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Can China’s New “Blocking Statute” Combat Foreign Sanctions?

by Jingru Wang, Wuhan University Institute of International Law

  1. Background

A blocking statute is adopted by a country to hinder the extraterritorial application of foreign legislation.[1] For example, the EU adopted Council Regulation No 2271/96 (hereinafter “EU Blocking Statute”) in 1996 to protest the US’s extraterritorial sanctions legislation concerning Cuba, Iran and Libya.[2] Since Donald Trump became the US president, the US government officially defined China as its competitor.[3] Consequently, China has been increasingly targeted by US sanctions. For example, in 2018, the US imposed broad sanctions on China’s Equipment Development Department (EDD), the branch of the military responsible for weapons procurement and its director for violating the US law on sanctions against Russia.[4] In 2020, the US announced new sanctions on Chinese firms for aiding North Korea’s nuclear weapons program.[5] A number of “Belt and Road” countries are targeted by US primary sanctions, which means that Chinese entities may face a high risk of secondary sanctions for trading with these countries. In these contexts, Chinese scholars and policy makers explore the feasibility to enact blocking law to counter foreign sanctions.[6] On 9 January 2021, China’s Ministry of Commerce (hereinafter “MOFCOM”) issued “Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures” (hereinafter “Chinese Blocking Rules”), which entered into force on the date of the promulgation.[7]

  1. Analysis of the Main Content

Competent Authority: Chinese government will establish a “Working Mechanism” led by the MOFCOM and composed of relevant central departments, such as the National Development and Reform Commission. The Working Mechanism will take charge of counteracting unjustified extraterritorial application of foreign legislation and other measures (Art. 4).

Targeted extraterritorial measures: The Chinese Blocking Rules target foreign legislation and other measures unjustifiably prohibit or restrict Chinese parties from engaging in normal economic, trade and related activities with third state’s parties (Art. 2), which is the so-called “secondary sanction”. Namely, if China considers sanctions unilaterally imposed by the US against a third country unjustified and violating international law, it may nullify such sanctions and allow Chinese companies to continue to transact with the third country. These Rules do not impact restrictions on business activities between China and the sanctioning country.

Unlike the EU Blocking Statute, the Chinese Blocking Rules do not provide an annex listing the legislation subject to the blocking but grant the Working Mechanism discretion. To determine whether foreign legislation or other measures fall within the application scope of the Chinese Blocking Rules, the Working Mechanism shall consider (1) the international law and fundamental principle of international relations; (2) potential impact on China’s national sovereignty, security and development interests; (3) potential impact on the legitimate interest of the Chinese party and (4) all other factors (Art. 6). On the one hand, the non-exhaustive list grants the Working Mechanism broad flexibility to analyse on a case-by-case basis. China has repeatedly become the target of US secondary sanctions. An exhaustive list of foreign legislation and other measures is insufficient to deal with the changing situations. On the other hand, China is prudent in confrontation with other countries. In a press conference, the MOFCOM spokesman stated that “the working mechanism will closely follow the inappropriate extraterritorial application of relevant national laws and measures.”[8] Therefore, the response of other countries will influence the enforcement of the Chinese Blocking Rules.

It is noteworthy the Chinese Blocking Rules will not affect China’s performance of its international obligations. These Rules shall not apply to such extraterritorial application of foreign legislation and measures as provided for in treaties or international agreements to which China is a party (Art. 15).

Information reporting system: A Chinese party prohibited or restricted by foreign legislation and other measures from engaging in normal economic, trade and related activities with a third state’s party shall report such matters to the MOFCOM within 30 days (Art. 5). Otherwise, the Chinese party may be warned, ordered to rectify or fined (Art. 13). To encourage the information report, Art. 5 of the Chinese Blocking Rules also provides that the competent authority shall keep such report confidential at the request of the Chinese party. The staff of the competent authority may undertake administrative penalties if they fail with such obligation (Art. 14).

Concerning the Information reporting system, when the report obligation is triggered is unclear. Should the Chinese party report within 30 days after the foreign legislation is published or other measures are taken or after its actual operation is restricted? Moreover, since the Chinese Blocking Rules do not list targeted foreign legislation and other measures, the Chinese party should rely on their judgment to report. Finally, who should report on behalf of the legal person remains to be answered.

Prohibition order: Once the unjustified extraterritorial application of foreign legislation and other measures is confirmed, the Working Mechanism may decide that the MOFCOM shall issue a prohibition order to ban the effect of relevant foreign legislation and other measures (Art. 7). A Chinese party that fails to observe the prohibition order will be punished (Art. 13). Therefore, Chinese parties are forced to comply with either Chinese or foreign laws. In other words, they will be punished by one or the other. To free the party from the dilemma, a Chinese party may apply for exemption from compliance with a prohibition order (Art. 8). China-based subsidiaries of foreign companies are formed under Chinese law. They are considered to be Chinese entities. Therefore, unless otherwise provided by law, they are subject to the prohibition order issued under the Chinese Blocking Rules and can apply for the exemption.

One major uncertainty is whether third state’s parties are subject to the prohibition order. These Rules do not stipulate that foreign entities will be punished by violating the prohibition order or can apply for the exemption. However, it is suggested that the prohibition order may bind the third state’s party for two reasons. Firstly, the US may issue secondary sanctions to prohibit Chinese parties from trading with third state’s parties (Iran as an example), or to prohibit third state’s parties (EU as an example) from trading with Chinese parties. According to Art. 2 of the Chinese Blocking Rules, both situations may obstruct the normal economic, trade and related activities between the Chinese party and the third state’s party. If the prohibition order merely applies to the Chinese party, it cannot protect Chinese businesses from being prejudiced by the US secondary sanctions in the latter situation. Secondly, a Chinese party can bring a lawsuit before the People’s Court against the party who infringes the legitimate interest of such Chinese party by complying with the foreign legislation and other measures covered by the prohibition order (Art. 9). This article does not limit the defendant to “a Chinese party.” Thus it shall include the third state’s party. If the prohibition order does not bind the third state’s party, it is doubtful that such third state’s party is liable for not complying with the prohibition order.

The prohibition order refrains relevant parties from complying with specific foreign legislation and other measures. A question is how should the prohibition order be observed. According to the European Commission’s Guidance Note, the purpose of the EU Blocking Statute is to ensure that business decisions on trading with third States remain free. It does not oblige EU operators to do business with Iran or Cuba. Also, the Chinese Blocking Rules cannot and should not oblige the Chinese party and the third state’s party to engage with each other. Therefore, it raises the worry that these Rules may apply better for breach of existing contract but be more difficult to “force” someone to enter into a contract or in terms of the pre-contractual obligation.

Judicial Remedy: A Chinese party can bring a lawsuit before the People’s Court of PRC against the party who infringes its legitimate interest by complying with the foreign legislation or measures covered by the prohibition order. A Chinese party may also suit the party who benefits from the judgment or ruling made under such foreign legislation or other measures before the People’s Court (Art. 9). Problems may arise if the losing party has no asset in China seized for enforcement by the Chinese court. Other countries may be reluctant to recognize and enforce such judgment.

Government support: Members of the Working Mechanism shall provide guidance and service to Chinese parties to deal with unjustified extraterritorial application of foreign legislation and other measures (Art. 10). Suppose a Chinese party that observes the prohibition suffers significant losses resulting from non-compliance with the relevant foreign legislation and measures. In that case, relevant government departments may provide necessary support based on specific circumstances (Art. 11). Which government department is responsible for these matters? Does “Necessary support” include financial compensation or support on litigation in the sanctioning country? These questions remain to be answered.

 

  1. Impact of the Blocking Statute

Considering that China has long suffered from secondary sanctions issued by the US government, promulgating the Chinese Blocking Rules is not a surprise. Overall, the Chinese Blocking Rules attempt to establish three core institutions anticipated by Chinese scholars: (1) blocking the effect and enforcement of specific foreign legislation in China; (2) prohibiting relevant parties from complying with specific foreign legislation and other measures; (3) enabling relevant parties to recover the damage from the party who complies with the foreign legislation and measures covered by the prohibition order. Therefore, a blocking statute serves as both shield and sword to fight against foreign sanctions.

But the function of blocking statute shall not be overemphasized. The same as the EU Blocking Statute, the Chinese Blocking Rules create a quandary for relevant parties.

For Chinese parties, if they comply with the Chinese prohibition order, they have to deal with US penalties. Chinese parties may invoke “foreign sovereign compulsion”[9] as a defence to insulate themselves from certain US sanctions penalties. In determining whether to buy such argument, US courts often consider whether foreign states actively enforce them.[10] The Chinese Blocking Rules can provide a legal basis for Chinese parties to exempt from the US sanctions by strategic enforcement actions. If so, Chinese parties will be relieved to transact with third state’s parties. But the Chinese government may not be willing to provide the same exemption. Out of self-interest, Chinese parties may be more likely to comply with the Chinese Blocking Rules.

These Rules have not yet stipulated the legal result if third states’ parties violate the Chinese prohibition order. In principle, prescriptive jurisdiction can be extraterritorial, but enforcement jurisdiction must be territorial. Therefore, China cannot always extend the effect of Blocking Rules to a third state’s party even if it has the will. However, it is reasonable to assume that third state’s parties may be added to the “unreliable entities list”[11] for disregarding the Chinese prohibition order. It may prompt third state’s parties to observe the Chinese prohibition order voluntarily to preserve their assets and reputation in China. But even if third state’s parties value the Chinese market, it is uneasy for them to choose China over the US.

China has become more active in exploring countermeasures against the US. On 19 September 2020, MOFCOM released provisions on establishing “unreliable entity list.”[12] Promulgation of the Chinese Blocking Rules is another proactive attempt. However, both are departmental rules, which are at a relatively low-level in the Chinese legal system. Predictably, higher-level legislation concerning the extraterritorial effect of foreign legislation and other measures will be enacted in the future. It may prompt China and the US back to the negotiating table.

[1] Menno T. Kamminga, “Extraterritoriality”, Max Planck Encyclopedia of Public International Law, November 2012, para. 26.

[2] COUNCIL REGULATION (EC) No 2271/96, available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:01996R2271-20140220.

[3] White House, National Security Strategy of the United States of America, December 2017.

[4] CAATSA – Russia-related Designations, available at: https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20180920_33. aspx.

[5] North Korea Designations, available at: https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20201208.

[6] Ye Yan, “On the EU Blocking Statute”, Pacific Journal, Vol. 28, No. 3, Mar. 2020, pp. 50-66; Huo Zhengxin, “Extraterritoriality of Domestic Law: American Model, Jurisprudential Deconstruction and Chinese Approach”, Tribune of Political Science and Law, Vol. 38, No. 2, Mar. 2020, pp. 173-191.

[7] Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures, available at: http://www.mofcom.gov.cn/article/i/jyjl/e/202101/20210103032421.shtml.

[8] The Head of the Department of Treaty of Law of Ministry of Commerce answers press on “Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures”, available at:  http://www.mofcom.gov.cn/article/news/202101/20210103029779.shtml.

[9] “Foreign Sovereign Compulsion” means that if a party is obliged to do or not to do an act by a state, it may constitute a defence for not complying with the obligation specified by the US law before the US court. See American Law Institute, Restatement of the Law, Third, The Foreign Relations Law of the United States, American Law Institute Publishers, 1990, p. 341.

[10] M. J. Hoda, “The Aerospatiale Dilemma: Why U.S. Courts Ignore Blocking Statutes and What Foreign States Can Do About It”, California Law Review, Vol. 106, No. 1, 2018.

[11] The entity added to the list will be restricted on China-related trade, investment in China and travel or work permits. See “MOFCOM Order No. 4 of 2020 on Provisions on the Unreliable Entity List”, available at:

http://www.mofcom.gov.cn/article/b/fwzl/202009/20200903002593.shtml.

[12] Ibid.

Personal Injury and Article 4(3) of Rome II Regulation

This blog post is a follow up to my earlier announcement on the decision of Owen v Galgey [2020] EHWC 3546 (QB).

Introduction

Cross border relations is bound to generate non-contractual disputes such as personal injury cases. In such situations, the law that applies is very important in determining the rights and obligations of the parties. The difference between two or more potentially applicable laws is of considerable significance for the parties involved in the case. For example a particular law may easily hold one party liable and/or provide a higher quantum of damages compared to another law. Thus, a preliminary decision on the applicable law could easily facilitate the settlement of the dispute between the parties without even going to trial.

Rome II Regulation[1] governs matters of non-contractual obligations. Article 4 of Rome II applies to general torts/delicts such as personal injury cases. It provides that:

  1. Unless otherwise provided for in this Regulation, the law applicable to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur.
  2. However, where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply.
  3. Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question.

In the recent case of Owen v Galgey & Ors.,[2] the English High Court was faced with the issue of applying Article 4 of Rome II to a personal injury case. This comment disagrees with the conclusion reached by the High Court Judge in displacing English law under Article 4(2) of Rome II, and applying French law under Article 4(3) of Rome II.

Facts

The Claimant is a British citizen domiciled and habitually resident in England who brought a claim for damages for personal injury sustained by him as result of an accident in France on the night of April 3rd 2018, when he fell into an empty swimming pool which was undergoing works at a villa in France – a holiday home owned by the First Defendant, whose wife is the Second Defendant. The First and Second Defendants are also British citizens who are domiciled and habitually resident in England. The Third Defendant is a company domiciled in France, and the insurer of the First and Second Defendants in respect of any claims brought against them in connection with the Villa. The Fourth Defendant is a contractor which was carrying out renovation works on the swimming pool at the time of the accident, and the Fifth Defendant is the insurer of the Fourth Defendant. The Fourth and Fifth Defendants are both companies which are domiciled in France.

It was common ground between the parties that French law applied to the Claimant’s claims against the Fourth and Fifth Defendants. But there was a dispute at to the applicable law in relation to his claims against the First to Third Defendants. These Defendants contended that, by operation of Article 4(2) of Rome II, English law applies because the Claimant and the First and Second Defendants are habitually resident in England. However, the Claimant contended that French law applied by operation of Article 4(3) the Rome II because, he says, it is clear that the tort in this case is manifestly more closely connected with France than it is with England.

It was common ground that French law applied under Article 4(1) of Rome II because the direct damage occurred in France in this case; and English law applied under Article 4(2) of Rome II because the Claimant and First and Second Defendants were all habitually resident in England. The legal issue to be resolved was therefore whether under Article 4(3) the tort/delict was manifestly more closely connected to France than it is with England.

Decision

In a nutshell, Linden J held that French law applied under Article 4(3) of Rome II. The Court considered Article 4 of Rome II as a whole and read it in conjunction with both the Explanatory Memorandum[3] and Recitals to Rome II.[4]

Linden J held that Article 4(2) created a special rule which automatically displaced Article 4(1), and Article 4(2) was intended to satisfy the legitimate expectation of the parties.[5] On this basis, he observed that Article 4(2) could only apply in two party cases (only one victim and one tortfeasor), and not multi-party situations.[6] Linden J explicitly disagreed with an earlier decision of Dingemans J in Marshall v Motor Insurers’ Bureau & Ors[7] that held that Article 4(2) applied in multi-party situations.[8]

Linden J considered the relevant circumstances that could give rise to applying Article 4(3) in this case in the following chronological order:

  1. the desire for a single law to govern the whole case involving the Claimant and the First to Fifth Defendants;[9]
  2. the circumstances relating to all the parties in the case;[10]
  3. the place of direct damage under Article 4(1);[11]
  4. the habitual residences of the parties, including where any insurer defendants are registered at the time of the tortious incident and when the damage occurs;[12]
  5. the habitual residence of the Claimant at the time of the consequences of the tort, including any consequential losses;[13]
  6. the nationalities of the parties; [14] and
  7. the fact that the parties have a pre-existing relationship in or with a particular country.[15]

Linden J held, following previous English decisions,[16] that the burden of proof was on the party that seeks to apply Article 4(3).[17] He held that Article 4(3) could only be applied as an exceptional remedy where a clear preponderance of factors supports its application.[18] However he observed that the facts of the case do not have to be unusual for Article 4(3) to apply, though Article 4(3) was intended to operate in a clear and obvious case.[19]

After considering the submission of the parties in the case, Linden J preferred the Claimant’s submission that Article 4(3) applied in this case. In his words: “France is where the centre of gravity of the situation is located and the preponderance of factors clearly points to this conclusion. This conclusion also accords with the legitimate expectations of the parties.”[20]

Linden J gave great weight to the place of direct damage. In his words:

“The tort/delict occurred in France, as I have noted. This is also where the injury or direct damage occurred. The dispute centres on a property in France and it concerns structural features of that property and how the First, Second and Fourth Defendants dealt with works on a swimming pool there. Although these defendants deny that there was fault on the part of any of them, the First and Second Defendants say that the Fourth Defendant was responsible if the pool presented a danger and the Fourth Defendant says that they were. The allegations of contributory negligence/fault also centre on the Claimant’s conduct whilst at the Villa in France.

The First and Second Defendants also had a significant and long-standing connection to France, the accident occurred on their property…

…the situation in relation to the swimming pool which is said to have been the cause of the accident was firmly rooted in France and it resulted from works which were being carried out by the Fourth Defendant as a result of it being contracted to do so by the First and Second Defendants. The liability of the First and Second Defendants, if any, will be affected by how they dealt with that situation, including by evidence about their dealings with the Fourth Defendant. That situation had no significant connections with England other than the nationality and habitual place of residence of the First and Second Defendants.”[21]

Linden J also gave great weight to the desire to apply a single law to govern the whole case against the First to Fifth Defendants.[22] In his words:

“…the works were carried out by a French company pursuant to a contract with them which is governed by French law. Their insurer, the Third Defendant, is a French company and they are insured under a contract which is governed by French law… It is also common ground that the claim against the Fourth Defendant, and therefore against the Fifth Defendant, also a French company, is entirely governed by French law and will require the court to decide whether the Fourth Defendant or, at least by implication, the First and Second Defendants were “custodians” of the property for the purposes of French law.”[23]

On the other hand Linden J did not give great weight to the common habitual residence, common nationalities and common domiciles of the Claimant and First and Second Defendants, and the place of consequential loss which pointed to England. Linden J did not consider the pre-existing relationship between the Claimant and First and Second Defendants to be a strong connecting factor in favour of English law applying in this case. He did not regard their relationship as contractual but one that appears to be “the agreement resulted from a casual conversation between social acquaintances in the context of mutual favours having been done in the past.”[24] He considered that if there was a contract between the parties, he would have held that French law applied under Article 4(3) of Rome I Regulation[25] because the parties mutually performed their obligations in France.

In the final analysis, Linden J held as follows:

“To my mind the tort/delict in this case is much more closely connected to the state of the swimming pool which, as I have said, was part of a property in France and resulted from the French law contract between the First and Second Defendants and the Fourth Defendant. If any of the Defendants is liable, that liability will be closely connected with this contract. This point, taken in combination with the other points to which I have referred, in my view clearly outweighs the existence of any contract with the Claimant relating to the Villa, even if I had found there to be a contractual relationship and even if it was governed by English law.

Similarly, although I have taken into account the nationality and habitual place of residence of the Claimant and the First and Second Defendants, these do not seem to me to alter the conclusion to which I have come. I have also taken into account the fact that the consequences of the accident have to a significant extent been suffered by the Claimant whilst he was in England, but in my view the other factors to which I have referred clearly outweigh this consideration.

I therefore propose to declare that the law applicable to the claims brought by the Claimant against the First, Second and Third Defendants is French law.”[26]

Comment

Owen is the second English case to utilise Article 4(3) as a displacement tool.[27] Interestingly, Owen and Marshall are both cases where Article 4(3) was used to trump Article 4(2) in order to restore the application of Article 4(1). These judicial decisions put to rest any contrary view that Article 4(3) cannot be used to restore the application of Article 4(1), when Article 4(2) automatically displaces Article 4(1). In this connection, I agree with the judges’ conclusion on the basis that Article 4(3) operates as an escape clause to both Article 4(1)&(2). Such an approach also honours the requirement of reconciling certainty and flexibility in Recital 14 to Rome II. A contrary approach will unduly circumscribe the application of Article 4(3) of Rome II.

I do not agree with Linden J that Article 4(2) of Rome II only applies in two party cases (one victim and one tortfeasor) and does not apply in multi-party cases. I prefer the contrary decision of Dingemans J in Marshall. Interpreting Article 4(2) as being only applicable to two party cases is a very narrow interpretation. Moreover, the fact that Article 4(2) is a strong exception to Article 4(1) does not mean that Article 4(2) should be unduly circumscribed. Article 4(2) should not be applied mechanically or without thought. It must be given some common sense interpretation that suits the realities of cross-border relations in torts.

Moving to the crux of the case, I disagree with the conclusion reached by Linden J that French law applied in this case. Applying the test of Article 4(3), the tort was not manifestly more closely connected with France. In other words, it was not obvious that Article 4(3) outweighed the application of Article 4(2). To my mind, the arguments between the opposing parties were evenly balanced as to whether the tort was manifestly more closely connected with France. Article 4(2) in this case, which pointed to English law, was also corroborated by the common domiciles and common nationalities of the Claimant and First and Second Defendants which should have been regarded as a strong connecting factor in this case. In addition, the non-contractual pre-existing relationship between the Claimant and First and Second Defendants, and consequential loss pointed to England, though I concede that these factors are not very strong in this case.

It is important to stress that Article 4(2) of Rome II is a fixed rule and not a presumption of closest connection as it was under Article 4(2) of the Rome Convention.[28] Once Article 4(2) of Rome II applies, it automatically displaces Article 4(1), except Article 4(3) regards the place of damage as manifestly more closely connected with another country. Linden J appeared to give decisive weight to the place of damage and the desire to apply a single law to all the parties in the case, but did not pay due regard to the fixed rule in Article 4(2) and the fact that it was corroborated by other factors such as the common nationalities and domiciles of the Claimant and First and Second Defendants involved in the case.

Conclusion

Owen presents another interesting case on the application of Article 4 of Rome II to personal injury cases. It is the second case an English judge would be satisfied that Article 4(3) should be utilised as a displacement tool. The use of the escape clause is by no means an easy exercise. It involves a degree of evaluation and discretion on the part of the judge. Indeed, Article 4(3) is very fact dependent. In this case, Linden J preferred the argument of the Claimant that French law applied in this case under Article 4(3). From my reading of the case, I am not convinced that this was a case where Article 4(3) manifestly outweighed Article 4(2). It remains to be seen whether the First, Second and Third Defendants will appeal the case, proceed to trial or settle out of court.

[1]Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations [2007] OJ L199/40 (“Rome II”). It takes effect in courts of Member States only for events giving rise to damage occurring after 11 January 2009, as decided by the Court of Justice of the European Union (CJEU) in Case C-412/10 Homawoo EU:C:2011:747 [37].

[2] [2020] EWHC 3546 (QB)

[3]Explanatory memorandum from the Commission, accompanying the Proposal for Rome II, COM(2003) 427final (Explanatory Memorandum).

[4] Ibid [15] – [24].

[5] Ibid [26] – [27].

[6] Ibid [27] – [29], [35]. However, the argument as to whether Article 4(2) applied only in two party situations was not put forward before Linden J.

[7] [2015] EWHC 3421 (QB) [17].

[8] Owen (n 2) [35].

[9] Ibid [36] – [38]. In this connection, Linden J considered and followed the decision in of Dingemans J in Marshall (n 7) [18].

[10]Owen (n 2) [39] – [45]. In this connection, Linden J considered and followed the decision of Cranston J in Pickard v Marshall & Ors [2017] EWCA Civ 17 [14] – [15].

[11]Owen (n 2) [46]. Linden J followed Winrow v Hemphhill & Anor. [2014] EWHC 3164 [43], and Dingemans J in Marshall (n 7) [19].

[12] Owen (n 2) [48]

[13] Ibid [49]. Linden J followed Winrow (n 11) [39]&[43] and  Stylianou v Toyoshima [2013] EWHC 2188 (QB). At paragraph 50 Linden J stated that less weight was to be given to this factor.

[14] Ibid [51]. Linden J followed Winrow (n 11) [54]&[55] and Marshall (n 7) [22].

[15] Ibid [52] – [[56]

[16] Winrow (n 11) [16] and Marshall (n 7) [20].

[17] Owen (n 2) [57].

[18]Ibid [58]

[19] Ibid [61].

[20] Ibid [74].

[21]Ibid [75]-[77]

[22] Indeed, it was common ground in this case that the contract of insurance between the First, Second and Third Defendants was governed by French law; the contract between the First Defendant and the Fourth Defendant was governed by French law; the contract of insurance between the Fourth and Fifth Defendants was governed by French law; and the Claimant’s claims against the Fourth and Fifth Defendants are governed by French law. Ibid [12]

[23]Ibid [76].

[24] Ibid [78].

[25]Regulation (Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations [2008] OJ L177/6 (“Rome I”).

[26] Ibid [81] – [83].

[27] Marshall (n 7) was the first case to successfully utilise escape clause as a displacement tool.

[28][1980] OJ L266.

Álvarez-Armas on potential human-rights-related amendments to the Rome II Regulation (II): The proposed Art. 6a; Art. 7 is dead, long live Article 7?

Eduardo Álvarez-Armas is Lecturer in Law at Brunel University London and Affiliated Researcher at the Université Catholique de Louvain. He has kindly provided us with his thoughts on recent proposals for amending the Rome II Regulation. This is the second part of his contribution; a first one on the law applicable to strategic lawsuits against public participation can be found here.

Over the last few months, the European Parliament´s draft report on corporate due diligence and corporate accountability (2020/2129(INL)) and the proposal for an EU Directive contained therein have gathered a substantial amount of attention (see, amongst others, blog entries by Geert Van Calster, Giesela Rühl, Jan von Hein, Bastian Brunk and Chris Thomale). As the debate is far from being exhausted, I would like to contribute my two cents thereto with some further (non-exhaustive and brief) considerations which will be limited to three selected aspects of the proposal´s choice-of-law dimension.

  1. A welcome but not unique initiative (Comparison with the UN draft Treaty)

Neither Article 6a of Rome II nor the proposal for an EU Directive are isolated initiatives. A so-called draft Treaty on Business and Human Rights (“Legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises”) is currently being prepared by an Open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights, established in 2014 by the United Nation´s Human Rights Council. Just like it is the case with the EP´s proposal, the 2nd revised UN draft Treaty (dated 6th August 2020) (for comments on the applicable law aspects of the 1st revised draft, see Claire Bright´s note for the BIICL here) contains provisions on international jurisdiction (Article 9, “Adjudicative Jurisdiction”) and choice of law (Article 11, “Applicable law”).

Paragraph 1 of the latter establishes the lex fori as applicable for “all matters of substance […] not specifically regulated” by the instrument (as well as, quite naturally, for procedural issues). Then paragraph 2 establishes that “all matters of substance regarding human rights law relevant to claims before the competent court may, upon the request of the victim of a business-related human rights abuse or its representatives, be governed by the law of another State where: a) the acts or omissions that result in violations of human rights covered under this (Legally Binding Instrument) have occurred; or b) the natural or legal person alleged to have committed the acts or omissions that result in violations of human rights covered under this (Legally Binding Instrument) is domiciled”.

In turn, the proposed Article 6a of Rome II establishes that: “[…] the law applicable to a non-contractual obligation arising out of the damage sustained shall be the law determined pursuant to Article 4(1), unless the person seeking compensation for damage chooses to base his or her claim on the law of the country in which the event giving rise to the damage occurred or on the law of the country in which the parent company has its domicile or, where it does not have a domicile in a Member State, the law of the country where it operates.” (The proposed text follows the suggestions made in pp. 112 ff of the 2019 Study requested by the DROI committee (European Parliament) on Access to Legal Remedies for Victims of Corporate Human Rights Abuses in Third Countries.)

Putting aside the fact that the material scopes of the EP’s and the UN’s draft instruments bear differences, the EP´s proposal features a more ambitious choice-of-law approach, which likely reflects the EU´s condition as a “Regional integration organization”, and the (likely) bigger degree of private-international-law convergence possible within such framework. Whichever the reasons, the EP´s approach is to be welcomed in at least two senses.

The first sense regards the clarity of victim choice-of-law empowerment. While in the UN proposal the victim is allowed to “request” that a given law governs “all matters of substance regarding human rights law relevant to claims before the competent court”, in the EP´s proposal the choice of the applicable law unequivocally and explicitly belongs to the victim (the “person seeking compensation for damage”). A cynical reading of the UN proposal could lead to considering that the prerogative of establishing the applicable law remains with the relevant court, as the fact that the victim may request something does not necessarily mean that the request ought to be granted (Note that paragraph 1 uses “shall” while paragraph 2 uses “may”). Furthermore, the UN proposal contains a dangerous opening to renvoi, which would undermine the victim´s empowerment (and, to a certain degree, foreseeability). Therefore, if the goal of the UN´s provision is to provide for favor laesi, a much more explicit language in the sense of conferring the choice-of-law prerogative to the victim would be welcomed.

  1. A more ambitious initiative (The “domicile of the parent” connection, and larger victim choice)

A second sense in which the EP´s choice-of-law approach is to be welcomed is its bold stance in trying to overcome some classic “business & human rights” conundrums by including an ambitious connecting factor, the domicile of the parent company, amongst the possibilities the victim can choose from. Indeed, I personally find this insertion in suggested Art. 6a Rome II very satisfying from a substantive justice (favor laesi) point of view: inserting that very connecting factor in Art. 7 Rome II (environmental torts) is one of the main de lege ferenda suggestions I considered in my PhD dissertation (Private International Environmental Litigation before EU Courts: Choice of Law as a Tool of Environmental Global Governance, Université Catholique de Louvain & Universidad de Granada, 2017. An edited and updated version will be published in 2021 in Hart´s “Studies in Private International Law”), in order to correct some of the shortcomings of the latter. While not being the ultimate solution for all the various hurdles victims may face in transnational human-rights or environmental litigation, in terms of content-orientedness this connecting factor is a great addition that addresses the core of the policy debate on “business & human rights”. Consequently, I politely dissent with Chris Thomale´s assertion that this connecting factor “has no convincing rationale”. Moreover, I equally dissent from the contention that a choice between the lex loci damni and the lex loci delicti commissi is already possible via “a purposive reading of Art. 4 para 1 and 3 Rome II”. For reasons I have explained elsewhere, I do not share this optimistic reading of Art. 4 as being capable of filling the transnational human-rights gap in Rome II. And even supposing that such interpretation was correct, as draft Art. 6a would make explicit what is contended that can be read into Art. 4, it would significantly increase legal certainty for victims and tortfeasors alike (as otherwise some courts could potentially interpret the latter Article as suggested, while others would not).

Precisely, avoiding a decrease in applicable-law foreseeability seems to be (amongst other concerns) one of the reasons behind Jan von Hein´s suggestion in this very blog that Art. 6a´s opening of victim´s choice to four different legal systems is excessive, and that not only it should be reduced to two, but that the domicile of the parent should be replaced by its “habitual residence”. Possibly the latter is contended not only to respond to systemic coherence with the remainder of Rome II, but also to narrow down options: in Rome II the “habitual residence” of a legal person corresponds only with its “place of central administration”; in Brussels I bis its “domicile” corresponds with either “statutory seat”, “central administration” or “principal place of business” at the claimant´s choice. Notwithstanding the merits in system-alignment terms of this proposal, arguably, substantive policy rationales (favor laesi) ought to take precedence over pure systemic private-international-law considerations. This makes all the more sense if one transposes, mutatis mutandis, a classic opinion by P.A. Nielsen on the three domiciles of a corporation under the “Brussels” regime to the choice-of-law realm: “shopping possibilities are only available because the defendant has decided to organise its business in this way. It therefore seems reasonable to let that organisational structure have […] consequences” (P. A. NIELSEN, “Behind and beyond Brussels I – An Insider´s View”, in P. DEMARET, I. GOVAERE & D. HANF [eds.], 30 years of European Legal Studies at the College of Europe [Liber Professorum 1973-74 – 2003-04], Cahiers du Collège d´Europe Nº2, Brussels, P.I.E.-Peter Lang, 2005, pp. 241-243).

And even beyond this, at the risk of being overly simplistic, in many instances, complying with four different potentially applicable laws is, actually, in alleged overregulation terms, a “false conflict”: it simply entails complying only with the most stringent/restrictive one amongst the four of them (compliance with X+30 entails compliance with X+20, X+10 and X). Without entering into further details, suffice it to say that, while ascertaining these questions ex post facto may be difficult for victim´s counsel, it should be less difficult ex ante for corporate counsel, leading to prevention.

  1. A perfectible initiative (tension with Article 7 Rome II)

Personally, the first point that immediately got my attention as soon as I heard about the content of the EP report´s (even before reading it) was the Article 6a versus Article 7 Rome II scope-delimitation problem already sketched by Geert Van Calster: when is an environmental tort a human-rights violation too, and when is it not? Should the insertion of Art. 6a crystallize, and Art. 7 remain unchanged, this question is likely to become very contentious, if anything due to the wider range of choices given by the draft Art. 6a, and could potentially end before the CJEU.

What distinguishes say Mines de Potasse (which would generally be thought of as “common” environmental-tort situation) from say Milieudefensie v. Shell 2008 (which would typically fall within the “Business & Human Rights” realm and not to be confused with the 2019 Milieudefensie v. Shell climate-change litigation) or Lluiya v. RWE (as climate-change litigation finds itself increasingly connected to human-rights considerations)? Is it the geographical location of tortious result either inside or outside the EU? (When environmental torts arise outside the EU from the actions of EU corporations there tends to be little hesitation to assert that we are facing a human-rights tort). Or should we split apart situations involving environmental damage stricto sensu (pure ecological damage) from those involving environmental damage lato sensu (damage to human life, health and property), considering only the former as coming within Art. 7 and only the latter as coming within Art. 6a? Should we, alternatively, introduce a ratione personae distinction, considering that environmental torts caused by corporations of a certain size or operating over a certain geographical scope come within Art. 6a, while environmental torts caused by legal persons falling below the said threshold (or, rarely, by individuals) come within Art. 7?

Overall, how should we draw the boundaries between an environmental occurrence that qualifies as a human-rights violation and one that does not in order to distinguish Art. 6a situations from Art. 7 situations? The answer is simple: we should not. We should consider every single instance of environmental tort a human-rights-relevant scenario and amend Rome II accordingly.

While the discussion is too broad and complex to be treated in depth here, and certainly overflows the realm of private international law, suffice it to say that (putting aside the limited environmental relevance of the Charter of Fundamental Rights of the EU) outside the system of the European Convention of Human Rights (ECHR) there are clear developments towards the recognition of a human right to a healthy or “satisfactory” environment. This is already the case within the systems of the American Convention on Human Rights (Art. 11 of the Additional Protocol to the Convention in the area of Economic, Social and Cultural Rights) and the African Charter on Human and People´s Rights (Art. 24). It is equally the case as well in certain countries, where the recognition of a fundamental/constitutional right at a domestic level along the same lines is also present. And, moreover, even within the ECHR system, while no human right to a healthy environment exists as such, the case-law of the European Court of Human Rights has recognized environmental dimensions to other rights (Arts. 2 and 8 ECHR, notably). It may therefore be argued that, even under the current legal context, all environmental torts are, to a bigger or lesser extent, human-rights relevant and (save those rare instances where they may be caused by an individual) “business-related”.

Ultimately, if any objection could exist nowadays, if/when the ECHR system does evolve towards a broader recognition of a right to a healthy environment, there would be absolutely no reason to maintain an Art. 6a versus Art. 7 distinction. Thus, in order to avoid opening a characterization can of worms, it would be appropriate to get “ahead of the curve” in legislative terms and, accordingly, use the proposed Art. 6a text as an all-encompassing new Art. 7.

There may be ways to try to (artificially) delineate the scopes of Articles 7 and 6a in order to preserve a certain effet utile to the current Art. 7, such as those suggested above (geographical location of the tortious result, size or nature of the tortfeasor, type of environmental damage involved), or even on the basis of whether situations at stake “trigger” any of the environmental dimensions of ECHR-enshrined rights. But, all in all, I would argue towards using the proposed text as a new Art. 7 which would comprise both non-environmentally-related human-rights torts and, comprehensively, all environmental torts.

Art. 7 is dead, long live Article 7.

News

HCCH Monthly Update: March 2023

Conventions & Instruments

On 1 March 2023, the 1993 Adoption Convention entered into force for Botswana. The Convention currently has 105 Contracting Parties. More information is available here.

On 8 March 2023, China deposited its instrument of accession to the 1961 Apostille Convention and Malta deposited its instrument of ratification of the 2000 Protection of Adults Convention during the meeting of the Council on General Affairs and Policy. The 1961 Apostille Convention, which has 124 Contracting Parties, will enter into force for China on 7 November 2023. The Convention is already in force in the Hong Kong and Macao Special Administrative Regions of the People’s Republic of China. The 2000 Protection of Adults Convention, which has 15 Contracting Parties, will enter into force for Malta on 1 July 2023. More information is available here.

On 9 March 2023, the 1961 Apostille Convention entered into force for Pakistan. The Convention currently has 124 Contracting Parties. More information is available here.

On 20 March 2023, the 1961 Apostille Convention entered into force for Senegal. The Convention currently has 124 Contracting Parties. More information is available here.

Publications & Documentation

On 6 March 2023, the Permanent Bureau published the Practical Guide to Access to Justice for International Tourists and Visitors. More information is available here.

On 8 March 2023, the Permanent Bureau published the HCCH 2022 Annual Report. More information is available here.

Meetings & Events

From 7 to 10 March 2023, the Council on General Affairs and Policy (CGAP) of the HCCH met in The Hague, with over 450 participants joining both in person and online. HCCH Members reviewed progress made to date and agreed on the work programme for the year ahead in terms of normative, non-normative and governance work. More information is available here.

Among other important developments, during the meeting CGAP took the historic decision to adopt Spanish as an official language as of 1 July 2024, on which more information is available here. It also decided to recommend Dr Christophe Bernasconi to the Netherlands Standing Government Committee on Private International Law for the position of Secretary General, on which more information is available here.

On 22 March, the Regional Office for Asia and the Pacific of the HCCH hosted the webinar “HCCH 1961 Apostille Convention – Application and Future Prospects in the Asia Pacific Region”.

Upcoming Events

Registrations are open for the conference “The HCCH 2019 Judgments Convention: Cornerstones – Prospects – Outlook”, which will be held in person on 9 and 10 June 2023 at the University of Bonn in Germany. More information is available here.

Invitation to Private International Law Career Talk: Faces in Private International Law

As the American Society of International Law Annual Meeting approaches, the ASIL Private International Law Interest Group (PILIG) warmly invites you to a career talk featuring professional development in Private International Law.

• 2:00 PM-3:00 PM ET, Thursday 30 March
Venue: Embassy,
Washington Hilton, 1919 Connecticut Ave NW, Washington, DC 20009

Neale Bergman, Attorney-Adviser, Office of the Legal Adviser (L/EB), U.S. Department of State
Milana Karayanidi, Counsel, Orrick
James Nafziger, Professor of Law, Vice-Chair, International Law Association (ILA)
Rekha Rangachari, Secretary-General, New York International Arbitration Center
David Stewart, Professor from Practice, Georgetown Law

This panel of seasoned experts will share their experiences and offer advice concerning career paths in international and particularly private international law fields, in areas such as research, government related work, dispute resolution, international development, and legal information. A short networking session will be offered to participants to further engage with speakers after the panel discussion.

In addition, we invite PILIG members, PILIG newsletter editors, and PILIG friends to join us for a casual happy hour gathering at the McClellan’s Sports Bar located at the Washington Hilton. Please find event details below:

  • Happy Hour

4:00 PM- 5:00 PM ET, Thursday 30 March
Social & Networking Event
McClellan’s Sports Bar

No Host Bar
We hope to celebrate with you the conclusion of “pandemic years” while you enjoy ASIL’s excellent conference programs. We look forward to learning any PIL (and non-PIL) inspirations from you for the more exciting years to come. Everyone is welcome to stop by.

  • PILIG newsletter editors recruiting 

We also invite scholars, practitioners, and students to contact us to become a PILIG newsletter editor.

ASIL Private International Law Interest Group Co-Chairs

Shu Shang <sshang@cpp.edu>

Jeanne Huang <jeanne.huang@sydney.edu.au>

Dicey, Morris & Collins on the Conflict of Laws

The latest edition of Dicey, Morris & Collins on the Conflict of Laws, jointly edited by The Rt Hon. the Lord Collins of Mapesbury and Professor Jonathan Harris KC (Hon.), was published by Sweet & Maxwell in September 2022. First published in 1896, Dicey, Morris & Collins on the Conflict of Laws is in its 16th edition. The publisher provides the following description for this pre-eminent treatise on private international law.

Dicey, Morris & Collins on the Conflict of Laws is renowned worldwide as the foremost authority on private international law. It explains the rules, principles and practice that determine how the law of England & Wales relates to other legal systems. Its commentary, Rules and illustrations, with detailed reference to international conventions, legislation and case law, ensures it remains an indispensable tool for practitioners engaged in cross-border matters.
Across two volumes and a Companion Volume, it contains high-quality and detailed analysis. Volume 1 deals with general principles, the effects of withdrawal by the United Kingdom from the European Union, foreign affairs and the conflict of laws, procedural issues relating to international litigation, jurisdiction, recognition and enforcement of foreign judgments and arbitration. Volume 2 deals with a number of specific areas of law. It addresses family law, property law, succession and trusts, corporations and insolvency and the law of obligations. A Companion Volume considers in greater detail the transitional issues arising from the United Kingdom’s withdrawal from the European Union and the relevant EU legislation in a number of key areas. 
Key Features 
    • Explains the rules, principles and practice that determine how the law of England and Wales relates to other legal systems. 
    • Volume 1 deals with general principles the effects of the withdrawal by the United Kingdom from the European Union, foreign affairs law, protective measures and international judicial cooperation, jurisdiction of English courts, recognition and enforcement of foreign judgments and international arbitration. 
    • Volume 2 covers family law, property law, succession and trusts, corporations and bankruptcy, contracts, torts, unjust enrichment and equitable claims, and foreign currency obligations.
    • Includes a new Part containing detailed analysis of Foreign Affairs and the Conflict of Laws, including expanded coverage of important developments in this area.
    • Includes detailed treatment of the Hague Convention on Choice of Court Agreements 2005.
    • Family law coverage includes important developments in respect of same-sex marriages, civil partnerships and surrogacy.
    • A Companion Volume explains in detail the transitional provisions relating to the withdrawal by the United Kingdom from the European Union and the relevant EU legislation in areas where those transitional issues will remain relevant for the foreseeable future, including on lis pendens, recognition and enforcement of foreign judgments, family law and insolvency.
New material in the Sixteenth edition:
The new edition addresses all key developments, international conventions, legislation and case law since publication of the 15th edition in 2012. It includes the following significant developments 
    • Full analysis of the effects of the withdrawal by the United Kingdom from the European Union.
    • Detailed coverage of the Hague Convention on Choice of Court Agreements 2005.
    • Analysis of domestic legislation, including the Private International Law (Implementation of Agreements) Act 2020, important amendments to the Civil Jurisdiction and Judgments Act 1982 and a number of key statutory instruments.
    • A new Part containing detailed analysis of Foreign Affairs and the Conflict of Laws, including expanded coverage of important developments in this area.
    • Covers important developments in family law, including in respect of same-sex marriages, civil partnerships and surrogacy.
    • Detailed analysis of the many decisions of the Supreme Court, Privy Council, Court of Appeal and High Court and in other parts of the United Kingdom, Commonwealth and other jurisdictions.
Companion to the Sixteenth Edition
The Companion Volume explains in detail the effects of the withdrawal by the United Kingdom from the European Union. It analyses the relevant transitional provision in the Withdrawal Agreement concluded between the United Kingdom and the European Union, as well as domestic legislation on transitional issues. It analyses the relevant EU law in areas likely to remain relevant for the foreseeable future, including in relation to lis pendens and the recognition and enforcement of judgments from EU Member States. It considers the relevant family legislation in the Brussels IIa and Maintenance Regulations. The Companion Volume also includes detailed coverage of relevant provisions of the recast Insolvency Regulation.

Further information is available here.