Back to the common law. Jurisdiction and judgments if there’s a ‘no deal’ Brexit.

 

 

On 13 Sept 2018 the UK government stated that in the event of a no-deal Brexit, it would repeal most of the existing civil judicial cooperation rules and instead use the domestic rules which each UK legal system currently applies in relation to non-EU countries. This is due to the lack of reciprocity from EU Member States that would pertain after ‘exit day’.

So, for the bin, would be:

The 2012 Brussels Regulation (Recast). Back to common law. The return of the anti-suit injunction to protect London arbitration agreements from suits commenced in EU states.

The Enforcement Order, Order for Payment and Small Claims Regulations: which establish EU procedures for dealing with, respectively, uncontested debts and claims worth less than EUR5,000

The EU/Denmark Agreement: which provides rules to decide where a case would be heard when it raises cross-border issues between Denmark and EU countries, and the recognition and enforcement of civil and commercial judgments between the EU and Denmark

The Lugano Convention: which is the basis of our civil judicial relationship with Norway, Iceland and Switzerland.

Most of the Insolvency Regulation, which covers the jurisdictional rules, applicable law and recognition of cross-border insolvency proceedings, although the EU rules that provide for the UK courts to have jurisdiction where a company or individual is based in the UK will be retained.

In addition, last year shipping minister John Hayes told members of the UK Major Ports Group that the hated 2017 Port Services Regulation will be “consigned to the dustbin” in the UK due to Brexit.

 

Staying out of the bin will be Rome I and Rome II on choice of law in contract and non-contractual matters. No reciprocity is involved with these regulations.

The Government intends the UK to accede to the 2005 Hague Convention on Choice of Court Agreements in its own right and anticipates that the convention would come into force across the UK by 1 April 2019. This is somewhat of a surprise as article 31 (a) provides the convention to come into effect for each state ratifying it on the first day of the month following the expiration of three months after the deposit of its instrument of ratification, acceptance, approval or accession. So, 1 July 2019.

The Convention does not apply to: consumer or employment contracts; insolvency; carriage of passengers or goods; maritime pollution; anti-trust/competition; rights in rem in immovable property, and tenancies of immovable property; the validity, nullity or dissolution of legal persons, and the validity of decisions of their organs; various matters concerning the validity or infringement of intellectual property rights; the validity of entries in public registers; arbitration and related proceedings

 

 

 

Good Lorde! A new transnational torte?

News last Friday that under the 2011 Law for Prevention of Damage to State of Israel through Boycott an Israeli Court has awarded damages of $19,000 plus costs against two New Zealanders who posted a tweet urging the popular chanteuse, Lorde, to cancel her planned concerts in Israel (which she did). The Israeli law is of universal effect. However, the judgment will not be enforceable in New Zealand which does not have a reciprocal treaty with Israel for recognition and enforcement of judgments and where the common law principle applies that absent presence by the defendant in the foreign state giving the judgment or submission to its jurisdiction the local court will not grant recognition to the foreign judgment.

The same would apply were a similar judgment to be given against UK tweeters. Although the UK does have reciprocal arrangements with Israel for recognition and enforcement of judgments under The Reciprocal Enforcement of Foreign Judgments Order (Israel) Order 1971 SI 1971/1039, the common law rule on recognition is applied in article 4(1). Additionally, article 3(4)(d) precludes recognition of a judgment which would be contrary to public policy.

Where is a debt?

In a case decided today, Hardy Exploration & Production (India) Inc v Government of India [2018] EWHC 1916 (Comm), IISTL member Peter Macdonald-Eggers QC in his judicial capacity faced a nice problem concerning the situs of a debt (vital for issues of third party debt orders, and also issues such as confiscation). We were always told that this was where the debtor was resident, that is, where the debt was recoverable (most recently in Taurus Petroleum Ltd v State Oil Marketing Co [2017] UKSC 64, noted here in this blog). But this can be ambiguous: what if the debtor resides in Ruritania and yet the debt, for example because of an exclusive jurisdiction clause, is recoverable only in Utopia? In this case the answer now seems to be Utopia.

In the Hardy case a claimant had the benefit of an arbitration award for $70 million or so against the Indian government. The government was for its part owed a tidy sum by an indirectly state-owned corporation incorporated in London and doing business there: but the contract creating the debt had what was effectively an Indian exclusive jurisdiction clause. Could a third party debt order be made against the corporation on the basis that the debt was situated in England? No: the debt fell to be regarded as situated in India and beyond the English court’s reach.

On the basis that this blog is for busy practitioners, we will leave it at that. For those interested, there is a great deal more in the judgment: a lot of scholarship, and also more about the third party debt order jurisdiction generally. Happy reading.

Multimodal transport and jurisdiction for cargo claims

It’s hardly news when the ECJ follows its advocate-general. But it has just done so in Zurich Insurance and Metso Minerals [2018] EUECJ C-88/17. If goods are carried multimodally from Finland to England by an English carrier, and stolen in England (as they always seem to be), Art.7(1) of Brussels I Recast says the contract fell to be performed in either England (destination) or Finland (origin) and the owner can sue in either at his option. Just as with air transport: flightright GmbH v Air Nostrum (C-274/16) [2018] EUECJ 274/16. And … that’s it. For comment on the Advocate-General’s opinion, see our blog here.

 

No direct liability in tort for UK parent company. Third ‘anchor defendant’ decision in the Court of Appeal.

 

AAA v Unilever [2018] EWCA Civ 1532 is the third Court of Appeal decision in the trio of anchor defendant cases (the others being Lungowe v Vedanta and Okpabi v Royal Dutch Shell) that came before the courts last year raising the issue of when a parent company owes a duty of care to persons affected by the activities of its overseas subsidiary. The claimants were workers on a tea plantation in Kenyan who had suffered from criminal acts following the violence that followed the 2007 elections, which was on tribal lines. The issue was whether the parent company and the subsidiary owed a duty of care to people on the estate to protect them from unlawful violence. The claimants conceded that Kenyan law applied but it was accepted that English law was very persuasive in Kenya and Kenyan law would follow English law on the imposition of a duty of care on the parent company. Elizabeth Laing J admitted the possibility of a duty of care being owed by the parent company but the claim foundered on the issue of foreseeability of the type of harm suffered by the claimants.

Last week the Court of Appeal dismissed the claimant’s appeal on the grounds that there was no arguable case that the parent company owed a duty of care to the claimants. Sales LJ, giving the judgment of the Court, held that a parent company could owe a direct duty of care to those affected by the activities of its subsidiary in two situations: (i) where the parent has in substance taken over the management of the relevant activity of the subsidiary in place of, or jointly with, the subsidiary’s own management; or (ii) where the parent has given relevant advice to the subsidiary about how it should manage a particular risk.

The appellants accepted that they could not say that their claim was within the first category as the management of the affairs of Unilever’s Kenyan subsidiary, UTKL, was conducted by the management of UTKL. Instead, they sought to bring their claim within the second category, relying upon advice which they say was given by Unilever to UTKL in relation to the management of risk in respect of political unrest and violence in Kenya.  However, the witness evidence and the documentary evidence, showed that UTKL did not receive relevant advice from Unilever in relation to such matters, and that UTKL understood that it was responsible itself for devising its own risk management policy and for handling the severe crisis which arose in late 2007, and that it did so.

So far, the three anchor defendant cases on whether a parent company owes a duty of care in respect of the activities of its subsidiary company have seen two decisions against the claimants, and one Vedanta v Lungowe in their favour. In Vedanta  permission to appeal to the Supreme Court was granted on 23 March 2018, and in Okpabi the claimants have stated their intent to apply for permission to appeal to the Supreme Court. We are likely to see a lot more on this question in the coming months.

 

 

EU anti-suit injunctions don’t rule — OK?

Confirmation from Males J today in Nori Holdings Ltd & Ors v PJSC Bank Otkritie [2018] EWHC 1343 (Comm)  of what we all suspected: you can’t injunct EU / Lugano proceedings in support of arbitration. The facts aren’t that interesting. Essentially an ailing Russian bank was seeking to undo the effects of a debt restructuring agreement entered into with a number of its borrowers and their sureties, members of the O1 group. To that end it sued in Russia and Cyprus. The present claimants, borrowers and sureties, sought anti-suit injunctions on the basis that the claims were the subject of valid arbitration agreements. It got injunctions in respect of the Russian proceedings; we say no more.

As for the Cypriot proceedings, the bank understandably invoked West Tankers Inc v Allianz SpA (Case C-185/07) [2009] ECR I-00663 and its holding that any intra-EU anti-suit proceedings unacceptably infringed EU full faith and credit under the then Brussels I, not to mention EU courts’ powers to decide on their own jurisdiction. The claimants countered, as might be expected, with the slightly curious remarks of the Advocate-General in the Gazprom OAO case (Case C-536/13) that suggested Recital (12) in Brussels I Recast had cast doubt on the West Tankers holding. Males J subjected the reasoning of the Advocate-General to searching scrutiny at [84]-[99]. His conclusion, though judicious, was pretty blunt: the Advocate-General was simply wrong. There was no room for any inference of an intent to depart from West Tankers.

So now we know. Professors may have lost a useful examination question: but for the rest of us, we know where we stand. And a good thing too.

Foreign banks breathe easier in the US after Supreme Court’s decision on scope of the Alien Tort Statute.

 

 

The US Judiciary Act of 1789, 28 U. S. C. §1350. which is now known as the Alien Tort Statute, provides: “The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of of the law of nations or a treaty of the United States.” For nearly forty years it has been used as the gateway to bring suits in the US District Courts against individuals and corporations based on alleged violations of norms of international law. The Supreme Court has twice considered the scope of the ATS, in Sosa in 2004, and in Kiobel in 2013, each time limiting its scope. It has now spoken for a third time in Jesner v Arab Bank when it gave judgment last Tuesday, in a majority decision that foreign corporations could not be subject to liability under the ATS.

In Jesner v Arab Bank  foreign plaintiffs sued a Jordanian bank, Arab Bank, alleging that it had helped facilitate financial transactions to terrorist organisations which had then committed attacks in Israel, West Bank and Gaza Strip between 1995 and 2005 during which plaintiffs or their family members were injured. It was alleged that Arab Bank had used its New York branch to clear US dollar transactions which had led to money being sent to the terrorist organisations.

The question framed before the Supreme Court was whether corporations could be held liable under the Alien Tort Statute. The Second Circuit in 2010 in Kiobel had found that corporations could not be held liable under the ATS, and the question was referred to the Supreme Court. However, in 2013 the Supreme Court left the question unanswered and affirmed the Second Circuit’s dismissal by reference to a new question it had raised during argument before it in 2012 concerning the extra-territorial scope of the ATS. The Supreme Court concluded that the presumption that US statutes should not have extra-territorial effect applied to the ATS and would only be rebutted if the claim were to ‘touch and concern the territory of the United States…with sufficient force’.

In Jesner, the Supreme Court gave a partial answer to the question initially framed in Kiobel. The Supreme Court referred to its 2004 decision on the scope of the ATS in Sosa  which set out a two part test. First, was the alleged violation of the law of nations a violation of a norm that  is ‘specific, universal and obligatory’?  Second, would allowing the case to proceed be an appropriate exercise of judicial discretion?

On the first question of whether there is a specific, universal and obligatory norm that corporations are liable for violations of international law, Justice Kennedy expressed the view that there was not such norm, citing the fact that international criminal tribunals had never been given jurisdiction over corporations, but only over natural persons. Justice Roberts and Thomas concurred but this view did not obtain majority support.

The case was decided on the basis of the application of the second Sosa test. By a 5-4 majority the Supreme Court concluded that extending liability under the ATS to foreign corporations should be a matter for Congress to decide, rather than the judiciary. Congress’s intent could be deduced from the fact that a similar statute, the 1991 Torture Victims Protection Act, had been specifically limited to suits against ‘individuals’.  Accordingly, the Supreme Court affirmed the Second Circuit’s dismissal of the suit under the ATS against Arab Bank, a foreign corporation.

The upshot of the decision is that the scope of the Alien Tort Statute has been further restricted in that it no longer permits claims against foreign corporations. The decision may put the final nail in the ATS coffin. However, claims against US corporations, and foreign and US natural persons, could still be made, although the ‘touch and concern’ requirement set out in Kiobel means that there must be a strong link to the US for the claim to proceed. Some Circuits have interpreted the ‘touch and concern’ requirement to mean that the primary violation of international law must have taken place within the US, so excluding claims based on secondary violations for aiding and abetting by US corporations. The Supreme Court has twice denied certiorari to clarify this issue.

Jurisdiction in EU multimodal transport cases

Goods are carried multimodally from Finland to England by an English carrier, and stolen in England. If the owner wants to sue the carrier, where is the contract performed within Art.7(1) of Brussels I Recast: England, Finland or both? The Advocate-General has just given an opinion in Zurich Insurance v ALS Ltd (area of freedom, security and justice) [2018] EUECJ C-88/17: it is the place of loading or discharge, at the claimant’s election. Hence the claimant there had the right, whatever the English defendant said, to sue in Finland.

This must be right. It has always been accepted that the place of discharge is competent. In Rehder v Air Baltic Corp (C‑204/08) [2009] E.C.R. I-6073; [2009] I.L.Pr. 44 and flightright GmbH v Air Nostrum (C-274/16) [2018] EUECJ 274/16 this was held to be the position as regards transport of passengers; and understandably the view was expressed that there was no reason to regard the transport of things any differently.

Good, but not surprising, news for cargo owners and insurers. Still, it’s nice to know.

Direct actions against liability insurers. Port of Assens v Navigators Management (UK) Ltd – the sequel.

 

Following the Court of Justice’s interpretation of art. 13(5) of the Brussels I Regulation, reported in this blog on July 13 2017, the matter came back before the Danish Supreme Court. The CJEU had found that an agreement on jurisdiction in an agreement between an insurer and a policyholder is not binding on an injured party who wishes to bring an action directly against the insurer before its home court or before the courts for the place where the harmful event occurred. On 9 October 2017 the Danish Supreme Court found that the CJEU judgment did not contain any reservations to the effect that, for this to apply, the injured party must be regarded as an economically or legally weaker party in this particular case.

Accordingly, under the Brussels I Regulation the Port of Assens would be entitled to bring an action before the Danish courts, if it was permitted to bring an action directly against the insurance company under the national rules applicable to the case. The claim was most closely linked to Denmark so this issue was to be settled under Danish law. Section 95(2) of the Danish Insurance Contracts Act thus applied and the Port of Assens was correct in bringing the action in Denmark. The Supreme Court remitted the case to be heard on its merits before the Maritime and Commercial Court.

Judgment creditors can celebrate in England — UK Supreme Court.

English courts are not very keen on judgment debtors who spirit assets away out of sight of our enforcement officers. The Supreme Court today showed they meant business when faced with this scenario. They confirmed in JSC BTA Bank v Khrapunov [2018] UKSC 19 that anyone who in England does anything to help a debtor do this can find himself at the receiving end of a civil claim from the judgment creditor.

Mukhtar Ablyazov, a colourful Kazakh politician, dissident and businessman who used to run the biggest bank in Kazakhstan, was successfully sued here by the bank for the moderate sum of US$4.6 billion. The court issued the usual congeries of worldwide freezing orders in aid of enforcement, which were disobeyed. In 2012 Mr Ablyazov, facing the prospect of time inside for contempt, fled England and continued with a large degree of success to move his assets around to make them inaccessible.

The Ablyazov cupboard being bare, the bank then turned to an associate, one Ilyas Khrapunov, who had allegedly agreed in England to help Mr Ablyazov to cause his assets to vanish and later done just that. It sued Mr Khrapunov in tort, alleging that the above acts amounted to an unlawful means conspiracy. Mr Khrapunov applied to strike, arguing that if (as is clear) contempt of court cannot give rise to damages, the bank shouldn’t be allowed to plead conspiracy to get a similar remedy by the back door. He also argued that in any case he was safely tucked up in Switzerland; that the assets were outside England; and that the mere fact that he had conspired in England to make those assets disappear did not take away his right under the Lugano Convention to be sued in his country of domicile.

Mr Khrapunov lost all the way in the Supreme Court. There was no reason why the fact that he had acted in contempt of court should not count as unlawful means for the purposes of conspiracy. Furthermore, the jurisprudence under the Brussels I / Lugano system made it clear that for the purpose of non-contractual liability, where jurisdiction laywas “either in the courts for the place where the damage occurred or in the courts for the place of the event which gives rise to and is at the origin of that damage”, an agreement amounted to an ” event which gives rise to and is at the origin of that damage.”

Good news, in other words, for judgment creditors: bad news for friends of fugitive tycoons.