Tag Archive for: public policy

„El clásico“ of Recognition and Enforcement – A Manifest Breach of Freedom of Expression as a Public Policy Violation: Thoughts on AG Szpunar 8.2.2024 – Opinion C-633/22, ECLI:EU:C:2024:127 – Real Madrid Club de Fútbol

By Madeleine Petersen Weiner, Research Fellow and Doctoral Candidate at Heidelberg University

Introduction

On 8 February 2024, Advocate General (AG) Szpunar delivered his Opinion on C-633/22 (AG Opinion), submitting that disproportionate damages for reputational harm may go against the freedom of expression as enshrined in Art. 11 Charter of Fundamental Rights of the European Union (CFR). The enforcement of these damages therefore may (and at times will) constitute a violation of public policy in the enforcing state within the meaning of Art. 34 Nr. 1 Brussels I Regulation. The AG places particular emphasis on the severe deterring effect these sums of damages may have – not only on the defendant newspaper and journalist in the case at hand but other media outlets in general (AG Opinion, paras. 161-171). The decision of the Court of Justice of the European Union (CJEU) will be of particular topical interest not least in light of the EU’s efforts to combat so-called “Strategic Lawsuits Against Public Participation” (SLAPPs) within the EU in which typically financially potent plaintiffs initiate unfounded claims for excessive sums of damages against public watchdogs (see COM(2022) 177 final).

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Which Law Governs Subject Matter Arbitrability in International Commercial Disputes?

Written by Kamakshi Puri[1]

Arbitrability is a manifestation of public policy of a state. Each state under its national laws is empowered to restrict or limit the matters that can be referred to and resolved by arbitration. There is no international consensus on the matters that are arbitrable. Arbitrability is therefore one of the issues where contractual and jurisdictional natures of international commercial arbitration meet head on.

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Uber Arbitration Clause Unconscionable

In 2017 drivers working under contract for Uber in Ontario launched a class action.  They alleged that under Ontario law they were employees entitled to various benefits Uber was not providing.  In response, Uber sought to stay the proceedings on the basis of an arbitration clause in the standard-form contract with each driver.  Under its terms a driver is required to resolve any dispute with Uber through mediation and arbitration in the Netherlands.  The mediation and arbitration process requires up-front administrative and filing fees of US$14,500.  In response, the drivers argued that the arbitration clause was unenforceable.

The Supreme Court of Canada has held in Uber Technologies Inc. v. Heller, 2020 SCC 16 that the arbitration clause is unenforceable, paving the way for the class action to proceed in Ontario.  A majority of seven judges held the clause was unconscionable.  One judge held that unconscionability was not the proper framework for analysis but that the clause was contrary to public policy.  One judge, in dissent, upheld the clause.

A threshold dispute was whether the motion to stay the proceedings was under the Arbitration Act, 1991, S.O. 1991, c. 17 or the International Commercial Arbitration Act, 2017, S.O. 2017, c. 2, Sch. 5.  Eight judges held that as the dispute was fundamentally about labour and employment, the ICAA did not apply and the AA was the relevant statute (see paras. 18-28, 104).  While s. 7(1) of the AA directs the court to stay proceedings in the face of an agreement to arbitration, s. 7(2) is an exception that applies, inter alia, if the arbitration agreement is “invalid”.  That was accordingly the framework for the analysis.  In dissent Justice Cote held that the ICAA was the applicable statute as the relationship was international and commercial in nature (paras. 210-18).

The majority (a decision written by Abella and Rowe JJ) offered two reasons for not leaving the issue of the validity of the clause to the arbitrator.  First, although the issue involved a mixed question of law and fact, the question could be resolved by the court on only a “superficial review” of the record (para. 37).  Second, the court was required to consider “whether there is a real prospect, in the circumstances, that the arbitrator may never decide the merits of the jurisdictional challenge” (para. 45).  If so, the court is to decide the issue.  This is rooted in concerns about access to justice (para. 38).  In the majority’s view, the high fees required to commence the arbitration are a “brick wall” on any pathway to resolution of the drivers’ claims.

The majority then engaged in a detailed discussion of the doctrine of unconscionability.  It requires both “an inequality of bargaining power and a resulting improvident bargain” (para. 65).  On the former, the majority noted the standard form, take-it-or-leave-it nature of the contract and the “significant gulf in sophistication” between the parties (para. 93).  On the latter, the majority stressed the high up-front costs and apparent necessity to travel to the Netherlands to raise any dispute (para. 94).  In its view, “No reasonable person who had understood and appreciated the implications of the arbitration clause would have agreed to it” (para. 95).  As a result, the clause is unconscionable and thus invalid.

Justice Brown instead relied on the public policy of favouring access to justice and precluding an ouster of the jurisdiction of the court.  An arbitration clause that has the practical effect of precluding arbitration cannot be accepted (para. 119).  Contractual stipulations that prohibit the resolution of disputes according to law, whether by express prohibition or simply by effect, are unenforceable as a matter of public policy (para. 121).

Justice Brown also set out at length his concerns about the majority’s reliance on unconscionability: “the doctrine of unconscionability is ill-suited here.  Further, their approach is likely to introduce added uncertainty in the enforcement of contracts, where predictability is paramount” (para. 147).  Indeed, he criticized the majority for significantly lowering the hurdle for unconscionability, suggesting that every standard-form contract would, on the majority’s view, meet the first element of an inequality of bargaining power and therefore open up an inquiry into the sufficiency of the bargain (paras. 162-63).  Justice Brown concluded that “my colleagues’ approach drastically expands the scope of unconscionability, provides very little guidance for the doctrine’s application, and does all of this in the context of an appeal whose just disposition requires no such change” (para. 174).

In dissent, Justice Cote was critical of the other judges’ willingness, in the circumstances, to resolve the issue rather than refer it to the arbitrator for decision: “In my view, my colleagues’ efforts to avoid the operation of the rule of systematic referral to arbitration reflects the same historical hostility to arbitration which the legislature and this Court have sought to dispel. The simple fact is that the parties in this case have agreed to settle any disputes through arbitration; this Court should not hesitate to give effect to that arrangement. The ease with which my colleagues dispense with the Arbitration Clause on the basis of the thinnest of factual records causes me to fear that the doctrines of unconscionability and public policy are being converted into a form of ad hoc judicial moralism or “palm tree justice” that will sow uncertainty and invite endless litigation over the enforceability of arbitration agreements” (para. 237).  Justice Cote also shared many of Justice Brown’s concerns about the majority’s use of unconscionability: “I am concerned that their threshold for a finding of inequality of bargaining power has been set so low as to be practically meaningless in the case of standard form contracts” (para. 257).

The decision is lengthy and several additional issues are canvassed, especially in the reasons of Justice Cote and Justice Brown.  The ultimate result, with the drivers not being bound by the arbitration clause, is not that surprising.  Perhaps the most significant questions moving forward will be the effect these reasons have on the doctrine of unconscionability more generally.

Book: Feraci, “L’ordine pubblico nel diritto dell’Unione europea”

Ornella Feraci (Univ. of Siena) has recently published “L’ordine pubblico nel diritto dell’Unione europea” (The public policy in EU Law) (Giuffrè, 2012). An abstract has been kindly provided by the author (the complete table of contents is available on the publisher’s website):

The work aims to examine one of the classic topic of private international law in the perspective of the European Union law under the two aspects of applicable law and recognition and enforcement of foreign decisions. Through the analysis of the case-law of the Court of Justice of the European Union and of the most recent instruments of private international law of the Union, it comes to identify a new concept of “public policy of the European Union”, which intends to protect the fundamental principles of European Union law; the book investigates the characteristics of the exception, trying to identify the functions, the relations with national public policy of the Member States and, as far as possible, the content.

Title: “L’ordine pubblico nel diritto dell’Unione europea“, by Ornella Feraci, Giuffrè (series: Collana di Studi del Dipartimento di Diritto pubblico dell’Università di Siena), 2012, XVI – 463 pages.

ISBN: 9788814173394. Price: EUR 50. Available at Giuffrè.

European Parliament’s Workshop on the Brussels I Proposal (20 September 2011) – Study on the Interpretation of the Public Policy Exception in EU PIL

On Tuesday, 20 September 2011, the EP Committee on Legal Affairs (JURI) will host in Brussels a workshop on the review of the Brussels I regulation. The round table, chaired by Tadeusz Zwiefka (EP rapporteur on the Brussels I proposal), will be followed by the presentation of the study “Interpretation of the Public Policy Exception as referred to in EU Instruments of Private International and Procedural Law”, prepared by Prof. Burkhard Hess and Prof. Thomas Pfeiffer (Ruprecht-Karls-Universität Heidelberg) on behalf of the Commission. Here’s the programme:

[UPDATE: the live video streaming of the workshop will be broadcasted on this page. The recorded session will be later available in the EP’s Multimedia Library]

9:00 – 9:10 Welcome and opening remarks by Tadeusz Zwiefka, Rapporteur.

9:10 – 10:20 Analysis of the main elements of reform of Brussels I Regulation – Round Table:

  • Professor Burkhard Hess, Institut für ausländisches und internationales Privat- und Wirtschaftsrecht der Ruprecht-Karls-Universität
  • Heidelberg;
  • Professor Marie-Laure Niboyet, Université Paris X-Nanterre;
  • Professor Horatia Muir-Watt, Sciences-Po Law School, Paris;
  • Professor Ilaria Pretelli, Università degli Studi di Urbino “Carlo Bo”;
  • Alexander Layton QC of the Bar of England and Wales;
  • Professor Andrew Dickinson, University of Sydney, solicitor advocate (England and Wales), consultant to Clifford Chance LLP;
  • Florian Horn, partner and attorney at law, Brauneis Klauser Prändl law firm.

10:20 – 11:00 Questions and answers.

11:00 – 11:10 Presentation of the Study on the “Interpretation of the Public Policy Exception as referred to in EU Instruments of Private International and Procedural Law” by Professor Burkhard Hess and Professor Thomas Pfeiffer, Institut für ausländisches und internationales Privat- und Wirtschaftsrecht der Ruprecht-Karls-Universität Heidelberg.

11:10 – 11:20 Questions and answers.

11:20 – 11:30 Closing remarks by the Rapporteur.

(Many thanks to Prof. Koji Takahashi for providing the links to the video sessions)