Written by Duncan Fairgrieve (BIICL;Université de Paris Dauphine) and Solenn Le Tutour (avocat, Barreau de Paris)

When the French Government announced in February this year plans to launch an “English” Commercial court in Paris, eyebrows were raised and, it is fair to say, an element of skepticism expressed in the common law world as to whether such a development would really prove to be a serious competitor to the Commercial Courts on Fetter Lane in London.In what some might say was an uncharacteristically pragmatic fashion, collective judicial sleeves in Paris were pulled up however and the project taken forward with some alacrity. With broad support from the legal and political class given what is seen as re-shuffling of cards post-Brexit, the project was accelerated to such an extent that the first hearing of the new Chamber took place yesterday afternoon. The Court, which is an International Chamber of the Paris Court of Appeal, will hear appeals from the international chamber of the first instance Commercial court in Paris which has been in operation – albeit rather discretely – for almost a decade.

Setting aside the PR and legal spin, the procedural innovations of the new International Chamber are in fact quite radical. The headline-grabbing change is of course the use of English. Proceedings can take place in languages other than French, including English, and indeed it has recently been confirmed by the Court that non-French lawyers will also be granted rights of audience to appear before the International Chamber, as long as accompanied by a lawyer called to the Paris Bar. This is of course a major change in a normally very traditional French institution, though it is interesting to note that written submissions and pleadings as well as the resultant judgments will be in French (and officially translated into English).

Case management is to be stream-lined as well. Gone will be the rather languorous meandering French appellate procedure and in will be ushered a new highly case-managed equivalent with the parties and judge settling a timetable at the outset with fixed dates for filing written submissions, as well as – strikingly – the actual date of the ultimate judgment being set in stone, usually within 6 months of the first case-management hearing.

A minor revolution has also occurred in terms of the hearing. The approach will mean that the hearings will be more detailed, with the Court placing an emphasis on oral submissions, over and above the traditionally document-based approach where the judicial dossier takes precedence. There is even provision for the cross-examination of witnesses and experts during the hearing, something that rarely occurs in France outside the criminal arena.

Indications are also that there might even be a more fundamental change in the style of judicial judgments handed down by the International Chamber. At a recent seminar at the Paris Bar, the first judge assigned to the Chamber noted that there would be a deliberate attempt to ensure the judgments set out in more detail the reasoning of the Court, and a greater attention to legal certainty in terms of following previous case law – itself a very interesting potential shift in a legal system which has not traditionally adhered to any form of judicial precedent.

Some have also talked of allowing a more expansive approach to the judicially-sanctioned disclosure of documents – a simplified form of discovery where litigating parties are forced to communicate inconvenient files to the other side – which is all the more surprising as often lampooned by French commentators as one of the misdeeds of “American” style litigation.

Whilst this might not all add up to a complete judicial revolution, the changes in France are significant, and along with similar announcements in Amsterdam, Frankfurt, and Brussels, it is clear that there is an attempt across Europe – albeit only an attempt at this stage – to challenge the hegemony of English courts in international commercial litigation.

Written by Guillaume Croisant, Université Libre de Bruxelles

In October 2017, as already reported in a previous post, the Belgian Government announced its intention to set up a specialised English-speaking court with jurisdiction over international commercial disputes, the Brussels International Business Court (“BIBC”). An update version of the text has finally been submitted to Parliament on 15 May 2018, after the Government’s initial draft faced criticisms from the High Council of Justice (relating to the BIBC’s independence and impartiality, its source of funding and its impact on the ordinary courts) and was subject to the review of the Conseil d’Etat.

In the wake of Brexit, the Belgian Government aims at establishing a specialised business court able to position Brussels as a new hub for international commercial disputes, in line with its international status as de factocapital of the EU and seat of many international institutions and companies. Similar projects are ongoing in several jurisdictions throughout the EU, including France, the Netherlands and Germany (see previous post).

The BIBC will have jurisdiction over disputes:

• which are international in nature, i.e. where (i) the parties have their establishment in different jurisdictions, (ii) a substantial part of the commercial relationship must be performed in a third country, or (iii) the applicable law to the dispute is a foreign law. In addition, another language than French, Dutch or German (Belgium’s official languages, which are already used before ordinary courts) must have been used frequently by the parties during their commercial relationship;
• among “enterprises” (i.e. every entity pursuing an economic purpose, including public enterprises which provide goods and services on a market basis); and
• provided that the parties have agreed to the BIBC’s jurisdiction before or after the crystallisation of their dispute.

Subject to potential amendments in Parliament, the main procedural hallmarks of the BIBC can be summarised as follows:

• the procedure will be conducted in English (notices and submissions, evidence, hearings, judgments, etc.);
• while the BIBC remains a State court, the procedure will be based on the UNCITRAL Model Law on international arbitration, which means that the parties will be offered greater flexibility and room to organise the conduct of the proceedings;
• the cases will be heard by ad hoc chambers of three judges, one professional and two lay judges (appointed by the president of the BIBC on the basis of a panel of Belgian and international experts in international business law), with the assistance of the Registrar of the Brussels Court of Appeal;
• the BIBC will be granted the power to issue provisional and protective measures (including upon request ex parte measures);
• no appeal will be open against the BIBC’s decision (with the exception of an opposition/tierce opposition before the BIBC for absent parties/interested third parties, and a pourvoi en cassation on points of law before the Supreme Court);
• the BIBC should be self-financing and the court fees are therefore going to be significantly increased (to around € 20,000/case).

The Belgian Government aims to have the BIBC up and running by 1 January 2020.

Written by Dr. Jie (Jeanne) Huang, Senior Lecturer, University of New South Wales Faculty of Law

The recent U.S. Supreme Court case, Animal Science Products, Inc. v. Hebei Welcome Pharmaceutical Co. Ltd, concerns what weight should be given to the Chinese government’s submission of Chinese law. On Page 58 of the trial transcript, Justices Kagan and Ginsburg asked how about other countries dealing with formal submissions from the Chinese government. There are two examples.

One is Hong Kong. In TNB Fuel Services SDN BHD v China National Coal Group Corporation ([2017] HKCFI 1016), the issue is whether the defendant, a state-owned enterprise, is protected by Chinese absolute sovereignty immunity under Chinese law. The court deferred to an official letter provided by the Hong Kong and Macao Affairs Office of the State Department in Mainland China. The Office answers no absolute sovereignty immunity to Chinese state-owned enterprises carrying out commercial activities. The Court adopted this opinion without second inquiry (para 14 of the judgment). After considering a bunch of other factors, the court ruled against the defendant.

The other is Singapore. In Sanum v. Laos ([2016] SGCA 57), the issue is whether the China-Laos Bilateral Investment Treaty (BIT) shall be applied to Macao Special Administrative Region. Chinese embassy in Laos and China Ministry of Foreign Affairs provided diplomatic announcements indicating that the BIT shall not be applied to Macao. However, the Court of Appeal of Singapore held that China’s announcements were inadmissible and, even if admitted, they did not change the applicability of the BIT to Macau. This is partly because, before the dispute with Sanum crystalized, no evidence showed that China and Laos had agreed that the BIT should not be applied to Macau. Therefore, the China’s diplomatic announcements should not be retroactively applied to a previous dispute. For a more detailed discussion, please see pages 16-20 of my article.

TNB Fuel Services and Sanum share important similarities with Animal Science Products, because the key issues are all about the proving of Chinese law. In the three cases, Chinese government all provided formal submissions to explain the meaning and the applicability of Chinese law. However, TNB Fuel Services and Sanum can also be distinguished from Animal Science Products, because comity plays no role in the former two cases. TNB Fuel Services concerns sovereign immunity, which is an issue that Hong Kong courts must follow China’s practices. This is established by Democratic Republic of the Congo v. FG Hemisphere Associates (FACV Nos. 5, 6 & 7 of 2010). Sanum is a case to set aside an investment arbitration award, so the Court of Appeal of Singapore need not consider comity between Singapore and China. In contrast, in Animal Science Products, the U.S. Court of Appeals for the Second Circuit elaborated the importance of comity between the U.S. and China. Therefore, Animal Science Products should not be considered as a technical case of proving foreign laws. The U.S. Supreme Court may consider deferring to the submissions of Chinese government to a certain extent but allows judges to decide whether the Chinese government’s submission is temporally consistent with its position on the relevant issue of Chinese law.

France is a state. France.com, by contrast, is a domain name, and it was, until recently, owned not by the French state but instead by a Californian company, France.com, Inc. That conflict is now being litigated in a fascinating dispute  reminiscent of the early days of the internet.

In those early days, in 1994 to be precise, a French-born individual living in the United States, Jean-Noël Frydman, registered the domain name France.com. The domain name is now held by a Californian company, France.com Inc, which Frydman set up. The website, at first dedicated to general information for Francophiles around the world, was later expanded to operate as a travel site. But France.com, Inc, did not, it appears, own trademarks in Europe. This enabled a Dutch company, Traveland Resorts, to register French and European word and graphic marks for France.com in 2010. In 2014, France.com, Inc brought suit in France against Traveland for fraudulent filings of trademarks and achieved a settlement under which Traveland transferred the trademarks.

But that was a Pyrrhic victory. The French state and its own travel development agency, Atout,  intervened in the litigation, claiming the trademarks for itself instead. Atout had been running, since 2010, its own information site, france.fr. French state and Atout were successful, first before the Tribunal de Grande Instance, Paris , and then, partly, on  appeal before the Cour’ d’appel de Paris (English translation, note by Alison Bouakel)  As a consequence, web.com transferred the domain in 2018. Now, France.com immediately directs to France.fr.

So far, the conflict is mostly a French affair. But Frydman is taking the litigation to the United States. France.com, Inc has brought suit in Federal Court in Virginia against the French State, Atout, and against Verisign, the authoritative domain registry of all .com addresses.  The suit alleges cybersquatting, reverse domain hijacking, expropriating, trademark infringement, and federal unfair competition. US courts and WIPO panels have so far not looked favorably at foreign government’s claims for their own .com domain name; examples include PuertoRico.com, NewZealand.com, and Barcelona.com. Will the French State be more successful, given the French judgment in its favor?

Although neither the French courts nor the complaint in the United States address conflict of laws issues, the case is, of course, full of those. Are the French state and its travel agency protected by sovereign immunity? The Foreign Sovereign Immunities Act contains an exception for commercial activities and is limited to sovereign acts: Does ownership of a domain name constitute commercial activity? Surely, many of the activities of Atout do. Or is it linked to sovereignty? After all, France is the name of the country (though not, ironically, the official name.) The U.S. Court of Appeal for the Second Circuit left the question open in 2002 (Virtual Countries, Inc. v. South Africa, 300 F.3d 230).

Must the federal court recognize the French judgment? That question is  reminiscent of the Yahoo litigation. Then, a French court ordered that Yahoo.com could not offer Nazi paraphernalia on its auction website. Yahoo brought a declaratory action in federal court against recognizability of the judgment in the United States. The affair created a lively debate on the limits of territorial reach in internet-related litigation, a debate that is still not fully resolved.

Relatedly, did the French state engage in illegal expropriation without compensation? Such acts of expropriation are in principle limited to the territory of the acting state, which could mean that the French state’s actions, if so qualified, would be without legal effect in the United States.

To what extent is US law applicable to a French trademark? By contrast, to what extent can the French trademark determine ownership of the domain? Trademarks are a perennially difficult topic in private international law, given their territorial limitations; they conflict in particular with the ubiquity of the internet.

Is the top level domain name – .com, as opposed to .fr – a relevant connecting factor in any of these matters? That was once considered a promising tool. But even if .fr could in some way link to France as owner, it is not clear that .com links to the United States, given that it has long been, effectively, a global top level domain. On the other hand, most governments do not own their own .com domain. And US courts have, in other cases (most famously concerning barcelona.com) not doubted applicability of US law.

A timeline with links to documents can be found at Frydman’s blog site.

Written by Bastian Brunk, research assistant and doctoral student at the Institute for Comparative and Private International Law at the University of Freiburg (Germany)

On April 24, the Supreme Court of the United States released its decision in Jesner v Arab Bank (available here; see also the pre-decision analysis by Hannah Dittmers linked here and first thoughts after the decision of Amy Howe here) and, in a 5:4 majority vote, shut the door that it had left ajar in its Kiobel decision. Both cases are concerned with the question whether private corporations may be sued under the Alien Tort Statute (ATS).

In Kiobel, the Court rejected the application of the ATS to so-called foreign-cubed cases (cases in which a foreign plaintiff sues a foreign defendant for acts committed outside the territory of the US), but left the door open for cases that touch and concern the territory of the US (see also the early analysis of Kiobel by Trey Childress here). In Jesner v. Arab Bank, the majority now held that – in any case – “foreign corporations may not be defendants in suits brought under the ATS” (p. 27).

The respondent in the present case, Arab Bank, PLC, a Jordanian financial institution, was accused of facilitating acts of terrorism by maintaining bank accounts for jihadist groups in the Middle East and allowing the accounts to be used to compensate the families of suicide bombers. The petitioners further alleged that Arab Bank used its New York branch to clear its dollar-transactions via the so-called Clearing House Interbank Payment System (CHIPS) and that some of these transactions could have benefited terrorists. Finally, the petitioners accused Arab Bank of laundering money for a US-based charity foundation that is said to be affiliated with Hamas.

As in Kiobel, the facts of the case barely touch and concern the territory of the United States. The Court therefore held that “in this case, the activities of the defendant corporation and the alleged actions of its employees have insufficient connections to the United States to subject it to jurisdiction under the ATS” (p. 11). However, in order to overcome the divided opinions between the Courts of Appeals and to provide for legal certainty, the Supreme Court decided to answer the question of corporate liability under the ATS, but limited its answer to the applicability of the ATS to foreign corporations only. Justice Kennedy, who delivered the opinion of the majority vote, therefore based his reasoning on a cascade of three major arguments that rely on the precedents in Sosa and Kiobel.

First, the Court referred to the historic objective of the ATS, which was enacted “to avoid foreign entanglements by ensuring the availability of a federal forum where the failure to provide one might cause another nation to hold the United States responsible for an injury to a foreign citizen” (p. 8 f.). Thus, the goal of the Statute’s adoption was to avoid disturbances in foreign relations and not to create them by alienating other countries. This was the main concern with the present case “that already ha[d] caused significant diplomatic tensions with Jordan for more than a decade” (p. 11).

Second, the Court emphasized the “strictly jurisdictional” character of the ATS and asked for a proper cause of action to impose liability on corporations in accordance with the test established in the Sosa-decision. The Sosa-test allows for the recognition of a cause of action for claims based on international law (p. 10), but requires the international legal provision to be “specific, universal and obligatory” (p. 11 f.). The majority concluded that it could not recognize such a norm as almost every relevant international law statute (e.g. the Rome Statute and the statutes of the ICTY and the ICTR) excludes corporations from its jurisdictional reach and, accordingly, limits its scope of application to individuals.

Thirdly, even if there was a legal provision justifying corporate liability in international law, the Supreme Court found that US courts should refrain from applying it without any explicit authorization from Congress. In this way, the Supreme Court upheld the separation-of-powers doctrine stating that it is the task of the legislature, not the judiciary, to create new private rights of action, especially when these pose a threat to foreign relations. From this reasoning, courts are required to “exercise ‘great caution’ before recognizing new forms of liability under the ATS” (p. 19). In doing so, courts should not create causes of action out of thin air but by analogous application of existing (and therefore Congress-approved) laws. However, neither the Torture Victim Protection Act (TVPA) nor the Anti-Terrorism Act (as the most analogous statutes) are applicable because the former limits liability to individuals whereas the latter provides a cause of actions to US-citizens only (thus being irreconcilable with the ATS, which is available only for claims brought by “an alien”; see p. 20-22).

Justice Sotomayor, who wrote a 34-page dissent, criticized the majority for absolving “corporations from responsibility under the ATS for conscience-shocking behavior” and argues that “[t]he text, history, and purpose of the ATS, as well as the long and consistent history of corporate liability in tort, confirm that tort claims for law-of-nations violations may be brought against corporations under the ATS” (Sotomayor, p. 1). However, the dissenting opinion could not prevail over the conservative majority.

Thus, for now, Jesner v Arab Bank has rendered human rights litigation against foreign corporations before US courts impossible. However, in contrast to this post’s title, the decision is not necessarily the end of the US human rights litigation. The ATS is still applicable if the defending corporation has its seat in the territory of the US. Moreover, the Court emphatically calls upon Congress to provide for legislative guidance. “If Congress and the Executive were to determine that corporations should be liable for violations of international law, that decision would have special power and force because it would be made by the branches most immediately responsive to, and accountable to, the electorate” (p. 27 f.). It remains to be seen whether Congress answers this call.

Two recent judgments of European courts have highlighted the difficulty in finding the right balance between the cultural assimilation of Muslim immigrants demanded by national laws on citizenship and the necessary degree of tolerance towards foreign laws and customs. In a widely reported decision of 11 April 2018, the French Council of State (Conseil d’Etat) ruled that a naturalisation of an Algerian-born woman could be revoked because she had refused to shake hands with a male public servant during the naturalisation ceremony.

The Council evaluated her behaviour as proof that she was obviously not sufficiently assimilated to French culture in order to become a French citizen. In sharp contrast to this restrictive attitude, the High Administrative Court of Baden-Württemberg (Germany), in an earlier decision of 25 April 2017, allowed the naturalisation of a Syrian-born man to be upheld although it turned out that he had lied to German authorities about the fact that he had entered into a polygamous marriage abroad. The court argued that the appellant’s polygamous marriage as such did not amount to a violation of German public policy, which, in the context of naturalisation, is a rather narrowly phrased concept that presupposes a lack of loyalty to the German constitutional order. From a traditional choice of law point of view, however, there are rather convincing arguments for assuming a violation of German public policy: the husband’s first wife was a German national, and both spouses had their habitual residence in Germany, thus creating a very strong connection with the German legal order and its constitutional values on equality of the sexes. The case is now pending before the German Supreme Administrative Court in Leipzig.

The Supreme Court of Canada, in Office of the Children’s Lawyer v Balev (available here), has evolved the law in Canada on the meaning of a child’s habitual residence under Article 3 of the Hague Convention.  The Convention deals with the return of children wrongfully removed from the jurisdiction of their habitual residence.

A majority of the court identifies [paras 4 and 39ff] three possible approaches to habitual residence: the parental intention approach, the child-centred approach, and the hybrid approach.  The parental intention approach determines the habitual residence of a child by the intention of the parents with the right to determine where the child lives.  This approach has been the dominant one in Canada.  In contrast, the hybrid approach, instead of focusing primarily on either parental intention or the child’s acclimatization, looks to all relevant considerations arising from the facts of the case.  A majority of the court, led by the (now retired) Chief Justice, holds that the law in Canada should be the hybrid approach [paras 5 and 48].  One of the main reasons for the change is that the hybrid approach is used in many other Hague Convention countries [paras 49-50].

The dissent (three of the nine judges) would maintain the parental intention approach [para 110].  One of its central concerns is the flexibility and ambiguity of the hybrid approach [para 111], which the judges worry will lead to less clarity and more litigation.  Wrongful removal cases will become harder to resolve in a timely manner [paras 151-153].

The majority did not apply the law to the facts of the underlying case, it having become moot during the process of the litigation [para 6].  The court rendered its decision to provide guidance going forward.  The dissent would have denied the appeal on the basis that the child’s habitual residence was in Germany (as the lower courts had held).

The court briefly addresses the exception to Article 3 in what is commonly known as “Article 13(2)” (since it is not numbered as such) – a child’s objection to return – setting out its understanding of how to apply it [paras 75-81 and 157-160].

The Supreme Court of Canada has recently adopted the practice of preparing summaries of its decisions (available here for this decision) to make them more accessible to the media and the public.  These are called “Cases in Brief”.

It has not been yet noted on this blog that the CJEU has recently settled a classic problem of characterisation that has plagued German courts and academics for decades (CJEU, 1 March 2018 – C-558/16, Mahnkopf, ECLI:EU:C:2018:138). The German statutory regime of matrimonial property is a community of accrued gains, i.e. that each spouse keeps its own property, but gains that have been made during the marriage are equalised when the marriage ends, i.e. by a divorce or by the death of one spouse. According to § 1371(1) of the German Civil Code (Bürgerliches Gesetzbuch – BGB), the equalisation of the accrued gains shall be effected by increasing the surviving spouse’s share of the estate on intestacy by one quarter of the estate if the property regime is ended by the death of a spouse; it is irrelevant in this regard whether the spouses have made accrued gains in the individual case. How is this claim to be characterized?

In the course of the German discussion, all solutions had been on the table: some have advocated to classify the issue as a part of succession law only, others have argued for characterising the issue as belonging to the field of matrimonial property law, and a minority opinion has developed a so-called “double characterisation”, i.e accepting the spouse’s share in the estate only if both the applicable succession and matrimonial property law would countenance such a solution. In 2015, the German Federal Court of Justice (Bundesgerichtshof – BGH), ruling on former autonomous choice of law rules, had settled the issue in favour of applying the German conflicts rules on matrimonial property, mainly arguing that § 1371(1) BGB determines what is left to the estate after the gains accrued during the marriage have been equalised (BGHZ 205, 289). The Court argued that, for practical reasons, the means that the provision deploys to allocate the gains are found in succession law, but its function is to deal with the dissolution of a marriage because of the death of one of the spouses. If frictions arose between the law applicable to matrimonial property and the rules governing succession – e.g. a widow receiving nothing although the succession law and the matrimonial property regime would grant her a share if applied in isolation –, such problems would have to be solved by the technique of adaptation.

In light of the Europeanisation of private international law, however, it had become doubtful whether this approach would remain valid within the context of the Succession Regulation (Regulation (EU) No. 650/2012). A pertinent question was referred to the CJEU by the Kammergericht (Higher Regional Court Berlin). Following the conclusions by AG Szpunar, the CJEU now has decided the case in diametrical opposition to the earlier judgment of the BGH, by adopting a purely succession-oriented characterisation. The CJEU argues that “Paragraph 1371(1) of the BGB concerns not the division of assets between spouses but the issue of the rights of the surviving spouse in relation to assets already counted as part of the estate. Accordingly, that provision does not appear to have as its main purpose the allocation of assets or liquidation of the matrimonial property regime, but rather determination of the size of the share of the estate to be allocated to the surviving spouse as against the other heirs. Such a provision therefore principally concerns succession to the estate of the deceased spouse and not the matrimonial property regime. Consequently, a rule of national law such as that at issue in the main proceedings relates to the matter of succession for the purposes of Regulation No 650/2012” (para. 40). The main reason, however, is to ensure that the European Certificate of Succession remains workable in practice by giving a true and comprehensive picture of the surviving spouse’s share in the estate, no matter whether domestic law achieves this result by inheritance law alone or rather by a combination of matrimonial property and succession law (see in particular paras. 42 et seq.). It remains to be seen how much scope this approach will leave to an application of the European Matrimonial Property Regulation (Regulation (EU) No. 2016/1103), which also covers the liquidation of the matrimonial property regime as a result of the death of one of the spouses. Whereas the law applicable to matrimonial property is, in principle, stabilised at the first common habitual domicile of the spouses, the applicable succession law is changed much more easily – it suffices that the deceased spouse had acquired a new habitual residence before his or her death. Thus, an extension of the Succession Regulation to the detriment of the Matrimonial Property Regulation may disappoint legitimate expectations of the surviving spouse concerning the allocation of accrued gains. The CJEU, however, does not seem to worry too much about this aspect, which was not problematic in the case at hand (para. 41). Future cases may be more enlightening in this regard.

On March 15 the ECtHR, sitting as the Grand Chamber,decided on the Naït-Litman v. Switzerland case (application no. 51357/07), against the applicant and his claim of violation of Article 6 ECHR. Independently on whether one agrees or not  with the final outcome, for PIL lawyers and amateurs the judgment (for very busy people at least the press release) is certainly worth reading.

The case concerned the refusal by the Swiss courts to examine Mr Naït-Liman’s civil claim for compensation for the non-pecuniary damage arising from acts of torture allegedly inflicted on him in Tunisia. According to the applicant, he was arrested in April 1992 by the police in Italy, and after being transferred to the Tunisian consulate in Genoa, he was taken to Tunis by Tunisian agents. Mr Naït-Liman alleges that, from 24 April to 1 June 1992, he was detained and tortured in Tunis in the premises of the Ministry of the Interior on the orders of A.K., the then Minister of the Interior. Following the alleged torture, Mr Naït-Liman fled Tunisia in 1993 for Switzerland, where he applied for political asylum; this was granted in 1995.

On 14 February 2001, having learnt that A.K. was being treated in a Swiss hospital, the applicant lodged a criminal complaint against him with the Principal Public Prosecutor for the Republic and the Canton of Geneva. He applied to join these proceedings as a civil party. The Prosecutor dropped the proceedings after finding out that A.K. had left the country some days earlier.

Several years later, on 8 July 2004, the applicant lodged a claim for damages with the Court of First Instance of the Republic and the Canton of Geneva against Tunisia and against A.K. The Court of First Instance declared the claim inadmissible on the ground that it lacked territorial jurisdiction and that the Swiss courts did not have jurisdiction under the forum of necessity in the case at hand, owing to the lack of a sufficient link between, on the one hand, the case and the facts, and, on the other, Switzerland. Mr Naït-Liman lodged an appeal with the Court of Justice of the Republic and the Canton of Geneva, which was rejected on the grounds of immunity from jurisdiction of the defendants. The Federal Supreme Court dismissed the second appeal in 2007, considering that the Swiss courts in any event lacked territorial jurisdiction.

The ECtHR considered that international law had not imposed an obligation on the Swiss authorities to open their courts with a view to ruling on the merits of Mr Naït-Liman’s compensation claim, on the basis of either universal civil jurisdiction in respect of acts of torture or a forum of necessity.

The case is without doubt of interest for CoL and beyond. To start with, the methodology employed by the Court is remarkable. A wide comparative legal analysis is conducted, which regarding universal civil jurisdiction encompasses the work of the Institute of International Law on the topic in 2015, and the report theretoby A. Bucher, and takes into account 39 member States of the Council of Europe (Albania, Armenia, Austria, Azerbaijan, Belgium, Bosnia and Herzegovina, Bulgaria, the Czech Republic, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Ireland, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Moldova, Monaco, the Netherlands, Norway, Poland, Portugal, Romania, Russia, San Marino, Serbia, Slovakia, Slovenia, Spain, Turkey, Ukraine and the United Kingdom), as well as certain States which are not members of the Council of Europe. The forum necessitatis prong comprises: the works of both the Institute of International Law and the  International Law Association -The Sofia Resolution, 2012, of its former Committee on International Civil Litigation and the Interests of the Public-; eleven European States (Austria, Belgium, Estonia, France, Germany, Luxembourg, the Netherlands, Norway, Poland, Portugal and Romania) which explicitly recognise either the forum of necessity, or a principle bearing another name but entailing very similar if not identical consequences (as in the case of France); Switzerland; and Canada (Quebec) as a non-member States of the Council of Europe. Finally, reference is also made to the forum necessitatis provisions in the EU maintenance, succession and matrimonial property regulations.

As to the merits, regarding universal civil jurisdiction the Strasbourg Court examined whether Switzerland was bound to recognise it for acts of torture by virtue of an international custom, or of treaty law. The Court concluded that those States which recognised universal civil jurisdiction beyond the acts of torture are currently the exception, hence evidence indicating the emergence of an international custom which would have obliged the Swiss courts to find that they had jurisdiction to examine Mr Naït-Liman’s action does not exist (and even less evidence of the consolidation of such custom). With regard to international treaty law, as it currently stands it also fails to recognise universal civil jurisdiction for acts of torture obliging the States to make available civil remedies in respect of acts of torture perpetrated outside the State territory by the officials of a foreign State.

On the forum necessitatis issue, the Court had to determine whether international law imposed an obligation on the Swiss authorities to make a forum of necessity available to Mr Naït-Liman. In light of the materials alluded to above, the Court could not find an international custom rule enshrining the concept of forum of necessity; it further noted that no international treaty obligation imposes on the States a duty to provide for a forum of necessity.

It followed that the Swiss authorities had enjoyed a wide margin of appreciation in this area. After examining section 3 of the Federal Law on Private International Law and the decisions issued by the Swiss courts, the Court concluded that neither the Swiss legislature nor the Federal Supreme Court had exceeded their margin of appreciation.

It is worth noting that Judge Wojtyczek expressed a partly dissenting opinion; that Judge Dedov and Judge Serghides each expressed a dissenting opinion; and that, being aware of the dynamic nature of this area, the Court expressly refrained from ruling out the possibility of developments in the future. As a consequence the Court (para. 220) “invites the States Parties to the Convention to take account in their legal orders of any developments facilitating effective implementation of the right to compensation for acts of torture, while assessing carefully any claim of this nature so as to identify, where appropriate, the elements which would oblige their courts to assume jurisdiction to examine it.”

Written by Dr. Jorg Sladic, Attorney in Ljubljana and Assistant Professor in Maribor (Slovenia)

The most interesting development in European private international law and European insolvency law seems the Croatian AGROKOR case. Rulings of English courts have been reported (see e.g. Prof. Van Calster’s blog, Agrokor DD – Recognition of Croatian proceedings shows the impact of Insolvency Regulation’s Annex A.)[1] However, a new and contrary development seems to be an order by the Slovenian Supreme Court in case Cpg 2/2018 of 14 March 2018.[2]

The Slovenian forum refused to grant exequatur to Croatian extraordinary administration as a way of divestiture of insolvent debtor.  Large parts of the order do read as a manual of non-contentious proceedings and deal in assessment of interest in bringing an appeal. However, the part dealing with private international law and European civil procedure has to presented. It will have a wider international effect. It is also interesting that the Slovenian forum refused to contemplate any assessment done by the High Court of Justice of England & Wales in case In the matter of Agrokor dd and in the matter of the Cross-border insolvency regulations 2006 ([2017] Ewhc 2791 (Ch)).

Facts:

AGROKOR is a huge agro-industrial enterprises in South-Eastern Europe (Croatia, Slovenia, Romania, Serbia and also perhaps some other European jurisdictions) employing more than 50 000 employees. It is also the biggest owner of agricultural lands in that part of Europe. The impacts of Agrokor were discussed by Hogan & Lovell on their website.[3] Agrokor was owned and operated by a local oligarch and is apparently implied in not all to transparent business operations. As a consequence it became insolvent.

Due to huge debts that would actually require a collective insolvency proceedings Croatia adopted the Law on Extraordinary Administration Proceeding in Commercial Companies of Systemic Importance for the Republic of Croatia.[4] The essence of that legislation is summarized in English by the High Court of Justice of England & Wales in case In the matter of Agrokor dd and in the matter of the Cross-border insolvency regulations 2006 ([2017] Ewhc 2791 (Ch)). The essence of Croatian legislation is the (temporary) suspension of par condicio creditorum in and pari passu clauses in insolvency law. AGROKOR was passed under extraordinary administration suspending the rights of owners and of the board of directors.

The Croatian extraordinary administrator requested the recognition of extraordinary administration under Croatian law also for the assets and subsidiaries in Slovenia in 2017. Upon opposition of creditors (banks as creditors ex iure crediti) the recognition order was vacated. After remedies the case came before the Supreme Court and ended with an unanimous refusal of recognition.

Reasoning:

In this report only points of private international law will be reported. Questions of standing and of interest in bringing proceedings will not be discussed.

Inapplicability of EU private international law

Even though Slovenia and Croatia are nowadays Member States of the EU, the Regulations 1346/200 and 848/2015 are not to be applied, as the Croatian proceedings are not mentioned in the Annex A. Slovenian national international collective insolvency law (Art. 445 – 488 Financial Operations, Insolvency Proceedings and Compulsory Winding-up Act) and the Bilateral Legal Assistance Treaty Between Slovenia and Croatia of 1994 are to be applied (par. 6).

The lis pendens plea

Agrokor argued that an arbitration case is pending in London and that some of the parties in the Slovenian case declared their claims in Croatian proceedings for extraordinary administration. The Slovenian Supreme court dismissed such a plea. The effects of lis pendens on the arbitration in the UK are a matter for UK courts (par. 23). As a consequence the recognition of Croatian extraordinary administration in the UK by the judgement of the High Court of Justice Nr. CR-2017-005571 of 9 November 2017 is of no importance for Slovenian proceedings. However, even if UK law incorporated the UNCITRAL guidelines the High court (judge Paul Matthews) based its argumentation on common law and precedents based on that law. The Slovenian forum completely cut the discussion by a laconic statement according to which understanding and application of devices of insolvency law under [English] common law is quite different from Slovenian civil law legal order (par. 24).

However, lis pendens could be given effect due to parallel pending proceedings in Slovenia and Croatia. The Slovenian Court did not apply the Regulation Brussels Ia (1215/2012) but referred to national Slovenian law. The Slovenian forum explained that the Regulation Brussels Ia is not t be applied by virtue of its exception for bankruptcy, proceedings relating to the winding-up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings (Art. 1(b) Regulation 1215/2012). National Slovenian private international law deals with the exception of lis pendens in Art. 88 Private International Law and Proceedings Act of 1999.[5] The essence of Slovenian international lis pendens is the request to suspend proceedings before a Slovenian forum. Where Slovenian private international law applies, a Slovenian forum will not suspend the proceedings ox officio. In concreto, however, none of the parties in Slovenian set of proceedings requested suspension.

Cross-border effects of substantive consolidation

One of the pleas in appeal was the erroneous application of substantive consolidation under the UNCITRAL model law. Lower courts considered that the substantive consolidation violated the par condicio creditorum principle, i.e. a basic principle of Slovenian insolvency law. Lower courts assessed the Croatian extraordinary administration and concluded that in essence such an administration is to be considered as a substantive consolidation. Substantive consolidation is a treatment of the assets and liabilities of two or more enterprise group members as if they were part of a single insolvency estate.[6] Slovenian insolvency legislation followed the UNCITRAL model law. The Supreme Court did not have any problem incorporating via its own case-law the UNCITRAL Legislative Guide on Insolvency Law. According to the Slovenian forum the Croatian  Law on Extraordinary Administration Proceeding in Commercial Companies of Systemic Importance for the Republic of Croatia indeed incorporated the substantive consolidation in Croatian law. Art. 43 of the said Croatian law namely provides for a systemic measure of substantive consolidation (paras. 29 – 40, especially par. 36). Substantive cross-border consolidation is contrary so Slovenian international ordre public.

The defence of ordre public (paras 41 – 53)

The essence of Slovenian Supreme Court’s reasoning consists of assessment of the compliance with ordre public condition for granting recognition (see on Slovenian legislation in Italian e.g. in Sladi? La Corte suprema slovena si confronta con i danni punitivi, Danno e responsabilità 1/2014, p. 18 et seq.). The national Slovenian law applies the prerequisite of international ordre public, i.e. only foreign decision that could endanger the legal and moral integrity of Slovenian legal order are not recognised. The ordre public defence is the ultimate refuge. However, recognition of foreign proceedings for divestiture of over-indebted debtors where the condition of equal treatment of creditors (par condicio creditorum) is not complied with would not comply with the requirements of Slovenian international ordre public. Slovenia namely protects on the one hand in national insolvency proceedings the equal treatment of creditors. On the other hand it only grants recognition in international insolvency legislation the powers of foreign administrator to conduct the case for the common representation of all creditors (par. 45). The Croatian Law on Extraordinary Administration Proceeding in Commercial Companies of Systemic Importance for the Republic of Croatia is a form of State’s economic intervention or economic protectionism having the aim of protection of commercial companies of systemic importance. The Croatian law interferes in the fundamental principles of collective insolvency law and gives certain creditors privileges to be paid by priority by an administrator’s discretionary decision without any consent of the board of creditors (par. 47). The extraordinary administration is conditioned by the State’s interest and certainly not by the interest of creditors. Creditors do not get nor the benefit of the par condicio creditorum (no equal treatment of creditors in having the same condition vis-a-vis the debtor) and are not paid in equal shares (no pari passu clause) (par. 48).

The Slovenian Supreme Court refused to engage in any assessment of compatibility of Croatian law with the Croatian ordre public (par. 49). However, it remarked that Courts in successor States of Yugoslavia refused to recognise the effects of judicial decisions based on the Law on Extraordinary Administration Proceeding in Commercial Companies of Systemic Importance for the Republic of Croatia. Courts in Montenegro (Supreme Court of Montenegro), Serbia (Commercial court of Appeal), Bosnia (Supreme Court of Bosnia) all concluded that the Croatian Law on Extraordinary Administration Proceeding in Commercial Companies of Systemic Importance for the Republic of Croatia does not deal in insolvency, it is aimed at the protection of State’s interests. The Croatian law is contrary to ordre public of any of those States. Perhaps the said decisions can also be seen as introducing the government interest analysis in South-Eastern Europe?

In the end the Slovenian Supreme Court stressed the importance of the European ordre public. “In the framework of national ordre public also the European ordre public is to be acknowledged next to regional ordre public. [Comment: The order does not clarify what the difference between the European and regional ordre public is]. A Slovenian forum is not empowered to refuse the recognition of foreign insolvency proceedings even though they might be contrary to national ordre public if such a refusal would not be justified or proportional from a European point of view. Slovenia and Croatia are namely both members of European legal area, i.e. members of the EU. However, each State is empowered to set types and conditions of collective insolvency proceedings on their territories. The effects and closing can then be a subject-matter of recognition (both automatic and according to the rules) in other States and also to set interest to be affected by legal consequences of recognition of foreign insolvency proceedings.” Slovenia decided to protect the creditors’ interests, for their equal treatment, as a consequence the refusal of recognition of the extraordinary administration complies with the Slovenian ordre public.

[1]https://gavclaw.com/2018/03/26/agrokor-dd-recognition-of-croatian-proceedings-shows-the-impact-of-insolvency-regulations-annex-a/#comment-69405

[2]Available in Slovenian at http://www.sodisce.si/sodni_postopki/objave/2018031912582798/

[3]https://www.hlbriworkoutblog.com/2017/12/english-recognition-agrokor-insolvency-not-tick-box-exercise/#page=1

[4]The Croatian version available on the webise of the Croatian Official Journal https://narodne-novine.nn.hr/clanci/sluzbeni/2017_04_32_707.html

[5]The translation in Encyclopedia of Private International Law (Jürgen Basedow, Giesela Rühl, Franco Ferrari and Pedro de Miguel Asensio), 2017, p. 3784–3804 reads as: »A court of the Republic of Slovenia will stay the proceedings at the request of a party if other proceedings on the same matter have been initiated before a foreign court between the same parties:

• if the suit in the proceedings conducted abroad was served on the defendant before the service of the suit in the proceedings conducted in the Republic of Slovenia; or if a non-contentious procedure abroad started earlier than in the Republic of Slovenia;
• if it is probable that the foreign decision will be recognized in the Republic of Slovenia, and;
• if reciprocity exists between the two states.«

[6]http://www.uncitral.org/uncitral/en/uncitral_texts/insolvency/2004Guide.html.