Private International Law


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Private International Law

  1. 1. Student’s notes – educational purposes only No responsibility assumed Private International Law Intro: A court seized by an interested party to an international agreement willfirst decide whether or not it has jurisdiction to decide the case, which will be donebased on its own “jurisdiction rules”: the court can accept or decline the case.Accepting the case, then the court will then decide which law is the governing law ofthe contract, based on its own “conflict of laws rules”. 1) identify the potential countries - an international contract will necessarilyinvolve parties from different countries, assets located in different countries anddocumentation providing for a choice of law (governing law of the contract) and/or achoice of jurisdiction (where to litigate): these 4 elements are elements of“connection”, ie they are the starting point to analyse the problem, because allcountries mentioned in the problem will potentially be a country where litigationmight take place. 2) pre-select some countries among those identified in the 1st step above,excluding the others and explaining why you are excluding one or some of them(the reason will be mainly because they haven’t got jurisdiction) - the second stepis to figure out which jurisdiction would accept the litigation to take place there,which would be decided – by the courts of the relevant jurisdiction – according to the“jurisdiction rules” of that particular jurisdiction itself. To provide a comprehensive analyses to a client, a lawyer should be able topresent an analyses of each jurisdiction mentioned in the problem, but this will not bethe case in the exam, since we have studied only the jurisdiction rules of EU MemberStates; therefore, we will probably be asked to provide an opinion as to where to suebased on an analysis of 2 or 3 EU countries (not to mention that opinions about aparticular jurisdiction can only be provided by licensed lawyers of that jurisdiction). * a court in Europe will accept or reject a case according to Brussels I(jurisdiction rules), only applicable where the defendant is domiciled in the EU or inan EEA State (if the defendant is not an EU-domiciled, then the court will look at itsown jurisdiction rules apart from Brussels I to decide if it has got jurisdiction – inEngland, this “second set” of jurisdiction rules are the common law rules, whichwould uphold a choice of law clause when reasonably justifiable or would considerother factors indicating strong connection between the case and this country, such asplace of performance, place of negotiation, the currency used in the contract: therehaving a factor of this type, it is likely that an English court would not decline thecase). Under Brussels I, the possibilities of an European court having jurisdiction arevery broad, so that potentially all EU countries mentioned in the problem question(except those with which the only element of connection is the fact that some of thedebtor’s assets are located there [this is not a cause of jurisdiction, unless the asset
  2. 2. itself is the subject-matter of the action – art. 6 (4) and art. 22]) will be a possibleplace to start litigation, because a country specified by a choice of jurisdictionclause, or where the defendant is domiciled, or where the contractual performancehas to take place, or where a tortious act has occurred (for claims in tort obviously)could be said to have jurisdiction (“concurrent jurisdiction”), unless the specific issuegives rise to a case of “exclusive jurisdiction” (which seems unlikely in a problemquestion – cases of exclusive jurisdiction are cases about land, public register, patentsand trade mark, company law issues – Brussels I, art. 22). * Brussels I (EU jurisdiction rules): A) if there is a choice of jurisdiction (art. 23 – it can be anexpress choice or an implicit choice, ie implied by uses and practices in the particularsector/business): in order to be allowed to chose a jurisdiction in any EU-country, itsuffices that one party to the agreement is domiciled in one of the Member States(then they can chose any EU Member State). The evaluation as to which jurisdiction to chose generallyinvolves where the assets are located, the quality and costs of legal services, theconvenience of harmonizing the forum with the probable governing law. Unlike thechoice of law (as will be seen below), the contract cannot be split into differentjurisdictions (eg disputes around certain clauses will be dealt with by the courts ofCountry A and the remaining clauses by the courts of Country B = this is notpermitted), BUT the choice of jurisdiction can be multiple (eg disputes arising fromthe contract will be judged in Country A or Country B), which enables “forumshopping”, since the specification will occur only when it becomes necessary to do so,so that it is not necessary to speculate in advance about which forum will be the mostconvenient; this can be done when a dispute needs to be brought before the court. * lenders normally prefer multiple and non-exclusive clauses,because if court intervention is necessary, it is very likely that that intervention is dueto a default by the borrower, so that a multiple and non-exclusive clause will enablethe lender to chose at the convenient time the most convenient place to sue. It doesnot necessarily follow that a lender can sue a borrower in a country even when it isagreed in their contract that the borrower submits to the jurisdiction of that court: thiswill primarily be a matter for the exact rules of jurisdiction in that country’s courts. * if the “choice of jurisdiction” clause benefits only one party(eg “the borrower submits himself to the courts of France”), then that party canchoose another country whose courts would also have jurisdiction as if no choice hadbeen made (KURZ v STELLA MUSIC case – see summary below). In order tocover the situation where the lender in fact prefers to sue in a country not included inthe jurisdiction clause, the clause should expressly state to be non-exclusive, whichenables a lender to go to the courts of the country in question, assuming itsjurisdiction rules permit, without the obstacles that he has made an “exclusive choice”of other courts (it can be advantageous to litigate in a jurisdiction in which thedefendant is not present and where he is unlikely to appear to defend the case: in thisevent, the plaintiff will normally obtain a judgment in default). B) if there is no choice (arts. 2-7): 1) the country where the
  3. 3. defendant is domiciled (art. 2); * if there are two or more defendants: either country ofdomicile (art. 6); * under English Law, domicile is where a company has itscentral administration or a registered office; 2) the country whereperformance has to take place. In a loan contract, repayment can be regarded as thecharacteristic performance of the agreement and shall be made in the lender’s place ofbusiness (even when the defendant is denying the existence of the contract, becausethe jurisdiction will be determined as the contract actually exists – TESAMDISTRIBUTION v SHUH MODE TEAM case – see summary below). Moreover,art. 5 of Brussels I states that, in the case of a contract for the provision of services,the courts of the country where the services were provided are to have jurisdiction. 3) the country where torttook place, for claims in tort. * if the problem question brings a connection with New York,it seems enough to know that New York (although it is “a popular forum in themarket” because, as England, it is famous for its courts being prone to uphold andinterpret contracts as they were intended and expressed by the parties) might not be agood strategy as a choice of where to litigate, because: (a) the assets will probably bein Europe and New York is not part of the Brussels I Convention, therefore a decisionmade in New York would not be “automatically enforced” in Europe based on art. 33of Brussels I, which provides for the “principle of free movement of judgments forenforcement purposes” (see below); (b) New York works on “defendant connection”,so that you can only sue in New York if the debtor company has a business presencethere or when it has appointed an agent for service to receive legal notices orprocesses on the company’s behalf; and (c) you, as a City lawyer advising on EnglishLaw is not allowed to give advice on New York Law, which should be obtained bythe client from a New York licensed law firm. Therefore, New York will be excluded. * other jurisdiction rules under Brussels I: a) “lis alibipendens” rule: art. 27 Brussels I: if a proceeding has been started in one jurisdiction,another case on the same dispute (same parties, same contract) cannot run in anotherjurisdiction: the court later seized will have to stay the case until the court first seizeddecides about its own jurisdiction (ERICH GASSER v MISAT – ECJ case): If the court 1st seized: Then the later seized court will: decline jurisdiction lift the stay and decide about its own jurisdiction accept jurisdiction decline jurisdiction in favour of the 1st seized * if the proceeding in the st court 1 seized was commenced in breach of a choice of jurisdiction clause, the courts of the chosen jurisdiction are not allowed to issue an injunction to compel the plaintiff to give up of that proceeding (TURNER v GROVIT – ECJ case). Instead, the court 1st seized have
  4. 4. to decide first if it has or has not jurisdiction, even where the 1st proceeding has been begun in bad faith, to frustrate the other party’s intention to initiate proceedings in the “correct” country (PRIMACON case)  options to the lender: a) resign itself to losing the benefit of the agreed jurisdiction clause and litigate in the jurisdiction of the borrower’s choice; b) fight the jurisdiction issue in the court first seized (with the consequent delay and expenses); or c) settle the case. * if the lender had included in the contract a jurisdiction clause in favour of the courts of a non-EU country, Brussels I art. 27 would not apply and the lender would then be able to commence proceedings in the “correct” court even before the court 1st seized by the counterparty has decided about its own jurisdiction, BUT the lender would lose the advantage of art. 33 of Brussels I (free movement of judgments for enforcement purposes). England: Notwithstanding what was just said, a plaintiff is prohibited from bringing a case in England where he has obtained judgment on the same case in another country and that first judgment is enforceable in England (Civil Jurisdiction and Judgments Act - CJJA 1982, s. 34): where the plaintiff lost the case abroad, he may be barred by the common law doctrine of estoppel. b) company law issues: if the company is European, then issues such as the validity of the companies’ constitution and the validity of a resolution passed by its board of directors, can only be judged by the courts of the country where the company was incorporated: art. 22 (2). BUT this rule only applies to cases “principally concerned with […] complex company matters”, not when a company law issue is barely incidental, especially where there is a choice of jurisdiction in the contract and the case is primarily a contractual dispute. Therefore, the provision is to be interpreted in a narrow way (BUG v JP MORGAN – ECJ case).3) having identified possible forums, the governing law of the contract will beone of the most relevant aspects for deciding where to sue (alongside theconditions of the forum itself and the enforcement issues): the governing law ofthe contract will be that resulting from an analysis of the “conflict of laws rules” of aparticular country. In EU-countries, those rules are substantiated in Rome I (forcontractual relationships) or in Rome II (for tort claims). Rome I and Rome II are theEU conflict of laws rules and, therefore, in deciding which law will govern a contractor a non-contractual relationship, European courts will apply Rome I or Rome II,regardless where the parties are from and which law will result as being the governinglaw. * Rome I rules:
  5. 5. A) if there is a choice of law clause in the agreement: thegoverning law will be the chosen law (art. 3, § 1); the parties to the agreement havefreedom to change the clause at any time (§ 2); * to avoid uncertainty, the contracting parties can specify achoice of law in their contracts. To decide which law to choose, the parties (or thatparty which has more bargaining power, usually the lender in term loan agreements)will normally prefer the law of the country: (a) to which they are more familiar; (b)whose political future does not represent a threat to the contract being ultimatelyeffected; (c) that will probably interpret the agreement as intended and expressed (thisis why New York and England are “popular” in the “market”); (d) that will probablybe the forum of any proceedings that might take place, in order to assure that judgeswill also be familiar to that law, which up to an extent can prevent uncertainoutcomes. * it appears advisable not to attempt to stabilize the choice oflaw, ie having a clause in the agreement to say that future changes in the law will notapply to that relationship: this can be interpreted as an absence of choice at all. Thesame would apply to a clause alternating the choice according to a specifiedcondition, such as a choice depending on where the case will be litigated.Notwithstanding this, it is perfectly possible to establish that certain clauses of thecontract will be governed by Law X whilst the remaining clauses by Law Y, whichwould enable the parties, for example, to include a penalty clause in the agreement,which under Law Y would be upheld, but that under Law X would be void.Therefore, the most appropriate wording of the clause would be the simplest way:“this contract shall be governed by English Law”. B) if there is not a choice of law: 1) country of residence ofthe service provider (art. 4, § 1): a bank providing a loan facility for a borrower canbe considered a service provider, so that the governing law will be the law of thecountry where the bank is domiciled (ie, where the bank has its central administrationor a branch at the time the contract was signed – art. 19); 2) place where theproperty is located – lex situs (for contracts relating to rights in rem in immovableproperty); 3) residence of the partyrequired to provide the characteristic performance of the contract (althoughaccording to the Giuliano-Lagarde Report, in a banking contract it is normally thebank which effects the characteristic performance of the contract, it can be said that,in a loan agreement, the obligation to repay is the characteristic performance of thecontract, therefore the residence of the borrower will be the place that will determinethe governing law, because under English Law at least, the borrower should seek outhis creditor to repay the borrowing); * the mutual obligations of an assignor and an assignee under avoluntary assignment of a debt are governed by the law which governs the contract ofassignment. The law governing the debt being assigned determines whether it can be
  6. 6. assigned and the relationship between the debtor and the assignee (art. 12). * Rome II (only if the case is a claim in tort, for example a charge fornegligent misstatement) A) if there is a choice of law (before or after the event – it willarise “before” the event when the parties anticipate the possibility of suing in tort): thegoverning law will be the chosen law (art. 14); B) if there is no choice (art. 4): 1) if the parties are fromthe same country: the law of that country will be the governing law (regardless wherethe damage occurred); 2) if the parties are fromdifferent countries: the law of the country where the damage occurred will be thegoverning law; 3) BUT, if it is clear thatthe tort is connected with a 3rd country and not with the country of both parties’residence nor with the country where damage took place: the law of that 3rd countrywill be the governing law.4) enforcement: where are the assets? Brussels I, art. 33: “principle of freemovement of judgments”: a decision from Member State A can be easily enforced inMember State B (only a minimum procedure is required), and there may be pre-judgment attachment (eg: an injunction to freeze assets): this can be required inMember State B while the main proceedings run in Member State A, provided that theremedy is available in Member State B and that the claimant satisfies the rules ofMember State B regarding pre-judgment attachment.LINKS:Rome I: II: I: CASES:
  7. 7. SUMMARIES BY WESTLAW: Kurz v Stella Musical Veranstaltungs GmbHSummary: Jurisdiction clause; non-exclusive jurisdiction agreed; effect onapplication of Brussels ConventionAbstract: Parties to a contractual agreement could agree that the English courtswould have jurisdiction and this did not offend the Brussels Convention of 1968Art.17 . P lived in England and D was in Germany. They entered into joint ventures tostage musicals. P provided the money for D, a German company, to stage a musical inGermany in return for a share of the profits. The agreement was expressed to begoverned by English law and contained a clause providing for non- exclusivesubmission to the jurisdiction of the English courts. P claimed that moneys wereowing to him and served a writ endorsed with a statement of claim on the defendantin Germany. D gave notice of intention to defend, sought discovery of documentsreferred to in the statement of claim, and was granted an extension of time for filing adefence. D applied by summons under Rules of the Supreme Court Ord.12 r.8 to setaside the writ on the ground that the court had no jurisdiction to determine the matterunder the Civil Jurisdiction and Judgments Act 1982 and the Convention onJurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968Art.17 and Art.18 , as set out in Sch.1 to the Act. Held, that (1) D had entered anappearance solely to contest the jurisdiction of the court, and the applications fordiscovery and extension of time to file a defence were not inconsistent with that. Thecourt therefore had no jurisdiction under Art.18; (2) however, Ds summons would bedismissed as the parties were domiciled in contracting states and had entered into anagreement coming within Art.17 for the English courts to have jurisdiction overdisputes. Under Art.17, jurisdiction was a question of the intention of the parties and"exclusive jurisdiction" did not limit their choice to a single jurisdiction, but meantthat their choice was to have effect to the exclusion of the jurisdictions that wouldotherwise be imposed by earlier articles of the Convention. The court therefore hadjurisdiction. Tesam Distribution Ltd v Schuh Mode Team GmbHSummary: Jurisdiction; question as to whether contract existedAbstract: T appealed against the setting aside of service of a writ outside thejurisdiction. T had claimed damages for breach of contract by S and for inducingbreach of that contract by Ss bank (B). S and B were both domiciled in WestGermany. B claimed that as there was no contract between themselves and T, T couldnot rely on the Brussels Convention 1968 Art.5 to establish the jurisdiction of theEnglish courts. Held: Appeal allowed. Following Effer SpA v Kantner (C38/81)[1982] E.C.R. 825 the disputed existence of a contract did not of itself denyjurisdiction under Art.5. However, neither did mere assertion of its existence renderArt.5 operative. The plaintiff had to show a good and arguable case. On the facts inthis case T was able to achieve this.