venezuela, Mozambique, Ukraine, Zambia, Liberia, Puerto Rico, and in other sovereign and sub-sovereign borrowers. (The pattern goes back even further – for a delightful treatment of the hundreds of such cases from the 1800s involving municipal debt, see here).
These cases raise what seems like a simple question: Does an international bond—i.e., one expressly made subject to foreign law—protect investors against the risk that the bond will later be deemed in violation of the issuer’s domestic law? Despite seeming simple, and how frequently the question arises, there is little clarity about the answer. New York law governs a big part of the sovereign debt markets, and the choice-of-law question in the PDVSA 2020 case has been certified to the New York Court of Appeals. Will that court’s decision offer clarity?
Variations in Clause Language
Count us skeptical. The problem is not just the unpredictability of choice of law rules. It is that many choice-of-law clauses are drafted in perplexing ways, which leave unclear the extent of protection they offer to investors. Consider three examples. The first is from the PDVSA 2020 bond itself where the relevant language is capitalized (as if capitalization has some magic effect):
THIS INDENTURE AND THE NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH, AND THIS INDENTURE AND THE NOTES AND ALL MATTERS ARISING OUT OF OR RELATING IN ANY WAY WHATSOEVER TO THIS INDENTURE AND THE NOTES (WHETHER IN CONTRACT, TORT OR OTHERWISE) SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW)
This clause apparently seeks to extend New York law to the widest possible range of questions. Whether that includes the question of whether the bonds were validly issued is, as John’s post puts it, the “billion-dollar question.” And the answer is not clear. The decision by the New York Court of Appeals might provide some clarity on it . . . maybe.
But now consider this clause, from a Brazilian bond (emphasis ours):
The indenture and the debt securities will be governed by, and interpreted in accordance with, the laws of the State of New York without regard to those principles of conflicts of laws that would require the application of the laws of a jurisdiction other than the State of New York . . .; provided, further, that the laws of Brazil will govern all matters governing authorization and execution of the indenture and the debt securities by Brazil.
Does the bold text mean that investors cannot enforce a loan issued in violation of Brazilian law? We aren’t sure. As we discuss in the paper, it can be hard to identify questions of “authorization” and “execution,” especially in the context of sovereign borrowing. Consider the question whether a loan violates a constitutional or statutory debt limit. Does the debt limit negate the sovereign’s capacity to borrow, limit the authority of government officials to bind the sovereign, or make the loan illegal or contrary to policy? How one categorizes the issue will affect the answer to the choice-of-law question. Carve outs like this—which reserve questions of authorization and execution for resolution under local law—appear in around half the New York-law sovereign bonds we examined.
Finally, consider this clause from a Turkish bond (again, emphasis ours):
[The] securities will be governed by and interpreted in accordance with the laws of the State of New York, except with respect to the authorization and execution of the debt securities on behalf of Turkey and any other matters required to be governed by the laws of Turkey, which will be governed by the laws of Turkey
What now? This “other matters” carve out is even odder than the one for questions of authorization and execution. It hints that additional, unspecified matters might be governed by the sovereign’s local law. Indeed, it implies that the sovereign’s own law might determine which issues fall within the “other matters” exception. If so, the clause potentially allows the government to create new exceptions to the governing law clause.
Conclusion
Our discussions with senior sovereign debt lawyers have done little to dispel our uncertainty about the meaning of these clauses. They seem just as confused as we are. All we can say with confidence is that many choice of law clauses include traps for unwary investors. Until drafting practices converge on a consistent and coherent model, the choice-of-law question is likely to remain fodder for litigation.
[This post is cross-posted at Transnational Litigation Blog.]
News
CJEU, Case C-566/22, Inkreal v. Dúha reality: Choice of another Member State’s court in an otherwise purely domestic case is sufficient to apply Art. 25 Brussels Ibis Regulation
In its judgment of 8 February 2024, the CJEU had to decide whether “the application of the Brussels Ibis Regulation be based solely on the fact that two parties with their seat in the same Member State agree on the jurisdiction of courts of another EU Member State.”
The case concerned two loans granted to Dúha reality, a Slovak company, by a third party also domiciled in Slovakia, in 2016 and 2017 respectively. Both loan contracts contained an identical choice of forum clause stating that any ‘dispute shall be settled by a court of the Czech Republic having substantive and territorial jurisdiction’. In 2021, the receivables arising from those loan agreements were assigned to Inkreal, another purely Slovak business corporation, who upon non-payment by the debtor brought action in the Czech Republic. Seeking, inter alia, to determine the specific Czech court having territorial jurisdiction, the Czech Supreme Court (Nejvyšší soud) referred the question to the CJEU.
First Issue for Lloyd’s Maritime and Commercial Law Quarterly in 2024
The first issue for Lloyd’s Maritime and Commercial Law Quarterly in 2024 was published recently. It contains the following articles and case notes.
Articles:
Andrew Dickinson, “Electronic trade documents and the conflict of laws in the United Kingdom”
The Electronic Trade Documents Act 2023, which entered into force on 20 September 2023, seeks to facilitate the use of trade documents (including bills of exchange, promissory notes and bills of lading) in electronic form by assimilating these instruments, and their legal effects, to the equivalent paper trade documents, provided that the systems used to process the relevant information meet certain technological requirements. However, the Act contains no provision that expressly addresses the legislation’s cross-border dimension or its relationship to the United Kingdom’s conflict of laws rules. This article considers how these matters should best be addressed in order to secure the Act’s promised economic benefits.
Just published: De los retos a las oportunidades en el derecho de familia y sucesiones internacional. (2023). Tirant lo Blanch – open access
This book brings together the contributions made at the 6th AEPDIRI Seminar on current issues in Private International Law, held at the Faculty of Law of the University of Seville, which was entitled “De los retos a las oportunidades en el derecho de familia y sucesiones internacional” (From challenges to opportunities in international family and succession law), Campuzano Díaz, B., Diago Diago, P., Rodríguez Vázquez, Mª.A. (dirs.). An English translation of the blurb is provided by the directors: