Kerry Underwood

INTERNATIONAL JURISDICTION AND EXTRA-TERRITORIAL ISSUES

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This blog first appeared on the Practical Law Dispute Resolution Blog on 27 September 2018.

In October I am delivering my new course – Getting the Retainer Right – in 10 cities – details and booking form here.

In an increasingly global world the issues of international and extra-territorial jurisdiction are becoming increasingly important, as a recent flurry of cases and developments shows.

The Netherlands Commercial Court has just circulated an update on the progress towards its creation, and this court, which will hear cases and publish judgments in English, is expected to launch in January 2019.

In a speech on 14 September 2018, Sir Geoffrey Vos, Chancellor of the High Court, said:

 

I believe the judges in our highest courts should consider carefully in every case how the common law is developing in different jurisdictions, with a view to seeing whether consistency can be achieved. There may even be case for more cross-jurisdictional debate between senior courts on a specific topic.”

 

It is not inconceivable that in the working lives of some of you reading this piece, we will have a World Commercial Court.

Judgment debtor can seek committal of party outside jurisdiction under CPR 81.4 for breach of order under CPR 71.2 

In Vik v Deutsche Bank AG [2018] EWCA Civ 2011

the Court of Appeal held that a party can make a committal application under CPR 81.4, in respect of a party outside the jurisdiction, to enforce an order to attend court made under CPR 71.2.

Deutsche Bank sought to enforce a judgment debt of around £300 million against a company owned by the appellant, who resided in Monaco.

It obtained an order under CPR 71.2 requiring the company to attend court to be cross-examined and produce documents.

Following the company’s failure to comply fully with the order, Deutsche Bank obtained an order for committal.

The appellant argued that the court had no jurisdiction to hear committal proceedings, asserting that it was not open to Deutsche Bank to make the committal application under CPR 81.4 rather than CPR 71.8, which contained a power to commit; and that the committal application was not incidental to the CPR 71 order, so permission to serve out was required.

In dismissing the appeal, the Court of Appeal observed that the decision highlights the tension between enforcing court orders on the one hand and keeping within the jurisdictional limits of the court, especially when individual liberty is at risk, on the other.

Deutsche Bank can now serve the order for committal on the appellant in Monaco, requiring him to attend court in England and provide information and documents about his assets, failing which the appellant could face imprisonment.

The Court of Appeal held that it was in the public interest that there should be a specific jurisdictional gateway in Practice Direction 6B permitting service on an officer of a company for contempt of an order made under CPR 81 or CPR 71, where the fact that he was out of the jurisdiction was no bar to the making of a committal application.

It noted that consideration of this issue by the Civil Procedure Rule Committee would be most welcome.

As well as providing Court of Appeal authority that a committal application can be made under CPR 81.4 to enforce an order under CPR 71.2, the decision confirms that the power to commit in CPR 71.8 is aimed at more straightforward cases, while the power to commit in CPR 81.4 is appropriate for more complex cases, including those involving a failure to comply with an order made under CPR 71.2.

Chapter 11 proceedings recognised re English company with UK centre of main interests 

In Re Videology Ltd [2018] EWHC 2186 (Ch),

the High Court granted recognition and discretionary relief under the Cross-Border Insolvency Regulations 2006 to an English incorporated member of a group of companies which was subject to Chapter 11 proceedings under the US Bankruptcy Code.

It held that that the Chapter 11 proceedings were foreign non-main proceedings, the company having its centre of main interests in the United Kingdom but an establishment in the United States.

The court also granted discretionary relief.

It did so on the basis of the moratorium applicable in an English administration to protect the company from claims by individual creditors and against the commencement of collective insolvency proceedings in the United Kingdom without court consent, and to allow the sale of its assets and the distribution of the proceeds to take place in the United States.

Jurisdiction over claim under 2001 Brussels Regulation for losses incurred by Austrian investor in relation to bearer bonds (ECJ)

In Löber v Barclays Bank plc (Case C-304/17) EU:C:2018:701

the European Court of Justice ruled that, for the purposes of Article 5(3) of the 2001 Brussels Regulation, in a tort claim by an individual Austrian investor for losses arising out of bonds purchased in reliance on a prospectus issued by Barclays Bank plc, the courts of the Austrian investor’s domicile had jurisdiction as the place where the harmful event occurred, where the damage consists of financial loss which occurred directly in an Austrian investor’s bank account.

The European Court of Justice referred to

Kolassa v Barclays Bank plc [2015] EUECJ C-375/13

in which it ruled that the courts of the investor’s domicile (Austria) had jurisdiction under Article 5(3) because the alleged damage materialised directly in the investor’s Austrian bank used to pay for the bonds.

It also referred to

Universal Music International Holding BV v Tetreault Schilling (C-12/15)

in which it held that the “place where the harmful event occurred” will not normally be the place where damage occurred if the damage consists exclusively of financial damage materialising directly in the claimant’s bank account, and directly resulting from an unlawful act committed in another member state.

The court in Universal Music noted that Kolassa reflected the specific context of that case, in particular the existence of circumstances contributing jurisdiction to those courts, and that purely financial damage occurring directly in the investor’s bank account cannot, in itself, be a relevant connecting factor pursuant to Article 5(3).

Here, the court concluded that, taken as a whole, the specific circumstances of the case contributed to attributing jurisdiction to the Austrian courts.

In particular:

  • All payments were made from Austrian bank accounts.
  • The Austrian investor acquired the certificates on the Austrian secondary market.
  • The information supplied to Löber about the certificates was in the prospectus as notified to the Austrian supervisory bank and on the basis of that information, the Austrian investor signed the contract in Austria.

The ruling is relevant to claims under Article 7(3) of the Recast Brussels Regulation, which is materially the same.

Supreme Court refuses permission to appeal judgment on territorial jurisdiction in damages actions based on LCD and CRT cartels

The Supreme Court has refused the defendants permission to appeal against a Court of Appeal judgment that ruled on jurisdiction issues in two separate damages actions, brought by the claimants, based on the liquid crystal display cartel and on the cathode ray tube cartels.

The Court of Appeal ruled that the actions should not be struck out nor summary judgment given.

The claimants were claiming damages due to the allegedly higher purchase prices that they paid due to the cartels.

However, the cartel products had first been supplied to entities outside the European Union/ European Economic Area then to a claimant holding company also outside the European Union/ European Economic Area, which then supplied the products to claimant subsidiary companies within the European Union/ European Economic Area for onward sale and distribution within the European Union/ European Economic Area.

The defendants had argued that the claimants would not be able to establish that they had suffered losses as a consequence of a breach of Article 101 of the Treaty on the Functioning of the European Union and that the High Court, therefore, had no territorial jurisdiction to hear the actions.

The Court of Appeal held that the issue of territorial jurisdiction could not be determined adversely to the claimants on a summary basis.

It held that the analysis of the territorial application of Article 101, in accordance with the qualified effects doctrine, would depend on a full examination of the intended and actual operation of the cartels as a whole.

The Court of Appeal also held that it was reasonably arguable that the cases were governed by the European Union law and that the forum to hear the actions should be England and Wales.

The actions should proceed to trial.

Final text of UNCITRAL Model Law on recognition and enforcement of insolvency-related judgments published

The United Nations Commission on International Trade Law has now published the final, adopted text of the United Nations Commission on International Trade Law Model Law on recognition and enforcement of insolvency-related judgments.

The Model Law on the recognition and enforcement of insolvency-related judgments is a legislative framework capable of adoption into countries’ domestic legislation and allows for the recognition of judgments arising out of insolvencies in cross-border situations.

It addresses the concern that, though there are various cross-border frameworks for the recognition and enforcement of judgments in civil and commercial matters, such frameworks generally do not cover insolvency-related legal proceedings.

The new model law is drafted as a standalone legislative framework but may also supplement the United Nations Commission on International Trade Law Model Law on Cross-Border Insolvency, adopted by United Nations Commission on International Trade Law on 30 May 1997, which provides for the recognition of, and cooperation in, cross-border insolvency proceedings.

The 1997 Model Law does not, however, provide for the cross-border recognition and enforcement of judgments arising out of the insolvency proceedings generally.

The new model law is intended to plug gaps in the existing United Nations Commission on International Trade Law framework for cross-border insolvency cooperation.

The minutes of the United Nations Commission on International Trade Law session also indicate that legislative text in the form of a further model law, addressing the cross-border insolvency of enterprise groups, as well as recommendations and commentary on the obligations of enterprise group directors in the period before insolvency, are likely to come before it for approval in 2019.

The former defined term “insolvency-related foreign judgment” has been changed to “insolvency-related judgment” although the law still only comes into play where a judgment given in one enacting state is to be recognised or enforced in another state (article 1, Model Law).

The Model Law draftsmen expressly chose not to define “insolvency-related judgments” by using similar wording used in the Recast Insolvency Regulation ((EU) 2015/848).

That Regulation defines the types of legal actions that are sufficiently connected with insolvency proceedings that they should be subject to the same jurisdiction as the insolvency proceedings being “any action which derives directly from the insolvency proceedings and is closely linked with them” (Article 6, Recast Insolvency Regulation).

Instead, the Model Law uses the formula “arises as a consequence of or is materially associated with an insolvency proceeding”.

This change was intentional, to avoid confusion with European Union terminology and to avoid suggestions that it should be interpreted in the same way.

This is helpful, as the purpose of the Model Law to regularise the cross-border recognition of insolvency-related judgments is different from the purpose of the Recast Insolvency Regulation to allocate jurisdiction over the underlying actions.

 

 

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Written by kerryunderwood

October 4, 2018 at 8:05 am

Posted in Uncategorized

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