No absolute immunity for international organisations before US courts.

 

The International Finance Corporation (IFC) makes loans to private businesses to finance projects in developing countries. In 2008, it lent $450 million to finance a coal-fired power plant in India. Local residents complained of harm suffered as a result of pollution from the plant and sued the IFC before a federal court in Washington, D.C., where it is headquartered, claiming, inter alia, that the the IFC had violated provisions of the loan agreement that were included to protect the local community. The International Organizations Immunities Act 1945 gives international organizations “the same immunity from suit” as “as is enjoyed by foreign governments.”

At the time foreign governments enjoyed virtually absolute immunity and the IFC claimed immunity from suit. Since then s1605(2)(a) of the Foreign Sovereign Immunities Act 1976, s1605(2)(a) U.S.C., has lifted the immunity of foreign governments in respect of suits based on their commercial activities, but the Act made no reference to the immunity of international organisations. In Jam et al v International Finance Corporation 586 U.S _ (2019) the US Supreme Court held on 27 Feb, Justice Breyer dissenting, that the immunity of international organisations is co-equivalent with that of foreign governments and the IFC is not absolutely immune from suit. The case was remanded for further hearing consistent with this opinion.

However under s.1605(2)(a) there are three alternative conditions for the lifting of immunity: (i) the action arises out of commercial activity in the US, or (ii) the action arises out of an act in the US in connection with commercial activity elsewhere, or (iii) the action arises out of an act outside the US in connection with commercial activity elsewhere  and the act causes a direct effect in the US. In many cases against international organisations based in the US these criteria will not be satisfied and this may prove to be the case with the further hearings in the instant case.

Anti-suit injunction against non-party to contract

Qingdao Huiquan Shipping Company v Shanghai Dong He Xin Industry Group Co Ltd  QBD [2018] EWHC 3009 (Comm) involved a claim for an anti-suit injunction against a non-party to a contract containing a submission to English law and London arbitration. Owners concluded a settlement with cargo receivers whereby the latter paid for the lifting of a lien over cargo which the owners had exercised following time charterers’ default in paying h ire. The agreement was subject to English law and provided for London arbitration. The settlement provided that the receivers authorised agent, SDHX, which was not a party to the agreement, would make the payment. Three years later SDHX sued owners in a Chinese court claiming repayment of those sums. It alleged that there was an oral agreement between itself and the owners. In December 2017 the Qindao Shinan District Court decided that the dispute constituted a maritime dispute, and that the matter should be transferred to the Qingdao Maritime Court to decide on the validity of the London arbitration clause. SDHX’s appeal was dismissed by the Qindao Intermediate Maritime Court which stated that one of the foundations of SDHX’s claim was the settlement agreement between owners and the receivers.

In August 2018 owners applied for an interim anti-suit injunction. Bryan J held that this was an appropriate cased where such an injunction could be obtained against a non-party to the contract. SDHX had sought to rely upon the terms of the Settlement Agreement in advancing its claims in the Chinese proceedings. In doing so, therefore, it had to take the burden of the arbitration clause. For the purpose of the interim relief claim the issue of whether there was an oral agreement with the owners did not need to be considered. SDHX were unable to show that there had been such excessive delay by owners in commencing proceedings that the court should not exercise its discretion. This was not a case involving considerations of comity or where there had been substantive proceedings in China which would lead to the English court second-guessing an existing ruling of a Chinese court. There was also some benefit from the clarity that had been provided by the Chinese appellate court.

Who is your neighbour? Corporate social responsibility and the tort of negligence.

In Das v. George Weston Limited, claims were made against a Canadian garment retailer, Loblaws, whose sub-suppliers, New Wave, had occupied premise in the Rana Plaza Building at the time of its collapse on  24 April 2013, and Bureau Veritas who had been employed to audit the corporate social responsibility code that Loblaws had inserted into its contracts with its suppliers and sub-suppliers. On April 23, 2013, cracks were discovered in three pillars of the structure of Rana Plaza. Local police evacuated the site and workers were sent home. Later that day, however, managers at New Wave ordered New Wave employees to return to work the following day. The next morning, April 24, 2013, New Wave advised workers that the building was safe and threatened to terminate their employment if they did not return to work.

That same morning, as a result of a power outage, the large back-up generators on the upper floors of Rana Plaza began to operate, causing substantial vibration. Around 9 a.m., Rana Plaza collapsed, killing 1,130 people and injuring 2,520 others. Those injured or killed included employees of New Wave, employees of other garment businesses operating out of Rana Plaza, and other people who happened to be in or around the building at the time of the collapse. The claimants were workers in and relatives of workers who had been killed or injured in the collapse . the action not only on behalf of employees of New Wave and their survivors, but on behalf of all persons who were in Rana Plaza at the time of the collapse and survived, the estates of all persons who died as a result of the collapse, and the family members and dependents of those who died or were injured. Claims were brought in 2015 shortly before the second anniversary of the collapse.

In 2017 Perell J dismissed the action 2017 ONSC 4129. The claims for death and personal injury were a time barred, save for claimants born after 22 April 1996, under the law of Bangladesh which was the governing law, as the lex loci delecti. There was no plausible case for liability in tort on either party under either the law of Bangladesh (effectively English tort law) and that of Ontario.

Shortly before Christmas 2018 the Court of Appeals in Ontario upheld the decision,  2018 ONCA 1053 (CanLII).

With respect to Loblaws’ liability, the Court found that it was plain and obvious that a negligence claim against Loblaws would fail under Bangladeshi law. The facts did not amount to the type of relationship or control over New Wave’s operations by Loblaws that has been found in English law to be sufficient to establish proximity or assumption of responsibility, and to thereby impose a duty of care to protect against harm by third parties. Loblaws was not directly involved in the management of New Wave, nor in the process of manufacturing the products. Loblaws did not have control over where the manufacturing operation took place. Loblaws’ only means of controlling New Wave was through cancellation of its product orders from Pearl Global for non-compliance with the CSR Standards. Nor was there any pleaded history of Loblaws using that lever to enforce any change in New Wave’s operations. The social audits required by Loblaws the limited social audits did not and were not intended to cover any structural issues in the New Wave factories and there was therefore no basis for any reliance on Loblaws or Bureau Veritas with respect to the structure of the Rana Plaza premises.

Similarly, the Court held that the judge correctly held that it was plain and obvious that the appellants’ pleaded claim in negligence against Bureau Veritas would fail under Bangladeshi law.

The vicarious liability claim also failed. It had not been pleaded that New Wave was acting as agent for, or on behalf of, Loblaws in conducting its operations. The exceptional circumstances in which an enterprise can be vicariously liable for the misdeeds of independent contractors were not present here. Loblaws was a retailer not a garment manufacturer and was not an enterprise engaged in a hazardous or inherently dangerous industry. It had no control over how its supplier and the sub-supplier carried on their manufacturing business or treated their employees.

Two other interesting cases on corporate liability for the acts of third parties were heard last month before the Supreme Court in Canada and the UK.

The former is the appeal in Araya v Nevsun Resources Ltd, 2017 BCCA 401, a claim against a Canadian company in respect of alleged slavery at a mine in Eritrea operated by the Eritrean government under a joint venture with it. The two issues under appeal were (a) whether the claim was barred by the Act of State doctrine and (b) whether there was a cause of action against the company for participating in a violation of customary international law.

The latter is the Vedanta Resources Plc v Lungowe noted here https://iistl.blog/2018/07/10/no-direct-liability-in-tort-for-uk-parent-company-third-anchor-defendant-decision-in-the-court-of-appeal/

This involved claims against the UK parent company and its Zambian subsidiary for environmental damage and personal injury in respect of the operation of a copper mine in Zambia. There were five issues: (i)  The proper approach to the “real issue”/”proper party” test under Practice Direction 6B para. 3.1, where a claimant seeks to sue a foreign subsidiary and a UK-domiciled parent company.

(ii) The proper approach to the exercise of discretion under CPR r.6.37(3) in mass tort claims, particularly the weight to be given to the prospect of parallel foreign proceedings as against the prejudice caused to a foreign defendant in defending mass tort claims in England and Wales.

(iii) The proper approach when determining whether there is a real risk that a claimant cannot obtain substantial justice in a foreign jurisdiction.

(iv)  The proper application of EU law principles and cases to claims brought against an English domiciled parent company, where the non-EU claimant sues both an EU-domiciled parent company and its non-EU subsidiary company.

(v) Whether to refer point (4) above to the EU Court of Justice.

 

 

No deal and jurisdiction

 

A few interesting developments on jurisdiction in the event of a no-deal Brexit on 29 March.

  1. On 1st April 2019, the UK would become a contracting party to the Hague Convention on Choice of Courts Agreement 2005 in its own right (it currently participates through the EU’s ratification). The UK government deposited its instrument of ratification on 28 December 2018 – while still a member of the EU, which has exclusive competence over jurisdiction.
  2. The European Commission set out its position in a notice on 18 January. EU rules on enforcement of UK judgments in the EU under the Brussels Regime will no longer apply even where the judgment was handed down before the withdrawal date, or the enforcement proceedings were commenced before the withdrawal date. Enforcement of such a judgment in a Member States will be subject to its national law. However, where the instrument concerned requires exequatur, a UK court’s judgment which has been exequatured but not yet enforced in a Member State before the exit date, will still be enforced under the Brussels Regime.
  3. The draft Civil Jurisdiction and Judgments (Amendment) (EU Exit) Regulations 2019 would see the end of the Brussels Regime and the Lugano Conventions. These regimes and the domestic legislation that implements them will, for transitional purposes, continue to apply in England and Wales, Northern Ireland and Scotland to determine jurisdiction for proceedings commenced in the UK before exit day. Judgments obtained in EU and EEA States will continue to be enforced under these regimes where proceedings were initiated before the withdrawal date.

 

The Sun newspaper reported today that Ladbrokes has put the odds at 3/1 that the UK will leave the EU without a deal before April 1, 2019, although it is not clear whether or not this was before the passage in the House of Commons tonight of two resolutions, Sir Graham Brady’s and Dame Caroline Spelman’s.

 

Where is General Average?

Jurisdiction decisions in the shipping context follow each other in close succession. Yesterday we had another, from Males J, of some interest to insurers: namely, Griffin Underwriting Ltd v Varouxakis (The Free Goddess) [2018] EWHC 3259 (Comm).

The Free Goddess, a 22,000 dwt bulker owned by Freeseas, was seized by Somali pirates while en route to Thailand with steel coils. K & R insurers Griffin, based in Guernsey but doing business in London, paid out something over $6 million to free her, whereupon she sailed to Oman. Griffin clearly had a right to take over from Freeseas a pretty cast-iron GA claim against cargo interests: on arrival it duly entered into a settlement agreement with Freeseas under which Freeseas agreed to furnish all assistance, including preservation of security, in claiming GA and also to account to Griffin for all sums received on that basis. GA, as might be expected, was settlable and payable in London.

According to Griffin’s (as yet unestablished) allegations, Freeseas did no such thing. Instead of the obvious course of oncarrying the cargo to Thailand and claiming GA in due course, it sold the ship in Oman, destroying any security for GA and providing cargo with a counterclaim for damages which was likely to dwarf the GA liability in any case. In addition it had allegedly trousered a large sum in interim GA contributions without accounting for it. 

Freeseas not being worth powder and shot, Griffin sued one Ion Varouxakis, the Greek-domiciled owner of the company, for inducing it to break the settlement agreement. They alleged that the damage had been suffered in London and therefore they could invoke Art.7, the tort article of Brussels I Recast. Mr Varouxakis insisted that he could only be sued in Greece, arguing for good measure that this was a suit by an underwriter in a matter relating to insurance under Art.14, so the other exceptions did not apply.

In fact Mr Varouxakis was held to have waived any jurisdiction point, so the claim is going ahead in London anyway. But Males J did go on to give a view on the other points. On the issue of the loss of the right to GA, he regarded the issue of where the loss had been suffered as finely balanced, but expressed the view that the direct damage had been suffered in Oman, where he opined that the right to enforce GA had been effectively lost: the fact that GA had not been paid in London he regarded as a remoter consequence and not in account because of decisions such as Kronhofer v Mayer [2004] All ER (EC) 939. So there would have been no jurisdiction. On the other hand, he thought the loss had been suffered in London as regarded the failure to account, and so would have allowed the claim under that head to go ahead on that head in any event. As for the suggestion that this was a matter relating to insurance, he smartly rebuffed the point: insurance might be the background, but this arose out of an independent settlement agreement.

The second point was fairly obvious: if someone infringes my right to an accounting in London, it is difficult to think of anywhere apart from London where the damage occurs. The third is also welcome: the insurance rules under under Art.14 are ill-thought-out even by Euro-standards, and anything that prevents their becoming any more bloated than they already are can only be a good thing.  

This blog is less sure about the first. Saying the damage occurred in Oman gets pretty close to conflating damage with the act giving rise to it; it also means that the place of the damage in cases of this sort becomes wildly arbitrary, depending on which port a vessel happens to be in at the time. On the other hand, if GA is settled and negotiated in London, it seems fairly convincing to argue that preventing it being settled and paid there causes a direct loss within the Square Mile. Unfortunately, because the claimants won in any case, we are unlikely to see an appeal here. But this shouldn’t be regarded as necessarily the last word.


Atlantik (misplaced) Confidence — the saga continues.

Last year we dealt here with Teare J’s meticulous decision in Aspen Underwriting Ltd & Ors v Kairos Shipping Ltd [2017] EWHC 1904 (Comm), in which following the Atlantik Confidence debacle, hull underwriters, having previously paid out on the orders of her owners’ (Dutch) bank under an insurance assignment provision, now sued the bank to recover their money on the basis that the ship had been deliberately scuttled. The issue was whether the bank could insist on being sued in the Netherlands on the basis of Art.4 of Brussels I Recast. The decision was that most claims, including those based on unjust enrichment, had to be brought in the Netherlands. Howver, claims based on tortious misrepresentation and under the Misrepresentation Act 1967 could be brought here. The fact that such claims related to insurance under Art.14 was no bar, since there was no question of a large Dutch bank being a weaker party who, according to Recital 18 to the Regulation, needed to be protected from the machinations of big bad insurers.

The Court of Appeal has dismissed an appeal (seeAspen Underwriting Ltd & Ors v Credit Europe Bank NV [2018] EWCA Civ 2590). On most points it simply said that the Judge had got it absolutely right. The only exception was that it was not open to a judge, consitently with Euro-law, to take the sensible view and decline to apply Art.14 to anyone he thouht was not in fact a weaker party. But this did not matter, since in Kabeg v Mutuelles Du Mans Assurances (Case C-340/16) [2017] I.L. Pr. 31 the ECJ Advocate-General had since Teare J’s judgment accepted that Art.14 could be disapplied to a subrogee “regularly involved in the commercial or otherwise professional settlement of insurance-related claims who voluntarily assumed the realisation of the claim as party of its commercial or otherwise professional activity”. This was near enough to the position of the bank here to justify ignoring Art.14.

Some good news, in other words, for marine underwriters trying to get their money back from those acting for crooks.  On the other had, the moral we advanced in our previous article still stands: all policies in future ought to contain a term, rigorously enforced, stating that no monies will be paid out save against a signed receipt specifically submitting to the exclusive jurisdiction of the English courts in respect of any subsequent dispute respecting the payment or the policy generally.

 

The Draft Withdrawal Agreement and Shipping Law

 

They came, they argued, they agreed (but now minus Raab and McVey).

This evening the Cabinet signed up to the Draft Withdrawal Agreement, all 586 pages of it – and also the seven page outline of the Political Declaration on the future relationship between the United Kingdom and the European Union.

All eyes are now focussed on the special status of Northern Ireland in the ‘backstop’ in the Agreement and on the inability of the UK unilaterally to withdraw from that agreement in article 21 of the Northern Ireland Protocol.

Less controversial are the provisions of the Agreement on Jurisdiction, Applicable Law, and Insolvency that are to be found in Articles 66 and 67, as follows.

Applicable law.

ARTICLE 66

Applicable law in contractual and non-contractual matters

In the United Kingdom, the following acts shall apply as follows:

(a) Regulation (EC) No 593/2008 of the European Parliament and of the Council shall apply in respect of contracts concluded before the end of the transition period;

(b) Regulation (EC) No 864/2007 of the European Parliament and of the Council shall apply in respect of events giving rise to damage, where such events occurred before the end of the transition period.

Jurisdiction.

ARTICLE 67

Jurisdiction, recognition and enforcement of judicial decisions, and related cooperation between central authorities

  1. In the United Kingdom, as well as in the Member States in situations involving the United Kingdom, in respect of legal proceedings instituted before the end of the transition period and in respect of proceedings or actions that are related to such legal proceedings pursuant to Articles 29, 30 and 31 of Regulation (EU) No 1215/2012 of the European Parliament …the following acts or provisions shall apply:

(a) the provisions regarding jurisdiction of Regulation (EU) No 1215/2012

Insolvency

Article 67

  1. In the United Kingdom, as well as in the Member States in situations involving the United Kingdom, the following provisions shall apply as follows:

(c) Regulation (EU) 2015/848 of the European Parliament and of the Council shall apply to insolvency proceedings, and actions referred to in Article 6(1) of that Regulation, provided that the main proceedings were opened before the end of the transition period;

For financial service providers, the following statement on p2 of the Political Declaration is of interest.

 

“Commencement    of    equivalence    assessments    by    both    Parties    as    soon    as    possible    after    the    United     Kingdom’s     withdrawal     from     the     Union, endeavouring     to     conclude     these     assessments     before the    end    of    June 2020.”

.

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.