Yearbook of Private International Law: Volume VI 2004 9783866537170

Table of contents :
Frontmatter
TABLE OF CONTENTS
FOREWORD
ABBREVIATIONS
FOREIGN REVENUE CLAIMS IN EUROPEAN COURTS
INTERNATIONAL PRIVATE LAW OF INTELLECTUAL PROPERTY
ON AVELLO AND OTHER JUDGMENTS: A NEW POINT OF DEPARTURE IN THE CONFLICT OF LAWS?
THE ‘DRAFT REGULATION ROME II’ IN 2004: ITS PAST AND FUTURE PERSPECTIVES
THE PROCESS OF CHARACTERIZATION IN THE EC CONFLICT OF LAWS: SUGGESTING A FLEXIBLE APPROACH
EC PRIVATE INTERNATIONAL LAW AND THE PUBLIC POLICY EXCEPTION
NON-MARITAL COHABITATION, REGISTERED PARTNERSHIP AND SAME-SEX MARRIAGE IN PRIVATE INTERNATIONAL LAW: THE SPANISH PERSPECTIVE
POLISH PRIVATE INTERNATIONAL LAW
THE INTERFACE BETWEEN THE U.N. CONVENTION ON THE RIGHTS OF THE CHILD AND THE FUTURE HAGUE CONFERENCE INSTRUMENT ON THE INTERNATIONAL RECOVERY OF CHILD SUPPORT AND OTHER FORMS OF FAMILY MAINTENANCE
THE HAGUE CONFERENCE ON PRIVATE INTERNATIONAL LAW
SWISS DECISION ON FOREIGN MANDATORY RULES
THE LAW GOVERNING COMPANIES IN SWISS PRIVATE INTERNATIONAL LAW
THE LAW APPLICABLE TO CROSS-BORDER ENVIRONMENTAL DAMAGE: FROM THE EUROPEAN NATIONAL SYSTEMS TO ROME II
LAW OF 16 JULY 2004 HOLDING THE CODE OF PRIVATE INTERNATIONAL LAW
BOOK REVIEWS
BOOKS RECEIVED
Backmatter

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YEARBOOK OF PRIVATE INTERNATIONAL LAW

YEARBOOK OF PRIVATE INTERNATIONAL LAW VOLUME VI – 2004

EDITORS PETAR ŠARČEVIĆ

PAUL VOLKEN

ANDREA BONOMI

Professor at the University of Rijeka

Professor at the University of Fribourg

Professor at the University of Lausanne

PUBLISHED IN ASSOCIATION WITH SWISS INSTITUTE OF COMPARATIVE LAW LAUSANNE, SWITZERLAND

Sellier. European Law Publishers

Stæmpfli Publishers Ltd. Berne

Sellier. European Law Publishers ISBN-10 3-935808-36-4 ISBN-13 978-3-935808-36-1

Stæmpfli Publishers Ltd. Berne ISBN 3-7272-2718-4

Die Deutsche Bibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie; detaillierte bibliografische Daten sind im Internet über http://dnb.ddb.de abrufbar. © 2005 by Sellier. European Law Publishers GmbH, München, Stæmpfli Publishers Ltd., Berne, and Swiss Institute of Comparative Law. Dieses Werk einschließlich aller seiner Teile ist urheberrechtlich geschützt. Jede Verwertung außerhalb der engen Grenzen des Urheberrechtsgesetzes ist ohne Zustimmung des Verlages unzulässig und strafbar. Das gilt insbesondere für Vervielfältigungen, Übersetzungen, Mikroverfilmungen und die Einspeicherung und Verarbeitung in elektronischen Systemen. Herstellung: Karina Hack, München. Druck und Bindung: Pustet, Regensburg. Gedruckt auf säurefreiem, alterungsbeständigem Papier. Printed in Germany.

ADVISORY BOARD JÜRGEN BASEDOW Hamburg

RUI MANUEL GENS DE MOURA RAMOS Lisbon/Coimbra

GENEVIÈVE BASTID-BURDEAU Paris SIR LAWRENCE COLLINS London HUANG JIN Wuhan

YASUHIRO OKUDA Tokyo GONZALO E. PARRA-ARANGUREN The Hague/Caracas

HANS VAN LOON The Hague

SYMEON C. SYMEONIDES Salem (Oregon)

FERENC MÁDL Budapest

PIERRE WIDMER Lausanne

ASSISTANT EDITOR GIAN PAOLO ROMANO Legal adviser Swiss Institute of Comparative Law ADRESS FOR MANUSCRIPTS AND CORRESPONDENCE Swiss Institute of Comparative Law Dorigny, CH–1015 Lausanne ENGLISH REVISION SUSAN ŠARČEVIĆ Professor at the University of Rijeka

TABLE OF CONTENTS ________________

Foreword ....................................................................................................... ix Abbreviations ................................................................................................ xi Doctrine Jürgen BASEDOW / Jan VON HEIN / Dorothee JANZEN / Hans-Jürgen PUTTFARKEN † Foreign Revenue Claims in European Courts ............................................. 1 François DESSEMONTET International Private Law of Intellectual Property .................................... 71 Tito BALLARINO / Benedetta UBERTAZZI On Avello and Other Judgments: A New Point of Departure in the Conflict of Laws?................................. 85 Willibald POSCH The ‘Draft Regulation Rome II’ in 2004: Its Past and Future Perspectives.............................................................. 129 General Issues of Private International Law in the European System – Reflections by Italian Scholars Roberto BARATTA The Process of Characterization in the EC Conflict of Laws: Suggesting a Flexible Approach ............................................................. 155 Luigi FUMAGALLI EC Private International Law and the Public Policy Exception – Modern Features of a Traditional Concept ............................................. 171 National Reports Cristina GONZÁLEZ BEILFUSS Non-Marital Cohabitation, Registered Partnership and Same-Sex Marriage in Private International Law: The Spanish Perspective ......................................................................... 185 Andrzej MĄCZYēSKI Polish Private International Law............................................................. 203

Peretz SEGAL / Myriam MILLER The Interface Between the U.N. Convention on the Rights of the Child and the Future Hague Conference Instrument on the International Recovery of Child Support and Other Forms of Family Maintenance – A Point of View from Israel.................................................................... 221 News from The Hague J.H.A. VAN LOON The Hague Conference on Private International Law – Work in Progress (2003-2004) ............................................................... 237 Case Law Alfred E. VON OVERBECK Swiss Decision on Foreign Mandatory Rules ......................................... 247 Forum Florence GUILLAUME The Law Governing Companies in Swiss Private International Law...... 251 Katia FACH GÓMEZ The Law Applicable to Cross-Border Environmental Damage: From the European National Systems To Rome II ................................ 291 Texts, Materials and Recent Developments Law of 16 July 2004 Holding the Code Of Private International Law (Belgian Official Journal 27 July 2004 – in force as from 1 October 2004) ...................................................................................... 319 Book Reviews .............................................................................................. 377 Books Received ........................................................................................... 379 Index ............................................................................................................ 391

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FOREWORD ________________

Although published in a different country and under the aegis of a new publisher, the Yearbook of Private International Law retains its original philosophy. As in the past, our goal is to offer readers an international forum for discussing general issues and recent developments at the national and international level worldwide. Compared to previous years, Volume VI looks rather ‘Euro-centric’. The main reason is the impressive and continuous rhythm at which the creation of a European system of private international law is progressing at Community level. After the adoption of several regulations dealing with various aspects of international civil procedure, the EC institutions are planning to introduce uniform choiceof-law rules in several important fields, including contract, torts, succession and even in certain areas of family law. The European Court of Justice also appears to be taking increased interest in PIL issues. This development is reflected in several contributions to this volume. An article in the ‘Doctrine’ section discusses the proposal for a ‘Rome II’ regulation on conflict of laws in torts, while another one analyses the interesting ‘Avello’ decision by the ECJ, which could create a new framework for the development of PIL in Europe. Moreover, a special section is devoted to the discussion of general PIL issues (‘allgemeine Lehren’, as the Germans say), namely characterization and public policy, from the perspective of a European PIL system in fieri, a topic that has captured the attention particularly of Italian scholars.1 Finally, although the two articles of the ‘Forum’ section deal with specific topics from a national point of view – company law and transnational pollution, they inevitably include an analysis of the impact of relevant European case law and legislation. Another group of articles focuses on the national conflict systems of some European States. An important comparative study based on a legal opinion prepared by the Max-Planck-Institute of Hamburg for the European Commission discusses the treatment of foreign tax laws and judgments in four major European countries (United Kingdom, Germany, France and Italy). Another contribution contains a general description of the PIL system in Poland, one of the new EU Member States. The actual and controversial issue of registered partnership is discussed from the perspective of Spanish law. An English translation of the latest national PIL codification, the recent Belgian Code, is published in the section on ‘Texts, Materials and Recent Developments’. Although 2004 did not bring many developments in the field of uniform law, the Yearbook remains faithful to its commitment to report on the elaboration of relevant international instruments. Three articles of this volume are devoted to current endeavours under the auspices of the Hague Conference of PIL and the 1

See PICONE P. (ed.), Diritto internazionale e diritto comunitario, Padua 2004.

American Law Institute, in particular in the field of choice of courts, maintenance obligations and intellectual property. Believing that the increasing internationalization of social and economic relationships requires adequate legal responses at a global level, we are confident that new important achievements in some of these areas will be covered in future volumes.

Petar Šarþeviü

Paul Volken

x

Andrea Bonomi

ABBREVIATIONS ________________

Am. J. Comp. L. Am. J. Int. L. Clunet ECR I.C.L.Q. I.L.M. id. IPRax OJ PIL RabelsZ Recueil des Cours

Rev. crit. dr. int. pr. REDI Riv. dir. int. priv. proc. Riv. dir. int. RIW RSDIE

American Journal of Comparative Law American Journal of International Law Journal de droit international European Court Reports International and Comparative Law Quarterly International Legal Materials idem Praxis des internationalen Privat- und Verfahrensrechts Official Journal Private International Law Rabels Zeitschrift für ausländisches und internationales Privatrecht Recueil des Cours de l'Académie de la Haye de droit international = Collected Courses of The Hague Academy of International Law Revue critique de droit international privé Revista española de derecho internacional Rivista di diritto internazionale privato e processuale Rivista di diritto internazionale Recht internationaler Wirtschaft Revue suisse de droit international et européen = Schweizerische Zeitschrift für internationales und europäisches Recht

DOCTRINE ________________

FOREIGN REVENUE CLAIMS IN EUROPEAN COURTS Jürgen BASEDOW / Jan VON HEIN / Dorothee JANZEN / Hans-Jürgen PUTTFARKEN †

I. II.

Introduction United Kingdom A. Chronological Survey of Cases B. The Private International Law (Miscellaneous Provisions) Act 1995 C. Does English Law Prohibit English Courts from Enforcing Foreign Tax Judgments? D. Does English Law Allow English Courts to Refuse to Enforce Foreign Tax Judgments, i.e., Are English Courts Granted Discretion in this Respect? E. Is There a Broader Rule in English Law Providing that English Courts Must not or Need not Enforce Foreign Revenue Laws? F. Are There – Even Broader – Rules in English Law According to Which English Courts Must not Apply or May Refuse to Apply Foreign Tax or Other Revenue Laws? G. Outside the Specific Context of Revenue Laws, What Is the Current State of the Law or Legal Discussion in England Concerning the Existence of a Frequently Cited General Rule that Courts Must not, Should not, or Need not Apply or Recognize a Rule of Public Law of Another State? Are Distinctions Made as to Whether the Foreign Legal Rule Directly Controls the Suit or Concerns Only an Incidental / Preliminary Question, or Whether the Claim Arises from Private or Public Law? H. To the Extent that the Above Questions Have Traditionally Found Restrictive Answers, Have Such Answers Been Questioned or Reversed in More Recent Legal Thinking? I. Summary

Max Planck Institute for Foreign Private Law and Private International Law, Hamburg. The national reports on the United Kingdom and Germany were written by Jan von Hein, the French report by Hans-Jürgen Puttfarken †, and the Italian report by Dorothee Janzen. Jürgen Basedow was responsible for the introduction and the comparative conclusions.

Yearbook of Private International Law, Volume 6 (2004), pp. 1-70. © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Jürgen Basedow / Jan von Hein / Dorothee Janzen / Hans-Jürgen Puttfarken †

III.

Germany A. Does German Law Prohibit Courts from Enforcing Foreign Tax Judgments? B. Does German Law Allow German Courts to Refuse to Enforce Foreign Tax Judgments, i.e., Are German Courts Granted Discretion in this Respect? C. Is There a Broader Rule in German Law Providing that German Courts Must not/Need not Enforce Foreign Tax or Other Revenue Laws? D. Are There – Even Broader – Rules in German Law According to Which German Courts Must not Apply or May Refuse to Apply Foreign Tax or Other Revenue Laws? E. Outside the Specific Context of Revenue Laws, What Is the Current State of the Law or Legal Discussion in Germany Concerning the Existence of a Frequently Cited General Rule that German Courts Must not, Should not, or Need not Apply or Recognize a Rule of Public Law of Another State? Are Distinctions Made as to Whether the Foreign Legal Rule Directly Controls the Suit or Concerns Only an Incidental/Preliminary Question, or Whether the Claim Made Arises from Private or Public Law? F. To the Extent that Restrictive Answers Have Traditionally Been Given to the Above Questions, Have Such Answers Been Questioned or Reversed in More Recent Legal Thinking? G. Summary

IV.

France A. B. C. D. E. F. G. H. I.

Introductory Remarks Basic Doctrine and Terminology Case Law Prior to 1990 The 1990 Supreme Court Decision in Guatemala The 1990 Supreme Court Decision in Duvalier Guatemala and Duvalier Today Exercise of Public Power Exception of International Solidarity or Converging Interests Summary

Italy A. B. C.

Recognition and Enforcement of Foreign Tax Judgments by Italian Courts Application of Foreign Public Law by Italian Courts Summary

V.

VI.

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Comparative Conclusions A. General Observations B. Common Principles C. Enforcement of Foreign Tax Judgments D. Some Leeway for the Enforcement of Foreign Revenue Laws

Yearbook of Private International Law, Volume 6 (2004)

Foreign Revenue Claims in European Courts

I.

Introduction

In October 2000, a civil suit was filed by the European Community with the United States District Court for the Eastern District of New York against some U.S. tobacco manufacturers that were alleged to have been involved in the smuggling of goods into the European Community. With its action, the European Commission sought mainly monetary compensation for losses caused by the smuggling to the financial interests of the Community and, to some extent, to the interests of the Member States (customs duties and VAT), plus treble and punitive damages. The action was based on the Racketeer Influenced and Corrupt Organizations Act (RICO),1 and on other counts such as common law fraud, negligence, negligent misrepresentation, unjust enrichment, and public nuisance. One of the issues at stake in that suit concerns the so-called revenue rule. Under that rule, the U.S. courts are not obliged and – as some put it – are not even allowed to enforce and to take notice of foreign tax laws and foreign judgments for the collection of taxes. However, the precise meaning of this rule and its bearing on the present litigation was far from certain. In particular, the European Commission took the view that the said rule was inapplicable where the United States had committed itself in an international agreement on mutual assistance in customs matters, as it had in its bilateral relations with the European Community.2 Moreover, the Commission questioned the application of the revenue rule to the enforcement of tax laws of States which grant reciprocity to American tax laws, i.e., which allow their courts to enforce tax claims of the United States based on American tax laws. When contemplating the filing of the action, the European Commission asked the authors of this paper in 2001 for a comparative assessment of the laws of some Member States with rules similar to the American revenue rule. The cigarette smuggling litigation is now approaching its end. Invoking the revenue rule, the Court of Appeals for the Second Circuit has dismissed the claim of the European Community,3 and the settlement negotiations4 indicate that an appeal to the U.S. Supreme Court is unlikely. Regarding the end of the case as a good opportunity to take a closer look at the law of other countries, we have decided to make the legal opinion prepared for the European Commission accessible to the public. It addresses the following questions raised by the Commission: 1

18 U.S.C. §§ 1961-1968. Agreement between the European Community and the United States of America on Customs Cooperation and Mutual Assistance in Customs Matters, O.J.E.C. 1997 L 222/17. 3 The European Community v. RJR Nabisco and others, 355 F3d 123 (2d Cir. 2004); see DUTTA A., ‘Keine zivilrechtliche Durchsetzung ausländischer Zölle und Steuern durch US-amerikanische Gerichte’, in: IPRax 2004, 446. 4 ‘EU Appears Ready to Approve Settlement with Philip Morris’, in: Wall Street Journal Europe, 9 July 2004, p. 2. 2

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Do the laws of the Member States prohibit courts from enforcing foreign tax judgments?

-

Do the laws of the Member States allow courts to refuse to enforce foreign tax judgments, i.e., are courts granted discretion in this respect?

-

Are there broad rules in the laws of the Member States providing that the courts must not/need not enforce foreign tax or other revenue laws?

-

Are there – even broader – rules in the laws of the Member States according to which courts must not apply or may refuse to apply foreign tax or other revenue laws?

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Outside the specific context of revenue laws, what is the current State of the law or legal discussion in the Member States concerning the existence of a frequently cited general rule that courts must not, should not, or need not apply or recognize a rule of public law of another State? Are distinctions made as to whether the foreign legal rule directly controls the suit or concerns only an incidental/preliminary question, or whether the claim made arises from private or public law?

-

To the extent that restrictive answers have traditionally been given to the above questions (i.e., in the sense of refusing to enforce foreign judgments, etc.), have such answers been questioned or reversed in more recent legal thinking, for example, on constitutional grounds such as the right to an effective remedy (Justizgewährungsanspruch/Déni de justice) or for the purpose of intensifying international relations?

The following survey is limited to the laws of the United Kingdom, Germany, France, and Italy. The systematic approach of the legal systems differs from country to country, as does the amount of materials available. Therefore, the above questions will be answered individually or in conjunction with others, depending on the characteristics of the national legal system. This paper reflects the state of the law at the time it was finalized in 2001; no major changes have taken place since.

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Foreign Revenue Claims in European Courts

II.

United Kingdom

A.

Chronological Survey of Cases

a)

Holman v. Johnson

As in the United States, the revenue rule in English law is traced back to the famous dictum of Lord Mansfield in Holman v. Johnson that ‘no country ever takes notice of the revenue laws of another’.5 The facts of the case were as follows: The plaintiff was resident at and an inhabitant of Dunkirk, France. There he and his partner sold and delivered a quantity of tea ordered by the defendant, knowing that the latter intended to smuggle it into England. The plaintiff and his partner did not, however, participate in the smuggling scheme itself. When the defendant – who had since decamped to England – failed to pay for the tea, the plaintiff brought an action in England. Discussing whether the contract was void on grounds of immorality or illegality, Lord Mansfield gave short shrift to the notion of immorality in the present case: ‘An immoral contract it certainly is not; for the revenue laws themselves, as well as the offences against them, are all positivi juris.’6 Neither did he regard the contract as illegal, ‘… [f]or no country ever takes notice of the revenue laws of another. […] This is an action brought merely for goods sold and delivered at Dunkirk. Where then, or in what respect is the plaintiff guilty of any crime? Is there any law of England transgressed by a person making a complete sale of a parcel of goods at Dunkirk, and giving credit for them? The contract is complete, and nothing is left to be done.’7 Lord Mansfield did not fail to note, however, that the outcome of the case would have been different if the plaintiff had not confined himself to the role of a neutral salesman, but had instead helped the smugglers, or if he had in any other way actively participated in their scheme: ‘If the defendant had bespoke the tea at Dunkirk to be sent to England at a certain price; and the plaintiff had undertaken to send it into England, or had had any concern in the running it into England, he would have been an offender against the laws of this country.’ 5

Holman v. Johnson, 1 Cowp. 341 = 98 Eng. Rep. 1120 (1775) (reprinted in: LOWENFELD A., Conflict of Laws: Federal, State, and International Perspectives, New York/Oakland/Albany 1986, 879-881, which is quoted here). There are a few earlier cases, but these are considered as ‘not giv[ing] much help’: Government of India v. Taylor, [1955] A.C. 491, 504 (H.L.) with further references, per Viscount Simonds. 6 Holman v. Johnson (previous note), 880. 7 Holman v. Johnson (supra n. 5), 880.

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b)

Municipal Council of Sydney v. Bull

Skipping other eighteenth and nineteenth century decisions,8 we come to the first twentieth century judgment, Municipal Council of Sydney v. Bull,9 which involved the following set of facts: An Act of the Legislature of New South Wales, Australia, authorized the Municipal Council of Sydney to carry out improvements in a certain street in that city and imposed on the property owners within the improvement area the liability to contribute toward the costs. Under circumstances specified in the statute, the Council was empowered to recover the amounts due by action. The Council sued a property owner in England to recover the amount owed as his contribution. Grantham J. refused to entertain the action: ‘Some limit must be placed upon the available means of enforcing the sumptuary laws enacted by foreign States for their own municipal purposes. But what restriction is to be imposed on such legislation if this claim could be put in suit in this country? It is true that the contribution which the Municipal Council of Sydney seeks to levy upon the defendant is a contribution in money, but it might be exacted in another form; the Colonial Legislature might have enacted that of those persons whose property had been improved one should plant trees, another should lay drains […]. Could the persons who omitted to perform these statutory obligations be sued in this country? Certainly not. And the mere fact that in New South Wales the contribution is a money contribution enforceable by action as well as by distress makes no difference. The action is in the nature of an action for a penalty or to recover a tax; it is analogous to an action brought in one country to enforce the revenue laws of another. In such cases it has always been held that an action will not lie outside the confines of the last-mentioned State.’10

c)

King of the Hellenes v. Brostrom and others

In this case,11 which involved allegedly illegal exports from Greece to the United Kingdom, the Greek government raised a claim to proceeds of goods (sultanas and currants) alleged to have been exported from Greece to Liverpool in contravention 8 On those decisions, see Government of India v. Taylor (supra n. 5), 504 et seq., with further references. 9 Municipal Council of Sydney v. Bull, [1909] 1 K.B. 7. 10 Municipal Council of Sydney v. Bull (supra n. 9), 12. 11 King of the Hellenes v. Brostrom, [1923] 16 Lloyd’s Rep. 167 et seq, 174, 190194.

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Foreign Revenue Claims in European Courts

of Greek government decrees. In the judgment of Rowlatt J., the pertinent decrees did not confer on the Greek government a right of property in the goods.12 However, Rowlatt J. did not refrain from elaborating obiter on how the case would have to be decided if the decrees did have such an effect: ‘It simply means that the government are given a lien over a certain levy on this property, and the question again arises whether then in the Courts of this country a foreign government can come and say: “We ask that a lien given by the laws of our own country shall be enforced against goods which we now find are in this country.” It is perfectly elementary that a foreign government cannot come here – nor will the courts of other countries allow our government to go there – and sue a person found in that jurisdiction for taxes levied and which he is declared to be liable to by the country to which he belongs; and if you cannot do it against a person I can see no reason at all why such process should be allowed against goods. It seems to me to be a simple case of enforcing in the directest possible way the revenue provisions of a foreign State.’13

d)

In re Visser, Queen of Holland v. Drukker

In this case, the Queen of Holland alleged that she was a creditor of the estate of the deceased David Visser, who died in Amsterdam in December 1926 as a Dutch subject domiciled in Holland. The defendant Drukker was the executor of Visser’s will. The estate included personal property in England. The Queen asked the English court to hand down a declaratory judgment that the estate was liable for succession duties levied pursuant to Dutch law.14 Tomlin J. refused to entertain the action: ‘My own opinion is that there is a well-recognized rule, which has been enforced for at least 200 years or thereabouts, under which these courts will not collect the taxes of foreign States for the benefit of the sovereigns of those foreign States; and this is one of those actions which these courts will not entertain.’15 He expressly followed the judgment in Sydney v. Bull,16 rejecting the argument by the defendant’s attorneys that this case should be distinguished because the 12

King of the Hellenes v. Brostrom (previous note), 193. King of the Hellenes v. Brostrom (supra n. 11), 193. 14 In re Visser, Queen of Holland v. Drukker, [1928] 1 Ch. 877. 15 In re Visser (previous note) 884, per Tomlin J. 16 Supra at A.b. 13

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plaintiff was a foreign municipality rather than a sovereign State.17 However, he pointed out that the revenue rule did not exclude the recognition of foreign revenue laws under certain circumstances: ‘[H]owever unwilling the Courts may be to recognize foreign law, there are certain cases in which, although they do not enforce the foreign revenue law, they are bound to recognize some of the consequences of that law – namely, those cases where, as one of the terms of the law, contracts are rendered invalid by the foreign law.’18

e)

Government of India v. Taylor

The leading case dealing with the revenue rule after World War II – Government of India v. Taylor19 – deals with a company registered in the United Kingdom but trading in India. In the voluntary liquidation of the company, the government of India sought to prove a sum due for Indian income tax, including capital gains tax on the sale of the company’s undertaking in India. The House of Lords held that claims on behalf of a foreign State to recover taxes due under its laws were unenforceable in English courts. Viscount Simonds based his opinion mainly on three pre-war cases: Sydney Municipal Council v. Bull,20 King of the Hellenes v. Brostrom,21 and In re Visser, Queen of Holland v. Drukker.22 He quoted verbatim the statement by Rowlatt J. in King of the Hellenes23 and referred in the same way to the terse motivation of Tomlin J. in In re Visser.24 Well aware that Holman v. Johnson25 was not on all fours with the present case, Viscount Simonds commented: ‘It is true that Lord Mansfield was not directly concerned with the case of a foreign power suing in an English Court to recover revenue, but with the validity of a contract made abroad where the seller was not implicated in smuggling operations which contravened the 17

In re Visser (supra n. 14), 883. In re Visser (supra n. 14), 883. 19 Supra n. 5. 20 Supra at A.b. 21 Supra at A.c. 22 Supra at A.d. 23 Supra at A.c, quoted in Government of India (supra n. 5), 503, per Viscount Simonds. 24 Supra at A.d, quoted in Government of India (supra n. 5), 504, per Viscount Simonds. 25 Supra at A.a. 18

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Foreign Revenue Claims in European Courts

revenue laws of this country […]. But […] he could not have reached his conclusion but for the fact that he applied the rule that no country ever takes notice of the revenue laws of another.’26 Summing up, and including some lesser known eighteenth and nineteenth century cases not discussed here, Viscount Simonds concluded that the revenue rule rested on ‘a formidable array of authority’.27 Taking up the dictum given by Tomlin J. in In re Visser,28 he admitted, however, that the scope of the revenue rule may be restricted by qualifications in certain cases: ‘It is possible that the words “take notice of” might, if applied without discrimination, lead to too wide an application of the rule; for as Lord Tomlin pointed out in In re Visser there may be cases in which our courts, although they do not enforce foreign revenue law, are bound to recognize some of the consequences of that law, and for this reason the terms of Lord Mansfield’s proposition have been criticized. But in its narrower interpretation it has not been challenged except in the three cases mentioned earlier in this opinion and in them it was unequivocally affirmed.’29 Viscount Simonds also considered the question of an indirect enforcement, i.e., recognition and enforcement of foreign judgments for taxes, pointing out that the pertinent British legislation excluded judgments for ‘a sum payable in respect of taxes or other charges’ from recognition and enforcement. From this fact, he inferred that Parliament ‘regarded [it] as axiomatic that the courts of one country do not have regard to the revenue laws of another’.30 Rejecting as ill-founded the argument that the so-called revenue rule should be restricted to penal claims,31 Viscount Simonds also considered the question of whether ‘there ought to be and is a trend towards a mitigation of the rule, particularly as between States which are united by the bonds of federal union or by such looser ties as bind the British Commonwealth of nations’.32 In this context he discussed the trend to deviate from the traditional revenue rule in the United States in relations between the members of the Union but dismissed this development as not decisive for international (as opposed to interstate) relations:

26

Government of India (supra n. 5), 504 et seq., per Viscount Simonds. Government of India (supra n. 5), 505, per Viscount Simonds. 28 Supra at A.d. 29 Government of India (supra n. 5), 505, per Viscount Simonds (footnotes omitted). 30 Government of India (supra n. 5), 506, per Viscount Simonds. 31 Government of India (supra n. 5), 506 et seq., per Viscount Simonds. 32 Government of India (supra n. 5), 506, per Viscount Simonds. 27

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‘[A] development [in the U.S.] which is not universal, and is in any case confined to relations between State and State within the Union, can have no weight in determining what the law is in this country.’33 He rejected deviating from the revenue rule in regard to other Commonwealth nations as well, invoking the constitutional separation of powers as an argument for leaving this task to the political rather than the judicial branch of government: ‘For such a distinction [i.e., between States within or outside of the Commonwealth] there is no authority and I can see no reason. If such a change is to be made, it is not for the courts to make it. It will be the task of Governments and perhaps of Parliaments. I do not think it will be an easy task.’34 Since the Indian government’s tax claim had been unenforceable in England while the company had been carrying on its business, it did not constitute a ‘liability’ within the meaning of the pertinent provisions on the winding-up of the company after its operations had ceased.35 Whereas Viscount Simonds’ opinion is based almost exclusively on precedent and is short on analysis with regard to policy, Lord Keith of Avonholm further explored the rationale underlying the revenue rule. As one possible explanation of the rule, he considered ‘… that a claim for taxes is but an extension of the sovereign power which imposed the taxes, and that an assertion of sovereign authority by one State within the territory of another, as distinct from a patrimonial claim by a foreign sovereign, is (treaty or convention apart) contrary to all concepts of independent sovereignties.’36 As another possible explanation, he considered the public policy reasons elaborated by Judge Learned Hand in the American case Moore v. Mitchell,37 which he quoted verbatim at some length.38 He did not decide, however, which of the explanations was to be preferred. Moreover, he cited the 1950 decision of the Irish High

33

Government of India (supra n. 5), 507, per Viscount Simonds; ibid. 511 et seq., per Lord Keith of Avonholm; ibid. 515, per Lord Somervell of Harrow. 34 Government of India (supra n. 5), 507 et seq., per Viscount Simonds; ibid. 515, per Lord Somervell of Harrow. 35 Government of India (supra n. 5), 508 et seq., per Viscount Simonds. 36 Government of India (supra n. 5), 511, per Lord Keith of Avonholm. 37 Moore v. Mitchell, 30 F.2d 600, 604 (2d Cir. 1929). 38 Government of India (supra n. 5), 511, per Lord Keith of Avonholm.

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Court of Justice in Peter Buchanan Ld. and Macharg v. McVey39 as an ‘admirable judgment’.40 Going further than Viscount Simonds in distinguishing Holman v. Johnson,41 Lord Somervell of Harrow stated: ‘The question whether today our courts would as between parties enforce a contract to break the revenue laws of another country has little if any relevance to the issue which we have to decide. […] There is no decision binding on your Lordship’s House and the matter therefore falls to be considered in principle.’42 Yet this consideration did not lead Lord Somervell to a different result. He based his opinion mainly on the fact that the ‘appellant is asking the English courts to do what the courts of no other country have done’.43

f)

Peter Buchanan Ld. and Macharg v. McVey

It should be noted that this is not an English but an Irish decision (from 1950, High Court of Justice, resp. 1951, Supreme Court).44 However, it was approved as an ‘admirable judgment’ by Lord Keith of Avonholm in Government of India v. Taylor45 and printed as a note to the latter decision in Law Reports, Appeal Cases. Moreover, it was subsequently adopted as a precedent by McNair J. in Rossano v. Life Insurance Co.46 The defendant, a Scot domiciled in Scotland, was the beneficial owner of all the shares in the Scottish company Peter Buchanan Ld. Rather than paying the tax he owed the Scottish revenue service, he decamped to Ireland after having channeled a substantial amount of money to this jurisdiction. He continued this transfer from Ireland with the help of his loyal secretary who had remained in Scotland. When the Scottish authorities became aware of the transactions, they brought an action in Scotland for a compulsory winding up of the company. The court so ordered and appointed Sir Andrew Macharg as liquidator. The latter sued the defendant in Ireland for the payment of all sums due to the company. It was in no way 39 Peter Buchanan Ld. and Macharg v. McVey, printed as a note to Government of India in [1955] A.C. 516; affirmed by the Irish Supreme Court, [1955] A.C. 530. On this case, see infra at A.f. 40 Government of India (supra n. 5), 510, per Lord Keith of Avonholm. 41 Supra at A.a. 42 Government of India (supra n. 5), 514, per Lord Somervell of Harrow. 43 Government of India (supra n. 5), 515, per Lord Somervell of Harrow. 44 Peter Buchanan Ld. and Macharg v. McVey (supra n. 39). 45 See supra at A.e. 46 See infra at A.i.

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concealed that ‘Sir Andrew worked in every respect hand in glove with the authorities in an effort “to chase the tax”.’47 The High Court faced two questions: first, whether the transactions initiated by McVey were intra vires and honest; and second, whether the liquidator could enforce a claim arising out of the invalidity of these transactions in Ireland. Kingsmill Moore J. answered the first question in the negative. Applying Scottish law, he found that the transactions were both ultra vires and dishonest. In doing so, he adopted a restrictive view of Lord Mansfield’s dictum in Holman v. Johnson (see supra at a): ‘I doubt whether Lord Mansfield intended his remarks to preclude a court from informing itself as to the provisions of a foreign revenue law in order to determine the question whether a foreign transaction was or was not fraudulent and void according to the law of that country. But, if he so intended, […] I must refuse to follow his view. The agreement between the defendant and Miss Farquharson [the defendant’s loyal secretary] was one to commit a fraud on the Scottish Revenue. It was not “honest” and so by Scots law, which I hold to be applicable, it was neither a valid act of the company nor effective to bind the company.’48 Yet he denied the enforcement of the liquidator’s claim in an Irish court. After an extensive discussion of English and American cases involving penal and revenue laws, Kingsmill Moore J. finally sided with the public policy arguments given by Learned Hand in Moore v. Mitchell.49 In adopting this view, the Irish judge elaborated: ‘If then, in disputes between private citizens, it has been considered necessary to reserve an option to reject foreign law as incompatible with the views of the community, it must have been equally, if not more, necessary to reserve a similar option where an attempt was made to enforce the governmental claims (including revenue claims) of a foreign State. But if the courts had contented themselves with an option to refuse such claims, instead of imposing a general rule of exclusion, the task of formulating and applying the principles of selection would have been one not only of difficulty but danger, involving inevitably an incursion into political fields with grave risks of embarrassing the executive in its foreign relations and even of

47

Buchanan (supra n. 39), 520, per Kingsmill Moore J. Buchanan (supra n. 39), 523, per Kingsmill Moore J. 49 Supra n. 37. 48

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provoking international complications. […] Safety lies only in universal rejection.’50 The fact that the claim in the present case was raised by a liquidator rather than the Revenue Service itself did not affect the outcome: ‘If I am right in attributing such importance to the principle, then it is clear that its enforcement must not depend merely on the form in which the claim is made. It is not a question whether the plaintiff is a foreign State or the representative of a foreign State or its revenue authority. In every case the substance of the claim must be scrutinized, and if it then appears that it is really a suit brought for the purpose of collecting the debts of foreign revenue it must be rejected.’51 The judgment was affirmed by the Irish Supreme Court in 1951.52

g)

Regazzoni v. KC Sethia (1944) Ltd.

This case of 1955/5653 illustrates the necessity to distinguish between the enforcement of a foreign revenue claim and the recognition of a foreign revenue or otherwise ‘political’ law. The facts were as follows: The defendants agreed to sell and deliver to plaintiff jute bags from India, which were to be delivered to the Republic of South Africa (RSA) via Genoa, Italy. Both the defendants and the plaintiff were aware of the fact that their contract violated an embargo enacted by India to the detriment of the RSA for political reasons. The plaintiff claimed damages for nondelivery of the jute bags. The Court of Appeal held ‘that while the English courts will not enforce foreign revenue or penal laws, they will not entertain an action based on a transaction which is knowingly intended to involve a breach of such laws’.54 Both Denning L.J. and Birkett L.J. distinguished Holman v. Johnson (supra at a) from the present case: ‘It seems to me that Lord Mansfield goes too far when he says that the courts will take no notice of such laws. It is perfectly true that the courts of this country will not enforce the revenue laws […] of another country at the suit of that other country, either directly or indirectly. These courts do not sit to collect taxes for another country 50

Buchanan (supra n. 39), 529, per Kingsmill Moore J. Buchanan (supra n. 39), 529, per Kingsmill Moore J. 52 See supra n. 39. 53 Regazzoni v. KC Sethia (1944) Ltd., [1956] 2 Q.B. 490 (C.A.). 54 Regazzoni (previous note), 490. 51

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[…]; and this is so even between countries of the Commonwealth […]. These courts will not enforce such laws at the instance of the foreign country. It is quite another matter to say that we will take no notice of them. It seems to me that we should take notice of the laws of a friendly country, even if they are revenue laws […], at least to this extent, that if two people knowingly agree together to break the laws of a friendly country or to procure some one else to break them or to assist in the doing of it, then they cannot ask this court to give its aid to the enforcement of their agreement.’55

h)

In re Emery’s Investments Trusts

This is another case56 dealing with the recognition of foreign revenue laws rather than the enforcement of a foreign revenue claim. The plaintiff was a British subject married to the defendant, an American. During their marriage they lived in South America most of the time. The husband acquired U.S. securities, which were registered in his wife’s name only to evade U.S. taxes. When the relationship between husband and wife deteriorated, the defendant sold the securities. The plaintiff claimed half of the proceeds, arguing that the beneficial interest in the securities should be as one-half to him. Wynn-Parry J., applying Regazzoni (supra at g), held ‘… that the registration of the securities in the wife’s name raised a presumption of advancement which could not be rebutted on the ground that the purpose of the registration in her name only was to enable the husband to avoid payment of American Federal tax, for equity would not grant relief in respect of a transaction carried out in contravention of law, albeit a foreign revenue law.’57

i)

Rossano v. Manufacturers’ Life Insurance Co.58

This case illustrates the difficulty of drawing a line between the forbidden enforcement of a foreign revenue claim and the recognition of foreign revenue laws, the latter of which is permitted to a certain degree in relations between private parties. The facts were as follows: In 1940 the plaintiff was an Egyptian national residing and carrying on business in Egypt. The defendants were a life insurance 55 Regazzoni (supra n. 53), 515 et seq., per Denning L.J.; ibid. 524 et seq., per Birkett L.J. 56 In re Emery’s Investments Trusts, [1959] 1 Ch. 410. 57 In re Emery’s (previous note), 411. On this case, see the analysis in Euro-Diam Ltd. v. Bathurst, [1990] 1 Q.B. 1, 23, per Staughton J. 58 Rossano v. Manufacturers’ Life Insurance Co., [1963] Q.B. 352.

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company headquartered in Toronto, Ontario (Canada). The defendants’ Cairo office issued three life insurance policies to plaintiff payable in 1960. In 1956, the plaintiff emigrated to Canada and later became an Italian citizen. When the policies matured in 1960, the Egyptian revenue authorities served two garnishee orders on the defendants’ branch in Egypt for tax alleged to be due by the plaintiff. The plaintiff brought an action in England claiming the money due under the insurance policies. The defendants contended that, because of the Egyptian garnishee orders, payment to plaintiff would expose them to penalties or to the risk of having to make payment twice. McNair J. held that ‘… the recognition of the garnishee orders served on the defendants would offend against the well-settled principle that English courts will not recognise or enforce directly or indirectly a foreign revenue law or claim […]; and that, accordingly, the defendants could not escape liability on the policies by reason of the garnishee orders and the plaintiff’s claim succeeded.’59 McNair J. relied on Holman v. Johnson,60 Government of India v. Taylor,61 and, above all, on Peter Buchanan Ld. & Macharg v. McVey.62 Quoting verbatim the arguments advanced by Kingsmill Moore J. in the latter case,63 he maintained that the enforcement of a foreign revenue claim must not depend merely on the form in which it is made, but the substance of the claim must be scrutinized.64 From this premise, he argued that ‘… for this court to allow the defendants to set up in diminution or extinction of the plaintiff’s claim a foreign garnishee order or attachment served upon them by the Egyptian tax authorities would clearly be contrary to the principles above stated.’65

j)

Pye, Ltd. v. B. G. Transport Service Ltd.

This case also belongs to the recognition rather than the enforcement group of cases. The facts of the case66 were quite simple: The plaintiffs sued the defendants 59

Rossano (supra n. 58), 353. Supra at A.a. 61 Supra at A.e. 62 Supra at A.f. 63 Supra A.f. 64 Rossano (supra n. 58), 377. 65 Rossano (supra n. 58), 377. 66 Pye, Ltd. v. B. G. Transport Service Ltd., [1966] 2 Lloyd’s Rep. 300 (Q.B.). 60

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for damages they had suffered because the defendants’ sub-contractors had – negligently, it was alleged – lost the plaintiffs’ goods (radio sets) in transit. The defendants contended that the plaintiffs could not recover the actual price of the radio sets, but were limited to the fictitious price fixed in a fake invoice, which was part of an arrangement between the plaintiffs and Lapman Company, Ltd. to defraud Persian customs. Justice Browne conceded that ‘… it follows from the decision of the Court of Appeal in the case of Regazzoni […] [see supra at g], that if these goods had not been stolen, and if the present plaintiffs had sued Lapman Company, Ltd. in the English Courts for their price, their action would have failed.’67 Nonetheless, he considered this of no relevance with regard to the damages owed by the defendants: ‘The measure of damages is prima facie the market value of the goods at the time of their loss. Even if the plaintiffs had agreed to make a free gift of these goods to Lapman Company, Ltd., they could still recover the value of the goods as against the defendants.’68 The decision was applied more recently in Euro-Diam Ltd. v. Bathurst.69

k)

Brokaw v. Seatrain U.K. Ltd.70

This case is especially interesting because it deals with the enforcement of U.S. revenue claims in English courts. Goods said to be household effects were shipped in a U.S. ship from Baltimore to London via Southampton. While the ship was on the high seas, the U.S. Treasury served a notice of levy for unpaid tax on the shipowners in the U.S., demanding the surrender of all property in their possession belonging to two U.S. taxpayers. When the ship docked at Southampton, the U.S. government claimed possession of the goods by virtue of the notice of levy. The plaintiffs, ultimate consignees of the goods, brought an action against the shipowners, claiming the delivery of the goods or their value (action of detinue). Their claim succeeded. Lord Denning M.R. explained: ‘The United States Government say that these goods were in the possession of the shipowners, who were “legally obligated under American law to surrender the goods” to the United States Government: that they were encumbered by a federal tax lien and were in 67

Pye, Ltd. (previous note), 309, per Justice Browne. Pye, Ltd. (supra n. 66), 309, per Justice Browne. 69 Euro-Diam Ltd. v. Bathurst, [1990] 1 Q.B. 1. 70 Brokaw v. Seatrain U.K. Ltd., [1971] 2 Q.B. 476 (C.A.). 68

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the possession of the United States Government who had a possessory interest in them: and that the Government were, therefore, in the constructive possession of the goods. It is well established in English law that our courts will not give their aid to enforce, directly or indirectly, the revenue law of another country. That was decided in the time of Lord Mansfield; but it was restated recently in Government of India v. Taylor […] [see supra at e], to which I would add Rossano v. Manufacturers’ Life Insurance Co. […] [see supra at i]. The United States Government submit that that rule only applies to actions in the courts of law by which a foreign government is seeking to collect taxes, and that it does not apply to this procedure by notice of levy, which does not have recourse to the courts. I cannot accept this submission. If this notice of levy had been effective to reduce the goods into the possession of the United States Government, it would, I think, have been enforced by these courts, because we would then be enforcing an actual possessory title. There would be no need for the United States Government to have recourse to their revenue law. […] If the United States Government had taken these goods into their actual possession, say in a warehouse in Baltimore, or maybe by attornment of the master to an officer of the United States Government, that might have been sufficient to enable them to claim the goods. But there is nothing of that kind here. […] Apart from this point, it appears to me that the United States Government are seeking the aid of these courts. They come as claimants in these interpleader proceedings. By so doing they are seeking the aid of our courts to collect tax. It is not a direct enforcement (as it would be by action for a tax in a court of law), but it is certainly indirect enforcement by seizure of goods. It comes within the prohibition of our law whereby we do not enforce directly or indirectly the revenue law of another country. If the position were reversed, I do not think that the United States courts would enforce our revenue laws. For no country enforces the revenue laws of another.’71

l)

X, Y and Z v. The Bank 72

This case raised the question whether a London branch of the defendant bank was obliged to comply with a subpoena issued in New York requiring production of 71

Brokaw (previous note), 482, per Lord Denning M.R.; Salmon L.J. and Phillimore L.J. concurring. 72 X, Y and Z v. The Bank, [1983] 2 Lloyd’s Rep. 535.

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documents relating to an account of the bank’s customer (plaintiff). The titles of the U.S. Code referred to in the subpoena related respectively to conspiracy to commit an offense or defraud the United States and to an attempt to evade or defeat tax.73 The applications before the court raised the question whether injunctions already issued to prevent the bank from complying with the subpoena should be continued to trial. The court answered this question in the positive. Taking issue with the arguments advanced by counsel for the defendants, Leggatt J. elaborated: ‘Mr. Longmore says that it is irrelevant that the subpoena was made in aid of foreign […] revenue matters, because that consideration does not justify any impediment being made by English Courts to the legitimate processes of United States Courts. Although it is true that the English Court will not enforce foreign revenue […] law, he says that the English Court is not being invited to undertake enforcement in this case, but merely not to impede […]. He relies, for example, on the case of Regazzoni v. K.C. Sethia (1944) Ltd. […] [see supra at g], which is authority for the proposition that if two people agree to break the laws of a foreign friendly country, the Court will not enforce the agreement, the application being that by implication the parties here, so he contends, have agreed to keep confidential what has been rendered illegal by the law of the place of performance. I think that this submission is attended by a certain unreality. The fact is that the gamekeeper is invited to turn a blind eye whilst the poacher takes a brace of pheasants, or three pheasants. In this context, it appears to me that not impeding involves a measure of assistance and, indeed, approbation, because, in particular, it would involve this Court tolerating a breach of confidentiality which, as I have pointed out, in the ordinary course must be maintained in the public interest.’74

m)

Attorney-General of New Zealand v. Ortiz and others 75

This case is interesting because it aptly illustrates the difficulties one faces when attempting to correctly classify laws as revenue, penal, or ‘other public’ laws. A door of a Maori treasure house that qualified as an historic antiquity under pertinent laws of New Zealand had been exported without the New Zealand government permission required by statute. After the Maori door had reappeared at 73

X, Y and Z (previous note), 539. X, Y and Z (supra n. 72), 546 et seq., per Leggatt J. 75 Attorney-General of New Zealand v. Ortiz and others, [1984] A.C. 1 (C.A.). 74

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Sotheby’s in London, the New Zealand government brought an action claiming the delivery of the door from the defendant. This claim was based on a forfeiture of illegally exported works of art under New Zealand law. Two questions arose: first, whether the forfeiture was automatic (a seizure had not taken place); and second, whether a claim based on an automatic forfeiture was enforceable in English courts. Both the Court of Appeal and the House of Lords answered the first question in the negative.76 Therefore, the second question was, strictly speaking, academic. Nevertheless, the appellate judges presented arguments on the second issue as well. Lord Denning characterized the pertinent New Zealand statute neither as a penal nor as a revenue law, but rather as belonging to a third category of ‘other public laws’ giving rise to claims which could not be enforced in English courts. After reiterating passages of his judgment in Regazzoni (supra at g) concerning the distinction between recognizing and enforcing foreign revenue laws, he elaborated: ‘[T]he general concept which embraces “penal” and “revenue” laws and others like them […] is to be found […] by going back to the classification of acts taken in international law. One class comprises those acts which are done by a sovereign “jure imperii”, that is, by virtue of his sovereign authority. The others are those which are done by him “jure gestionis”, that is, which obtain their validity by virtue of his performance of them. […] Applied to our present problem the class of laws which will be enforced are those laws which are an exercise by the sovereign government of its sovereign authority over property within its territory or over its subjects wherever they may be. But other laws will not be enforced. By international law every sovereign State has no sovereignty beyond its own frontiers. The courts of other countries will not allow it to go beyond the bounds. They will not enforce any of its laws which purport to exercise sovereignty beyond the limits of its authority.’77 He reached the conclusion ‘… that if any country should have legislation prohibiting the export of works of art, and providing for the automatic forfeiture of them to the State should they be exported, then that falls into the category of “public laws” which will not be enforced by the courts of the country to which it is exported, or any other country, because it is an act done 76 A-G of New Zealand (previous note), 19, per Lord Denning M.R.; ibid. 31, per Ackner L.J.; ibid. 35, per O’Connor L.J.; Attorney-General of New Zealand v. Ortiz and others, [1984] A.C. 1 (H.L.) 49, per Lord Brightman. 77 A-G of New Zealand (supra n. 75), 20 et seq., per Lord Denning M.R.

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in the exercise of sovereign authority which will not be enforced outside its own territory.’78 Ackner L.J. and O’Connor L.J. reached the same result by characterizing the forfeiture claim as arising from a ‘penal’ statute.79

n)

Williams & Humbert Ltd. v. W. & H. Trade Marks (Jersey) Ltd.80

This case does not deal with revenue law proper, but with foreign expropriatory laws. Simplifying the rather complicated case, the facts were as follows: Williams & Humbert Ltd. was an English company controlled by Rumasa S.A., a Spanish company. In 1976, Williams & Humbert Ltd. transferred its valuable trademarks to W. & H. Trade Marks Ltd., a Jersey company which in turn granted licenses to Williams & Humbert Ltd. to use the trademarks. These licenses were granted with the proviso that they were terminable without notice in the event of Rumasa S.A.’s shares being expropriated. In 1983, Rumasa S.A.’s shares were actually expropriated by the State of Spain. Williams & Humbert Ltd. – now indirectly controlled by the State of Spain – tried to recover the trademarks. The House of Lords considered the question whether Spain was trying to enforce a foreign revenue, penal, or other public law, but answered this question in the negative: ‘There is another international rule whereby one State will not enforce the revenue […] laws of another State. This rule […] may in the future be modified by international convention or by the laws of the European Economic Community in order to prevent fraudulent practices which damage all States and benefit no State. But at present the international rule with regard to the non-enforcement of revenue […] laws is absolute. […] [I]n any event the plaintiffs […] are not seeking to enforce the Spanish law [whereby the shares of Rumasa S.A. were expropriated]. […] Nourse J., ante, p. 385D-E, succinctly observed that the object of the Spanish law […] “was to acquire direct ownership and control of Rumasa […]. That object has been duly achieved by perfection of the State’s title in Spain. Accordingly, on a simple but compelling view of the matter there is nothing left to enforce”. I agree.’81

78 79

A-G of New Zealand (supra n. 75), 24, per Lord Denning M.R. A-G of New Zealand (supra n. 75), 34, per Ackner L.J.; ibid. 35, per O’Connor

L.J. 80 81

20

Williams & Humbert Ltd. v. W. & H. Trade Marks (Jersey) Ltd., [1986] A.C. 368. Williams & Humbert (previous note), 428 et seq., per Lord Templeman.

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One should note the scepticism Lord Templeman expressed about the revenue rule with regard to considerations of legal policy.

o)

In re State of Norway’s Application 82

This case gave rise to the question whether English courts could accede to a foreign State’s (here: Norway’s) request for evidence in foreign proceedings relating to a foreign taxpayer’s liability to tax where the request was supported by the taxpayer and the State. The question was turned into an ‘academic’ one because the Court of Appeal classified the request as an unacceptable ‘fishing expedition’.83 Nevertheless, Kerr L.J. considered the question, calling the revenue rule ‘certainly a principle of general international acceptation’.84 Yet he distinguished the present case: ‘However, it is clearly open to argument whether a request for evidential assistance […] relating to proceedings in a foreign court concerning a foreign resident’s tax liability, is properly describable as an action for the enforcement, directly or indirectly, of a revenue law of a foreign State. The recent decision of the House of Lords in Williams and Humbert […] [see supra at o] suggests that the principle stated in Dicey is to be construed narrowly. […] Accordingly, despite the references to the various stages of the process of “tax gathering” which Lord Somervell of Harrow mentioned [in Government of India v. Taylor, see supra at e], it must be doubtful whether the English courts would be wholly debarred from considering a request such as the present as a matter of public policy. Nevertheless, if this issue had arisen in the present case in a different form – that is, if a foreign State had sought to enlist the assistance of the English courts in order to obtain evidence against one of its taxpayers in opposition to the taxpayer – then I would have regarded such a request as part of the foreign “tax gathering” process to which the English courts should not lend their assistance as a matter of public policy, in keeping with principles which are internationally accepted.’85

82

In re State of Norway’s Application [1987] 1 Q.B. 433 (C.A.). In re Norway’s Application (previous note), 479F, per Kerr L.J. (with Ralph Gibson L.J. dissenting). 84 In re Norway’s Application (supra n. 82), 478A, per Kerr L.J. 85 In re Norway’s Application (supra n. 82), 479C-F, per Kerr L.J.; ibid., 489G, per Glidewell L.J., save that he declined to express ‘any firm view as to what the decision should have been if the application had been opposed by the [deceased taxpayer’s] estate’; ibid. 492B, per Ralph Gibson L.J., concurring with Glidewell L.J. 83

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One should note Kerr L.J.’s reading of Williams and Humbert as suggesting that the revenue rule is to be construed narrowly.

p)

United States of America v. Inkley 86

Although this case involves foreign penal rather than revenue laws, it is enlightening with regard to the English courts’ approach to drawing the line between civil and public law. The facts were as follows: The defendant, a British citizen, was arrested in Florida and charged with criminal offenses. He was released on bail on condition that he entered into an ‘appearance bond’ pursuant to 18 U.S.C.A. § 3146. Subsequently, the defendant was granted the permission to attend his father’s funeral in England and for obvious reasons did not return to Florida. After obtaining a judgment in their domestic courts against the defendant in the amount of the bond plus interest, the U.S. tried to enforce this judgment in England. The U.S. Department of Justice characterized the procedures for executing an appearance bond forfeiture as civil rather than criminal.87 From a discussion of the precedents, the Court of Appeal deduced a fivestep test for the characterization of issues involving foreign public law and the enforcement of pertinent claims in English courts: ‘From these authorities the following propositions seem to emerge which are relevant to the present appeal: (1) the consideration of whether the claim sought to be enforced in the English courts is one which involves the assertion of foreign sovereignty, whether it be penal, revenue or other public law, is to be determined according to the criteria of English law; (2) that regard will be had to the attitude adopted by the courts in the foreign jurisdiction which will always receive serious attention and may on occasions be decisive; (3) that the category of the right of action, i.e. whether public or private, will depend on the party in whose favour it is created, on the purpose of the law or enactment in the foreign State on which it is based and on the general context of the case as a whole; (4) that the fact that the right, statutory or otherwise, is penal in nature will not deprive a person, who asserts a personal claim depending thereon, from having recourse to the courts of this country; on the other hand, by whatever description it may be known if the purpose of the action is the enforcement of a sanction,

86 87

22

United States of America v. Inkley, [1989] 1 Q.B. 255 (C.A.). U.S. v. Inkley (previous note), 262F-G.

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power or right at the instance of the State in its sovereign capacity, it will not be entertained; (5) that the fact that in the foreign jurisdiction recourse may be had in a civil forum to enforce the right will not necessarily affect the true nature of the right being enforced in this country.’88 Applying these criteria, the Court of Appeal held ‘… that, notwithstanding its civil form, the purpose of the plaintiffs’ action was the execution of their public law process to ensure attendance of those charged with criminal offences before their criminal courts; and that, accordingly, the High Court had no jurisdiction to entertain the plaintiffs’ action and it should be struck out.’89

B.

The Private International Law (Miscellaneous Provisions) Act 1995

The British rules governing tort choice of law were codified in 1995.90 Section 14(3) of the Private International Law (Miscellaneous Provisions) Act 1995 (hereinafter: PIL (MP) Act 1995) provides: ‘… nothing in this Part – (a) authorises the application of the law of a country outside the forum as the applicable law for determining issues arising in any claim in so far as to do so […] (ii) would give effect to such a penal, revenue or other public law as would not otherwise be enforceable under the law of the forum.’ The intention of this provision is not to create new law but to make it clear that the abolition of the traditional double actionability rule in tort choice of law does not affect the available common law escape clauses that exclude penal, revenue, or other public laws. However, the legislators apparently did not intend to block further development. The authors in DICEY & MORRIS explain: ‘The phrase “would not otherwise be enforceable under the law of the forum” is intended to indicate that as far as “public law” is concerned, section 14(3)(a)(ii) is not intended to confirm that there is

88

U.S. v. Inkley (supra n. 86), 265C-F, per Purchas L.J. U.S. v. Inkley (supra n. 86), 256A-B. 90 Private International Law (Miscellaneous Provisions) Act 1995, Statutes in Force, Tort and Delict, 122:3:18; reprinted in: MAYSS A. J., Principles of Conflict of Laws, 3rd ed., London/Sydney 1999, 409-418. 89

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such an exclusionary rule but is concerned, rather, to reflect the common law position which is uncertain and possibly developing.’91 The same qualification is made by CHESHIRE & NORTH: ‘This provision is carefully worded so as not to suggest when a foreign public law will not be enforceable under English law, a matter on which there is some controversy. Instead, it provides that, if it would not be so enforceable, this will continue to be so even though the foreign law is the applicable law.’92

C.

Does English Law Prohibit English Courts from Enforcing Foreign Tax Judgments?

The answer is yes. In DICEY & MORRIS, the traditional revenue rule is restated as Rule No. 3: ‘English courts have no jurisdiction to entertain an action: (1) for the enforcement, either directly or indirectly, of a penal, revenue or other public law of a foreign State […].’93 ‘Indirect enforcement’ of foreign revenue laws includes, but is not limited to, recognition and enforcement of foreign tax judgments: ‘English courts will not enforce foreign revenue […] laws either directly or through the recognition of a foreign judgment.94 For a foreign judgment to be enforced in England, it must not be for foreign revenue […] laws.’95 Although there seems to be no precedent involving precisely the enforcement of a foreign tax judgment in England, one has to take account of Viscount Simonds’ discussion of indirect enforcement (recognition of foreign judgments) in Government of India v. Taylor.96 In light of the English courts’ persistent refusal to directly enforce foreign revenue laws,97 it is not astonishing that no plaintiffs tried their luck at having foreign tax judgments recognized. One should mention, however, the case of U.S. v. 91

DICEY & MORRIS, The Conflict of Laws, 13th ed., Vol. 2, London 2000, para. 35-

114. CHESHIRE & NORTH, Private International Law, 13th ed., London 1999, 647. 93 DICEY & MORRIS (supra n. 91), Vol. 1, para. 5R-018. 94 CHESHIRE & NORTH (supra n. 92), 447 (emphasis added). 95 MAYSS (supra n. 90), 96. 96 Supra n. 5, quoted supra at A.e. 97 See the preceding survey of cases. 92

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Inkley,98 in which the U.S. government tried to enforce a judgment for an ‘appearance bond’. Strictly speaking, the English courts’ refusal to entertain this action concerns a foreign penal law, but the arguments advanced by the court show that its reasoning extends to any claim ‘which involves the assertion of foreign sovereignty, whether it be penal, revenue or other public law’.99

D.

Does English Law Allow English Courts to Refuse to Enforce Foreign Tax Judgments, i.e., Are English Courts Granted Discretion in this Respect?

Since the question in part C above was answered in the positive, this takes care of the present question as well.

E.

Is There a Broader Rule in English Law Providing that English Courts Must not or Need not Enforce Foreign Revenue Laws?

As the preceding survey of twentieth century court practice has shown, English courts will not enforce foreign revenue laws. The leading case is still Government of India v. Taylor.100 Although Dicey & Morris framed the rejection of foreign revenue laws in terms of lack of jurisdiction,101 the authors of the current edition do not fail to notice that the pertinent cases have usually been dismissed on the merits.102 In spite of these technicalities, it is obvious that English courts consider themselves bound to refuse to enforce foreign revenue laws without exercising

98

Supra at A.p. U.S. v. Inkley (supra n. 86) 265C, supra at A.p. 100 Supra n. 5, supra at A.e. On the importance of this case, see DICEY & MORRIS (supra n. 91), Vol. 1, para. 5-019, who refer to Lord Keith of Avonholm’s reflections (see supra at A.e) as ‘the best explanation’ of the revenue rule in English law. See also CHESHIRE & NORTH (supra n. 92), 108: ‘All doubts [as to whether an action lies in England for the enforcement of a foreign revenue law] were […] stilled in 1955 by the decision of the House of Lords in Government of India v Taylor […]’; CARTER P.B., ‘Rejection of Foreign Law: Some Private International Law Inhibitions’, in: British Yearbook of International Law 55 (1985), 111-131, at 114. See also Brokaw v. Seatrain (supra n. 70), which is regarded as ‘the most important case’ by HARTLEY T.C., ‘Foreign Public Law and Private International Law: English Report’, in: KLEIN F.-E. (ed.), Basle Symposium on the Role of Public Law in Private International Law (20-21 March 1986), Basle/Frankfurt a.M. 1991, 13-27, at 17. 101 DICEY & MORRIS (supra n. 91), Vol. 1, para. 5R-018: ‘English courts have no jurisdiction to entertain an action […] for the enforcement […] of a […] revenue […] law.’ 102 See DICEY & MORRIS (supra n. 91), Vol. 1, para. 5-020. 99

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discretion. In the words of the House of Lords, ‘at present the international rule with regard to the non-enforcement of revenue […] laws is absolute’.103

F.

Are There – Even Broader – Rules in English Law According to Which English Courts Must not Apply or May Refuse to Apply Foreign Tax or Other Revenue Laws?

As the preceding survey of cases has shown, Lord Mansfield’s dictum that ‘no country ever takes notice of the revenue laws of another’104 has been criticized as being too wide.105 Today, it seems to be generally accepted that the English courts are not prohibited from recognizing foreign revenue laws, i.e., considering their effects on relationships between private parties (as opposed to indirectly enforcing foreign revenue claims).106 Therefore, English courts will not enforce a contract that is aimed at breaking foreign revenue laws.107 By the same token, they will not grant relief in equity for a transaction that violated the applicable revenue law.108 Damages for loss of goods in transit will be calculated on actual market value rather than on fake invoices designed to defraud foreign customs authorities.109 It is not always easy, however, to draw the line between indirect enforcement and mere recognition in cases where State actors ‘hide’ behind private parties such as executors, liquidators, or State-controlled private companies. It seems to be generally accepted, however, that the substance of the claim should be decisive rather than the form in which the action is brought.110 103

Williams & Humbert, supra at A.n. Holman v. Johnson, supra at A.a. 105 See In re Visser (supra n. 14) 883, per Tomlin J. (supra at A.d); Government of India v. Taylor (supra n. 5) 505, per Viscount Simonds (supra at A.e); Peter Buchanan Ld. and Macharg v. McVey (supra n. 39) 523, per Kingsmill Moore J. (supra at A.f); Regazzoni v. KC Sethia (1944) Ltd (supra n. 53) 515 et seq., per Denning L.J. (supra at A.g). 106 See CARTER P.B. (supra n. 100), 115; CHESHIRE & NORTH (supra n. 92), 110; DICEY & MORRIS (supra n. 91), Vol. 1, para. 5-021; HARTLEY T. C. (supra n. 100), 26. 107 See Regazzoni v. KC Sethia (1944) Ltd. (supra n. 53) 515 et seq., per Denning L.J. (supra at A.g). 108 See In re Emery’s (supra n. 56) 411 (supra at A.h). 109 See Pye, Ltd. (supra n. 66) 309 (supra at A.j). For further examples of recognition, see DICEY & MORRIS (supra n. 91), Vol. 1, para. 5-022; CHESHIRE & NORTH (supra n. 92), 110. 110 See Peter Buchanan Ld. and Macharg v. McVey (supra n. 39), 529, per Kingsmill Moore J. (supra at A.f); as adopted by Rossano v. Manufacturers’ Life Insurance Co. (supra n. 58) 377, per McNair J. (supra at A.i); U.S. v. Inkley (supra n. 86) (supra at A.p), 266A, (C.A.), per Purchas L.J. ‘Notwithstanding its civil clothing, the purpose of the action […] was the due execution […] of a public law process […].’ CHESHIRE & NORTH (supra n. 92), 109; DICEY & MORRIS (supra n. 91), Vol. 1, para. 5-023. 104

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One has to admit, however, that it is hard to reconcile the decision of the House of Lords in Williams & Humbert with these cases.111 If one accepts the argument advanced by the House of Lords that the expropriation of Rumasa S.A. was perfected in Spain and that the action to recover the trademarks was just an ordinary civil case, it does not seem quite logical that the liquidator in Buchanan should have been prohibited from ‘chasing the tax’ in Ireland. Applying the rationale of Williams & Humbert, one could argue that the Scottish revenue authority had exercised its sovereign power in Scotland (in filing for the compulsory winding-up of the company) and that the liquidator was merely exercising non-sovereign rights. Kerr L.J. draws the conclusion from Williams & Humbert that the revenue rule is to be construed narrowly.112 Thus, it remains to be seen whether the House of Lords will prefer a more formal approach to dealing with foreign revenue claims in the future. Two things have to be kept in mind: First, English courts characterize claims as revenue claims according to the criteria of English law.113 Therefore, even if, in a given case, U.S. law considered a claim as being an ordinary civil claim for damages, English courts would reserve the right to prefer a different classification. For the purposes of tort choice of law, this principle has been codified in section 9(2) of the PIL (MP) Act 1995: ‘The characterisation for the purposes of private international law of issues arising in a claim as issues relating to tort or delict is a matter for the courts of the forum.’ Second, since section 14(3) of the PIL (MP) Act 1995 lays down that ‘nothing in this Part – (a) authorises the application of the law of a country outside the forum as the applicable law for determining issues arising in any claim in so far as to do so […] (ii) would give effect to such a penal, revenue or other public law as would not otherwise be enforceable under the law of the forum’, it is clear that tort choice of law cannot be used to bypass the traditional common law revenue rule: If a claim (1) is lege fori characterized as a revenue claim and (2) would not otherwise (i.e., pursuant to common law rules, treaties, or conventions) be enforceable under English law, an action for such a claim cannot be entertained even if the applicable law is U.S. law (be it federal or State law). 111

See supra at A.n. In re State of Norway’s application (supra n. 82), 479D (supra at A.o). 113 See U.S. v. Inkley (supra n. 86) 265C, supra at A.p. The literature mostly approves of characterization lege fori, see, e.g., P.B. Carter (supra n. 100) 116; but see MANN F.A., ‘The International Enforcement of Public Rights’, in: N.Y.U. J. Int’l L. & Pol. 19 (1987), 603-630, at 612-617, especially 613: ‘The real question is whether international law regards that claim as constituting an infringement of the sovereignty of the forum State.’ 112

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G.

Outside the Specific Context of Revenue Laws, What Is the Current State of the Law or Legal Discussion in England Concerning the Existence of a Frequently Cited General Rule that Courts Must not, Should not, or Need not Apply or Recognize a Rule of Public Law of Another State? Are Distinctions Made as to Whether the Foreign Legal Rule Directly Controls the Suit or Concerns Only an Incidental / Preliminary Question, or Whether the Claim Arises from Private or Public Law?

According to DICEY & MORRIS, the ‘issue […] still remains open for decision in England whether the doctrine that penal and revenue laws will not be enforced extends to laws of a “political” or “public” character’.114 The authors themselves submit that ‘the prohibitions on the enforcement of penal and revenue laws are examples of a wider principle that a State cannot enforce its public law or its political and prerogative rights [abroad]’.115 This view was adopted in A-G of New Zealand v. Ortiz116 and in U.S. v. Inkley.117 It has been described above (see F) that English law distinguishes (forbidden) indirect enforcement of revenue laws from their permissible recognition. With regard to public laws the same distinction applies.118 Cases involving private parties and in which merely incidental/preliminary questions are governed by a foreign public law will probably have to be classified as only giving rise to a recognition rather than to an indirect enforcement of foreign public law. As far as the nature of the claim is concerned, one has to keep two things in mind: first, that the claim will be characterized pursuant to the criteria of the English lex fori, regardless of the applicable substantive private law (lex causae);119 and second, that English courts will prefer scrutinizing the substance of a claim rather than giving weight to a ‘civil clothing’.120

114

DICEY & MORRIS (supra n. 91), Vol. 1, para. 5-036. DICEY & MORRIS (supra n. 91), Vol. 1, para. 5-030. 116 Supra n. 75, supra at 1.m, per Lord Denning (obiter). 117 Supra n. 86, see supra at A.p. On expropriation, see Williams & Humbert (supra n. 80), supra at A.n. 118 See HARTLEY T. C. (supra n. 100), 26. See the decision in Regazzoni v. KC Sethia (1944) Ltd. (supra n. 53) supra at A.g. 119 See supra, answer to question F (at the end). 120 U.S. v. Inkley (supra n. 86) 266A (C.A., per Purchas L.J.). 115

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H.

To the Extent that the Above Questions Have Traditionally Found Restrictive Answers, Have Such Answers Been Questioned or Reversed in More Recent Legal Thinking?

A scathing criticism of the revenue rule can be found with P.B. CARTER121 who criticizes the practical consequences of the revenue rule: ‘England, it would seem, should be a haven for foreign tax evaders and defaulters.’122 The justification of the revenue rule given by Lord Somervell in Government of India v. Taylor123 is disparaged by CARTER: ‘This, with all respect, to the extent that it is not simply a restatement of the rule in the form of a principle, smacks of excessive formalism.’124 CARTER points out that it is not reasonable to afford protection to foreign tax dodgers when England imposes similar taxes.125 He emphasizes that the revenue rule is especially unsatisfactory where claims for the payment of public services (e.g., delivering electricity to households) might just as well be based on private law (e.g., contract).126 The decision of Lord Denning in Brokaw v. Seatrain127 is criticized as being overly focused on technicalities.128 Nevertheless, CARTER does not go so far as to imply that the revenue rule should not be considered as still being good law in English courts. He even points out the practical difficulties that would arise if the established rule were reversed: ‘The formulation of relevant choice of law rules [for foreign revenue claims] would also demand careful thought. Moreover, it would be necessary to ensure that the new pattern of the law could accommodate the various types of double taxation agreements entered into between States. Satisfaction of all these needs might well be a formidable task of considerable complexity. Total refusal to enforce foreign revenue laws has, it must readily be conceded, one undoubted attraction – that of simplicity. This is a quality which it shares with many arbitrary and irrational phenomena.’129

121

CARTER P.B. (supra n. 100), 114-119. CARTER P.B. (supra n. 100), 114. 123 ‘Tax gathering is not a matter of contract but of authority and administration as between the State and those within its jurisdiction’, Government of India (supra n. 5) 514. 124 CARTER P.B. (supra n. 100), 117. 125 CARTER P.B. (supra n. 100), 117. 126 CARTER P.B. (supra n. 100), 118. 127 See supra at A.k. 128 CARTER P.B. (supra n. 100), 119. 129 CARTER P.B. (supra n. 100), 119. 122

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This point is also raised in a less sarcastic fashion by COLLINS: ‘If, for example, contrary to the practice in 99 cases out of 100, probably contrary to universal practice, there was a rule which allowed the enforcement of foreign tax law […], we would have to have a choice of law rule and probably jurisdictional rules telling us in what circumstances a foreign tax law would be applicable. I think it is one of the reasons why we do not enforce foreign tax laws: It is almost impossible to formulate appropriate rules.’130

I.

Summary

Apart from a treaty or convention, English courts will not, either directly or indirectly, enforce foreign revenue or other public law claims. They will ‘take notice’, however, of the effects of foreign public law on (e.g., contractual) relationships between private parties (so-called recognition of foreign public law). The revenue rule – understood as a non-enforcement rule – has so far not been successfully challenged in English courts. The clearly dominant view among English scholars supports the non-enforcement rule. Even its critics do not deny its validity de lege lata as far as revenue laws or other claims based on acta iure imperii are concerned. The characterization of a claim as public or private is made in accordance with the lex fori. English courts scrutinize the substance of the claim rather than giving weight to the form in which the action is brought. Nevertheless, one should not fail to notice the skepticism expressed by the House of Lords in Williams & Humbert (supra at A.n) that the revenue rule may encourage ‘fraudulent practices which damage all States and benefit no State’. Given the opportunity and under the impression of more open-minded American judgments, English courts might well reconsider the traditional non-enforcement rule.

III. Germany A.

Does German Law Prohibit Courts from Enforcing Foreign Tax Judgments?

Aside from a treaty or convention, it is not possible to enforce foreign tax judgments in Germany. § 328 of the German Zivilprozessordnung (ZPO = Code of Civil Procedure), which governs the recognition of foreign judgments, is applicable 130

30

COLLINS L., in KLEIN F.-E. (supra n. 100), 128.

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only to judgments in civil law matters (bürgerlich-rechtliche Streitigkeiten) within the meaning of § 13 of the Gerichtsverfassungsgesetz (GVG; General Law on the Organization and Constitution of the Courts). The characterization of a claim as civil/private is made in accordance with the German lex fori.131 It is unanimously accepted that decisions in penal or revenue (tax and customs) matters do not constitute foreign judgments that could be recognized pursuant to the criteria laid down in the ZPO.132 The Finanzgerichtsordnung (FGO; Code of Procedure Before the Tax Courts) does not envision a recognition and enforcement of foreign judgments. § 117 of the Abgabenordnung (AO; General Tax Code) deals with the international cooperation of German revenue authorities with their foreign counterparts. Pursuant to § 117(2) AO, German revenue authorities may give their assistance (e.g., when confronted with foreign rogatory letters) on the basis of applicable international treaties/conventions and according to EC law. They have discretion in doing so. Under § 117(3) AO, German tax authorities may give their assistance in other cases, provided that the following requirements are met: -

reciprocity;

-

the State asking for assistance has to guarantee that the information provided will only be used for taxation purposes;

-

undertakings of the requesting State to prevent double taxation;

-

answering the request must not infringe upon the sovereignty, the safety, the public policy, or other essential interests of the Federal Republic or one of its local State bodies; there must be no danger to trade secrets, professional secrets, etc.

Courts, however, are not authorities (Behörden) for the purposes of § 6(1) AO, since they usually perform judicial rather than administrative tasks. Therefore, § 117 AO provides no basis for recognizing and enforcing foreign tax judgments or other titles. Nevertheless, the provision shows that German tax law is basically open-minded when it comes to answering other States’ requests for legal assistance in matters of taxation. The public international legal framework is elucidated by a 1983 decision of the Bundesverfassungsgericht (BVerfG = Federal Constitutional Court) dealing

131 See GEIMER R., Internationales Zivilprozeßrecht, 3rd ed., Cologne 1997, para. 2867; ZÖLLER R., Zivilprozeßordnung, 21st ed., Cologne 1999, § 328, para. 77. 132 See SCHACK H., Internationales Zivilverfahrensrecht, 2nd ed., Munich 1996, para. 817. See also KROPHOLLER J., Internationales Privatrecht, 3rd ed., Tübingen 1997, 555 (§ 60 II 4): ‘Actions based on public law are excluded.’

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with the German-Austrian Treaty on Administrative and Legal Cooperation in Customs, Excise Tax, and Monopoly Matters.133 The Court explained: ‘The previously non-existent legal possibility opened by the Legal Cooperation Treaty of 11 September 1970 – namely, that also Austrian titles of the kind described in this Treaty are to be executed in the Federal Republic of Germany by way of legal cooperation – did not merely change or extend previously existing procedural law but rather introduced a completely new general legal basis for execution. From the standpoint of international policy, this also represents a weighty step seldom seen in the practice of States. According to general public international law, a State is basically not obligated to tolerate in its sovereign territory the undertaking or execution of the sovereign acts of another State, or to assist in this by way of legal cooperation; public international law also does not, of course, prohibit such toleration or assistance; it leaves this decision to the States. States tend to practice extreme discretion in cases involving the execution of foreign criminal sentences or the collection of foreign tax liabilities in their own sovereign territory. Extradition for the purposes of execution of [a] sentence (in the requesting State) is as a rule here the utmost boundary of legal cooperation that a State is prepared to offer (and particularly for fiscal crimes, States often reserve in extradition treaties the freedom to deny extradition). In the law of tax collection as well, they consistently refuse to execute the foreign tax liability title in their own sovereign territory – under public international law, they are, however, not prevented from doing so. The practice by the Federal Republic of Germany in this area corresponds with the general practice of States. Nevertheless, it does recognize some exceptions in tax liability law: in several (usually, double-taxation) agreements, mutual execution of legally effective tax liability titles is agreed upon […].’134

133 BVerfG 22.3.1983 – 2 BvR 475/78, English translation in Decisions of the Bundesverfassungsgericht – Federal Constitutional Court – Federal Republic of Germany, vol. 1, Part II: International Law and Law of the European Communities, 1952-1989, published by the Members of the Court, Karlsruhe 1992, No. 29, 455-478. Original decision published in Entscheidungen des Bundesverfassungsgerichts (BVerfGE), vol. 63, p. 343. The following citations refer to the translation. 134 BVerfG 22.3.1983 (previous note), 465 et seq. (footnotes omitted).

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A German court may, however, enforce a foreign judgment in inheritance matters even though this could involve a compensation for the payment of succession duties.135 The facts of the case were as follows: A Belgian curateur (executor) had paid Belgian succession duties for the German part of the estate of a deceased German who had been domiciled in Belgium. The German heir J. had only paid the succession duty levied in Germany. The curateur sued J. in Belgium in order to receive a reimbursement of his costs and obtained an ex parte judgment against J. The Regional Court Dortmund recognized and enforced this judgment. It characterized the dispute as an inheritance rather than a tax matter. Moreover, the court pointed out that under German substantive law as well, the Belgian heir D. could demand from J. that each heir assume a fair share of the tax burden. The decision seems to be correct, although it is criticized as being wrongly decided by Kegel.136

B.

Does German Law Allow German Courts to Refuse to Enforce Foreign Tax Judgments, i.e., Are German Courts Granted Discretion in this Respect?

The answer to the first question takes care of the second question as well.

C.

Is There a Broader Rule in German Law Providing that German Courts Must not/Need not Enforce Foreign Tax or Other Revenue Laws?

According to the prevailing view in German court practice and literature, German courts must not enforce claims arising from foreign revenue or other public laws. The problem is usually framed as involving a lack of power or jurisdiction to adjudicate, but there is a controversial discussion about the doctrinal details.

135 Landgericht (LG = Regional Court) Dortmund 13.8.1976, Neue Juristische Wochenschrift (NJW) 1977, 2035. 136 KEGEL G., in KEGEL G./SCHURIG K., Internationales Privatrecht, 8th ed., Munich 2000, 936 (§ 23 I 1). But see GEIMER R., Internationales Zivilprozessrecht (supra n. 131) para. 1978b with further references.

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a)

Lack of power to adjudicate (Gerichtsbarkeit)

According to one line of opinion, German courts do not have the power to adjudicate foreign revenue claims because these claims are an expression of foreign sovereignty.137 In German legal terminology, the courts lack ‘Gerichtsbarkeit’ (‘jurisdiction’ or ‘pouvoir de juger’ in the French sense.) Kegel translates this as ‘jurisdiction […] which mainly belongs to the law of nations’.138 But the English concept of jurisdiction is wider.139 A similar view was expressed by the Kammergericht in one of the rare German decisions dealing with the enforcement of foreign revenue claims.140 The facts of the case were as follows: A Russian city brought an action against a former resident who was subsequently domiciled in Prussia for the payment of municipal taxes. The court dismissed the action as an infringement of German (or Prussian) sovereignty: ‘No sovereign State allows – treaty or convention apart – that a foreign State exercises sovereign powers within its territory, or that its authorities give assistance to the foreign State in exercising such powers, especially with regard to the collection of taxes for national or municipal purposes. Therefore, it is not a task for our courts to examine whether revenue claims of a foreign State are legal, to ascertain them and to enforce them with the aid of the coercive powers 137

Münchener Kommentar zum Bürgerlichen Gesetzbuch, vol. 10, Internationales Privatrecht, 3rd ed., Munich 1998, Einleitung, para. 360: German courts have no power to adjudicate ‘claims which are rooted in a foreign State’s interest iure imperii’; also KROPHOLLER J. (supra n. 132), 138 et seq. (§ 22 II 2): ‘Enforcement [of public law claims] by means of sovereign coercion (including court actions) is in principle – treaty or convention apart – limited to the territory of the State in question’; from the perspective of public international law, see SEIDL-HOHENVELDERN I./STEIN T., Völkerrecht, 10th ed., Cologne/Berlin/Bonn/Munich 2000, para. 1510-11 (enforcement of foreign taxes would be contrary to the principle of territoriality); implicitly Oberlandesgericht (OLG = Regional Court of Appeals) Hamm 21.3.1994, Recht der Internationalen Wirtschaft (RIW) 1994, 513 = Die deutsche Rechtsprechung auf dem Gebiete des Internationalen Privatrechts (IPRspr.) 1994, No. 2 (p. 3); see also SCHMITTMANN J. M./KOCKER S., ‘Zur Geltendmachung niederländischer Parksteuern vor deutschen Gerichten’, Deutsches Autorecht (DAR) 1996, 293 et seq.; presumably also NAGEL H./GOTTWALD P., Internationales Zivilprozeßrecht, 4th ed., Münster 1997, § 2, para. 20. 138 KEGEL G., ‘The Role of Public Law in Private International Law: German Report’, in: KLEIN F.-E. (supra n. 100), 29-62, at 34 and 52. 139 On the difficulties of translation, see SCHACK (supra n. 132) para. 132. 140 Kammergericht (KG = Regional Court of Appeals Berlin) 19.11.1908, Die Rechtsprechung der Oberlandesgerichte auf dem Gebiete des Zivilrechts (OLGE) 20 (1910), 91.

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of their own State. […] The plaintiff cannot claim the legal protection afforded by Prussian courts.’141

b)

Lack of international competence/jurisdiction to adjudicate (internationale Zuständigkeit)

The view that German courts lack the power to adjudicate claims arising under foreign public law has been rejected, however, by a more recent decision of the Bundessozialgericht (BSG = Federal Social Security Court).142 In this case, the Dutch unemployment insurance authority brought an action for restitution against a German citizen who had illegally drawn Dutch unemployment benefits. According to the BSG, one must not confuse the immunity from jurisdiction that the foreign State enjoys on the grounds of its acta iure imperii with the question whether a German court has the power to adjudicate claims against a citizen of the Federal Republic of Germany. Since the defendant was German, he was subject to the sovereignty of the Federal Republic of Germany, which included the power to adjudicate claims against him.143 Nevertheless, the court dismissed the action because it lacked the jurisdiction to adjudicate the claim (internationale Zuständigkeit = international competence).144 The view that courts lack jurisdiction (‘international competence’) to adjudicate claims arising under foreign public law is shared by numerous scholars.145

141 142

KG 19.11.1908 (previous note), 91 et seq. BSG 26.1.1983, Entscheidungen des Bundessozialgerichts (BSGE), vol. 54, 250,

at 251. 143

BSG 26.1.1983 (previous note), 251. BSG (supra n. 142), 254. ‘International competence’ is the translation suggested by KEGEL G., in KLEIN F.-E. (supra n. 100), 34. The difference between ‘jurisdiction’ and ‘international competence’ is that ‘jurisdiction’ is seen as belonging to the law of nations, whereas ‘international competence’ is regarded as merely being a ‘part of international procedural law’, a part of the law that is subject to sovereign policy-making by each State. KEGEL G., ibid., 52. 145 See EICHENHOFER E., Internationales Sozialrecht, Munich 1994, para. 639; SCHACK H. (supra n. 132), para. 511; SCHENKE W.-R., in: KOPP F.O./SCHENKE W.-R., Verwaltungsgerichtsordnung, Munich 2000 § 1, para. 25; SCHURIG K., Kollisionsnorm und Sachrecht, Berlin 1981, 163; WALCHSHÖFER, ‘Die deutsche internationale Zuständigkeit’, in: Zeitschrift für Zivilprozess 80 (1967), 165, at 75 et seq. See also FRANK, ‘Öffentlichrechtliche Ansprüche fremder Staaten vor inländischen Gerichten’, in: RabelsZ 34 (1970), 56, 58. 144

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c)

Lack of subject matter or functional jurisdiction

According to a third line of opinion, German courts lack subject matter jurisdiction (sachliche Zuständigkeit) to adjudicate foreign public law claims.146 Closely related to this school of thought is a fourth opinion whose supporters emphasize that there are no German courts which have the functional competence to adjudicate foreign revenue or other public law claims (fehlender Rechtsweg).147 The German court system distinguishes between different types of courts, each of which is assigned a specific functional competence: ordinary civil (and penal) courts, tax courts, administrative courts, labor courts, and social security courts. The ordinary civil courts are competent to hear civil law matters within the meaning of § 13 GVG (see supra, answer to question A). An action aiming at the enforcement of a foreign revenue claim is not a civil law matter within the meaning of this provision (see supra, answer to question A). The tax courts’ competence is defined in § 33 of the FGO (see supra, answer to question A). The tax courts are competent to adjudicate public law disputes concerning revenues levied under federal legislation and administered by federal or State authorities, § 33(1) No. 1 FGO. They are also competent if other administrative acts are performed in accordance with the AO (Tax Code), § 33(1) No. 2 FGO; if the matter is governed by the law on tax advisers, § 33(1) No. 3 FGO; and if the matter is assigned to the tax courts by another federal or State law, § 33(1) No. 4 FGO. This provision does not cover tax claims arising under foreign law.148 In comparison with § 33 of the FGO, the provision on the competence of the administrative courts is less clear. § 40(1) of the Verwaltungsgerichtsordnung (VwGO; Code of Administrative Courts) provides that the administrative courts are competent to deal with all public law matters which are not constitutional in

146 RIEZLER E., Internationales Zivilprozessrecht und prozessuales Fremdenrecht, Tübingen 1949, 230-233. See VAN HECKE G., ‘Nochmals: Der ausländische Staat als Kläger’, in: IPRax 1992, 205, at 206 (referring to Belgian law); VISCHER F., ‘Der ausländische Staat als Kläger’, in: IPRax 1991, 209, at 211 (referring to Swiss law). Undecided whether international or subject matter jurisdiction is lacking: KEGEL G., in KEGEL G./SCHURIG K. (supra n. 136), 937 (§ 23 I 1). 147 See JAEGER E., ‘Unzulässigkeit des Rechtswegs für Abgabenansprüche des Auslands’, in: Zeitschrift für Zivilprozess 58 (1934), 277-279; MÜLLER H., ‘Die internationale Zuständigkeit’, in: Deutsche Landesreferate zum 7. internationalen Kongreß für Rechtsvergleichung (1966), 181, at 186 et seq.; SCHMITTMANN J. M./KOCKER S. (supra n. 137), 294; WENGLER W., in: BGB-Reichsgerichtsrätekommentar (RGRK), Vol. 6, Internationales Privatrecht, Berlin 1981, Part II, 793, note 173. 148 See SCHMITTMANN J. M./KOCKER S. (supra n. 137) 294; WENGLER W. (previous note) Part II, 793, note 193.

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nature and which are not explicitly assigned to another court. At least the wording of § 40(1) VwGO allows the inclusion of claims arising under foreign law.149 But the view seems to prevail that § 40(1) VwGO presupposes that an action brought before a German administrative court is controlled by German law.150 The Code of Social Security Courts (Sozialgerichtsbarkeitsgesetz; SGG) does not confer competence on the social security courts to deal with claims arising under foreign law.151 Although the arguments referring to a lack of functional competence may smack of a rather narrow-minded formalism, one should be aware that the right of a person to have his or her case tried before the judge specified by law enjoys constitutional protection (Article 101 of the German Basic Law, i.e., the Federal Constitution). Actions brought for the enforcement of foreign revenue claims thus have the potential of being litigated all the way up to the Federal Constitutional Court if the defendant does not accept the functional competence of a specific court in a given case. It is submitted, however, that an interpretation of § 40(1) VwGO in the sense that it comprises actions for the enforcement of foreign tax claims would not exceed the boundaries of a constitutionally proper interpretation. One may ask, though, whether it would be a sensible result if the German administrative courts – which are not competent to adjudicate even German tax matters – were to deal with foreign tax laws.

d)

Lack of procedural equality

Moreover, distinguished scholars have advanced the argument that the enforcement of foreign revenue claims violates the principle of equality before the law since – pursuant to the principle of State immunity – the taxpayer has no option but to sue the State which levied the tax before the latter’s own courts.152

149 See FRANK R. (supra n. 145), 58; GEIMER R. (supra n. 131), para. 1978; ROLOFF S., Die Geltendmachung ausländischer öffentlich-rechtlicher Ansprüche im Inland, Regensburg 1993, 148 et seq. 150 See SCHENKE W.-R., in: KOPP F.O./SCHENKE W.-R. (supra n. 145), § 40 VwGO, para. 37 (foreign law only applicable to incidental / preliminary questions); SCHMITTMANN J.M./KOCKER S. (supra n. 137), 294; WENGLER W. (supra n. 147), Part II, p. 793, note 193; see also BURGI M., ‘Verwaltungsgerichte als Gemeinschaftsgerichte’, in: Deutsches Verwaltungsblatt 1995, 772-779, at 776 et seq.; VISCHER F. (supra n. 146), 210. 151 BSG (supra n. 142), 253. 152 WENGLER W. (supra n. 147), Part I, 124; also SCHACK H. (supra n. 132), para. 511; VISCHER F. (supra n. 146), 212.

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From a public international point of view, however, a State waives its immunity from jurisdiction with regard to a counterclaim raised by the defendant provided that this claim is closely connected with the subject of the original suit.153

e)

Lack of a conflict rule

Others reject the application of foreign public law because there is no conflicts rule telling the court to apply it.154

f)

Foreign policy inhibitions

Apart from that, one finds arguments similar to those advanced by Judge Learned Hand in Moore v. Mitchell,155 i.e., that an examination of foreign acta iure imperii might give rise to irritations in other States and create difficulties with regard to foreign policy.156

g)

Lack of interest

Several authors openly acknowledge that a State is simply not interested in enforcing another State’s tax claims: ‘No State is another’s beadle.’157

h)

Recent court practice

In court practice, it is often not easy to determine the precise doctrinal grounds for the refusal to entertain an action for the payment of foreign taxes. This is illustrated

153 See SEIDL-HOHENVELDERN I./STEIN T. (supra n. 137), para. 1467; ROLOFF S. (supra n. 149), 142-145. 154 See VOGEL K., Der räumliche Anwendungsbereich der Verwaltungsrechtsnorm, Frankfurt a.M./Berlin 1965, 195 et seq. 155 Supra n. 37. 156 See FRANK R. (supra n. 145), 70; RIEZLER E. (supra n. 146), 232; SCHACK H. (supra n. 132), para. 511: courts should avoid ‘meddling in questions involving the sovereignty of other States’; SCHURIG K. (supra n. 145), 163, note 523. 157 GEIMER R. (supra n. 131), para. 1975-76; see also KEGEL G., in KEGEL G./ SCHURIG K. (supra n. 136), 937 (§ 23 I 1): ‘States don’t help each other’; NEUHAUS P.H., Die Grundbegriffe des Internationalen Privatrecht, 2nd ed., Tübingen 1976, 403 (§ 54 II 2 b): ‘Domestic courts do not lack the power to adjudicate foreign tax claims, they are just not interested in them’; SCHACK H. (supra n. 132), para. 511: ‘a thankless task’.

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by three decisions of lower regional courts concerning the enforcement of Dutch parking taxes (belasting) against German car owners in Germany.158 The Amtsgericht Mannheim dismissed the suit of the Dutch municipality because the plaintiff failed to prove that the defendant had used the parking lot at all. The Amtsgericht Münster declined its jurisdiction because of a ‘lack of functional competence of German courts for the enforcement of claims arising from the public law of a foreign State’. Only the Amtsgericht Leverkusen accepted the plaintiff’s assertion that the belasting claim should be characterized as contractual. It then went on, however, to dismiss the claim, finding that a ‘purely fictitious conclusion of a contract’ is incompatible with German public policy (Article 6 of the EGBGB = Introductory Law to the German Civil Code).

D.

Are There – Even Broader – Rules in German Law According to Which German Courts Must not Apply or May Refuse to Apply Foreign Tax or Other Revenue Laws?

As in English law (see supra at II), a distinction must be made between enforcing foreign revenue claims and the mere recognition of foreign revenue or other public laws. The Bundesgerichtshof (BGH = Federal Supreme Court in civil matters) has repeatedly decided that foreign public law comes into play when giving shape to notions of immorality contained in German substantive law.159 In the Borax case, the BGH ruled that a violation of a U.S. embargo against the members of the Warsaw Pact gave rise to immorality of a contract pursuant to § 138 of the German Civil Code (not to illegality under § 134 of the Civil Code). The facts of the case of the Nigerian masks are very similar to the English decision in A-G of New Zealand v. Ortiz.160 The BGH had to determine the validity of a contract insuring Nigerian works of art that could not be exported legally. The BGH ruled that the contract violated German notion of ‘good morals’ (§ 138 of the Civil Code). In the most recent case, the facts were as follows: A Thai company had ordered steel (via intermediaries) from a German company. Although all documents specified that the steel should come from West Germany, the German company – 158 Amtsgericht Mannheim 21 June 1994, DAR 1994, 405 with a note by SCHULTE = IPRspr. 1994, No. 36; Amtsgericht Münster 23 November 1994, DAR 1995, 165 with a note by SCHULTE = IPRspr. 1994, No. 146; Amtsgericht Leverkusen 14 February 1995, Neue Zeitschrift für Verkehrsrecht (NZV) 1996, 36 = IPRspr. 1995, No. 5. 159 The leading cases are BGH 21 December 1960, Entscheidungen des Bundesgerichtshofs in Zivilsachen (BGHZ), vol. 34, 169 (Borax); BGH 22 June 1972, BGHZ, vol. 59, 82 = NJW 1972, 1575 with a note by MANN at 2179 (Nigerian masks); BGH 20 October 1992, RIW 1993, 146 = IPRspr. 1992, No. 59 (South African Steel). 160 A-G of New Zealand (supra n. 75).

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without the knowledge of the Thai final buyer – delivered South African steel, which, on its arrival in Bangkok, was confiscated by the Thai authorities because it violated a Thai embargo against the Republic of South Africa. Applying the German law of torts, the BGH found that the German company had intentionally inflicted harm on the final buyer in a way that offended German ‘good morals’ (§ 826 of the Civil Code) and ordered it to pay compensation. German scholars (who mainly prefer a conflicts approach) have criticized the immorality approach as ‘inconsistent and lead[ing] to a vicious circle since it presupposes its purported results’.161 It should be noted, however, that Germany made a reservation to the conflicts solution proposed in Article 7(1) of the Rome Convention on the law applicable to contractual obligations.162

E.

Outside the Specific Context of Revenue Laws, What Is the Current State of the Law or Legal Discussion in Germany Concerning the Existence of a Frequently Cited General Rule that German Courts Must not, Should not, or Need not Apply or Recognize a Rule of Public Law of Another State? Are Distinctions Made as to Whether the Foreign Legal Rule Directly Controls the Suit or Concerns Only an Incidental/Preliminary Question, or Whether the Claim Made Arises from Private or Public Law?

See the cases discussed in the answer to question D, which do not involve revenue law stricto sensu. Contrary to the historical development of the discussion in common law jurisdictions, the non-enforcement of revenue law is not regarded as a specific case but rather as part of a wider doctrine of the non-enforcement of foreign public law claims.163 If a foreign authority merely requests reimbursement for an act that it could have performed just as well under private law, German courts may enforce a pertinent claim.164

161 BASEDOW J., ‘Private Law Effects of Foreign Export Controls – An International Case Report’, in: German Yearbook of International Law 27 (1984), 109-141, at 122, with further references; see also KEGEL G., in: KLEIN F.-E. (supra n. 100), 45 et seq., 55-59. 162 See BASEDOW J. (previous note), 139-141; KEGEL G., in: KLEIN F.-E. (supra n. 100), 59 et seq.; KROPHOLLER J. (supra n. 132), 447-449. 163 See BASEDOW J. (supra n. 161), 115 et seq. 164 See LG Hamburg 9 March 1977, IPRspr. 1977, No. 115: The city of Vienna sued the owner of a house situated in Vienna to pay the cost accrued as a result of necessary measures taken by the city to prevent damages to passers-by because of the deteriorating structure of the house. The Landgericht emphasized the similarity of this claim with those arising from negotiorum gestio (agency without mandate, §§ 677-687 of the German Civil

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If a rule of a foreign public law is merely needed to decide an incidental question (e.g., in the case of the Landgericht Dortmund discussed at the end of the answer to question A), German courts will apply it. However, this must not lead to an indirect enforcement of foreign revenue claims. It should be kept in mind that the characterization of a claim as ‘public’ or ‘private’ follows the criteria established by the German lex fori.165 The facts of this case were as follows: The plaintiff was a Dutch public limited company with its seat in Amsterdam. It was founded by a German bank. After World War II, the company’s shares were expropriated by the Dutch government. The government appointed liquidators who took charge of the company. The defendants had been shareholders of the plaintiff company before the expropriation. The plaintiff claimed that it had given a guarantee for the defendants’ tax debts to the Dutch authorities in 1942-43 and paid the amount owed by the defendants. It brought an action in Germany for the restitution of this amount. Although the plaintiff based its claim on Dutch private law provisions, the Hanseatic Court dismissed it as a ‘disguised revenue claim’.166 Moreover, in the case before the BSG in 1983,167 the Dutch authority tried in vain to convince the court of a characterization of the claim as being simply directed at ordinary civil restitution or sounding in tort. The BSG classified the claim for the restitution of illegally received unemployment benefits as being of a public law nature and therefore unenforceable in German courts. However, distinguished scholars have criticized the BSG for erring on the characterization issue.168

Code). Consequently, it did enforce the claim. But see the decision of the BGS, supra, answer to question C, at b. 165 See Hanseatisches OLG (Hanseatic Court of Appeals) Hamburg 25 November 1959, IPRspr. 1958-59, No. 61. 166 Hanseatisches OLG Hamburg (previous note) 243: ‘If a company which has been expropriated by a State pays taxes to this State, the State is paying money into its own pocket.’ 167 See supra, answer to question C, at b. 168 See GEIMER R. (supra n. 131), para. 1974; KEGEL G., in KEGEL G./SCHURIG K. (supra n. 136), 937 (§ 23 I 1); MANN F. A. (supra n. 113), 614. The court’s characterization is defended, on the other hand, by EICHENHOFER E. (supra n. 145), para. 639; SCHACK H. (supra n. 132), para. 511; VISCHER F. (supra n. 146), 214. See also the decision of the Amtsgericht Münster, supra n. 158, answer to question C, on Dutch parking taxes.

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F.

To the Extent that Restrictive Answers Have Traditionally Been Given to the Above Questions, Have Such Answers Been Questioned or Reversed in More Recent Legal Thinking?

The traditional rule was challenged in an article by Frank in 1970169 and in a doctoral dissertation by Roloff in 1994.170 It should be mentioned, however, that Frank’s criticism is directed mainly at the non-enforcement of claims related to social security and public services (e.g., payments for water supply or electricity), a set of rules that German lawyers refer to as Daseinsvorsorge (ensuring the public’s well-being), a term coined by Forsthoff.171 Even Frank considers the enforcement of claims rooted in foreign acta iure imperii (such as taxes) ill-advised since their examination could give rise to political irritation.172 Roloff criticizes the traditional arguments advanced for the non-enforcement of foreign public law claims as irrational and mechanical.173 However, she stops short of advocating the enforcement of foreign public law claims in Germany de lege lata.174 She then goes on to develop a model law for the enforcement of foreign public law claims, which is not discussed here as it concerns the situation de lege ferenda only.175 Although, at the end of the day, neither Frank nor Roloff advocates the enforcement of foreign revenue claims de lege lata, their arguments against the traditional restrictive view merit consideration. Frank argues that the enforcement of foreign public law claims does not infringe the sovereignty of the plaintiff or the forum State. The plaintiff State consents to the application and examination of its own public law by the courts of the forum State.176 The sovereignty of the forum

169 170

FRANK R. (supra n. 145), 56-75. ROLOFF S. (supra n. 149) critically reviewed by FRANK, in: RabelsZ 62 (1998),

568-570. 171

FRANK R. (supra n. 145), 74. FRANK R. (supra n. 145), 70. 173 ROLOFF S. (supra n. 149), 129-160. 174 ROLOFF S. (supra n. 149), 161: ‘The true reason [why] de lege lata [foreign public law claims will not be enforced in Germany] lies in constitutional law. The rule of law (Rechtsstaatsprinzip) requires that the criteria for the enforcement of foreign public law claims must be spelled out in an act of parliament which so far does not exist (Vorbehalt des Gesetzes).’ 175 For a very critical – not to mention harsh – evaluation of ROLOFF’s proposal (supra n. 149, 161-183), see FRANK R. (supra n. 170), 570 (‘hardly comprehensible’, ‘shallow’, ‘lack of a theoretical concept’). 176 FRANK R. (supra n. 145), 63; see also ROLOFF S. (supra n. 149), 146. 172

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State is not infringed because the plaintiff State ‘humbly and simply prays’ to make domestic courts available to it.177 According to Frank, not to allow actions based on a foreign public law cannot be justified by a lack of (internal) functional competence. Namely, if the German courts had (international) jurisdiction, the German administrative courts would be (internally) competent.178 The lack of a positive conflicts rule does not, in his view, constitute an obstacle to the enforcement of foreign public law claims. The principle that authorities of a State only apply their own administrative law does not extend to the courts.179 Frank sums up his opinion in the following paragraph: The only possible reason to justify a refusal of jurisdiction could be lack of interest, rather than lack of power. However, there is today a wide and everincreasing area of international judicial co-operation, and it would not be very persuasive if a State generally disclaimed any interest in adjudicating foreign public law cases if it had the power to do so. As a better approach it is suggested that every individual case be examined for concrete reasons why jurisdiction should be granted or refused. Furthermore, a categorical distinction of private law actions for which the domestic courts would exercise jurisdiction, and public law actions for which they would refuse it, would not do justice to the numerous borderline cases which do not permit an unambiguous classification; divergent characterisation would render unlikely any uniformity of decision as between the courts of different countries.180 Geimer calls the principle of non-enforcement of foreign public law claims ‘increasingly questionable with regard to the globalisation of humanity’s problems and the resulting need for international cooperation’.181 As an example, he cites Haiti v Duvalier.182 For his part, Schurig advocates a case-by-case approach in dealing with public law claims but rejects the enforcement of ‘political’ claims.183

177 FRANK R. (supra n. 145), 64. But see the criticism directed against this argument by MANN F. A. (supra n. 113), 608: The plaintiff State ‘does not “humbly and simply pray” […]; instead, it puts forward a sovereign or public right. It demands the recognition and enforcement of that right’ (emphasis in the original text). 178 FRANK R. (supra n. 145), 57-59; see supra, answer to question C, at c. 179 FRANK R. (supra n. 145), 60 et seq. ROLOFF S. (supra n. 149), 150-152. See also BAADE H. W. , ‘Operation of Foreign Public Law’, in: International Encyclopedia of Comparative Law, Vol. 3, Private International Law, Ch. 12, Tübingen 1991, para. 70 (calling the lack of conflicts rules a ‘parochial’ argument). 180 FRANK R. (supra n. 145), 74 et seq. 181 GEIMER R. (supra n. 131), para. 1978c. 182 Cass. civ. 29 May 1990, Rev. crit. dr. int. pr. 80 (1991), 386, see infra at IV. 183 SCHURIG K. (supra n. 145) 163.

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G.

Summary

Apart from a treaty or convention, German courts will not, either directly or indirectly, enforce foreign revenue or other public law claims. They will take foreign public law into account, however, when evaluating (e.g., contractual) relations between private parties, for instance for the purpose of ascertaining immorality pursuant to substantive law (§§ 138, 826 of the German Civil Code). Although there is an ongoing controversy about the proper doctrinal foundation of the nonenforcement rule, to date it has not been successfully challenged in German courts. The prevailing view among German scholars clearly supports the non-enforcement rule. Even its critics do not deny its validity de lege lata in matters relating to revenue laws or other claims based on acta iure imperii. The characterization of a claim as public or private is made in accordance with the lex fori. German courts scrutinize the substance of the claim rather than giving weight to the form in which the action is brought.

IV. France A.

Introductory Remarks

The report on French law basically needs to do no more than present and comment on two decisions by the Cour de cassation (French Supreme Court), both rendered within less than four weeks in May 1990: the Guatemala case184 and the Duvalier case.185 Whatever case law there was before was either abandoned or taken up by these two decisions, which must be read together, as a French commentator rightly remarked.186 In fact, there was not much case law – ‘real’ law – before, and nothing seriously debated with respect to the questions discussed here. A bird’s eye view is still necessary to outline the context.

184

Cass. civ. 2.5.1990, République du Guatemala c/Société de négoce de café et du cacao Sincarc et autres, Clunet 1991, 137; Rev. crit. dr. int. pr. 1991, 379 note AUDIT B., ibid. 381. 185 Cass. civ. 29.5.1990, Consorts Duvalier et autres c/Etat Haïtien et autres, Clunet 1991, 137 (139); Rev. crit. dr. int. pr. 1991, 386 note BISCHOFF J.-M., ibid. 388. 186 DEHAUSSY J., ‘Le statut de l’Etat étranger demandeur sur le for français: Droit international coutumier et droit interne’, in: Clunet 1991, 109, 110.

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B.

Basic Doctrine and Terminology

The departure point of French law and doctrine is the fundamental civil law dichotomy of private and public law: Private law concerns the relations between private parties, public law the relations between citizens, on the one hand, and the State and State agencies, on the other (and, of course, the relations between the agencies themselves). Numerous refinements of this distinction are not dealt with here. Revenue laws belong to public law and are usually expressly mentioned as a sub-category, i.e., tax statutes or tax and customs statutes (lois fiscales et douanières), a term whose scope practically coincides with revenue laws. Against this background, the view that foreign public law cannot be applied directly by French courts has remained uncontested.187 Notwithstanding this dogma, French courts have always applied foreign public law when it was invoked by conflict of laws rules in litigation between private parties. This is also usually emphasized by French commentators to the effect that the dogma, in truth, is considerably reduced in its purportedly general scope.188 However, as regards revenue laws in particular, it seems that no exceptions to the dogma or restrictions have been admitted.189 On the other hand, court decisions involving tax and customs statutes are scarce; the following overview appears to be essentially complete for the period it covers. In fact, there has apparently been no single court decision on the central issue of the revenue law dogma, i.e., the direct enforcement of foreign tax or customs statutes. The issue whether or not a foreign revenue statute should be applied has been raised only indirectly in cases within the framework of reimbursement.

C.

Case Law Prior to 1990

a)

In a 1928 Supreme Court case, the German tax administration found that the sale of a block of shares in a potassium mine held in joint ownership was taxable, and it levied the whole amount of the tax against one of the two sellers who were jointly and severally liable. That debtor paid the whole amount before he died. His estate then claimed proportional reimbursement from the other seller who was resident in France. The claim was dismissed in all French courts – the District Court, the Court of Appeals and the Supreme Court – because of the ‘strict territoriality of tax statutes’, which

187 See ANCEL B./LEQUETTE Y., Les grands arrêts de la jurisprudence française de droit international privé, 2e ed., Paris 1992, 592, 596 and 597; DEHAUSSY J. (previous note) 109: ‘The French courts do not have to make themselves the arm of a foreign souvereign.’ 188 See generally BATIFFOL H./LAGARDE P., Droit international privé, Vol. I, 8th ed., Paris 1993, 416 (no. 248). 189 BATIFFOL H./LAGARDE P. (previous note), 418; AUDIT B. (supra n. 184), 382.

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was held to prevent the application of a foreign tax statute even within the context of reimbursement or unjust enrichment. The decision was criticized as incorrect, ‘drawing a seemingly exaggerated consequence from the uncontested principle of territoriality of tax statutes’, as a commentator aptly remarked at the time.190 This may possibly be explained by the fact that the sale and its taxation by the German authorities occurred in 1911 in Alsace-Lorraine, which was returned to France in 1918, and the suit in France was brought subsequently (though this territorial change of hands could justify the opposite result as well). In any case, the decision has not been followed in later case law. b)

A 1972 Supreme Court case involved a dispute between the plaintiff and the French tax administration in Algeria before 1962 when Algeria was still French. The administration had agreed to postpone enforcement of the taxes assessed, subject to a bank guarantee given by the defendant bank as surety. In turn, the bank required the plaintiff to deposit a number of shares and accept the express obligation to reimburse the defendant for all payments eventually claimed by the administration. After Algeria became independent, the plaintiff sued the bank for restitution of his shares and annulment of his obligation, claiming that Algeria had succeeded to the French tax claims under the independence agreement but could not enforce them in France, thus making the principal obligation – i.e., the tax claim – void, and the surety obligation as well. The claim was denied in both the Court of Appeals and the Supreme Court on the ground that the tax claim had arisen prior to 1962 and had been assigned to the State of Algeria. Consequently, the surety obligation of the defendant bank continued to exist, and the plaintiff failed to prove that his own obligations no longer existed.191 Although the case is cited as indicating a possible exception to the territoriality of tax statutes, such interpretation is not justified.192

c)

In 1975, the Supreme Court squarely abandoned the rationale of the 1928 decision cited above (though this has never been expressly stated in French decisions). The French owner of a hotel situated in Algeria had been required to pay Algerian taxes but successfully claimed reimbursement from

190

Cass. civ. 3.7.1928, Héritiers Voigt c/Feltin, Clunet 1929, 385, note J.P. Cass. civ. 13.12.1972, Epoux Derouet c/S.A. Crédit Lyonnais, Bull.civ. I no. 287. 192 Apparently in this sense BATIFFOL H./LAGARDE P. (supra n. 188), 419 (no. 248). 191

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the operator/manager (gérant libre) who was liable for payment pursuant to their contractual obligations.193 d)

Confirming the decision of the Court of Appeals, in a 1983 case the Supreme Court upheld an enforcement order (exequatur) granted for an Algerian judgment in favor of the Algerian Central Bank. The bank had been sued by the French plaintiff for the balance of his account resulting from a devaluation of the French franc, with its profit being reserved to the Algerian fisc under an Algerian decree. This decree certainly was a revenue statute; however, the account affected had always been located in Algeria and was subject to Algerian law. Accordingly, declaring the Algerian judgment enforceable in France did not give extra-territorial effect to the decree.194

D.

The 1990 Supreme Court Decision in Guatemala

a)

The 1990 Guatemala coffee case involves coffee exported from Guatemala that did not meet the export standards required under Guatemalan regulations. Moreover, taxes and customs duties had not been paid. After a chain of sales and purchases ‘passablement confuse’ in the words of a commentator, in part fictitious and with the alleged use of forged documents, the coffee ended up in the Netherlands. The Republic of Guatemala brought action in the Paris Commercial Court against the defendant French company, which was alleged to have instigated the scheme, and other parties to the chain of transactions, claiming an amount of money equal to the unpaid customs duties, as well as restitution of the coffee or, failing this, of its value. The claims were dismissed in all instances.195

b)

The leading phrase of the Supreme Court’s reasoning forms the syllabus wherever this judgment is published, thus indicating its importance: ‘From the principles of international law governing the relations between States it follows that, to the extent their object, as seen by the lex fori, is tied to the exercise of the public power, claims of a foreign State based on provisions of public law cannot be brought before French courts. The principle may, however, be disregarded, in 193

Cass. civ. 21.1.1975, Richier c/veuve Jourdan, Rev. crit. dr. int. pr. 1977, 120, note COUCHEZ G. 194 Cass. civ. 15.11.1983, Soc. Schenk Algérie c/Banque nationale d’Algérie, Rev. crit. dr. int. pr. 1985, 100, note BATIFFOL H. 195 Cass. 2.5.1990 (supra n. 184).

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particular, if, from the point of view of the forum, the requirements of international solidarity or convergence of the interests concerned justify it.’196 It should be noted that this text is taken almost literally from resolutions of the Institut de droit international; however, this pedigree is left aside as our task here is to determine to what extent it has become actual French law.197 c)

On the basis of this principle, the Court first approved the holding of the Court of Appeals that the lack of jurisdiction (défaut de pouvoir de juridiction) derived from the very object of the Republic of Guatemala’s claims; secondly, it stated that the illegality of the act of exporting the coffee arises only on the basis of Guatemala’s foreign commerce regulations and not as a violation of international agreements requiring solidarity between France and Guatemala. Finally, it found that the foreign State’s claim to restitute the illegally exported goods on the ground of its right to follow the asset (droit de suite) constituted a sufficient expression of the exercise of a prerogative of public power.

d)

By way of commentary, it should be underlined that the Court’s finding of lack of jurisdiction must be seen in the framework of continental concepts of procedure rather than English or American concepts. In the United States, the concept of jurisdiction encompasses in particular the division of the power to adjudicate as between several States or ‘jurisdictions’, i.e., in continental terms the rules on ‘international competence’. As opposed to that concept, the French Supreme Court expressly approves the Court of Appeals’ finding of a lack of jurisdiction prior to any examination of international competence based on the nationality or location – localisation in the original text – of the defendants, which would have been the first regular step in international proceedings in continental European courts. The Court concludes that in doing so, the Court of Appeals did not violate any French rule on ‘international judicial competence’. This is stunning because it is the foreign State itself that submits the matter to the French courts; however, the Supreme Court clearly means what it says. Stressing its point, it says 196

The original reads as follows: ‘Il résulte des principes du droit international régissant les relations entre Etats que, dans la mesure où du point de vue de la loi du for, leur objet est lié à l’exercice de la puissance publique, les demandes d’un Etat étranger fondées sur des dispositions de droit public ne peuvent être portées devant les juridictions françaises. Toutefois, le principe peut être écarté, notamment, si, du point de vue du for, les exigences de la solidarité internationale ou la convergence des intérêts en cause le justifient.’ 197 For a current analysis of French law, see AUDIT B., Droit international privé, nd 2 ed., Paris 1997, 248-253 (no. 278 et seq.).

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even more directly that what is lacking is ‘the power to adjudicate’ (le pouvoir de juger). Since the foreign State’s sovereign power is not at issue, it can only be French sovereign power that is lacking; however, that is hardly conceivable (or it might be the power of the judiciary within the internal French division of powers, but then such power would have to be vested in one or both of the other branches of government, which seems even less conceivable). At this point, the Supreme Court has left its commentators and analysts at a loss. Nevertheless, the judgment must be taken as it stands. e)

In its second conclusion, the Supreme Court finds that the exception to the principle is unavailable to the Republic of Guatemala; there is nothing extraordinary in this. In contrast, the Supreme Court’s third conclusion – that in reclaiming the coffee Guatemala is exercising its sovereign power – is remarkable again. Since Guatemala brought action before the Paris Commercial Court, this could be regarded as an act of refraining from exercising its public power – which it cannot exercise in France anyway – and instead requesting the help of the French public power. But again, the judgment must be taken as it stands, and the proper analysis is that the Supreme Court, for a finding of an exercise of sovereign power, considers it to be sufficient that the right pleaded by Guatemala to support its claim for restitution is a prerogative, i.e., a right reserved to the State. According to this analysis, however, it appears that the two main elements of the Supreme Court’s principle merge into a single one – namely public law as the basis of the claim – which includes the exercise of public power as the second element.

E.

The 1990 Supreme Court Decision in Duvalier

a)

The Supreme Court further expounded the above concepts in its decision in the Duvalier case less than four weeks later. While in office, Duvalier, former president of the Republic of Haiti now living in the south of France, as well as members of his family and his government, had diverted public funds from the Haitian State and other public entities of that country into their own pockets, their accounts, or otherwise into their possession. The Republic of Haiti and the other entities concerned sued for restitution in the District Court (tribunal de grande instance) of Grasse, which declared itself incompetent. Upon ‘objection’ (contredit), the Court of Appeals of Aix-enProvence declared itself competent, holding that the prejudice caused to a public collectivity by its agents committing personal fault in doing private acts had nothing to do with any rule or principle of Haitian public law. The Supreme Court quashed this decision, reversing it without remand.

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b)

Again, the syllabus is quoted verbatim: ‘It follows from the rules of international law governing the relations between States in connection with Article 3 of the Civil Code that the French courts, in principle, lack the power to adjudicate claims of a foreign State or of a foreign public entity based on provisions of public law insofar as their object, from the point of view of French law, concerns the exercise of public power.’198

c)

This judgment unequivocally continues the holdings of the Guatemala decision but is somewhat shorter; it may appear even more rigid. The Duvalier decision confirms that the decisive point is the lack of jurisdiction. By virtue of the visa, i.e., the indication of the statutory ground for reversing, including Art. 3 of the Civil Code, the Court incorporates the rules of international law into the French conflict of laws rules. The exception to the principle expressly set forth in the Guatemala decision is not repeated here, though it might be found in the wording that the French courts ‘in principle’ lack the power to adjudicate. The Court clarifies that the term ‘State’ includes other entities existing under public law. As regards the issue of exercising public power, the Supreme Court gives short shrift to the Aix Court of Appeals by stating tersely that litigation concerning the relations between a State and its dirigeants, as classified by the French lex fori, is necessarily connected with the exercise of public power, regardless of the nature of the fault committed.

F.

Guatemala and Duvalier Today

Guatemala and Duvalier have not been overruled; their principles are still upheld. However, case law is never final. Distinguishing and overruling (revirement de jurisprudence) are accepted as a means of developing the case law in France as well. A closer analysis of the two precedents might lead to a different result today. For the purpose of this analysis, we apply a three step approach: first, the current standing of Guatemala and Duvalier is examined; second, the question arises as to what exactly constitutes a tax or customs statute, in particular in connection with

198

The original reads as follows: ‘Résulte de la combinaison des règles de droit international régissant les relations entre Etats et de l’article 3 du code civil, le défaut de pouvoir des juridictions françaises de connaître, en principe, des demandes d’un Etat étranger ou d’un organisme public étranger, fondées sur des dispositions de droit public, dans la mesure où, du point de vue de la loi française, leur objet est lié à l’exercice de la puissance publique.’

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the exercise of public power; third, attention is focused on the solidarity or convergence exception envisaged in the Guatemala decision. a)

Guatemala and Duvalier were decided ten years ago. This would usually be a short time in which to expect a change; however, this may be different in the case of these two decisions. Despite their categorical and principled appearance, there are indications that cast doubt on their standing. First, their reception by commentators and critics – whose role in the development of French case law cannot be overestimated – has been ‘lukewarm’ overall. To our knowledge, only one comment has expressed full approval;199 most have been critical;200 disappointment has also been expressed (of course, all within the framework of what the Supreme Court says is law).201 There is at least one extensive comment which fully supports the decision of the Aix Court of Appeals in Duvalier, although it was set aside by the Supreme Court.202

b)

Second, it may be that the Supreme Court justices themselves were not and still are not truly satisfied with their decisions. In Duvalier, the Court surprisingly awarded the costs to the losing State and other plaintiffs. This can be presumed to be more than just an expression of judicial sympathy.203

c)

Third, during the ten years since Guatemala and Duvalier, the French courts have taken a leap forward as regards taking account of and accepting the international context of matters brought before them and of the law which they apply to these matters. International conventions are now usually applied directly and given priority over French general law (though not over constitutional law). Some of them, in particular the European Convention on Human Rights, have increasingly pervaded French law in recent years.204

199

DEHAUSSY J. (supra n. 186), passim. See BISCHOFF J.-M. (supra n. 185), at 390: ‘The Court’s solution probably will not find everyone’s acceptance.’ 201 AUDIT B. (supra n. 184), at 384: ‘Lack of international cooperation which one may find regrettable’; BISCHOFF J.-M. (supra n. 185), at 390: The exceptions available in principle were not applied, although the circumstances of the case might perhaps have called for their application. 202 Aix 25.4.1988, Etat Haïtien et autres c/Jean-Claude Duvalier et autres, Clunet 1988, 779 note HUET A., ibid. 785 (790, 792). 203 Reported by DEHAUSSY J. (supra n. 186), 128. 204 For the recent development, see Cass. Ass. plén. 2.6.2000, Mlle Fraisse, Bull. Ass. plén. n° 7, p. 4; Gaz.Pal. 24-28 déc. 2000, p. 7 note FLAUSS J.-F.; with comment JAN P., 200

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In the conflict of laws, the French courts have abandoned their original position that conflicts rules had to be invoked and foreign law pleaded and proved. A notable step was the Supreme Court’s recent double bang: first, it reversed the holding that it is the judge’s task to establish the content of a foreign law, which must be applied even if only in an indirect manner (which may be relevant in the present context); then it reversed the decision of a Court of Appeals because the latter had failed to apply the conflicts rule of the foreign law designated by the French conflicts rule.205 d)

In short, the climate of French law and the French courts in regard to international matters has changed since Guatemala and Duvalier. These decisions still stand; however, it is doubtful whether they would survive a renewed challenge in a similar case.

G.

Exercise of Public Power

What is a tax and customs statute and, in particular, what exactly constitutes the exercise of public power in matters concerning such statutes? a)

This seemingly simple issue turns out to be a rather difficult one in recent case law. As for the first step, it goes without saying that a statute or other legal provision imposing a tax or a customs duty constitutes a tax or customs statute within the meaning of the principles examined here. Nevertheless, the issue of the exercise of public power remains ambiguous, at least in respect of tax and customs statutes. Although it has been said that the Guatemala decision deals with a ‘pure’ tax and customs statute,206 no guidance is given on the exercise of public power; there may be guidance by inference, but it is not explicitly stated.

b)

The Supreme Court maintains that claiming restitution of the coffee by invoking a State’s right to follow the asset (droit de suite ) amounts to an act of exercising public power, whereas claiming payment of unpaid customs duties apparently does not merit a single word. This is confusing be-

‘L’immunité juridictionnelle des normes constitutionnelles’, in: Petites affiches 2000 N° 246, p. 11. 205 Cass. civ. 19.10.1999, Compagnie d’assurances Rhin et Moselle c/M. Moussa Seyah et autres, Bull. Civ. I n° 280; Clunet 2000, 751 note PÉROZ H.; JCP G 2000, II, 10243 note MUIR WATT H.; Cass. civ. 21.3.2000, Mme G. Moussard c/Consorts Ballestrero, Bull. civ. I n° 96; Rev. crit. dr. int. pr. 2000, 399 note ANCEL B.; Rep. Defrénois 2000 n° 37240 note REVILLARD M. 206 AUDIT B. (supra n. 184), 381.

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cause, if Guatemala was barred from claiming the coffee, it should at least be allowed to levy the export duties due, and the Court should have addressed this issue. This could infer that claiming the unpaid duties was as much regarded as an exercise of public power as the claim for restitution of the coffee. Otherwise the court could not have dismissed the case altogether. However, in light of older case law on tax and customs statutes, a mere inference such as this is unsatisfactory. c)

In all four cases cited above in part C, the tax statute – or the currency decree in the case in C.d – had been applied by the administration processing the case in question; tax had been assessed and/or levied, and the bank account had been adjusted to the devalued currency. This seems to be the natural meaning of the two terms: A tax statute is nothing more than the statute, promulgated, in force, and waiting to be applied; and the exercise of public power is its application by administrative authorities in the process of assessing and levying taxes and duties of enforcement, collection, etc. Without such application by administrative authorities, there would be no exercise of public power over a tax statute. The application of a tax statute by a court of law in the absence of a previous application of the same statute by an administrative authority would not appear to suffice.

d)

The Guatemala decision, insofar as such may be inferred, goes in the opposite direction, but without saying so. No previous steps of assessment or enforcement by Guatemalan authorities are mentioned. To find (provided that such a finding may be inferred) that the act of bringing a lawsuit in a French commercial court is an exercise of the Guatemalan public power is also astounding in itself in the light of older cases.

e)

The Duvalier decision prima facie seems to supply the missing link in the court’s reasoning; however, this first impression is not convincing upon closer analysis. The Duvalier decision does not deal with a tax and customs statute but with public law in general. According to one of the commentators, it bears upon the link between the public law provision whose application is at issue and the exercise of public power. The Aix Court of Appeals had reasoned that reclaiming property stolen or diverted or embezzled by private acts and the personal fault of public agents had nothing to do with Haitian public law. As the comment points out, this was reversed by the Supreme Court not on the basis of the claim itself or its legal ground (recovery in tort in Duvalier), but by going back to the original relationship binding the parties and giving rise to the right invoked by the plaintiff, in other words, back to the source act or the source situation: ‘le rapport origi-

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naire liant les parties et d’où découle le droit invoqué par le demandeur […] en remontant à l’acte ou à la situation-source.’207 As regards a lawsuit such as that filed by the European Community in the Eastern District of New York, this reasoning would mean that, although the claim is for recovery of profits from a common law or RICO tort, one would still have to go back to the original act of smuggling and defrauding customs duties which would fall under a tax and customs statute. f)

As pointed out above, this line of reasoning is speculative because it was not explicitly mentioned by the Court. Moreover, it is troublesome because it may collide with the accepted rule that provisions of public law will be applied where they govern incidental issues in cases otherwise not governed by public law, and by virtue of the conflicts rules pertaining to these issues. It should be noted here that where a State or State agency brings action for claims which could also be brought by a private plaintiff, it will be treated as a private plaintiff and be subject to the same rules of the applicable law; this does not amount to an exercise of public power. The commentator’s speculation may simply be erroneous. Perhaps the Court’s reasoning was not intended to go beyond its express statements: By characterization according to the forum law, it simply applied French law to the relations between the State and its dirigeants, i.e., to the relations between Haiti and Duvalier and their co-plaintiffs and co-defendants (strange as that may appear).

g)

But then, neither Guatemala nor Duvalier provides any guidance on what is meant by the exercise of public power with respect to a tax statute. Thus the issue remains open-ended. According to the result of Guatemala – though not according to its principle or reasons – bringing action for the recovery of unpaid customs duties would amount to exercise of public power applying a tax and customs statute. However, it would be more natural to interpret the application of a tax statute and the exercise of public power as two different and clearly separate criteria. From this point of view an action in tort would not constitute an exercise of public power since the tax statute is incidental and merely provides the grounds for determining the plaintiff’s loss suffered as a result of illegal acts such as smuggling. Consequently, the public law character of the tax statute would not impede its application.

h)

One might conclude that French law, upon proper construction of its principles in the light of recent case law, would not necessarily exclude a suit in 207

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tort for the mere fact that its basis involves a foreign tax or customs statute, and that such a statute should be applied in accordance with common conflict of law rules. While such solution appears possible as a matter of construction, it should be repeated that French courts have never actually drawn such conclusions.

H.

Exception of International Solidarity or Converging Interests

a)

The exception to the principle that courts lack jurisdiction to apply foreign public law is found in the second part of the Guatemala holding cited in part D.b above: The principle may, however, be disregarded, in particular, if, from the point of view of the forum, the requirements of international solidarity or convergence of the interests concerned justify it.208 This is remarkable in its sweeping scope.

b)

However, French courts and scholars treat the exception as a parent pauvre, (poor sister of the principle as it were), thus revealing a surprising malaise towards the broad discretion French courts would have if the exception were interpreted literally. As regards the Guatemala Court, the fact that ‘only’ (seulement) Guatemalan foreign commerce regulations but no international agreement expressing a requirement of international solidarity between France and Guatemala had been violated was sufficient for the Court to reject the exception. In light of this, commentators have concluded that only international agreements – or, of course, a French statute – could serve as a legal basis for such requirements of solidarity or convergence of interests.209

c)

The text of the Guatemala exception, however, is broader than this narrow interpretation suggests. As the word ‘notamment’ (= in particular) indicates, the principle of lack of jurisdiction may be disregarded even on grounds other than requirements of solidarity or convergence. In plain English: The courts are empowered to apply foreign public law whenever they deem it justified. This, of course, is the exception, whereas the lack of jurisdiction remains the principle, however, the scope of the exception will depend on 208

See the original supra in note 196. DEHAUSSY J. (supra n. 186), 117: ‘Only express provisions of an international agreement can have this effect’; ibid. 126: ‘Unilateral derogations are, to say the truth, improbable. They would have to result from a statute (d’une loi). The judges could not take that initiative.’ 209

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its possible justification. There are no grounds in the text for attempting to limit sources – or expressions – of international solidarity or convergence of interests to agreements or statutes. Moreover, the idea that it was not to be left to the judges to determine these requirements is contrary to the gist of the Guatemala holding, which defines what French judges may or may not do in matters concerning foreign public law.210 Taken literally, the solidarity or convergence exception is the basic rule permitting French judges to directly apply foreign public law – including tax and customs statutes – where they deem it justified, in particular by requirements of international solidarity or convergence of the interests concerned. d)

The problem is judicial discretion. It is up to the judge in each case to find – or not to find – sufficient justification to apply foreign public law. Apparently, there has not yet been any decision that would set limits or provide some guidelines in this respect. By finding that a mere violation of foreign commerce regulations is insufficient, the Guatemala decision does not (and need not) clarify the type or degree of justification or factual circumstances required to make the exception available.

e)

In summary, there is apparently no French precedent which would clearly tell us whether a French judge would – or would not – apply a foreign tax or customs statute (or other regulation) in a claim for damages arising from smuggling. Without such a precedent, it is impossible to predict whether or not a French judge would apply the foreign statute. It can, however, be stated unambiguously that the exception to the Guatemala principle allows a French judge to apply a foreign tax or customs statute if there are sufficient elements to justify such application. The burden of proof is on the plaintiff.

I.

Summary

a)

Enforcement of judgments (questions A and B)

French law does not prohibit the enforcement of foreign tax judgments provided they do not give extraterritorial effect to the foreign tax law, which would probably be against French public policy. The courts have no discretion in this respect.

210

Clearly ANCEL B./LEQUETTE Y. (supra n. 187) 601; AUDIT B. (supra n. 184), 384

et seq.

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b)

Application of foreign tax laws (questions C, D and E)

In principle and unless an exception is justified, French judges are not empowered to apply foreign tax or other revenue laws if this implies the exercise of foreign public power. In the absence of such implication, French judges may and, according to relevant conflicts rules, must apply foreign revenue laws; the latter case is probably coextensive with incidental application.

c)

Flexible approaches (question F)

The leading French cases were decided ten years ago; however, since then the general development in French law shows a tendency towards greater acceptance of the international context.

V.

Italy

A.

Recognition and Enforcement of Foreign Tax Judgments by Italian Courts

The recognition and enforcement of foreign judgments by Italian courts in general is regulated in Articles 730-746 codice di procedura penale (Code of Criminal Procedure) and in Articles 64-69 legge 31 maggio 1995, n. 218 (the Law Reforming the Italian Conflict of Laws System of March 31, 1995; hereinafter: Law 218/95), which replaced the respective provisions in the Code of Civil Procedure. There have been no court decisions on the recognition and enforcement of foreign tax judgments on the basis of these provisions, nor are such decisions expected. The rules laid down in the Code of Criminal Procedure govern only the recognition and enforcement of penal sanctions, not of tax judgments. The provisions in Law 218/95 regulate the recognition of foreign judgments in general and are not explicitly restricted to civil judgments.). However, one prerequisite for the recognition and enforcement of foreign judgements is that the foreign judge would have had jurisdiction under the respective Italian rules (see Art. 64 a) Law 218/95).The provisions of Art. 64(a) Law 218/95 contain the rules defining the jurisdiction of an Italian private law judge (giudice civile italiano ordinario).211

211 ANNIBALE S., Riforma del sistema italiano di diritto internazionale privato, Padova 1997, 314; CAMPEIS G./DE PAULI A., Il processo civile italiano e lo straniero, 2nd ed., Milan 1996.

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Art. 1 of the Code of Civil Procedure grants jurisdiction in civil litigation to such judges only, whereas tax and other revenue litigation fall within the jurisdiction of special courts. Due to this lack of jurisdiction to adjudicate tax and revenue disputes under the relevant Italian provisions, foreign tax and revenue judgments do not meet the requirement of Art. 64(a) Law 218/95 and thus cannot be enforced by Italian judges.212 A further argument against the enforcement of foreign tax judgments by Italian courts is based on the sovereign nature of tax collection. Imposing and collecting taxes is an exercise of governmental power limited to the territory of the respective State. Moreover, the recognition and enforcement of a foreign tax judgment has the same effect as the enforcement of foreign tax law, i.e., it helps the foreign State exercise its sovereign prerogatives outside its territory.213

B.

Application of Foreign Public Law by Italian Courts

In Italy, no explicit rule or principle addresses the application of foreign public law by Italian courts. Decisions on this matter are scarce, and no set of general judgemade rules has been developed to deal specifically with so-called conflicts of public law. In addition, the matter has not been the object of extensive investigation by Italian authors; if the problem is discussed at all, it is addressed in more or less traditional conflict of laws terms. As a result, it is difficult to predict precisely the stand Italian courts would take toward foreign public law.

a)

Enforcement and application of foreign tax and revenue law by Italian courts

Two decisions are reported and discussed in Italian legal literature on the application of foreign revenue laws by Italian courts and claims by foreign governments based on foreign revenue law. In 1932 the Court of Appeals of Genoa had to decide a lawsuit filed by the Greek government for the attachment of property situated in Italy but belonging to the estate of a Greek national. The attachment aimed at securing and obtaining inheritance tax from the heir to the property. The Court of Appeals denied jurisdiction and thus the power to issue the attachment. It viewed the imposition and collection of taxes as acts subject to the fundamental powers of a sovereign that can be exercised only within the territory of that State. To allow a foreign government to impose or collect taxes in Italy would require a special law or international convention granting such power.214 212

ANNIBALE S., 314; CAMPEIS G./DE PAULI A., 307-308 (both previous notes). BISCOTTINI G., Diritto amministrativo internazionale, Padova 1966, 445. 214 Corte di Appello di Genova 14.1.1932, Riv.dir. int. 1932, 432. 213

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From this ruling it follows that Italian judges are not allowed to directly enforce foreign revenue laws in Italy. A similar position was taken in 1985 by the Tribunale di Milano in a dispute between two French companies and the Italian tax agency on customs duties owed under EC law on goods imported into Italy. Since the certificates for the transit of goods within the EC had been issued and used in France, the French plaintiffs sustained that, under Art. 25 of the preliminary provisions of the Italian Civil Code, French law was applicable when determining whether a violation of the rules on transit of goods within the EC had occurred, and whether customs were due as a result thereof.215 Rejecting this argument, the Court declared that the conflict of laws rules were not applicable when designating the law governing fiscal relations, which by definition has a highly territorial character involving the specific aims and needs of each State and of this State only. The Court further stated in an obiter dictum that the Italian State had absolutely no interest in recognizing foreign tax laws and that foreign public laws regulating similar legal relations could not be applied if designated as applicable by a rule of that national legal system.216 Both decisions favor a strictly territorial application of tax and revenue laws, unless national law or international conventions provide otherwise. Furthermore, both decisions exclude the direct enforcement of foreign tax laws by Italian courts or their application in cases involving customs/taxes due under Italian law. In both cases, however, the courts dealt with an application of foreign revenue laws that would have amounted to their enforcement by an Italian court. The cases do not discuss whether foreign revenue laws are applicable for the purpose of answering preliminary/incidental questions. It is uncertain whether the Tribunale di Milano, in its obiter dictum, also intended to address the issue whether tax laws apply to incidental questions. One counter-argument is that the obiter dictum is made in the context of a case dealing with a request for the enforcement of a foreign tax law and that the court neither explicitly addresses nor discusses the question of whether foreign revenue law is applicable in private litigation. The main argument of both courts against the application of foreign revenue laws, i.e., that an Italian court will not assist a foreign sovereign in exercising its governmental powers outside its territory, is not relevant for the issue whether foreign revenue laws may be applied when answering an incidental question in truly private litigation. Thus existing case law excludes the application of foreign tax provisions aimed at the enforcement of these rules; however, it does not answer the question whether such provisions may be applied in private litigation. 215 Art. 25 of the preliminary provisions of the Civil Code was the conflict of laws rule for determining the law applicable to contractual and non-contractual obligations before the reform of Italian private international law in 1995. 216 Tribunale di Milano 11.2.1985, Riv. dir. int. priv. proc. 1987, 346.

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Scholarly opinions on the subject are nearly as scarce as decisions. As regards the application of foreign public law in connection with revenue laws, scholars reject the direct enforcement of foreign revenue laws by Italian courts.217 However, some support the application of foreign tax laws for the purpose of answering incidental questions in private litigation.218 As an example, Biscottini mentions the case where a notary public, who is obliged by foreign revenue laws to pay an amount owed by his client, claims compensation after making the respective payment.219

b)

Application of foreign public law in general

As a matter of principle, Italian courts respect the traditional rule that public law is applied within the territory of a State in matters involving its citizens as well as non-citizens, but it is not applied outside the territory of the enacting State. However, this general rule is subject to many exceptions based on express legal provisions or logical reasons.220 An example of a logical exception is a decision of the Venice Court of Appeals dealing with claims based on foreign public and foreign private law. In this decision, the Court denied Egypt’s power to confiscate Egyptian money that had been smuggled out of the country and had arrived abroad. The court also rejected a claim based on Egyptian currency laws for compensation in the amount of the smuggled money. The Court argued that the relevant Egyptian provisions were not applicable under Art. 25 of the preliminary provisions of the Civil Code because this conflict of laws rule referred only to foreign private law and not to foreign criminal law, which could not be effective within the territory of Italy. However, compensation was finally granted by virtue of a provision in the Egyptian Civil Code providing that any person committing a culpable act is liable for third party damages thereby caused. Regarding the violation of the Egyptian currency law as such an act, the Court took account of the amount of damages specified by the Egyptian currency law when determining damages in an amount equal to that of the illegally exported money.221 217

BISCOTTINI G. (supra n. 213), 441; BALLARINO T, Diritto internazionale privato, 2 ed., Padova 1996, 281. 218 BISCOTTINI G. (supra n. 213), 443-444; RADICATI DI BROZOLO L., ‘Foreign Public Law before Italian Courts’, in: KLEIN F.-E. (supra n. 100), 85, 94. 219 BISCOTTINI G. (supra n. 213), 443-444. For a similar case concerning a claim for restitution of a payment made under foreign tax law against a co-debtor, see Tribunale di Roma, 11.11.1994 n. 15553 (unpublished) cited in CARBONE S. M., ‘La Riforma del Sistema Italiano di Diritto Internazionale Privato’, in: Riv. dir. int. priv. proc. 1995, 905, 977. 220 Pretore di Roma 12.4.1977, Riv. dir. int. priv. proc. 1977, 890, 894. 221 Corte di Appello di Venezia 30.9.1988, Riv. dir. int. priv. proc. 1990, 343, see especially 354-355. nd

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In this decision the Court clearly rejects Egypt’s claim as far as it is based on foreign public law, thus stressing the strictly territorial effect of the relevant public law provisions and the limits of Art. 25 of the preliminary provisions of the Civil Code. However, at the same time, the Court gives effect to the same foreign public law provisions when determining the amount of damages caused by the export of the Egyptian money. Thus the Court rejects a claim based directly on foreign public law, but applies foreign public law to answer the incidental question of the amount of damages arising in connection with the claim based on Egyptian private law. Legal scholarship is divided on the issue to which extent foreign public law is applicable by Italian courts. Some authors do not discuss the methods used to make foreign public law applicable in Italy; however, all authors advocate at least some form of application of foreign public law.222 Those authors who discuss different forms of application of foreign public law by Italian courts take a conflict of laws approach to the problem by arguing that private international law calls not only for the application of strictly private law provisions of the foreign legal system, but also of rules of public law concerning the legal relations between private parties. Only provisions of foreign public law dealing with relations between the State or its legal entities and private persons that can be regarded as an expression of governmental power are not included in the reference made by private international law.223 While Vitta seems to deny the applicability of rules concerning relations between an individual and the State even for the purpose of answering incidental questions arising in a private dispute, most authors exclude the application of such rules only if it would amount to an enforcement.224 Several arguments are presented by legal scholars to justify the application of foreign public laws in private litigation: one is the increase in the number of public rules affecting private rights and legal relations, such as rules regulating various aspects of international commerce (for instance, competition law and exchange law); another concerns developments in public law leading to the rejection of the principle of strict territoriality.225

222 VITTA E., Diritto internazionale privato, Vol. 1, Turin 1992, 12-17; RADICATI DI BROZOLO L., in KLEIN F.-E. (supra n. 100), 85; CARBONE S. M. (supra n. 219), 977-979; BALLARINO T. (supra n. 217), 281-282; MOSCONI F., Diritto internazionale privato e processuale, Turin 1996, 140-141; ANNIBALE S. (supra n. 211), 15. 223 VITTA E. (previous note), 12-17; TREVES T., Il controllo di cambi nel diritto internazionale privato, Padova 1967, 91-95; RADICATI DI BROZOLO L., in KLEIN F.-E. (supra n. 100), 85; CARBONE S. M. (supra n. 219), 978; MOSCONI F. (previous note), 140-141. 224 For the latter position, see BISCOTTINI G. (supra n. 213), 443-444; RADICATI DI BROZOLO L., in: KLEIN F.-E. (supra n. 100), 94; CARBONE S. M. (supra n. 219), 979. 225 CARBONE S. M. (supra n. 219), 977; ANNIBALE S. (supra n. 211), 115.

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More concerned with the practical aspects of the problem, a further argument favors at least some application of public law because it is becoming increasingly difficult to draw a clear distinction between public and private law in some areas, and a theoretical distinction does not provide a solid foundation for establishing a clear demarcation.226 Finally, some authors refer to the resolutions adopted in 1975 and 1977 by the Institut de droit international stating that ‘… the public law character attributed to a provision of foreign law which is designated by the rule of conflict of laws shall not prevent the application of that provision [...].’227 In summary, Italian scholars support the application of foreign public laws that affects legal relations between private parties if the subject matter of the dispute is of a private nature. This view is in conformity with the few decisions on this matter. The characterization of a dispute as private or as an open or indirect exercise of governmental powers applying private law is governed by Italian law and legal categories.228

C.

Summary

The lack of any written rules and the scarcity of decisions and scholarly debate on the issue of the application and enforcement of foreign public law make it difficult to State any general rules on the applicability of foreign public law by Italian courts with any certainty. No decisions exist on the enforcement of foreign tax judgments by Italian courts. However, enforcement is impossible under Art. 64 of Law 218/95 because the foreign judge would have had no jurisdiction under the Italian rules governing the jurisdiction of private law judges. The existing decisions dealing with the application or enforcement of foreign tax and other public laws, scant as they are, reject any application that would amount to the enforcement of foreign public law. They give no clear answer to the question whether it is possible to apply foreign public law in the context of private litigation; however, they could be interpreted as allowing it.

226

MOSCONI F. (supra n. 222), 140. MOSCONI F. (supra n. 222), 141; CARBONE S. M. (supra n. 219), 978; for the resolutions of the Institut de droit international, see Annuaire, Vol. 56, Session de Wiesbaden 1975, Basle 1975, 551-553 and Annuaire, vol. 57, II, Session d’Oslo 1977, Basle 1978, 328-331. 228 CARBONE S. M. (supra n. 219), 978-979. 227

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Legal scholarship rejects the application of foreign public law where that would amount to an enforcement of this law. It favors the application of foreign public law where it affects private law in truly private litigation. However, none of the authors discusses in detail the exact requirements which foreign public law would have to meet to be applicable before Italian courts.

VI. Comparative Conclusions A.

General Observations

The materials presented and discussed in the preceding national reports result in an overall picture that is coherent in its general outlines, but displays a great variety of details at the national level. Before attempting to summarize the answers given by the national legal systems and outline the State of the law in Europe, it is necessary to make some general observations. In the first place, it should be noted that legislation in none of the four countries provides meaningful guidance on the matters discussed in this opinion. The only State where legislation has actually tackled the issue is the United Kingdom. But the relevant provision of the Private International Law (Miscellaneous Provisions) Act 1995, far from requiring the application of foreign revenue laws, in practice only makes a reservation for the previous case law relating to that issue, thereby acknowledging the outstanding significance of the courts for the matter discussed in this paper. The situation is by no means different in the so-called continental jurisdictions of codified law. All in all there is a complete lack of legislative guidance. The second observation concerns the frequency and significance of the court decisions on the matter. While there is a long line of post-war cases in England, including some House of Lords decisions and, to a lesser extent, also a number of judgments of the French Cour de cassation, the case law is less developed in Germany, where only a single opinion of a Supreme Court is available, and in Italy. Consequently, the assessment of the law depends much more on legal writings in the latter countries. Taking into account the great weight of judgments handed down by superior courts for the development of the law, it is fair to conclude that the law relating to the enforcement of foreign revenue laws is less settled in Germany and Italy than in England and France. Any future evolution of the law in the direction of mutual assistance, which might appear necessary in order to cope with the globalization of markets, will take place within the framework of the rules coined by the French and English courts; their basic approach will be maintained. Contrary to these two countries, the superior courts of Germany and Italy are not hindered from going new ways by their own former decisions. While notice will certainly be taken of lower court judgments and legal writings, their authority

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is not the same as that of former opinions of Supreme Courts. This would also mean that they are more open to signals from abroad that demonstrate the willingness of American courts to give effect to European revenue laws. A third general observation relates to the structures of the law. When tackling the issue of foreign revenue laws, the three continental jurisdictions proceed from a basic division of their legal systems into private and public law. Revenue laws are regarded as particular examples of public laws, and no distinction is made between foreign revenue claims and other monetary claims of foreign sovereigns, for example, contributions to social security funds. It is well known that the common law is not based on the same central division of public law and private law; as one commentator put it, ‘nothing turns on it’.229 The development of English case law demonstrates this different structure. It has not proceeded from a comprehensive concept of public law claims, but from the much smaller concepts of revenue laws and penal laws. It should be noted, however, that the English courts have not stopped there. The international context of the issues discussed here, and in particular the aspect of sovereignty, which is referred to in almost every decision, have repeatedly suggested to the courts the employment of the wider concept of public law. The use of a concept which is not known or irrelevant in domestic English law demonstrates that the legal assessment in these matters effectively hinges on the traditional understanding of sovereignty.

B.

Common Principles

a)

The national reports demonstrate some common principles that provide guidance to the courts when it comes to the decision of particular issues. In none of the four countries will the courts entertain an action aimed at the enforcement of a tax claim based on foreign revenue laws; a lawsuit filed by a foreign State or its public agencies which pursues the payment of tax money due under foreign revenue laws will be dismissed. The reasons given are not the same everywhere, but they all turn on the concept of sovereignty. The collection of taxes is regarded as a central right derived from the sovereignty of the State. Since the State disposes of various means to enforce its tax claims on its own territory, it does not generally need the help of other States for that purpose. Of course, the other States are not prohibited from providing assistance, but the courts tend to think that, as a matter of principle, this is not their task in the absence of international treaties providing pertinent obligations. 229

WEIR T., ‘The Common Law System’, in: International Encyclopaedia of Comparative Law, vol. 2 ch. 2 (1971) para. 115; see also SAMUEL G., ‘English Private Law in the Context of the Codes’, in: VAN HOECKE M./OST F. (eds.), The Harmonisation of European Private Law 2000, 47, 51.

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Upon closer inspection, this general position appears questionable. The power of States to enforce their own revenue laws on their respective territories does not take care of debtors who have left the country and transferred their assets abroad. Since international migrations and asset transfers have been liberalized to a large extent and encounter only minor obstacles today, the need for mutual assistance between States in revenue matters is growing constantly. This was reflected by the conclusion of a cooperation agreement between the European Community and the United States of America in 1997.230 As a consequence of changes in the international legal framework of migrations and foreign investments which have brought about globalization, courts have to redefine their own task. If they maintain the assumption that the collection of revenues is every State’s own business, tensions with the liberal regime of international movements of persons and assets will increase. The territorial scope of sovereignty does not preclude the courts of one nation from granting assistance to the claims of another. While these claims may be classified as sovereign claims as long as a State can enforce them by administrative means on its own territory, they change character once that State appears as a plaintiff before a foreign civil court. By filing this lawsuit, the foreign State acknowledges that the enforcement of a revenue claim outside its national borders is not a sovereign prerogative. It follows that courts which want to give way to the preceding policy considerations are not really precluded from doing so by traditional concepts of sovereignty. b)

There is a second line of common thought that can be traced through all four European jurisdictions. It relates to the admissibility of the application of foreign revenue laws in the context of incidental or preliminary questions. Such an application does not amount to an enforcement; it usually occurs in lawsuits between private individuals whose outcome is dependent upon obligations of one party arising from foreign revenue or other public laws. Although the early dictum of Lord Mansfield that ‘no country ever takes notice of the revenue laws of another’231 would suggest that such foreign legal provisions would not even be applied in the context of preliminary provisions, that conclusion has clearly been rejected in a line of cases starting with Regazzoni v. KC Sethia.232 230

Agreement between the European Community and the United States of America on Customs Cooperation and Mutual Assistance in Customs Matters, O.J.E.C. 1997 L 222/17. 231 Holman v. Johnson (supra n. 5). 232 Regazzoni v. KC Sethia, (1944) Ltd. (supra n. 53), 515 et seq.

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The more lenient attitude toward foreign public laws in the framework of incidental questions is equally supported by court decisions and legal writers in France, Germany, and Italy. However, it should be pointed out that it is very difficult to draw the borderline between cases involving preliminary questions subject to foreign revenue laws and outright enforcement cases where foreign public entities pursue the recovery of taxes accrued under foreign law. The rule against the enforcement of foreign revenue laws will be applied equally in cases which the courts find to deal with an ‘indirect enforcement’. It is characteristic of those cases that the plaintiff pursues his action on the basis of the general laws and that recourse to foreign revenue laws is taken only incidentally. Thus, it is not possible from a purely legal analysis to distinguish these cases from those dealing with the application of foreign revenue laws in the context of preliminary questions. If a criterion for distinguishing between ‘indirect enforcement cases’ and ‘preliminary questions’ emerges from international case law, it could be an economic one, which, however, is not indicated in the reasoning given by the courts: it appears that courts invoke the non-application of foreign revenue laws whenever the amount of money pursued by the plaintiff is designed to flow either directly or indirectly to a foreign public treasury. It is difficult to check the correctness of this assumption since the courts do not expressly refer to this rationale. However, it appears that it would accommodate the vast majority of the cases reported above. The basic assumption seems to be that every country has to use its own institutions and sovereign prerogatives in order to fill up its public treasury, and that it should not rely on the assistance of foreign States. As pointed out above, this attitude no longer suits the needs of modern societies and statehood in the era of globalization. The courts are well-advised to use the discretion available under their own judge-made rules in order to allow for more international assistance in the enforcement of public laws.

C.

Enforcement of Foreign Tax Judgments

In Germany and Italy, where the preconditions for the enforcement of foreign judgments are laid down in the codes, there is a general belief that the statutory regulation is exhaustive and that no recognition and enforcement is possible outside the scope of the statutory provisions. Since the codes do not deal with the enforcement and recognition of foreign judgments relating to revenue or other public laws, the conclusion is that the recognition and enforcement of such judgments is not possible. However, the premise of that conclusion is far from convincing and highly questionable. It is a very common occurrence in all matters relating to international law that a certain issue is not explicitly regulated by statutory provisions. As of the

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present day, there are no written conflict rules on the law applicable to agency or on the law applicable to corporations in German private international law. Yet there is no doubt that German courts are prepared to apply foreign law in these areas. A similar example can be given with regard to the recognition and enforcement of foreign adoption decrees, which were unregulated by written conflict rules before 1986; yet the courts did not hesitate to give effect to such foreign decrees. Similarly, a positive rule on the recognition of foreign decrees never existed in German law in insolvency matters before the adoption of EC Regulation No. 1346/2000.233 Nevertheless, the BGH has allowed foreign insolvency decrees to take effect in Germany.234 The absence of positive legal provisions on the recognition and enforcement of foreign judgments and decrees is due instead to the former scarcity of practical cases involving issues of the kind, and moreover to the particular difficulties encountered in the drafting of such conflict rules because of the complexity of international law. But it should be excluded that the lack of written provisions on the matter allows the conclusion that no recognition and enforcement can take place outside the scope of the existing statutes. Fragile as the reasoning may be, it is an undisputed fact that foreign judgments relating to the enforcement of foreign revenue laws have never been enforced either in Germany or Italy. While the same is true with regard to England, a French decision of 1983 gave effect to an Algerian judgment that had been based on an Algerian revenue regulation.235

D.

Some Leeway for the Enforcement of Foreign Revenue Laws

If it is true that courts will above all look at the final destination of the litigated amount of money and reject the application of foreign revenue laws if that amount is designated to flow to a foreign treasury, there is little reason to believe that courts will be willing to make a distinction between the direct and the indirect enforcement of foreign revenue laws. As the International Law Association put it in 1988: ‘A State cannot be required to enforce either directly or indirectly such laws, although it is free to do so.’236 Courts will pay little attention to the legal shell of the lawsuit if they are convinced – as they basically are in all four countries – that it is not their task to help foreign sovereigns collect taxes. Instead of making fine legal distinctions 233 Regulation (EC) No. 1346/2000 of the Council of 29 May 2000, on insolvency proceedings, O.J.E.C. 2000 L 160/1; see especially Art. 25. 234 BGH 11 July 1985, BGHZ 95, 256 = ZIP 1985, 944, 949. 235 Cass. civ. 15 November 1983 (supra n. 194). 236 International Law Association, Report of the Sixty-Third Conference held at Warsaw (1988) 719, 753.

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between outright enforcement and enforcement under cover of a claim sounding in tort for damages, the courts should be open for a policy discussion which can lead to new distinctions. They should be confronted with policies which militate in favor of the enforcement of foreign revenue laws and which have been outlined above. In particular, the free movement of persons and assets across national borders no longer permits the maintenance of the concept of a self-sufficient State which employs its institutions and sovereign prerogatives only for the enforcement of its own public laws, but does not assist foreign States in the enforcement of theirs. The outright refusal of such assistance must give way to a more open-minded attitude which at least contemplates such assistance in case of reciprocity or if common interests of the States concerned so require. This does not mean that the courts are supposed to conduct their own foreign policy. What they should do, however, is to evaluate the significance of the case at hand and its outcome for the relations between their own State and the foreign State concerned. In most cases it is not a difficult task for a judge to assess those relations as ‘friendly’ or not, and this is what judges have repeatedly done in the past. In its Regazzoni judgment, the House of Lords gave effect to the Indian embargo against South Africa, inter alia, because a different decision would amount to committing an act in a foreign and friendly State that violates the law of that State. This principle is based on public policy and international comity.237 In the Borax case reported above, the German BGH was much more explicit. The violation of the American embargo against the Soviet bloc was regarded as an immoral act, inter alia, because that embargo was held to protect the maintenance of peace and freedom of the Western world. Therefore, the American measures had been adopted ‘not only in the American interest, but in the interest of the entire free western world and therefore also in the interest of the Federal Republic of Germany’.238 The two decisions demonstrate that judges can effectively cope with the assessment of the quality of foreign policy relations to a certain extent. It is in the light of this observation that the Guatemala decision of the French Cour de cassation has to be seen. As reported above, the Court, although rejecting the enforcement of foreign public law as a matter of principle, pointed out that ‘… the principle may [...] be disregarded, in particular, if, from the point of view of the forum, the requirements of the international solidarity or the convergence of the interests concerned justify it.’239 This decision almost literally reproduced a resolution on ‘Public Law Claims Instituted by a Foreign Authority or a Foreign Public Body’ adopted by the Institut

237

Regazzoni v. Sethia, [1958] A.C. 301, 302 (H.L.) (my emphasis). BGH 21.12.1960 (supra n. 159), 176-177. 239 Cass. civ. 2.5.1990 (supra n. 184). 238

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de droit international at its Oslo Session in 1977. After stating the basic inadmissibility of public law claims, that resolution continues: ‘(b) Such claims should nevertheless be considered admissible if, from the viewpoint of the State of the forum and taking account of the right of the defendant to equitable treatment in his relations with the authority or body in question, this is justified by reason of the subject-matter of the claim, the needs of international co-operation or the interests of the States concerned.’240 Taken together, the German Borax case, the French Guatemala decision, and the resolution of the Institut de droit international provide a rule that would allow a domestic court to entertain an action for the enforcement of foreign revenue laws if a convergence of the national interests of the States concerned can be assessed in this respect. The ascertainment of common national interests can be supported by the existence of international treaties relating to the respective field of interest. With regard to smuggling, the agreement between the European Community and the United States of America demonstrates that there is a common interest on both sides of the Atlantic to secure the enforcement of revenue laws.241 It is true that this agreement deals only with the cooperation between the customs authorities on both sides of the Atlantic Ocean and that it does not extend to courts of law. On the other hand, its rules give evidence of an increasing awareness of common interests which go far beyond the specific scope of the agreement. Thus, the preamble points out, on the one hand, ‘the importance of the commercial links between the European Community and the United States of America’ and of the ‘harmonious development of those links’. On the other hand, the contracting parties believe that, ‘in order to attain this objective, there should be an undertaking to develop customs cooperation of the widest possible scope’. Both sides agree that ‘operations in breach of customs legislation are prejudicial to the economic, fiscal and commercial interests of both Contracting Parties’. It should be clear from these words that the common interests shared by the United States of America and the European Community are much broader than the scope of the agreement, i.e., the cooperation of customs authorities. In the light of that preamble it is difficult to conceive that a European court such as the French Cour de cassation or the BGH of Germany, if confronted with an action filed by the United States of America for the enforcement of American tax claims, would reject that action out of hand for lack of powers. The exception clause drafted by 240 See Institut de droit international/Institute of International Law (supra n. 227) 329. On that resolution, see BAADE H. W. (supra n. 179) no. 68. 241 Agreement between the European Community and the United States of America on Customs Cooperation and Mutual Assistance in Customs Matters, O.J.E.C. 1997 L 222/17.

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the French Cour de cassation in 1990 would appear to be the platform on which common interests of both sides could be assessed and an action for the enforcement of foreign customs claims could be admitted.

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INTERNATIONAL PRIVATE LAW OF INTELLECTUAL PROPERTY François DESSEMONTET

I. II.

IV.

Introduction Principles and Exceptions A. Principles B. Exceptions Basic Tenets for Conflict Rules A. A European Approach B. A Global Approach C. A Differential Approach D. A Protective Approach E. The Law Applicable to Licensing Agreements Conclusion

I.

Introduction

III.

The territoriality principle is the first and foremost conflict rule in intellectual property matters. Conflict rules are needed to resolve the conflicts of laws in this area. Assuredly, the level of harmonization between countries throughout the world appears to be unusually high. There are 181 countries party to the Convention Establishing the World Intellectual Property Organization, as of 15 October 2004. 168 States are party to the Paris Convention of 1883 for the Protection of Industrial Property, and 157 to the Berne Convention of 1886 for the Protection of Literary and Artistic Works (both Conventions as revised until 1967 and 1971). 148 States are party to the World Trade Organization and the ancillary Agreement on Trade Related Aspects of Intellectual Property (TRIPs) of 1994. Nonetheless, harmonization does not include all areas and does not encompass the most protective measures of intangible assets. The diversity of the laws of different countries is increasing each year. Therefore, under the territoriality principle, there are nearly 200 potential applicable laws for any given issue of intellectual property if a dispute involves a worldwide market. There were fewer countries when the international system of uniform conventions and municipal laws was developed in the nineteenth century. Moreover, there were fewer ownership or infringement issues that had the potential of reaching the whole world. English was not the universal language of youth and media;

Professor, University of Lausanne and University of Fribourg, Switzerland. Yearbook of Private International Law, Volume 6 (2004), pp. 71-84 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

François Dessemontet

traditional technology was not entirely replaced by a constant flow of patented inventions (today there are more than 340,000 U.S. patent applications annually, of which more than 150,000 are filed by foreigners; approximately 190,000 U.S. patents are issued annually, of which 47 per cent are to foreigners1). World famous trademarks were not common, nor was piracy scattered over the five continents, which are now interlinked for the sale of counterfeit goods and every other aspect of trade. It is rumored that three to nine per cent of international trade consists of counterfeit goods. Thus, in the twenty-first century, one can ask whether the territoriality principle can still function as the basic rule for the conflict of laws and jurisdiction. Territoriality might mean that more than 20 litigations involving one and the same patented invention, trademark or copyrighted work could be conducted in the 20 some markets that are most important for the right owner, thus resulting in possible conflicting judgments due to the application of 20 some municipal laws, hence judgments which could not be recognized and enforced abroad without difficulty. With the Internet having made the world a global village, it is widely acknowledged that there is an urgent need to devise a better system. Of course, the dichotomy of territoriality and universality has already sparked controversies in the past. For example, the preparatory works for the Rome Convention of 1980 on the Law Applicable to Contractual Obligations were geared towards determining the law applicable to non-contractual obligations as well. The ‘intellectualists’ (as scholars versed mainly in intellectual property are called here) opposed the ‘conflictualists’ (my term for specialists in the conflict of laws and jurisdiction, who are forced to be versed in all areas of the law because they devise rules that are effective in all areas). The ‘intellectualists’, with A. Troller2 and later E. Ulmer3 at the forefront, insisted that a separate set of rules should be devised for the conflict of laws and/or jurisdiction. Convinced that nothing human was alien to them, the ‘conflictualists’ firmly believed that the ordinary rules on torts, property or contracts sufficed for resolving all conflicts in the area of intellectual property.4 Since the Rome Convention of 1980 did not regulate conflicts in noncontractual matters, the initial controversy remained unresolved. The flickering debate has been kept alive as a result of UNCTAD’s preparatory works for a Code

1 See the US Patent and Trademark Office Website: http://www.uspto.gov/web/ offices/ac/ido/oeip/taf/us_stat.pdf. 2 TROLLER A. Das internationale Privat- und Zivilprozessrecht im gewerblichen Rechtsschutz und Urheberrecht, Basel 1952. 3 ULMER E., Die Immaterialgüterrechte im Internationalen Privatrecht, Köln [etc.] 1975; see the sets of rules proposed by ULMER E., ‘Vorschlag für die Regeln über Immaterialgüterrechte in einem Übereinkommen über das internationale Privatrecht in den Mitgliedstaaten der Europäischen Wirtschaftsgemeinschaft’, in: RabelsZ 1976, pp. 308-311. 4 Nymphenburg – Kolloquium of April 1975, see GRUR Int. 1975, p. 308.

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of Conduct for the International Transfer of Technology in the 70’s and 80’s,5 and the fact that the law applicable to agreements on the transfer of technology was placed on the agenda of the Hague Conference on International Private Law in the 90’s.6 Meanwhile, the Hague Conference worked on a Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters for some years, only to arrive at the present, less ambitious but still controversial draft on exclusive choice of court agreements (Working Document N° 110). The failure to do better aroused a separatist movement in the realm of intellectual property rights (hereafter: IPR or IPRs). The ‘intellectualists’ decided that unification of the conflict rules for IPR should go ahead unimpeded by obscure diplomatic pressures and the obvious diffidence of the North Atlantic partners among themselves. While two scholars tentatively developed a single set of rules for the law applicable to Internet and Copyright Conflicts,7 Rochelle Dreyfuss initiated a redrafting of the failed Hague proposal for IPR.8 The two projects were then merged and later became an official American Law Institute project bearing the title: Intellectual Property: Principles governing Jurisdiction, Choice of Law and Judgments in Transnational Disputes. This project is currently in progress. The completion date is targeted for 2007 at the earliest, although this is regarded as optimistic at least by the Reporters.9 Thus, it would be premature to comment on particular provisions as if they were adopted or near adoption. Instead, it seems more appropriate to present the general format of the draft (part I below) and some methodological considerations necessarily raised when working on such a project (part II below).

5 DESSEMONTET F., ‘Transfer of Technology under UNCTAD and EEC Draft Codifications: A European View on Choice of Law in Licensing’, in: 12 Journal of International Law and Economics (1977), p. 1 et seq. 6 See, e.g., SCHACK H., Urheber- und Urhebervertragsrecht, 2nd ed., Tübingen 2001; KOUMANTOS G., ‘Les aspects de droit international privé’, in: Copyright in Cyberspace – Le droit d’auteur en cyberspace, ALAI Study Days 1996. Actes des journées d’études de l’ALAI 1996, Amsterdam 1997, p. 257 et seq.; DESSEMONTET F., ‘Les contrats de licence en droit international privé’, in: Mélanges Guy Flattet, Lausanne 1985, p. 435 et seq.; DESSEMONTET F., ‘L’harmonisation du droit applicable aux contrats de licence’, in Mélanges Alfred von Overbeck, Fribourg 1990, p. 725 et seq. 7 DESSEMONTET F./GINSBURG J., ‘Proposition commune’, in: DESSEMONTET F., ‘Internet, le droit d’auteur et le droit international privé’, in: Revue suisse de jurisprudence 1996, p. 285 et seq. (pp. 293-294). 8 DREYFUSS R., ‘An Alert to the Intellectual Property Bar: The Hague Judgments Convention’, in: Ill.L.Rev. (2001), p. 421. 9 Rochelle Dreyfuss, Professor, New York University; Jane Ginsburg, Professor, Columbia University; François Dessemontet, Professor, Lausanne University and Fribourg University. François Dessemontet expresses his personal views here.

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II.

Principles and Exceptions

A.

Principles

The Reporters first considered the question whether to prepare a draft Convention or a set of Principles. They decided in favor of Principles, following the example of the UNIDROIT Principles for International Commercial Contracts (1st version 1994, 2nd version 2004).10 It was reasoned that a set of Principles will immediately help national courts and practitioners understand the various issues of jurisdiction and choice of law in IPR matters, whereas the lengthy preparation of a convention, though a worthy educational procedure in itself, would not easily lead to a text binding on many States – as has been witnessed in the Hague draft Convention on Foreign Judgments. The Principles will not be linked to any other international convention. This was the second difficult decision made by the authors of the project. Some arguments could be made in favor of restricting the benefit of the Principles to States party to either of the main WIPO Conventions or to the WTO TRIPs. Finally, the question arose whether the country (or countries) whose courts may be called upon to cooperate must be member to one of the three main IPR Conventions. After the question was answered in the negative in respect of cases of a consolidation of multiple proceedings before a single court, the proposal that a case should not be consolidated in the court of a non-member State of the World Trade Organization was later dropped in favor of a consolidation in the court of any State offering the same guarantees of procedure as those in Art. 42 et seq. of the GATT/TRIPs Agreement. It is recalled that the TRIPs mandate the WTO States to provide effective judiciary and administrative remedies (Art. 42 et seq. TRIPs), which explains the present proposal. Nevertheless, it appears that making the ALI Principles otherwise independent of the TRIPs would favor their reception, especially in courts of countries such as Russia or Saudi Arabia, which are not yet members of the WTO. The goal of helping courts and practitioners find their way in the thicket of conflict rules for IPR would not be achieved by establishing new, original or innovative rules. Therefore, to the greatest extent possible, the draft seeks to restate a common approach wherever it is believed that common ground could be found between Europe, the United States and the Commonwealth countries. Of the 26 advisers to the project Reporters, one half are scholars outside the U.S.

10

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Both available at http://www.unidroit.org.

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B.

Exceptions

There are exceptions to the willingness to restate the obvious. They usually concern matters already regulated in a multilateral instrument. For instance, Brussels11 remits claims concerning the validity of a registered right to the country where the right is registered, which is an obstacle to consolidation. Further, the lis pendens doctrine under Art. 27 of Brussels I allows consolidation only in the court first seized. This hinders efficiency – the primary goal of consolidation. Therefore, conflicts may arise between the solution advocated in the Principles and the positive law of a country or group of countries. The Reporters’ intention is not to encourage legislators to attempt to copy the Principles in their own municipal law of conflicts. However, they do hope that countries with fewer statutory provisions or cases in IPR than the U.S. or some European countries will consult the Principles for the sake of identifying the issues at stake and finding guidance on these matters. The American Law Institute and the National Conference of Commissioners have a long tradition of cooperation in preparing Uniform Laws that have been accepted throughout the United States. At this point it is impossible to make predictions about the extent to which the Principles will be accepted in countries other than the U.S. The style of the Principles is heavily influenced by the drafting techniques of U.S. legislation; in addition, the constant emphasis on achieving total compatibility with U.S. constitutional concerns necessarily makes the draft a U.S.-centered endeavor. The fear that the set of Principles could fail to be as widely accepted as the UNIDROIT Principles on International Commercial Contracts is reinforced by what some European scholars regard as a clever move in favor of more consolidation, which could lead to an even greater U.S. consolidation of the proceedings. Compounded by the desire to designate one applicable law (rather than the fragmented approach of territoriality), this, in their opinion, could promote increased application of the U.S. laws on copyright entitlement.12 The mistrust vis-à-vis the imperialistic tendencies of the U.S. may have deeper roots outside the peaceful area of intellectual property and the conflict of laws. However, no scholar who has followed the movies production and the progressive Americanization of the movies distribution will entirely dismiss the fear as unfounded that the U.S. conceptions of copyright (work for hire, etc.) could take hold in many more countries, as a result of which the Principles might fail to achieve recognition in jurisdictions where such notions are currently unknown.

11 E.g., Art. 16 (4) of Brussels I (Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, available at http://www.curia.eu.int/common/recdoc/ convention/en/c-textes/brux-idx.htm). 12 See KUR A., ‘Trademark Conflicts on the Internet: Territoriality Redefined?’, in: BASEDOW J. ET AL. (ed.), Intellectual Property in the Conflict of Laws (Materialen zum ausländischen und internationalen Privatrecht 44), Hamburger Symposium, March 2004, Tübingen 2005.

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In other words, territoriality, which not so long ago appeared to be an impediment preventing the right owners from reasonably exercising their IPR, is now seen as a strategy to stop globalization of the IPR-based economy. The motto is ‘cultural exception’. This brings us to the most important concern – putting it in the proper perspective – which is methodological in nature.

III. Basic Tenets for Conflict Rules A.

A European Approach

Conflict rules are dictated by many different considerations. Achieving fairness, respect for important policies, and adequacy as regards the substantive issues most likely to be raised in litigation are among the goals of a given set of conflict of laws rules. The overall aim has always been to define the geographical extent of application of each domestic law.13 A fundamental tenet of the ALI draft Principles is to ensure that patent law and other IPR legislation will enjoy application outside the boundaries of the legislating State. When setting up the rules, it appears that fairness to the litigants can be guaranteed only if neutrality of interests is ensured. It would be incorrect to favor the IPR owner to the detriment of the alleged infringer. Since the alleged infringement may not be an infringement under the defendant’s law, for instance, the applicable law will be determined without regard to the result of the application of one law (that of a claimant IPR owner) or another law (e.g., that of the location of the allegedly infringing acts or, preferably, that of the location of their result). By the same token, determining jurisdiction over claims should not be made with a view to facilitating their admission in order to apply or hinder application of the procedural rules of the forum. Second, fairness in commercial matters and IPR litigation appears to mandate bilateralism in conflict rules. This means that the same test should be used to determine whether a given legal relationship is subject to the laws of country A (which legislates) or to those of country B (the other country); in other words, an easier or different test cannot be used to designate the law of the legislating country as applicable instead of that of the other country. This is a type of ‘mirror image’ conflict rule that is traditionally viewed as fair, since both parties, the local and the foreign one, are on equal footing as regards the method of determining the applicable law or jurisdiction It is, however, well known that most legislatures have favored a unilateral approach in certain matters, submitting a given legal relationship to their own law as they saw fit, without implying that the same solution should be adopted in the See VOLKEN P., in: Zürcher Kommentar zum IPRG, 2nd ed., Zurich 2004, N. 5-6 ad Art. 1 SPIL. 13

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opposite case, i.e., where another State claims that its own laws apply. To some extent, it may be argued that this unilateral approach has prevailed in copyright14 and related matters (neighboring rights, designs and models), as well as in patent and trademark cases. The applicable body of law was not determined by conflict rules but rather by the law on the status of foreigners within the domestic jurisdiction. IPRs were envisaged as privileges of the Ancien Régime, and as such were supposed to escape the conflict of laws within a country, and as international conflict rules evolved from those internal conflicts, there was no room for bilateral consideration. Later on, reciprocity requirements were established as a tool to extract concessions from foreign partners.15 This technique of diplomatic pressure was alleviated with the entry into force of the Paris and Berne Conventions, with some exceptions provided in their texts, then revived after the failure to modernize Berne and Paris in the 70’s and 80’s. The reciprocity requirement for semi-conductor topographies was admitted in the U.S. and European legislation, and the watchdogs under U.S. Sec. 301 were and still are keen to monitor enforcement of IPR in other countries, which is definitely contrary to the neutrality and bilateralism in the area of conflict rules. Hence, the very idea of a body of private international law for registered IPRs, let alone its neutrality and bilateral character, has not been familiar to IPR specialists. These ‘intellectualists’ have tended to prefer an approach based on multilateral conventions, with the aim of unifying the applicable law. Where harmonization could not be reached, every State would be free to pursue its own policies. A unilateral approach would do. Discrimination against foreigners might be contrary to Berne, Paris or the TRIPs, but only for the subject matter covered in those conventions (where there is no possibility of requiring reciprocity). It is also contrary to the basic principles of the European Union, but only for subjects or citizens of its Member States.16 A. Troller and E. Ulmer are accredited with having changed the paradigm: Instead of applying the status of foreigners for privileges granted by the State and their enforcement by the courts of that State, they devised systems of bilateral conflict rules. This approach was all the more understandable for A. Troller, since Switzerland had rejected reciprocity in copyright matters (e.g., already in the preparatory works for the Stockholm Act of the Berne Convention, and with the exception of secondary use of performers’ rights). 14 See, e.g., LUCAS A. and H.-J., Traité de la propriété littéraire et artistique, 2nd ed., Paris 2001, p. 717 et seq. 15 On bilateral copyright agreements see SHERMAN B./BENTLY L., The Making of Modern Intellectual Property Law, Cambridge 1999, passim e.g. p. 114 et seq.; on the policy of arm-wringing behind reciprocity, see DESBOIS H., Le droit d’auteur en France, 3rd ed., Paris 1978, N. 793. 16 Phil Collins v. Imtrat Handelsgesellschaft mbH and Patricia Im- und Export Verwaltungsgesellschaft mbH and Leif Emanuel Kraul v. EMI Electrola GmbH, cases 92/92 and 326/92, 20.10.1993, ECJ, in: ECR 1993 I, p. 5145.

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B.

A Global Approach

The Principles are based on the presumption that they will provide guidance for many different States. Thus, they are in essence bilateral and neutral. They are bilateral per force. They are neutral even if their authors wish to favor the prompt adjudication of claims and to avoid parallel proceedings in many countries. The Reporters are aware that tests such as the ‘expertise’ of a court, which should be taken into account when deciding whether and where to consolidate proceedings, might give the impression that only a number of courts of Northern countries would eventually qualify. However, in a globalized world, the idea of establishing specialized courts for patent cases has already emerged, be it in a given State (Switzerland is considering establishing such a specialized Federal Tribunal) or in a regional union (such as the European Union or the States party to the European Patent Convention). WIPO and a small number of other forums specialized for the application of the ICANN Policy on domain names is another example. Finally, in tomorrow’s world, the fragmentation of jurisdiction within a given territory in special matters like IPR will no longer be acceptable; efficiency and expertise will dictate centralization within countries. As between States, there may be excellent courts in Southern countries to adjudicate claims relating to IPR, as there are excellent software programmers, skilled merchants in brand products or generic drugs, etc. in the same countries. The idea that only U.S. or English judges would be called upon to adjudicate IPR disputes is ludicrous – be it only because of the costs that any litigation in the U.S. or in London might entail. As was mentioned earlier, the territoriality principle is the prevailing conflict rule in intellectual property matters (cf. Art. 5(2) and Art. 14 bis (2)(a) i.f. Berne Convention; see also Art. 110(1) SPIL).17 Since they are ubiquitous, IPRs are difficult to localize.18 When determining the applicable law, it seems appropriate to distinguish between registered and unregistered rights. As to the applicable law, the registered rights should be governed by the law of the country of registration, including the issues relating to the entitlement to such rights. With respect to other IPRs, the law of the country for which protection is claimed should apply. The initial title to unregistered rights would be governed either by the law of the place where the unregistered trademark or trade dress identifies the source of the goods or services, the so-called ‘law of the market’, or by the law of the place where the work was first made available to the public, the socalled ‘law of first publication’.19 If none of those tests is relevant, the country of the creator’s habitual residence or principal place of business at the time of the 17

See, e.g., ATF 78 II 164 (trademark); ATF 79 II 305 (commercial name). NOVIER M., La propriété intellectuelle en droit international privé suisse (doctoral dissertation Lausanne), Tolochenaz 1996, p. 22. 19 For a development of the universality theory reflected in the draft only in this regard, see SCHACK H., Urheber- und Urhebervertragsrecht, 2nd edition, Tübingen 2001, N. 793 et seq., p. 356 et seq. 18

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work’s creation might apply to the entitlement but this is disputed. Of course, if there is a commission or employment contract, initial title is governed by the law of that contract. For personal rights such as the right of publicity (droit à l’image), the law of the country where the damage occurred will apply. In this context it should be mentioned that Art. 6-quinquies of the Paris Convention obliges the Member States to recognize ‘as is’ (in French ‘telle quelle’) every trademark duly registered in the country of origin. This provision addresses the form of the trademark and does not deal with ownership.20 Therefore, the universalist approach – which may be desirable – is not mandated by the TRIPs or the Paris Convention. These general rules should provide a sufficient framework for resolving most conflicts of laws. However, in line with some recent codifications,21 the ALI draft Principles propose a general exception to the territoriality principle if it is clear from all the circumstances of the case that it is more closely connected to the law of another country; or if the claim is closely connected to a pre-existing relationship which is subject to a law other than the law otherwise applicable or if having due respect to the social interests of the States concerned, and to the need for predictability in designation of the applicable law, the court determines that its ruling will potentially impact territories outside the borders of its jurisdiction, and that it is unduly burdensome to decide on the basis of all the laws of the territories involved. Any provision on the conflict of laws to the effect that ‘the court determines that its ruling will potentially impact territories outside the borders of its jurisdiction, and that it is unduly burdensome to decide on the basis of all the laws of the territories involved’ may be read in conjunction with the provision on consolidation. This is a Trojan horse, designating the law of the consolidating forum as applicable to all IPRs at issue, or so the argument goes. First, the text does not support this fear. From the text it follows that a court located in country A may designate the law of country B as solely applicable to govern a multi-country litigation. The idea that the forum will exclusively apply its own law is possibly true in regard to consumer cases and public policy considerations. However, it should not be a general practice, as there would then be little use in having a set of jurisdiction rules and a different set of conflict rules. In fact, the number of court decisions applying foreign law in IPR matters is increasing. Second, the rules on jurisdiction should lead to the defendant’s forum mainly competent for worldwide claims. Otherwise, in the absence of a choice of forum by both or all parties to the litigation or acceptance of the forum’s jurisdic20 As decided by the WTO Dispute Resolution Panel (Panel N° WT/DS 176, European Union v. United States of America, Section 211 Omnibus Appropriations Act, published on August 6, 2001, confirmed in this regard by the Appellate Body on 2 January 2002; both available at www.wto.org). 21 See, e.g., Art. 15 SPIL (http://www.admin.ch/ch/f/rs/2/291.fr.pdf) and Art. 19 Belgian Private International Law Code (http://www.notaires.be/info/actes/100_code_dip. htm).

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tion by virtue of the failure to raise objection, the defendant may be attracted to the courts of the place where he principally acted or the courts of the State to which the alleged infringement was directed. In the latter case, jurisdiction will nevertheless be given only in respect of the injury arising out of unauthorized use occurring in that State,22 unless the injured person has his habitual residence or principal place of business in that State. To be sure, the plaintiff’s forum can be the consolidating forum under the rules of consolidation, but only if the infringing activity has been directed towards that State. Otherwise, the ‘domicile, habitual or temporary residence, or presence of the plaintiff in a State’ is prohibited as a ground for asserting jurisdiction. Now the question arises whether it is really inconceivable that a party in Malaysia willing to export infringing goods to England can be made to answer in England. In any event, this is already the case under the principle of territoriality (see, e.g., Art. 109(1) SPIL). Further, if the dispute is consolidated in England for the whole of Europe, it may be in keeping with justice, equity and good conscience to deal with all these infringing acts at once, under English law rather than 25 different laws. The defendant will always be in the position to show, for example, that the IPR at stake does not exist or is not valid in one particular State, or that he or she is not infringing because he or she owns the right or works as a contractor for a third party owning the right, or because the definition of infringement is not identical to the English one. The Swiss Federal Tribunal already confirmed23 that a defendant could bring a declaratory action in Switzerland stating that he had not infringed a given European patent in several European countries, although the validity of the patent was not at stake. This last point should be adjudicated under each national law of patents and in light of the circumstances of the case, Swiss courts would not have jurisdiction under Art. 16(4) of the Lugano Convention; however, the case did not bear on the validity of the patent.

C.

A Differential Approach

The European approach to conflicts is based on an approach that distinguishes between various categories. As for jurisdiction, the ALI draft Principles distinguish between different classes of actions: 1) declaratory actions, 2) actions seeking substantive relief infringement, and 3) actions arising out of contracts such as licensing agreements. As regards the applicable law, the draft Principles enumerate registered rights, non-registered trademarks, works of authorship, rights of performers, of phonogram producers or broadcasting entity, unregistered semi-conductors topography, plant variety, design and model, trade secret, geographical indication, right of publicity, right to a database. This list in itself is indicative of 22 Cf. with the ECJ cases Fiona Shevill, in: ECR 1995 I, 415 and Antonio Marinari, in: ECR 1995 I, 2719. 23 ATF 129 III 295.

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the broad reach of the Principles. Only trade names and domain names are not mentioned because their status as IPRs is not certain.24 The enumeration of sub-categories should in itself make it clear that more is at stake than merely patents, trademarks and copyrights. Of course, practitioners are aware of the conflict of laws in respect of geographical denominations25 or right of publicity.26 It is important to make the ‘conflictualists’ aware of the true extent of modern intellectual property; otherwise scholars risk limiting discussions of conflicts to better-known exclusive rights such as patents for inventions or copyright. The purpose of differentiating between actions or between IPR categories is to devise finely tuned solutions for conflicts. In the end, it is important to reach a proper balance between an oversimplifying generalization, such as the new Article on IPR proposed in the draft Rome II,27 and a detailed description of every particular situation. Altogether the ALI draft contains 35 separate provisions on jurisdiction, the applicable law and the recognition of foreign judgments. In view of the large number of issues to be resolved, this may not be excessive; however, it might impede the legibility of the draft. In addition, there are comments and the Reporters’ notes, thus resulting in a bulky draft that might have to be reshaped into a shorter version, so as to make it more suitable for European readers. Finally, it should be pointed out that the ALI draft does not follow the German approach (also partially accepted in Switzerland28), which allows the plaintiff to choose the applicable law in right of personality cases by making a choice among various connecting factors. Here the choice is made by the draft Principles, which specify the governing law in any given situations. This method provides 24 See the decision of the Appellate Body (reversing the Panel’s decision) according to which Art. 1.2 and 2.1 of the TRIPs Agreement are not exhaustive and also cover trade names (Panel N° WT/DS 176, European Union v. United States of America, Section 211 Omnibus Appropriations Act, published on 6 August 2001; decision of the Appellate Body on 2 January 2002; both available at www.wto.org). 25 See, e.g., ECJ decision in Turron de Alicante, C-3/91 in: ECR 1992 I, 5529. 26 See, e.g., Cardtoons L.C. v. Major League Baseball Players Association, 868 F. Supp. 1266 (N.D. Okl. 1994), 95 F. Rep. 3d 959 (10th Cir. 1996). 27 Art. 8 Rome II (Proposal for a Regulation of the European Parliament and the Council on the law applicable to non-contractual obligations (COM (2003) 427 final): ‘Article 8 – Infringement of intellectual property rights 1. The law applicable to a non-contractual obligation arising from an infringement of an intellectual property right shall be the law of the country for which protection is sought. 2. In the case of a non-contractual obligation arising from an infringement of a unitary Community industrial property right, the relevant Community instrument shall apply. For any question that is not governed by that instrument, the applicable law shall be the law of the Member State in which the act of infringement is committed.’ 28 See, e.g., Art. 139 SPIL.

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greater predictability, and neutrality is best safeguarded when the plaintiffs have no option as to choice of law, i.e., no possibility to designate one of various potential laws as applicable.

D.

A Protective Approach

It should be noted that the draft Principles recognize the European notion of a weaker party – the consumer, for example – who deserves protection. Both the choice of law and the choice of forum are protected in non-negotiated agreements. Therefore, there is no basic incompatibility between the free market approach of most U.S. and Commonwealth jurisdictions and the European protective approach (provided, for example, under Art. 13 Lugano Convention), even if the system is not entirely identical. Further, more protection can be expected when ordre public is applied by the court. In this respect, the draft distinguishes between public policy and laws of direct application (lois d’application immédiate). The ‘cultural exceptions’ that abound in copyright laws around the globe will fit in smoothly under those headings.

E.

The Law Applicable to Licensing Agreements

The ALI draft (§ 315(1)) recognizes the freedom of the parties to choose the law applicable to their licensing agreement. In the absence of a contractual choice of law, the ALI draft (§ 315(2)) designates the law of the country with the closest connection to the contract as applicable. It presumes that the country of habitual residence of the licensor is the country with the closest connection to the contract.29 Some jurisdictions (e.g., Canada) recognize effects of licensing agreements towards third parties. Canadian courts admit, for instance, actions brought by licensees against counterfeiters for violation of ‘their’ IPRs. The law applicable to such infringement actions must be determined. Licensing agreements are contracts on IPRs; the parties must therefore have the possibility to choose the law applicable to their relationship (see Art. 122(2) SPIL; § 315(1) ALI Draft). Sometimes, such choices of governing law have no 29 Cf. Art. 122 SPIL (translation by DUTOIT B., Commentaire de la loi fédérale du 18 décembre 1987, 3rd ed., Basel 2001, ad Art. 122 SPIL): ‘1. Agreements pertaining to intellectual property are governed by the law of the state in which the transferor or grantor of the intellectual property right has his or her habitual residence. 2. A choice of law is allowed. 3. Agreements made between an employer and an employee concerning intellectual property rights to inventions made by the employee in the course of performing his or her work are governed by the law applicable to the employment contract.’

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connection to the parties or to the market for which the right is transferred. This raises the question whether such agreements have effects towards third parties. Furthermore, is the choice of Canadian law, for example, a reliable way to ensure that the licensee can sue any counterfeiter? Generally, pursuant to the principle res inter alios acta aliis nec nocet nec prodest, contracts only concern the relationship between the parties and have no effect towards third parties. The law applicable to third parties must be determined in each individual case.30 The free choice of the law applicable to the agreement must not endanger the situation of a third party. For example, if a particular law requires the contract to be registered in a public register, the registration can be accomplished only if the agreement fulfills the conditions of that particular State (see also § 314 ALI Draft: ‘The transferability of rights is determined by the law of each State for which the rights are exercised’). In cases of counterfeiting, the law of the State for which protection of the IPR is required shall determine whether a licensee can sue the counterfeiter. The situation does not appear to be similar in cases of sublicenses: The possibility for the licensee to concede a sublicense to a third party must be examined under the law governing the initial license agreement.31 A judgment falling within a basis of a jurisdiction designated in the ALI draft Principles should be recognized in a different country if it is recognized in the rendering State. The preclusive effect of such a judgment should not be greater than its effects in the rendering State. If a review is still possible in the rendering State, enforcement can be postponed in a different country even if the judgment is enforceable in the rendering State. The court addressed should verify the jurisdiction of the rendering court. The facts as established by the judgment to be recognized will be binding, except in cases of a default judgment. A judgment applying a law manifestly inconsistent with the ALI draft Principles should not be recognized or enforced. Further grounds for denial of recognition are mentioned. The recognition and enforcement of foreign judgments is essential for IPR litigants. One of the main benefits of the consolidation proposed by the ALI draft Principles is that an adjudication will be valid in the main markets at issue. The link established between the conflict rules and the recognition and enforcement of foreign judgments gives some raison d’être to the whole endeavor.

30

DESSEMONTET F., ‘L’harmonisation du droit applicable aux contrats de licence’, in: Mélanges von Overbeck, Fribourg 1990, p. 725 et seq. (p. 733); DUTOIT B., Commentaire de la loi fédérale du 18 décembre 1987, 3rd ed., Basel 2001, N. 5 ad Art. 122 SPIL. 31 DESSEMONTET F. (note 30), at pp. 736-737).

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IV. Conclusion Since the ALI Project is a difficult one, no prediction can be made as to the eventual adoption of the draft. However, even if it will not be adopted, it would have been the most thorough and serious attempt to date to restate the law on jurisdiction and applicable law in intellectual property matters. Hopefully, the draft Principles will be adopted by the ALI within three to five years. Thereafter, the process of making the Principles known outside the U.S. and the academic circles of some European nations will start with a great impetus.

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ON AVELLO AND OTHER JUDGMENTS: A NEW POINT OF DEPARTURE IN THE CONFLICT OF LAWS? Tito BALLARINO / Benedetta UBERTAZZI

1. 2. 3. 4. 5. 6. 7. 8.

Introductory Remarks The Garcia Avello Case The Rules Governing the Attribution of Nationality from the Point of View of EC Law Nationality as a Connecting Factor From the Cross-Border Requirement to Union Citizenship Conflict of Laws Technicalities in EC Law EC Mandatory Rules Continuation: ‘Zurück zu Savigny’

1.

Introductory Remarks

In recent judgments – not only the one used as the point of departure of this study – the European Court of Justice has been applying the law of the European Community freedoms to facts containing none of the cross-border elements that are a precondition for its applicability according to the original EC Treaty. This development can be regarded as quite natural in the traditional areas in which the European Community functions. Like many other authors, Weatherill and Beaumont point out that, ‘as market integration accelerates and national borders lose economic relevance, the logic of the purely internal situation diminishes.’1 Thus, a long time ago, dating back well before the national competition authorities had acquired competence to apply the rules of Community law within their jurisdictions and before the EC had decentralized the application of competition law, the Court of Justice had already ruled that the damaging effects of competition in the single market could even be felt within an industry geographically confined within one State.2 The same applies to State subsidies that distort or

Professor of Law, University of Padua and the Catholic University of Milan. Doctor iuris, Dottore di ricerca in Diritto internazionale. 1 WEATHERILL S./BEAUMONT P., EC Law, Penguin, 1993 (earlier edition), 540. See also infra, Part 5 of this article. 2 ECJ, 17 October 1972, case 8/72, Vereiniging van Cementhandelaren v EC Commission, in: ECR 1972, 977. The Court found: ‘According to Article 85(1) [of the EC

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threaten to distort competition and are prohibited by the EC Treaty (Article 87(1)) ‘insofar as they affect trade between Member States’. In the majority of cases, this requirement is not the object of a specific investigation since mere proof of the fact of distortion of competition is deemed adequate. Similarly, as regards the right of establishment, the European Court rejected the objection raised by the Danish government in the well-known Centros case, which concerned a set of facts purely internal to Denmark. (The case was about a company that was formed by Danish citizens for the exclusive purpose of operating in Denmark but was incorporated in England in order to evade the Danish laws on the minimum capital for trading companies.)3 This evasion of the cross-border requirement can be seen in other areas as well. The Brussels Convention of 1968 on Jurisdiction and the Enforcement of Judgments (amended several times) states in its preamble that, in order to strengthen the legal protection of persons established in the Community, it is Treaty] all agreements which have as their object or effect the prevention, restriction or distortion of competition are incompatible with the Treaty once they may affect trade between Member States. An agreement extending over the whole of the territory of a Member State by its very nature has the effect of reinforcing the compartmentalization of markets on a national basis, thereby holding up the economy interpretation which the Treaty is designed to bring about and protecting domestic production’ (paras. 28-29). 3 ECJ, 9 March 1999, C-212/97, Centros, in: ECR 1999, I-1459, paras. 24-25: ‘It is true that according to the case-law of the Court a Member State is entitled to take measures designed to prevent certain of its nationals from attempting, under cover of the rights created by the Treaty, improperly to circumvent their national legislation or to prevent individuals from improperly or fraudulently taking advantage of provisions of Community law […]. However, although, in such circumstances, the national courts may, case by case, take account – on the basis of objective evidence – of abuse or fraudulent conduct on the part of the persons concerned in order, where appropriate, to deny them the benefit of the provisions of Community law on which they seek to rely, they must nevertheless assess such conduct in the light of the objectives pursued by those provisions.’ The Court rejected the argument that there had been a fraude à la loi, relying on its own previous judgment in Seghers (ECJ, 18 July 1986, 79/85, in: ECR 1986, 2375); para. 16 establishes: ‘As regards the doubt expressed by the national court concerning the significance of the fact that the English company clearly does not conduct business in the United Kingdom, it should be noted that for the application of the provisions on the right of establishment, Article 58 requires only that the companies be formed in accordance with the law of a Member State and have their registered office, central administration or principal place of business within the Community. Provided that those requirements are satisfied, the fact that the company conducts its business through an agency, branch or subsidiary solely in another Member State is immaterial.’ In another judgment relating to services, the Court opposed intentional delocalisation. See ECJ, 5 October 1994, C-23/93, in: ECR 1994, I-4759. On the issue of abuse of Community law see KARAYANNIS V., ‘L’abus des droits découlant de l’ordre juridique communautaire’, in: Cah. dr. eur. 1999, 521-535; BALLARINO T., ‘Sulla mobilità delle società nella Comunità europea. Da Daily Mail a Überseering: norme imperative, norme di conflitto e libertà comunitarie’, in: Riv. soc. 2003, 669-698, at p. 677, especially footnote 13.

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necessary ‘to determine the international jurisdiction of their courts’. This formula gave rise to considerable doubt as to whether the Convention would apply to a dispute arising from a contract which was merely domestic at the time of its formation (inside a sole Member State)4 but was brought before the court of a different Member State, for example, pursuant to a jurisdiction clause (under Article 17 of the Convention, now Article 23 of Regulation 44/2001/EC). During the transformation of the Convention into Regulation 44/2001/EC, the above-mentioned ‘international’ or ‘cross-border’ concept was replaced in the recitals by the concept of ‘the sound operation of the internal market’.5 In other cases it has been found that, where the European Court has jurisdiction, the cross-border nature of the facts need not be actual, it suffices for it to be merely potential.6 The requirement of a cross-border element and the consequent indifference of Community law in ‘purely internal’ situations used to be evident in different aspects of the various branches of the law relating to free movement.7

4

See, e.g., MARI L., Il diritto processuale civile della convenzione di Bruxelles, I, Il sistema delle competenze, Padua (Cedam) 1999. 5 This argument was stressed by the High Court of Justice, Queen’s Bench Division, in its judgment of 12 November 2004 [2004] All ER (D) 219 (Nov.). The Court gave relief to a para. 20 (Third Party) Defendant (BF) sued in England because it had supplied the gearbox of a pulp press which was sold in England and failed there. BF argued successfully that it had concluded with the manufacturer of the press a forum clause giving exclusive jurisdiction to an Italian court. The question arose whether this clause, which was agreed between two subjects, both of whom were Italian and concerned a contract performed entirely in Italy, fell within Article 23 of Regulation 44/2001/EC. The Court responded affirmatively. 6 Thus, in the famous series of judgments on Golden shares, the finding of illegality, from a Community point of view, of the national laws establishing the restrictions was based on their possible dissuasive effect on investors belonging to other countries. See ECJ, 13 May 2003, C-463/00, in: ECR 2003, I-4581 at para. 61: ‘Although the relevant restrictions on investment operations apply without distinction to both residents and nonresidents, it must none the less be held that they affect the position of a person acquiring a shareholding as such and are thus liable to deter investors from other Member States from making such investments and, consequently, affect access to the market […]’. For other judgments and an analysis of the problem, see (also for references) BALLARINO T./BELLODI L., ‘La golden share nel diritto comunitario. A proposito delle recenti sentenze della Corte comunitaria’, in: Riv. soc. 2004, 2-42. Similarly, see the judgment in Salzmann concerning capital investments, 15 May 2003, C-300/01, in: ECR 2003, I-4899, in which the Court conceded that all the elements relating to the case were confined within a single Member State: the competent Austrian official refused to permit an Austrian citizen to purchase a building situated in Austria. Nevertheless, the Court rendered its own judgment (relating to a question of prejudice), arguing that it was obliged to interpret Community law in any event. On this and similar cases see IDOT L., ‘Variations sur le domaine spatial du droit communautaire’, in: Mél. Lagarde (see infra, note 89), 431-493, at p. 442.

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For persons, the term ‘internal’ was given a restrictive interpretation in order to exclude from free movement all those who intended to take up employment or carry on business in their country of origin without having established any kind of link with the Member State,8 thus giving rise to the well-known phenomenon of ‘reverse discrimination’ (discrimination à rebours). This situation changed, however, with the advent of European citizenship (citizenship of the Union). This circumstance modified the logic of free movement, paving the way for a new concept: that of the protection of citizens of the Union. At the same time, European law was extended to include family law,9 thus opening a new field for the application of European citizenship. Reinforced and extended, Community law began to acquire the character of a system of rules that, albeit within the confines of the Community structure, attempts to take on the role of legislation whose applicability is subject to a connecting factor. The problems arising from an analysis of Avello and subsequent judgments are not restricted to defining the sphere of application of the EC Treaty in respect of persons, especially in connection with the principle of non-discrimination under Article 12, but also include the problem of making a choice of law in legal relations with a foreign element. 7 See PAPADOPOULOU R.E., ‘Situations purement internes et droit communautaire: un instrument jurisprudentiel à double fonction ou une arme à double tranchant’, in: Cah. dr. eur. 2002, 95-129, at pp. 97-101 (see also the references infra, part 5): ‘Il ressort de ce qui précède que le terme “interne” n’a pas un contenu identique dans les différentes branches du droit de libre circulation […]’. 8 The position of Community law on the free movement of goods is different. See PAPADOPOULOU R.E. (note 7): ‘La position du juge communautaire sur ce point revient à dire qu’une situation purement interne peut entrer dans le champ du droit communautaire, si la mesure nationale qui lui est appliquée est susceptible de s’appliquer aussi aux marchandises provenant d’autres Etats membres.’ The well-known category of measures which are ‘indistinctly applicable’ is related to this situation. 9 WOODS L., ‘Family Rights in the EU – Disadvantaging the Disadvantaged?’, in: Child and Family Law Quarterly 1999, p. 17 et seq.; MCGLYNN C., ‘A Family Law for the European Union?’, in: SHAW J. (ed.), ‘Social Law and Policy in an Evolving European Union’, Oxford-Portland (Hart) 2000, 223-241; ID., ‘The Europeanisation of Family Law’, in: Child and Family Law Quarterly 2001, 35 et seq.; MCELEAVY P., ‘The Brussels II Regulation: How the European Community Has Moved into Family Law’, in: ICLQ 2002, 883-908; JÄNTERÄ-JAREBORG M., ‘A European Family Law for Cross-border Situations – Some Reflections Concerning the Brussels II Regulation and its Planned Amendments’, in: this Yearbook, Vol. IV, 2002, 67-82; BARRETT G., ‘Family Matters: European Community Law and Third-country Family Members’, in: CML Rev. 2003, 369-421; STALFORD H., ‘Regulating Family Life in Post-Amsterdam Europe’, in: Eur. Law Rev. 2003, 39-52; REICH N./HARBACEVICA S., ‘Citizenship and Family on Trial: a Fairly Optimistic Overview of Recent Court Practice with Regard to Free Movement of Persons’, in: CML Rev. 2003, 615-638; CARACCIOLO DI TORELLA E./MASSELOT A., ‘Under Construction: EU Family Law’, in: Eur. Law Rev. 2004, 32-51. See Part 4 infra.

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In this case, the introduction of European citizenship has created a link that serves as a suitable connecting factor for making a choice between national and Community law, using a method not unlike that in the rules of the conflict of laws.

2.

The Garcia Avello Case

This case concerns the family name of children born in Belgium to a married couple resident in that country.10 The father was a Spanish national and the mother a Belgian, as a result of which the children had dual nationality. In accordance with Belgian private international law, the name of an individual is determined by the national law of the individual:11 when a Belgian national has one or more other nationalities at the same time, the Belgian authorities give priority to Belgian nationality.12 This results in the application of Belgian substantive law, according to which a child bears the surname of the father.13 10

ECJ, 2 October 2003, C-148/02, in: ECR 2003. See the annotations on the Avello judgment by QUIÑONES ESCÁMEZ A., ‘Derecho comunitario, derechos fundamentales y denegación del cambio de sexo y apellido: un orden público europeo armonizador? (a propósito de las SSTJCE, asuntos K.B. y Garcia Avello)’, in: Revista de derecho comunitario Europeo 2004, 507-529; LAGARDE P., in: Rev. crit. dr. int. pr. 2004, 192-202; ILIOPOULOU A., ‘What’s in a name? Citoyenneté, égalité et droit au nom. A propos de l’arrêt Garcia Avello’, in: Rev. trim. dr. eur. 2004, 565-579; LARA AGUADO A., ‘Libertades comunitarias, doble nacionalidad y régimen de los apellidos’, in: La ley 2004, n. 6107, 1-12; REIG FABADO I., in: Cuadernos Civitas de jurisprudencia civil 2004, 463-475. The Court had already taken a stand on the names of individuals in its judgment of 30 March 1993, C-168/91, Christos Konstantinidis v Stadt Altensteig, in: ECR 1993, I-1191, where it found: ‘There is nothing in the Treaty to preclude a Member State which uses the Roman alphabet from transcribing a Greek name in Roman characters in its registers of civil status. Where it undertakes such transcription, it is for such State to adopt legislative or administrative measures laying down the detailed rules for such transcription, in accordance with the prescription of any international conventions relating to civil status to which it is party. Such rules are to be regarded as incompatible with Article 52 of the Treaty only in so far as their application causes a Greek national such a degree of inconvenience as in fact to interfere with his freedom to exercise the right of establishment enshrined in that article.’ 11 See Art. 3 para. 3 of the Belgian Civil Code, according to which the laws governing personal status and capacity shall apply to Belgian nationals, even though they are residents outside Belgium. In the event of a conflict between the laws governing a person’s surname, most Member Sates give priority to the law of his or her nationality as the law governing personal status. For a comparative survey of the law governing the names of individuals in the various systems of private international law of the Member States, see para. 8 of the Opinion of the Advocate General Jacobs. 12 See para. 8 of the judgment. This rule is widespread and is consistent with the customary rule of public international law codified by Article 3 of the Hague Convention of

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Treated as Belgian citizens at the registration of their birth in Belgium, the Garcia Avello’s children were given the double surname of their father, Garcia Avello, which, in accordance with Spanish law and custom, consists of the first element of his father’s surname and the first element of his mother’s (maiden) surname. The parents subsequently applied to the Belgian authorities to change the children’s surname to Garcia Weber, reflecting the Spanish pattern by using the first element of their father’s surname, followed by their mother’s (maiden) surname. That application was refused, notwithstanding the Belgian administrative practice of allowing derogations in certain cases. In fact, under Belgian law and administrative practice, a change of surname to comply with a foreign law may be allowed when there are few links with the Belgian State, for example, because the family has lived in another Member State, however, not when the person possesses dual nationality, including Belgian nationality, and should therefore be treated as a Belgian citizen.14 The Belgian Conseil d’État referred the matter to the Court of Justice for a preliminary ruling on the question whether this refusal was precluded by the principles of Community law relating to citizenship of the Union and freedom of movement for citizens.15 12 April 1930 on certain questions relating to the conflict of nationalities, in: League of Nations Treaty Series, vol. 179, p. 89. Article 3 provides that a person having two or more nationalities may be regarded as its national by each of the States whose nationality he possesses. The Convention was ratified by Belgium through a law of 20 January 1939, but not by Spain (which signed it with one reservation). 13 See Article 335 of the Belgian Civil Code, which reads: ‘A child whose paternal filiation alone is established or whose paternal and maternal filiation is established at the same time shall bear the surname of its father unless the father is married and recognizes a child conceived during marriage by a woman other than his spouse.’ For a comparative analysis of the substantive laws of the Member States governing the surname given to a child, see paras. 10-18 of the Opinion of Advocate General Jacobs. 14 Exceptionally, and in particular when there are few connecting factors referring to Belgium, a surname may be conferred in accordance with foreign law, especially if the family has lived in a country other than Belgium where the child was registered under the double surname so as not to adversely affect his or her integration. In recent years the Belgian administration has adopted a more flexible approach, particularly in cases where the first child born under Spanish jurisdiction had a double surname in accordance with Spanish law, whereas the second child, who had Belgian and Spanish nationality, bore the double surname of its father in accordance with Article 335(1) of the Belgian Civil Code, thus reestablishing the same surname within the family. See para. 12 of the judgment. 15 The Belgian Conseil d’État referred the following question to the Court: ‘Are the principles of Community law relating to the European citizenship and to the freedom of movement of persons, enshrined particularly in Articles 17 and 18 [of the EC Treaty] to be interpreted as precluding the Belgian administrative authorities, to which an application to change the surname of minor children residing in Belgium who have dual Belgian and

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The task of the Court was first to establish whether Community law, in particular the EC Treaty provisions on citizenship of the Union, were applicable to the case. Replying to an objection raised by various governments intervening in the proceeding, the Court held that the rules governing a person’s surname were matters falling within the competence of the Member States.16 However, it refused to admit that, because the children concerned were also nationals of the Member State in which they had been resident since their birth and which was the only nationality recognized by the authorities of that State, the situation under examination was merely internal to Belgium and had no link with Community law. According to the Court, granting the nationality of a Member State to an individual who also possesses the nationality of another Member State creates a link with the Community system in such a way that any law of a Member State similar to the Belgian law under examination giving priority to Belgian nationality where a Belgian national has at the same time one or more nationalities of other Member States, wrongfully restricts the effect created by that link with the Community system. Having established that the situation of Garcia Avello’s children involves Community law,17 the Court went on to examine whether the Community principle of non-discrimination precluded the Belgian administrative authorities from turning down an application for a change of surname in a situation such as that in this case. According to well-established Community case-law, the principle of nondiscrimination requires that comparable situations must not be treated differently and that different situations must not be treated in the same way, unless this treatment is based on objective considerations independent of the nationality of the

Spanish nationality has been made on the ground, without other special circumstances, that those children should bear the surname to which they are entitled according to Spanish law and tradition, from refusing that change by stating that that type of application is habitually rejected on the ground that, in Belgium, children bear their father’s surname, particularly where the position usually adopted by the authority results from the fact that it considers that the grant of a different surname may, in the context of social life in Belgium, arouse questions as to the parentage of the child concerned, but that, in order to reduce the difficulties associated with dual nationality, it is suggested to applicants in that situation that they adopt only the father’s first surname, and that, exceptionally, where there are few connecting factors to Belgium or it is appropriate to re-establish the same surname among siblings, a favourable decision may be taken?’ (Avello judgment, para 19). 16 Para. 25 of the Avello judgment. 17 On the relevance of citizenship of the European Union for the Community system, see infra, Part 5 of this article.

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persons concerned and is proportionate to the objective being legitimately pursued.18 As we have seen under Belgian law and administrative practice, a change of surnames on the basis of a foreign law may be granted in certain cases but not when the person possesses dual nationality, one of which is Belgian, and thus falls to be treated as a Belgian citizen. Having drawn attention to the fact that the principle of non-discrimination precludes Member States from treating persons in different situations in an identical manner, the Court decided that, in the present case, persons having Belgian nationality in addition to the nationality of another Member State had been treated in the same manner as persons who had only Belgian nationality. The Court then found that such a practice was discriminatory because it accorded the same treatment to persons in objectively different situations. In fact, the Court went on to explain that, contrary to persons having only Belgian nationality, Belgian nationals who also held Spanish nationality had different surnames under the two legal systems concerned. Thus they were entitled to plead difficulties specific to their situation which distinguished them from persons holding only Belgian nationality, who were identified by one surname only. Among those difficulties were the ‘obvious practical’ ones which ‘may ensue for the children from the fact that their surname as recorded by the Belgian authorities differs from that recorded by the Spanish authorities’.19 Application of the Belgian system to a Spanish surname is also likely to present a distorted image of family relationships to those familiar with the Spanish system, as it makes Mr. Garcia Avello’s children appear to be his siblings. None of what the Court had ruled should be construed as a criticism of the Belgian or any other rules governing the attribution of nationality or the attribution of surnames or the determination of the law applicable to that attribution. The choice of those substantive or conflict of law rules is in fact a matter falling within the competence of the Member States,20 which must nonetheless comply with Community law when exercising that competence.21

18

ECJ 11 July 2002, C-224/98, D’Hoop, in: ECR 2002, I-6191, para. 36 and 17 July 1997, C-354/95, National Farmers’ Union and Others, in: ECR 1997, I-4559, para. 61. See LENGAUER A., ‘The new General Principle of Non-Discrimination in the EC Treaty as Amended by the Treaty of Amsterdam’, in: Austrian Rev. int. & Eur. Law 1998, 369-395, at p. 373. 19 See para. 56 of the Opinion of Advocate General Jacobs; as an example of such practical difficulties, Jacobs cites an educational qualification issued in Belgium in a name not recognized as that of the holder in Spain. Other examples are given in the Explanatory Report to the 8 September 1982 Hague Convention on the issue of a certificate of differing surnames signed by Belgium and Spain but ratified only by the latter. 20 See the above-mentioned para. 25 of the judgment. 21 Ibidem.

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In summary, the Advocate General remarked that ‘the only point on which Belgian practice appears to conflict with Community law lies in the systematic refusal to consider a situation such as that of Mr. Garcia Avello and his children as constituting such grounds’.22 The Court agreed very succinctly with the Advocate General’s Opinion. In the final ruling of the judgment there is, however, a reference to Article 12 of the EC Treaty,23 as well as to Article 17,24 both of which deserve further consideration.25

3.

The Rules Governing the Attribution of Nationality from the Point of View of EC Law

Prior to Garcia Avello, the European Court had often scrutinized the compatibility with Community law of the rules of the Member States governing the attribution of nationality and considered how to resolve the so-called positive conflicts of nationality, always answering in favour of the Member State. In the first series of cases, Airola26, Van der Broeck27 and Kenny-Levick in Devdred,28 the Court acknowledged the competence of each Member State to lay down internal substantive provisions on the granting of nationality.29 22

In para. 75 of the Opinion Advocate General Jacobs also wrote: ‘I would stress that none of what I have said above should be construed as a criticism of the Belgian or any other rules governing the attribution of surnames. The point is rather that such rules should not be applied in such a way as to infringe the Community-law principle of nondiscrimination. Belgium has a procedure whereby a surname can be changed if sufficiently serious grounds are present’. 23 Art. 12 EC Treaty reads: ‘1. Within the scope of application of this Treaty, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited. 2. The Council, acting in accordance with the procedure referred to in Article 251, may adopt rules designed to prohibit such discrimination.’ 24 Art. 17 EC Treaty reads: ‘1. Citizenship of the Union is hereby established. Every person holding the nationality of a Member State shall be a citizen of the Union. Citizenship of the Union shall complement and not replace the national citizenship. 2. Citizens of the Union shall enjoy the rights conferred by this Treaty and shall be subject to the duties imposed thereby.’ 25 See infra, Parts 5-6 and Part 8 of this article. 26 See ECJ, 20 February 1975, 21/74, Airola v Commission of the European Community, in: ECR 1975, 221. The case concerned an application for the annulment of a Commission decision to withdraw from Mrs. Airola, an official of the Commission, an expatriation allowance provided for by the Staff Regulations for Officials of the Communities. The withdrawal was based on Article 4(A) of Annex VII of the Staff Regulations of Officials, according to which an expatriation allowance was to be paid only to officials who ‘are not and

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In a recent judgment, Kunqian Catherine Zhu,30 the Court confirmed this case law. Catherine Zhu is the daughter of two Chinese nationals, Mr. and Mrs. Chen, who wanted to have a second child but came up against the ‘one-child policy’ adopted by the People’s Republic of China to dissuade couples from having a second child. For this reason they decided to give birth to Catherine in Northern Ireland so that she could acquire iure soli Irish nationality (which is given to everybody born on the island, even outside the territory of Eire) and take advantage of the right to reside as a Union citizen in the United Kingdom, where Mr. Chen frequently travelled for his work.

have never been nationals of the State in whose European territory the place where they are employed is situated’. Mrs. Airola contended that Article 4(A) did not apply to her because she had acquired the nationality of her Italian husband, without the right to renounce it; Italy was the European territory in which she was employed. The Court accepted this opinion, and considered it necessary to define the concept of an official’s present or previous nationality under Article 4 (A) ‘as excluding nationality imposed by law on a female official upon her marriage with a national of another State, when she has no possibility of renouncing it’. Regarding the Airola judgment, see the annotation by MASSARO L., ‘The Nationality of Married Women and the Principle of Gender Equality in the European Economic Communities’, in: Columbia Journal of Transnational Law 1976, 514-537. 27 ECJ, 20 February 1975, 37/74, Chantal Van den Broeck v Commission of the European Community, in: ECR 1975, 235. E.C.J., 20 February 1975, 37/74, Chantal Van den Broeck v Commission of the European Community, in: ECR 1975, 235. This case concerned an application for annulment of a Commission decision to reject a complaint lodged in 1973 in which Mrs. Van den Broeck applied for the expatriation allowance provided for in the above-mentioned Staff Regulations for Officials. The rejection was again based on the above-mentioned Article 4(A) of Annex VII to the Staff Regulations for Officials. Mrs. Van den Broeck had argued that Article 4(A) was inapplicable to her case, as she had acquired, with the right to renounce it, the Belgian nationality of her husband, which was the nationality of the State in whose European territory she was employed. The Court did not accept this argument, because Mrs. Van den Broeck had had the option of renouncing Belgian nationality by making an ad hoc declaration in the manner prescribed by Belgian law, but had not exercised that option, as a result of which she had definitively acquired Belgian nationality, albeit without losing her nationality of origin. 28 ECJ, 14 December 1979, 257/78, Evelyn Devdred, née Kenny-Levick, v Commission of the European Community, in: ECR 1979, 3767, which is similar to the Van den Broeck case described in the preceding footnote. 29 Paras. 5 of the above-mentioned Airola and Van den Broeck judgments, in which the Court pointed out that some national rules on the granting of nationality provide that a foreign wife does not automatically acquire the nationality of her husband, whereas under other national laws, it is still provided that, as was once the common rule, the nationality of a married woman depends on that of her husband. 30 ECJ 19 October 2004, C-200/02, Kunqian Catherine Zhu, Man Levette Chen v Secretary of State for the Home Department.

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After giving birth, Mrs. Chen moved to the United Kingdom and applied to the UK authorities for a residence permit for Catherine and herself. The permit was refused by the Home Department, and Mrs. Chen brought a claim before a British Court. That Court referred to the Court of Justice the question whether the Community provisions on the free movement of persons and residence confer on a young minor the right to reside in another Member State when the minor is a national of one Member State and is in the care of a parent who is a national of a nonmember country. According to the U.K. Government, Catherine and her mother were not entitled to rely on the Community provisions in question because ‘Mrs. Chen’s move to Northern Ireland with the aim of having her child acquire Irish nationality constitutes an attempt improperly to exploit the provisions of Community law’ and ‘illegally to circumvent national legislation’.31 In accordance with its own case-law referred to above, the Court rejected this argument, holding that it is up to each Member State to lay down the conditions for the acquisition and loss of their nationality and that Member States cannot restrict the effects of the grant of the nationality of another Member State by imposing additional conditions, such as the ‘involuntary’32 acquisition of a nationality for its recognition.33 However, the Court found ‘(…) that would be precisely what would happen if the United Kingdom were entitled to refuse nationals of other Member States, such as Catherine, the benefit of a fundamental freedom upheld by Community law merely because their nationality of a Member State was in fact acquired solely in order to secure a right of residence under Community law for a national of a non-member country’.34 In summary, the European Court confirmed by these arguments the validity of the grant of Irish nationality made by Ireland according to its internal substantive law. In another series of judgments, the Court examined the compatibility with Community law of internal provisions designed to resolve positive conflicts of nationality. 31

Para. 34 of the Kunqian Catherine Zhu judgment. Para. 127 of the Advocate General’s Opinion. 33 Paras. 37 and 39 of the Kunqian Catherine Zhu judgment. 34 Para. 40 of the Kunqian Catherine Zhu judgment. 32

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The well-known Micheletti judgment35 concerns a dual national of Argentina and Italy. As an Italian national, and thus a Community citizen, Mr. Micheletti applied to the competent Spanish authorities for a permanent residence card in order to set up as a dentist in Spain. The competent Spanish authorities dismissed his application pursuant to Article 9 of the Spanish Civil Code, which provides that, in cases of dual nationality neither of which is Spanish, the nationality corresponding to the habitual residence of the person concerned before his arrival in Spain takes precedence: in this case the Argentine nationality prevailed, i.e., a nonCommunity one. Thus he was barred from establishing himself in Spain as a dentist. The national Court, at which Mr. Micheletti filed his application for annulment of the Spanish decision, referred to the Court of Justice the question whether the provisions of Community law granting freedom of establishment to persons who were nationals of a Member State precluded that Member State from denying the same right of establishment to a national of another Member State (who possessed at the same time the nationality of a non–member country) on the ground that the law of the host State deemed him to be a national of the non-member country where he had his habitual residence.36 The Court confirmed that under international law, it was for each Member State to lay down the rules on the conditions for acquisition and loss of nationality and for the solution of positive conflicts of nationality, since the enactment of those rules was a matter falling within the competence of the Member States.37 35 ECJ 7 July 1992, C-369/90, Micheletti and others v Delegación del Gobierno de Cantabria, in: ECR 1992, I-4239 and the critical annotation by RUZIÉ D., ‘Nationalité, effectivité et droit communautaire’, in: Revue générale de droit international public 1993, 107-120. On the Micheletti case, see also the annotations by BORRÁS RODRIGUEZ A., in: Revista jurídica de Catalunya 1993, 584-587; JESSURUN D’OLIVEIRA H.U., in: CML Rev. 1993, 623-637; BOUTARD LABARDE M.C., in: Clunet 1993, 430-431 and the remarks by BALLARINO T., Manuale di diritto dell’Unione europea, 6th ed., Padua (Cedam) 2003, at p. 222 and at p. 405 and TESAURO G., Diritto comunitario, 3rd ed., Padua (Cedam) 2003, at p. 466. 36 The following question was referred to the Court: ‘May Articles 3(c), 7, 52, 53 and 56 of the EEC Treaty, and Directive 73/148 and the relevant provisions of secondary law on the free movement of persons and freedom of establishment be interpreted as being compatible, and thus as allowing the application of domestic legislation which does not recognize the “Community rights” inherent in a person’s status as a national of another Member State of the EEC merely because that person simultaneously possesses the nationality of a non–member country and that country was the place of his habitual residence, his last residence or his actual residence?’ See para. 6 of the Micheletti judgment. 37 Para. 10 of the Micheletti judgment. See also para. 14 of the above-mentioned Kenny Levick in Devdred judgment. Mrs. Kenny Levick in Devdred claimed that when, as a result of her marriage, a female official, whilst acquiring a new nationality, retains her nationality of origin, the latter should prevail over the former in respect of her entitlement to the expatriation allowance, wherever the nationality of origin appears in fact to be the

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However, according to the Court, Member States must nonetheless comply with Community law when exercising that competence and must not restrict the effects of nationality granted by another Member State by imposing an additional condition, such as residence, for their recognition of the possession of an additional Community nationality by the person concerned.38 In the Avello case, the Court further remarked that, under international law, Member States are at liberty freely to determine the conditions for the acquisition of their own nationality and the means of resolving any positive conflicts of nationality that arise.39 However, it is not permissible for Member States to restrict the effects of nationality granted by another Member State by giving priority to the nationality of the forum as the most ‘effective’ when there are several nationalities, one of which is that of the forum. In particular, it is not permissible to restrict this effect by relying on the above-mentioned Hague Convention of 12 April 1930 on certain questions relating to the conflict of nationality laws,40 which provides in Article 3 that a person who has two or more nationalities may be regarded as its national by each of the States whose nationality he possesses. In fact, according to the Court, Article 3 does not ‘impose an obligation but simply provides an option for the contracting parties to give priority to their nationality over any other’, and therefore a Member State must not exercise this option where to do so would be contrary to Community law.41 According to some scholars, the Court would regard any internal provision intended to resolve positive conflicts of nationality as incompatible with Community law if it gives priority to the nationality of a non-member country or to the nationality of the forum in cases where the individual concerned possesses another Community nationality. Community law would thus require every Member State to recognize a nationality other than the most ‘effective’ one, which would likely be in conflict with the above-mentioned rule of international public law that provides that States are free to determine the most ‘effective’ nationality. Arguing that the

‘effective’ nationality compared with the nationality acquired by marriage. The Court dismissed this argument, maintaining that ‘the concept of effective nationality is used mainly in private international law in order to resolve positive conflicts of nationality. The concept cannot be transferred to a sphere quite different from that for which it was developed, specifically the scope of the staff regulations for officials of the Communities, in order to determine entitlement to receive the expatriation allowance’. 38 Para. 15 of the Micheletti judgment. 39 Para. 28 of the Garcia Avello judgment. 40 See supra (note 12). 41 Para. 28 of the Avello judgment.

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Community system cannot be in conflict with international law, they maintain that the case law of the Court should be reviewed.42 However, the European Court does not treat as incompatible with Community law internal provisions for resolving positive conflicts of nationality that give priority to the nationality of a non-member country or to the nationality of the forum in cases where the individual concerned possesses another Community nationality, if those rules have been made for the sole purpose of determining the national law applicable to the case under discussion. Community law does not impose upon Member States the application of the law of the nationality possessed by the interested, if it differs from the one considered the most ‘effective’ according to the relevant rule of the forum. Thus, Community law is not contrary to the above-mentioned international public law rule.43 The problem of incompatibility with Community law arises again in regard to the application of the applicable substantive law. In fact, according to the European Court, the internal rules for resolving positive conflicts of nationality cannot allow Member States to disregard the fact that individuals who possess the nationality of another Member State are entitled to Community rights by applying to such individuals an internal substantive law that is discriminatory on the ground of nationality and therefore incompatible with the Community system. In other words, the Court’s only task is to ensure the application of Community law and not to establish which nationality should prevail for the purpose of determining the applicable law.44 This conclusion does not lead to acceptance of the thesis that each Member State is empowered to freely determine the conditions for the acquisition of its nationality and the manner of resolving positive conflicts of nationality which would have a double meaning for EC law. Each Member State must respect the sovereign decision of other Member States on granting or refusing their citizen-

42 RUZIÉ D. (note 35), at p. 115: ‘Il n’y a aucune raison d’autoriser un Etat membre à se faire justice à lui-même.’ 43 For all see QUIÑONES ESCÁMEZ A. (note 10), who writes at p. 515: ‘La solución del conflicto positivo de nacionalidades ateniendo a la belga, coincidente con la residencia de los niños y la familia, no podría tacharse de discriminatoria e incompatible con el derecho comunitario. Ni siquiera de insensible frente a los elementos internacionales de la situación en este Asunto (Avello)’. 44 ILIOPOULOU A. (note 10), pp. 569-570, who maintains that ‘il ne s’agit pas d’une méconnaissance de ce principe (le principe d’effectivité) mais de sa mise en œuvre “acclimatée” au contexte communautaire’ and also that ‘en effet, il n’est pas nécessaire de poser le problème en faisant valoir qu’une nationalité est prédominante par rapport à l’autre. Ceci serait pertinent si la question soulevée en l’occurrence concernait le choix de la législation nationale applicable dans l’optique du droit international privé. Or, ici la question est de savoir s’il est possible d’invoquer le droit communautaire’.

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ship. Therefore, Community law may not grant citizenship contrary to the decision of a Member State on that matter.45 As we have seen, it is true that the Court has never criticized rules of the Member States governing the acquisition of nationality or the solution of positive conflicts of nationality, provided those rules are applied to determine the applicable law. Nevertheless, it is not true that Community law is not empowered to extend nationality beyond the decision of a Member State. In fact, it should be emphasized that the Court has declared the law designated as applicable by the conflict rules of Member States for positive conflicts of nationality to be incompatible with Community law because the substantive rules of the applicable law restricted the effects of another Community nationality possessed by the individual concerned. With this declaration of incompatibility, the Court extended a nationality beyond the decision of a Member State although, in conformity with international law, the said decision had been taken in accordance with the principle of the most effective nationality. Certainly this declaration of incompatibility occurred ‘au profit du droit communautaire “vivant” et de sa cohérence’46, making us assist, ‘sinon à la mainmise des principes de droit international, à leur mise sous la tutelle du droit communautaire’.47 The problem remains that the Court declared the internal substantive rules to be incompatible with Community law without indicating which rules should instead be applied in those and in similar cases. Considering that the Court ‘n’est pas à même d’indiquer, faute d’un pouvoir de juridiction fédéral puisé dans la construction communautaire, la règle de droit matériel applicable dans le cas’,48 this silence is understandable; however, it poses several problems to national judges who remain without an applicable rule.49 45

REICH N./HARBACEVICA S. (note 9), p. 618. BALLARINO T., ‘Les règles de conflit sur les sociétés commerciales à l’épreuve du droit communautaire d’établissement’, in: Rev. crit. dr. int. pr. 2003, 373-402, at p. 376, footnote 5. 47 Ibid., at p. 376, footnote 5. 48 Ibid., at p. 396. 49 An authoritative opinion maintains that, after the Avello judgment, the subjective choice of the applicable law made by individuals seeking to register their names is destined to become the best connecting factor to determine the names of individuals with dual nationality. According to QUIÑONES ESCÁMEZ A. (note 10), at 527: ‘La autonomía de la voluntad [...] podrá ser la directriz en la solución de los conflictos positivos entre las nacionalidades de Estados miembros [...] para la materia concreta de la que se ocupa el caso García Avello: el nombre y apellidos. Pero esto no significa que los binacionales puedan invocar, según su desiderata, para todas las materias ‘del estatuto personal’ o del derecho de persona y de familia que contengan la conexión de la nacionalidad, la que les convenga. Por ejemplo, para hacer testamento o nombrar un tutor en caso de incapacidad. La autonomía de la voluntad no es la solución generalizada a los conflictos positivos de nacionales entre 46

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4.

Nationality as a Connecting Factor

The Avello case also raises the question whether the use of nationality as a connecting factor to determine the law applicable to the names of individuals is compatible with the EC principle of non-discrimination. Several authors dealt with this issue at the very beginning of the European integration process50 and others have tackled it again recently.51 Estados miembros. Y si lo es en el ámbito de los apellidos lo es en la medida en que la autonomía material impregne el derecho material y la norma de conflicto en la materia.’ See also LARA AGUADO A. (note 10), at 9; REIG FABADO I. (note 10), at 472 and LAGARDE P. (note 10), at 196-197, who stresses ‘l’approche fonctionnelle du conflit de nationalités’. 50 SAVATIER R., ‘Le Marché commun au regard du droit international privé’, in: Rev. crit. dr. int. pr. 1959, 237-258; WENGLER W., ‘Les conflits de lois et le principe d’égalité’, in: Rev. crit. dr. int. pr. 1963, 203-231 and 503-527; BEITZKE G., ‘Probleme der Privatrechtsangleichung in der Europäischen Wirtschaftsgemeinschaft, in: Zeitschrift für Rechtsvergleichung 1964, 80-93; DROBNIG U., ‘Verstößt das Staatsangehörigkeitsprinzip gegen das Diskriminierungsverbot des EWG-Vertrages?’, in: RabelZ 1970, 636-662; ID., ‘L’apport du droit communautaire au droit international privé’, in: Cah. dr. eur. 1970, 526543; LOUSSOUARN Y., ‘Les incidences des Communautés européennes sur la conception française du droit international privé’, in: Rev. trim. dr. eur. 1974, 708-727; UBERTAZZI G.M., ‘Règles de non-discrimination et droit international privé’, in: 157 Recueil des Cours 1977, 337-414; BALLARINO T., ‘La CEE e il diritto internazionale privato’, in: Dir. com. sc. int. 1982, 1-13; VILLANI U., ‘L’azione comunitaria in materia di diritto internazionale privato’, in: Riv. dir. eur. 1981, 373-424; BADIALI G., ‘Le droit international privé des Communautés européennes’, in: 191 Recueil des Cours 1985, 9-181. 51 STRUYCKEN A.V.M, ‘Les conséquences de l’intégration européenne sur le développement du droit international privé’, in: 232 Recueil des Cours 1992, 257-383; FALLON M., ‘Variations sur le principe d’origine entre droit communautaire et droit international privé’, in: Nouveaux itinéraires en droit - Hommage à François Rigaux, Bruxelles (Bruylant) 1993, pp. 187-221; RADICATI DI BROZOLO L., ‘L’influence sur les conflits de lois des principes de droit communautaire en matière de libre circulation’, in: Rev. crit. dr. int. pr. 1993, 401-424; RIGAUX F., ‘Droit international privé et communautaire’, in: L’internationalisation du droit. Mélanges en l’honneur d’Yvon Loussouarn, Paris (Dalloz) 1994, 341354; TEBBENS H.D., ‘Les conflits des lois en matière de publicité déloyale à l’épreuve du droit communautaire’, in: Rev. crit. dr. int. pr. 1994, 451-481; FALLON M., ‘Les conflits de lois et de juridictions dans un espace économique intégré. L’expérience de la Communauté Européenne’, in: 253 Recueil des Cours 1995, 9-281; DE MIGUEL ASENSIO P., ‘Integración europea y Derecho internacional privado’, in: Revista de Derecho Comunitario Europeo 1997, 413-445; DONY M., ‘Les discriminations fondées sur la nationalité dans la jurisprudence de la Cour de justice des Communautés européennes’, in: BRIBOSIA E./ DARDENNE E./MAGNETTE P./WEYEMBERGH A. (eds.), Union européenne et nationalités. Le principe de non discrimination et ses limites, Bruxelles (Bruylant) 1999, 45-62; MOURA RAMOS R.M., ‘Un diritto internazionale privato della Comunità Europea: origine, sviluppo, alcuni principi fondamentali’, in: Divenire sociale e adeguamento del diritto. Studi in onore di Francesco Capotorti, II, Milan (Giuffrè) 1999, 273-305; GOSSELIN-GORAND A., ‘L’in-

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The Court has addressed this problem in several judgments. For instance, Walt Wilhelm,52 an early judgment, turned on the issue whether an internal German provision using nationality as a connecting factor was compatible with the Community principle of non-discrimination.53 As regards the principle of non-discrimination, the Court pointed out that it ‘(…) is not concerned with any disparities in treatment or the distortions which may result, for the persons and undertakings subject to the jurisdiction of the Community, from divergences existing between the laws of the various Member States, so long as the latter affect all persons subject to them, in accordance with objective criteria and without regard to their nationality’.54 According to the Court, the EC non-discrimination principle is not concerned with disparities which may result from divergences between the laws of the various Member States, but rather with the fact that all persons subject to those laws must be treated equally, i.e., the laws must be applied in accordance with objective criteria and without regard to nationality.55 fluence des principes communautaires de libre circulation sur les règles nationales de conflit des lois’, thèse, 2001; WILDERSPIN M./LEWIS X., ‘Les relations entre le droit communautaire et les règles de conflits de lois des Etats membres’, in: Rev. crit. dr. int. pr. 2002, 1-37 and 289-313; ROSSOLILLO G., Mutuo riconoscimento e tecniche conflittuali, Padua (Cedam) 2002, 228; PULJAK M.P., Le droit international privé à l’épreuve du principe communautaire de non-discrimination en raison de la nationalité, Préface par Yves Lequette, Aix-enProvence (Puam) 2003. 52 ECJ, 13 February 1969, 14/68, Walt Wilhelm, in: ECR 1969, 1. See the annotation on this judgment by WALZ R., ‘Rethinking Walt Wilhelm, or the Supremacy of Community Competition Law over National Law’, in: Eur. Law Rev. 1996, 449-464. 53 This provision provides that the authorities of a State having jurisdiction over cartel matters should address their measures exclusively to the nationals of that State, thereby possibly placing them at a disadvantage compared with nationals of other Member States in a similar situation. 54 Para. 13 of the Walt Wilhelm judgment. 55 FALLON M. (note 51), at 121-123. Some scholars interpret the expression ‘objective criteria and without regard to their nationality’ of the Walt Wilhelm judgment as referring to ‘connecting factors’, in particular to the ‘nationality connecting factor’; in this context they conclude that every internal bilateral conflict rule which uses nationality as a connecting factor is apt to be discriminatory on the ground of nationality in a manner incompatible with Community law. See BERGÉ J.S., La protection internationale et communautaire du droit d’auteur. Essai d’une analyse conflictuelle, Paris (L.G.D.J.) 1996, pp. 366 et seq., who argues that the term ‘critère’ applies whenever the ECJ designates a connecting factor in conflict rules to determine the applicable law in the case in question. Other authors maintain that this interpretation of the Walt Wilhelm judgment is correct insofar as it pertains to competition, however, not to matters of personal status. Consequently, the Community system does not preclude Member States from using

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In other words, the principle of non-discrimination precludes every Member State from applying its internal substantive law differently on grounds of nationality; however, it does not prevent the Member States from using nationality as a connecting factor to determine the law applicable to the relevant case, provided such designation is made without considering the content of the law designated as applicable and without any intention of privileging one party to the disadvantage of the other: id est using neutral conflict of law rules.56 In essence, conflict of law rules are regarded as neutral if they do not result in discrimination other than that which automatically arises due to divergences existing between the laws of the various Member States which are compatible with Community law.57 The Court confirmed this interpretation in a series of subsequent judgments. In Boukhalfta,58 Alsthom Atlantique,59 Überseering60 and Hoorn,61 it adopted the

nationality as a connecting factor for conflicts categories relating to to personal status. See FALLON M. (note 51), at 128 et seq.; DROBNIG U. (note 50), at 538. In fact, it has been recently pointed out, first: ‘Il ne va pas de soi, en 1969, que par le biais du traité CE, les pères fondateurs aient voulu bouleverser le droit des conflits de lois des États membres. En effet, l’on sait, que, à cette date, les seules références communautaires aux règles de droit international privé figurent et s’épuisent dans les articles 288 et 293 CE avec toute la prudence nécessaire pour ne pas affecter la souveraineté des États. Dans ce contexte, il est douteux que la Cour de justice ait dès cette époque envisagé une incidence conflictuelle du principe de non-discrimination’. Similarly, PULJAK M.P. (note 51), at 185-186. Secondly, in its Walt Wilhelm judgment, the Court drew attention to the problem of the law applicable to the relationship under consideration, showing no interest in the mechanism leading to the application of the German substantive rules; instead it focused its attention on the fact that these substantive provisions were not discriminatory on grounds of nationality; and concluded that ‘seules les modalités d’application de la loi interne ou son contenu étaient critiqués. En revanche, la méthode de droit international privé ayant conduit à la rendre applicable n’était pas discutée’. Thus PULJAK M.P. (note 51), at 186. Finally, in the Walt Wilhelm judgment, the Court uses the expression ‘objective criteria and without regard to their nationality’ to refer to the conditions of application of the internal substantive provisions determining disparities in treatment among nationals of Member States, and not to refer to the conflict rule which designates those substantive provisions as applicable in the relevant case. 56 PULJAK M.P. (note 51), at 185-189. 57 BARIATTI S., ‘Prime considerazioni sugli effetti dei principi generali e delle norme materiali del Trattato CE sul diritto internazionale privato comunitario’, in: Riv. dir. int. priv. proc. 2003, 671-706, at pp. 694-695; BALLARINO T. (note 46), at 391-402. 58 ECJ, 30 April 1996, C-214/94, Ingrid Boukhalfa v Bundesrepublik Deutschland, in: ECR 1996, I-2253, with annotation by LHOEST O., in: CML Rev. 1998, 247-267. 59 ECJ, 28 January 1991, C-339/89, Alsthom Atlantique v Compagnie de Construction Mecanique Sulzer SA, in: ECR 1991, I-107, with annotation by HERMITTE M.A., in: Clunet 1991, 488-489. See also PULJAK M.P. (note 51), at 186.

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same scheme by showing little interest in the mechanism that led to the application of certain substantive rules, focusing instead on the non-discriminatory character of the relevant substantive provisions. The Hoorn judgment is the most important in this context because the Community judge applied the non-discrimination principle directly in connection with an internal conflict of law rule using the nationality of the individuals as the connecting factor. Specifically, the Court judged the compatibility of using the nationality of the workers as the connecting factor for determining the law applicable to calculating the amount of their pensions,62 as specified in an agreement between Germany and the Netherlands.63 According to Mr. Hoorn, a Dutch national, the agreement discriminated against Dutch nationals on the ground that their pension entitlement under Dutch legislation was less than that paid by the German pension insurance scheme to its own nationals. The Court dismissed this claim, maintaining that the disparities in treatment derived from the existence of divergences between the substantive laws of Germany and the Netherlands, not from the use of the connecting factor of nationality in the agreement.64 Further, it found that the applicable substantive law of the

60 ECJ, 5 November 2002, C-208/00, Überseering BV v Nordic Construction Company GmbH, in: ECR 2002, I-9919; see LAGARDE P., in: Rev. crit. dr. int. pr. 2003, 524-536; LUBY M., in: Clunet 2003, 608-611; BALLARINO T., in: this Yearbook, Vol. IV, 2002, 203216; BALLARINO T. (note 46), at 391-402; BALLARINO T. (note 3), at 669-698. 61 ECJ, 28 April 1994, C-305/92, Albert Hoorn v Landesversicherungsanstalt Westfalen, in: ECR 1994, I-1525. 62 According to Article 2, periods of insurance completed by Dutch nationals under the German pension insurance scheme were deemed to have been completed under the Dutch insurance system, if the employee ceased working before 1 September 1945 and returned to the Netherlands by no later than 31 December 1945. Consequently, those periods did not grant any right to claim against the German pension insurance scheme, although claims could be lodged by Germans who had also been subjected to forced labour during the war in Germany. 63 See the Complementary Agreement No. 4 between the Federal Republic of Germany and the Kingdom of the Netherlands on the settlement of rights acquired under the German social insurance scheme by Dutch workers between 13 May 1940 and 1 September 1945. This agreement is listed in Annex III to Regulation No. 1408/71 as an international convention remaining applicable pursuant to Article 7(2)(c) thereof after the Regulation’s entry into force. 64 According to the Court, the alleged difference of treatment does not stem from the Agreement, ‘which merely determines the law applicable to the workers concerned, without stating the scope of the benefits. Rather it arises from the fact that the Netherlands legislature laid down for the pensions for which it is responsible under the Complementary Agreement an amount different from that laid down by the German old-age insurance scheme for pensions payable by it’. See para. 12 of the Hoorn judgment.

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Netherlands did not accord different treatment to different categories of Community nationals on the basis of their nationality.65 Thus the Court held that there had been no violation of the EC principle of non-discrimination in the case submitted. As in the Walt Wilhelm judgment, the Court maintained that the principle of non-discrimination is not concerned with any disparities in treatment resulting from divergences existing between the substantive laws of the various Member States, as long as the latter affect all persons subject to them, in accordance with objective criteria and without regard to their nationality.66 Recently the Court was again requested to intervene in a case concerning the issue whether the use of the spouses’ nationality by Germany as a connecting factor to determine the law applicable to the effects of a divorce was compatible with the Community principle of non-discrimination. However, in the Johannes judgment,67 the Court considered divorce and all related matters as falling within 65

Para. 13 of the Hoorn judgment. Para. 13 of the Walt Wilhelm judgment. 67 ECJ, 10 June 1999, C-430/97, Jutta Johannes and Hartmut Johannes, in: ECR 1999, I-3475. Mr. Johannes, a former official of the Commission, had received a retirement pension from the European Community. Once divorced from her husband, Mrs. Johannes claimed payment of apportioned pension rights acquired by Mr. Johannes during their marriage, including those acquired in his capacity as a Commission official. According to the relevant German private international law rule, the pension entitlement of a divorced spouse is regulated, as are all the other effects of divorce, by the national law of the persons concerned, namely in this case by German law, since both Mr. and Mrs. were German nationals. Mr. Johannes contended, however, that the pension paid to him by the European Commission should not be apportioned. He relied particularly on Article 27, para. 1 of Annex VII to Council Regulation No 259/68 of 29 February 1969, which lays down the Staff Regulations of Officials and Conditions of Employment of Other Servants of the European Communities and provides special measures temporarily applicable to officials of the Commission, as amended by Council Regulation No 2799/85 of 27 September 1985. Article 27 para. 1 reads: ‘The divorced wife of an official or a former official shall be entitled to a survivor’s pension, as defined in this chapter, provided that, on the death of her former husband, she can justify entitlement on her own account to receive maintenance from him by virtue of a court order or as a result of a settlement between herself and her former husband.’ Requested by the national court to determine whether Article 27 constituted an exhaustive set of rules governing the pension entitlements of the divorced spouse of an official so as to exclude further claims under national law, the Court held that the Community legislature lacked jurisdiction to establish the rights of spouses in divorce proceedings, including those resulting from any compensatory adjustment of pension rights. Such rights were governed by the rules of private and family law applying in the Member States, which fell within the jurisdiction of those Member States. Consequently, the Staff Regulations, and in particular Article 27 of Annex VII to the Staff Regulations, did not preclude the application of national rules designed to provide for the apportionment of pension rights for divorced spouses. Thus the Court held that Article 27 was not applicable in this case. The case should have been resolved by applying the substantive rules of German law, which 66

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the competence of the Member States.68 In particular, it found that ‘neither the national provisions of private international law determining the substantive national law applicable to the effects of a divorce nor the national provisions of civil law substantively regulating those effects fall within the scope of the Treaty’.69 Anyway, the Community has recently ‘moved into family law’70 and enacted substantive and private international law provisions in this field.71 Therefore, it is fitting to ask what the position of the Court would be today if it were confronted with the same question raised in the Johannes case? The Court would probably hold that the internal conflict of laws provisions on the law applicable to the effects of divorce does fall within the scope of the Treaty, thus forcing it to take an express position on the question whether the use of the spouses’ nationality as a connecting factor to determine the law applicable to the effects of divorce is compatible with the EC principle of non-discrimination. Furthermore, it is very likely that the Court’s express position would follow the judgment in Walt Wilhelm and Hoorn: the Court would find the use of nationality as a connecting factor compatible with EC law.72 governed the effects of divorce pursuant to a German provision on the conflict of laws using the spouses’ nationality as the connecting factor. Mr. Johannes had maintained that using nationality as a connecting factor was incompatible with the non-discrimination principle. The national Court had also asked the Court of Justice whether the use of nationality as a connecting factor was compatible with this Community principle. However, as we will later see, the Court did not give an answer to the second question. On the Johannes judgment see RIGAUX F., in: Praxis des internationales Privat- und Verfahrensrechts 2000, 287-288; PIRRUNG J., in: Gedächtnisschrift für Alexander Lüderitz, 2000, 543-553; QUIÑONES ESCÁMEZ A., ‘Compatibilidad de la norma de conflicto relativa a los efectos del divorcio con el derecho comunitario’, in: Revista de derecho comunitario europeo 2001, 645-661; FRANCQ S., ‘Droit civil, droit familial et droit international privé: un cocktail qui plaît peu à la Cour’, in: Zeitschrift für europäisches Privatrecht 2002, 597-610. 68 Para. 18 of the Johannes judgment. 69 Para. 27 of the Johannes judgment. The Court concluded that the Community principle of non-discrimination ‘does not preclude the laws of a Member State from taking the spouses’ nationality into consideration as a connecting factor for the purpose of determining the substantive national law applicable to the effects of a divorce’. Similarly, para. 28 of the same judgment. 70 MCELEAVY P. (note 9), at 883-908. See also the authors mentioned in the following footnote. 71 WOODS L. (note 9), at 17 et seq.; MCGLYNN C., ‘A Family Law’ (note 9), at 223241; ID., ‘The Europeanisation’ (note 9), at 35; BARRETT G. (note 9), at 369-421; STALFORD H. (note 9), at 39-52; REICH N./HARBACEVICA S. (note 9), at 615-638; CARACCIOLO DI TORELLA E./MASSELOT A. (note 9), at 32-51. 72 PULJAK M.P. (note 51), at 195-196; BARIATTI S. (note 57), at 694-695. In fact, the new proposed acts of private international law in the field of family law give preference to habitual residence over nationality as a connecting factor, using nationality only as a subsidiary consideration. The autonomy of the relevant party is also treated as a significant

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This conclusion is supported by the Garcia Avello judgment, in which the Court implicitly maintained that the use of nationality as a connecting factor in the relevant Belgian conflict of laws provision on the names of individuals is compatible with the Community principle of non-discrimination.

5.

From the Cross-Border Requirement to Union Citizenship

The Avello case constitutes the first revirement of Community case-law in matters concerning persons, in which it had been held that rights are conferred by the Treaty, only if a sufficient connection existed with Community law to justify the application of its provisions, and that no such connection existed when a citizen of a Member State had never crossed that State’s national boundaries.73 In the Avello judgment, the Court maintained that a link did exist with Community law in respect of persons in a situation such as that of Garcia Avello’s children, who were nationals of one Member State and as such possessed citizenship of the Union conferred upon every national of the Member States (Article 17 EC Treaty),74 and who were lawfully resident in the territory of another Member consideration in family matters. In this sense, see LAGARDE P., ‘Développements futurs du droit international privé dans une Europe en voie d’unification: quelques conjectures’, in: RabelsZ 2004, 225-243, at pp. 236-238; HENRICH D., Abschied vom Staatsangehörigkeitsprinzip?, in: Festschrift für Hans Stoll, Tübingen (Mohr) 2001, 436-449, at p. 442 and 449. On the future community acts see BARIATTI S., Casi e materiali di diritto internazionale privato comunitario, Milan (Giuffrè) 2003, at p. 36 ; DAVÌ A., ‘L’autonomie de la volonté en droit international privé des successions dans la perspective d’une future réglementation européenne’, in: Riv. dir. int. priv. proc. 2004, 473-498. 73 See ECJ, 5 June 1996, C-64-65/96, Ücker and Jacquet, in: ECR 1996, I-3171, para. 23 with annotation by WEBER D.M., in: CML Rev. 1998, 1437-1445; 27 October 1982, C-35-36/82, Morson and Jhanjan v Netherlands, in: ECR 1982, 3723. See also para. 21 of the Opinion of Advocate General Jacobs in the Garcia Avello case. On this case law see JOHNSON E./O’KEEFE D., ‘From discrimination to free movement: Recent developments concerning the free movement of workers 1989-1994’, in: CML Rev. 1994, 1316-1346, 1334; VICENTE BLASCO D.J., Los métodos normativos del derecho internacional privado en la libre circulación de trabajadores, in: VELASCO SAN PEDRO L.A. (ed.), Mercosur y la Unión Europea: dos modelos de integración económica, Valladolid (Lex Nova) 1998, 263 et seq.; LENGAUER A. (note 18), at 376; PAPADOPOULOU R.E. (note 7), at p. 97-101; BARRETT G. (note 9), at 377-378. 74 By virtue of Article 17 EC, every person holding the nationality of a Member State is a citizen of the Union and by virtue of a well-established ECJ principle, Union citizenship is destined to be the fundamental status of nationals of Member States. See, e.g., ECJ, 20 September 2001, C-184/99, Rudy Grelczyk v Centre public d’aide sociale

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State, notwithstanding the fact that a) they had been resident since birth in the host Member State, without exercising their right to movement and b) they also possessed the nationality of the host Member State, which was the only nationality recognized as theirs by that State. This judgment thus eliminated the requirement of exercising the freedom of movement anytime a person possesses dual Community nationality,75 even when one of these nationalities is the nationality of the Member State in which he has resided since birth and which is the only nationality recognized by the authorities of that State. In the above-mentioned Kunqian Catherine Zhu judgment, the Court went even further. As we have seen, the Court of justice was asked to ascertain whether the Community law provisions on free movement of persons and residence confer upon a young minor who is a national of a Member State the right to reside in another Member State.76 The Irish and United Kingdom Governments contended that a person in Catherine’s situation could not claim the benefit of the right to move and reside freely within the territory of the European Union because, after moving from Ireland to the United Kingdom, she had never left the latter country to go to another Member State. According to these Governments, the only foreign element of the case submitted was Catherine’s Irish nationality; however, the possession of a foreign Community nationality by a person resident in a Member State was not sufficient in itself to render the situation relevant under Community law, as the cross-border requirement was not satisfied, and therefore the dispute related to a purely internal situation.77 d’Ottignies-Louvain-la-Neuve, in: ECR 2001, I-6193, para. 31; see the annotation by DAVID F., ‘La citoyenneté de l’Union, statut fondamental des ressortissants des Etats membres’, in: Rev. trim. dr. eur. 2003, 561-578, and Baumbast and R. v Secretary of State for Employment, C-413/99, in: ECR 2002, I-7091, para. 82; see the annotation by BODE S., in: Europäische Zeitschrift für Wirtschaftsrecht 2002, 767-768. See also, e.g., Kunqian Catherine Zhu, at para. 25; Avello, at para. 22. 75 In the Micheletti case only one nationality was a Community one, but the subject had moved from his country of origin to the host Community country (Spain). 76 The Court was also asked to ascertain whether Catherine’s mother had a derivative right of residence. On this question and the Court’s answer see infra in this same Part, especially footnote 82. 77 The Irish and United Kingdom Governments raised several other objections. As we have seen, one of them concerned the granting of nationality by Ireland to Catherine. On this objection and its dismissal by the Court, see supra, Part 3 of this article. Another objection was that Catherine had not attained the age prescribed for the acquisition of legal capacity to personally exercise Community rights (Para. 20 of the Kunqian Catherine Zhu judgment). The Court dismissed this objection also on the ground that the capacity of a national of a Member State to be the holder of the rights of freedom of movement and residence in EU territory ‘cannot be made conditional upon the attainment by the person concerned of the age prescribed for the acquisition of the legal capacity to exercise those

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Advocate General Tizzano rejected this argument, reminding the Court of the findings in the Garcia Avello case, especially the finding that ‘the fact of possessing the nationality of a Member State other than the one in which a person resides is sufficient to render Community law applicable, even when the person relying on those provisions has never crossed the frontiers of the Member State in which he lives’. He concluded that Catherine’s Irish nationality was sufficient to establish the fact that her situation was not purely internal to United Kingdom law.78 The Court accepted this reasoning finding that the situation of a person possessing a single nationality, that of a Member State, ‘who was born in the host Member State’ (in fact, as we have seen, Catherine was born in Ireland and was moved immediately after birth to the United Kingdom, but this fact made no difference as regards nationality since Northern Ireland and the United Kingdom constitute a single Member State) ‘and has not made use of the right of freedom of movement cannot, for that reason alone, be assimilated to a purely internal situation, thereby depriving that national of the benefit in the host Member State of the provisions of Community law on freedom of movement and of residence’.79 rights personally’ (para. 20 of the Kunqian Catherine Zhu judgment). See also paras. 47 to 52 of Advocate General Tizzano’s Opinion. A final objection was that Catherine did not satisfy the conditions for the right of a citizen of the Union to reside freely in a Member State other than that from which he derives his nationality. On this objection see infra in this same Part. 78 In paras. 32 and 34 of his Opinion, Advocate General Tizzano himself refers to the Micheletti and Avello judgments. 79 Para. 19 of the Kunqian Catherine Zhu judgment. Note that the right of a national of a Member State to reside in another Member State is subject to several limitations and conditions imposed by the EC Treaty and by measures adopted to give effect to it; these limitations and conditions are, in turn, subject to the proportionality test. See para. 26 of the Kunqian Catherine Zhu judgment. See also paras. 84-85 of the Baumbast judgment. Exhaustively on these conditions see BARRETT G. (note 9), at 381-418, included are those set out in Article 1(1) of Directive 90/364/EEC of 28 June 1990 on the right of residence (in OJ L 180, of 28 June 1990, p. 26), according to which Member States may require nationals of another Member State and all members of their family who wish to benefit from the right to freely reside in the territory of the host Member State to be covered by health insurance in respect of all risks in the host Member State and have sufficient resources to avoid becoming a burden on the social assistance system of the host Member State during their period of residence. A further objection from the Irish and United Kingdom Governments was that Article 1(1) must be interpreted as requiring the person concerned to possess those resources personally and not to use for that purpose those of an accompanying family member, such as the mother in Catherine’s situation. The Court rejected this argument as well, holding that, pursuant to the terms of Article 1(1), ‘it is sufficient for the nationals of a Member State to “have” the necessary resources, independently of their origin’ and that ‘the correctness of that interpretation is reinforced by the fact that provisions laying down a fundamental principle such as that of the free movement of persons must be interpreted broadly’ (paras. 30 and 31 of the Kunqian Catherine Zhu judgment).

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In other words, this new case law considers the possession of a single nationality of a Member State other than the one in which the person has resided since birth sufficient to render Community law applicable to his situation. This conclusion of the Court’s case law has immediate implications for the rights granted under Community law to third-country family members of citizens of the Union.80 In an earlier series of judgments, the Court had held that the mere fact that a person was a third-country family member of a Community national was not sufficient to bring that person within the scope of Community law. Instead, it was necessary that the citizen of the Union should have exercised his right to move within EU territory.81 These judgments have now been superseded by the Avello and the Kunqian Catherine Zhu judgments,82 thus making it possible to maintain that today Commu80

For a complete study of the question which third-country family members acquire rights under Community law, and which rights, see BARRETT G. (note 9), at 369-421; BECKER M., ‘Managing Diversity in the European Union: Inclusive European Citizenship and Third-Country Nationals’, in: Yale Human Rights & Development Law Journal 2004, 132-183, who proposes that European citizenship should be based on residence rather than on nationality. See also footnote 82. 81 For all see ECJ Ücker and Jacquet at para. 23. On this case-law see BARRETT G., (note 9), 377-378, at p. 419. 82 As we have seen, the Court was also asked in Kunqian Catherine Zhu to ascertain whether Catherine’s mother had a right of residence in the capacity of a ‘dependent member of the family’ of the child for the purposes of the above-mentioned Directive 90/364, or as Catherine’s primary carer, or, finally, on the basis of the right to respect for family life upheld by Article 8 ECHR. The Court held that ‘a refusal to allow the parent, whether a national of a Member State or a national of a non-member country, who is the carer of a child to whom Article 18 EC and Directive 90/364 grant a right of residence, to reside with that child in the host Member State would deprive the child’s right of residence of any useful effect. It is clear that enjoyment by a young child of a right of residence necessarily implies that the child is entitled to be accompanied by the person who is his or her primary carer and accordingly that carer must be in a position to reside with the child in the host Member State for the duration of such residence. For that reason alone, where, as in the main proceedings, Article 18 EC and Directive 90/364 grant a right to reside for an indefinite period in the host Member State to a young minor who is a national of another Member State, those same provisions allow a parent who is that minor’s primary carer to reside with the child in the host Member State’. Thus paras. 45-46 of the Kunqian Catherine Zhu judgment. Similarly, see the ECJ Baumbast judgment, in which the issue at stake was the residence of Mrs. Baumbast, a Colombian national married to a German citizen and living in the United Kingdom. Mrs. Baumbast could not rely on any so-called traditional ‘parasitic’ Community right as her husband was working in China. The Court of Justice held that she could remain in the UK as the carer of the couple’s children, who were enjoying the right to education pursuant to Article 12 of Regulation 1612/68. The judgment in Carpenter was on the same lines: C-60/00, in: ECR I-6279; see, e.g., SPAVENTA E., ‘From Gebhard to Carpenter: Towards a (non-)economic European constitution’, in: CML Rev. 2004, 743-773.

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nity law grants rights to third-country family members of everyone who possesses the nationality of a Member State, regardless whether he is also a national of the host Member State and regardless of the fact that this person has never exercised his right to move from the host State to another Member State since birth. Finally, this case-law has recently been confirmed by EC legislation. Article 3.1 of the Directive 2004/38/EC of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States83 provides that the Directive ‘shall apply to all Union citizens who move to or reside in a Member State other than that of which they are a national, and to their family members’. The fact remains that the Court and Community legislature still need a foreign element to consider any situation falling within the sphere of application of Community law. This element was originally constituted by exercising the right to move to another State together with the possession of the nationality of a Member State other than that of the host Member State. Thus it was effectively a crossborder element: now it is constituted only by possession of the nationality of another Member State. In fact, the Court has held several times that, by virtue of Article 17 of the EC Treaty, every person holding the nationality of a Member State is a citizen of the Union and that ‘Union citizenship is destined to be the fundamental status of nationals of Member States’.84 In the Carpenter case, a Philippine national was refused leave to remain in the United Kingdom as she had overstayed the period of residence granted to her before marrying a UK citizen. Mrs. Carpenter could not enjoy the parasitic rights because her husband was not a citizen of another Member State. However, the Court maintained also in this case that she could remain in the UK as she was her husband’s children’s primary carer and because ‘the separation of Mr. and Mrs. Carpenter would be detrimental to their family life and therefore to the conditions under which Mr. Carpenter exercises a fundamental freedom [free movement of services]’. In other words, as has been stressed by CARACCIOLO DI TORELLA E./ MASSELOT A. (note 9), at 49, ‘children, whose status under Community law up to now has been determined according to their dependence on their migrant parents, are now able to enjoy the very same status as their non-working or non-EU parents’. With the Baumbast, the Carpenter and the Kunqian Catherine Zhu judgments, among others, the Court has demonstrated its willingness to interpret provisions of the Treaty and secondary Community legislation in such a way as to benefit third-country national family members, see BARRETT G. (note 9), at 421. 83 OJ L 229, of 29 June 2004, p. 35. The Directive amends EEC Regulation No 1612/68 and repeals the Directives 64/221/EEC, 68/360/EEC, 72/194/EEC, 73/148/EEC, 75/34/EEC, 75/35/EEC, 90/364/EEC, 90/365/EEC and 93/96/EEC. Member States must bring into force the laws, regulations or administrative provisions necessary to comply with the Directive by 30 April 2006 (see Art. 40.1). 84 See supra, part 2. On European citizenship see BOURRINET J., ‘Vers une citoyenneté européenne. Aspects économiques’, in: Rev. marché commun 1992, 772-776; CLOSA R., ‘The concept of Citizenship in the Treaty on European Union’, in: CML Rev.

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According to the Opinion of Advocate General Léger delivered in the Boukhalfta case, if the concept of citizenship of the Union is followed to its logical conclusion, every citizen of the Union must, whatever his nationality, enjoy exactly the same rights and be subject to the same obligations, irrespective of his having exercised the free movement right or of the fact that he resides in a State other than the one which has granted him its nationality.85 Thus it should make no difference whether the EU citizen is defending his right of residence or any other Community right in the State which granted him its nationality or in another Member State: nationality should no longer be considered a ground for applying Community law differently.86 1992, 1137-1169; PENSOVECCHIO M.C., La cittadinanza europea: i diritti dei cittadini dell’Unione europea, Palermo (F.lli Farina) 1994; LIPPOLIS V., La cittadinanza europea, Bologna (Il Mulino) 1994; JIMÉNEZ DE PARGA MASEDA P., El derecho a la libre circulación de las personas físicas en la Europa comunitaria, Madrid (Tecnos), 1994, 167-210; LIROLA DELGADO I., Libre circulación de personas y Unión europea, Madrid (Editoria civitas), 1994, 257-288; CLOSA R., ‘Citizenship of the Union and Nationality of Member States’, in: CML Rev. 1995, 487-518; MENEGAZZI MUNARI F., Cittadinanza europea: una promessa da mantenere, Torino (Giappichelli) 1996; HALL S., ‘Loss of Union Citizenship in Breach of Fundamental Rights’, in: Eur. Law Rev. 1996, 129-143; JORGENSEN E.B., Union Citizens – Free Movement and Non-Discrimination, Copenhagen (Jurist-og Okonomforbundets) 1996; CASSESE S., ‘La cittadinanza europea e le prospettive di sviluppo dell’Europa’, in: Riv. ital. dir. pubbl. comunitario 1996, 869-895; ORLANDI M., Cittadinanza europea e libera circolazione delle persone, Napoli (Edizioni Scientifiche Italiane) 1996; SODERMAN J., ‘Le citoyen, l’administration et le droit communautaire’, in: Rev. marché unique eur. 1998/2, 19-67; DOLLAT P., Libre circulation des personnes et citoyenneté européenne: enjeux et perspectives, Bruxelles (Bruylant) 1998; LA TORRE M. (eds), European Citizenship: an Institutional Challenge, Conference on Citizenship of the European Forum at the European University Institute held in Florence 1996, The Hague (Kluwer) 1998; DEL VECCHIO A. (eds.), La cittadinanza europea: atti del convegno di Roma, 26 marzo 1998, Milan (Giuffrè) 1999; CONDINANZI M./LANG A./NASCIMBENE B., Cittadinanza dell’Unione e libera circolazione delle persone, Milan (Giuffrè) 2003; ELDER K. (eds.), European citizenship: between National Legacies and Postnational Projects, Oxford (Oxford University Press) 2003; PEÑA ECHEVARRÍA J., ‘La Carta de derechos fundamentales y la ciudadanía europea’, in: Revista de Estudios Europeos 2003, 63-83; BECKER M. (note 80), at 140-145; GUILD E., The Legal Elements of European Identity: EU Citizenship and Migration Law, The Hague (Kluwer) 2004; PENNINIX R. (eds.), Citizenship in Europe Cities: Immigrants, Local Politics and Integration Policies, Aldershot (Ashgate) 2004; SANTORO E./BELLAMY R./CASTIGLIONE D. (eds.), Lineages of European Citizenship: Rights, Belonging, and Participation in Eleven Nation-State, New York (Palgrave Macmillan) 2004; CAUTRÈS B., La citoyenneté européenne, Paris (Documentation Française) 2004. 85 Para. 63 of the Opinion of the Advocate General delivered in the Boukhalfa case. 86 REICH N./HARBACEVICA S. (note 9), at 634, who stress that this conclusion should overrule the principle of inapplicability of Community law in cases of reverse discrimination. In fact, reverse discrimination still survives in matters where EC law has not attained complete harmonization (for instance, in certain fields of professional training).

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It would therefore appear impossible to construe a ‘purely internal situation’ without a link with Community law wherever the person involved in the relevant case is a citizen of the Union, irrespective of whether he is resident in the Member State which has granted him nationality or in another Member State:87 the mere possession of the nationality of a Member State gives him citizenship of the Union, thus creating a link with Community law, as a result of which the requirement of a cross-border element, whatever its nature, would appear to have been definitively superseded. In other words, the mere possession of the nationality of a Member State and consequently of citizenship of the Union must be treated as a relevant connecting factor when determining the application of Community law to the person concerned. Each citizen of the Union is thus entitled to certain rights conferred on him by Community law, which the internal authorities must apply by virtue of the connecting factor constituted by his Union citizenship.88 87

BERNARD N., ‘La libre circulation de marchandises, des personnes et des services dans le Traité CE sous l’angle de la compétence’, in: Cah. dr. eur. 1998, 16-45, 26, who criticizes the Court for following its own case law on the inapplicability of the principle of free movement in internal situations ‘malgré la possibilité de ré-interprétation ouverte par l’introduction du concept de citoyenneté de l’Union’. See also NIC SHUIBHNE N., ‘Free Movement of Persons and the Wholly Internal Rule: Time to Move On?’, in: CML Rev. 2002, 731-771; GARRONE P., ‘L’interdiction des discriminations entre situations internes et transfrontalières: un principe général du droit communautaire’, in: RSDIE 2003, 211-242, 240-242 and BARRETT G. (note 9), at 381, according to whom the cross-border requirement ‘in the era of European Union citizenship and of an area of freedom, security and justice does seem to have a somewhat artificial air about it. If it is a requirement which, in any case, can be relatively easily met […] one is tempted to question the point in having the rule in the first place’. See also HAILBRONNER K., Immigration and Asylum: Law and Policy of the European Union, The Hague (Kluwer) 2000, at pp. 181-182; ALCARO F. and BALDINI G., ‘Profili evolutivi della cittadinanza europea: “verso un diritto privato comunitario?”’, in: Riv. ital. dir. pubbl. comunitario 2002, 445-484, at pp. 458 and 467; ILIOPOULOU A. (note 10), at 571; MOCCIA L., ‘Du “marché” à la “citoyenneté”: à la recherche d’un droit privé européen durable et de sa base juridique’, in: Revue internationale de droit comparé 2004, 291-327, at p. 296. 88 Moreover, Community law grants rights to the family members of a European citizen of the Union. Once it has been established that Community law is applicable in the relevant situation, the internal authority needs to identify which family members are entitled to Community rights. According to learned legal writers, this identification should be made in accordance with Community law. See, e.g., SIEHR K., ‘Family Unions in Private International Law’, in: Netherlands International Law Rev. 2003, 419-435, at p. 427. The Court of Justice has intervened several times in matters regarding the classification of the category ‘family members’. In a first series of judgments (e.g., see ECJ, 31 May 2001, C-122/99 P and C-125/99 P, D. v Kingdom of Sweden, in: ECR 2001, I-4319; 17 February 1998, C-249/96, Grant v South-West Trains Ltd, in: ECR 1998, I-621; 17 April 1986, 59/85, Netherlands State v Reed, in: ECR 1986, 1283), the Court maintained that Community law confers rights on members of the so-called model European family, consisting in a tradi-

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tional ‘nuclear’ family composed of heterosexual married partners. In this traditional nuclear family the husband was ‘the head of the family and principal breadwinner and the wife was the primary child carer’. On the Court case law regarding the nature of the female and male roles within the family, see MCGLYNN C. (note 9), at 226-229. In other words, the Court considered initially that a ‘spouse’, for the purpose of the acquisition of Community family rights, was only a married person of different sex, thus excluding same-sex partners or heterosexual cohabitees from the definition. The Court has always justified its narrow definition of ‘family’ by reference to the lack of a ‘general social development’ in all Member States towards equating unmarried couples or same-sex partners with spouses: in other words, the Court’s definition of ‘family’ was previously the same as that of most Member States at the time of the decisions of the cases submitted to the Court. But recently the legal situation has changed considerably and most Member States have enacted laws regulating the so-called new ‘atypical’ families. See, e.g., SIEHR K., op. cit. in this note, at 421, who remarks that there are at least nine different types of family unions today: ‘1. traditional marriage of opposite-sex partners, 2. “covenant marriage” according to the law of some States of the United States, 3. same-sex marriages such as those introduced recently in the Netherlands and Belgium, 4. registered partnerships of same-sex partners such as those introduced in the Scandinavian countries and in Germany, 5. registered partnerships of opposite-sex partners as introduced by the French PACS, 6. contractual partnerships of same-sex partners as introduced by the French PACS, 7. contractual partnerships of opposite-sex partners as introduced by the French PACS, 8. factual partnerships of opposite-sex partners such as those recognized in Slovenia and Croatia, as well as in South America as “uniónes de hecho”, 9. factual partnerships of same-sex partners such as those recognized in France as “concubinage” or in the United States.’ See also WAALDIJK K., ‘Civil Developments: Patterns of Reform in the Legal Position of SameSex Partners in Europe’, in: Canadian Journal of Family Law 2000, 62-88; RICHARDS C., ‘The Legal Recognition of Same-Sex Couples – the French Perspective’, in: ICLQ 2002, 305-324; TAYLOR G., ‘Same-Sex Unions and the Law: The New Gay and Lesbian Partnerships Law in Germany’, in: Alberta Law Review 2003, 573-617; ROSSOLILLO G., ‘Registered Partnerships e matrimoni fra persone dello stesso sesso: problemi di qualificazione ed effetti nell’ordinamento italiano’, in: Riv. dir. int. priv. proc. 2003, 374376; BILOTTA F., ‘I contratti di convivenza: le esperienze straniere’, in: TORINO R. (eds.), I rapporti familiari tra autonomia e responsabilità, Torino (Giappichelli) 2004, at pp. 87-104; COX B.J., ‘The right to marry: making the case to go forward: using an “incident of marriage” analysis when considering interstate recognition of same-sex couples’ marriages, civil unions and domestic partnerships’, in: Widener Law Journal 2004, 699-754. Consequently, the Court and Community legislature now seem to adopt a broader approach to what constitutes a family and this approach is generally viewed in a favourable light by the prevailing opinion. See PALLARO P., ‘Coppie di fatto e ricongiungimento familiare nell’ordinamento comunitario; un nuovo indirizzo della Corte di giustizia?’, in: Dir. com. sc. int. 2001, 264-280, at p. 275; REICH N./HARBACEVICA S. (note 9), at 638; CARACCIOLO DI TORELLA E./MASSELOT A. (note 9), at 42-43; ROSSOLILLO G., op. cit. in this note, at 395-398; ROTTOLA A., ‘La valutazione internazionalprivatistica dei presupposti giuridici di norme materiali comunitarie’, in: Dir. Un. Eur. 2004, 329-346, at p. 340; COX B.J., op. cit. in this note, at 699-754; BOELE-WOELKI K./FUCHS A. (eds), Legal Recognition of Same-Sex Couples in Europe, Antwerpen (Intersentia) 2003. See also the Opinion of Advocate General Geelhoed in the Baumbast case, who argued for a broader approach to what

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constitutes a family, emphasizing that ‘the traditional family, of course, continues to exist but it has become much less dominant amongst the forms of cohabitation in the Western world’ and that ‘other relationships of sufficient permanence stand on the same footing as […] marriage’ (para. 23 of the Opinion). This change in the legal situation in most Member States has induced the Court to adopt a different approach to what constitutes a family under Community law. First, in the judgment of 7 January 2004, C-117/01, K.B. v National Health Service Pensions Agency, Secretary of State for Health, in www.curia.eu.int, the Court held that Community law grants to transsexuals the right to marry persons of the same sex to which they belonged prior to gender reassignment surgery. Thus, Community law evidently regards any married couple consisting of a transsexual and his or her partner as a family and grants Community rights to every member of this family. See the annotations by CANOR I., in: CML Rev. 2004, 1113-1125 and QUIÑONES ESCÁMEZ A. (note 10), at 519 et seq. Furthermore, in its judgment of 22 June 2000, C-65/98, Safet Eyüp and Landesgeschäftsstelle des Arbeitsmarktservice Vorarlberg, in: ECR 2000, I, 4747, the Court regarded the partner of the individual concerned as a family member; their relationship resembled marriage but with no formal marital bond. This judgment marks a turning point in the Court’s case law. It is true that the situation at issue in the Eyüp case is unusual. The couple – two Turkish citizens – was divorced by a Turkish district court. Nevertheless, Mr. and Mrs. Eyüp continued to cohabit, as a result of which their joint life in Austria lasted since the date of their marriage and four of the couple’s seven children were born during the period of their non-marital cohabitation. Finally they remarried and continued to cohabit, Mr. Eyüp having legitimated his four children born out of wedlock. Taking account of the particular facts of the case, the Court reached the aforesaid conclusion, which amounts to the recognition of the individual’s partner as a family member in a relationship resembling marriage but without a formal marital bond. The Court specifically stressed the fact that ‘the Eyüps’ period of extra-marital cohabitation took place between their two marriages’ and therefore ‘that period cannot be regarded as an interruption of their joint family life in Austria’ (para. 36 of the judgment). However, the particular facts of the case are not viewed by prevailing learned legal opinion as the only ones that would justify the Court placing registered partnerships without formal marriage on equal footing with marriage. Therefore, the judgment is interpreted as an indication of a broader approach adopted by the Court to what constitutes a family under Community law. See PALLARO P., op. cit. in this note, at 275 and ROSSOLILLO G., op. cit. in this note, at 395-398. Moreover, other relevant indexes of this broader concept of family are present in Community legislation. First, in para. 2a) of the Draft programme of measures for implementation of the principle of mutual recognition of decisions in civil and commercial matters (see the Council Draft programme 2001/C 12/01, in OJ C 12, of 15 January 2001, 1), the Council maintained the necessity of supplementing the area covered by the Brussels II Regulation (Regulation (EC) No 1347/2000) ‘to take account of sociological reality: increasingly, couples are choosing to dispense with any matrimonial formalities, and there is a marked rise in the number of children born out of wedlock’. Consequently, the Council considered it necessary to extend the scope of the Brussels II Regulation notably to judgments concerning the exercise of parental responsibility with regard to the children of unmarried couples. This extension intervened with the Council Regulation (EC) No 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, which repealed the Brussels II Regulation (see the new Regulation in OJ L 338, of 23 December 2003, 1). In fact, the 5th ‘whereas’ of this new

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When transposed, the Directive will constitute a corpus of uniform rules in force in all Member States. It will prevail over domestic laws by reason of the primacy of EC law. This is nothing new from the point of view of the technique of private international law. However, as in private international law, the Directive uses a category to determine personal status (in one case a State’s nationality, in the other citizenship of the Union). Thus we can say that the Directive and the development of Community law brought about by the Court contain a new element leading us into the field of the conflict of laws. As we know, the rules on choice of law determine the law applicable to situations containing foreign elements (such as foreign domicile, nationality etc.). It is not material that the choice falls on the lex fori: what matters is the

regulation provides that, ‘in order to ensure quality for all children, this Regulation covers all decisions on parental responsibility, including measures for the protection of the child, independently of any link with a matrimonial proceeding’. Furthermore, Article 2(2)b of the above-mentioned Directive on the right of Union citizens to move and reside freely within the Union territory provides that the term ‘family member’ also includes the partner with whom a Union citizen has contracted a registered partnership on the basis of the legislation of a Member State. However, this same provision stipulates that such classification of family member is valid only in so far as ‘the legislation of the host Member State treats registered partnerships as equivalent to marriage and in accordance with the conditions laid down in the relevant legislation of the host Member State’. It is also relevant to note that on 11 February, 2003, the European Parliament voted that non-Citizens of the Union, who were the same-sex partners or registered or unmarried partners of Citizens of the Union should have the same right of residence as spouses, if either the host country or the home Member State treats such couples in the same way as married couples. See ‘Free Movement of People: MEPS vote to strengthen Residence Rights to EU Citizens’, in: Eur. Rep., Feb.12, 2003, 461. On 15 April 2003, the European Commission tabled an amendment to this. See ‘Free Movement of People: Commission Opposes Extending Right of Residence to Samesex Couples’, in: Eur. Rep., 28 April 2003, 462. Finally, it is worth recalling that, in accordance with the principle of the priority of Community law over internal laws, the new broad Community classification of family members is capable of affecting internal classifications. Thus, whenever a case before the national courts falls within the sphere of application of Community law, the national judge has no power to invoke internal public order to avoid the granting of Community rights and freedoms to individuals who are considered by Community law to be members of the family of the person concerned. In this sense, see ROSSOLILLO G., op. cit. in this note, at 395-398; QUIÑONES ESCÁMEZ A. (note 10), at 527 et seq. In general on the necessity to limit the use of the instrument of public order for the purpose of respecting the Community freedoms, see BALLARINO T. (note 46), at 376; MOSCONI F., ‘Un confronto tra la disciplina del riconoscimento e dell’esecuzione delle decisioni straniere nei recenti regolamenti comunitari’, in: Riv. dir. int. priv. proc. 2001, 545-554; KARYDIS G., ‘L’ordre public dans l’ordre juridique communautaire: un concept à contenu variable’, in: Rev. trim. dr. eur. 2002, at 1-26; BARIATTI S. (note 72), at 161, for references to relevant Community case law.

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foreign element and the theoretical possibility that the matter may be submitted to a foreign legal system.

6.

Conflict of Laws Technicalities in EC Law

As we have already observed, with the two judgments in Avello and Zhu, the Court of Justice extended the sphere of application of Community law into the areas of human rights and family law by using the usual methods of private international law. The relationship between private international law and Community law, as is well known and as we have already in part observed, has recently been the subject of lively debate by academic writers.89 This attention has not been confined to the new competences acquired by the Community in the field of private international law ‘insofar as necessary for the proper functioning of the internal market’ (Article 65 EC Treaty). Private international law appears for the first time in the text of the EC Treaty in Article 65(b) in the formula ‘promoting the compatibility of the rules applicable in the Member State concerning the conflict of laws and jurisdiction’. Very often, however, Community law has had to deal with conflicts situations, but has dealt with them – or rather the Court of Justice has dealt with them – by focusing its attention on the outcome of the application of the conflict rule rather than on the particular method used. In connection with the subject of nationality, we remarked earlier that it is the result of the application that counts and not the choice of the connecting factor. We know that, following Savigny, the practice became dominant, according to which ‘bilateral’ conflict rules are enacted with the aim of localizing every legal question under one law. Since then, the connecting factor (Anknüpfungspunkt, 89

This is seen by the growing number of publications of collected papers such as Diritto internazionale privato e diritto comunitario (ed. PICONE P.), Padua (Cedam) 2004; Les conflits de lois et le système juridique communautaire (eds. FUCHS A./MUIR WATT H./ PATAUT E.), Dalloz (Paris) 2004. Several contributions are also included in the recent book Le droit international privé: esprit et méthodes. Mélanges en l’honneur de Paul Lagarde, Paris (Dalloz) 2005. For a useful overview of Community intervention in the field of private international law, see the chronicles of KOHLER C./JAYME E.: ‘Europäisches Kollisionsrecht 1999 – die Abendstunde der Staatsverträge’, in: IPRax 1999, 401-413; ‘Europäisches Kollisionsrecht 2000: Interlokales Privatrecht oder universelles Gemeinschaftsrecht’, in: IPRax 2000, 454-465; ‘Europäisches Kollisionsrecht 2001: Anerkennungsprinzip statt IPR’, in: IPRax 2001, 501-514; ‘Europäisches Kollisionsrecht 2002: Zur Wiederkehr des Internationalen Privatrechts’, in: IPRax 2002, 461-471; ‘Europäisches Kollisionsrecht 2003: Der Verfassungskonvent und das Internationales Privat- und Verfahrensrecht’, in: IPRax 2003, 485-495 and ibi other references.

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point de rattachement) has been accredited as the ‘true core of the conflicts rule, its absolute substratum’.90 The indifference of Community law to the nature of the connecting factor was aptly expressed by Advocate General Dámaso Ruiz-Jarabo Colmer in his opinion in the Überseering case:91 ‘Issues regarding definition of the connecting factor determining the law applicable to a company and questions concerning cross-border transfers of companies’ head offices were and are governed, in the absence of harmonizing measures, by the legal systems of Member States which must, none the less, comply with substantive Community law. From that point of view, European law still does not directly affect the ability of Member States each to organise its rules on the conflict of laws as it wishes, beyond the requirement that they respect the principle of that law.’92 Some writers have sought, with particular intensity in recent times, to introduce techniques of conflict into the theory of the conflict of laws, so as to provide rational explanations for the simple principle of the primacy of Community law. In fact, when deprived of the effectiveness that a federal construction would give them (accompanied by the effect of the abrogation of national laws incompatible with the ‘superior’ Community law and, moreover, by the guarantee of a controlling superior jurisdiction), the primacy of Community law is often difficult to translate into such clear, unequivocal rules of behaviour for individuals that would make it effective. The underlying values at issue are the Community freedoms. As a means of achieving them and overcoming possible opposition from national legislations, both an indirect and a direct method have been perfected, particularly in the field of commercial law. Both of these methods draw on concepts used in private international law, while at the same time bearing in mind the principle that Community law is only concerned with the substantial consequences of its application.93 The former method aims to give priority to the national law that is most compliant with 90

BALLARINO T., Diritto internazionale privato, 3 ed., Padua (Cedam) 1999, at

p. 270. 91

See supra, Part 4 of this article. Paras. 39-40 of the Opinion. 93 BASEDOW J., ‘Der kollisionsrechtliche Gehalt der Produktfreiheit im Europäischen Binnenmarkt: favor offerentis’, in: RabelsZ 1995, 1-55. On this point see also WILDERSPIN M./LEWIS X., ‘Les relations entre droit communautaire et les règles de conflit des lois des États membres’, in: Rev. crit. dr. int. pr. 2002, 1-37 and 289-313; the writers also reject the theory that national conflict rules are sindacable [by the Court] on the ground of non-discrimination: ‘jusqu’à ce jour la Cour de justice n’a jamais condamné explicitement une règle nationale de conflit de lois au motif que celle-ci était contraire aux dispositions de l’art. 12’, at p. 7. 92

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the imperatives of the Community freedoms; the latter consists in affirming that Community law directly prevails over national laws with which it is in conflict. The indirect method is connected to the Community principle of the country of origin.94 In its most radical formulation,95 it holds that the rules of the EC Treaty on free movement mask a choice of law rule which, subject to Treaty-based exceptions and the rule of reason, obliges the courts to apply the law of the Member State of origin. Learned legal opinion, however, is almost unanimous in rejecting this theory.96 Nevertheless, the theory can be upheld in a different and lesser form, called ‘the exception of mutual recognition’ by FALLON/MEEUSEN.97 But, understood in this way, i.e., as the search for a particular substantive result, the principle of

94

On this point see FALLON M./MEEUSEN J., ‘Private International Law in the European Union and the Exception of Mutual Recognition’, in this Yearbook, Vol. IV, 2002, at 37-66. 95 As in the contributions of GRUNDMANN S., RADICATI DI BROZOLO L. and others cited in FALLON M./MEEUSEN J. (note 94), in footnote 49. 96 See references in FALLON M./MEEUSEN J., (note 94) at p. 575. See further BARIATTI S. (note 57), at 687-690; KOHLER C., ‘Lo spazio giudiziario europeo in materia civile e il diritto internazionale privato comunitario’, in: PICONE P. (ed.) (note 89), 65-94, at p. 90 (‘Parimenti infruttuoso sarà il tentativo di reinventare la ruota del diritto internazionale privato sulla base del principio dello Stato di origine’); BOSCHIERO N., ‘Verso il rinnovamento e la trasformazione della convenzione di Roma: problemi generali’, ibidem, 319-420, at p. 373 (‘è certamente vero che il c.d. principio d’origine non può configurarsi come una norma di conflitto’). For a recent and more radical criticism see HEUZÉ V., ‘De la compétence de la loi du pays d’origine en matière contractuelle ou l’anti-droit européen’, in: Mél. Lagarde (note 89), 393-415. 97 ‘A close analysis of general substantive Community law suggests that the provisions on free movement may indeed have an impact on the choice-of law process, albeit less on the elaboration of a choice-of-law rule. This occurs when the choice-of-law rule is applied in a particular case, not during the process of determining the applicable law. In other words, in effect the application of the choice-of-law rule rather than its elaboration.’ FALLON M./MEEUSEN J. (note 94), at 66. See also PICONE P., ‘Diritto internazionale privato comunitario e pluralità dei metodi di coordinamento tra ordinamenti’, in: PICONE (eds.) (note 89), 485-525, at 492. According to PICONE, the principle of country of origin is a rule of coordination between legal systems using the method of the so-called ‘reference to the competent “foreign” legal system’ (‘riferimento all’ordinamento “straniero” competente’). In PICONE’s opinion, this method serves primarily to ensure recognition in the forum of legal situations arising abroad, particularly by an act of a foreign public body. In such case ‘il riconoscimento riguarda (…) tutte le situazioni giuridiche del tipo considerato, che siano concretamente efficaci nell’ordinamento straniero di riferimento, per essere state ivi costituite o, eventualmente, solo riconosciute (in quanto poste in essere e quindi provenienti da Stati terzi)’, ibidem. See also infra in Part 8.

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recognition is not only outside the realm of private international law in its traditional sense98 but also represents an alternative to it toto caelo. 99

7.

EC Mandatory Rules

The concept that Community law prevails in situations of conflict of laws and does so by means of conceptual instruments belonging to private international law had an important airing in the judgment Ingmar GB v. Eaton Leonard Technologies.100 Ingmar GB, a company incorporated under English law, had in 1989101 entered into an agreement with Eaton Leonard Technologies, a Californian company, to act as its commercial agent in the territory of the United Kingdom. The parties had agreed that the proper law of the contract should be the law of California. When the contract was breached in 1996, Ingmar GB initiated proceedings against Eaton for payment of its commission and damages. The claim was based on the Commercial Agent Regulations of 1993 which transposed into the United Kingdom the Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents.102 The High Court found that the Regulations did not apply to the contract because it had been made subject to Californian law, but the Court of Appeal did not uphold that judgment. The matter was referred to the EC Court of Justice on the prejudicial question whether the Directive applied to the facts. The Court of Justice found wholly in favour of the agent. According to the Court: 98 The aspects of the principle relating to the traditional concept of the rule are stressed by LAGARDE P. (note 72). 99 See BALLARINO T., Diritto internazionale privato, 1st ed., Padua (Cedam) 1982, at 255: ‘Si deve tuttavia muovere dal concetto che le norme di conflitto non rappresentano che uno dei mezzi attraverso i quali l’ordinamento provvede al riconoscimento di valori giuridici estranei.’ 100 ECJ, 9 November 2000, C-381/98, Ingmar GB c. Eaton Leonard Technologies, in: ECR 2000, I-9305 (in French with a commentary of IDOT L., in: Rev. crit. dr. int. pr. 2001, at 107 et seq.). 101 The date of the contract was too early to fall under the well-known Article 7 para. 2 of the Rome Convention on the Law Applicable to Contractual Obligations of 1980. By virtue of its Article 17, the Convention only applies to contracts entered into after its entry into force in the State in which the forum is situated. The Convention entered into force in the first group of seven States on 1 April 1991. 102 In: OJ L 382, of 31 December 1986, p. 17. Article 17, in fact, favours the agent as regards compensation for loss of customers as well as damages for loss suffered as a consequence of termination of the contract.

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‘The purpose of the regime established in Articles 17 to 19 of the Directive is thus to protect, for all commercial agents, freedom of establishment and the operation of undistorted competition in the internal market. Those provisions must therefore be observed throughout the Community if those Treaty objectives are to be attained. It must therefore be held that it is essential for the Community legal order that a principle established in a non-member country, whose commercial agent carries on his activity within the Community, cannot evade those provisions by the simple expedient of a choice-oflaw clause. The purpose served by the provisions in question requires that they be applied where the situation is closely connected with the Community, in particular where the commercial agent carries on his activity in the territory of a Member State, irrespective of the law by which the parties intended the contract to be governed. In the light of those considerations, the answer to the question must be that Articles 17 and 18 of the Directive, which guarantee certain rights to commercial agents after termination of agency contracts, must be applied where the commercial agent carried on his activity in a Member State although the principal is established in a nonmember country and a clause of the contract stipulates that the contract is to be governed by the law of that country.’ (paras. 24, 25 and 26 of the judgment). The final ruling of the judgment makes no mention of mandatory rules or of lois de police;103 however, the way in which the rights of the agent must be recognized is clear:104 Community law cannot be set aside by a mere choice of law clause. What is noticeable here is not only the primacy of Community Law over agreements between private parties – a concept long upheld by the Court105 – but the extension of this rule to conflicts situations. 103 But see para. 16: ‘However their submissions differ as to the conditions which a legal rule must satisfy in order to be classified as a mandatory rule for the purposes of private international law’ (emphasis added). 104 IDOT L. (note 100), at 113 writes: ‘En effet, la Cour de justice donne l’impression de faire du droit international privé comme M. Jourdain faisait de la prose, sans le savoir.’ See also the author’s remarks on the category of lois de police à géométrie variable (at p. 115) and the comments of BOSCHIERO N. (note 96), at 376 et seq. On the problems inherent in the definition of Community rules as lois de police, see PATAUT E., Lois de police et ordre juridique communautaire, in: FUCHS A./MUIR WATT H./PATAUT E. (eds.) (note 89), and his comments on the Mazzoleni judgment (ECJ, 15 March 2001, C-165/98, in: ECR 2001, 2189) in Rev. crit. dr. int. privé 2001, at 503-512. 105 See ECJ, 22 January 1981, Case 58/80, in: ECR 1981, 181: ‘It is impossible in any circumstances for agreements between individuals to derogate from the mandatory provisions of the Treaty on the free movement of goods.’

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In subsequent judgments the Court of Justice has refrained from flying the flag of mandatory rules, but the spirit of these rules lives on in its support for the freedom of establishment106 in cases where the national rules of one Member State (B) (considered as mandatory within that state) impede companies of another Member State (A) desiring to: -

incorporate in B a subsidiary of A, intended to carry on all its business in B (Centros);

-

transfer to B the place of business of a company incorporated in A, while maintaining its legal capacity and without making it subject to the restrictive rules in force in B (Überseering);

-

carry on exclusively in B the business of a company incorporated in A, without complying with the rules in force in B concerning the incorporation of companies (Inspire Art).

These three cases – like that of Daily Mail107 which had preceded them but where the opposite answer had been given – propose a conflict between the Community freedoms (which are absolutely mandatory as they belong to primary Community law) and the mandatory rules – expressed or implicit – of a Member State.108 The solution is not as simple and linear as it was in Ingmar/Eaton, where it consisted in applying Community law to the facts in question conceived as easily definable individual conducts (of State bodies or individual legal or natural persons). The solution was simple in Centros, where the judgment of the Court led the Danish Trade and Commercial Board to drop the requirement obliging Centros to provide evidence of the minimum capital of DKK 200,000, as laid down in a Danish law of 1991. The same thing happened in Inspire Art, where the judgment of the Court required the Chamber of Commerce and Industry of Amsterdam to abandon its requirement that the subsidiary of Inspire Art, in addition to its registration in the Dutch Register of Commerce, insert the words ‘a company formally Danish’ (formeel buitenlandse vennotschap). The same cannot be said of the Überseering case. Even before the judgment of the European Court, a compromise solution had been found, which ignored the 106 ECJ, Centros (note 3); Überseering (note 60); 30 September 2003, C-167/01, Inspire Art, in: ECR 2003, I-10155 with annotations by MUIR-WATT H., in: Rev. crit. dr. int. pr. 2004, 173-184 and VAQUERO LÓPEZ C., in: Revista de derecho de sociedades 2004, 285291. For the vast literature dedicated to these judgments see the works cited in the footnotes below and GRUNDMANN S., European Company Law, 2004, paras. 835, 839-846. 107 ECJ, 8 March 1988, 81/87, The Queen v Treasury ex parte Daily Mail, in: ECR 1988, 5483. 108 The cases referred to have been examined by one of the present writers from that point of view; see BALLARINO T. (note 46), at 379 et seq.

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Court’s condemnation of the previous ‘negative’ attitude of the German practice that had given rise to its preliminary ruling.109 In order to avoid losing its legal capacity, a Dutch company which had been assessed as having its real place of business in Germany after all its shareholdings had passed into the ownership of German legal or natural persons, would have had to ‘redefine itself’, as the case may be, as a civil law company or as a company having a joint name. There would thus have been a problem of adaptation,110 or even a conflit mobile, caused by a change of the statutes governing the company, which was due in the last analysis to a resolution or the actual conduct of the company and not to the change in objective circumstances (like the nationality of a person).111 The matter, as one might say, was closed as a result of a subsequent judgment of the German Federal Court,112 but the prospect created by the first reaction of the German legal system in the judgment of the BGH of 2002,113 which introduced the modified Sitztheorie, has fuelled considerable literature.

8.

Continuation: ‘Zurück zu Savigny’

It is therefore possible to affirm that Überseering and the other two judgments in the trilogy114 do not have the effect of condemning, even indirectly by pointing to the substantive result, the theory of the real ‘residence’ of a company,115 thus raising the prospect of numerous conflicts problems possibly emerging again in the near future. 109 Bundesgerichtshof, 1 July 2002, in: IPRax 2001, 343, which introduces a modified form of the so-called Sitztheorie. 110 On this point see BALLARINO T. (note 46), at 379 et seq. 111 LAGARDE P., annotation to Überseering (note 60), at 532. 112 Bundesgerichtshof, 13 March 2003, in: NJW 2003, 1461, which abandoned this new variation of the Sitztheorie and recognized that a Dutch company limited by shares that had transferred its actual place of business to Germany possessed the legal capacity and rights belonging to it as a Dutch company. According to the Court, judging the company on the basis of German law by the yardstick of an unlimited company or partnership would have changed its nature and led to consequences such as the personal liability of the members: this would have been a violation of the Community right of establishment. 113 Bundesgerichtshof, 1 July 2002, (note 109). 114 Expression used by MUIR-WATT H. (note 106), at 173 et seq. 115 In summary form see LAGARDE P., in the annotation to Überseering (note 60), at 529: ‘En somme, la théorie du siège réel n’est condamnée par la Cour de Justice que dans la mesure où elle ferait obstacle, dans l’État d’établissement, à la reconnaissance pure et simple par cet État d’une société jouissant de la personnalité juridique dans son État de constitution.’

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In addition to the absence of Community competence in matters of private international law, the origin of this state of affairs lies in the methods used by Community law to impose certain substantive results – in accordance with the freedoms constituting the essence of Community law – as regards relations between individuals without the formal support of conventional international law. As long as the mandatory provisions of Community legislation were dependent on their cross-border nature, there was convergence with a method often used to prevent conflicts of laws: that of creating, by international treaties, substantive private law rules which expressly state an element of foreignness and describe, in terms of substantive rules, the consequences that must arise from them.116 There was, however, nothing comparable to private international law in the strict sense. The same conclusion is valid in general terms when general Community law prevails by requiring compliance with its own rules. In the present study, which focuses on topics of private law, we are concerned solely with the Community freedoms. Their primacy is founded on international public law and the consent accorded to it by the internal law of the Member States. Therefore, it is not possible to draw an analogy with the method of private international law, which is essentially founded on the attribution of competences regulated by another legal system.117 ‘Primacy’ and not ‘delegation’ by means of referral is thus fundamental to the solutions expressed by the Court of Justice. The lessons that can be learned from Centros/Überseering/Inspire Art are as follows. Community legislation does not entirely prevent States from establishing criteria for the domicile of companies, but it limits this power when its exercise would restrict the enjoyment of the Community freedoms which are full rights of Community citizens and corporations. One has a sense of déjà vu. In fact, it mirrors exactly the hypothetical situation presented in the past by proponents of overtly internationalist theories of pri-

116 See BALLARINO T. (note 99), at 513: ‘Questo modo di disciplinare le fattispecie con elementi di estraneità – secondo certi autori – sarebbe stato caratteristico dello ius gentium romano e costituirebbe ancor oggi un’alternativa possibile al metodo della scelta di legge’ and references there. The provisions of the Hague Convention on the International Sale of Goods (1980) are a good example of such rules. On their use in (private) Community law, see IDOT L. (note 6). 117 For a contrary view, see PICONE P. (note 97), at 502, who pointing at the case-law Centros/Überseering/Inspire Art writes ‘(…) l’art. 48 del Trattato CE finisce col configurarsi come una norma comunitaria di coordinamento tra gli ordinamenti degli Stati membri la quale dispone (…) che l’ordinamento di costituzione di una società venga considerato (...) come il suo ordinamento competente’ (MECHELLI’s view is included in the text). PICONE concludes: ‘La tecnica conflittuale utilizzata da tale norma risulta quindi ancorata (…) al modello costituito dal metodo del riferimento all’ordinamento (straniero) competente.’

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vate international law. It suffices to recall Zitelmann,118 their most illustrious exponent. In the judgments in Avello and Catherine Zhu, by contrast, we find a complete retrieval of the traditional conflict of laws method. In the Avello case, the Belgian, Danish and Dutch governments maintained that the facts did not fall to be dealt with under EC law: since the right to the free movement of persons had not been exercised, there was not a sufficient link to Community law to justify its application.119 The Court rejected this objection, finding that there was in fact a link to Community law.120 A similar objection was raised by the British Government in the case of Catherine Zhu. The Government argued that a sufficient foreign element was lacking to justify the decision to apply Community law. The Court took a different stand, adopting the opinion of Advocate General Tizzano that possession of the citizenship of a Member State other than that of one’s residence was a sufficient connecting factor to justify the decision to apply Community law.121 The situation in these two cases is actually quite different from the wellknown one in Rutili,122 where the Court applied the rule of the EC Treaty on the free movement of workers to legislation restricting the free movement of an Italian worker, born and resident in France, on the sole ground that the legislation was discriminatory: ‘In particular, measures restricting the right of residence to only part of its national territory may not be imposed by a Member State on 118

ZITELMANN E., Internationales Privatrecht, I, Leipzig (Duncker & Humblot) 1907. According to ZITELMANN (summary at p. 71), every individual human right (diritto privato soggettivo) is a legal ‘power’ (Macht) granted to the individual by the law of the State. Only the State is empowered to grant or withdraw such ‘power’, which must be recognized by international public law in order to be internationally effective. Although its effects are of greater intensity, Community law’s grip on the Member States is less than that of public international law on its subjects. But the relationship is the same. See ZITELMANN (at p. 122): ‘Bei jedem Rechtsstreit handelt es sich, wie wir wissen, um die Frage, ob ein bestimmtes subjektives Recht erworben oder verloren sei. Diese Frage muss nun immer und ausschließlich nach der Rechtsordnung desjenigen Staats beurteilt werden, der die völkerrechtlich anerkannte Rechtsmacht hatte, ein solches subjektives Recht zu verleihen und darum auch zu nehmen; und zwar muss der Staat diese Rechtsmacht selbstverständlich zu der Zeit gehabt haben, da der behauptete Erweb oder Verlust eingetreten sein soll.’ 119 See the Opinion of Advocate General Jacobs, paras. 45-48. 120 See para. 27 of the Judgment where the Court states: ‘Such a link with Community law does, however, exist in regard to persons in a situation such as that of the children of Mr Garcia Avello, who are nationals of one Member State lawfully resident in the territory of another Member State.’ 121 See the argument in para. 32 of the Opinion of Advocate General Tizzano mentioned in Part 5 of this article. 122 ECJ, 28 October 1975, case 36/75, in: ECR 1975, 1219.

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nationals of other Member States: they are protected by the provisions of the EC Treaty except in circumstances where such measures validly apply also to nationals of the State concerned.’ The two more recent cases differ in the direct effect given to Article 17 establishing citizenship of the Union,123 which widens the prohibition of discrimination on grounds of nationality set out in Article 12.124 Advocate General Jacobs stated in Avello: ‘I agree that Article 17 makes clearer the applicability of the principle of non-discrimination to all situations falling within the sphere of Community law, without there being any need to establish a specific interference with a specific economic freedom.’125 Thus there is a transition from the ‘vertical’ to a form of ‘horizontal’ coordination126 by using the method proper to private international law. European citizenship is used as the connecting factor to identify the seat (Sitz) of the legal relationship, as Savigny intended it, between Community law and the national law. Community law, however, does not provide substantive legislation to resolve the case but ‘offers’ the rule of equal treatment.127 As frequently occurs when the rules of private international law are applied, a foreign element is required in any case,128 (thus strengthening the view that, at 123 Article 18.1 has already been acknowledged to have direct effect in the Baumbast judgment (see supra, note 82) as to the right to move and reside freely. 124 See the Avello judgment, para. 45: ‘Having regard to all of the foregoing, the answer to the question submitted must be that Articles 12 EC and 17 EC must be construed as precluding, in circumstances such as those of the case in the main proceedings, the administrative authority of a Member State from refusing to grant an application for a change of surname made on behalf of minor children resident in that State and having dual nationality of that State and of another Member State, in the case where the purpose of the application is to enable those children to bear the surname to which they are entitled according to the law and tradition of the second Member State.’ 125 Para. 61 of the Opinion. ILIOPOULOU A. (note 10) at 572 remarks: ‘L’avocat général place alors sur un pied d’égalité les deux qualités de M. Garcia Avello: celle de travailleur communautaire et celle de citoyen migrant.’ 126 See IDOT L. (note 6), at 453. See also POILLOT-PERUZZETTO S., ‘De la coordination verticale à la coordination horizontale, l’exemple du droit de la concurrence et du droit judiciaire’, in: Melanges en hommage à Guy Isaac, Toulouse, 2004, 639-653. 127 See ECJ, 23 March 2004, case C-138/02, Collins, as yet unpublished, at para. 61: ‘Citizenship of the Union is destined to be the fundamental status of nationals of the Member States, enabling those who find themselves in the same situation to enjoy the same treatment in law irrespective of their nationality, subject to such exceptions as are expressly provided for […].’ 128 The foreign element always played an important role in the technical-legal analysis, particularly in Italian legal writings in the first half of the last century (and in the French doctrine as well); see the accurate review of ELHOUEISS J.-L., ‘L’élément d’extranéité préalable en Droit international privé’, in: Clunet 2003, 39-85). See the exemplary

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least for the time being, reverse discrimination is still allowed).129 In Avello, the foreign element found by the Court was the possession of the citizenship of a Member State other than l’Etat du raisonnement (which means the State in the context of which the question has arisen).130 In Catherine Zhu, the Court found the foreign element in the fact that one parent belonged to a third State.

exposition of these problems in AGO R., Teoria del diritto internazionale privato, Padua (Cedam) 1934, at pp. 91 et seq.: ‘[al legislatore si pone] il problema del regolamento di quei fatti e rapporti che … possono… definirsi come fatti e rapporti della vita internazionale, e vengono a trovarsi quindi in una posizione di estraneità, non rispetto all’ordinamento giuridico, ma rispetto alla vita reale interna.’ In Elementi di diritto internazionale privato italiano, by MORELLI G., 12th ed., Napoli (Jovene), 1986, a work studied by several generations of Italian lawyers, the ‘foreign nature’ (carattere di estraneità) is said to be an element of the rules of private international law (at p. 30). On the one hand, this raised the question whether rules of private international law can serve as a yardstick of the applicability of national laws when dealing with facts that have a foreign element (see BALLARINO T. (note 90), at 253; on the other hand, the question arises how to ascertain its existence in an objective way. Surely, there is something tautological in this issue since, as ELHOUEISS states (op. cit. in this note, at p. 45): ‘L’extranéité serait plutôt une limite à l’application par le for de sa propre législation et non un préalable à l’application d’une législation étrangère.’ We agree that the foreign element is not something which always exists in rerum natura, but something ‘intégré dans une catégorie de rattachement qui mène à un critère de rattachement permettant la désignation, indifféremment, de la lex fori ou d’une lex causae’ (ELHOUEISS, op. cit. in this note, at p. 66). The practical purpose of the concept is proved by the debate on the ability of the contractual choice of a foreign law to confer an international character on a contract (see the Hague Convention 1955 on the Conflict of Laws on the Matter of Sales of Corporeal Movables, Art. 1, para. 4). In order to cope with this problem, the Rome Convention on the Law Applicable to Contractual Obligations rejected the solution of the Hague Convention 1955, choosing a minimal guarantee of respecting the mandatory rules of the law of the country with which all other elements of the contract are connected at the time of the choice (Art. 3, para. 3). 129 See also supra note 86. The fact remains, however, that the foreign element is to be ascertained on the basis of objective facts, whereas reverse discrimination depends on the manner in which Community freedoms are made effective by EC legislation. The same applies to the ascertainment of the purely internal character of situations falling within EC competence. See PAPADOPOULOU R.E. (note 7), 115: ‘Une situation purement interne peut entrer dans le champ du droit communautaire, si la mesure nationale qui lui est appliquée est susceptible de s’appliquer aussi aux marchandises provenant d’autres Etats membres.’ See also ECJ, 5 March 2002, Cases C-519/99 – 524/99 etc. Reisch, in: ECR 2002, where the question of freedom of capital concerned the regulations of one Land which required a previous notification by acquirers of title in immovable property, and the Salzmann judgment (see supra, note 6). 130 See LAGARDE P., Rev. crit. dr. int. pr., at 197: ‘Dans l’affaire Garcia Avello (…) la double nationalité est considérée comme suffisante pour créer l’internationalité de la situation, condition d’application du droit communautaire, en dehors de tout déplacement des intéressés.’

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In practice, the application of Community law leads to different effects in the two cases. In Avello, the Court required the national authorities to apply an administrative practice which exists in the country but which they had initially refused to apply; while in Catherine Zhu the Court required the application of provisions of Community law relating to the right of persons to move and reside freely. One must bear in mind, however, that Community law is special in that it does not offer a complete and independent set of legal provisions, but operates largely by reference to legal assets created in the legal systems of the various Member States.131 Moreover, the range of modern private international law encompasses such a variety of types of rules for dealing with conflicts of laws – all under the banner of their own ‘materialisation’132 – thus obscuring the Copernican revolution of Savigny.133 The progressive disappearance of the requirement that a conflict rule must be abstract and neutral, which was regarded as fundamental by Savigny’s followers, should not detract from the importance of the other two contributions made by the great German jurist to private international law: on the one hand, his programme for identifying the situs of the legal relationship (Sitz der Rechtsverhältnisse) and, on the other, the community of nations. The Savigny method can be said to survive wherever these two points are treated as fundamental to any system of the conflict of laws. The solutions given by the European Court in the cases examined here fulfil these two requirements. Thus it appears that the two judgments can be regarded as representing a new departure in the field of European Community private international law. This is a system that is still in the process of formation, and which is not likely for the time being to replace the private international law of individual States or even to incorporate private international EC law (as constituted by the Brussels Convention which became Regulation 44/2001, and by the future ‘Rome I’ and ‘Rome II’ Regulations), although it necessarily shares some of its characteristics. Through the Community freedoms important changes have been brought about which affect the status of persons – a classic theme in private international law. The conflict of laws rules which can be extrapolated from the Community system, can be characterised in comparison with ‘ordinary’ private international law, by the following elements. 131

See BALLARINO T., Manuale di diritto dell’Unione europea, 6th ed., Padua (Cedam) 2001, 204 et seq. 132 See AUDIT B., ‘Le droit international privé en quête d’universalité’, in: 305 Rec. cours 2004, 327 et seq. 133 AUDIT B. (note 132), at 357: ‘Copernical revolution’ is an expression used by NEUHAUS P.H., ‘Savigny und die Rechtsfindung aus der Natur der Sache’, in: RabelsZ 194950, p. 346-381.

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a)

the law applicable to a particular set of facts is not determined directly, but emerges indirectly from the analysis of a Community freedom or from the principle of non-discrimination;

b)

the facts that are the object of a Community conflict of laws rule must be characterised on the basis of that rule: in other words, the process of characterisation cannot rely on any lex fori134.

c)

The public policy exception is ‘incorporated’ into the Community freedoms and thus does not have an independent role135. Its function as a remedy of general application – traditionally associated with the ‘Italian School’ because of the role given by Mancini to public policy alongside the other general principles – is discharged by the principle of non-discrimination. This latter principle is invested with the power to express all the fundamental principles136 requiring to be respected and is used to bring about their application137.

134

See BARATTA R., ‘The Process of Characterization in EC Conflict of Laws: Suggesting a Flexible Approach’, in this Yearbook, present volume; see also BARIATTI S. (note 57), at 702. 135 FUMAGALLI L., ‘EC Private International Law and the Public Policy Exception’, in this Yearbook, present volume, especially at Point III. 136 See particularly BARILE G., I principi fondamentali della comunità statale ed il coordinamento fra sistemi, Padova (Cedam) 1969; BENVENUTI P., Comunità statale, comunità internazionale e ordine pubblico internazionale, Milano (Giuffrè) 1977. 137 See the case of Boukhalfa (note 58) in which the Court of Justice held: ‘The answer to the national court’s question must therefore be that the prohibition of [against] discrimination based on nationality, laid down in Article 48(2) of the Treaty and Article 7(1) and (4) of Regulation No 1612/68, applies to a national of a Member State who is permanently resident in a non-member country, who is employed by another Member State in its embassy in that non-member country and whose contract of employment was entered into and is permanently performed there, as regards all aspects of the employment relationship which are governed by the legislation of the employing Member State’ (para. 22).

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THE ‘DRAFT REGULATION ROME II’ IN 2004: ITS PAST AND FUTURE PERSPECTIVES Willibald POSCH

I. II.

IV.

Introduction: Regulation Delayed History of ‘Rome II’ A. The Starting Point: Diversity of National Conflict Rules in the Field B. Early Harmonization Projects C. Recent Developments The Proposed ‘Regulation Rome II’: its Characteristic Features in Discussion A Structure B. Scope C. Uniform Rules for Non-contractual Obligations 1. Conflict Rules for Obligations Arising out of Tort or Delict 2. Conflict Rules for Obligations Arising out of an Act Other than Tort and Delict D. Party Autonomy E. Overriding Mandatory Rules and Ordre Public Conclusion

I.

Introduction: Regulation Delayed

III.

On 22 July 2003 the Commission adopted the proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Non-Contractual Obligations (‘Rome II’).1 The same day the Commission submitted the proposal to the European Parliament and the Council for further negotiations in the co-decision legislative procedure under Article 251 EC. Acting in accordance with Article 262 EC, the Council decided to consult the European Economic and Social Committee on 8 September 2003. Pursuant to Article 27 of the proposed Regulation ‘Rome II’, the long and painstaking development of a European instrument to harmonize the conflict rules for international cases of ‘non-contractual liability’, unjust enrichment and ‘agency without authority’ or negotiorum gestio should have passed the finishing line at the turn of the year 2004/2005, as that Article provides that ‘[t]his Regulation shall enter into force on 1 January 2005’.

1

Professor of Law, University of Graz, Austria. COM (2003) 427 final, 2003/0168 (COD).

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However, the Commission’s planned date for the Regulation’s entry into force could not be met. At the end of 2004 it was still not possible to predict with a minimum of certainty when this event will finally take place. In reality, the Committee of Legal Affairs has just started the internal negotiations, and the European Parliament is far from completing the first reading of the draft. Moreover, the final report of the rapporteur may propose radical amendments to the Commission proposal, thus making it difficult for the Parliament and the Council to reach a common position in the near future. That means that the ‘co-decision procedure’ which would culminate in the enactment of the Regulation is still in its initial stages, seriously delaying the date of the entry into force of the final Regulation. In this moment two versions of the draft report on the proposed Regulation are available, both of which were elaborated for the first reading by Diana Wallis MEP,2 the responsible rapporteur in the Committee on Legal Affairs of the European Parliament: the first draft report was submitted on 5 April 2004,3 the most recent version on 11 November 2004.4 In early 2005, the revised draft report was still scheduled for discussion in the relevant Committee on Legal Affairs of the European Parliament. Also available is the Opinion of the European Economic and Social Committee, which was prepared by the Section for the Single Market, Production and Consumption and adopted by the Committee in its 409th plenary session on 2 June 2004.5 This Opinion includes a limited number of proposals for modifications or clarifications of the Commission paper and is generally favourable to the Draft Regulation. Nonetheless, it is still not possible to correctly assess the current state of affairs within the multi-institutional proceedings in the European Parliament and the Council. According to an experienced Austrian Member of the European Parliament,6 the latest enlargement and instalment of the new Parliament after the elections of 10/13 June 2004 have contributed to the delay of legislative projects on which it is apparently difficult to reach consensus within the Parliament. The delay, however, should not be taken as an indication that the enactment of a Regulation on the Law Applicable to Non-Contractual Obligations is of secondary interest for the European legislative bodies.

2

UK, ALDE. Provisional 2003/0168 (COD); PE 338.465. 4 Provisional 2003/0168 (COD); PE 349.977. 5 OJ 2004 C 241 p. 1. 6 Reinhard RACK, MEP Austria (PPE-DE) since 1995; Professor of Law, University of Graz. 3

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II.

History of ‘Rome II’

A.

The Starting Point: Diversity of National Conflict Rules in the Field

Having emerged as a result of individual evolution based on court practice, the national conflict rules for non-contractual obligations have developed differently within the EU Member States thus far and have become increasingly fixed by national statutory provisions over the past 25 years. New conflict rules for noncontractual obligations have been codified in both the old and new Member States7 and in numerous Non-members of the European Union as well.8 Therefore, this period has been aptly labelled the ‘second wave of codification’ in the ‘century of codifications of private international law’.9 As a result of these national codifications, especially in regard to non-contractual obligations, it is correct to say that the differences between conflicts laws have increased within the EU Member States and beyond. The European trend of enacting national codifications and replacing judgemade conflict rules has not been limited to countries with a civil law tradition. In the United Kingdom, the codification of conflict rules became a paramount legislative concern in the early eighties when the English and Scottish Law Commissions recommended the reform of choice of law in tort viz. delict. Their proposals led to enactment of the Private International Law (Miscellaneous Provisions) Act 1995, which sets forth choice of law rules for torts in Part III.10 As an English author put it,11 the new rules ‘abolished the choice of law rules for tort developed in the common law in respect of most causes of action in tort.’ The most peculiar of these abolished choice of law rules was undoubtedly the so-called ‘double actionability rule’. Established in the nineteenth century in Phillips v. Eyre,12 it required two conditions to be fulfilled in order for a claim to be actionable in England for a wrong allegedly committed abroad: ‘First, the wrong must be of such a character that it would have been actionable if committed in England’ and, ‘secondly, the act must not have been justifiable by the 1aw of the place where it was done’.13 This rule,14 which was modified a century later by the 7

E.g., in Austria (1978), Hungary (1979), Italy (1995), Germany (1999), Slovenia (1999) and in the Baltic States. 8 E.g., in Turkey (1982), Yugoslavia (1982), Switzerland (1987), Romania (1992), Liechtenstein (1996). 9 RAUSCHER T., Internationales Privatrecht, 2d ed., Heidelberg 2002, p. 10 et seq. 10 This part entered into effect on 1 May 1996. 11 MORSE C.G.J, ‘Torts in Private International Law: A New Statutory Framework’, in: 45 I.C.L.Q. 888 (1996) p. 888. 12 [1870] L.R.6, Q.B. 1. 13 [1870] L.R.6, Q.B. 1, p. 28 et seq.

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holding of the House of Lords in the famous case of Boys v. Chaplin15 and again recently by the Judicial Committee of the Privy Council,16 has been expressly invalidated by section 10 of the Private International Law (Miscellaneous Provisions) Act 1995.17 The English and Scottish drafters of the 1995 Act resorted to a new and at the same time old doctrine. In this sense, section 11(1) provides that ‘the general rule is that the applicable law is the law of the country in which the events constituting the tort or delict in question occur’. Thus, the lex loci delicti commissi rule has been introduced into the Private International Law of the United Kingdom as the general rule for designating the law applicable to international torts, however, not in the form of a ‘hard and fast rule’ but ‘softened’ by the so-called ‘displacement rule’, making it possible for the law of the place of the injury to be replaced by ‘the law of the country in which the most significant element or elements’ of the specific events constituting the tort (delict) occurred.18 It is necessary to mention this rather recent modification of the traditional common law rule of the conflict of laws because the ‘double actionability requirement’ constituted an insurmountable obstacle and was probably the most important reason for the failure of the project for a comprehensive convention on the law applicable to contractual and non-contractual obligations, as discussed and suggested in the seventies. As a result, considerable diversity exists in the conflict rules for noncontractual liability within the European Union and will continue to exist until the proposed Regulation finally enters into force. Since cross-border contacts occur much more frequently in a permanently enlarged area characterized by the free movement of goods and persons, the number of disputes in a non-contractual context has increased, particularly but not exclusively in the field of tortious or delictual liability. As early as 30 years ago and in a much smaller European Economic Community, the diversity in the field of private international law was deemed unsatisfactory. Serious proposals to harmonize these rules were presented by then prominent PIL specialists.19 However, in those days, no Article of primary Community

14

For a concise description of the history of the ‘double actionability rule’, see KAYE P., ‘Recent Developments in the English Private International Law of Tort’, in: IPRax 1995, pp. 406-409. 15 [1971] A.C. 356. 16 In Red Sea Insurance Co. Ltd. v. Bouygues S.A., [1994] All.E.R. 749, P.C. 17 With the exception of defamation cases according to Sec.13. 18 Sec 11. (2)(c) of the Private International Law (Miscellaneous Provisions) Act 1995. 19 See LANDO O./VON HOFFMANN B./SIEHR K., European Private Law of Obligations, Tübingen 1975.

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law, not even Article 220 ECT,20 could serve as a formal basis for a project to propose a uniform instrument for the international law of contractual and noncontractual obligations for the EEC. Since Article 220 ECT is restricted to treaties between Member States that aim at the ‘simplification of formalities governing the reciprocal recognition and enforcement of judgments and arbitration awards’,21 the question of the applicable law was not dealt with by the primary Community law of that period. Therefore, it is not surprising that no comprehensive harmonized or uniform law existed for the Common Market in the field of conflict rules for contractual and non-contractual liability. The only efforts to unify conflict rules for non-contractual obligations that have had limited success in the past are conventions drafted and opened for ratification in the early seventies by the Hague Conferences on Private International Law. These conventions deal with narrowly defined topics of international tort/delict law, such as liability for injuries resulting from traffic accidents or defective products.22 As a result of the unification activities of the Hague Conferences in these areas, special conflict rules for international torts are well established in the laws of several EU Member States, thus causing a difficult problem that cannot be satisfactorily resolved by Article 25 of the Draft Regulation ‘Rome II’.23

B.

Early Harmonization Projects

The suggestion to create a uniform regime of conflict rules for the entire law of obligations emerged in the Benelux countries nearly forty years ago. The Belgian representative was motivated by a project for a Benelux-Code on Private International Law,24 on the one hand, and by the imminent completion of the Convention on Jurisdiction and the Enforcement of Civil and Commercial Judgments, on the other. In order to ensure consistency with the harmonized law of international civil procedure and the conflict rules, the Commission of the European Communities 20

Today: Article 293 EC. Thus, Article 220 ECT (= 293 EC) is the basis for the Convention on Jurisdiction and the Enforcement of Civil and Commercial Judgments, (OJ 1972 L 299 p. 1; consolidated version OJ 1998 C 27 p. 1), which was signed on 27 September 1968 and has been replaced by the Regulation 44/2001/EC on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters of the Council of 22 December 2000, OJ 2001 L 12 p. 1. 22 See Convention on the Law Applicable to Traffic Accidents of May 4, 1971, and Convention on the Law Applicable to Products Liability of October 2, 1973. 23 See HAMBURG GROUP FOR PRIVATE INTERNATIONAL LAW, ‘Comments on the European Commission’s Draft Proposal for a Council Regulation on the Law Applicable to Non-Contractual Obligations’, in: RabelsZ 2003, pp. 1-56 (at 55 and 56). 24 ‘Traité Benelux portant loi uniforme relative au droit international privé’. For the revisited text, see Rev. crit. dr. int. pr. 1968, pp. 812 et seq. 21

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resorted to a prolongation of the harmonization process in the field of jurisdiction and enforcement.25 This initiative led to the formation of a group of national experts from the six original Member States in 1967 for the purpose of elaborating a proposal for a ‘Convention on the Law Applicable to Contractual and NonContractual Obligations’. After five years of work, a Preliminary Draft Convention containing rules on the law applicable to contractual and non-contractual obligations was presented on 6 December 1972, together with an explanatory report by the Commission.26 However, this Draft was subsequently withdrawn after the first enlargement of the European Communities to nine Member States. Namely, the new Member States – Denmark, Ireland and the United Kingdom – had not participated in the preparation of the 1972 Draft Convention and could not accept the proposed conflict rules for non-contractual obligations. Thereafter, an enlarged group of experts reduced the content of the Convention to a conflicts law on contractual obligations. The ‘European Convention on the Law Applicable to Contractual Obligations’, better known as the ‘Rome Convention’, was signed by the then Member States of the EEC on 16 June 1980 in Rome. It became effective no less than 11 years later, on 1 April 1991, after being ratified by seven of the 12 Member States.27 At present, the Convention is being modernized and converted into a Community instrument that will be based on Articles 61 c) and 65 b) EC. It is expected that, simultaneously with the ‘Regulation Rome II’, a Regulation on the Law Applicable to Contractual Obligations ‘Rome I’ will be enacted to replace the Rome Convention.28 The drafters of the Rome Convention eliminated no more than five articles from the comprehensive Preliminary Draft Convention of 1972, i.e., Articles 10 to 14,29 which provided a ‘softened place of injury-rule’ for international cases of non-contractual liability but did not permit the parties to choose the applicable law. With regard to unjust enrichment and agency without authority, Article 13 simply stated that such obligations should be governed by the law of the country where the event occurred. 25 See LANDO O., ‘The EC Draft Convention on the Law Applicable to Contractual and Non-Contractual Obligations’, in: RabelsZ 1974, pp. 6-55, at 6. 26 See Text in Acts and Documents of an International Colloquium held in Copenhagen on 29/30 April 1974, published in LANDO O./VON HOFFMANN B./SIEHR K., (note 19), p. 220 et seq. 27 For a consolidated version, see OJ 1998 C 27 p. 34. 28 See Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernisation of 14 January 2003, COM (2002) 654 final. 29 The text of these articles which were proposed but never realised can be found in VON HOFFMANN B., European Private International Law, Nijmegen 1998, pp. 89 and 90; for details see OVERBECK A.E./VOLKEN P., ‘Das internationale Deliktsrecht im Vorentwurf der EWG’, in: RabelsZ 1974, pp. 55-77.

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More than thirty years later, these rules are certainly not convincing. Notwithstanding their inclusion into a wider context, they appear to be too sketchy and incomplete, especially as their silence on party autonomy demonstrates. Thus, it is not surprising that little of the preliminary draft of the early seventies has survived in the new, much more detailed proposal for a ‘Regulation Rome II’.

C.

Recent Developments

Although the Commission of the European Communities had long neglected the idea of harmonizing conflict rules for non-contractual obligations, legal scholars continued their work on the unification or harmonisation of such conflict rules. As a result, a proposal for a European Convention on the law applicable to noncontractual obligations was elaborated and adopted by the European Group for Private International Law (GEDIP) in September 1997.30 Written by prominent conflicts experts, this paper clearly had a significant impact on the Commission’s subsequent activities on the subject, which reached its first culmination when the preliminary draft proposal for a Council Regulation on the Law Applicable to NonContractual Obligations31 was presented on 3 May 2002. Nearly 30 years after the publication of the preliminary Draft Convention on the Law Applicable to Contractual and Non-Contractual Obligations, the Commission finally resumed its activities in the conflict of laws of non-contractual obligations. The goal of the Commission staff working paper was ‘to launch a public debate on a future Community instrument on the law applicable to noncontractual obligations’. To this end, all interested parties were invited to submit duly substantiated comments on the 25 articles of the working paper. Prior to this significant Commission initiative, important changes had been made in primary Community law, giving new momentum to the unification of conflict rules within the European Union: Article K.1(6) of the Maastricht Treaty provided for intergovernmental judicial cooperation in civil matters, thereby creating a formal basis for choice of law treaties among the Member States.32 Shortly thereafter a ‘Convention on the law applicable to extra-contractual obligations’ was envisaged by a Council Resolution33 passed prior to the agreement on the comprehensive overhaul of the EC and EU Treaties by the Amsterdam Treaty. The most important achievement, however, was the entry into force of the Treaty of

30

See http://www.drt.ucl.ac.be/gedip/ gedip_documents.html. See http://europa.eu.int/comm/justice_home/news/consulting_public/rome_ii/wai/ news_hearing_rome2_en.htm. 32 For a concise explanation of the relevant EC law, see VON HOFFMANN B. (note 29) pp. 19-37. 33 OJ 1996 C 319, p. 1. 31

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Amsterdam,34 by virtue of which new provisions were incorporated into the EC Treaty to facilitate the realisation of an ‘area of freedom, security and justice’, which would no longer be limited to improving the situation of refugees, immigrants and persons seeking asylum in a Member State of the Union. A new Title IV with the bulky heading ‘Visas, asylum, immigration and other policies related to free movement of persons’ was integrated into Part Three of the EC Treaty. The provisions of Articles 61 c) and 65 b) form the legal basis for supranational measures, viz. regulations or directives, in the field of judicial cooperation in civil matters with a cross-border impact.35 The latter of these provisions clearly states that such measures include ‘promoting the compatibility of the rules applicable in the Member States concerning the conflict of laws and jurisdiction’, thus making it possible for the unification of conflict rules to be taken up by a Community instrument under Article 249 EC, provided it was deemed necessary for the proper functioning of the internal market.36 Two years later the European Council issued its ‘Tampere Conclusions’37 aiming at the establishment of a genuine ‘European Area of Justice’ that would provide better access to justice, enhanced mutual recognition of judicial decisions and greater convergence in civil law. To this end, the European Council invited the Council and the Commission ‘to prepare new procedural legislation in cross-border cases’ and an overall study ‘on the need to approximate Member States’ legislation in civil matters in order to eliminate obstacles to the good functioning of civil proceedings’.38 On the basis of these conclusions, the Commission and Council envisaged measures for the harmonisation of conflict of laws rules in their joint programme 2001/C 12/0139 as a means of enhancing mutual recognition of decisions in civil and commercial matters, in addition to the Council Regulation 44/2001/EC on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters.40 It was held that harmonization of the rules on jurisdiction alone could not succeed in making the result of an international lawsuit predictable. Thus it became evident that the same rules should be applied throughout 34

OJ 1997 C 340/1. With the exception of Denmark: see Articles 1 and 2 of the Protocol (N° 5) annexed to the EU and EC Treaty on the position of Denmark. 36 On the importance of these new provisions see KOHLER C., ‘Interrogations sur les sources du droit international privé européen après le traité d’Amsterdam’, in: Rev. crit. dr. int. pr. 1999, pp. 1-30; REMIEN O., ‘European Private InternationaL Law, the European Community and Its Emerging Area of Freedom, Security and Justice’, in: Common Market Law Review 2001, pp. 53-86. 37 N. 28 and seq., at http://www.europarl.eu.int/summits/tam_en.htm. 38 N. 38 and 39 of the conclusions. 39 Adopted by the Council on 30 November 2000; OJ C 12, 15.1.2001, pp. 1-9 (at 6). 40 OJ 2001 L 12/1 (note 21). 35

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the European Union to designate the applicable substantive law in international cases of civil liability, unjust enrichment and of ‘actions performed without due authority in connection with the affairs of another person’.41 In response to a questionnaire compiled by the Commission in 1998 on a Draft Convention on the law applicable to non-contractual obligations, the Member States expressed strong support for the harmonization of conflict rules in this area. Thereafter, informal preparatory proceedings commenced anew, even with significant contributions by experts, such as Professor von Hofmann, who had already worked in this area in the seventies. In addition to eminent preliminary work by outstanding scholars, the Directorate-General for Justice and Home Affairs was assisted in its final work on the preliminary draft proposal for a Council Regulation on the Law Applicable to Non-Contractual Obligations by an ‘ad hoc Rome II Working Party’ established under the auspices of the European Commission. Consultations on the preliminary draft proposal launched by the Commission in May 2002 resulted in some 80 comments of different focus and intensity. Many of these comments can be found on the Internet with the help of a synthesis paper summarizing the ‘Rome II’ consultations and contributions of interested persons and institutions42. The comments included practice-oriented statements directed by specific interests as well as strictly dogmatic criticism by legal scholars specialized in the conflict of laws. An outstanding contribution was provided by a ‘Hamburg group for private international law’ composed of scholars affiliated with the Max-Planck Institute for Foreign Private and Private International Law and the University of Hamburg.43 After the consultation procedure ended with a public hearing in January 2003, the responsible Directorate-General overhauled the text of the preliminary draft proposal, making a significant number of modifications. The Draft Regulation ‘Rome II’, currently the relevant text, has become the object of widespread analysis and criticism.44 Therefore, the final text is expected to undergo more alterations. This is due only partly to the moderate suggestions of the European Economic and Social Committee, which are limited in number and focus mainly on specific technical problems, such as defining the relationship between Article 5 of the Regulation and Article 4(1) of the Draft Directive on unfair 41 This is the long-winded circumscription of negotiorum gestio in Article 10.3. of the Preliminary Draft Proposal and Article 9 4. of the Draft Regulation. 42 See http://europa.eu.int/comm/justice_home/news/consulting_public/rome_ii/ news_summary_rome2_en.htm. 43 See supra (note 24). 44 For comments written in German see BENECKE M., ‘Auf dem Weg zu Rom II – der Vorschlag für eine Verordnung zur Angleichung des IPR der außervertraglichen Schuldverhältnisse’, in: Recht der internationalen Wirtschaft, 2003, pp. 830-837; LEIBLE S./ ENGEL A., ‘Der Vorschlag der EG-Kommission für eine Rom II-Verordnung’, in: Europäische Zeitschrift für Wirtschaftsrecht 2004, pp. 7-17; VON HEIN J., ‘Die Kodifikation des europäischen Internationalen Deliktsrechts, in: Zeitschrift für vergleichende Rechtswissenschaft 2003, pp. 528-562.

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competition.45 Other questions are also raised, for example, is Article 7 really appropriate, how can the relationship between Article 9(3) and (4), on the one hand, and Article 9(1) and (2), on the other, be made more transparent, and should semantic adjustments be made, such as replacing the word ‘other’ in the title of Section 3 by ‘common’? A more serious reason for fearing that the legislative process will take longer than would normally be expected because of the specific topic of the Regulation can be seen in the draft report by the rapporteur in the Committee on Legal Affairs of the European Parliament,46 which, in several aspects appears to be influenced by the characteristic style of English legislation and obviously to some extent by the American Restatement of Conflict of Laws.47 As is well known and is illustrated by the transposition of EC Directives into the law of the United Kingdom,48 it is obviously necessary to draft very detailed and case-oriented statutes so as not to overburden judges who are still prepared ‘to find the law’ in a system of binding precedents and are not familiar with the interpretation of abstract legal norms and the methodical filling of gaps in statutory law. This explains some of the 24 amendments to the provisions of the proposed Regulation suggested by the English rapporteur in the latest version of her draft report of 11 November 2004.

III. The Proposed ‘Regulation Rome II’: its Characteristic Features in Discussion A.

Structure

The structure of the Draft Regulation is simple: 27 articles are divided into four Chapters: The title of the first Chapter is ‘Scope’; the second Chapter entitled ‘Uniform rules’ is subdivided into three ‘sections’, the first of which deals with tort or delict in Articles 3-8, the second deals with other types of non-contractual obligations such as unjust enrichment and negotiorum gestio in Article 9, and the third with common rules for the two groups of non-contractual obligations in Arti45 Proposal for a Directive of the European Parliament and of the Council concerning unfair business-to-consumer commercial practices in the Internal Market and amending directives 84/450/EEC, 97/7/EC and 98/27/EC, COM(2003) 356. 46 See supra (note 4). 47 AMERICAN LAW INSTITUTE, Restatement of the Conflict of Laws Second, St.Paul, Minn. 1971. 48 See, e.g., the implementation of the product liability directive by the Consumer Protection Act 1987, Part I, 1987 Chapter 43.

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cles 10-17. The third Chapter entitled ‘Other provisions’ consists of Articles 18-25, which tackle specific problems of private international law, such as the exclusion of renvoi.49 As a rule, the solutions are compatible with those in the respective articles of the Rome Convention. The fourth and final Chapter contains two ‘Final provisions’. No relevant criticism has been raised against this structure; however, there have been some suggestions. For example, the parliamentarian rapporteur suggested that party autonomy be made the primary connecting factor, which would entail shifting the relevant provision in Article 10 to a prominent place preceding the uniform rules.50 For its part, the European Economic and Social Committee proposed that a single exception clause be provided for the conflict rules for noncontractual obligations arising from a tort or delict, on the one hand, and for unjust enrichment agency without authority, on the other.51

B.

Scope

Article 1 on ‘Material scope’ demarcates the field of application of the proposed Regulation limiting it to ‘non-contractual obligations in civil and commercial matters’; it is not extended to non-contractual obligations arising from family relationships or matrimonial property regimes and successions, nor to non-contractual obligations arising out of negotiable character of bills of exchange, cheques, promissory notes etc., the personal liability of officers and members for the debts of a company and of auditors. Non-contractual obligations arising out of a trust and from nuclear damage are also excluded from the scope of the proposed Regulation. There are various reasons for these exceptions: Non-contractual obligations arising out of family relationships and successions should be subject to the specific conflict rules existing in the respective fields of law. This is also the case in regard to bills of exchange and cheques. As for obligations arising out of nuclear damage, there are widely accepted international treaties providing specific solutions. Article 2 provides for ‘universal application’ and is compatible in this regard with international conflicts conventions such as the Rome Convention on the law applicable to contractual obligations52 and the Hague Convention on the law applicable to traffic accidents,53 which are lois uniformes. This solution is certainly preferable to a parallel system with two sets of conflict rules, one for cross-border 49 See Article 20. This provision corresponds with Article 15 of the Rome Convention. 50 See Draft Report (note 4), PE 349.977, p. 13, infra, point D. 51 See Opinion of the European Economic and Social Committee, (note 5) OJ 2004 C 241, p. 5, infra, point C 2. 52 Supra (note 27). 53 Supra (note 22).

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cases within the European Union and the other for cases involving the laws of third countries, as it avoids unnecessary complications that would otherwise arise in the law of conflicts in respect of non-contractual obligations. Since Article 2 provides that ‘any law specified by this Regulation shall be applied whether or not it is the law of a Member State’, fear has been expressed54 that the public policy clause of Article 22 may not be sufficient to cope with certain situations, for example, where a law is to be applied that provides for excessive or punitive damages. However, this fear seems to be exaggerated and no significant modification has been suggested either by the parliamentarian rapporteur or by the Economic and Social Committee with regard to the first two articles of the Draft Regulation.

C.

Uniform Rules for Non-contractual Obligations

1.

Conflict Rules for Obligations Arising out of Tort or Delict

The most important provisions of the proposal as it now stands are included in the first section of Chapter II which covers in Articles 3-8 the rules ‘applicable to noncontractual obligations arising out of a tort or delict’. The core article of this chapter is certainly Article 3 which lays down the general rule according to which, in the absence of a choice by the parties55 and subject to certain exceptions, the ‘lex loci delicti commissi’ or ‘place of injury rule’ would apply.56 In this regard, the Draft Regulation of 2003 follows its predecessor, since Article 10 of the unrealized Draft Convention on the Law Applicable to Contractual and Non-contractual Obligations of 1972 designated the law of the country as applicable in which the event occurred that resulted in the damage or injury. Moreover, the ‘place of injury rule’ appears to be a nearly universally accepted57 general rule of international tort law. Developed to satisfy the need for certainty and uniformity in an increasingly complex world, it has been accepted by virtually all recent national codifications of Private International Law,58 as a result of which they basically conform with Article 3 of the Draft Regulation. 54

Summary and contributions of the consultation ‘Rome II’ (note 42). See Article 10. 56 In German ‘Tatortregel’. For a recent explanation of its variations and importance, cf. GRAZIANO T.K., Europäisches Internationales Deliktsrecht, Tübingen 2003, pp. 19 et seq. 57 With the exception of the American jurisdictions. 58 See e.g. § 48(1) Austrian PIL Act; Article 133(2) Swiss PIL Act; Article 62(1) Italian PIL Act; Article 40(1) Introductory Law of the German Civil Code (EGBGB). GRAZIANO T.K., (note 56), p. 19 lists more than 20 European States that adhere to the ‘Tatortregel’ as the basic rule of international tort law. 55

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However, since lex loci delicti commissi is a ‘catch-all heading’,59 there are at least two possible ways of defining ‘place of injury’: It could be the law of the place where the cause of the injury or loss is generated, or the place where the damage arises. Determining which of these fundamental alternatives should prevail bears important consequences in the context of ‘bilocal torts’ or ‘double locality cases’60 such as environmental damage.61 In certain national conflict of laws statutes, the ‘place of injury’ means the place where the damage arises. For example, Article 62 of the modern Italian statute on Private International Law of 1995 designates the ‘legge dello Stato in cui si è verificato l’evento’ as applicable.62 However, other national codifications of PIL prefer to define the ‘place of injury’ as the place of the activity giving rise to the damage. This is the case in the relevant Austrian provision63 and the more recent German provision.64 The Commission has opted for the first solution, i.e., the law of the country in which the damage arises. As the European Economic and Social Committee aptly remarked in its Opinion of 2 June 2004,65 ‘the Commission’s choice is justifiable on the grounds that it gives priority to protection of the injured party, without however completely neglecting the interests of the party causing the damage’.66 This led the Economic and Social Committee to the positive finding that ‘[t]he Commission’s attempt to balance the interests of the various parties seems in every respect acceptable’.

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241, p.3. 60

In German: ‘Distanzdelikt’; for more details, cf. e.g. GRAZIANO T.K. (note 56), pp. 45 et seq. 61 See the facts of the famous Mines de Potasse d’Alsace decision of the European Court of Justice of 1976, Case 21/76, [1976] ECR, 1735. 62 Law No. 218 of 31 May 1995. Art. 62 (1): ‘Tortious liability shall be governed by the law of the State in which the damage materialized. Nonetheless, the person suffering damage may request the application of the law of the State in which the event causing the damage took place’ (author’s translation). 63 § 48 (1) Austrian PIL Act: ‘Non-contractual damage claims shall be judged according to the law of the state in which the damage-causing conduct occurred. However, if the persons involved have a stronger connection to the law of one and the same other state, that law shall be determinative’. Translation by PALMER, E., in: 28 Am. J. Comp. L. 225 (1980), p. 234. 64 Article 40(1) first sentence of the Introductory Law of the German Civil Code reads: ‘Claims arising from a tortious act are governed by the law of the state in which the injurious conduct of the responsible person was set’. 65 Opinion of the European Economic and Social Committee (note 5), OJ 2004 C 241, p. 3, N. 5.1. 66 That would have been the case if the Commission had favoured the criterion of the victim’s habitual residence as the decisive factor for the designation of the applicable law.

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Many contemporary conflicts lawyers would agree with this statement by maintaining that the idea of strict liability has gathered momentum and aspects such as ‘protection of individual rights’, ‘compensation of loss’ and ‘equitable distribution of social risks’ have become more important, whereas the aspect of sanctioning faulty conduct has lost much of its once dominant position.67 Thus, Article 3(1) of the Draft Regulation seems to be in line with current trends and it may be assumed that the substance of the current version of this provision will remain unchanged: ‘The law applicable to a non-contractual obligation shall be the law of the country in which the damage arises or is likely to arise, irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event arise.’ The ‘output oriented place of injury rule’ of Article 3(1) gives priority to the resulting damage rather than the harmful conduct, thus focusing on the law of the state in which the damage occurs. This approach is ‘softened’ by paragraph 2, which takes account of situations where the defendant tortfeasor and the victim have their habitual residence in the same state at the time the damage occurred, and by paragraph 3 which deals with the question whether a ‘closer connection’ may override the general rule. According to paragraph 2, the law of the common place of residence shall apply if the parties habitually reside in the same country. The exception clause of paragraph 3 provides that, ‘if it is clear from all the circumstances of the case that the non-contractual obligation is manifestly more closely connected with another country, the law of that other country shall apply’. By providing these two limitations to the general ‘place of injury-rule’, the Draft Regulation appears to be in line with many national codifications of Private International Law in Europe which follow the same pattern by combining a seemingly ‘hard and fast connecting rule’ with ‘softening’ exceptions.68 The drafters are apparently following the mainstream once again by proposing a special rule for determining the law applicable to product liability. It is well known that cross-border product liability cases may involve peculiar and very difficult problems. For this reason a number of states69 and the Hague Conferences70 have elaborated special rules for this type of non-contractual obligation. Under the Draft Regulation, a ‘non-contractual obligation arising out of damage or 67

See GRAZIANO T.K. (note 56), p. 50. See e.g. § 48(1) Austrian PIL Act; Article 15(1) Swiss PIL Act; Article 41(1) Introductory Law of the German Civil Code (EGBGB); Sect. 12 English PIL Act . 69 See Article 135 Swiss PIL Act; Article 63 Italian PIL Act. 70 See supra (note 22); the following EU States are Contracting States of the Hague Product Liability Convention: Finland, France, Luxembourg, The Netherlands, Slovenia, Spain. 68

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a risk of damage caused by a defective product’ is governed by the law of the country of the habitual residence of the victim. However, if the defendant manufacturer could prove ‘that the product was marketed in that country without his consent’, the law of the country of the defendant’s habitual residence would apply instead. This provision occasioned numerous controversial comments in the consultation procedure because of the conflict of interests at stake. On the one hand, it is in the interest of the industrial and business sector to avoid exposure to radical systems of strict product liability; on the other, it is also necessary to protect consumer rights to due process. In the end, Article 4 of the Draft Regulation provides a rule that is rather simple and obviously more workable than the complex solution provided by the Hague Convention. Article 4 is similar to the rules in the Swiss and Italian codifications of PIL, however, it does not allow the victim to choose between the law of the marketplace and the law of the manufacturer’s place of business.71 In this context, the Economic and Social Committee concludes in its Opinion72 that ‘against the background of globalisation’ Article 4 provides a balanced solution that takes sufficient account of the legitimate interests of industry as well as those of consumers.73 Article 5 of the proposed Regulation provides a specific rule for determining the applicable law in matters of unfair competition. Several national PIL statutes have already introduced a rule for unfair competition.74 All of the relevant provisions resort to the principle that the law of the country whose market is directly and substantially affected by the unfair practices shall apply,75 thus ensuring equal treatment of domestic and foreign competitors by subjecting them to the same rules. No relevant arguments are raised against the substance of this rule. Nonetheless, the Economic and Social Committee made an important observation concerning the sometimes obscure ‘pre lex-situation’ within the European Community that occurs as a result of insufficient coordination of the legislative activities of the different Directorates-General. As the Committee points out, the same subject is dealt with in Article 4(1) of the proposed Directive on unfair

71 However, such choice is provided by Article 135(1) Swiss PIL Act and Article 63 Italian PIL Act. 72 Opinion of the European Economic and Social Committee (note 5), OJ 2004 C 241, p. 4, N. 5.2. 73 For a concise explanation of the problems involved in international product liability law, see GRAZIANO T.K. (note 56), pp. 63-79. 74 E.g. § 48(2) Austrian PIL Act, Article 136(1) Swiss PIL Act, Article 52(2) Liechtenstein PIL Act. 75 For a concise explanation of the problems involved with regard to unfair competition, see GRAZIANO T.K. (note 56), pp. 90-100.

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business practices,76 and thus the solution presented could lead to a ‘disparity in the application of general principles of Community and internal market law’.77 Articles 6 to 8 of the Draft Regulation provide specific conflict rules for violations of privacy and rights relating to the personality, violation of the environment and infringement of intellectual property rights. Pursuant to Article 6(1), violations of privacy or rights relating to the personality are governed by the law ‘of the forum where the application of the law designated by Article 3 would be contrary to the fundamental principles of the forum as regards freedom of expression and information’. Article 6(2) provides that the right of reply or equivalent measures is governed by ‘the law of the country in which the broadcaster or publisher has its habitual residence’. According to the Economic and Social Committee,78 the exception in favour of the lex fori could be rendered superfluous in certain circumstances by the public policy reservation of Article 22. Article 7 of the Draft Regulation provides an exception to the general rule of Article 3(1) of the Draft Regulation by empowering a person sustaining environmental cross-border damage to ‘base his claim on the law of the country in which the event giving rise to the damage occurred’. As regards this provision, the Economic and Social Committee79 is correct when it says: ‘The Commission is pursuing objectives which actually have nothing to do with conflict of laws, but which are rather intended to encourage potential environmental polluters to take environmental protection very seriously by threatening them with the application of a more stringent system of substantive law.’80 Article 8 of the Draft Regulation dealing with infringements of intellectual property rights follows the rules generally accepted in this field in Europe by designating ‘the law of the country for which protection is sought’ as applicable to crossborder disputes involving intellectual property rights. The articles providing conflict rules for non-contractual obligations arising out of a tort or delict are based on a common European tradition in this field and thus appear well-founded. Therefore, significant changes are not expected in the co-decision proceedings; however, at this moment it is futile to speculate about the 76

COM (2003) 356. Opinion of the European 241, p. 4 , N. 5.3. 78 Opinion of the European 241, p. 4 , N 5.4. 79 Opinion of the European 241, p. 4, N. 5.4. 80 Opinion of the European 241, p. 4, N. 5.5. 77

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final content and structure of the ‘Regulation Rome II’. Unfortunately, at the end of 2004 it is impossible to predict whether the proposals of the parliamentarian rapporteur will entail radical revisions in Articles 3 to 8. Her proposals for reformulating Article 3 of the Draft Regulation are indeed all but moderate. According to her proposal in the draft report of 11 November 2004,81 Article 3 would consist of three complex paragraphs as follows: ‘1. Unless otherwise provided for in this Regulation, the law applicable to a non-contractual obligation arising out of a tort or a delict shall be the law of the country with which the non-contractual obligation is most closely connected. 2. In order to determine the applicable law in a particular case, the following presumptions shall be applied, individually or severally: a) where the person claimed to be liable and the person sustaining loss or damage both have their habitual residence in the same country when the damage occurs, the non-contractual obligation shall be governed by the law of that country; b) subject to Article 13, where the harmful event results in a claim for damages for personal injuries, the non-contractual obligation shall be governed by the law of the victim’s country of residence; c) where appropriate, the law of the country in which the most significant element or elements of the loss or damage occur or are likely to occur shall be applicable, irrespective of the country in which the event giving rise to the damage occurred; d) a manifestly closer connection with another country may be based in particular on a pre-existing relationship between the parties, such as a contract that is closely connected with the non-contractual obligation in question. 3. Notwithstanding paragraph 2, where it is clear from all the circumstances of the case that the non-contractual obligation is manifestly more closely connected with another country, the law of that other country shall apply. In particular, in the case of a claim based on a non-contractual obligation arising out of damage caused by a defective product, regard may be had in determining the applicable law to the country or countries in which a product in respect of which a claim for non-contractual liability arises was intended to be marketed or to which it was specifically directed.’ 81

Draft Report (note 4), PE 349.977, pp. 14-18.

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If the above version of Article 3 is adopted as proposed by the rapporteur, the articles on product liability, unfair competition and violation of the environment would have to be abrogated. Further, the rapporteur is of the opinion that Article 6 on the ‘violation of privacy or rights relating to the personality’ needs to be significantly modified in order to be truly consistent with the judgment of the European Court of Justice in Fiona Shevill and Others (Case C-68/93).82 In addition, a new Article 6a on ‘industrial action’ would be incorporated with the following – somewhat dubious – wording: ‘The law applicable to a non-contractual obligation arising out of industrial action, pending or carried out, shall be the law of the country in which the action is to be taken or has been taken.’ Acceptance of the rapporteur’s proposals would entail far-reaching amendments and revisions that go to the heart of the Draft Regulation, substantially changing the approach to international tort law taken by the Commission. The rapporteur, who apart from politics is active as an English solicitor, seems to be fully aware of the consequences of her proposals, which she justifies by the desire to opt ‘for the sake of clarity (…) for a single principle and a set of presumptions designed to assist the courts in determining the applicable law’.83 She is convinced that the proposed amendments would ‘simplify the original proposal by introducing the concept of general rules for determining the law applicable to tort/delict’ and that this approach would ‘allow the courts to use their discretion in choosing the solution which best accords with the need to do justice to the victim and with the reasonable expectations of the parties, whilst minimising the risk of forum shopping’ and allowing dépeçage. It is evident that the general principle of the amended Article 3(1) would provide little guidance for lawyers who must decide a dispute over a non-contractual claim for the recovery of damages. As shown by the example of the Austrian PIL Act,84 such a rule may be helpful as a general clause of last resort for specific factual situations. However, it seems doubtful as to whether it is sufficiently definite to be effective as a basic rule in international tort law. In addition, the method of applying presumptions could cause problems for lawyers from legal systems with a civil law tradition. It is difficult to believe that the conception of a general lex loci delicti commissi rule, softened and limited by exceptions in specific fields of non-contractual tortious obligations, could be replaced by a number of presumptions to be applied ‘individually or severally’ by judges. Such presumptions 82 [1995] ECR I-415. In fact, the holding of the European Court of justice has been considered by the responsible Directorate-General on Justice and Home Affairs as the reference in the Explanatory Memorandum indicates, COM (2003) 427 final, p. 18. 83 Draft Report (note 4), PE 349.977, p. 15 et seq. 84 § 1 Austrian PIL Act designates the ‘law to which the closest connection is established’ as the applicable law if no specific conflict rule exists in a given case.

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entrust great discretionary power to judges but provide only vague guidelines for decision-making. Furthermore, the question arises as to whether the proposed presumption in (c) designating the law of the place of the actual or probable occurrence of ‘the most significant element or elements of the loss or damage’ as applicable actually corresponds with the lex loci delicti commissi, as the rapporteur maintains. Can the globally recognized goals of conflict of laws rules – certainty, predictability and uniformity of result85 – actually be achieved by such a system of presumptions? Can the higher degree of flexibility provided by a regime that combines a rather vague general rule with a series of presumptions justify the reduction of legal certainty and predictability of result achieved by a set of ‘rigid rules for each class of non-contractual obligation’?86 According to the rapporteur, paragraph 3 ‘covers residual cases and also seeks to deal with cases involving defective products where the product in question was not intended to be marketed in the country in which the harmful event occurred’. In this context the question arises whether paragraph 3 provides sufficient guidance for a judge of the civil law tradition who has to ascertain the applicable law in a cross-border case of product liability. These are only a few crucial questions that arise in connection with the amendments proposed in the rapporteur’s draft report. It can hardly be denied that the proposed changes cast serious doubt as to whether clarity is actually enhanced. Nevertheless, there are some ideas in the draft report that deserve consideration and respect, such as the suggestion to reposition the current Article 10 of the Draft Regulation.

2.

Conflict Rules for Obligations Arising out of an Act Other than Tort and Delict

Unjust enrichment and ‘actions performed without due authority in connection with the affairs of another person’, i.e., cases of negotiorum gestio, constitute the core of the second section of the second chapter, which consists of a single article. As explained by the Commission, the complicated heading of the chapter and longwinded definitions set forth in Article 9 of the Draft Regulation are a reaction to the diversity of legal concepts existing in the national systems of substantive law.87 85

See Restatement of Conflict of Laws Second (note 46), § 6 (2) (f). Draft Report (note 4), PE 349.977, p. 29. 87 The Explanatory Memorandum observes that, due to the ‘wide divergences between national systems’ in this field, ‘technical terms had to be avoided’ and that, since ‘the substantive law and the conflict rules are still evolving rapidly in most of the Member States’, rules had to be laid down ‘that are neither so precise that they cannot be applied in a Member State whose substantive law makes no distinction between the various relevant hypotheses nor so general that they might be open to challenge as serving no obvious purpose’: COM (2003) 427, p. 21. 86

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The provisions of this Article contain the conflict rules for all non-contractual obligations not covered by Articles 3 to 8 of the Draft Regulation. Article 9(1) provides an ‘accessory connection’88 for non-contractual obligations that are based on a previously existing legal relationship between the parties, such as a contract closely connected with the non-contractual obligation. As a rule, the non-contractual obligation is governed by the same law as the existing relationship, unless the parties are habitually resident in the same country and this is not the state of the existing relationship. Since an ‘accessory connection’ is widely acknowledged in this context, this provision of the Draft Regulation is basically consistent with existing national codifications of PIL. The same conclusion may be reached with regard to the rule for unjust enrichment in Article 9(3), which provides that the law of the country in which the enrichment takes place shall apply. Again, the drafters resorted to a rule that is apparently well established in many European codifications of PIL.89 It appears that the drafters were particularly impressed by the respective German and Swiss provisions, which base their international law of unjust enrichment on a combination of an ‘accessory connection’ in cases with a pre-existing relationship, especially a contractual relationship, and the general principle that unjust enrichment is governed by the law of the place of the occurrence of the enrichment. A corresponding combination is proposed for the relationships in paragraphs 1 and 3 of Article 9. However, since Article 9(1) also applies to cases of agency without authorisation, one may find the solution of the Draft Regulation less clear and stringent, as the Economic and Social Committee did when it requested greater clarity ‘in order to prevent misunderstandings on the part of users of the law’.90 The general conflict rule adopted in the first sentence of Article 9(4) of the Draft Regulation in respect of negotiorum gestio (agency without authority) designates the law of the country in which the beneficiary is habitually resident as applicable. This rule is not consistent with the Austrian and German provisions which provide that ‘the law of the state in which the unauthorized agency was carried out’ shall apply.91 The proposed rule has been criticized by the Economic and Social Committee as conferring an advantage on the beneficiary. Instead, the Committee would prefer a conflict rule designating the law of the place where the transaction 88 The Explanatory Memorandum, COM (2003) 427, p. 12 and seq, and the Opinion of the Economic and Social Committee (note 5), OJ 2004 C 241, p. 5 N. 6.2 use the term ‘secondary connection’. 89 See § 46 first sentence Austrian PIL Act, Article 38 (3) Introductory Law of the German Civil Code (EGBGB); Article 128 (2) Swiss PIL Act. 90 The Committee found that the rule set out in Article 38 (1) and (3) of the German EGBGB ‘could serve as a model’: see Opinion of the European Economic and Social Committee (note 5), OJ 2004 C 241, p. 5, N. 6.2. 91 § 47 Austrian PIL Act; Article 38(3) Introductory Law of the German Civil Code (EGBGB); see Article 29(2) Slovenian PIL Act.

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occurs as applicable.92 However, the second sentence of Article 9(4) on a negotiorum gestio relating ‘to the physical protection of a person or of specific tangible property’ comes close to this by providing that such matters shall be governed by ‘the law of the country in which the beneficiary or property was situated at the time of the unauthorised action’.93 The exception clause in Article 9(5) applies to all types of non-contractual obligations other than those arising out of tort or delict. It fully corresponds with the ‘softening device’ of Article 3(3) of the Draft Regulation by providing that the law of another country shall apply if that law ‘is manifestly more closely connected with the obligation’. This led the Economic and Social Committee to the question ‘whether an overarching principle cannot be derived from this which would apply to all the provisions of the Regulation, including those set out in Articles 4-8’ and whether a single ‘catch-all rule’ should be inserted for this purpose into Section 3, thereby replacing Articles 3(3) and 9(5) of the Draft Regulation.94 Interestingly enough, the parliamentarian rapporteur’s approach to the regulation of unjust enrichment and agency without authority and the problem of a single ‘softening’ or ‘exception clause’ differs considerably from that of the Economic and Social Committee. Moreover, her proposal to provide separate rules for unjust enrichment and ‘negotiorum gestio’ (Articles 9a and 9b),95 as well as separate exception clauses for the parties’ habitual residence in the same country and for a manifestly closer connection with another law, appears to be inconsistent with her earlier suggestion to create one general rule and certain presumptions for noncontractual obligations arising out of a tortious activity. It appears that the rapporteur may have been impressed by the comments submitted by the Hamburg Group for Private Insurance Law on the preliminary Draft Regulation of 3 May 2002,96 which provide separate rules for determining the law applicable to unjust enrichment, on the one hand, and to ‘negotiorum gestio’, on the other.97

92 Opinion of the European Economic and Social Committee (note 5), OJ 2004 C 241, p. 5, N. 6.4. 93 The Explanatory Memorandum, COM (2003) 427, p. 22, explains the existence of two connecting factors for unauthorized agency by the fact that measures by the agent may have an assisting or an interfering character. In the case of assistance, the person to be protected is the agent, in the case of interference it is the ‘principal’. 94 Opinion of the European Economic and Social Committee (note 5), OJ 2004 C 241, p. 5, N. 6.5. 95 The rapporteur uses Latin terminology (!) in her Draft Report (note 4), PE 349.977, p. 20. 96 See supra (note 31). 97 HAMBURG GROUP FOR PRIVATE INTERNATIONAL LAW (note 23), pp. 28-33.

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D.

Party Autonomy

Article 10 of the Draft Regulation permits a choice of law by the parties: They may ‘agree, by an express or conclusive agreement entered into after their dispute arose, to submit non-contractual obligations to the law of their choice’; however, party autonomy is expressly excluded in matters involving an ‘infringement of intellectual property rights’. This rule corresponds with many but not all98 modern PIL codifications. In this context, it is not just a matter of taste whether party autonomy is made the primary connecting factor99 or whether it is simply annexed as another possibility of determining the applicable law.100 In particular, the rapporteur’s proposal to move the former Article 10 to the beginning of the Regulation deserves consideration. It may seem more logical – not only from her point of view – to give priority to the principle of party autonomy by placing it at the top of the hierarchy of conflicts provisions. Indeed, it is true that ‘if the parties have reached an agreement between them as to the applicable law, account should be taken of the parties’ intention before applying exogenous rules in order to determine the applicable law’.101 What appears to be superfluous, however, is her suggestion to expressly state that non-contractual obligations may be submitted to the parties’ choice not only ‘by an agreement entered into after their dispute arose’, but also ‘where there is a pre-existing arms-length commercial relationship, by an agreement entered into before the dispute arose’.102 In cases of ‘pre-delictual contact’ it goes without saying that the parties may agree on a specific law to be applied; however, it is necessary to expressly state that a subsequent choice of law by the parties is permitted in cases of ‘non-contractual’ damages where the tortfeasor and victim had 98

E.g., no party autonomy is provided for non-contractual obligations by the Slovenian PIL Act of 1999. 99 See e.g. § 35 (1) Austrian PIL Act and Article 132 Swiss PIL Act. 100 See Article 42 Introductory Law of the German Civil Code (EGBGB). 101 Draft Report (note 4), PE 349.977, p. 14. 102 According to the rapporteur, Article 2a on ‘Freedom of choice’, should read as follows: ‘(1) The parties may agree, by an agreement entered into after their dispute arose or, where there is a pre-existing arms-length commercial relationship, by an agreement entered into before the dispute arose, to submit non-contractual obligations to the law of their choice. The choice must be expressed or demonstrated with reasonable certainty by the circumstances of the case. It may not affect the rights of third parties and shall be without prejudice to the application of mandatory rules within the meaning of Article 12. (2) If all the other elements of the situation at the time when the loss or damage is sustained are located in one or more of the Member States of the European Community, the parties’ choice of the applicable law shall not debar the application of provisions of Community law.’

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no previous contacts and thus no opportunity to reach an agreement on any problem. Similarly, it seems unnecessary to state that a choice of law by the parties ‘shall be without prejudice to the application of mandatory rules within the meaning of Article 12’ of the Draft Regulation on ‘overriding mandatory rules’. It follows from the definition of ‘overriding mandatory rules’ and the wording of the relevant provision that a choice of law by the parties cannot set aside such rules. On the other hand, it is questionable whether sufficient reasons exist for not permitting the parties to choose the applicable law in cases of intellectual property.103

E.

Overriding Mandatory Rules and Ordre Public

A number of general provisions are found in the third section of Chapter II under the heading ‘Common Rule applicable to non-contractual obligations arising out of tort or delict and out of an act other than a tort or delict’ and in Chapter III, for example, Article 12 on ‘overriding mandatory rules’, Article 20 on the ‘exclusion of renvoi’ and Article 20 on ‘public policy of the forum’. The substance of these provisions is already well known as they more or less correspond literally with the respective provisions of the Rome Convention.104 Nevertheless, the parliamentarian rapporteur proposes that certain amendments be made in some of these provisions as well. For instance, Article 12 of the Draft Regulation, which, apart from minor variations, corresponds with Article 7 of the Rome Convention, is on the list of provisions to be modified. Closer scrutiny, however, reveals that the proposed modifications do not affect the substance but merely aim at a more logical order of the paragraphs and a better alignment of the English text with the other language versions.105 Similarly, the rapporteur does not simply accept the vested wording of the ordre public exception, which is modelled on Article 16 of the Rome Convention and Article 22 of the Draft Convention, but proposes adding a clarification in a provisory paragraph 1a stating that ‘[i]n particular, the application of a rule of law of any country specified by this Regulation may be refused and/or the law of the forum applied if such application would be in breach of fundamental rights

103

Draft Report (note 4), PE 349.977, p. 14. See Articles 12, 20 and 22 of the Draft Regulation with Articles 7, 15 and 16 of the Rome Convention. 105 Draft Report (note 4), PE 349.977, p. 24. 104

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and freedoms enshrined in the European Convention on Human Rights, national constitutional provisions and humanitarian law.’106 Indeed, ‘such a clarification of the meaning of public policy’ appears to be characteristic of the legislative style of statutory provisions in English law, which, as was mentioned earlier, tend to provide casuistic explanations to facilitate judges in their task of construing the law. From this point of view, the insertion of the proposed new paragraph would be of no general value for the vast majority of practitioners and judges within the enlarged European Union. The second part of the amendment proposing the introduction of a new paragraph 1b deals the question whether the national courts of the EU Member States should apply a rule of the applicable foreign law providing for excessive exemplary or punitive damages. It is true that this is a question of ordre public and could be dealt within the context of the general rule on public policy. Therefore, it might be worthwhile to consider moving the rule of Article 24 which provides that such foreign law would ‘be contrary to Community public policy’.107 Notwithstanding the rapporteur’s opinion that ‘it is thought beyond the scope of this regulation to introduce a new concept of Community public policy’, this concept would nevertheless become accepted by virtue of the entry into force of the Regulation, an instrument of Community law that has general application and is binding in its entirety and directly applicable in all Member States.108

IV. Conclusion The discussion on whether a ‘Community public policy’ exists and how the public policy exception should be worded brings us to a final consideration concerning the impact of the delay in the co-decision procedure on the envisaged Community instrument. Particularly in the third section of Chapter II and in Chapter III, there are so many general concepts of private international law that deserve to be uniformly defined and interpreted regardless of whether they occur in a contractual or non-contractual setting. At present, one of the greatest problems of Community legislation is its considerable lack of transparency and fragmentation. A good example is the law of consumer protection with its large number of ‘pointillist directives’. The envisaged enactment of a ‘Regulation on the Law Applicable to NonContractual Obligations’ and a separate ‘Regulation on the Law Applicable to

106

Draft Report (note 4), PE 349.977, p. 25. Draft Report (note 4), PE 349.977, p. 25. 108 Article 249 EC. 107

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Contractual Obligations’ designed to replace the actual Rome Convention109 is not a favourable solution. Both instruments would have to contain a large number of provisions almost identical in substance. As a result, clarity and simplicity of the law would be unnecessarily sacrificed for a legislative dualism in fields of law that are closely related. It is difficult to predict when and how the European Parliament and the Council will arrive at a common position on the proposed text of a regulation on this subject. However, there is one positive aspect of the delayed co-decision procedure, i.e. it could lead to an increasing conviction among lawyers and lawmakers that the enactment of a single ‘Regulation on the Law Applicable to Contractual and Non-Contractual Obligations’ would be preferable. After a painstaking evolution of 35 years, a uniform European Private International Law for the entire law of obligations would finally have made a complete circle.

109 See Green Paper on the conversion of the Rome Convention of 1980 on the law applicable to contractual obligations into a Community instrument and its modernisation, COM (2002) 654 final, 14.1.2003.

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GENERAL ISSUES OF PRIVATE INTERNATIONAL LAW IN THE EUROPEAN SYSTEM Reflections by Italian Scholars ________________

THE PROCESS OF CHARACTERIZATION IN THE EC CONFLICT OF LAWS: SUGGESTING A FLEXIBLE APPROACH Roberto BARATTA

I. II. III. IV. V.

Introduction Some Peculiarities of Characterization in the EC Conflict of Laws Preclusion of the National Legal Systems of the Member States Possible Solutions Conclusion

I.

Introduction

The problem known as characterization arises in the classical choice of law method. From the legal point of view, characterization takes place even though judges are not always aware of it.1 The issue of qualification or classification (to use the ‘civil law’ parlance), i.e., determining the rule under which the facts of a given claim or defence are to be subsumed, will arise in a future system of EC

Professor at the University of Macerata. Sometimes national judges do not even grasp the problem (JUENGER F.K., Choice of Law and Multistate Justice, Dordrecht/Boston/London 1993, at p. 73). This does not mean that the issue of characterization is sterile or unreal. Since Kahn’s and Bartin’s first analysis of the problem of characterization, it has become a classical topic of the so-called general part of PIL, whenever its rules are based on the classical choice of law method. However, in other methods of coordinating national legal systems, the same issue may arise in a less problematic way (infra, section II). 1

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conflict rules. If categories or institutions of private law (divorce, contract, tort etc.) are designated, it will be necessary to determine which category or institution is at stake in a given case. The matter is far from simple, particularly in borderline cases where there are two concurring conflict rules of the forum and where a conflict of classification arises between the law of the forum and the potentially applicable foreign law. The problem of characterization, which arises whenever a conflict of laws system is based on traditional conflict rules, could be weakened, but not entirely avoided by adopting a conflicts system that is not based on legal categories and connections, but on interests favouring the application of a substantive law as lois d’application immédiate, or on a governmental interests analysis, as has been suggested by some American doctrines. However, such methods of resolving conflicts of laws will probably not be endorsed in Europe, at least not as general approaches.2 Therefore, the choice of law process should begin, as usual, by classifying the social relationship,3 the legally informed fact situation,4 or rule of law5 as belonging to one of the legal categories envisaged by the future EC conflict rules. Characterization is one of the most controversial problems in general conflicts theory.6 As for EC conflict rules, the process of characterization is likely to be just as difficult. The problem has not yet been investigated by scholars from this perspective, and the first Community acts in the field of PIL give little indication in this respect. Further, the European Court of Justice (ECJ) has not yet had the op2 On the general methodological trends in the EC conflict of laws see: KOHLER C., ‘Lo spazio giudiziario europeo in materia civile e il diritto internazionale privato comunitario’, in: PICONE P. (ed.), Diritto internazionale privato e diritto comunitario, Padua 2004, at p. 65 et seq.; and PICONE P., ‘Diritto internazionale privato comunitario e pluralità dei metodi di coordinamento tra ordinamenti’, ibidem, at p. 485 et seq. 3 RABEL E., ‘Das Problem der Qualifikation’, in: RabelsZ, 1931, at p. 244. 4 BATIFFOL H./LAGARDE P., Droit international privé, tome 1, 7th ed., Paris 1981, at p. 340; BERNASCONI C., Der Qualifikationsprozess im internationalen Privatrecht, Zürich 1997, at p. 74 et seq. The so-called object of characterization is only mentioned briefly in this article mainly because the object of qualification does not appear to be specially characterized from a European perspective. On the object of characterization see ZICCARDI P., ‘Oggetto delle qualificazioni e funzioni dei criteri di collegamento. Note critiche su alcuni aspetti delle norme di diritto internazionale privato’, in: Comunicazione e Studi 1955, p. 365 et seq.; ANCEL B., ‘L’objet de la qualification’, in: Clunet 1980, at p. 227 et seq. According to MAYER P., Droit international privé, 5th ed., Paris 1994, at pp. 112-115, the object of qualification is a question of substantive law, as alleged and introduced by the plaintiff and defendant. 5 WENGLER W., ‘Réflexions sur la technique des qualifications en droit international privé’, in: Rev. crit. dr. int. pr. 1954, at p. 691. 6 It has given rise to a great deal of literature that cannot be mentioned here. A recent commendable monograph on this topic is that of BERNASCONI C. (note 4), passim, with further bibliographical references.

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portunity to decide real cases of characterization, given the scarcity of EC conflict rules. This will probably change as a result of the recent entry into force (1 August 2004) of Protocols I and II to the Rome Convention, thus increasing the probability that the ECJ will deal with problems of characterization in matters of contracts and related institutions, provided they are Communitarian in nature. In an attempt to approach the problem, some indications might be drawn from the case law of the ECJ involving the rules of the Brussels Convention on jurisdiction. In fact, those rules make it necessary to place the legal relationship, as alleged and introduced by the parties, into a certain category, thus making it possible to determine the applicable rule, as is shown, for example, in the recent Tacconi case on pre-contractual liability.7 However, the question arises whether classifying a claim by subsuming it under a uniform jurisdictional rule embodied by the ‘Brussels I’ regime can be regarded as a real problem of characterization, in that it is the same as classifying a claim under a traditional bilateral conflict rule. It can be argued that all common jurisdictional rules take account of the interest of the co-operating States to administer justice in disputes involving several Member States. Therefore, the law of a third State law could hardly be relied on to resolve problems of interpretation arising from legal institutions subject to a common jurisdictional rule.8 Moreover, the application of a uniform jurisdictional rule entails to some extent the interpretation of a Community rule. In such situations, the wording, context and purposes of the rule play a prominent role when defining its scope. As a matter of principle, it is hardly conceivable that there would be a conflict between the classification of a claim from a ‘Community perspective’ and its classification according to the law of a third State. As regards the ‘Brussels I’ regime, it appears reasonable to use an ‘internal perspective’, as the ECJ often did, to classify a claim under one of the common jurisdictional rules, thus enhancing the predictability of exercising jurisdiction, as well as the proximity of the judge to the case, both of which are instrumental in attaining the purpose of due process and 7 In that case the ECJ held that a situation of alleged culpa in contrahendo (precontractual liability) is tortious in nature: see case C-334/00, Tacconi v. Wagner [2002] ECR p. I-7357 et seq.: cf. FRANZINA P., ‘La responsabilità precontrattuale nello spazio giudiziario europeo’, in: Riv. dir. int. 2003, p. 715 et seq.; BERTOLI P., ‘Criteri di giurisdizione e legge applicabile in tema di responsabilità precontrattuale alla luce della sentenza Fonderie Meccaniche Tacconi’, in: Riv. dir. int. priv. proc. 2003, p. 109 et seq.; MANKOWSKI P., ‘Die Qualifikation der culpa in contrahendo. Nagelprobe für den Vertragsbegriff des europäischen IZPR und IPR’, in: IPRax 2003, p. 127 et seq. 8 From the point of view of a national conflicts system, the exercise of adjudicatory authority can be regarded as an expression of State sovereignty that prevents any reference to the lex causae: BARATTA R., ‘Article 12’, in: BARIATTI (ed.), Riforma del sistema italiano di diritto internazionale privato, in: Le nuove leggi civili commentate, XIX (1996), at p. 1008. On the theoretical foundations of exercising adjudicatory jurisdiction, see recently VON MEHREN A., ‘Theory and Practice of Adjudicatory Authority in Private International Law: A Comparative Study of the Doctrine, Policies and Practice of Common- and Civil Law Systems’, in: Recueil des cours 2002, Vol. 295, at p. 29 et seq.

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facilitating judicial function. In short, this approach generally does not make it necessary to characterize a claim according to the lex causae of a non-Community State, unless the common jurisdictional rule so requires.9

II.

Some Peculiarities of Characterization in the EC Conflict of Laws

The problem of characterization has numerous facets in general conflicts theory. It is often regarded as a problem of interpretation.10 The process of subsuming claims (or defences), as formulated by the parties, under one of several domestic conflict rules requires construing the category of the corresponding legal institution. At the same time, the factual situation must be carefully analysed.11 Moreover, during the process of characterization, attention should also be paid to the rationale and objective of each rule. To put it differently, a decisive element – perhaps less focused on by specialists – is to take account of the function of each conflict rule to be characterized. For instance, one may reasonably argue that a serious problem of conflicting characterizations does not arise when applying rules based on either the ‘jurisdictional’12 or the ‘unilateral’13 approach in the conflict of laws. Such rules 9 This does not mean that a foreign law should never be applied in procedural matters, even in conflicts systems based on the general principle that all aspects of the litis ordinatio are governed by the lex processualis fori (amplius BARATTA R. (note 8), at p. 1002 et seq.). 10 WENGLER W. (note 5), at p. 662; BARILE G., ‘Qualificazione (diritto internazionale privato)’, in: Enciclopedia del diritto, Vol. XXXVIII, Milan 1987, at p. 1. 11 Scholars have pointed out that the application of any rule entails the process of subsuming the concrete facts under the abstract fact-situation of the particular rule: RIEZLER E., Internationales Zivilprozessrecht und prozessuales Fremdenrecht, Berlin/Tübingen 1949, p. 101 et seq.; BETTI E., Interpretazione della legge e degli atti giuridici, Milan 1971, p. 101 et seq.; NIEDERER W., Die Frage der Qualifikation als Grundproblem des internationalen Privatrechts, Nendeln (Liechtenstein) 1977, at p. 39. 12 Such rule, which is called an autonomous method of solving conflicts between national legal systems by PICONE P., ‘Il metodo dell’applicazione generalizzata della lex fori’, in: La riforma italiana del diritto internazionale privato, Padua, 1998, p. 371 et seq., treats the conflict of laws as questions of jurisdiction: if a domestic court is competent, the lex fori applies as a matter of course. If the court is not competent, the case does not come up for trial at all. In the latter situation, legal protection is provided in the forum only by recognizing a foreign judgment. As is known, this ‘jurisdictional approach’ has its origin in the English history of PIL: see SACK A. N., ‘Conflict of Laws in the History of English Law’, in: Law: A Century of Progress 1835-1895, III, New York 1937, p. 342 et seq.; SCHMITTHOFF C. M., The English Conflict of Laws, 3rd ed. London 1954, p. 23 et seq.; HOLDSWORTH W. S., A History of English Law (ed. by GOODHART and HANBURY), Vol. XV, London 1965, p. 334 et

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seem to prevent the judge from taking account of any possible conflicts of characterization between the lex fori and the applicable foreign law. In particular, there is no need to take account of a foreign law to define characterization issues of rules whose function is to delimit the territorial scope of application of the lex fori only. Further, problems of characterization eventually arising from a foreign conflicts system whose substantive private law considers itself applicable to a certain dispute (especially according to the principle of ‘self-connection’, i.e., auto-collegamento advocated by Quadri) would naturally be resolved according to the lex causae. As regards a future EC conflicts system, the process of characterization seems to be even more diverse. First, under the ECJ’s well-known ERTA doctrine,14 the EC has competence to conclude treaties in the field of the conflict of laws. Therefore, a conflict rule needing characterization might be contained in an international convention to which the EC becomes a party. As a rule, the national legal terms of one of the participating states (or EC law, if any) are not used in a convention. Given the goal of uniformity pursued by such convention, one may reasonably argue that a customary rule of public international law on the interpretation of treaties prevents judges from resolving a problem of characterization

seq., and Vol. I, London 1956, p. 526 et seq. This approach is still used in the English system of conflict of laws: DICEY & MORRIS, The Conflict of Laws, 13th ed. (ed. by COLLINS L.), London 2000, at. p. 4. In modern PIL schools of thought, the theories which link jurisdiction and choice of law in the sense that a legal system, in principle, always applies its own national law, were advocated by von Wächter, Currie and Ehrenzweig (see LIPSTEIN K., ‘General Principles of Private International Law’, in: Recueil des cours 1972, Vol. 135-I, at p. 131 et seq.; KEGEL G., ‘Fundamental Approaches’, in: International Encyclopedia of Comparative Law, Vol. III, Private International Law, Chap. III, Dordrecht/London/ Lancaster 1986, at p. 29 et seq.). 13 QUADRI R., Lezioni di diritto internazionale privato, 5th ed., Napoli 1969, at p. 335, denied that a real problem of characterization could arise under the ‘unilateral approach’ to the conflict of laws advocated by him. 14 According to this doctrine, the EC is implicitly competent to enter into international treaties where it has a parallel internal normative competence: see, e.g., BORRÁS A., ‘Effectos respecto a terceros del ejercicio de competencia por la Comunidad europea en el àmbito del derecho internacional privado’, in: Anales de la Facultad de Derecho de l’Universidad de Barcelona 2001, p. 99 et seq.; ID., ‘Diritto internazionale privato comunitario e rapporti con Stati terzi’, in: PICONE P. (ed.), Diritto internazionale privato e diritto comunitario (note 2), p. 449 et seq.; POCAR F., ‘The Drafting of a World-Wide Convention on Jurisdiction and the Enforcement of Judgments: Which Format for the Negotiations in the Hague?’, in: Law and Justice in a Multistate World. Essays in Honor of Arthur von Mehren, New York 2002, p. 194 et seq.; BARIATTI S., Casi e materiali di dritto internazionale privato comunitario, Milan 2003, p. 3 et seq.

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according to their respective lex fori15 (or EC law). As a result, an autonomous/ international solution should be preferred, unless otherwise provided by the convention itself.16 Secondly, it may be submitted that EC conflict rules will probably play a fundamental role in co-ordinating the territorial sphere of application of the national legal systems of the Member States. From this point of view, the process of characterization entails, on the one hand, the problem of interpreting Community provisions, with their own peculiarities often explained in the ECJ case law whenever it deals with general issues of interpreting Community law; on the other hand, it is necessary to understand the real nature of the rule, its function of resolving ‘intra-Community’ conflicts, and also the method of co-ordinating the national legal systems, on which the conflict rule is based. In such situations, it may be advocated that the process of characterization will not rely at all on the principle of in claris non fit interpretatio mentioned in the CILFIT case with regard to the interpretation of EC law.17 On the contrary, it would be better for national judges to stay the proceedings and refer any questions of characterization to the ECJ for a preliminary ruling under Article 68 of the EC Treaty. Finally, there are additional elements deserving attention when considering an appropriate solution for questions of characterization. The EC conflict rule may have a ‘universal’ character and designate the law of a non-Member State applicable to the dispute;18 renvoi may or may not be admitted.19 15 See GIARDINA A., ‘Le convenzioni internazionali di diritto uniforme nell’ordinamento interno’, in: Riv. dir. int. 1971, p. 701 et seq.; BARIATTI S., L’interpretazione delle convenzioni internazionali di diritto uniforme, Padua 1986, p. 69 et seq., at p. 119 et seq. 16 Cf. LIPSTEIN K., ‘Characterization’, in: International Encyclopedia of Comparative Law, Vol. III, Private International Law, Ch. 5, Dordrecht/Boston/Lancaster 1999, at p. 27 et seq. 17 The ECJ interprets the Latin maxim in claris non fit interpretatio as a limitation to referring a question of interpretation of EC law to the same Court under ex Article 234 of the EC Treaty: see Srl Cilfit and Lanificio di Gavardo Spa v. Ministry of Health Case 283/91 ECR [1982], p. 3415 et seq. In this ruling the ECJ approved the so-called acte clair doctrine. 18 As is known, Article 65 of the EC Treaty does not clearly state whether it confers power on the European institutions to adopt erga omnes conflict of laws rules. Obviously a negative position would mean that the EC has competence to adopt interlocal rules only. A more systematic approach might overcome those doubts. First, it does not seem necessary to interpret Article 65 as a provision conferring competence on the EC to resolve intraCommunity conflicts of laws only (cf. BARATTA R., ‘Article 65’, in: TIZZANO A. (ed.), Trattati dell’Unione europea e della Comunità europea, Milan 2004, at p. 452 et seq.). Secondly, even if one supports a restrictive interpretation of Article 65, it seems logical to interpret Article 308 of the EC Treaty as granting the EC the necessary power to adopt uniform conflict rules applicable in relations with non-Member States. Thirdly, it would be unreasonable to deny Community competence to adopt conflict rules having a universal character when the EC can intervene in this field by entering into an international convention. It can be argued that an external competence may imply an internal one. Finally, it is

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III. Preclusion of the National Legal Systems of the Member States As is well known, it is generally stated that the process of characterization in the traditional choice-of-law method adopted by a national conflicts system relies on the lex fori,20 with certain limited exceptions (for example, when the characterization issue concerns a conflict rule based on the parties’ choice of law)21 or corrections.22 This theory rests principally on the consistency of national legal concepts (eius est interpretari, cuius est condere), as well as on ‘vicious circle’ arguments,23 whereas the positivist’s ideology and the assertion of a State’s sovereignty that worth mentioning that Article 293 of the EC Treaty provides that the EC may adopt PIL conventions between Member States that are applicable in both intra-Community and extraCommunity situations. The new Article III-269 of the Treaty establishing a Constitution for Europe still requires a conflict measure to be adopted ‘notamment lorsque cela est nécessaire au bon fonctionnement du marché intérieur’, thus implying that the future EC conflict of laws system may have erga omnes rules (on previous drafts of the ‘Constitution for Europe’ see JAYME E./KOHLER Ch., ‘Europäisches Kollisionsrecht 2003: Der Verfassungskonvent und das internationale Privat- und Verfahrensrecht’, in: IPrax 2003, at p. 486). See also BONOMI A., ‘Conversion of the Rome Convention on Contracts into an EC Instrument: Some Remarks on the Green Paper of the EC Commission’, in this Yearbook 2003, Vol. V, at p. 59 et seq. This author also favours the erga omnes solution, though for different reasons. 19 See the text infra, section IV. 20 Sometimes it is also suggested, especially by the Italian doctrine, that the problem of characterization may be approached in two ways, each of which leads to the same result: on the one hand, the judge can interpret a given legal category so as to determine its scope; on the other hand, he can ascertain how the facts of the case should be characterized and subsumed under a given legal category. The lex fori doctrine is favoured by many specialists: see, inter alia, SPERDUTI G., Saggi di teoria generale del diritto internazionale privato, Milan 1967, p. 7 et seq.; VITTA E., Diritto internazionale privato, I, Turin 1972, at p. 302 et seq.; MORELLI G., Elementi di diritto internazionale privato italiano, 12th ed. Naples 1986, at p. 34-36; MAYER P. (note 4), at pp. 116-117, CHESHIRE & NORTH, Private International Law (ed. by NORTH P.M./FAWCETT J.J.), 11th ed. London 1987, p. 45 et seq.; CASTEL J.-G., Canadian Conflict of Laws, 2nd ed., Toronto 1986, at p. 61. In France the Cour de Cassation follows this theory since the leading Caraslanis case (1955) (in Clunet 1955, at p. 682); so do English courts: see CHESHIRE and NORTH (this note), at p. 46. 21 Cf. CHESHIRE and NORTH (note 20), at p. 47; KROPHOLLER J., Internationales Privatrecht, 3rd ed., Tübingen 1997, at p. 106 et seq. 22 A problem clearly arises when so-called unknown foreign institutions are involved. In such case, it is necessary to begin by characterizing the legal features of the institution according to the foreign law: see CONTALDI G., Il trust nel diritto internazionale privato italiano, Milan 2001, at p. 45 et seq. For a different approach, cf. TONOLO S., Il rinvio di qualificazione nei conflitti di leggi, Milan 2003, at p. 147 et seq. 23 Cf. BATIFFOL H./LAGARDE P. (note 4), at p. 341 et seq.

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originally prevailed24 have progressively been losing appeal. The lex fori approach may still be regarded as the implied starting point of some recent codifications of national conflicts systems.25 Although different solutions may be and have been logically advocated,26 the overall view is that the national conflicts systems do not go so far as to dispense with the traditional lex fori doctrine.27 For example, Article 31(2) of the Italian PIL Act (1995), according to which the judge shall apply his own national law if the legal institutions of separation or divorce are unknown in the foreign applicable law,28 implicitly favours the lex fori doctrine. Nonetheless, the process of characterization raised by an EC conflict rule could not rely on the lex fori of any Member State. There is no need to use a lot of words to explain this point, even if this theory is correctly intended not to imply a strict equivalence between the legal category of PIL and the respective legal con24 Since 1897, the problem of characterization was resolved from the perspective of a national conflict of laws system and was based on the presumption that a close connection existed between the conflict of laws rule and national law: BARTIN E., ‘La doctrine des qualifications et ses rapports avec le caractère national des règles du conflit de lois’, in: Recueil des cours 1930, I, at p. 604, 610-611, 618-619; see also BATIFFOL H., Aspects philosophiques du droit international privé, Paris 1956, at p. 38. As a result, Bartin held that the process of characterization involved the application of national rules and had to be resolved according to the lex fori. Moreover, he presumed that defining the scope of the lex fori was a matter of sovereignty of the particular State: BARTIN E. (supra), at p. 565 et seq., especially at pp. 597-598, for some exceptions justified by the general principle that State sovereignty was not at stake when resolving the respective issues. 25 Some Italian scholars advocate this theory after the reform of the national conflicts system (e.g., BALLARINO T., Diritto internazionale privato, 2nd ed. with the collaboration of BONOMI A., Padua 1996, at p. 225). Other scholars partly support different approaches (MOSCONI F./CAMPIGLIO C., Diritto internazionale privato e processuale. Parte generale e contratti, Turin 2001, at pp. 156-157), especially as regards the characterization of international conventions applied ‘in all cases’, thus making them applicable even in situations otherwise excluded from their scope (MENGOZZI P., Il diritto internazionale privato italiano, Naples 2004, at p. 69 et seq.; contra, POCAR F., Il nuovo diritto internazionale privato italiano, Milan 2003, at pp. 13-14). 26 Cf. BETTI E., Problematica del diritto internazionale privato, Milan 1956, at. p. 256 et seq.; RIGAUX F., Droit international privé, Bruxelles 1978, at p. 146 et seq., LIPSTEIN K., Characterization (note 16), at 5. This author points out that, when subsuming claims formulated according to a foreign law under one of several national conflict rules, the court must interpret each rule in terms of the other. Lipstein’s proposal apparently rejects both the traditional lex fori doctrine and the lex causae approach: see especially LIPSTEIN K., General Principles (note 12), at p. 200. Cf. KNOEPFLER F./SCHWEIZER P., Précis de droit international privé suisse, Berne 1990, at p. 102. 27 Characterization according to the lex fori is favoured by some national PIL codifications: for references see LIPSTEIN K., Characterization (note 16), at pp. 7 and 16-19. 28 Cf. amplius BARATTA R., Scioglimento e invalidità del matrimonio nel diritto internazionale privato, Milan 2004, p. 18 et seq.

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cept of the national law.29 In the first place, applying the lex fori of a Member State to resolve a problem of characterization arising as a result of a conflict rule of an international convention to which the EC is a party would be wrong because it is inconsistent with a customary rule of international law on the interpretation of treaties.30 In addition, as to an EC conflict rule aimed at resolving intra-Community conflicts, a lex fori approach would not be compatible with the prevailing Community obligation to interpret and apply EC law with a high degree of uniformity, unless provided otherwise by EC law itself.31 If the technical legal terms of a rule of EC law were defined according to the respective national concepts of the Member States, there would be at least potentially as many meanings as there are Members States of the EC. Such consequence would be absurd. As a result, it may be submitted that a general principle of EC law forbids the Member States to rely on their national legal systems for the purpose of characterization. This conclusion is apparently supported by the Reed case (1986). This ruling, which does not involve PIL, deals with the free movement of persons, in particular the right of an unmarried companion to obtain a residence permit under the Regulation No 1612/68. In its ruling the ECJ made it clear that the concepts of ‘spouse’ and ‘marital relations’32 are not to be defined according to the lex fori of a Member State, when not provided otherwise by the Regulation.33 In Reed, the ECJ laid down the methodological principle according to which Member States are not to rely on national legal concepts and values when applying Community rules. This principle can be extended to the process of characterization in the conflict of laws. 29

Cf., e. g., NIEDERER W. (note 11), at p. 67; CHESHIRE and NORTH (note 20), at pp. 45-46; and JAYME E., ‘Identité culturelle et integration: le droit international privé postmoderne. Cours général de droit international privé’, in: Recueil des cours 1995, Vol. 251, at pp. 107-108 ; AUDIT B., Droit international privé, 2nd ed., Paris 1997, at p. 174 et seq. 30 Cf. LAGARDE P., ‘Observations sur l’articulation des questions de statut personnel et des questions alimentaires dans l’applications des conventions de droit international privé’, in: Mélanges Alfred von Overbeck, Fribourg 1990, at p. 511 et seq.; MOSCONI F., Sulla qualificazione delle norme di diritto internazionale privato di origine convenzionale’, in: Studi in memoria di Gino Gorla, Vol. II, Milan 1994, p. 1459 et seq. 31 In Ekro BV Vee- en Vleeshandel v. Produktschap voor Vee en Vlees [1984], Case 327/82 ECR, p. 107 et seq., the ECJ held that it was possible to interpret an EC provision according to the law of a Member State. However, this decision was essentially based on the reasoning that the Regulation incorporated an implied reference to certain customs differing in the Member States (para. 14). Consequently, this ruling does not express the general opinion of the Court regarding the interpretation of EC provisions. 32 Case C-59/85 ECR [1986] p. 1283 et seq. 33 See para. 15. It did so in respect of ‘social developments’ in order to determine whether non-marital companions should be treated the same as spouses. It held that ‘any interpretation of a legal term on the basis of social developments must take into account the situation in the whole Community, not merely in one Member State’, since a Community rule ‘has effects in all of the Member States’ (para. 13).

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IV. Possible Solutions EC conflict rules will probably have a specific nature and purpose. Basically, they will aim at ensuring the free movement of persons, including their legal status and legal relationships, between Member States. Article 65 of the EC Treaty clearly grants competence to the EC for harmonization in the field of private international law (and in matters relating to the jurisdiction and mutual recognition of judgments) ‘if deemed necessary for the proper functioning of the internal market’.34 An integrated area where social and economic factors enjoy freedom of movement requires, inter alia, a common discipline guaranteeing the co-ordination of all national legal systems – in short, a shared conflict of laws system. In any case, intra-Community conflicts could not be easily interpreted as false conflicts; on the contrary, they are more real than it may appear prima facie.35 It is reasonable to presume that the goal of ensuring the continuity of private legal relationships entered into in one Member State throughout the entire territory of the EC tends to play a major role in the process of characterization. Therefore, the categories and institutions of private law envisaged by EC conflict rules cannot be defined by the meaning attached to them by the national law of any Member State. Instead, it will be necessary to identify common legal concepts and values expressed in uniform general principles of law shared by the Member States.36 It is not by chance that in some decisions the ECJ has laid down autonomous notions of ‘guarantee contract’37 and of ‘marriage’,38 which may be considered effective also

34

Cf. DRAPPTAZ T., Die Überführung des internationalen Zivilverfahrensrechts in eine Gemeinschaftkompetenz nach Art. 65 EGV, Tübingen 2002, passim; BOELEWOELKI K./VAN OOIK R.H., ‘The Communitarization of Private International Law’, in this Yearbook 2002, Vol. IV, at p. 11 et seq. 35 The fact that the internal market exists does not imply uniformity of the national legal systems of the Member States, although differences in conflicts of laws may turn out to be less intense (LAGARDE P., ‘Développements futurs du droit international privé dans une Europe en voie d’unification: quelques conjectures’, in: RabelsZ, 2004, p. 225 et seq., at p. 226). Even in such situation there is a need for rules aimed at co-ordinating the legal concepts and values of the national legal systems (JESSURUN D’OLIVEIRA, ‘The EU and a Metamorphosis of Private International Law’, in: FAWCETT J. (ed.), Reform and Development of Private International Law. Essays in Honour of Sir Peter North, Oxford 2002, p. 111 et seq., at p. 123). 36 The fact that, according to Article 69 of the EC Treaty, the common conflict rules are not applicable in all Member States is not a sufficient reason to object to this approach. 37 Cf. Case C-266/01 Préservatrice foncière TIARD SA v. Staat der Nederland [2003] p. I-4867 et seq. In this ruling the ECJ explained: ‘According to the general principles which stem from the legal systems of the contracting States, a guarantee contract represents a triangular process, by which the guarantor gives an undertaking to the creditor that he will fulfil the obligations assumed by the principal debtor if the debtor fails to fulfil

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in the process of characterization. A survey of this case law reveals the praetorian role of ECJ judges who often create a uniform model of a given legal institution for all Member States, although the comparative inspiration sometimes appears to stop at the surface.39 The same is true in regard to Community acts, although they do not expressly refer to the problem of characterization. For example, Article 2 Points 7 to 11 of the Regulation No 2201/2003 concerning matrimonial matters and parental responsibility contains common uniform concepts such as ‘parental responsibility’, ‘holder of parental responsibility’, ‘rights of child custody’, ‘rights of access’, ‘wrongful removal or retention’ of a child.40 Consequently, as regards intra-Community conflicts, it can be said that an implied general principle of EC law obliges judges to use an ‘autonomous’ approach to characterization based on normative elements inferred either from EC law or from general principles common to the national legal systems of the Member States. This Communitarian approach shares some similarities with Rabel’s41 them himself’ (para. 27). Thereafter, the Court stated that the obligation of the guarantor is autonomous and accessory by nature (paras. 28 and 29). 38 Cf. Case C-122/99 P and C-125/99 P D. and Kingdom of Sweden v. Council of the European Union [2001] p. I-4319 et seq. In this ruling concerning the refusal to grant a household allowance to an official under the Staff Regulation, the ECJ refused to equate a registered partnership between partners of the same sex with the legal institution of marriage. The Court held that ‘it is not in question that, according to the definition generally accepted by the Member States, the term marriage means a union between two persons of the opposite sex’ (para. 34). It admitted that since 1989 ‘an increasing number of Member States have introduced, alongside marriage, statutory arrangements granting legal recognition to various forms of union between partners of the same sex or of the opposite sex and conferring on such unions certain effects which, both between the partners and as regard third parties, are the same as or comparable to those of marriage’ (para, 35). According to the Court, ‘it is clear, however, that apart from their great diversity, such arrangements for registering relationships between couples not previously recognised in law are regarded in the Member States concerned as being distinct from marriage’ (para. 36). 39 Another example of the autonomous construction of a legal concept may be found in the case law concerning non-contractual liability of the EC for damages caused by its institutions. The general requirements for a successful claim were summarized by the Court of First Instance in New Europe Consulting v. Commission, case T-231/97 [1999] ECR p. II2403 et seq., where it explained that ‘the conduct of the Community institutions in question must be unlawful; there must be real and certain damage; and a direct causal link must exist between the conduct of the institution concerned and the alleged damage (…)’. This method of interpreting EC law has been criticized by some authors: see AUDIT M., ‘L’interpretation autonome du droit international privé communautaire’, in: Clunet, 2004, at p. 797 and pp. 802-803, with further bibliographical references. 40 Council Regulation (EC) No 2201/2003 of 27 November 2003 concerning jurisdiction and recognition and enforcements of judgments in matrimonial matters and matters of parental responsibility, repealing Regulation (EC) No 1347/2000, Official Journal of the European Union L 338 of 23 December 2003, p. 1 et seq. 41 Supra, note 3.

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and Beckett’s42 well-known ‘third school doctrine’ of international or comparative characterization and appears to satisfy the consistency and internal rationality required by EC law. Of course, this method may result in some non-predictability as to the content of the legal institutions designated by EC conflict rules. However, this problem does not come as a surprise when dealing with characterization in PIL matters. In addition, other factors need to be taken into account in order to find an adequate solution for characterization. Going back to Bartin’s view, for instance, there is widespread doctrinal agreement that a conflict of characterization can be avoided in matters relating to interests in movable and immovable property by accepting the characterization provided by the lex situs, whenever a conflict of laws system has two different rules based on such a distinction.43 It is often suggested that this approach amounts to an autonomous conflict of laws method (renvoi de qualification, renvoi à la qualification, Qualifikationsverweisung). Although it may result in some inconvenience,44 favouring the lex causae solution in matters regarding the rights to movable and immovable property may be retained in the field of succession. On a more general level, it seems conceivable that, as regards ‘resultselecting rules’ (where the content of the laws designated plays a fundamental role in determining the applicable law in a particular case), the question of characterization should be left open so as to achieve the best substantive result.45 In such cases, it appears to be in line with the rationale of such rules to widen the scope of the particular legal category in the process of characterization, having regard for the objective of the rule. Again, a conflict rule may designate the so-called ordre juridique étranger compétent (according to the terminology used by the author 42 BECKETT W.E., ‘The Question of Classification (“Qualifications”) in Private International Law’, in: British Yearbook of International Law 1934, at p. 58 et seq. 43 Cf. JAYME E., ‘Zur Qualifikationsverweisung im internationalen Privatrecht’, in: Zeitschrift für Rechtsvergleichung 1976, at p. 93 et seq. According to TONOLO S. (note 22), at p. 30 et seq., this solution does not amount to a proper exception to the lex fori doctrine. 44 This occurs when the lex situs ignores such a distinction, as is the case in German law. According to JAYME E. (note 29), at p. 111 et seq., a comparative approach plays a decisive role in resolving issues caused by renvoi par qualification divergente. 45 In this regard, it is worth mentioning Antonius van den Boogaard v. Paula Laumen, case C-220/95, [1997] ECR p. 1147 et seq., although it does not directly involve the problem of characterization in the sense of PIL. In this preliminary ruling concerning the definition of matters relating to maintenance under the Brussels Convention, the Court stated that a judicial decision designed to enable one spouse to provide maintenance for himself or herself must be regarded as relating to maintenance and, therefore, as falling within the scope of the Brussels Convention (paras 22-27). In defining the notion of ‘maintenance’, the Court seems to have attached relevant weight to the purpose of the institution, i.e., protecting the spouse who needs maintenance, thus declaring that it makes no difference whether maintenance is paid in the form of a lump sum (see para. 23).

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who proposed this method of resolving conflicts between legal systems)46 as a means of creating in the forum a particular legal situation which will be recognized in the designated foreign legal system. In light of the features of this special conflicts method, one may argue, at least in general, that characterization, particularly involving an unknown foreign institution, should be based on the law of the foreign legal system designated by the forum. Such approach should at least avoid the possibility of distorting the legal concepts used by the foreign legal system designated by the forum; such approach would facilitate the objective of co-ordination. Another variable element bound to influence the process of characterization is renvoi. Once a conflict rule admits renvoi, the judge must take account of the foreign conflict rule as it is conceived and interpreted in its own legal system, i.e., its characterization, which cannot be logically arrived at according to the lex fori.47

V.

Conclusion

To sum up, it can be said that the problem of characterization is to a certain extent interpretative by nature. However, it is worth noting that, to arrive at an appropriate solution, the judge must take account of both the function and nature of the conflict rule whose category or institution is to be characterized. In particular, it will be necessary to distinguish between intra-Community conflict rules, rules with universal character and rules of international origin contained in a treaty to which the EC becomes a party. Moreover, a conflict rule may be based on a peculiar methodological approach which must be taken into account during its characterization. In the final analysis, in a future system of EC conflict rules, the problem of characterization will arise in such a variety of ways48 that a uniform solution is hardly conceivable. At this initial stage in the development of EC conflict of laws, a praetorian and open-ended solution of this classical conflicts problem appears 46 See, inter alia, PICONE P., Ordinamento competente e diritto internazionale privato, Padua 1986, at p. 59 et seq. ; ID., ‘La méthode de la référence à l’ordre juridique compétent en droit international privé’, in: Recueil des cours 1986, Vol. 197, p. 229 et seq. ; ID., ‘Les méthodes de coordination entre ordres juridiques en droit international privé. Cours général de droit international privé’, in: Recueil des cours 1999, Vol. 276, at p. 123 et seq. 47 This approach was proposed by ANCEL B./LEQUETTE Y., Les grands arrêts de la jurisprudence française de droit international privé, 4th ed., Paris 2001, at. p. 64 et seq. Regarding the acceptance of this line of reasoning in the Italian conflict of laws system, cf. BOSCHIERO N., Appunti sulla riforma del sistema italiano di diritto internazionale privato, Turin 1996, at p. 224 et seq. ; MOSCONI F./CAMPIGLIO C., ‘Diritto internazionale privato (riforma del)’, in: Digesto delle discipline privatistiche, sez. civ., Aggiornamento, Torino 2000, at p. 333 et seq.; TONOLO S. (note 22), at p. 197 et seq. 48 See the text supra at Section II.

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appropriate for the intrinsic complexity of the future EC conflicts system. Some general and principal guidelines may be suggested for the process of characterization, as I have attempted to explain above. To begin with, and as a matter of principle, the process of characterization cannot be based on the lex fori of any Member State.49 A better approach for intra-Community conflicts50 is to rely on common legal concepts and values expressed in uniform general legal principles shared by the Member States, taking into account the principal objective of the EC conflict of laws, i.e., the free movement of persons retaining their own legal and personal status, and other factors of the common market. As the ECJ case law shows, rarely will there be an occasion when it is impossible to reach an agreement on general principles based on case law. However, different solutions may be justified in certain situations: for instance, when a conflict rule of an international convention to which the EC is a party admits renvoi and when a particular method of co-ordinating legal orders is adopted instead of Savigny’s traditional model.51 The reasonable method is to examine a rule to ensure that its intended objective and policy is taken account of during characterization. Thus, all problems of characterization need not be resolved in the same way. Instead, the approach to characterization may remain flexible in order to accommodate the numerous situations arising in different cases,52 without excluding the possibility of a characterization ex lege causae in some situations.53 After all, the national PIL reforms in some countries, for instance, Switzerland and Italy, did not codify a rigid solution for the problem of characterization, probably because no single solution is appropriate for all situations. Of course, a flexible approach affects predictability to a certain extent at the initial stage when the conflicts system starts to operate.54 Although the problem of characterization can be alleviated by providing a large number of conflict rules 49

See the text supra at Section III. See the text supra at Section IV. 51 See the text supra at Section IV. 52 From a national perspective, a flexible solution has been favoured by some specialists: see SCOLES/HAY, Conflict of Laws 2nd ed., St. Paul (Minn.) 1992, at p. 53, DICEY & MORRIS (note 12), at 42 et seq. 53 The school of thought favouring characterization according to the appropriate foreign law, as proposed by several writers, bristles with some logical difficulties; for a critical analysis of this theory and further references to literature cf. BECKETT W.E. (note 42), at. p. 58; BERNASCONI C. (note 4), at p. 163 et seq.; LIPSTEIN K., ‘Characterization’ (note 16), at p. 6; TONOLO S. (note 22), at p. 38. First, a generalized application of this theory may determine whether conflicts of laws are positive or negative, as occurred in the well-known ruling of the Reichsgericht, 23 January 1882, in: Entscheidungen des Reichsgericht in Zivilsachen, 7, 21. Secondly, the argument favouring uniformity with the lex causae is correct only if its conflict rules are identical with those of the forum. 54 As is known, determining the legal nature of the issue at stake is the first step in the choice of law process. 50

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based on narrow, more specific categories or, as was suggested, on categories describing the facts,55 it seems inevitable that EC judges will play an instrumental role in defining each category of private law institutions envisaged by a future EC conflicts system.56 The task of specifying the scope of these legal categories belongs primarily to the ECJ, given the supremacy accorded the Court by Article 220 of the EC Treaty in matters relating to the interpretation and application of EC law.

55 ‘(…) décrivant plus directement les faits’: VON OVERBECK A.E., ‘Les questions générales du droit international privé à la lumière des codifications et projets récents’, in: Recueil des cours 1982-III, Vol. 176, at p. 119. 56 WENGLER W. (note 5), at p. 691, pointed out that in the process of characterization ‘le juge (…) doit jouer un rôle créateur et actif’.

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EC PRIVATE INTERNATIONAL LAW AND THE PUBLIC POLICY EXCEPTION Modern Features of a Traditional Concept Luigi FUMAGALLI

I. II.

IV. V. VI.

Introductory Remarks Elements Affecting the Examination of Special Features of the Public Policy Exception in EC Private International Law Instruments The Public Policy Exception as a Limitation of the Freedom of Movement of Legal Values Special Features of the Public Policy Exception in EC Private International Law Tendencies Conclusions

I.

Introductory Remarks

III.

The public policy (ordre public) exception is one of the most traditional features in the field of private international law. In fact, every national conflict-of-laws system, be it based on statutory provisions or on a case-law approach, places limitations on the application or enforcement of foreign rules or judgments that are contrary to the forum State’s most basic notions of morality and justice.1 In the same way, as Fitzmaurice put it,2 ‘treaties dealing with undertakings relating to topics of private international law are to be read as subject to the implied condition or exception of ordre public, i.e. that the parties are not obliged to implement the treaty in any case where to do so would be contrary to the juridical conceptions of ordre public as applied by their courts’.

Professor of Private International Law at the State University of Milano – Bicocca. Arts. 16 and 64(g) of Italian Law No 218 of 31 May 1995; Arts. 17 and 27(1) of the Swiss Federal Law on Private International Law; MAYER P./HEUZÉ V., Droit international privé, 7e ed., Paris 2001, p. 13 et seq.; CHESHIRE & NORTH, Private International Law, 13th ed., London 1999, p. 123 et seq. 2 FITZMAURICE G., ‘Law of Treaties. Fourth Report’, in: INTERNATIONAL LAW COMMISSION, Yearbook 1959, II, p. 47. 1

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Consistent with this approach, every EC instrument relating to judicial cooperation in civil matters adopted pursuant to Art. 65 of the EC Treaty has contained a public policy exception to the recognition and enforcement of foreign judgments or to the application of a foreign governing law,3 thereby confirming the position taken in the Brussels Convention of 1968 and the Rome Convention of 1980.4 The examination of the public policy mechanism, however, as provided by recent EC rules, seems to indicate that it can be affected by the new context in which it is applied. One may wonder, in fact, whether there was a single common inspiration behind those rules that would allow their nature (as EC law) to be decisive in identifying the common and special features of the (apparently traditional) public policy exception they constitute. Indeed, legal doctrine has taken account of the impact of EC law on the conflict-of-laws system in an attempt to determine whether it is necessary to redefine the role of private international law when it is incorporated into the EC system, thus ensuring that the object of the particular instrument is to implement the common market.5 In the same token, it appears to be possible to investigate 3

EC Regulation No 1346/2000 of 29 May 2000 on insolvency proceedings, Art. 26; EC Regulation No 1347/2000 of 29 May 2000 on jurisdiction and the recognition and enforcement of foreign judgments in matrimonial matters and in matters of parental responsibility for children of both spouses, Art. 15; EC Regulation No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of foreign judgments in civil and commercial matters, Art. 34(1); EC Regulation No 1206/2001 of 28 May 2001 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters, Art. 17(5); EC Regulation No 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of foreign judgments in matrimonial matters and in matters of parental responsibility repealing Regulation (EC) No 1347/2000 of 29 May 2000, Arts. 22 and 23. 4 Respectively, at Art. 27(1) and Art. 16, both of which provide for the ordre public exception. 5 RADICATI DI BROZOLO L., ‘L’influence sur les conflits de lois des principes de droit communautaire en matière de liberté de circulation’, in: Rev. crit. dr. int. pr. 1993, p. 401 et seq.; ROTH W.-H., ‘Der Einfluß des Europäischen Gemeinschaftsrechts auf das Internationale Privatrecht’, in: RabelsZ 1991, p. 623 et seq.; FALLON M., ‘Les conflits de lois et de juridictions dans un espace économique intégré. L’expérience de la Communauté européenne’, in: Recueil des Cours 1995-III, p. 9 et seq.; WILDERSPIN M./LEWIS X., ‘Les relations entre le droit communautaire et les règles de conflits de lois des États membres’, in: Rev. crit. dr. int. pr. 2002, p. 1 et seq., p. 289 et seq.; MUIR WATT H., ‘Choice of law in integrated and interconnected markets: a matter of political economy’, in: Columbia J. Eur. L. 2003, p. 383 et seq.; BARIATTI S., ‘Prime considerazioni sugli effetti dei principi generali e delle norme materiali del trattato CE sul diritto internazionale privato comunitario’, in: Riv. dir. int. priv. proc. 2003, p. 671 et seq. The effect of EC law on domestic conflict of laws systems has been considered also by the EC Court of Justice: 24.10.1978, 15/78, Koestler, in: ECR 1978, p. 1971; 7.7.1992, C-369/90, Micheletti, in: ECR 1992-I, p. 4239;

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whether such impact has an effect on the operation of the public policy exception as well.

II.

Elements Affecting the Examination of Special Features of the Public Policy Exception in EC Private International Law Instruments

Several elements come into play when attempting to identify a common inspiration behind the rules in the various EC instruments of private international law. The first element concerns the ‘fragmentary’ (and non-exhaustive) nature of the EC private international law system comprising the conflict-of-laws rules and provisions governing the recognition and enforcement of foreign judgments, as well as the different modalities used within the various ‘fragments’ to put mechanisms into place to play the traditional role of the public policy exception, i.e. limit the operation of the conflict-of-laws rules. While traditional terms and concepts seem to have been adopted in instruments directly regulating judicial cooperation in civil and commercial matters,6 new terminology has been used to define exceptions to the operation of the conflict-of-laws rules contained in instruments (mainly directives) of harmonization of national legislation intended to remove obstacles to the fundamental freedoms. An example can be found in the directives relating to life and non-life insurance matters which contain not only choice of law rules for contracts dealing with activities falling under the directives but also rules permitting protection of the ‘general good’ provided by rules in force in the Member State where the risk is located. This is the case even in situations where the contract has been concluded with an insurance company acting under the freedom of movement rules and governed by a law other than the law of the Member State where the risk is located.7 When considering the approach of the EC system to the public policy exception, attention should also be paid to several provisions in which the public policy exception is mentioned in fields where mechanisms other than those traditionally referred to in private international law are applied. In fact, different provi30.4.1996, C-214/94, Boukhalfa, in: ECR 1996-I, p. I-2253; 2.10.2003, C-148/02, Garcia Avello, not yet published. 6 Note 3 above. 7 Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life insurance, Art. 33; Council Directive 92/49/EEC of 18 June 1992 on the coordination of laws, regulations, and administrative provisions relating to direct assurance other than life assurance and amending Directives 73/239/EEC and 88/357/EEC (third non-life insurance Directive), Art. 28.

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sions of the Treaty establishing the European Community8 define the scope of the various freedoms of movement on which the internal market is based, but at the same time allow the Member States to limit their application on grounds of ‘public policy’ (Art. 30 with respect to the movement of goods; Art. 39 concerning the movement of workers; Art. 46 relating to the right of establishment, which is also applicable to services pursuant to Art. 55; Art. 58 concerning capital and payments). In addition, several decisions of the ECJ should be mentioned in which the Court has confirmed that ‘mandatory requirements’ of the Member States may limit the freedom of movement9 or declared that an entity rendering services or availing itself of the right of establishment must comply with host country rules adopted in the interest of the general good.10 The second element is common to all systems (domestic or supranational) of private international law; however, it appears to be more urgent in a ‘system’ where it is difficult to detect a consistent common inspiration behind the ‘fragmentary’ rules constituting it. This problem is linked to the impossibility to define a ‘general part’ of such system (public policy exception included) without considering the special features of the actual conflict-of-laws rules and ways in which they interact with foreign law.11 Nobody can deny that the scope of public policy differs when it operates with respect to a conflict-of-laws rule designating the governing law on the basis of localising factors or on the basis of the substantive con8

Similar provisions can be found also in pieces of ‘secondary legislation’: e.g. see Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce in the internal market (Directive on electronic commerce), Art. 3(4)(a)(i). 9 ECJ, 20.2.1979, 120/78, Cassis de Dijon, No 8, in: ECR 1979, p. 649, where the Court underlined that ‘obstacles to movement within the Community resulting from disparities between national laws (…) must be accepted in so far as those provisions may be recognized as being necessary in order to satisfy mandatory requirements relating in particular to the effectiveness of fiscal supervision, the protection of public health, the fairness of commercial transactions and the defence of the consumer.’ 10 ECJ, 25.7.1991, C-76/90, Säger, in: ECR 1991-I, p. 4221; 30.11.1995, C-55/94, Gebhard, in: ECR 1995-I, p. 4165. The same concepts have been confirmed by the Commission interpretative communications on freedom to provide services and the general good in the insurance sector (in: OJ 2000, C 43, p. 5), and on the freedom to provide services and the interest of the general good in the Second Banking Directive (in: OJ 1997, C 209, p. 6). 11 PICONE P., Ordinamento competente e diritto internazionale privato, Padua 1986, p. 165 et seq. The same definition of public policy as an ‘exception’ implies that it is necessary to highlight its functional characteristics to identify the features of the system in which it operates and which it actually prevents from functioning. For instance, as underlined by the same Author (PICONE P., La riforma italiana del diritto internazionale privato, Padua 1998, p. 364, note 187), the role of public policy is reduced with respect to (so-called ‘alternative’) rules in which the substantive contents of a foreign law is relevant in its selection and is thus examined before the law is actually designated as applicable.

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tents of conflicting foreign laws, or, again, provides for general application of the lex fori. Moreover, it is obvious that the same limitation takes on a different role with respect to the recognition of a foreign judgment or the application of a foreign law;12 or in an international system open to the recognition and application of judgments and laws of third (non-contracting) States as opposed to a ‘closed’ system where the ‘movement’ of judgments is limited between the contracting States. This having been said, the EC private international law rules appear to follow several methods when resolving conflicts of laws;13 in addition, some deal with the recognition and enforcement of foreign judgments, others designate the governing law, which may even be the law of a non-Member State. The third element arises due to the difficulty of ‘isolating’ the effects of EC law on the operation of the public policy exception derived exclusively from the ‘communitarization’ of conflicts rules and distinguishing such effects from those of EC law on the domestic conflict-of-laws system. As a matter of fact, EC law affects the Member States’ conflict-of-laws systems (and therefore the public policy exception contained therein) irrespective of their ‘communitarization’: national private international law rules are subject to the provisions of EC law when they fall within its scope of application, and therefore the operation of the public policy exception is affected in such cases. The fourth element concerns the necessity to emphasize that there are two approaches to the relationship between EC law and public policy. The first approach is to examine how EC law affects the ways in which public policy operates; as a second approach, one could investigate how EC law directly affects the legal principles and values that public policy aims to protect by limiting the operation of private international law rules. EC law, indeed, can create new values or exclude the relevance of others that are incompatible with EC basic principles. The above-mentioned difficulties, however, do not prevent us from identifying some special features of public policy in the EC context and detecting some recent tendencies.

12 BOSCHIERO N., Appunti sulla riforma del sistema italiano di diritto internazionale privato, Turin 1996, pp. 235-235. 13 PICONE P., ‘Diritto internazionale privato comunitario e pluralità dei metodi di coordinamento tra ordinamenti’, in: PICONE P. (ed.), Diritto internazionale privato e diritto comunitario, Padua 2004, p. 485 et seq.

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III. The Public Policy Exception as a Limitation of the Freedom of Movement of Legal Values In order to define, by way of conceptual reconstruction, the legal framework in which the public policy exception is affected by the nature of the conflict-of-laws rules limited by such exception, it is necessary to begin with a systematic consideration: i.e., the link between the private international law in EC instruments and the fundamental purposes of the Treaty, primarily the freedom of movement guaranteed therein. Harmonisation of the conflict-of-laws rules (and the rules of international civil procedure) promotes equal treatment in the European judicial area and eventually the freedom of movement (which is guaranteed only if rights are consistently respected). From this point of view, the public policy exception represents an obstacle to the attainment of that purpose because it limits the free movement of judgments or allows the application of a law other that that designated by the harmonized private international law rules. The link between the purposes of the Treaty and the rules governing the recognition and enforcement of judgments was stressed long ago by the ECJ with respect to the 1968 Brussels Convention.14 As the Court held in Coursier, ‘the Brussels Convention is intended to facilitate the free movement of judgments by establishing a simple and rapid procedure in the Contracting State where enforcement of a foreign decision is applied for’.15 As a result, the ECJ underlined that the operation of the public policy exception constitutes an obstacle to the attainment of one of the fundamental objectives of the Convention, which is the free movement of decisions within the common market.16

14

ECJ 10.2.1994, C-398/92, Mund & Fester, No 11-12, in: ECR 1994-I, p. 467: the purpose of ‘the fourth indent of Article 220 of the EEC Treaty (…) is (…) to facilitate the working of the common market through the adoption of rules of jurisdiction for disputes relating thereto and through the elimination, as far as possible, of difficulties concerning the recognition and enforcement of judgments in the territory of Contracting States. It is on the basis of that article and within the framework defined by it that the Member States concluded the Brussels Convention. Consequently, the provisions of that Convention relating to jurisdiction and to the simplification of formalities concerning the recognition and enforcement of judgments and also the national provisions to which the Convention refers are linked to the EEC Treaty’. 15 ECJ, 29.4.1999, C-267/97, Coursier, No 25, in: ECR-I, p. 2543. In the same sense, ECJ, 15.11 1983, 288/82, Duijnstee, in: ECR 1983, p. 3674. 16 ECJ, 28.3.2000, C-7/98, Krombach, No 21, in: ECR 2000-I, p. 1935; 11.5.2000, C-38/98, Renault c. Maxicar, in: ECR 2000-I, p. 2973; 4.2.1988, 145/86, Hoffman, in: ECR 1988, p. 645; 10.10.1996, C-78/95, Hendrikman, in: ECR 1996-I, p. 4943; 2.6.1996, C414/92, Solo Kleinmotoren, in: ECR p. I-2237 (with respect to Art. 27(3) of the Brussels Convention).

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The ECJ has drawn two conclusions from the principle so stated. First, the Court of Justice stressed the need for narrow interpretation and hence application of the public policy exception only in exceptional cases.17 Secondly, and more importantly, the Contracting States remain in principle free to determine their own public policy requirements; however, limitations of that policy are a matter requiring interpretation of the Convention. Consequently, while it is not up to the Court to define the contents of the public policy of a Contracting State, it can nonetheless be required – and has the power – to review the limits within which the courts of a Contracting State may have recourse to that concept for the purpose of refusing the recognition of a judgment emanating from a court in another Contracting State.18 This point of view confirms a common feature of European integration: the tendency to leave prerogatives to the Member States while subjecting their exercise to Community control, mainly by the Court of Justice. More specifically, this occurred in a different context with respect to the free movement of person, goods and services, and the possibility of limiting it by invoking the public policy exception.19 As regards the latter, the ECJ has stressed several times that recourse to the public policy exception is a limitation to a fundamental freedom and as such is to be construed narrowly and shall not be determined unilaterally by a Member State without any control on the part of the Community institutions.20 This seems to be typical of the operation of the public policy exception in the EC legal context and corresponds with its dual role. On one hand, it guarantees internal consistency of the domestic systems whose general principles it protects; on the other hand, when invoked, it hinders the continuity of the supranational solutions that harmonize and coordinate the domestic systems, favouring the protection of domestic values to the detriment of supranational coordination. In the EC system, derogation from its internal harmony (and frustration of the purposes the EC rules pursue) is possible only within the limits laid down by the same system and remains subject to the controls established therein. 17 ECJ, 4.2.1988, 145/86, Hoffmann, in: ECR 1988, p. 645. However, this point has to be reconsidered under certain circumstances: see § IV below. 18 ECJ, 28.3.2000, Krombach (note 16). 19 CHALTIEL F., ‘L’ordre public devant la Cour de justice des Communautés européennes. À propos de l’arrêt Olazabal du 26 novembre 2002’, in: Rev. marché comm. 2003, p. 121; HUBEAU F., ‘L’exception d’ordre public et la libre circulation des personnes en droit communautaire’, in: Cah. dr. eur. 1981, p. 207; KARYDIS G., ‘L’ordre public dans l’ordre juridique communautaire: un concept à contenu variable’, in: Rev. trim. dr. eur. 2002, p. 1; CONDINANZI M./LANG A./NASCIMBENE N., Cittadinanza dell’Unione e libera circolazione delle persone, Milan 2003, p. 97 et seq.; FORLATI PICCHIO L., ‘Territorio giudiziario comunitario e insindacabilità del ricorso all’ordine pubblico: radicalizzazioni di segno opposto?’, in: Jus 1990, p. 73. 20 ECJ, 4.12.1974, 41/4, Van Duyn, in: ECR 1974, p. 1337; 27.10.1977, 30/77, Bouchereau, in: ECR 1977, p. 1999; 28.10.1975, 36/75, Rutili, in: ECR 1975, p. 1219; 26.11.2022, C-100/01, Olazabal, in: ECR 2002-I, p. 10981.

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IV. Special Features of the Public Policy Exception in EC Private International Law The fact that only principles of EC law are relevant when defining the modalities and extent to which public policy may be invoked as an exception to the application of EC rules leads to a series of consequences, anticipated in part by the ECJ case law relating to the Brussels Convention. These consequences correspond to the requirements which must be fulfilled in order for provisions of national legislation to be lawfully applied in the interest of the general good, although such provisions limit the right of establishment or the freedom to provide services.21 The first is the requirement to comply with the principle of proportionality (Art. 5(3), EC Treaty) with respect to the object pursued. In order to be ‘lawful’ from the point of view of EC law, the application of rules that would require the recognition or enforcement of a foreign judgment or the application of a foreign law may be refused on the grounds of public policy on condition that such refusal is deemed appropriate for achieving the objective pursued and does not exceed the means strictly necessary for achieving such purpose.22 Secondly, a concrete and serious threat to the values protected by the domestic provisions must objectively exist in order to justify such intervention. It is therefore necessary to carefully examine the actual effects that would arise in the domestic system if the foreign law were to be applied or the foreign judgment recognized. Recourse to the public policy exception to prevent application of the foreign rule or judgment is admissible only if the interests protected would be seriously impaired by the operation of the private international law rules to a degree exceeding the normal sacrifice required by supranational integration. A third consequence is the impossibility to invoke the public policy exception in cases where the foreign law constitutes an appropriate implementation of the EC provisions by means of which complete harmonisation of national legislation was achieved. It must be presumed, in fact, that the interests of the Member States and the general principles of law in their domestic systems were already taken into account and coordinated in the process of adopting the Community rules. As a result, the (indirect) application of those Community rules (by direct application of the national legislation implementing them) cannot be frustrated by

21

30.11.1995, C-55/94, Gebhard (note 10); 15.12.1995, C-415/93, Bosman, in: ECR, 1995-I, p. 4921; 30.9.2003, C-167/01, Inspire Art, in print. 22 As a result, for instance, one may wonder whether the intervention of the public policy as a limitation to the application of the foreign law designated by the EC conflict of laws rule automatically and in every case leads to the application of the lex fori. This consequence could appear to be excessive (and not pass the proportionality test) if a solution within the foreign system could be found that is compatible with the public policy requirements of the forum State.

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according new mandatory character to domestic interests and general principles of law.23 Fourthly, it is prohibited to take recourse to the public policy exception on a discriminatory basis or if it would lead to discriminatory effects.24 The fact that an interest or principle can be protected by invoking the public policy does not exclude the necessity of its compliance with EC law.25 In other words, in a broader sense, the public policy exception can be invoked to protect fundamental interests and values in the domestic system in question, however, only if they are compatible with EC law. 26 At the same time, the public policy may be invoked to protect fundamental principles in the EC system belonging to the constitutional traditions common to the Member States and confirmed by international treaties. For example, human rights must be respected,27 regardless of whether they are recognized in the Member State where the foreign value is to be applied. This latter consequence reveals how the EC legal nature of the rules on public policy affects the principles underlying public policy. More specifically, examining national interests in the light (and within the limits) of Community interests seems to confer on public policy within EC private international law a specific new function, i.e., guaranteeing compliance with the principles and values in force in the EC system, thus ensuring that they will be respected even in domestic systems of the Member States which differ from them. From this point of view, the public policy exception plays a ‘positive’ role in the sense that it promotes 23

ECJ, 10.7.1984, 72/83, Campus Oil, in: ECR 1984, p. 2727; 3.10.1985, 28/84, Commissione v. Germany, in: ECR 1985, p. 3097; 20.9.1994, C-249/92, Commissione v. Italy, in: ECR 1994, p. 4311; 5.10.1994, C-323/93, Société civile agricole, in: ECR 1994, p. 5077. This principle has been mentioned in connection with Treaty provisions allowing a derogation from the freedoms of movement on grounds of public policy. 24 ECJ, 5.6.1997, C-105/94, Celestini, in: ECR 1997-I, p. 2971; 26.11.2002, C100/01, Olazabal (note 20). 25 ECJ, 23.11.1999, C-369/96 and C-376/96, Arblade, in: ECR 1999-I, p. 8453. 26 In this sense, Art. 10 of the Brussels Convention of 29 February 1968 on the mutual recognition of companies [never entered into force] stated that principles or rules contrary to the provisions of the EEC [as it then was] Treaty cannot be considered as principles of ordre public. More in general, as underlined by the ECJ, in Rutili (28.10.1975, 36/75, note 20) and Carpenter (11.7.2002, C-60/00, in: ECR 2002-I, p. 6279), a Member State can invoke reasons of general interest to justify a national measure suitable to hinder the provision of services only when such measure is compatible with the fundamental rights that the ECJ is obliged to protect. In this regard, the European Convention for the Protection of Human Rights and Fundamental Freedoms (Rome, 4.11.1950), as well as the decisions of the European Court of Human Rights, have been attributed particular significance. Indeed, as the ECJ stressed in Debaecker (11.6.1985, 49/84, in: ECR 1985, p. 1779), the simplification of the formalities required for the recognition and enforcement of judgments brought about by the Brussels Convention cannot imply a sacrifice of the right of defence and to fair legal process. 27 ECJ, 28.3.2000, C-7/98, Krombach (note 16).

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Community integration by protecting the fundamental principles of the EC system. Arising from the case-law of the ECJ, such principles are binding on the Member States by virtue of their Community nature: they form the core of a so-called ‘European public policy’. The extent to which their binding force is recognized reflects the degree of the Member State’s participation in European integration. As a result, the Community nature of the basic legal instruments of EC private international law confers a new task on the public policy exception laid down therein by broadening its function as an instrument for guaranteeing EC interests. It prevents the recognition and application of irreconcilable values not only when the public policy principle is fully operative in the forum State (as a principle of domestic public policy) but also when it belongs to EC law as a principle of Community public policy. Therefore, the effect of the public policy exception is twofold. On the one hand, it guarantees that its underlying principles will also be respected by State courts which otherwise would not have recognized them as such on the basis of domestic legislation. On the other hand, domestic legislation must comply with the principles of Community public policy as a condition for its application by foreign courts.

V.

Tendencies

In addition to identifying specific modalities in which the public policy exception operates within the framework of EC private international law rules, it is possible to detect a tendency that appears to be characteristic of EC private international law. Such tendency can be described as a growing departure from the classical function of public policy as a posteriori instrument to limit the application of foreign laws or judgments and its replacement by new mechanisms intended to promote and protect Community principles. The ongoing departure from the classical features of the public policy exception can be detected in Regulation No 44/2001 and in Regulation No 1346/2000 and is even more evident in Regulation No 805/2004, which creates a European enforcement order for uncontested claims. The adoption of Regulation 44/2001 implied (in addition to the amended wording of Art. 27(1) of the Brussels Convention in Art. 34(1)28 that an ex officio control of the compliance of a foreign (EC) judgment with the public policy of the 28 Art. 34(1) of Regulation 44/2001 provides that ‘[a] judgment shall not be recognised (...) if such recognition is manifestly contrary to public policy in the Member State in which recognition is sought’; Art. 27(1) of the Brussels Convention, on the other hand, stipulates that ‘[a] judgment shall not be recognised (…) if such recognition is contrary to the public policy in the State in which recognition is sought’.

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forum was no longer possible. This follows because recognition and enforcement can be denied on grounds of public policy only if the defendant files an opposition providing evidence that the foreign judgment is manifestly contrary to the public policy of the requested State. Regulation 1346/2000 confirms that the public policy exception may be invoked to limit the recognition of foreign insolvency proceedings and the enforcement of foreign insolvency decisions (Art. 26); however, there is no mention of public policy in the section containing choice of law provisions (Arts. 4-15). Going a step further, Regulation No 805/2004 completely excludes all control of compatibility with the public policy of the forum State of the enforcement order granted in another Member State. In this sense it provides that a judgment on an uncontested claim which has been certified as a European enforcement order in the Member State of origin shall be recognized and enforced in the other Member States without any special procedure being required in the Member State of enforcement (Art. 4). As a result, public policy no longer seems to play an inevitable function within the EC system. As regards relations between Member States, public policy is no longer a device that is taken for granted in the private international law system. The tendency to combine the public policy exception with new mechanisms to promote and protect Community principles is clearly evident in the text of the Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Non-Contractual Obligations (‘Rome II’), adopted by the Commission on 22 July 2003.29 In addition to the classical public policy exception rule in Art. 22,30 three other mechanisms are found in the provisions of the Proposal. Thus, Art. 23(1)31, albeit with rather obscure wording, shows a preference for the application of EC rules and principles over the law designated by the conflict-of-laws rules of the Regulation. Another new method of giving preference to principles of public policy is to impose such principles on the Member States by expressly excluding application of the foreign governing law in such cases. This is

29

Doc. COM (2003) 427 def. Art. 22 (Public policy of the forum): ‘The application of a rule of the law of any country specified by this Regulation may be refused only if such application is manifestly incompatible with the public policy (ordre public) of the forum’. The classical public policy exception appears to be necessary in a conflict-of-laws system leading to the application of laws of third States in the Member States. 31 Art. 23 (Relationship with other provisions of Community law): ‘1. This Regulation shall not prejudice the application of provisions contained in the Treaties establishing the European Communities or in acts of the institutions of the European Communities which: (…) – prevent application of a provision or provisions of the law of the forum or of the law designated by this Regulation’. 30

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done in Art. 24 in regard to non-compensatory damages.32 A third aspect of this tendency is to focus attention on basic public policy principles of EC law while introducing conflict-of-laws rules for the same subject matter. This occurs, for instance, with respect to freedom of the press, which is guaranteed by a specific safeguard clause, and in matters relating to the protection of the environment, product liability and unfair competition.33 The latter method constitutes a more general tendency used to implement the free movement of legal values within the entire Community. Instead of applying the already harmonized procedures of control in the State of destination, the rules in the State of origin are harmonized. By attempting to harmonize the rules in the State of origin where the substantive law or judgment is formed, the EC system concentrates all controls ensuring their compatibility with EC principles in that State, thus excluding the need for a double-check in the State of destination. A more complete example of this approach has been put into place in Regulation No 805/2004 which creates a European enforcement order for uncontested claims. The Regulation excludes all possible control by the State of recognition of a decision certified as a ‘European enforcement order’ in the State of origin. By requiring certification in the State where the order was rendered, the Regulation creates, as its central element, a mechanism that eliminates the need for an exequatur, thus enabling free movement in the EC judicial area. Such certification is issued on the basis of controls in the State of origin ensuring that certain requirements (specified in Art. 6 of the Regulation) have been fulfilled. This result has been made possible only by defining minimum uniform procedures, mainly in regard to the service of process, which must be honoured as a precondition for certification of the decision as a ‘European enforcement order’. Moreover, minimum standards have been established for the proceedings leading to the judgment to ensure that the debtor has been informed about the court action against him, about the modalities of his active participation in the proceedings in 32 Art. 24 (Non-compensatory damages): ‘The application of a provision of the law designated by this Regulation which has the effect of causing non-compensatory damages, such as exemplary or punitive damages, to be awarded shall be contrary to Community public policy.’ 33 Regarding product liability, the conflicts rule (Art. 4) is intended to meet the objectives of fairly spreading the risks inherent in a modern high-tech society, protecting consumers’ health, stimulating innovation, securing undistorted competition and facilitating trade, which correspond to the Community purposes underlying the EC legislation adopted in this matter. In matters of unfair competition, the conflicts rule (Art. 5) is meant to protect competitors, consumers and the general public and ensure that the market economy functions properly. In matters relating to violations of the environment, the Community purposes cited in Art. 174 of the Treaty, which provides that there must a high level of protection based on the precautionary principle and the principle that preventive action must be taken, the principle of priority for corrective action at source and the principle that the polluter pays, fully justified the use of the principle of discriminating in favour of the person sustaining the damage.

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order to contest the claim at issue and about the consequences of his non-participation. The defendant must be duly serviced, i.e., in due time and in such a way so as to enable him to arrange for his defence. In other words, the uniform rules contained in the Regulation serve as a guarantee that fundamental rights have been respected and implemented, in particular the principles recognized by the Charter of Fundamental Rights of the European Union, above all the right to a fair trial. The exclusion of every form of control in the State addressed, primarily the possibility of recourse to the public policy exception, has been made possible by the creation of a mechanism ensuring compliance with the principles of public policy (and control of that compliance) in the State of origin. As such, the recent legislation confirms and expands what the ECJ stressed in Krombach: ‘(…) recourse to the public-policy clause must be regarded as being possible in exceptional cases where the guarantees laid down in the legislation of the State of origin and in the Convention [the European convention on human rights] (…) have been insufficient to protect the defendant from a manifest breach of his right to defend himself before the court of origin, as recognised by the ECHR.’34

VI. Conclusions The identified characteristics and tendencies, however, are not sufficient in themselves to be deemed an indication that the few rules of private international law in the various EC instruments have been transformed into a true system of ‘EC private international law’ comparable to domestic private international law systems. Indeed, the same public policy exception (though laid down by EC rules) is called upon to play a role in a domestic context. It is invoked by a national court (subject to control by the ECJ) for the purpose of preventing foreign legal values incompatible with the fundamental principles of public policy from being applied in the domestic legal system. This, however, does not affect the innovative nature of the identified tendencies. At this point it is difficult to say whether the direction they have taken is final. As stressed above, the EC rules of private international law are fragmentary, incomplete and provisional and as such, this prevents us at present from reaching final conclusions on that point.

34

ECJ, 28.3.2000, C-7/98, Krombach, No 44 (note 16).

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NATIONAL REPORTS ________________

NON-MARITAL COHABITATION, REGISTERED PARTNERSHIP AND SAME-SEX MARRIAGE IN PRIVATE INTERNATIONAL LAW: THE SPANISH PERSPECTIVE Cristina GONZÁLEZ BEILFUSS

I.

II.

The Evolution of Substantive Law A. Comparative Survey B. Spain Private International Law A Current Legislation B. Proposals for Reform 1. Constitutive Elements of the Relationship: Basic Ideas 2. Legal Effects of the Relationship 3. Dissolution of the Relationship

I.

The Evolution of Substantive Law

A.

Comparative Survey

Heterosexual couples wishing to live together have always had the possibility of choosing between marriage and cohabitation. What is remarkable today is the number of couples who, for various reasons,1 choose not to marry. In Spain this constitutes only four percent of the population between the ages of 18 and 49; however, the numbers are growing.2 Moreover, cohabitation without marriage has

Professor of Law, University of Barcelone. HAUSMANN R., ‘Einführung’, in: HAUSMANN R./HOHLOCH G., Das Recht der nichtehelichen Lebenspartnerschaft, Berlin 1999, pp. 44-45. 2 MEIL LANDWELIN G., Las uniones de hecho en España, Madrid 2003, p. 50. 1

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become socially acceptable. This was confirmed by three out of four persons participating in an opinion poll carried out by an official institute in 1997.3 Disputes between unmarried couples must be resolved by the courts. While some cases can be settled by resorting to general civil law, for others general civil law offers no adequate remedy as it fails to take account of the special personal relationship between the parties. Since the problems of unmarried couples are similar to those of spouses, an option in such cases is to apply the rules for married couples. Followed in the former Yugoslavia and in some Latin-American countries, this option, however, is not without problems. On the one hand, the question arises whether treating persons who expressly chose not to marry as if they were married violates the right of all persons not to marry, which, of course, is the counterpart of the right to marry. On the other hand, if the law treats married and unmarried couples the same, why should a couple marry? According to some authors, this could even give rise to constitutional problems in countries where the institution of marriage enjoys special protection, entitling spouses to certain benefits.4 Thus there are numerous reasons for creating a different regime for unmarried couples. This can be done in the case law, by statute or both. Instead of enacting special laws on cohabitation without marriage like those in Norway or Sweden,5 numerous countries reacted by regulating one or more specific matters. Together with the case law, these scattered rules of written law constitute the legal regime of cohabitation in such systems. Therefore, one cannot say, as Napoleon supposedly did, that the law disregards cohabitants because they disregard the law. Whatever the source, all European legal systems have a more or less complete set of rules on cohabitation. In numerous systems it is disputed whether such rules should apply to samesex couples as well. The French concept of concubinage, for example, was originally applicable to heterosexual couples only; by virtue of the legislation on the Pacte civil de solidarité it became possible to apply the case-law on concubinage to homosexual couples as well.6 In 1989 the Danish legislator created a new legal institution called registered partnership. The rules on registered partnership are applicable if a couple meets the subjective and objective conditions laid down by law. The parties desir3

ALBERDI I., La nueva familia española, Madrid 1999, p. 39. In the case of Spain it has been held that equalizing cohabitation with marriage in all aspects would be incompatible with the Spanish constitution, see GAVIDIA SANCHEZ J.V., ‘Es la unión libre una situación análoga al matrimonio?’, in: Revista Jurídica del Notariado 1999, pp. 225-226. 5 These laws basically deal with the dissolution of the common household. See MARTIN CASALS M., ‘Informe de Derecho comparado sobre la regulación de las parejas de hecho’, in: Anuario de Derecho civil 1995, pp. 1765-1772. 6 MÉCARY C./LEROY-FORGEOT F., Le PACS, Paris 2000, p. 83 et seq. 4

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ing to enter into a registered partnership must voluntarily perform a formal act, i.e., registration. Moreover, no impediments may bar the couple from entering into such relationship. These impediments closely resemble those for marriage. For example, persons may not enter into a registered partnership if one of the partners is married or is party to a registered partnership with another person or if the partners are related. Registered partnership was originally conceived as an institution for samesex partners only, basically as a parallel to marriage because in most systems such couples still cannot marry. From this point of view, it should not be regarded as an alternative but rather as a substitute for marriage. The Danish law served as a model in the Nordic countries7 and was followed to a certain extent also in Germany, where a registrierte Lebenspartnerschaft is available only to same-sex partners. For its part, the German legislator made a clear distinction between the new institution and marriage, which was justified on constitutional grounds.8 As a result, the legal effects of the German institution are less intense than those of its Nordic counterparts. In 1998 registered partnership was introduced in the Netherlands as an institution with basically the same effects as marriage but with a more simplified procedure of dissolution.9 The Dutch, however, departed significantly from the Nordic model by making the institution available to heterosexual couples as well, reasoning that it would otherwise be discriminatory. In my opinion, this argument is not convincing because heterosexual couples already had a parallel institution to registered partnership, i.e., marriage. The same reasoning has been used by other legislators such as the Belgian and the French, whose registered partnerships are available to both homosexual and heterosexual couples. There is, however, an important difference. Whereas the effects of 7

There are laws on registered partnership in Sweden, Norway, Iceland and Finland. A judgment of the Bundesverfassungsgericht of 17 July 2002 made it clear that the institution of registered partnership does not pose a threat to the institution of marriage since it is available to same-sex couples only and they are not permitted to marry under German law. This law served as the impulse for further legislative reform granting registered partners more rights. A law adopted on 29 October 2004 applies the economic regime of the Zugewinngemeinschaft to registered partners, if they do not agree otherwise. This is the subsidiary property regime applicable to married couples as well. 9 It is possible to dissolve a registered partnership out of court on the ground of mutual consent, whereas a divorce always requires a court procedure. Since Dutch law allows the conversion of a marriage into a registered partnership, it has become popular to convert a marriage into a registered partnership for the purpose of obtaining a ‘lightning divorce’. See BOELE-WOELKI K., ‘Registered Partnership and Same-sex Marriage in the Netherlands’, in: BOELE-WOELKI K./FUCHS A., Legal Recognition of Same-sex Couples in Europe, Antwerpen 2003, p. 49 et seq. On conversion from the PIL perspective see SUMNER I., ‘Dissolution of Registered Partnerships: Excursion in Conversion’, in: International Family Law 2004, pp. 231-237. 8

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the Dutch institution closely resemble those of marriage, the French PACS and the Belgian cohabitation légal do not go that far. Thus the Belgian and French institutions can be regarded as an alternative to marriage for couples with capacity to marry.10 The final turning of the screw took place when marriage was made available to same-sex couples in the Netherlands in 2001 and in Belgium in 2003. Excluding couples from an institution on the grounds of their sex and sexual orientation is considered discriminatory in both countries. Nonetheless, differences regarding children still exist between married couples depending on whether they are heterosexual or homosexual. The Dutch legislator, for example, does not permit married couples of the same sex to be party to an intercountry adoption. Paradoxically, there is no such rule in countries such as Sweden or Spain, where same-sex partners are not yet permitted to marry. As regards their legal effects, the difference between a registered partnership and a same-sex marriage can be far-reaching or merely semantic.11

B.

Spain

The comparative survey above shows that this area of the law is characterized by a plurality of forms and a rapid evolution. This is the case in Spain as well and both traits can be said to be particularly intense in Spanish law. Spain is divided into 17 autonomous communities and two autonomous cities. Legislative powers are shared between the State, i.e., the Central Authority, and the autonomous communities. The legislative powers of the autonomous communities are not homogeneous. For historical reasons six of them – the Balearic Islands, Catalonia, Aragón, Navarra, the Basque Country and Galicia – have competences in private law (the so-called foral regimes), whereas private law in the rest of the country remains under the jurisdiction of the Central Authority (the so-called Spanish Civil Code regime). Some areas of private law are not decentralized. Pursuant to Art. 149.1.8 of the Spanish Constitution, the forms of marriage and the organization of public registries are in the exclusive jurisdiction of the Central State. Legislation on cohabitation without marriage has been enacted in 11 autonomous communities. Catalonia was the first in 1998 (Llei 10/1998, de 15 de julio, de unions estables de parella12), followed by Aragón (Ley 6/1999, de 26 de marzo, 10

In France, however, same-sex couples are excluded from marriage. It has therefore been held that, as regards the regulation of same-sex relationships, the French legislator has shown a lack of political courage. 11 AGELL A., ‘Family Forms and Legal Policies’, in: Scandinavian Studies in Law, 1999, vol. 38, p. 208; SCHÜMANN K., Nichteheliche Lebensgemeinschaften und ihre Einordnung im Internationalen Privatrecht, Frankfurt a.M. 2001, p. 61. 12 BOE of 19 August 1998.

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relativa a las parejas estables no casadas13), Navarra (Ley 6/2000, de 3 de julio, para la igualdad jurídica de las parejas estables14), Valencia (Ley 1/2001, de 6 de abril reguladora de las uniones de hecho15), the Balearic Islands (Ley 18/2001, de 19 de diciembre, de parejas estables16), Madrid (Ley 11/2001, de uniones de hecho de la Comunidad de Madrid17), Asturias (Ley 4/2002, de 23 de mayo, de parejas estables18), Andalusia (Ley 5/2002, de 16 de diciembre, de parejas de hecho19), the Canary Islands (Ley 5/2003, de 6 de marzo, de Canarias, sobre parejas de hecho20), Extremadura (Ley 5/2003, de 20 de marzo de Extremadura, sobre parejas de hecho21) and the Basque Country (Ley 2/2003, de 7 de mayo, reguladora de las parejas de hecho del País Vasco22). This explosion of legislative activity is not the result of decentralization alone. The legislation enacted by the autonomous communities having no competence in private law is very ‘thin’ in substance; their competence is very limited and in broad areas of social security and immigration law they have no competence whatsoever. Moreover, there is no or little correlation between legislative intervention and the number of couples actually cohabiting without marriage. The figures are higher on the Islands and in Valencia, Catalonia and the Basque Country but very low, for example, in Aragón or Extremadura.23 Nevertheless, the latter autonomous communities have enacted legislation on cohabitation without marriage, and Aragón was the second community to act immediately after its neighbour, the Autonomous Community of Catalonia. The wish not to lag behind other regional legislators probably explains at least in part why some autonomous communities became active. Another possible explanation is the highly political nature of these laws, which were supported by left and moderate conservative regional parties but opposed by the governing Partido Popular. As a result, numerous proposals to regulate non-marital cohabitation were rejected between 1996 and 2004. Since the change of Government in March 2004, new legislation has been announced that will extend marriage to

13

BOE of 21 April 1999. BOE of 6 September 2000. 15 BOE of 10 May 2001. 16 BOE of 16 January 2002. 17 BOE of 5 March 2002. 18 BOE of 2 July 2002. 19 BOE of 13 January 2003. 20 BOE of 14 April 2003. 21 BOE of 9 May 2003. 22 BOE of 23 May 2003. 23 MEIL LANDWELIN G. (note 2), p. 61. 14

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same-sex couples,24 and new State legislation is expected on issues of non-marital cohabitation in the exclusive competence of the Central Authority. Although the Catholic Church and several influential institutions, such as the Governing body of the Judiciary (Consejo General del Poder Judicial), have expressed their opposition, above all to same-sex marriage, opinion polls show that around 70 percent of the population supports such action.25 This development at the level of the Central State is bound to have a strong impact on the laws adopted by the autonomous communities, thus leading to further reforms. Moreover, the autonomous laws have been strongly criticized in legal scholarship on technical grounds. In many cases the legislators exceed their legislative competence, sometimes the substance simply reiterates what has already been established as law, and in other cases the provisions do not comply with general family law.26 Sometimes the differences between the various Spanish laws are significant. Since a detailed comparison is neither possible nor necessary here,27 only the most important elements are mentioned in this article. As regards the beginning of such a relationship, some Spanish laws explicitly require that the parties voluntarily perform a particular act, which, however, differs from jurisdiction to jurisdiction. This is the case in Valencia, Madrid, Extremadura, the Balearic Islands, the Basque Country and also in Catalonia in respect of same-sex couples.28 The laws of other communities, including Catalonia (regarding heterosexual couples), Aragón, Navarra, and the Canary Islands, apply not only to couples who voluntarily register their relationship but also to couples who have cohabited for a certain period of time, which varies from one to two 24

A bill on same-sex marriage was submitted to Parliament on 21 January 2005: see ‘Proyecto de Ley por la que se modifica el Código Civil en materia de derecho a contraer matrimonio’ (121/000018), BOCG Congreso de los Diputados Núm. A-18-1 de 21/01/2005, available at www.congreso.es, under ‘Iniciativas Parlamentarias - VIII Legislatura’. 25 See GALAN L., ‘España deja de ser (tan) católica’, in: EL PAÍS, 5 September 2004. 26 AMUNATEGUI RODRIGUEZ C., Uniones de hecho; una nueva visión después de la publicación de las leyes sobre parejas estables, Valencia 2003, pp. 209-213. 27 See AMUNATEGUI RODRIGUEZ C. (note 26); CARRO-WERNER C., Die nichteheliche Lebensgemeinschaft in der spanischen Rechtsordnung, Hamburg 2003; GONZALEZ BEILFUSS C., ‘Länderbericht Spanien und Portugal’ (forthcoming); MATA DE ANTONIO J.M., ‘Algunos aspectos de un análisis comparativo entre las distintas leyes autonómicas reguladoras de las parejas de hecho en España’, in: Revista de Derecho de Familia 2004, p. 296 et seq.; ORTUÑO MUÑOZ J.P., Las uniones estables de pareja, Madrid 2003. 28 The Catalan law was the first law; it establishes two distinct legal regimes for couples of the same and of different sex. This was strongly criticized and none of the other laws follows this model formally, although there are still differences between heterosexual and homosexual couples. There is, however, a tendency to treat both types of couples the same. See infra, point I B.

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years.29 In the latter case, the legislation applies regardless of the couple’s will and there is no possibility to opt out of the legal regime.30 The laws are applicable to both homosexual and heterosexual couples not affected by certain impediments. The impediments have obviously been influenced by the bars to marriage and may differ from one autonomous community to the other. There are also differences in their legal effects, which is not surprising since the autonomous legislators have different degrees of legislative competence. Nonetheless, all Spanish laws share two characteristics. If one compares the legal regime of married couples with that of their unmarried counterparts,31 it is evident that the latter regime is weaker, while marriage continues to be a privileged institution. As regards their legal effects, the Spanish cohabitation statutes are closer to the French PACS than to the Dutch registered partnership. The second characteristic feature is the tendency to equate relationships between couples of the same and of different sex in the sensitive area of child law as well. From the very beginning, Navarra and the Basque Country permitted couples of the same sex to jointly adopt a child. Aragón recently reformed its law in this sense and Catalonia will soon follow. The actions brought by the former Government to have the relevant laws of Navarra and the Basque Country declared unconstitutional have been withdrawn by the present Government, and it has been announced that joint adoption by same-sex couples will be permitted under the Spanish Civil Code. The dissolution of such relationships is similar in all Spanish laws. A samesex partnership or heterosexual cohabitation is terminated upon the mutual consent of the partners or upon the request of one of the partners after the other has been duly informed (unilateral consent). The relationship is also dissolved if the parties are factually separated for a specific period of time specified by the law of the particular jurisdiction, or if they marry or if one partner enters into a marriage with a third party. No court proceedings or other procedure is required. Some autonomous laws require only that the formal act by which the parties entered into the relation-

29

Many Spanish laws do not require the couple to have cohabited for a specified period of time if they have common children. Some systems recognize the entire time the couple lived together as cohabitation even though one of the parties was still married at the beginning and for this reason could not formally enter into such a relationship. 30 This has been strongly criticized. See FORDER C., ‘European Models of Domestic Partnership Laws’, in: Canadian Journal of Family Law 2000, p. 383. 31 One should not forget that the laws do not apply to all cohabiting couples but only to those who meet the objective and subjective requirements. This inevitably means that there will be two groups of unmarried couples, those to whom the statute applies and those not affected by the statute. See GONZALEZ BEILFUSS C. (note 26).

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ship be invalidated in cases where this was a constitutive element of the relationship.32 The laws of the autonomous communities of Catalonia, Aragón, Navarra, the Balearic Islands and the Basque Country provide for maintenance rights after dissolution of the relationship. Maintenance can also be obtained under the Spanish Civil Code as a result of a change in case law which was justified by the Supreme Court by reference to legislation in the foral regimes.33 In cases where the relationship is terminated by mortis causa, the succession rights of the surviving partner differ considerably. In some jurisdictions the surviving partner is not granted any ab intestato succession rights (Aragón, Catalonia: heterosexual couples); in others the surviving partner enjoys succession rights that are on equal footing with those of a surviving spouse (Navarra, Balearic Islands, Basque Country) or carry less weight (Catalonia: homosexual couples).

II. Private International Law A.

Current Legislation

Obviously conflict of laws rules are needed to deal with the diverse forms of interpersonal relationships and the growing number of mixed couples and/or couples who relocate. This holds true regardless of whether specific legislation exists or not at the substantive level. Since non-marital cohabitation, registered partnership and same-sex marriage lead to legal effects in many areas, the recognition of a foreign institution is likely to arise as a preliminary question in the context of private law disputes on matters such as maintenance or succession, as well as in connection with public law issues in areas such as social security or immigration law. The regulation of the new forms of family relationships poses a great challenge in private international law, in particular because the basic concepts of family law are no longer common in different jurisdictions.34 It is difficult to elaborate conflict solutions which are applicable to diverse situations at the substantive level, especially when the law is in constant flux and subject to imminent reform and certain issues have constitutional implications as well. This probably explains why national legislators have been extra cautious in this area. The Dutch legislator, for example, did not introduce conflict rules in the 32

For example, if the law required a notarial deed, it must be invalidated. CERVILLA GARZON M.D., ‘El derecho a percibir una pensión compensatoria en las rupturas de las parejas de hecho’, in: Revista Jurídica del Notariado 2002, p. 127 et seq. 34 RIGAUX F., ‘The law applicable to non-traditional families’, in: Private Law in the International Arena. From National Conflict Rules Towards Harmonization and Unification. Liber Amicorum Kurt Siehr, The Hague 2000, p. 648. 33

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bill on registered partnerships but requested an opinion from the Netherlands Standing Committee on Private International Law. The rules proposed in this and in a later opinion on same-sex marriage were then informally applied in practice35 until enactment of the Wet conflictenrecht geregistreerd partnerschap on 6 July 2004. Similarly, no conflict rules were proposed in Belgium when the institution of cohabitation légale was introduced in 1998. This changed recently with enactment of the new Private International Law Code on 6 July 2004. Although the German conflict rule was enacted together with the substantive legislation regulating registered partnerships, § 17 b EGBGB is considered to be a provisional solution.36 In some instances, however, national legislators did not respond to the challenge at all. The French PACS law contains only a limited number of conflict rules.37 In Spain such conflict rules are not only scarce but are even regarded as unconstitutional. The Spanish Constitution grants exclusive jurisdiction over ‘rules to resolve the conflict of laws’ to the Central Authority. As was mentioned above, the Central Authority is the private law legislator for the whole of Spain with the exception of the so-called foral territories, i.e., the Balearic Islands, Catalonia, Aragón, Navarra, the Basque Country and Galicia. The Spanish Parliament did not enact substantive rules but decisively rejected all projects on non-marital cohabitation. The fact that other Spanish legislators of private law (five out of six) became active in their respective areas of competence at the substantive level was not deemed sufficient in itself to intervene at the conflict of laws level. Therefore, there are no common conflict rules for this matter. Partially in anticipation of such response, some legislators of the autonomous communities decided to enact rules defining the scope of application of their laws. Of the foral territories, only Aragón wisely refrained from doing so. The Basque Country requires that at least one of the partners has his or her vecindad administrativa (habitual residence plus registration in the local Population Registry) in its territory. The statutes of Catalonia, the Balearic Islands and Navarra stipulate that they are applicable to couples meeting the objective and subjective conditions laid down by law, only if at least one of the parties has the vecindad civil of the respective territory. All Spaniards have a vecindad civil subjecting him or her to one of the foral laws or to the Civil Code regime. Foreign nationals have no vecindad civil.

35

JESSURUN D’OLIVEIRA H.U., ‘Registered Partnerships, PACSes and Private International Law: Some Reflections’, in: Riv. dir. int. priv. proc. 2000, pp. 299-300. 36 WAGNER R., ‘Das neue Internationale Privat- und Verfahrensrecht zur eingetragenen Lebenspartnerschaft’, in: IPRax 2001, p. 281. 37 KHAIRALLAH G., ‘Les partenariats organisés en droit international privé (Propos autour de la loi du 15 novembre 1999 sur le pacte civil de solidarité)’, in: Rev. crit. dr. int. pr. 2000, p. 320.

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In my opinion, there seems to be no doubt that such rules violate the Spanish Constitution. The fact that Art. 149.1.8 of the Constitution only mentions ‘rules to resolve the conflict of laws’ does not mean that the competence of the Central Authority is limited to bilateral conflict of laws rules and that the autonomous communities are thus free to enact unilateral rules defining the scope of application of their laws.38 Such interpretation cannot be upheld because both techniques are functionally equivalent, i.e., both have the purpose of determining the applicable law.39 The only possible argument that could lend credibility to the view that these rules enacted by the Autonomous Communities are compatible with the Constitution is to regard them as secondary rules which apply after the applicable law has been designated by the relevant conflict rule. For example, if the relationship is governed by Catalan law, then the Catalan statute would apply secondarily if at least one of the partners has the Catalan vecindad civil. The main problem is not so much that this interpretation probably does not reflect the intent of the autonomous legislators but that no conflict rule exists for cohabitation or registered partnership in the Spanish system of private international law. Even if Catalan law is the governing law by analogy, for example, by applying the conflict rules on marriage, it is still difficult to resolve cases in which neither of the partners has the Catalan vecindad civil. The Catalan statute on cohabitation cannot be applied because it requires that at least one of the partners possesses the Catalan vecindad civil. Nevertheless, Catalan law must be applied because the Spanish conflict rule designates Catalan law as the applicable law. A decision will be rendered by the Constitutional Court in the near future in response to the action (cuestión de inconstitucionalidad) brought by the Superior Court of Navarra to have the matter declared unconstitutional.40 In the case giving rise to this action,41 a man and woman were cohabiting in Agreda (Soria), a village in the Autonomous Community of Castilla-León, a territory subject to the Civil Code. While he had the vecindad civil of Navarra, she held the so-called common vecindad civil, thus subjecting her to the Spanish Civil Code. Upon his death, she requested the judge to declare that both parties formed a pareja estable under the law of Navarra. The cohabitation statute of Navarra contains a proviso restricting 38 See BORRAS A., ‘Los conflictos de leyes en materia civil a la luz de la legislación vigente’ and IRIARTE ANGEL J.L., ‘Parámetros constitucionales para los conflictos internos en materia civil’, in: Conflictos de leyes en el desarrollo del Derecho civil vasco, Bilbao 1999, p. 71 et seq. and 39 et seq. respectively. 39 GONZALEZ BEILFUSS C., ‘Recurso de inconstitucionalidad contra la Ley Foral 6/200, de 3 de julio, del Parlamento de Navarra, para la igualdad jurídica de las parejas estables’, in: REDI 2000, p. 690 et seq. 40 Cuestión de inconstitucionalidad núm. 228/2003 (BOE 07-04-2003). 41 Sentencia Audiencia Provincial Navarra núm. 99/2002 (Sección 2ª), de 12 de junio (JUR 2002/201896).

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its application only to cases where at least one of the parties holds the vecindad civil of Navarra. On the other hand, if the conflict rule for the effects of marriage (Art. 9.2 Civil Code) were applied by analogy, the Civil Code would be applicable because it is the law of the first habitual residence of the couple. The designation of the applicable law is decisive in this case because the two laws lead to significantly different results: the law of Navarra grants cohabitants the same succession rights as spouses. Another interesting case was decided by the Audiencia Provincial of Girona on 2 October 2002.42 After a Swiss couple that had cohabited in Girona terminated their relationship, she requested maintenance under Catalan law. While Catalan law provides maintenance to cohabitants upon termination of their relationship if they qualify as a unió estable de parella, it also requires that at least one of them holds the Catalan vecindad civil. Since only Spanish nationals have a vecindad civil and both cohabitants are Swiss nationals, the Catalan statute is not applicable on that basis. Pursuant to Art. 9.2 of the Civil Code (conflict rule for the effects of marriage), Swiss law is applicable in this case. However, since the parties did not plead and prove foreign law, the judge fell back on the lex fori and applied Catalan law after all. Spanish private international law on cohabitation without marriage is currently unclear, to say the least. At present, according to the view that still appears to prevail in legal scholarship, the conflict rule relevant to the nature of the particular claim would apply. In this sense, if the validity of an agreement between the parties is at stake, the conflict rule for contractual obligations would apply.43 Elsewhere I argued in favour of the application of the conflict rules for marriage (Art. 9.2 Civil Code),44 whereas other authors favour the application of the conflict rule for status matters (Art. 9.1 Civil Code).45 The first solution has several flaws. If the dispute is characterized as a contractual matter, it is unclear, for example, whether the Rome Convention on the law applicable to contractual obligations should apply or whether, as appears more appropriate, Art. 10.5 of the Civil Code is applicable by virtue of the fact that Art. 1.2 (a) and (b) of the Rome Convention exclude family and status matters. 42

Sentencia de la Audiencia Provincial de Girona, núm. 474/2002 (Sección 2ª) de 2 de octubre (AC 2002/1493). 43 SANCHEZ LORENZO S., ‘Las parejas no casadas ante el Derecho internacional privado’, in: REDI 1989, p. 487 et seq. 44 GONZALEZ BEILFUSS C., Parejas de hecho y matrimonios del mismo sexo en la Unión Europea, Madrid 2004, pp. 110-113. See also FONTANELLAS MORELL J.M., ‘Noves perspectives per a una regulació de les unions de fet en el Dret internacional privat espanyol’, in: MARTINELL J.M./ARECES PIÑOL M.T., Uniones de hecho, Lerida 1998, p. 233 et seq.; CARRILLO CARRILLO B., ‘Ley aplicable a las parejas de hecho en el Derecho internacional privado español’, in: Mundialización y familia, Madrid 2001, p. 385 et seq. 45 QUIÑONES ESCAMEZ A., ‘Nuevos modelos familiares y Derecho internacional privado’, in: PASCUAL ORTUÑO J.P., Las uniones estables de pareja, Madrid, 2003, p. 145.

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Above all, it seems inadequate to opt for a solution that results in dépeçage when there is a tendency in substantive law to create an organized autonomous regime for cohabiting couples.46 Arts. 9.1 and 9. 2 of the Civil Code both lead to the application of the law of the common nationality of the parties or secondarily to the law of their habitual residence. There is, however, one main difference. The conflict rule on the effects of marriage in Art. 9.2 provides that the applicable law is determined at the beginning of the relationship and does not allow any change as a result of a change in the connecting factor, whereas conflit mobil would be possible under the general rule in Art. 9.1 on status matters simply because the connecting factors are not fixed by a time element. Determining the adequate solution depends on whether the couple is cohabiting or registered their partnership. In the latter case, the parties probably expect their voluntary relationship to remain unchanged. It would therefore be unfair to apply Swedish or Danish law to a partnership that was registered under Belgian law. The Belgian institution produces limited effects, whereas Swedish and Danish law equate the effects of a partnership with those of marriage.

B.

Proposals for Reform

Spanish private international law has the dual task of providing solutions for both internal and international conflicts. Conflict of laws issues arise in cases involving Spanish nationals belonging to different Spanish jurisdictions and in cases with a foreign element where one or both of the parties are foreign nationals. Similarly, a situation acquires a conflict dimension if a couple relocates in Spain, goes abroad or comes to Spain from abroad. Traditionally, Spanish interregional cases have been resolved by applying conflict rules for international cases. Although increasingly questioned in legal scholarship,47 this so-called parallelism still constitutes the cornerstone of the Spanish interregional conflict system.48 The main argument for differentiating between interregional and international conflict rules is the diverse nature of the conflict between Spanish laws. All Spanish laws comply or at least are presumed to comply with the Spanish Constitution, until the contrary is proved. Despite differences in numerous details, the majority of such laws belong to the same family. 46

This is recognized by SANCHEZ LORENZO, whose article (see note 43) has had a significant impact on Spanish private international law. See FERNANDEZ ROZAS J.C./ SANCHEZ LORENZO S., Derecho internacional privado, Madrid 2004 (3rd ed.), p. 393. 47 ALVAREZ GONZALEZ S., ‘Derecho Interregional: claves para una reforma’, in: Anuario español de Derecho internacional privado, 2003, p. 37 et seq.; FONT SEGURA A., Una construcción sistemática del Derecho interregional (forthcoming). 48 See Art. 16 Civil Code.

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The question of whether it is advisable to have different sets of rules for interregional and international cases is not dealt with here. For the purpose of this paper, in my opinion, it is more important to focus on the basic points that should be taken into account in a future reform of the conflict of laws system.49 A general reform of Spanish private international law is presently being discussed by scholars.50 Although the discussion has not yet been placed on the political agenda, the introduction of same-sex marriage and a special cohabitation regime in the Civil Code could perhaps lead to common conflict rules in Spain.51 In my opinion, it is first important to make a clear distinction between nonmarital cohabitation, registered partnership and same-sex marriage. To my knowledge, Spanish substantive law is the only domestic law which applies the same rules to couples who simply cohabitate and those who voluntarily register their partnership. There are, however, at least two significant differences between non-marital cohabitation, registered partnership and same-sex marriage that are relevant in private international law. The statutory rules on registered partnership are binding on the parties only if they voluntarily register their partnership. In this sense, registered partnership is more similar to marriage than to non-marital cohabitation. As a new institution, registered partnership still has no tradition and thus the decision to enter into such a relationship probably requires greater forethought by the parties than by future spouses prior to marriage. As a result, party expectations have to be taken into account. As a rule, such expectations carry less weight if the parties simply cohabitate. Legal considerations usually do not play a decisive role in the parties’ decision not to marry or not to register their partnership.52 49 The following analysis is basically an extension and partly a development of the ideas contained in my book published the beginning of 2004: see GONZALEZ BEILFUSS C. (note 44). 50 See GONZALEZ CAMPOS, J.D., ‘La reforma del sistema español de Derecho internacional privado. Algunas propuestas para un debate’, in: REDI 2000, p. 351 et seq. 51 In my opinion, there is practically no chance that these highly controversial matters will be placed on the agenda of the Hague Conference on Private International Law at present. There are plans in the European Community to tackle the issue because the Programme for the implementation of the mutual recognition principle (OJ C 12, of 15 January 2001) mentions legislation on unmarried couples. However, there are different positions in the EC as regards the recognition of both same-sex marriage and registered partnership. This issue has already caused considerable difficulty in connection with the new directive on the free movement of persons [Directive 2004/58/EC of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States, (OJ L 158 of 30 April 2004)]. Therefore, I am of the opinion that it will probably take some time before conflict rules are adopted on this matter. 52 In the case of Spain this might not always hold true as some autonomous legislators equate the rights of registered partners with those of unmarried cohabitants, which could give partners less incentive to register their relationship.

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Registered partnership is a new institution still unknown in many legal systems. Conflict rules designating the law of a country where the institution is unknown only appear to resolve the case at first glance; however, there are no substantive rules on the issue in the applicable law. Although it is held that solutions can always be found within a given legal system, it often occurs that the designated law is a foreign law. In practical terms, the difficulties often prove to be insurmountable in cases of registered partnership where a foreign law applies in which the institution is unknown. Even when only minor differences exist between the substantive rules on same-sex marriage and registered partnership, there is a fundamental difference from the point of view of PIL. Since marriage is a universally known institution, both conflict and substantive rules exist in all legal systems. As regards same-sex marriage, the main issue is whether the relationship will qualify as marriage or be rejected on grounds of public policy.

1.

Constitutive Elements of the Relationship: Basic Ideas

The discussion on the conflict aspects of non-marital cohabitation focuses on the law governing the effects of the relationship. The constituent elements and dissolution of such a relationship are a question of fact and thus deserve little attention. More interesting is the act of entering into a registered partnership, which resembles the celebration of marriage in that the parties must meet certain subjective requirements and perform a formal act. When a legal system introduces registered partnership, one of the basic questions is whether to make the institution available to foreign nationals and, in the affirmative, whether to require that a connection exists between the couple and the State of registration. The existing conflict rules are strikingly similar in respect of these issues. The institution of registered partnership is usually available to foreigners but a connection between the partners and the State of registration is required in the Nordic countries, France, Belgium and the Netherlands. German law is an exception in this respect as there need not be a connection between the partners and Germany. The basic purpose of such provision is, on the one hand, to respect a person’s freedom of choice when selecting a partner, a right which is granted to nationals and residents and, on the other hand, to avoid becoming a haven for couples seeking recognition of their partnership, as has happened, for example, in the US State of Vermont.53 From the point of view of the State of registration, it is also necessary to determine the law governing the capacity to enter into a partnership. While the capacity to marry is determined in many legal systems by the national law of the future spouses, this solution is less common in registered partnership, mainly be53

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For further references see GONZALEZ BEILFUSS C. (note 44), p. 22.

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cause the institution of registered partnership is still not regulated in most legal systems. Legal systems which have not regulated the institution cannot be expected to possess rules on the capacity to enter into a registered partnership. Therefore, designating such a law as applicable would often lead to a cul de sac, as it is very difficult or impossible to determine whether capacity exists. Having regard for the argument of national legislators that the institution of registered partnership is antidiscriminatory, it can be said that designating a foreign law as applicable that does not permit registered partnerships is incompatible with such purpose. As regards the recognition of a partnership registered outside the forum, I favour a liberal recognition rule which recognizes any partnership that has been validly constituted under the law of the State of registration. Such a rule is well established in respect of marriage.54 However, the capacity to marry is often governed by the law of the nationality or the domicile of each party as a means of preventing the parties from attempting to evade statutory limitations to capacity laid down by their home State. It could be argued that such a rule is appropriate for registered partnership as well; however, in my opinion, this argument is not convincing. First, most of the States that have introduced registered partnership require the existence of a connection between the parties wishing to enter into a partnership and the forum. Secondly, one should bear in mind that, at the stage of recognition, we are dealing with a partnership that exists and is valid in the State of registration and that the aim of conflict rules is to give continuity to that partnership, unless this would be incompatible with the forum’s public policy. Ordre public considerations, however, should be taken into account after the decision on the recognition of a partnership has been made. In other words, they should not be an element of the recognition rule itself. From the point of view of Spanish PIL, public policy is not an impediment to the recognition of a same-sex marriage or a registered partnership contracted abroad. Some time ago I argued that the recognition of a same-sex marriage celebrated abroad does not violate Spanish public policy because the Spanish legislator could decide to extend marriage to partners of the same sex without reforming the Spanish Constitution if and when it deemed it appropriate. This is the current position of the Spanish Government, although it remains to be seen whether such stand would be confirmed by the Spanish Constitutional Court, if an action is brought to have the legislation permitting same-sex marriage declared unconstitutional. It would clearly no longer be possible to invoke public policy if Spain finally, as intended, introduces same-sex marriage. Registered partnership already exists in Spanish law.

54

See PALSSON L., Marriage in Comparative Conflict Laws: Substantive Conditions, The Hague 1981, p. 7.

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2.

Legal Effects of the Relationship

Marriage and registered partnership produce a wide range of effects in the relations between the parties and relations with third parties. Although the effects of cohabitation are usually not as far-reaching, they are nevertheless manifold in most systems. As regards private international law, one should keep in mind that some of the effects are regulated in special rules. For example, Spanish private international law has special rules for maintenance, parental responsibilities, succession etc. At first glance it may appear that such rules function independently and are not affected by the new forms of interpersonal relationships. This, however, is not always the case; the institution of registered partnership is likely to cause difficulties, above all when it is unknown in the applicable law. This is aptly illustrated by the following example. In Spanish private international law matters of succession are governed by the national law of the deceased. If the deceased is a Spanish national, matters of succession are governed by the law of his or her vecindad civil. If the deceased is married, one can be assured that the applicable law, whichever it may be, will be favourable for the surviving spouse. If the deceased is party to a registered partnership, it could occur that the surviving partner has no succession rights because the institution is either unknown in the applicable law or is regulated differently than in the State of registration. Moreover, it could be that the applicable law equates registered partners with married couples, but the deceased and his or her partner were registered in a country where registered partners have no succession rights. It is not possible to deal with this and similar problems in detail. Nevertheless, it is important to mention two supplementary actions, which, in my opinion, could be undertaken. First, it is important to inform the parties about such problems. This is done, for example, in the Netherlands where the parties are advised to make a will if property is owned abroad. The second possibility is to empower the judge to adopt a flexible approach, making it possible to take account of the existence of the partnership at the substantive level or to designate the law of the State of registration as applicable to the succession of the deceased registered partner. There should be different rules for determining the law applicable to the patrimonial effects of cohabitation, registered partnership and same-sex marriage. Since the recognition of same-sex marriage is not contrary to Spanish public policy, there is no reason not to apply the Spanish conflict rules on marriage. The applicable law will always have rules regulating the effects of marriage. There are areas in which it will be necessary to adapt certain substantive provisions to take account of the fact that the parties are of the same sex. The situation is different in the case of registered partnership because the institution is unknown in many systems and, as pointed out above, there are significant differences in the effects of a registered partnership. I would therefore favour application of the law of the State of registration, supplemented by certain rules to protect third parties.

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Non-Marital Cohabitation, Registered Partnership and Same-Sex Marriage

As mentioned earlier, the difference between a registered partnership and a same-sex couple can only be semantic. The name chosen by a foreign legislator to designate an institution is not decisive for the application of the conflict rules of another system. This could be an argument for making two sets of rules for registered partnerships, one for the Nordic type and the other for the French type. However, I am not in favour of such solution, basically because I believe it would often be too difficult to implement. This area of law is not well established and is subject to frequent reform. The situation in cases of non-marital cohabitation is a question of fact: There is no registration and it is often difficult to determine at which time the relationship began. Therefore, in my opinion, the most appropriate solution would be to develop a rule with a factual connecting factor such as habitual residence.

3.

Dissolution of the Relationship

There are three basic issues at stake when a relationship is dissolved: Which authority is competent, which law governs the dissolution and which law governs the effects of dissolution? All three issues arise in the dissolution of marriage and relevant conflict rules exist in all systems. In systems that have introduced same-sex marriage, the question arises as to whether existing conventions and sources of Community law apply. It can be argued that all such instruments were drafted with the traditional concept of marriage in mind and that to apply them to a same-sex marriage would be a violation of the rules of international law on the interpretation of treaties. This argument, however, is not convincing as far as the Brussels II Regulation is concerned. At the time of the enactment of the Regulation, the Netherlands was in the process of recognizing same-sex marriage. At the request of a Member of Parliament, the Commission cautiously replied that there is no obligation to apply the Regulation when determining which court has jurisdiction to adjudicate the dissolution of a same-sex marriage, however, to do so is also not excluded.55 A country that has not recognized same-sex marriage is not obliged to apply the Brussels II Regulation. In this context the question arises whether it can deny access to its courts to a same-sex couple wishing to divorce. In my opinion, this would not comply with human rights standards. Accepting jurisdiction, however, does not prejudge the case; thus it could occur that the competent judge would find that the marriage does not exist and therefore that there is no need to consider the question of divorce. Such a decision would probably not be recognized as divorce in the State of registration. As for registered partnership, some systems require court proceedings while others allow a consensual dissolution with little or no formalities. In systems requiring court proceedings, it is common to designate a forum necessitatis to guar55

E-3261/01, OJ C O28E of 6 February 2003.

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antee access to the courts of the State of registration if the parties relocate later. In that case it could occur that the institution is unknown in the new State of residence and the judge refuses to dissolve the partnership. If the parties relocate in a country where the institution is recognized but dissolution is non-litigious, it could be adequate to specify that such dissolution produces effects in the State of registration, thus making it unnecessary for the parties to dissolve their partnership abroad. The termination of non-marital cohabitation never requires court proceedings. Nonetheless, a dispute arises in some cases and therefore it would be sensible to apply the jurisdiction rules for marriage in order to avoid the application of different rules of jurisdiction depending on the issue at stake. Determining the law applicable to the dissolution of a registered partnership poses special problems. As mentioned above, registered partnership is an alternative to marriage in some systems and, as such, one of its attractions is precisely that it is easier to dissolve than marriage. In other systems it is a substitute for marriage for couples barred from marriage. Therefore, it would not be fair to apply a law that had not been considered by the parties when they decided to formalize their union. From this point of view, the application of the law of the State of registration is probably the most appropriate solution. As regards same-sex marriage, the applicable law should be determined by the conflict rule for divorce. There should also be different rules for determining the law applicable to the effects of the dissolution of a relationship depending on whether it is a samesex marriage, a registered partnership or a non-marital cohabitation. In cases of marriage, no difference should be made between same-sex and heterosexual marriages, whereas the law of the place of registration should, in my opinion, apply to the effects of dissolution of registered partnerships. This is probably the best solution in light of the great diversity in the substantive rules regulating the rights and obligations of the partners. As regards non-marital cohabitation, the best solution is probably to apply the law of the last habitual residence of the partners.

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POLISH PRIVATE INTERNATIONAL LAW Andrzej MĄCZYēSKI*

I. II. III.

V. VI. VII. VIII.

Historical Background Characteristics of the PIL Act of 1965 General Provisions A. Renvoi B. Non-Homogenous Law C. Public Policy Exception (ordre public) D. Subsidiary Application of Polish Law E. General Problems not Dealt with by the PIL Act of 1965 Connecting Factors A. Citizenship B. Domicile C. Seat of a Legal Person, Seat of an Enterprise D. Location of a Thing E. Place Where an Event Occurs Leading to Legal Consequences F. Seat of the Court Deciding a Case G. Lex causae H. Choice of Law Other Legislative Acts International Agreements Court Practice Conclusion

I.

Historical Background

IV.

Poland has a long tradition of statutory regulation in the domain of private international law. The Law Applicable to Private International Law Relations (hereinafter: PIL Act of 1926) was adopted as early as 2 August 19261 and entered into force on 13 November 1926. Based on a bill drafted in 1920 by Fryderyk Zoll,2 the project was thoroughly elaborated and examined by the Codification Commission in *

Professor at the Jagiellonian University, Cracow, Chair of Private International Law; Vice-President of the Constitutional Tribunal of the Republic of Poland. 1 The 1926 Act was amended only once: Article 40 was amended in 1936. 2 Fryderyk Zoll (1865-1948), professor at the Jagiellonian University in Cracow, was one of the two Poles who participated in the drafting of Austrian private international law prior to World War I.

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Andrzej MączyĔski

1920/21. Drafted in the same style, the Law Applicable to Private Inter-district Relations (hereinafter: PID Act) entered into force at the same time. The PID Act was important because in 1918 five different civil law systems were in force in various parts of the then territory of Poland. Subsequently those systems were replaced by uniform Polish civil law, and the PID Act lost importance; however, it was never formally abrogated.3 It is worth mentioning that, prior to the adoption of both Acts, Polish courts applied the provisions of the respective projects as adopted by the Codification Committee. Therefore, the project served in fact as binding law imperio rationis. Both Acts were based on analogous principles and contained provisions similar in wording; however, there were essential differences: the basic connecting factor in inter-district relations was habitual residence (and not citizenship) and the public policy exception (ordre public) could not be invoked in those relations. It can be said that the PIL Act of 1926 is one of the greatest achievements of Polish legal thought. Due to its wide scope (embracing the entire subject matter of private law, together with the law of obligations and property law), the modernity of its content and values of legislative technique, it was highly regarded by foreign scholars as well. It could compete not only with contemporary statutes in Germany and Switzerland, but also with those enacted in other countries many dozens of years later. Despite its unquestionable quality, a decision was made in the early 1950’s to replace the PIL Act of 1926. The adoption of a new statute was probably regarded as a symbolic ‘final accord’ in creating a socialist private law codification comprising three codes, all of them adopted in 1964 – the Civil Code, the Family and Guardianship Code and the Code of Civil Procedure, all of which entered into force on 1 January 1965. The new statute, called the ‘Private International Law Act’ (hereinafter: PIL Act of 1965) was adopted on 12 November 1965 and entered into force on 1 July 1966.4 Notwithstanding its political genesis, the provisions of the PIL Act of 1965 are free from ideological elements. No influences of Soviet law can be traced; on the contrary, there are explicit similarities to statutes later adopted in western European countries. Thanks to the chief referent of the project – Kazimierz Przybyáowski – the positive elements of the former Act were preserved to a great extent.5

3

The PID Act was amended only once; in 1945 the transitional period after which a person who has changed his place of residence is subject to the law of the new place of residence was reduced from one year to one month. 4 The articles cited hereafter are from the PIL Act of 1965, unless indicated otherwise. 5 Kazimierz Przybyáowski (1900-1987), before World War II professor at the Jan Kazimierz University in Lvov, since 1945 professor at the Jagiellonian University in Cracow; as early as 1935 he published a systematic analysis of the general provisions of

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After the entry into force of the new Act, attention was focused on the differences between the present and former Acts. It was emphasized, for example, that parental relations are regulated independently of the child’s origin, i.e., whether he or she is born in or out of wedlock; labor relations were excluded from the overall regulation of obligations, and the general provisions were transferred to the opening section. Judging from a greater temporal perspective, it can be said that the PIL Act of 1965 is based on the same principles laid down in its predecessor Act of 1926. Apart from that, certain provisions were amended to express a formerly adopted interpretation. The most significant new and original solution in the 1965 Act is the recognition of jurisdiction of the personal law of the parties with regard to non-contractual obligations (Article 31 para. 2). The fact that the adopted solutions were preserved despite the profound system transformation after 1989 is proof of their actuality. In particular, none of the provisions of the Act has been declared unconstitutional under the new Polish Constitution of 1997. Two minor amendments introduced in Article 22 para. 1 in 1996 and in Article 18 in 1999 were the result of changes in Polish family law, i.e. restrictions placed on child adoption by persons residing outside Poland and the introduction of the institution of legal separation. In particular, the latter change was unnecessary, as the problem of determining the law applicable to separation had existed earlier and, in the absence of relevant statutory provisions, solutions had been proposed in the doctrine. Neither of the mentioned amendments was a response to the stand taken by the courts or in the doctrine. Legal scholars had long suggested that the conflict rules for contractual obligations (Articles 25-29) should be replaced by a new provision based on the Rome Convention of 19 July 1980 on the Law Applicable to Contractual Obligations. This proposal has not yet been realized; however, after Poland’s accession to the European Union (1 May 2004), amendment of the Act in that respect is no longer necessary in light of future accession to the Rome Convention, which, in addition, should later be replaced by a European Union regulation.

II.

Characteristics of the PIL Act of 1965

The PIL Act of 1965 is an embodiment of the principle that private international law constitutes a separate branch of law consisting of rules for determining the law of which country is applicable when deciding a civil case. According to this conception, questions of jurisdiction in civil cases, i.e., which cases fall under the jurisdiction of Polish courts and which do not, and rules on the recognition and enforcement of foreign judgments do not form a part of private international law. private international law, which to date is still regarded as the leading monograph in the field.

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According to some authors, they belong to the domain of civil procedure, whereas others regard them as constituting a separate branch of law, namely international civil procedure.6 Furthermore, the regulation of citizenship is not regarded in Poland as belonging to private international law;7 the same is true in regard to provisions establishing a special legal status for foreigners and foreign legal persons in the area of civil law.8 The PIL Act of 1965 is a normative act of limited volume: It comprises only 38 articles, some of which are divided into two or three paragraphs. The articles are grouped into 12 Chapters as follows: introductory general provisions (Articles 1-8), personal law (Articles 9-11), formal requirements of legal transactions (Article 12), limitation of liability (Article 13), marital law (Articles 14-18), parental law, including maintenance obligations and adoption (Articles 19-22), guardianship and curatorship (Article 23), property law (Article 24), obligations (Articles 25-31), labor law (Articles 32-33), succession law (Articles 34-35). The last Chapter (Articles 36-38) contains the final provisions on the abrogation of the PIL Act of 1926, the continued validity of special private international law provisions included in other statutes and the date of the Act’s entry into force. As can be seen, the legislator used the so-called ‘pandect systematic’. Generally speaking, two groups of provisions can be distinguished: those regulating general issues (Articles 1-8) and those containing conflict rules designating the applicable law in a given situation (Articles 9-35). As provided in Article 1 para. 1, the Act designates ‘the law applicable to international personal and property relations in civil law, guardianship and curatorship law and labor law’. This enumeration of domains reflects the conception that prevailed in legislation adopted in the socialist countries in that the notion of private law was rejected and family relations were excluded from the scope of civil law and regulated in a separate code. Today this conception is outdated in Poland; the Family and Guardianship Code of 1946 is still binding but is now treated as one of the books of the Civil Code, only formally separated. The fact that one of the provisions has nothing to do with determining the applicable law could be deemed an inconsistency with the wording of Article 1 para. 1. This is in Article 8, which provides that ‘foreigners in Poland have the same rights and obligations as Polish citizens, unless provided otherwise by law’. 6

The majority of those provisions comprise a separate, fourth (therefore final) part of the Code of Civil Procedure. The matters regulated in those provisions are analysed in separate textbooks; however, at some universities the subject is taught together with private international law. 7 Those matters are regulated in constitutional and administrative law, in particular in the 1963 (then several times amended) law on Polish citizenship, and in international agreements. Citizenship (nationality) plays an important role in Polish private international law as a connecting factor determining the applicable law. 8 An example is the often amended Law of 1920 on the acquisition of immovable property by foreigners.

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This general rule was directly transposed to the civil law from Article 37 of the Polish Constitution of 2 April 1997; it had no counterpart in the constitutional provisions in force when the PIL Act of 1965 was adopted. The scope of the PIL Act of 1965 did not cover all private law matters belonging to civil law in the broad sense, but only those regulated by the Civil Code, the Family and Guardianship Code and the Labor Code. Specific provisions in earlier laws dealing primarily with matters outside the scope of the PIL Act of 1965 were not transferred to the Act. This includes, for example, conflict rules in the law of bills of exchange and cheques, maritime law and air traffic law.9 This, however, does not mean that the provisions of the PIL Act of 1965 had no bearing on such matters. Their significance can be compared with that of the provisions of the Civil Code for civil law relations regulated by other laws, i.e. they apply unless the specific statute provides otherwise. Accordingly, the PIL Act of 1965 plays the same role in the conflict of laws as do the general provisions of the Civil Code in regard to substantive civil law. The majority of provisions of the PIL Act of 1965 that belong to the socalled specific part of private international law contain complete conflict rules (i.e. rules for situations where Polish law applies and situations where foreign law applies), as well as symmetric conflict rules (i.e., rules using the same connecting factor to determine the applicable law, be it Polish or foreign law).10 In this way the Polish legislator has succeeded in guaranteeing equal treatment of Polish and of foreign law. A characteristic feature of the conflict rules of the PIL Act of 1965 is that they strive to provide the greatest degree of certainty possible as to the applicable law in a given situation, i.e. the predictability of the results of the conflict rules. One manifestation of this is the absence of provisions designating the application of the law ‘more favorable’ for one of the parties, for instance, the child. The description of the factual situation included in a conflict rule is formulated in a general and synthetic manner, without regulating details and casuistic questions. The Act does not include provisions defining certain terms and restricting the scope of application of specific conflict rules.11 The terminology used in the PIL Act is uniform with that in the Polish codes. In some provisions of the PIL Act, however, terms were used that have no counterpart in any of the codes. 9

See Part V below. Exceptions to the rule providing for the exclusive application of Polish law are found in Articles 10 and 11 para. 2. The justification for formulating those rules in the form of incomplete rules is questionable. 11 The following can be regarded as sui generis exceptions: first sentence of Article 12 and Article 13 (regarding the scope of rules designating the law applicable to legal transactions), Article 16 (which has the same function in respect of Articles 14 and 15) and Article 31 para. 3 (which refers to paras. 1 and 2 of Article 31). 10

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Obviously the PIL Act of 1965 infringes neither international agreements12 to which Poland is a party nor Community acts. The priority of such instruments over statutory law is guaranteed by the Constitution (Article 91). The same principle applies in regard to international agreements entered into prior to the entry into force of the Constitution of 1997 (Article 241 para. 1 of the Constitution). As for international agreements, the same principle is found in Article 1 para. 2 of the PIL Act of 1965 (totally unnecessary because of the Constitutional provision).

III. General Provisions Like its predecessor, the PIL Act of 1965 is restrained as regards the scope of matters regulated and the degree of detail. As a result, it is a successful compromise between two extreme positions: drafting general provisions that allow considerable freedom for developing private international law by judge-made law as opposed to detailed provisions that restrict interpretation but also discourage development by means of judge-made law, which provides solutions to new problems considerably speedier than adopting new legislation. The Act’s moderation in that respect is particularly visible in the provisions in the so-called general part of private international law.

A.

Renvoi

One of the matters regulated in detail in the 1965 Act is renvoi. The position taken by Polish law with respect to the application of foreign private international law (Article 4) is based on the distinction between renvoi in the first degree (which refers back to Polish law) and renvoi in the second degree (which refers to the law of a third state). The second type is accepted only if Polish law designates domestic law as applicable; the first type is not limited in this respect. Renvoi is not applied in cases where the parties have chosen the applicable law. Further restrictions are placed on the application of renvoi in the doctrine, for example, in cases where the lex loci actus is designated as applicable with regard to the formal aspects of a transaction (Article 12, sentence 2) or the national law of an adoptee is applicable parallel to the national law of the adopting person (Article 22 para. 2). In Polish law there are no other provisions regulating the application of the conflict rules of a foreign law.

12

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See Part VI below.

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B.

Non-Homogenous Law

The provisions of the PIL Act of 1965 refer to the law of a country.13 Therefore, in countries with multiple civil law systems whose application depends on territorial or personal criteria, the applicable system is to be determined by the conflict rules of the country in question (Article 5). It is not specified how to proceed in situations where it is impossible to ascertain the content of the respective rules; the doctrine prefers the application of the legal system most closely connected to the situation. By analogy, in cases where the substantive rules of the applicable law have been changed, the doctrine proposes determining the subsequent binding rules of the applicable law by consulting the relevant transitional provisions. It is emphasized that defining the decisive time element for determining the connecting factor in PIL provisions (i.e., in Articles 34 and 35) should not prejudice the ruling in a particular case.

C.

Public Policy Exception (ordre public)

Article 6 provides that the application of Polish law may be refused only if its application would lead to results contrary to the basic principles of Polish law. By ‘basic principles’ we mean rules protecting values of fundamental importance. It is the results of a rule in practice that count, not its content. The doctrine postulates moderate use of the public policy exception, for instance, by refusing to apply a specific provision and not the foreign law as a whole. In court practice there is extensive use of that principle. The relevant provision does not designate the application of an alternative law in cases where the foreign applicable law is refused; the doctrine emphasizes that such refusal does not necessary lead to the application of Polish law.

D.

Subsidiary Application of Polish Law

Under Article 7 of the PIL Act of 1965, Polish law shall apply if the factors determining the application of a given law are unknown or the content of the applicable foreign law cannot be ascertained. However, specific provisions designating the law otherwise applicable in the absence of or inability to identify the factors determining the primary applicable law have priority over Article 7 (for example, in personal law, the law of the country of citizenship is deemed applicable first, then the law of the country of habitual residence). The method of ascertaining the content of a foreign law is specified in Article 1143 of the Code of Civil Procedure 13 An exception is the first sentence of Article 28, which refers to the ‘law of the place where the stock exchange is located’ and not to the ‘law of the country where the stock exchange is located’.

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(also specifies methods of interpretation); several international agreements to which Poland is a party stipulate how information on provisions of the foreign law is to be provided. In this context it should be emphasized that in Poland the applicable law is determined ex officio and not at the parties’ request. This means that the court deciding a case is obliged to indicate the factors leading to the application of a foreign law and how its content was ascertained. The application of a foreign law cannot be made conditional to jurisdiction in the sense that the courts of that State must have jurisdiction, nor can it be required that Poland recognizes the State that enacted the applicable provisions.

E.

General Problems not Dealt with by the PIL Act of 1965

1.

The 1965 Act contains no general provision on qualification. As regards the interpretation of terms, there is a longstanding practice in Poland to take account of the specific function of the term in the provision where it appears. The definition of terms in substantive law is not decisive when interpreting conflict rules, even if the same terms are used in a conflicts provision. This approach was already used by the drafters of both Acts; later it was further developed in monographs dealing with specific matters (such as capacity or form). This approach is also used when interpreting terms defining connecting factors. As opposed to its predecessor, the PIL Act of 1965 does not contain definitions of terms used in the Act.

2.

There is also no provision on preliminary questions in the PIL Act of 1965; however, such questions are dealt with thoroughly in doctrinal studies. As in foreign doctrine, multiple solutions are proposed. A particularly interesting solution proposes not to search for a uniform general rule but for specific solutions for given preliminary questions (for example, the termination of a previous marriage as a condition for the capacity to remarry; the existence of marriage as a condition for succession). Several preliminary questions are answered by taking account of the relevant provisions on the recognition and enforcement of judgments. As regards preliminary questions relating to citizenship, the solution proposed by the lex causae is usually adopted; the same method is suggested in matters involving the name of a natural person.

3.

The so-called provisions of mandatory application, i.e., substantive provisions of domestic law that are applied in a given situation instead of the applicable foreign law, are well known and widely discussed in the doctrine; however, the subject matter is not yet regulated in a general manner. Introducing such a general provision is considered unnecessary for the purpose of domestic law rules and too controversial with respect to foreign law rules.

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4.

Apart from the above-mentioned Article 6, the PIL Act of 1965 does not deal with situations where the application of a foreign law is refused. Therefore, no general provisions exist on the evasion of law; a protective measure (concerning Polish law only) justifies the refusal to recognize a foreign court judgment in a case where Polish law should have been applied but a foreign provision differing significantly from its Polish counterpart was applied instead.14

There is also no general rule on the refusal to apply the foreign law designated by a conflict rule on the ground that the case is more closely connected to some other legal system; nor are there specific provisions providing for such a possibility.

IV. Connecting Factors A.

Citizenship

Citizenship is a basic connecting factor in personal law, family law and succession law. A person’s citizenship is determined in accordance with the law of the country whose citizenship is at stake. Although the relevant provision of the Hague Convention of 12 April 1930 is not repeated in any Polish law, there is no doubt as to its binding force. The PIL Act of 1965 regulates only the situation where a person is a citizen of two or more countries. If a conflict rule designates the lex patriae as applicable, the rule provides that the law of the citizenship country with which the person is most closely connected shall apply (Article 2 para. 2). If a person with dual nationality has Polish citizenship, Polish law is always applicable (Article 2 para. 1). In the case of stateless persons, the law of the country of the person’s habitual residence shall apply. The legal capacity of a natural person is determined by the law of the country of the person’s citizenship (Article 9 para. 1). As regards the capacity to marry, the law of the country of the person’s citizenship shall apply to each of the parties (Article 14). Personal and property relations between spouses are governed by the law of the country of their common citizenship (Article 17), as are divorce and separation (Article 18). If the spouses have no common citizenship, the law of the country of their habitual residence shall apply. In cases concerning parent/child relations, the law of the country of which the child is a citizen is applicable (Article 20); in maintenance cases, the law of the country of which the person entitled to maintenance is a citizen; in guardianship cases, the law of the country of which the person under guardianship is a citizen (Article 23 para. 1); and in succession cases, 14

Article 1146(1) point 5 of the Code of Civil Procedure. The ratio of this provision is sometimes questioned.

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the law of the country of which the deceased was a citizen (Articles 34 and 35). On the contrary, in adoption cases, the law of the country of which the adopting person is a citizen shall apply; however, the law of the country of which the adoptee is a citizen applies to a certain extent as well (subject to the adoptee’s consent) (Article 22). A change of citizenship is explicitly regulated by some provisions. For example, in succession cases, the law of the country of which the deceased was a citizen at the time of his death shall apply (Article 34); however, the validity of a testament or other mortis causa act is determined by the law of the country of which the deceased was a citizenship at the time the act was performed (Article 35). Similarly, kinship is determined according to the law of the child’s citizenship at the time of birth (Article 19 para. 2, sentence 1). A change of citizenship is decisive when determining the law applicable to the personal and property relations between spouses: Relations entered into after a spouse has changed his or her citizenship are governed by the law of the country of the new citizenship, while previous relations are subject to the law of the former citizenship (Article 17). The issue of changed citizenship was not regulated in several matters, thus leaving it up to the courts to take a stand in such matters. For example, in court practice it is accepted that the capacity to marry (Article 14) is governed by the party’s law of citizenship at the time the marriage was entered into; child/parent relations (Article 19 para. 1) by the law of citizenship at the time the issue is addressed.

B.

Domicile

The domicile of a natural person is used as a connecting factor instead of the law of the country of a person’s citizenship in cases where the person is stateless. Domicile is an independent connecting factor in the law of obligations. A good example is the catalogue of contracts listed in Article 27 para. 1, in which the primary connecting factor is the law of the domicile of the person carrying out a characteristic performance (e.g., the vendor in a sales contract). This list has a closed character. Other contracts are governed by the law of the country of common domicile of both parties (Article 26). This principle does not apply to contracts concerning immovables, contracts concluded at the stock exchange or at a public trade fair, and in cases where the parties have chosen the applicable law. The provision on non-contractual obligations deserves special attention. In particular, obligations arising out of a tort are governed by the law of the country of common citizenship of both parties, provided that their place of domicile is in that country (Article 31 para. 2). The concept of ‘domicile’ is not defined in the PIL Act of 1965. According to court practice and the doctrine, it is the place where a person lives with the intention of residing permanently. This definition dates back to the earlier mentioned PID Act and is found in the present Civil Code and Code of Civil Procedure. It

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should be emphasized that the connecting factor of domicile refers only to the law of a given country, not to a specific location within that country.

C.

Seat of a Legal Person, Seat of an Enterprise

Matters concerning a legal person are governed by the law of the country where its seat is located (Article 9 para. 2); however, this provision does not specify how the seat is to be determined. The doctrine suggests that it is the factual seat (place of activity) of the administration of the legal person. Some authors, however, maintain that the seat should be determined in the statute of the particular legal person. It might be added that an act performed by a natural person or legal person within the scope of activities of an enterprise owned by the person is governed by the law of the enterprise’s seat and not by the law of the person’s citizenship, domicile or seat of the person (Articles 9 para. 3 and 27 para. 3).

D.

Location of a Thing

The place where a thing is situated is the primary connecting factor in the field of property law (Article 24). To be more precise, the rule applies not only to material things, but to all things and rights that may be the object of property law. Obligations relating to immovables are governed by the law of the country where the real property is situated (Article 25 para. 2). A choice of law is inadmissible.

E.

Place Where an Event Occurs Leading to Legal Consequences

This connecting factor plays a far less important role in modern law than earlier. The place where an event occurs is used as an alternative connecting factor for the form of legal transactions (Article 12, sentence 2). The lex loci actus is applicable ultimo loco to contractual obligations (Article 29) and unilateral legal transactions (Article 30), and it is also used in the provision on obligations arising out of contracts concluded at the stock exchange (although the provision refers to the ‘seat of the stock exchange’) or at a public trade fair (Article 28). When determining a foreigner’s capacity to perform a valid act in Poland (other than in family law and succession law), Polish law applies, if the good faith of third parties is to be protected (Article 10). In this provision (a reflection of the widely known Lizardi case in French case law), the connecting factor of the place where an act occurs is supplemented by the connecting factor of the place where the act is performed. The place where a person performs his work is the decisive connecting factor in the last resort when determining the law applicable to labor relations (Article 33 para. 2). An obligation arising out of an act or event other that a legal transaction is governed by the law of the country where the act or event took place (Article 31

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para. 1), but only if the parties have no common citizenship or are not domiciled in the same country.

F.

Seat of the Court Deciding a Case

The law in force at the seat of the court deciding a case (lex fori) shall apply only as ultimum refugium where the factors determining the applicable law cannot be identified in the case at hand or where the content of the applicable law cannot be ascertained (Article 7). The provision subjecting a declaration of death to Polish law in cases where a Polish court decides the case (Article 11 para. 2) is an exception is this respect.

G.

Lex causae

In several provisions the legislator designates the applicable law by stipulating that a law applicable to some other matter shall apply. In this sense, the formal requirements of a legal transaction are determined by the law applicable to the transaction itself (Article 12, sentence 1); the prescription of an obligation by the law applicable to the particular obligation (Article 13) and the question whether a person of limited legal capacity may be held liable for damages caused by a tort by the law applicable to that obligation (Article 31 para. 3). A characteristic example is the provision providing that the annulment of a marriage shall be governed by the law applicable to the capacity to marry and the formal requirements for the validity of a given marriage (Article 16). This reflects the general principle that the legal consequences of the violation of a legal rule are governed by the law governing that act or event. The provision of Article 16 was incorporated into the Act to prevent application by analogy of the law governing divorce.

H.

Choice of Law

The provisions containing conflict rules have a ius cogens character. A choice of law by the parties is admissible only in the narrow scope defined by Article 25 para. 1 concerning contractual obligations (this provision may also be applied to unilateral legal transactions pursuant to Article 30) and labor law relations, as stipulated in Article 32. According to both provisions, the parties must choose a law that is connected to the particular obligation or labor relation. The nature of this connection is a widely debated issue with some scholars supporting a radical approach, others a liberal one. A choice of law by the parties is prohibited in obligations concerning immoveables, whereas it is widely permitted in air traffic law and maritime law. In recent years, specific limitations have been placed on the choice of law in provi-

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sions on contracts concluded with consumers. Under the influence of several European Union directives, such limitations were introduced in Polish law, though in a modified form, which resulted in justified criticism by legal scholars. De lege ferenda Polish doctrine supports liberalization of the choice of law and proposes widening its scope to include other matters, such as marital property contracts, testaments, succession contracts and non-contractual obligations. Freedom of choice by the parties should be distinguished from choice of law rules that provide for the application of one of several – alternatively designated – laws. For example, the formal aspects of a legal transaction are determined by the law applicable to that transaction (lex causae); however, it is sufficient to comply with formal requirements prescribed by the law of the country where the transaction was performed (lex loci actus) (Article 12). The decisive factor here is the objective element of acting in accordance with the law and not the will of the parties. A similar construction is used in regard to the formalities of marriage (Article 15), which are governed by the law of the country where the marriage is celebrated. However, if the marriage is celebrated outside Poland, it is sufficient to comply with the formalities prescribed by the law of both countries of which the spouses are citizens.

V.

Other Legislative Acts

The PIL Act of 1965 is the basic but not the only source of Polish private international law. Prior to and after the adoption of the 1965 Act, conflict rules have been laid down in other acts as well. Some of those rules can be regarded as complementing the PIL Act of 1965 in matters not covered by the Act. For instance, conflict rules for negotiable instruments such as cheques and other bills of exchange are still included in two acts, both of 28 April 1936, which incorporate the provisions of the Geneva Conventions of 7 June 1930 and of 12 March 1931 into Polish law. Of recent legislation, it is worth mentioning the Insolvency Act of 28 January 2003, which contains rules on international procedure in insolvency. Some legislative acts containing conflict rules are no longer in force; these include, inter alia, the Law of 28 April 1952 on Labor Performed on Polish Merchant Ships, the Air Traffic Act of 31 May 1962, which contained a specific connecting factor: the airplane’s country of origin, and the Maritime Code of 1 December 1961, which contained conflict rules for navigation at sea (except for labor relations). These three legislative acts have been recently replaced by new versions; however, the ‘old’ conflict rules are reproduced almost literally in Article 2 of the Law on Labor Performed on Merchant Ships of 23 May 1991, Articles 355-359 of the Maritime Code of 18 September 2001, and Articles 6-15 of the Air Traffic Act of 3 July 2002. It is to be regretted that the legislator did not use

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the occasion to improve shortcomings and correct inaccuracies pointed out over the years.15 In recent years the number of conflict rules in Polish legislation has increased and today they are found even in the Civil Code. As seen in some of the above-mentioned provisions, the increased legislative activity in this area is partly the result of the transformation of European Union directives into Polish law. An alarming phenomenon is the visible lack of coherency between the conflicts provisions in the PIL Act of 1965 and those in other legislative acts regulating specific matters. An extreme example is the provision that limits the choice of law in a situation where Polish law does not allow a choice of law at all. As fully unjustifiable (and contrary to correct drafting technique) is the practice of incorporating provisions of the PIL Act of 1965 into other legislative acts using the same or a slightly different wording.16

VI. International Agreements Polish lawyers have always shown great interest in the activities of the Conference on Private International Law held in The Hague since 1893.17 In the interwar period Poland participated in the 1925 and 1928 Conferences. The provisions of the Hague Conventions of 1902 and 1905 were taken into account during the preparatory work on the draft of the PIL Act of 1926. Poland acceded to those Conventions in 1929.18 As a result of the ‘iron curtain’ that separated Poland from Western Europe after World War II, the Hague Conference statute was not adopted until 1984. Nevertheless, Poland acceded to the Convention on the Law Applicable to the Form of Wills as early as 1969.19 After 1989 Poland acceded to other Hague conventions, as well as to several conventions of the Council of Europe and the International Commission on Civil Status. A characteristic phenomenon in the part of Europe where Poland is located is the network of bilateral agreements binding various states in the region. Such agreements are a sui generis codification of private international law in the broad sense: In addition to designating the applicable law, they also define the basis for 15

E.g., the formulation of Article 356 of Maritime Code is too broad; the position on the choice of law is unclear in Articles 10, 12 para. 2 and 13 of the Air Traffic Act. 16 An example is the formulation of the public policy exception in Article 359 para. 2. 17 The numerous publications on the work of the Hague Conferences and the Polish translations of the elaborated drafts and conventions are proof of this interest. 18 Three of the Conventions containing provisions on marriage were denounced by Poland several years after the PIL Act of 1965 was adopted. 19 Five years later a monograph on the convention was published in Poland.

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the international jurisdiction of national courts, the recognition and enforcement of judgments of those courts and other procedural matters, such as international legal assistance, and even penal matters. They are applied, however, only in cases involving certain matters connected to the State parties to the particular agreement. The nature of that connection is not explicitly defined in the agreements. Between 1957 and 1962 Poland signed such agreements with almost all European States of the so-called socialist block (GDR, USSR, Hungary, Yugoslavia, Czechoslovakia, Bulgaria, Romania) and later with other countries of the extended block (Mongolia, Cuba, North Korea, Vietnam). The conflict rules of those agreements are very similar to each other as the first ones were influenced by the PIL Act of 1926 and subsequent projects for a new PIL Act. Numerous attempts to replace the multiple bilateral agreements by one multilateral agreement (although it dealt with only part of the subject matter) proved to be unsuccessful. Some of the agreements were later amended, others replaced by new ones (Czechoslovakia, Mongolia, Romania). The events after 1989 – German unification, the breakup of the USSR and Yugoslavia, Czechoslovakia’s division – also had an impact on the scope of the agreements concluded with those States. Further agreements were concluded with the newly emerged States: Lithuania, Ukraine, Latvia, Belarus, Estonia and Russia. As early as 1963, an agreement of similar scope was concluded with Austria and entered into force in 1974, together with an additional protocol signed the previous year. Legal scholars showed particular interest in a bilateral agreement concluded with France in 1969, although it dealt only with matters of family law and personal law. Some conflicts provisions were also included in the agreement concluded with Finland in 1980. Moreover, Poland has signed several bilateral agreements on procedural law and consular agreements. The conflict rules set forth in the above-mentioned bilateral agreements make it necessary to change the relevant statutory regulations; however, they were formulated in such a way so as to enable the courts and other public authorities to apply them directly. As for the authorities responsible for their application, they regard the obligations arising from such agreements as binding. Specific problems arise in connection with multilateral conventions and agreements containing conflict rules designating the application of a law of a country that is not a State party to the convention or agreement (other than the former Hague Conventions and current bilateral agreements).20 Conflict rules laid down in such conventions and agreements make the statutory provisions unnecessary. Difficulties occur in practice when establishing the scope of situations covered by a particular instrument and when resolving conflicts arising in matters regulated by two or more conventions or agreements. Repercussions in practice are inevitable when provisions regulating the same matter are formulated differently in each convention or agreement. 20 The principle is found in more recent Hague Conventions and in the Rome Convention to which the EU Member States are party.

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Even when a conflict rule of an agreement designates a law as applicable on the basis of a connecting factor that is defined in the same way as in the relevant statutory provision or other agreement, this does not necessarily mean that both instruments will refer to the same applicable law (because of a different interpretation of the connecting factors).

VII. Court Practice Judgments rendered by courts in cases decided by them do not constitute a source of law in Poland. Nevertheless, the interpretation and application of statutes by the courts is regarded as an excellent method of evaluating the quality of statutory rules and thus can be deemed to serve as a source of inspiration for de lege ferenda postulates. It is difficult to gain insight on the interpretation of the PIL Act of 1965 by an analysis of court decisions based on the PIL Act for several reasons. Above all, the number of cases in which conflicts problems arise is relatively small compared with Western European countries. No special casebooks on private international law have been published,21 and it appears that many provisions of the PIL Act of 1965 have never served as the basis for a published court decision. As a result, it is practically impossible to establish the position taken by the courts, for example, in cases involving the problem of qualification resulting from the imprecise definition of the scope of the rules applicable to parental relations (Article 19 para. 1) and to maintenance claims between relatives (Article 20). Bearing in mind the above-mentioned reservations, it can be said that an analysis of the court practice relating to the PIL Act of 1965 reveals no major flaws either in its basic principles or specific provisions. Moreover, reference to the court practice can assist in finding a satisfactory solution in cases where the court must determine the applicable law on the basis of conflicts rules in statutory provisions. A good example dating back to the initial years after the entry into force of the PIL Act of 1965 concerns the admissibility of applying the conflict rule of Article 31 para. 2 to an obligation of a legal person. The narrow formula of the provision operating with citizenship and domicile as connecting factors (i.e., relating to natural persons) did not prevent the Supreme Court from applying the said provision to an obligation of a legal person.22 Such solution, which has been

21 Only selected judgments of the Civil Chamber of the Supreme Court are published. Access is hindered by the incompleteness of their indexes and lack of entries, thus making it very difficult to trace statements on conflicts problems. 22 Supreme Court decision of 22 November 1972, IICR 458/72; Supreme Court decision of 5 October 1974, IIICZP 71/73.

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approved by the doctrine, is a good example of creative interpretation, thanks to the Supreme Court’s decision to go beyond a literal interpretation of the provision. In the past, the doctrine showed considerable interest in the problem of determining the law applicable to the succession of a farm located in Poland and the position taken by the courts in that case. The Supreme Court23 found that, despite the absence of a statutory provision providing an exception to the general principle of applying the national law of the deceased,24 the objective of the specific provisions regulating the succession of farms (in the primary version of the Civil Code) was of systematic importance for the socialist transformation of agricultural property. As such it promoted the social-economic system and was thus found to be consistent with the objectives and aims of the People’s Republic. Considering those provisions to be an embodiment of the main principles of Polish law in the sense of the PIL Act of 1965, the Supreme Court held that the provisions should also be applied although the testator was not a Polish citizen. This reasoning was apparently reiterated after the relevant provisions had been amended, although the content had been thoroughly changed and the primary purpose altered. Nonetheless, even after the amendments, some legal scholars continued to support the position taken by the Supreme Court, despite its misguided justification. The view that the above-mentioned provisions may be applied in cases falling outside their scope of application, as defined by Article 34, took on specific character after the Constitutional Court declared the provisions to be unconstitutional on 31 January 2001, even in their final, more neutral version of 1990. In this context it should be mentioned that this problem was discussed from a wider perspective in the doctrine without limiting it to matters falling under the provisions in question or their particular purpose. For instance, the view is held that the scope of application of the personal law statute can be separated from the succession statute by applying the property statute instead to the question of property acquired by a successor appointed on the basis of the law governing succession. Later the stand was taken that the specific mortis causa succession of some property rights other than inheritance may be considered to fall under the law regulating those rights. As regards institutions that are not explicitly regulated, the courts have not yet taken a stand on how to determine the law applicable to agency. The doctrine suggests various solutions, one of which is that agency is governed by the law applicable to the underlying legal relation (for instance, mandate or labor). Another solution could be – de lege ferenda – to provide a separate provision allowing for a choice of law by the parties. Similarly, the courts have yet to take a stand on conflicts problems relating to the name of a natural person. The view prevails that the 23 Supreme Court decision of 28 May 1969, IIICZP23/69; Supreme Court decision of 6 March 1970, ICR 3-70. 24 Unlike Article 30 of the PIL Act of 1926, the provision does not contain separate rules regulating specific elements of inheritance.

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conflict rule for the legal capacity of a natural person should be applied per analogiam, thus leading to the law of the country of citizenship, the law that is also applied in cases of a name change resulting from a change in civil status (for example, by marriage).

VIII. Conclusion It can be said that the Polish doctrine of private international law is well developed. The majority of issues have been analyzed in monographs, some even repeatedly; however, those studies are unknown abroad as they are published in Polish only. The general provisions of private international law are not covered to a comparable extent; for example, there is no monograph on qualification. Several course books of varying merit have been published, one of which (by Maksymilian Pazdan) has had multiple editions.25 Private international law is taught at all Polish law faculties. The main academic centers in this field are at the universities (in alphabetical order) in Cracow, Katowice, Poznan and Warsaw. Unfortunately, the courts are not always willing to take account of academic output. For some years Polish legal scholars have discussed the need to reform Polish private international law, debating how and to what extent it should be reformed. As was mentioned earlier, the conflicts provisions on obligations have been the object of criticism. In particular, the limitation of freedom of choice by the parties has been criticized as too arbitrary and restricted. The restricted scope of application of the principle of characteristic performance has also been criticized. Later it was proposed that the Polish provision should be brought into line with the 1980 Rome Convention. Presently the most radical suggestion is to draft an entirely new code of Polish private international law. In my opinion, this proposal is too extreme and inappropriate in light of the increasing role of multilateral international conventions and of European Union regulations in Polish law.

25 The study by SOĝNIAK M., Précis de droit international privé polonais, Warsaw, Wroclaw [etc.] (Ossolineum) 1976, does not reflect the actual state of Polish private international law.

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THE INTERFACE BETWEEN THE U.N. CONVENTION ON THE RIGHTS OF THE CHILD AND THE FUTURE HAGUE CONFERENCE INSTRUMENT ON THE INTERNATIONAL RECOVERY OF CHILD SUPPORT AND OTHER FORMS OF FAMILY MAINTENANCE A Point of View from Israel Peretz SEGAL / Myriam MILLER

I. II. III. IV. V.

VI. VII. VIII.

Introductory Remarks The United Nations Convention on the Rights of the Child: Child Maintenance as a Human Right The Hague Conventions The Proposed Hague Convention on International Recovery of Child Support and Other Family Maintenance Obligations Private International Law Issues A. Authorities of the State of the Habitual Residence of the Child Should Be Empowered to Take ‘All Appropriate Measures’ to Recover Child Support B. The State of the Child’s Habitual Residence Should Have Jurisdiction over Child Maintenance 1. Creditor’s choice 2. Fact-based jurisdiction 3. Application system 4. Child-centered jurisdiction C. Choice of Law for Determining the Amount of Support in an Initial Order D. Jurisdiction to Amend Existing Orders Cost of Recovery Recovery of Support Paid by State Conclusion

Ministry of Justice, Israel.

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Printed in Germany

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I.

Introductory Remarks

In May 2003, the Hague Conference began work on a new comprehensive convention on maintenance obligations that would improve the existing conventions.1 To date, four Hague Conventions have addressed maintenance obligations: the Convention on the Law Applicable to Maintenance Obligations of 1956; the Convention on the Recognition and Enforcement of Decisions Relating to Maintenance Obligations toward Children of 1958; the Convention on the Law Applicable to Maintenance Obligations of 1973, and the Convention on the Recognition and Enforcement of Decisions Relating to Maintenance Obligations of 1973.2 The Special Commission of May 2003 on the International Recovery of Child Support and Other Forms of Family Maintenance saw as its future goal a new instrument that would ‘intervene on behalf of children and other family members whose relative has abdicated his elementary responsibility of support’.3 The existing Hague Conventions apply to ‘maintenance obligations arising from a family relationship, parentage, marriage or affinity’.4 Thus, child support has the same standing under the existing Hague Conventions as maintenance obligations between spouses and other forms of family maintenance.

1 The Special Commission on Maintenance Obligations of the Hague Conference on Private International Law of April 1999 met ‘to examine the operation of the Hague Conventions on maintenance obligations and the New York Convention of 20 June 1956 on the Recovery Abroad of Maintenance’. The Special Commission recommended that the Hague Conference commence work on a new worldwide international instrument. Report and Conclusions of the Special Commission on Maintenance Obligations of April 1999, drawn up by the Permanent Bureau in December 1999, paragraph 1 (http://www.hcch.net/ e/workprog/maint.html). After significant preparatory work, negotiations on the new instrument began at the first meeting of the Special Commission on the International Recovery of Child Support and other Forms of Family Maintenance in May 2003. See Report on the First Meeting of the Special Commission on the International Recovery of Child Support and Other Forms of Family Maintenance (5-16 May 2003). Preliminary Document No. 5. (http://www.hcch.net/ doc/maint_pd05e.pdf). 2 For other international agreements on child maintenance see the United Nations Convention on the Recovery Abroad of Maintenance (UNCRAM) 1956; Council of Europe Recommendation on Payment by the State of Advances on Child Maintenance 1982; Council of Europe Recommendation on Parental Responsibilities 1984; Inter-American Montevideo Convention on Support Obligations of 1989. 3 Special Commission on the International Recovery of Child Support and other Forms of Family Maintenance, Report of Meeting No. 1, 5 May 2003, Introductory Remarks. 4 See, for example, the Hague Convention on the Law Applicable to Maintenance Obligations of 1973, Art. 1.

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After these conventions were drafted, however, the 1989 United Nations Convention on the Rights of the Child (hereinafter: CRC) entered into force. One of the most widely signed conventions,5 the CRC elevated frequently neglected issues affecting children to the status of fundamental human rights. Included in these rights is the child’s right to maintenance.6 This article aims to explore how child support, as a right now embodied in international law, should best be considered in the framework of the proposed Hague Convention on International Recovery of Child Support and Other Forms of Family Maintenance. We suggest that, as the only maintenance obligation enshrined as a human right in international law, child support deserves its own instrument. We then propose a framework that would give a future Hague Convention on child maintenance obligations the practical ways and means to protect this human right by providing an efficient jurisdictional system for the international recovery of child maintenance.

II.

The United Nations Convention on the Rights of the Child: Child Maintenance as a Human Right

The CRC grants every child the right to an adequate standard of living. This right is enshrined in Article 27(1) as follows: ‘State Parties recognize the right of every child to a standard of living adequate for the child’s physical, mental, spiritual, moral and social development.’ Specific obligations to facilitate the realization of this right are laid down in subsections (2) to (4),7 which read as follows: ‘2. The parent(s) or others responsible for the child have the primary responsibility to secure, within their abilities and financial capacities, the conditions of living necessary for the child’s development. 3. States Parties, in accordance with national conditions and within their means, shall take appropriate measures to assist parents and others responsible for the child to implement this right and shall in case of need provide material assistance and support programmes, particularly with regard to nutrition, clothing and housing. 5 To date, 193 countries have signed the Convention. Only one country – the United States – has not joined the CRC. 6 1989 United Nations Convention on the Rights of the Child, Art. 27. The relevant sections of Article 27 are cited in the text below. 7 DETRICK S., A Commentary on the United Nations Convention on the Rights of the Child, The Hague 1999, p. 458.

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4. States Parties shall take all appropriate measures to secure the recovery of maintenance for the child from the parents or other persons having financial responsibility for the child, both within the State Party and from abroad. In particular, where the person having financial responsibility for the child lives in a State different from that of the child, States Parties shall promote the accession to international agreements or the conclusion of such agreements, as well as the making of other appropriate arrangements.’ Article 27(4) was included in the Convention at the suggestion of the observer from Finland, who maintained that a child’s welfare should not be jeopardized by the fact that his parent or other person financially responsible for him lives in a different State.8 The final draft of the Convention included the obligation of States Parties ‘to promote the accession to international agreements or the conclusion of such agreements, as well as the making of other appropriate arrangements’ so as to ensure the recovery of maintenance due from persons living in a State different than that of the child. Article 27(4) thus makes it obligatory to protect the child’s right and to enforce the parental responsibility toward the child set forth in Article 27(1)-(2). Therefore, the efforts of the Hague Convention to draft a new instrument on the international recovery of maintenance fall squarely within the ambit of Article 27 of the CRC.

III. The Hague Conventions The preamble to the Hague Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children of 1996 places it explicitly in the wake of the CRC.9 Like the Convention on Protection of Children and Co-operation in respect of Inter-country Adoption of 1993 before it, Article 1 of the Convention on the Protection of Children uses the expression parental responsibility instead of the language used in the earlier conventions (i.e., relationship subjecting the infant to authority10), because this is the term used in the CRC.11

8

Ibid., 465. Note that the Hague Convention of 1996 explicitly does not apply to maintenance obligations. See Article 4(e). 10 See, for example, the Hague Convention Concerning the Powers of Authorities and the Law Applicable in Respect of the Protection of Infants of 1961, Art. 3. 9

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As shown by the explanatory report to the 1996 Convention, the definition of the term parental responsibility, as agreed to by the delegates to the conference, is broad: It not only includes responsibility for the person of the child, his property, and legal representation of the child but also encompasses those rights of parents necessary to raise children and ensure their development.12 By replacing its previous narrow language with the significantly broader term parental responsibility, the Hague Conference acknowledged that the CRC created a basket of children’s rights and parental obligations that Hague Conventions must henceforth take into account if they are to intervene on behalf of children. Similarly, any future Hague Convention on maintenance obligations with respect to children must work within the framework of parental responsibility and the States’ duty to ensure that parents respect the rights of the child established in international law by the CRC.

IV. The Proposed Hague Convention on International Recovery of Child Support and Other Family Maintenance Obligations As presently conceived, the proposed Maintenance Convention will cover all forms of family maintenance: child support as well as spousal and elder support and other support obligations arising from family relationships. In our opinion, a first convention dealing exclusively with child maintenance is in order for several reasons. Thanks to the CRC, child support is presently the only family maintenance obligation internationally recognized as a human right, thus placing it in an entirely different legal and conceptual framework than alimony and elder support. Even the only country that has not recognized the transformation of child support obligations into a human right by joining the CRC – the U.S. – at least recognizes child support as a legal obligation.13 This is not the case in regard to other family maintenance obligations. While spousal support in cases of divorce or separation is an accepted norm in 11

LAGARDE P., Explanatory Report on the Hague Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children of 1996, para. 14. 12 Ibid. 13 It should be noted that other forms of family maintenance obligations – alimony, elder support – are contractual arrangements between adults, whereas child support is an obligation of an adult towards a child who has an internationally recognized right to enforce that obligation.

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some countries (e.g., the U.S.), in others it is not. Furthermore, in countries where much of family law is under the jurisdiction of religious courts, spousal support often does not fall within the framework of civil law (e.g., Israel). A legal obligation to support family members other than one’s children or spouse is even less recognized around the world. Thus, before enshrining in an international convention standards of family obligations that may not exist in many countries, it would be more effective to focus first on the one obligation of family maintenance that is almost universal and in fact constitutes the most common type of maintenance claim. This would greatly facilitate the negotiations on the drafting of a convention by removing the more controversial and less common denominator from discussion, thus making it possible to focus with greater clarity on child maintenance. Many States already have programs in place for recovery of child support. A new convention would thus not need to start from scratch but could consider the different options already available, draw on the experience of Member States, and build from there. The fact that such State programs already exist would facilitate the implementation of the new convention. Moreover, where States pay child maintenance in cases of parental delinquency, they would have the added incentive of seeking to recover maintenance paid from the delinquent parent. Therefore, confining the convention to child support obligations alone will result in a more efficient, comprehensive and faster journey from discussion to draft to implementation of a convention, the lack of which keenly impacts children around the world on a daily basis.

V.

Private International Law Issues

A.

Authorities of the State of the Habitual Residence of the Child Should Be Empowered to Take ‘All Appropriate Measures’ to Recover Child Support

Article 27(4) of the CRC imposes on State Parties the obligation to take ‘all appropriate measures to secure the recovery of maintenance for the child from the parents or other persons having financial responsibility for the child, both within the State Party and from abroad’. In this context the question arises for which children the State is obliged to take measures to recover maintenance. Since we are addressing an internationally recognized human right, it is not clearly stated whether the State’s obligation extends to any resident child or whether the child must be domiciled in that State or whether it is restricted to a national of that State. However, the proposal to include this article in the Convention was prompted by the desire not to adversely affect a child’s welfare by the fact that the person financially responsible for him lives in a different State, thus implying that the responsible State is the one where the child

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habitually resides. This is supported by the previous section of the same article – Article 27(3) – which obliges a State, in case of need, to provide material assistance, especially with regard to the child’s nutrition, clothing and housing needs – needs intimately connected with the child’s domicile. Thus, while it could be argued that the State of the person liable for maintenance should be obliged to enforce the obligation, an approach more consistent with the CRC would hold the State of the child’s habitual residence accountable for the recovery of the child’s maintenance. After all, this is the State that will be required to provide maintenance for the child under Article 27(2)-(3) if the debtor party does not fulfill his obligation. This is also usually the State best positioned to make an assessment of the child’s needs and is often the State whose courts issued the maintenance order. Furthermore, it is the parents’ obligation to provide their child’s maintenance where the child lives, and not the child’s duty to pursue his parents to collect it. Therefore, the State of the child’s habitual domicile should have the power to guarantee the child’s right.14 Accordingly, the new Hague Convention should take into account the existing obligation of States under the CRC to pursue delinquent parents abroad by empowering them to take the necessary measures to recover the maintenance due. Article 27 of the CRC requires State Parties to take ‘all appropriate measures’. This mandate should include competence to establish a parent-child obligation, to determine the needs of the child, and to set the amount of maintenance due. Each of these topics should be addressed by the Conference.

B.

The State of the Child’s Habitual Residence Should Have Jurisdiction over Child Maintenance

Different jurisdictional regimes have been proposed for the new Convention, several of which are discussed more fully by William Duncan in the Preliminary Document No. 3 to the proposed Convention.15 They are reviewed only briefly here.

14 We note here that, according to Article 27(3) of the CRC, the State is obliged not only to collect child support due, but also to ensure that the duties of parental responsibility set forth in Article 27(2) are carried out, i.e., ‘to secure, within their abilities and financial capacities, the conditions of living necessary for the child’s development’. 15 DUNCAN W., ‘Toward a New Global Instrument on the International Recovery of Child Support and Other Forms of Family Maintenance’, Preliminary Document No. 3 of April 2003.

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1.

Creditor’s choice

Two regional instruments on maintenance provide for a choice of jurisdictional bases to be made at the creditor’s discretion. -

The Brussels approach: In cases where maintenance is ancillary (i.e., divorce proceedings), the ‘Brussels I’ Regulation allows the creditor to choose between the State of the debtor’s domicile, that of the creditor’s domicile, or a court having jurisdiction in matters relating to personal status, unless that court’s jurisdiction is based on the nationality of only one of the parties.16 The Regulation also allows prorogation of jurisdiction and jurisdiction based on the defendant’s appearance (unless the defendant appeared only to contest jurisdiction.)17

-

The Montevideo approach: Like the Brussels Regulation, the Montevideo Convention allows a creditor seeking a maintenance order to choose either the jurisdiction of his own habitual domicile, that of the debtor, or that of a State to which the debtor is connected by ‘personal links’, such as property ownership or financial benefit.18 As to changing an existing order, the Montevideo Convention provides that, while this same regime also applies to petitions to increase the amount of the order, petitions to reduce or terminate support can be heard only by the jurisdiction that determined the amount in the original order.19

2.

Fact-based jurisdiction

The U.S. has submitted the concept of fact-based jurisdiction to the Hague Conference. Under this approach, a State may apply its own jurisdictional standards and its court orders will be recognized by the second State if, given the same factual scenario, it would have been possible for the latter to exercise jurisdiction.20 16 Council Regulation (EC) No 44/2001 of 22 December 2000 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, Arts. 2(1), 5(2). 17 Ibid., Arts. 23, 24. 18 Inter-American Convention on Support Obligations of 1989, Art. 8. 19 Ibid., Art. 9 s. 20 SPECTOR R.G., ‘Essay: Toward an Accommodation of Divergent Jurisdictional Standards for the Determination of Maintenance Obligations in Private International Law’, Attachment 4 to the United States response to the 2002 Questionnaire, Preliminary Document 2 on Maintenance Obligations, 3, 11-13.

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The impetus for this approach is the U.S. constitutional requirement that jurisdictional standards be based on a connection between debtor and forum. As explained by SPECTOR: ‘After a long and serious debate the United States Commission on Interstate Child Support and the drafters of the Uniform Interstate Family Support Act determined that any attempt to base jurisdiction on the residence of the maintenance creditor or the child would be unconstitutional under the United States Supreme Court’s interpretation of the Due Process Clause as applied to the exercise of jurisdiction by State courts in maintenance cases. Thus, the Uniform Act [the Uniform Interstate Family Support Act of 1996] expands those actions of a maintenance debtor that would subject him to jurisdiction to the limits allowed by the Supreme court but does not attempt to base jurisdiction on the habitual residence of the maintenance creditor or of the child.’21

3.

Application system

Some States, such as Canada and Australia, use an application system: The creditor is given State assistance in preparing an application for support, which is then sent to the State of the debtor’s habitual residence, which will issue the order.22 This system is based on the presumption that a connection must exist between debtor and jurisdiction, but it also balances the need to provide support for the creditor.23 Since these different schemes are in conflict, Preliminary Document No. 3 proposed a draft article that would accommodate the different regimes by making it possible for States to make reservations to the articles inconsistent with their own jurisdictional systems.24

4.

Child-centered jurisdiction

In our opinion, special attention should be given to the concept of ‘child-centered jurisdiction’ by granting jurisdiction to the State of the child’s habitual residence, despite the conflicts in jurisdictional regimes and despite the constitutional difficulty of the United States. However, Duncan’s diplomatic suggestion to seek accommodation for all States should be taken into account. 21 22

SPECTOR R.G. (note 20), p. 9. See, for example, British Columbia’s International Support Orders Act, Bill 23-

2002. 23 24

Preliminary Doc. 3, p. 49. Preliminary Doc. 3, pp. 39-40, including note 146.

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Granting jurisdiction to the State of the child’s habitual residence is consistent with the Hague Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children of 1996. That Convention granted jurisdiction to take measures to protect the child’s person or property to the judicial or administrative authorities of the State of the habitual residence of the child.25 This principle of jurisdiction, a reiteration of Article 1 of the Convention Concerning the Powers of Authorities and the Law Applicable in Respect of the Protection of Minors of 5 October 1961, was accepted unanimously.26 It is also consistent with Article 3(2) of the Convention Concerning the Recognition and Enforcement of Decisions Relating to Maintenance Obligations Towards Children of 15 April 1958, where the habitual residence of the maintenance creditor is one of three acceptable bases for jurisdiction,27 and with the Montevideo Convention28 and the Brussels Regulation.29 The reasons for granting jurisdiction to the State of the child’s habitual residence are perhaps more obvious in matters regarding the issuing of protective or25

Hague Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children of 1996, Art. 5. 26 LAGARDE P., Explanatory Report. 27 The Convention was published in French only. Article 3 reads: ‘Aux termes de la présente Convention, sont compétentes pour rendre des décisions en matière d’aliments les autorités suivantes: 1. les autorités de l’Etat sur le territoire duquel le débiteur d’aliments avait sa résidence habituelle au moment où l’instance a été introduite; 2. les autorités de l’Etat sur le territoire duquel le créancier d’aliments avait sa résidence habituelle au moment où l’instance a été introduite; 3. l’autorité à la compétence de laquelle le débiteur d’aliments s’est soumis soit expressément, soit en s’expliquant sur le fond sans réserves touchant la compétence.’ 28 Article 8, which reads, in part: ‘At the option of the creditor, support claims may be heard by the following judicial or administrative authorities: Those of the State of domicile or habitual residence of the creditor; or Those of the State of domicile or habitual residence of the debtor; or Those of the State to which the debtor is connected by personal links such as possessing property, receiving income or obtaining financial benefits.’ 29 Article 5, which reads, in part: ‘A person domiciled in a Member State may, in another Member State, be sued: (…) (2) in matters relating to maintenance, in the courts for the place where the maintenance creditor is domiciled or habitually resident (…)’

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ders for the child’s benefit. As a result, there was significantly less jurisdictional conflict on this issue than in the area of maintenance. Nonetheless, there are compelling reasons for applying the same approach to maintenance orders as well, particularly in light of the CRC. The CRC’s mandate militates for conferring jurisdiction on the State of the child’s habitual residence. Since the CRC obliges States to take all appropriate measures to recover maintenance for children in their jurisdiction, it would not be logical to make the fulfillment of this obligation conditional to another State’s having exercised its jurisdiction. Another compelling reason to do so is that the harm to the child’s right to maintenance occurs in the State where he resides, regardless of whether the child is a national of that State, and wherever in the world the debtor parent may be, the harm caused by the debtor’s failure to fulfill his obligations occurs in the State of the child’s habitual residence. This is also the State that will be obliged under the CRC to provide maintenance to the child if the debtor fails to do so. Accordingly, this State has the best incentive to act on the child’s behalf. Incentives to energetically pursue the child’s rights are considerably reduced if the child does not reside in that State, if he is not a national of that State, if the harm is not caused on its territory, and if the State will suffer no consequences in cases where it fails to pursue the child’s claim. Furthermore, it is unjust to force an economically disadvantaged child whose parents have failed to pay maintenance to use substantial energy and funds he often lacks to pursue his debtor across the globe. Duncan expresses concern that allowing a creditor-based jurisdiction only would be inconsistent with U.S. constitutional law and would thus threaten universal ratification of the new instrument.30 However, the fact-based approach proposed by the U.S., which would require States to recognize orders made in cases where, given the same facts, they themselves would have exercised jurisdiction, does not go far enough to protect the child’s rights. It would still allow States refuse to 30 DUNCAN W. (note 15), pp. 33, 38. We note, however, that the US Commission of Interstate Child Support and the drafters of the Uniform Interstate Family Support Act seriously considered adopting the concept of child-based jurisdiction. Constitutional constraints notwithstanding, there seems to be widespread consensus that child-based jurisdiction is the best choice for the child. Once again, we emphasize the fundamental difference between an adult creditor and a child seeking maintenance from his parent. The former is an adult with a contractual right, seeking to enforce a contractual obligation. The latter is a minor with a fundamental human right to maintenance seeking to enforce the internationally recognized maintenance obligation of his parent. The parent-child relationship does not consist of two separate entities – debtor and creditor – who are competent and willing parties joined by a contractual bond. Hence it does not belong in the same legal category as other contractual relations between creditor and debtor. It may be worthy of consideration to raise the question whether this status should be changed back to the traditional ‘creditor/debtor’ framework, however, with respect to outstanding arrears when a child has reached majority.

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recognize orders based on jurisdictional rules that they themselves do not apply. Thus such approach is at best a bare minimum standard. We do not mean to disregard proposals such as Duncan’s that strive to accommodate the U.S. position;31 however, every other State Member of the Hague Conference has committed itself to the requirements of Article 27 of the CRC. In light of the CRC, it would be a conceptual aberration not to confer jurisdiction on States that recognize child maintenance as a human right and have assumed the obligation to take all appropriate measures to secure the recovery of maintenance due from abroad, as a result of which they lack jurisdiction to fulfill their legal mandate in the most appropriate manner.

C.

Choice of Law for Determining the Amount of Support in an Initial Order

There are several theoretical possibilities for determining the choice of law. Like the original jurisdiction, we advocate that the court apply the law of the child’s habitual residence. The Hague Conventions of 1956 and 1973 both gave priority to the law of the creditor’s habitual domicile.32 If this law did not give the child right to maintenance, the 1956 Convention applied the law of the forum, while the 1973 Convention adopted a hierarchy of possibilities: the law of the common nationality of creditor and debtor, then the law of the forum.33 The Montevideo Convention provides two alternatives but requires the court to use the approach most favorable to the creditor.34 The two possible choices are the law of the creditor’s habitual residence or that of the debtor’s habitual residence. Since a parent’s ability to meet his or her child’s needs is necessarily constrained by the parent’s resources and the economic reality of his or her place of residence, the parent’s income should be the decisive factor when determining the amount of maintenance, instead of leaving the decision to the court’s discretion.35 31

DUNCAN W. (note 15), pp. 39-40. Hague Convention on the Law Applicable to Maintenance Obligations of 1956, Art. 1; Hague Convention on the Law Applicable to Maintenance Obligations of 1973, Art. 4. An important difference between the two instruments is that the rules of the 1956 Convention applied only when the applicable law was that of a Contracting State, whereas the 1973 Convention provided that even the law of a Non-contracting State could be applied. See Preliminary Document No. 3, at 56. 33 Convention of 1956, Art. 2; Convention of 1973, Arts. 5-6. 34 Arts. 6, 7. The Brussels Regulation is not discussed here as it contains no clause on applicable law. 35 To this end, we suggest that the Convention encourage States to adopt a formulabased or guidelines approach when determining the amount of maintenance payments. Such an approach takes account of the paying parent’s resources wherever he may reside, while 32

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This reasoning seems to have been instrumental in the Canadian Inter-jurisdictional Support Orders (ISO) Acts, which designate the law of the child’s habitual residence as applicable, then the law of the forum if the child is not entitled to maintenance under the former when determining the child’s right to maintenance.36 However, when determining the amount of maintenance, these Acts apply the law of the forum. For example, the ISO enacted in British Columbia provides that, upon receipt of an application from a reciprocating foreign jurisdiction for a child support order or for amending a child support order, the British Columbia court issuing the order will, as a first choice, apply the law of the child’s domicile to determine entitlement to maintenance, but will apply the law of the paying party’s domicile to determine the amount of the maintenance payment.37 This approach resolves the problem of maintenance awards that are, practically speaking, unreasonable in light of the paying parent’s economic situation. However, it disregards the fact that the needs of the child are just as dependent on the economic situation of his place of residence as the responsible parent’s ability to pay is on that of his or her own domicile. The State of the child’s residence is in a better position to judge the child’s needs and, under the CRC, it is the child’s right that is recognized in private international law – and that must be the guiding factor in the deliberations of the Hague Conference.

D.

Jurisdiction to Amend Existing Orders

The lack of jurisdiction to amend existing orders is a frequent problem. Duncan describes the conflict between States that confer jurisdiction on the place of the creditor’s habitual residence and those that subscribe to the principle of continuity by having the court that issued the original order retain jurisdiction. As he illustrates, the conflict can result in difficult situations where no jurisdiction will be prepared to amend an order despite changed circumstances that would justify doing so.38 However, the reasons that support granting original jurisdiction to the State of the child’s habitual residence also hold true for amending orders. One could allowing the child’s needs to be determined by the law of the State best suited to evaluate them – that of the child’s habitual residence. Furthermore, where courts other than those of the child’s habitual residence have jurisdiction to amend orders, the use of guidelines would facilitate the court’s decision: A court asked to amend a support order for a child living in a foreign jurisdiction will be better able to apply the laws of the child’s jurisdiction when fixing the amount of maintenance if those laws contain a set formula for this purpose. 36 See the Inter-jurisdictional Support Orders Act (British Columbia) Bill 23 – 2002, Art. 12. 37 Ibid., Arts. 12, 31. 38 DUNCAN W. (note 15), p. 45.

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argue that, where the debtor parent seeks to amend the order because of changed circumstances, it is more appropriate for the court of his domicile to determine his income. Nonetheless, the fact remains that the child’s needs are best determined by the court at his habitual residence.39 Nonetheless, to facilitate amending orders, ways of promoting administrative cooperation between States should be explored, in particular ways to make accurate, up-to-date information on the debtor parent’s income available to the court seized. Although in this context the rights of the child have priority in private international law, in the interest of parity between the parties, one could also consider that, where a party’s ability to provide child support has substantially changed, the parent should be permitted to file a request to have the order amended by the authorities of his State of habitual residence, in a manner similar to that set forth in the Canadian ISO acts, with the request being forwarded to the courts of the child’s habitual residence. Therefore, we suggest that: 1)

jurisdiction over parent-child maintenance obligations be conferred on the courts of the child’s habitual residence and move with the child when a new habitual residence is established; and

2)

the law of the child’s habitual residence be designated as applicable for establishing the maintenance obligation and for determining the amount of maintenance.

VI. Cost of Recovery Under the CRC, the State is obliged to provide assistance to the child for the purpose of recovering maintenance due. Therefore, the State should provide such services at no charge to the child. The question of providing legal aid to the debtor parent could be discussed by the Conference; however, nothing in the CRC would require such aid to be granted.

39

It is essential, however, that in appropriate circumstances, courts enforcing orders from a foreign jurisdiction also have competence to amend them. This becomes crucial, for example, where the State of the child’s habitual residence has jurisdiction to amend an order but at the time of the request the child resides in a different State than that where the original order was granted. In such cases the courts of the new habitual residence must have jurisdiction to amend the foreign order. In some countries, this is presently not the case.

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VII. Recovery of Support Paid by State Where the State of the child’s habitual residence pays maintenance to the child because of delinquency on the part of the responsible parent, the State should have the right to reclaim the support it has paid. To this end, the State should be empowered to recover past paid maintenance from the responsible parent. To promote international cooperation and encourage States to fulfill their duties, we propose that, where a State is unable to recover maintenance from the parent because the State of the parent’s domicile fails to fulfill its obligations, the future Hague instrument or existing agreements should introduce measures to help enforce the maintenance order, for example, by requiring the State of the parent’s domicile to attempt to locate the delinquent parent, to locate his assets or to apply other enforcement methods. Furthermore, where that State fails to take such measures, the State of the child’s habitual residence should be entitled to recover the maintenance paid from the State of the delinquent parent’s domicile. This amounts to more than a simple incentive-producing measure: A State that fails to enforce a child support order is neglecting its obligation to protect internationally recognized rights of the child.

VIII. Conclusion In the aftermath of the Convention on the Rights of the Child, private international law recognizes that children have the right to maintenance and that States have the obligation to take all appropriate measures to help children recover maintenance due. In light of this, any future global instrument on the international recovery of child support must take the State’s obligations into account. Above all, it must provide the most suitable framework to enable a State to fulfill its mandate of taking ‘all appropriate measures’ to recover maintenance due to a child who habitually resides in that State. This means empowering States to take such measures.

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NEWS FROM THE HAGUE ________________

THE HAGUE CONFERENCE ON PRIVATE INTERNATIONAL LAW WORK IN PROGRESS (2003-2004)* J. H. A. VAN LOON**

I. II. III. IV. V. VI. VII. VIII. IX.

Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary Preliminary Draft Convention on Exclusive Choice of Court Agreements Towards a Global Convention on the International Recovery of Child Support and Other Forms of Family Maintenance International Conference on the Legal Aspects of an E-Commerce Transaction Special Commission on General Affairs and Policy of the Conference – Admission of the European Community Malta Judicial Conference on Cross-Frontier Family Law Issues Latin American Judges’ Seminar on the Child Abduction Convention Co-operation with UNCITRAL Centennial of Japan’s Participation in the Hague Conference – Adherence to the Hague Conventions

*

For earlier reviews, see this Yearbook, Vol. I, 1999, pp. 205-214; Vol. II, 2000, pp. 169-178; Vol. III, 2001, pp. 237-244; Vol. IV, 2002, pp. 219-226; Vol. V, 2003, pp. 169-175. ** Secretary General of the Hague Conference on Private International Law.

Yearbook of Private International Law, Volume 6 (2004), pp. 237-245 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

J. H. A. van Loon

I.

Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary

After its adoption on 13 December 2002, the process of development of the Convention on the Law Applicable to Certain Rights in respect of Securities held with an Intermediary entered its stage of consolidation.1 The Rapporteurs, Professors Sir Roy Goode (United Kingdom), Hideki Kanda (Japan) and Karl Kreuzer (Germany), with the assistance of First Secretary Christophe Bernasconi, worked intensely on the Explanatory Report. Contrary to the customary way of negotiating at the Hague Conference, no preliminary draft Convention with accompanying Explanatory Report was elaborated. Instead, the negotiations led directly to a final Convention text, as a result of which this Report provides the first and only authoritative explanation of the Convention. It was therefore deemed important to consult the Member States on the draft Report, and their comments were taken into account in the final text of the Report. The Report will soon be published in the Proceedings of the Hague Conference and, separately with the text of the Convention, in a commercial edition. The importance of the Convention is reflected by the fact that key industry groups promptly urged its immediate and universal ratification2 and governmental and regional efforts to that end were commenced promptly and are ongoing.3 Currently the Convention is also being assessed with a view to a possible signing in various States, including Japan, Switzerland and the United States.4

1 See this Yearbook, Vol. V, pp. 169-170. For the text of the Convention, see ibidem pp. 261-276. 2 Group of Thirty (G30), Global Clearing and Settlement – A plan of action, January 2003 (see www.group30.org/recommendations.php). Recommendation 15 of this Report addresses the need to advance legal certainty in respect of ‘rights to securities, cash, or collateral’; the commentary on this Recommendation stresses that ‘[o]ne area of recommendation for which united support can be offered is choice of laws. National authorities should be encouraged by all interested parties to sign and ratify the just-adopted Hague Convention as soon as reasonably possible. It is of course critical to its effectiveness that the Hague Convention be ratified as quickly as possible in as many nations as possible’. 3 On 15 December 2003, the European Commission submitted to the Council a proposal for a Council Decision concerning the signing of the Hague Convention (16292/03 JUSTCIV 273). 4 An updated selection of publications relating to the Convention can be found on the website of the Hague Conference (www.hcch.net), under the headings ‘Welcome’, ‘Conventions’, ‘36’, and ‘Bibliography’.

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II.

Preliminary Draft Convention on Exclusive Choice of Court Agreements

As reported in last year’s volume of this Yearbook,5 an informal working group convened by the Permanent Bureau, chaired by Professor Allan Philip of Denmark, drew up a draft text on choice of court agreements. This text, together with a Report prepared by First Secretary Andrea Schulz, served as a basis for a meeting of a Special Commission in December 2003, chaired by Allan Philip. The Permanent Bureau also published two other preliminary documents drawn up by Andrea Schulz: Preliminary Document No 23 ‘Mechanisms for the transfer of cases within federal systems’ and Preliminary Document No 24 ‘The relationship between the judgments project and other international instruments’, both accessible on the Hague Conference website. The Special Commission produced a draft and mandated two Co-Rapporteurs, Professors Masato Dogauchi (Japan) and Trevor Hartley (United Kingdom) to prepare an Explanatory Report on the draft Convention. The Special Commission met again from 21 to 27 April 2004 and adopted a preliminary draft Convention on Exclusive Choice of Court Agreements. Together with the Explanatory Report by Professors Dogauchi and Hartley, it is accessible on the Hague Conference website as Preliminary Document No 26. The preliminary draft Convention appears as Annex A to this article. Sadly, Professor Allan Philip passed away on 10 September 2004. At the Twentieth Session, which will take place 1430 June 2005, a new Chairman of the Commission will be elected and charged with finalising the Convention.

III. Towards a Global Convention on the International Recovery of Child Support and other Forms of Family Maintenance From 7 to 18 June 2004, the Special Commission charged with the elaboration of a new global convention on child support and other forms of family maintenance met for the second time. The meeting had before it a Working draft of a Convention on the International Recovery of Child Support and other Forms of Family Maintenance, drawn up by the Drafting Committee established the year before and circulated to all participants and National Organs in April 2004. Representatives from 42 Member States of the Hague Conference, 13 non-Member States, 6 intergovernmental organisations, and 7 non-governmental organisations attended. The meeting was prepared by Deputy Secretary General, William Duncan, with the 5

Vol. V, 2003, p. 172.

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assistance of First Secretary, Philippe Lortie and was chaired by Judge Fausto Pocar, expert from Italy. The Drafting Committee will continue to refine the Working Draft, and Working Groups on applicable law and on administrative co-operation are to continue with parallel work. The third meeting of the Special Commission is planned for 4-15 April 2005. In addition to the usual English / French interpretation, Spanish interpretation was offered at the second meeting of the Special Commission. Thanks to the additional support of certain Member States, the third meeting of the Special Commission will again benefit from Spanish interpretation.

IV. International Conference on the Legal Aspects of an E-Commerce Transaction On 26 and 27 October 2004, the Hague Conference on Private International Law, the International Chamber of Commerce (ICC) and the Dutch Ministry of Economic Affairs co-hosted an ‘International Conference on the Legal Aspects of an E-Commerce Transaction’ in the Academy building of the Peace Palace in The Hague. The Conference attracted around 120 participants from 29 countries, including many European States as well as Canada, China, the Dominican Republic, Japan, Korea, Libya, Panama, Peru, Russia, Sri Lanka and the United States. The Secretary General of the Hague Conference and Mr Kees van der Waaij, Chairman of ICC Netherlands and of Unilever Nederland, presented the opening speeches. They welcomed representatives of governments, intergovernmental organisations (including the United Nations Commission on International Trade Law (UNCITRAL), the World Intellectual Property Organization (WIPO), the Organization for Economic Cooperation and Development (OECD) and the European Union), national Supreme Courts and international courts, private practice, business, non-governmental organisations (e.g., the Union Internationale des Huissiers de Justice and the Motion Pictures Association), academics world-wide and the press. The Minister of Economic Affairs of the Netherlands, Laurens Jan Brinkhorst, delivered the closing address. The Conference brought together representatives of legislatures, governments, business and universities. Taking a practical approach, it focused on the ‘life-cycle’ of an e-commerce transaction and the specific legal problems relating to the use of electronic means of communication at each stage of this life-cycle. In four half-day sessions, the Conference examined the pre-contractual phase, the conclusion of the contract, its performance, and the post-contractual phase. A moderator outlined the legal issues raised by e-commerce at each of the four phases. A panel presentation of possible solutions followed, along with a general discussion.

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The issues discussed at the session on the ‘pre-contractual phase’ included, inter alia, advertising and competition and the infringement of intellectual property rights in that context. The ‘contractual phase’ focused on the negotiation and conclusion of the contract, its formal and substantive validity, as well as choice of court and choice of law clauses. The session on ‘the performance phase’ covered the delivery of goods or services and online performance, on the one hand, and electronic payment and taxes, on the other. The discussion at the session on the ‘post-contractual phase and dispute resolution’ dealt with issues such as data protection, confidentiality, spam, and product and service liability. In addition, there were presentations on a casestudy on online dispute resolution and on the preliminary draft Hague Convention on Exclusive Choice of Court Clauses.6 A conference book containing the full papers will be published in 2005.

V.

Special Commission on General Affairs and Policy of the Conference – Admission of the European Community

The Special Commission on General Affairs and Policy met 6-8 April 2004 at The Hague under the chairmanship of Mrs Monique Jametti-Greiner from Switzerland. Decisions were taken on several important issues, in particular on the continuation of work on the Judgments Convention (see supra, Point II) and the admission of the European Community to the Hague Conference. It was already reported in earlier volumes of this Yearbook7 that, as a result of the Amsterdam Treaty, the European Community may now adopt measures in the field of judicial cooperation in civil matters having cross-border implications in so far as is necessary for the proper functioning of the internal market. The EC has already exercised this competence in particular by the adoption of several regulations. Having become a player in the field of private international law, it is important that the EC be integrated into the leading global organisation in the field, the Hague Conference. This was acknowledged by the Special Commission on General Affairs and Policy, which expressed unanimous support for the principle that the European Community should become a Member of the Hague Conference. In addition, the Special Commission approved a number of criteria and procedures for determining the modalities of such membership.

6

The abstracts of the presentations are accessible on the Hague Conference website (www.hcch.net) at http://hcch.e-vision.nl/upload/wop/e-comm_intro_e.html. 7 See this Yearbook, Vol. V, 2003, pp. 171-172.

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First of all, the admission of the European Community will require a modification of the Statute, the Rules of Procedure for Plenary Meetings and, possibly, of the Regulations on Budgetary Matters. Work on these modifications should be undertaken in parallel and any final decision on the admission of the European Community should be taken on the basis of an agreed package of amendments to all relevant instruments. Modification of the Statute should not be restricted to the admission of the European Community but should allow the admission of any Regional Economic Integration Organisation (REIO), provided its Member States have empowered it to act in matters of private international law. It was further agreed that Membership of the European Community – or REIOs in general - should not lead to additional voting or procedural rights (the principle of ‘non-additionality’). In any case, there is a common desire that the work of the Conference be conducted on a consensual basis to the extent possible. The amendment of the Statute should – without prejudice to the possibility of further reform at a later stage – include further limited revision in several of its articles reflecting practices that have developed since the Statute entered into force on 1 July 1955. It was agreed that the Secretary General, assisted by an Informal Advisory Group which first met in January 2004, and in consultation with the European Commission, should draw up a complete proposal, including modifications of the Statute, the Rules of Procedure and, possibly, the Regulations on Budgetary Matters. This proposal should be submitted for consideration, if possible, to the next meeting of the Special Commission in April 2005. The second meeting of the Informal Advisory Group was held 16-17 December 2004.

VI. Malta Judicial Conference on Cross-Frontier Family Law Issues From 14 to 17 March 2004, Judges and Experts from Algeria, Belgium, Egypt, France, Germany, Italy, Lebanon, Malta, Morocco, the Netherlands, Spain, Sweden, Tunisia, the United Kingdom, the European Commission, the Council of the European Union, the International Social Service and Reunite, as well as the Hague Conference on Private International Law, met in St Julian’s, Malta, to discuss how to secure better protection for cross-frontier rights of contact of parents and their children and the problems posed by international abduction between the States concerned. The meeting was prepared by the Permanent Bureau (Secretary General, the Deputy Secretary General William Duncan, First Secretary Philippe Lortie and Legal Officer Caroline Harnois) in close co-operation with the Government of Malta and the Ambassador of Malta at The Hague, Mr Adrian Strickland. The participating Judges and Experts agreed inter alia on the following:

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The principles set out or implicit in the United Nations Convention on the Rights of the Child of 1989 are affirmed as a basis for action. In particular: a) b)

c) d) -

Efficient and properly resourced authorities (Central Authorities) should be established in each State to co-operate with one another in securing crossfrontier rights of contact and in combating the illicit transfer and non-return of children. Such co-operation should include at least: -

-

in all actions concerning children, the best interests of the child shall be a primary consideration; a child whose parents reside in different States shall have the right to maintain on a regular basis, save in exceptional circumstances, personal relations and direct contacts with both parents; a child should have the opportunity to learn to know and respect the culture and traditions of both parents; States are obliged to take measures to combat the illicit transfer and non-return of children abroad.

assistance in locating a child; exchange of information relevant to the protection of the child; assistance to foreign applicants in obtaining access to local services (including legal services) concerned with child protection.

The cases under consideration need to be handled by experienced judges. Judicial training and concentration of jurisdiction to a limited number of courts contribute to the development of the necessary expertise.

It was furthermore agreed that the process of dialogue should continue, with the assistance of the Hague Conference in co-operation with other international organisations including the European Union, with a view to the progressive elaboration and implementation of these conclusions. Translations into Arabic should be prepared of the texts of the essential Conventions of the Hague Conference on Private International Law, in particular those concerning the protection of children, thus enabling widespread diffusion of the norms and principles contained in these international instruments and spreading knowledge and awareness of the texts.

VII. Latin American Judges’ Seminar on the Child Abduction Convention From 1 to 4 December 2004, ninety Judges, Central Authority officials and other experts from Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Dominican

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Republic, Ecuador, El Salvador, Guatemala, Mexico, Nicaragua, Panama, Paraguay, Peru, Spain, United States of America, Uruguay, and Venezuela and the following Organisations: Organization of American States – Inter-American Children’s Institute, International Centre for Missing and Exploited Children, American Bar Association – Latin American Law Initiative Council, TexasMexico Bar Association and the Law School of Instituto Tecnólogico y de Estudios Superiores de Monterrey met in Monterrey, Mexico, to discuss how to improve, among the countries represented, the operation of the Hague Convention of 25 October 1980 on the Civil Aspects of International Child Abduction. The meeting was prepared by Legal Officer Marion Ely under the supervision of Deputy Secretary General William Duncan and with the assistance of First Secretary Philippe Lortie, Legal Officer Caroline Harnois and former Deputy Secretary General Adair Dyer. Agreement was reached on a number of Conclusions and Recommendations relating, inter alia, to: -

international co-operation: The effective functioning of the Hague Convention of 1980 in the interests of children depends on close co-operation among the Judges and among the Central Authorities of the 75 Contracting States. Regular international meetings and contacts among Judges and Central Authorities are needed to promote the exchange of information, ideas and good practice. Such meetings and contacts help develop and maintain the mutual understanding and trust necessary for the Convention to be effective. A follow-up Seminar should be held in approximately two years. In the meantime, further initiatives should be pursued to encourage more frequent meetings and contacts, including the establishment of a website for this purpose;

-

the time element in Hague Proceedings, including appeal procedures: The Judges in attendance endorsed the Conclusions and Recommendations of the March 2001 Fourth Meeting of the Special Commission to Review the Operation of the 1980 Convention: -

-

-

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underscoring the obligation (Article 11) of Contracting States to process return applications expeditiously, and extending this obligation also to appeal procedures; calling upon trial and appellate courts to set and adhere to timetables that ensure speedy decision-making in respect of return applications; and calling for the firm management by judges, both at trial and appellate levels, of the progress of return proceedings;

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the Hague Convention of 1996 on International Child Protection: The potential advantages of the Hague Convention of 19 October 1996 on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in respect of Parental Responsibility and Measures for the Protection of Children, as an adjunct to the 1980 Convention, are recognised. States in the region are encouraged to consider its ratification or accession.

VIII. Co-operation with UNCITRAL As a result of a new and close co-operation with UNCITRAL, the Hague Conference now provides assistance to UNCITRAL. In 2004, the Permanent Bureau continued to participate in the Working Group on Electronic Commerce, and a delegation of the Hague Conference assisted the Working Groups preparing draft Legislative Guides on Secured Transactions and on Insolvency Law.

IX. Centennial of Japan’s Participation in the Hague Conference – Adherence to the Hague Conventions The centennial of Japan’s participation in the Hague Conference (1904-2004) was celebrated by events both in The Hague – a reception at the Peace Palace (23 September 2004) – and in Tokyo – a meeting of the Japanese Association on Private International Law (11 October 2004), as well as an International Symposium on the Hague Securities Convention (12 October 2004) – attended by the Secretary General and First Secretary Christophe Bernasconi. In 2004, the number of States Parties to the Legalisation or Apostille Convention reached a record of 80 States with Albania’s accession on 9 May 2004. Turkey’s ratification brought the number of States Parties to the Intercountry Adoption Convention up to 60; the Convention on the Service Abroad of Judicial and Extrajudicial Documents welcomed Romania as its 50th State Party on 1 April 2004. The number of States Parties to the Child Abduction Convention increased to 75 as a result of the Dominican Republic’s accession on 1 November 2004.

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CASE LAW ________________

SWISS DECISION ON FOREIGN MANDATORY RULES Alfred E. VON OVERBECK*

1. Article 19 of the Swiss Statute of Private International Law (hereinafter: PIL Act) of 18 December 19871 reads as follows: ‘1) When legitimate and manifestly preponderant interests [of a party] with regard to the Swiss conception of law so require, a mandatory provision of a law other than the one designated by the present statute may be taken into consideration if the situation at hand has a close connection to that law. 2) In determining whether such a provision is to be taken into consideration, the purpose of the provision and the consequences of its application shall be considered so as to reach a decision compatible with the Swiss conception of law.’ A similar provision is found in several Hague Conventions, in Belgian and Quebec statutes, and especially in the EU Convention on the Law Applicable to Contractual Obligations of 19 June 1980.2 The EU provision is very controversial, and several Member States have set it aside under the reservation permitted by the Convention. In hindsight, it can be said that such provisions have occupied professors considerably more than the courts; in fact, they have rarely been applied in practice. * Professor Emeritus of the University of Fribourg (Switzerland); former Director of the Swiss Institute of Comparative Law. 1 RS 291. Translation by CORNU J.-C./HANKINS S./SYMEONIDES S.C., in: 37 Am. J. Comp. L. 189 (1989), at p. 199. 2 Art. 7(1) reads: ‘1. When applying under this Convention the law of a country, effect may be given to the mandatory rules of the law of another country with which the situation has a close connection, if and in so far as, under the law of the latter country, those rules must be applied whatever the law applicable to the contract. In considering whether to give effect to these mandatory rules, regard shall be had to their nature and purpose and to the consequences of their application or non-application.’

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The Swiss provision is somewhat more precautious than the Rome text. Furthermore, it is important to point out a significant difference between the French text, on the one hand, and the equally authentic German and Italian texts, on the other. The words of a party, which are placed in brackets above for the sake of emphasis, are found only in the German and Italian versions, not in the French one. The legislative history seems to prefer the French text. The narrow interpretation of para. 1 restricting the interests to those ‘of a party’ was rejected by the Conseil National; however, the words einer Partei got into in the final German text (later translated into Italian) by mistake.3 As regards the substance, party interests may be material in most cases; however, the restrictive interpretation based on the German text fails to take account of the original purpose of such provision, i.e., to give effect to important policies of a foreign State, such as prohibiting the export of archaeological remains or works of art.4 In the case at hand, the Federal Court refrained from stating which of the equally authentic texts should prevail. 2. In case A.B. v. D. SA of 7 May 2004, the Federal Court had to decide whether Article 19 should be applied in the following situation5: In 1993 A.B., a wife domiciled in California, opened an account at the Zurich Branch of Bank D., whose seat is in Geneva. The contract with the Bank provided that both A.B. and her husband A.C., also domiciled in California, were owners of the account and that A.C. had power of disposal. In 1994, a postnuptial agreement between the spouses provided that the husband was the sole owner of all assets within the U.S., and the wife the sole owner of all assets outside the U.S. In 1996 the husband A.C. filed bankruptcy. Invoking the civil and criminal sanctions of the U.S. Bankruptcy Code, the bankruptcy Administrator wrote to Bank D., requesting various information and documents, in particular a list of all accounts in the name of A.C., or for which he had the power to sign or in which he had an economic interest. The Bank replied that the Swiss provisions on bank secrecy prohibited it from providing such information; the wife refused to waive the right to secrecy.

3 VON OVERBECK A. E., ‘Das neue schweizerische Bundesgesetz über das Internationale Privatrecht’, in: Praxis des Internationalen Privat- und Verfahrensrechts 1988, pp. 329334. 4 Such Eingriffsnormen or lois d'application immédiate were taken into account in a number of cases in several countries even without a specific provision: see SIEHR K., Das Internationale Privatrecht der Schweiz, Zurich 2002, p. 608. 5 First Civil Court, case 4C.332/2003, available at http://wwwsrv.bger.ch, published (certain procedural aspects are omitted) in: Arrêts du Tribunal Fédéral Suisse, vol. 130 III, 2004, p. 620 and translated in part in: Semaine judiciaire 2004, p. 576.

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Foreign Mandatory Rules

The wife A.C. (claimant) sued Bank D (respondent) before the Handelsgericht of Zurich in payment of the value of the account in the amount of CHF 703,310. The Handelsgericht recognized that, in principle, the claimant was entitled to that amount. However, it considered that the respondent could possibly incur sanctions under Californian law or be obliged to pay twice. Applying Article 19 of the PIL Act, the Handelsgericht rejected the claim for the time being, reserving the right for the claimant to sue again later if the circumstances changed. 3. In appeal (Berufung) the Federal Court reversed the judgment in an elaborately reasoned and well-documented decision. The Federal Court first considered that Swiss law, applicable to the contract between the parties, does not provide for the application of mandatory provisions of U.S. law. Such provisions could be taken into account only if the conditions of Article 19 were fulfilled. It then proceeded to examine the circumstances of the case in light of these conditions. a)

Do the rules of the American Bankruptcy Code extend to this case? – One would have expected this to be the first issue decided by the Federal Court. However, the Handelsgericht had answered this question in the affirmative, and Swiss federal procedural law prevented the Federal Court from reexamining the lower court’s interpretation of the foreign law in the matter at hand.6

b)

Is there a close connection between the present situation and U.S. bankruptcy law? – A close connection could be established by virtue of the location of the assets. Applying a provision of the Swiss bankruptcy statute, the Handelsgericht held that all assets claimed in bankruptcy were located in the domicile of the bankrupt creditor. On the contrary, the Federal Court, relying on the correct interpretation of the Swiss bankruptcy statute and other Swiss provisions, as well as the terms of the contract with the Bank, decided that the account was located at the Swiss seat of the Bank. The Federal Court then conceded that the domicile of the parties could constitute a close connection. Both spouses are domiciled in California. However, the wife is not bankrupt herself and the bankrupt husband is not a party to the contract between her and the Bank. The person with an interest in the American provision is not the claimant wife but the defendant Bank, whose seat is in Switzerland. The fact that the Bank has other activities in California is irrelevant.

c)

Do legitimate and manifestly preponderant interests with regard to the Swiss conception of law require that American bankruptcy law be taken 6

Federal Statute on the Organisation of Courts of 16 December 1943, RS 173.119 Art. 43a, in: Arrêts du Tribunal Fédéral Suisse, vol. 126 III, 2000, p. 492.

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into account? – In the case at hand, no public interest, only the private interest of the Bank could justify recourse to Article 19. Thus it does not matter which language version of this provision7 is considered. The Handelsgericht had concluded that the respondent, an internationally active Bank, would be placed at considerable risk of being subjected to criminal sanctions and forced to make a second payment if it were held liable to pay the claimant. Upholding the presumption that, in accordance with international law, the foreign State would apply the mechanisms provided by the Swiss PIL Act for the recognition and enforcement of foreign bankruptcy proceedings (Articles 166-175), the Federal Court held that no interests existed that would justify the application of Article 19. d)

Are the conditions of Article 19(2) fulfilled? – The Federal Court found that they are not. It considered that the situation at hand is taken care of by the provisions of the Swiss international bankruptcy law und that the lower court had ignored the exceptional character and purpose of Article 19.

Thus the decision of the Handelsgericht was set aside and the case referred back to that court to rule on questions relating to the contract which had not been dealt with in the first decision. The Federal Court’s decision is certain to meet with approval. Since the result is fairly obvious, the reasons could have been less elaborate. The Federal Court probably wanted to avail itself of the rare opportunity to provide a comprehensive interpretation of Article 19.

7

250

See Point 1 above.

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FORUM* ________________

THE LAW GOVERNING COMPANIES IN SWISS PRIVATE INTERNATIONAL LAW Florence GUILLAUME

I.

Introductory Remarks

II.

Notion of Company A. Organized Associations of Persons and Organized Units of Assets (Article 150 Swiss PIL Act) B. Evaluation of the Organization Factor

III.

The Incorporation Theory A. The Lex Societatis 1. Law of the Place of Organization (Primary Rule) and Law of the Place of Central Administration (Subsidiary Rule) (Article 154 Swiss PIL Act) 2. Scope of Application of the Lex Societatis (Article 155 Swiss PIL Act) B. Recognition Ipso Jure of the Existence of a Foreign Company C. Branches of Foreign Companies in Switzerland 1. Application of the Lex Societatis of the Mother Company 2. Application of Swiss Law to Certain Matters (Article 160 Swiss PIL Act) D. The Incorporation Theory in European Community Law

IV.

Correctives to the Incorporation Theory in Favour of Third Parties A. Necessary Correctives to the Incorporation Theory 1. Restriction of the Freedom of Incorporation in Cases of Abuse or Fraudulent Conduct 2. Development of Community Case Law B.

Restriction of Representation Power (Article 158 Swiss PIL Act)

*

This section contains summaries of books recently published by young authors in languages other than English.

Dr. Florence Guillaume is attorney-at-law with the law firm Niederer Kraft & Frey in Zurich, Switzerland. The author is very grateful to Mr. Marc Schwitter and Mrs. Barbara Wilson for their thorough reading of her text.

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C.

D.

E. F.

V.

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Liability for a Foreign Company (Article 159 Swiss PIL Act) 1. Application of Swiss Law instead of the Lex Societatis 2. Conditions of Application of Article 159 Swiss PIL Act 3. Consequences of Application of Article 159 Swiss PIL Act 4. Jurisdiction of Swiss Courts (Article 152 Swiss PIL Act) Public Policy Exceptions 1. Public Policy Clause (Article 17 Swiss PIL Act) 2. Application of Mandatory Provisions of Swiss Law (Article 18 Swiss PIL Act) 3. Observance of Mandatory Provisions of Foreign Law (Article 19 Swiss PIL Act) Exception Clause (Article 15 Swiss PIL Act) The Fraus Legis Principle 1. Application of the Fraus Legis Principle in Company Law 2. Consequences of Application of the Fraus Legis Principle as a Corrective to the Incorporation Theory

Changing the Lex Societatis A. The Law Applicable to the International Transfer of a Company 1. Transfer of a Foreign Company to Switzerland (Articles 161 and 162 Swiss PIL Act) 2. Transfer of a Swiss Company Abroad (Article 163 Swiss PIL Act) B. The Law Applicable to International Merger, Demerger and Transfer of Assets and Liabilities 1. The Law Applicable to International Merger a) Merger from abroad to Switzerland (Article 163a Swiss PIL Act) b) Merger from Switzerland abroad (Article 163b Swiss PIL Act) 2. The Law Applicable to International Demerger a) Demerger from abroad to Switzerland (Article 163d cum Article 163a Swiss PIL Act) b) Demerger from Switzerland abroad (Article 163d cum Article 163b Swiss PIL Act) 3. The Law Applicable to International Transfer of Assets and Liabilities a) Transfer of Assets and Liabilities from abroad to Switzerland (Article 163d cum Article 163a Swiss PIL Act) b) Transfer of Assets and Liabilities from Switzerland abroad (Article 163d cum Article 163b Swiss PIL Act) 4. The Law Applicable to Merger, Demerger and Transfer Contracts (Article 163c Swiss PIL Act) C. Common Provisions Applicable in Cases of Emigration of a Swiss Company 1. Protection of Rights of Creditors and Partners prior to Deletion from the Register of Commerce (Article 164 Swiss PIL Act) 2. Jurisdiction for Actions for Examination of Participation and over Membership Rights (Article 164a(1) Swiss PIL Act)

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D.

Retention of the Place of Debt Enforcement and Jurisdiction in Switzerland (Article 164a(2) Swiss PIL Act) Recognition of International Transfers of a Company, Mergers, Demergers or Transfers of Assets and Liabilities among Foreign Companies (Article 164b Swiss PIL Act)

VI.

Conclusion

I.

Introductory Remarks

In the Swiss Federal Private International Law Act of 18 December 1987 (hereinafter: Swiss PIL Act), the Swiss legislator has, with respect to companies, opted for a system of conflict of law rules referring primarily to the incorporation theory. This system is gradually being completed by the case law of the Swiss Federal Court,1 which clarifies the exact scope of application of the law governing companies – i.e., the lex societatis – determined by the Swiss PIL Act. The purpose of this article is to give a short overview of the system of connecting factors applied to companies under the Swiss conflict of law rules and to discuss the two main issues which distinguish the Swiss system from the traditional incorporation theory: the existence of correctives to the incorporation theory in favour of third parties and the possibility to change the lex societatis without any prior liquidation or new formation. A survey of the case law of the European Court of Justice (hereinafter: ECJ) concerning the freedom of establishment will draw a parallel between Swiss law and European Community law.

II.

Notion of Company

A.

Organized Associations of Persons and Organized Units of Assets (Article 150 Swiss PIL Act)

In terms of Swiss private international law, a company means ‘any organized association of persons and any organized unit of assets’ (Article 150(1) Swiss PIL Act). The purpose of such a wide notion of company is to assign every entity to the legal

1 The Swiss Federal Court is the highest Swiss Court; its decisions are cited as follows when published: ATF (= Arrêt du Tribunal Fédéral) 124 (= volume) II (= indicating the area of law) 15 (= page).

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category of ‘companies’, provided it has a solid organization or is at least organized as a whole.2 An entity without sufficient organization is governed by the provisions on contracts (Article 150(2) Swiss PIL Act).3 Hence, if an entity is not sufficiently organized in the sense of Article 150 Swiss PIL Act, regardless of its legal status or form of association, it will be classified in the legal category of ‘contracts’ under Swiss private international law (Articles 112 et seq. Swiss PIL Act). Otherwise, it will be governed by the provisions on companies (Articles 150-165 Swiss PIL Act). The notion of company in Swiss private international law differs from the one in Swiss substantive law4 and is thus autonomous. The composition of a company (i.e., either an association of persons or an association of companies or a unit of assets), its legal status (with or without legal personality), the nature of its purpose (profit or non-profit) and its form of association (partnership, corporation, limited liability company, cooperative, etc.) are of no significance for its classification in the legal category of ‘companies’ in Swiss private international law. Thus not only the forms of companies existing in Swiss substantive law but also other forms of associations of persons or units of assets existing in foreign substantive laws but unknown to Swiss substantive law,5 i.e., any analogous legal relationships of foreign type, will fall into the legal category of ‘companies’ if they are organized in the sense of Article 150(1) of the Swiss PIL Act. It follows from this autonomous notion of company under Swiss conflict of laws that there is no numerus clausus of companies in Swiss private international law, contrary to the basic principle of Swiss substantive law.6

2

See Projet de loi de la commission d’experts et Rapport explicatif – Loi fédérale sur le droit international privé, Zurich 1978, p. 346. 3 Article 150(2) Swiss PIL Act reads: ‘Simple partnerships without any organisation shall be governed by the provisions on contracts (Art. 116 et seq.)’. This wording is misleading and should read as follows: ‘Entities without sufficient organization shall be governed by the provisions on contracts.’ See GUILLAUME F., Lex societatis – Principes de rattachement des sociétés et correctifs institués au bénéfice des tiers en droit international privé suisse, Zurich 2001, pp. 14 et seq. 4 See Article 530(1) of the Swiss Code of Obligations and infra II. B. 5 See Projet de loi (note 2), p. 346; DUTOIT B., Commentaire de la loi fédérale du 18 décembre 1987, 3rd ed., Basel/Geneva/Munich 2001, ad Art. 150, No 3, p. 483; VON PLANTA A., in: HONSELL/VOGT/SCHNYDER (eds.), Kommentar zum schweizerischen Privatrecht - Internationales Privatrecht, Basel/Frankfurt am Main 1996, ad Art. 150, No 1, p. 1121; VISCHER F., in: GIRSBERGER ET AL. (eds.), Zürcher Kommentar zum IPRG, 2nd ed., Zurich 2004, ad Art. 150, No 1, p. 1724. 6 See Article 530(2) of the Swiss Code of Obligations, which provides that any entity that does not fulfil the prerequisites of one of the Swiss legal forms of company is deemed to be a simple partnership.

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B.

Evaluation of the Organization Factor

By generally referring to the organization of an entity, an element that must be evaluated in each individual case, Article 150 Swiss PIL Act leaves the decision to the discretion of the judge.7 When applying this rule, the Swiss judge must classify8 the entity concerned, i.e., evaluate several factors connected with the structure of the entity concerned9, in order to determine whether its internal organization is sufficient so as to be recognized by third parties.10 If the judge decides in the affirmative, the entity concerned falls into the legal category of ‘companies’. Since the classification must be made on a case-by-case basis, it is not possible to discuss every element that can be taken into account when classifying an entity as a company. Nevertheless, some basic elements can be presented to shed light on the mechanism of classification in the field of company law. As regards an association of persons, reference can be made to the notion of ‘company’ in Swiss substantive law. According to Article 530(1) of the Swiss Code of Obligations (hereinafter: Swiss CO), a company is ‘a contractual relationship between two or more persons to attain a common purpose by joint efforts or means’. If the form of organization of the entity to be classified is similar to one of the Swiss companies (general partnership, limited partnership, corporation, corporation with unlimited partners, limited liability company, cooperative, association or foundation), its degree of organization will most probably be sufficient in the sense of Article 150(1) of the Swiss PIL Act to fall into the legal category of ‘companies’. On the other hand, if the entity concerned does not have the characteristics of one of the Swiss forms of company, it will be considered as a Swiss Simple Partnership in the sense of Article 530(2) of the Swiss CO and its classification in the category of ‘companies’ will be more problematic. In such a case, the following elements can be taken into consideration when classifying an entity in the legal category of ‘companies’: (1) the common purpose of the members of the entity; (2) a certain degree of independence of the entity from its members; and (3) the designation of at least one member as representative of the entity towards third parties. We are of the opinion that if these three factors are present, the entity concerned will be considered as a company under the Swiss conflict of laws.

7

Projet de loi (note 2), p. 346. The classification is made on the basis of the law of the forum; this principle has been accepted for a long time in Swiss law. See, e.g., ATF 96 II 78; ATF 108 II 442. 9 DUTOIT B. (note 5), ad Art. 150, No 4, p. 484; VON PLANTA A. (note 5), ad Art. 150, No 18, p. 1126. 10 DUTOIT B. (note 5), ad Art. 150, No 4, p. 484; EBENROTH C.T./MESSER U., ‘Das Gesellschaftsrecht im neuen schweizerischen IPRG’, in: Revue de droit suisse 1989 I, pp. 49-106, at p. 67; VON PLANTA A. (note 5), ad Art. 150, No 18, p. 1126; SCHWANDER I., Einführung in das internationale Privatrecht – Zweiter Band: Besonderer Teil, St. Gallen 1997, No 721, p. 319. 8

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The notion of ‘unit of assets’ does not exist in Swiss substantive law and is not defined in the Swiss PIL Act either. To be considered as a company, the unit of assets must be at least organized as a whole. This notion can be compared with the notion of association of persons: the factor of organization is the same for both types. In our opinion, at least three requirements must be fulfilled in order for a specific unit of assets to be included in the notion of ‘company’ as defined under Article 150(1) of the Swiss PIL Act: (1) one or several persons – natural person or legal person – must own and manage the unit of assets for the benefit of one or several beneficiaries; (2) the assets must be organized as a separate patrimony, which implies that these assets are independent of the owner’s or manager’s assets; and (3) the assets must have been combined to pursue a special purpose. The notion of ‘unit of assets’ of Article 150(1) of the Swiss PIL Act seems to be ‘tailor made’ for a trust. We are of the opinion that a trust fulfills in principle the requirements of the organization factor set forth in Article 150(1) Swiss PIL Act.11 However, as the classification must be made on a case-by-case basis, a specific trust may nevertheless be classified in the legal category of ‘contracts’.12 As a result, a trust can be classified either as a company or as a contract under Swiss private international law.13 The Swiss Federal Court has ruled that a specific trust may be classified as a company although not all trusts have a sufficient degree of organization to be included in the scope of application of Articles 150 et seq. of the Swiss PIL Act.14

11

Same opinion: GHANDCHI J., Der Geltungsbereich des Art. 159 IPRG (Haftung für ausländische Gesellschaften), Zurich 1991, p. 53; SUPINO P., Rechtsgestaltung mit Trust aus Schweizer Sicht, Zurich 1994, p. 162; MAYER T.M., Die organisierte Vermögenseinheit gemäss Art. 150 des Bundesgesetzes über das Internationale Privatrecht – Unter besonderer Berücksichtigung des Trust, Basel/Frankfurt am Main 1998, p. 118. 12 VISCHER F. (note 5), ad Art. 150, No 13, p. 1726. 13 This legal insecurity could be avoided only by ratification of the Hague Convention on the Law Applicable to Trusts and on their Recognition of 1 July 1985. Such ratification is currently being considered by Switzerland; see http://www.ofj.admin.ch/f/ index.html and the pre-draft of ‘Arrêté fédéral portant approbation de la Convention de La Haye relative à la loi applicable au trust et à sa reconnaissance’ at http://www.ofj.admin.ch/ f/index.html. See GUILLAUME F., ‘Incompatibilité du trust avec le droit suisse? Un mythe s’effrite’, in: Revue suisse de droit international et de droit européen 2000, pp. 1-36. 14 Decision of 3 September 1999 published in Semaine Judiciaire 2000 I, pp. 269 et seq., at p. 271. This decision modifies the former case law in which the Swiss Federal Court took the stand that all trusts had to be classified in the legal category of ‘contracts’; see ATF 96 II 79.

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III. The Incorporation Theory A.

The Lex Societatis

When an entity is classified as a company under Article 150 of the Swiss PIL Act, its governing law (i.e., its lex societatis) is determined according to Article 154 of the Swiss PIL Act.

1.

Law of the Place of Organization (Primary Rule) and Law of the Place of Central Administration (Subsidiary Rule) (Article 154 Swiss PIL Act)

Swiss private international law refers to the so-called incorporation theory, which means that companies are governed by the law of their place of incorporation.15 Traditionally, this connecting system is opposed to the so-called real seat theory,16 which refers to the law of the State where the central administration of the company or, more precisely, the center of gravity of the company is located. The main difference between these two main connecting theories is that the founders’ freedom of choice prevails in the incorporation theory, as a result of which a formal connection between the company and the State of incorporation suffices. On the contrary, the real seat theory believes that the formation of companies must be preventively controlled by the authorities and consequently refers to a material connection between the company and the State of incorporation. More precisely, Article 154(1) of the Swiss PIL Act provides that ‘companies shall be governed by the law of the State under whose law they are organized’. This primary rule is supplemented by a subsidiary rule referring to the actual administration of the company: if the governing law cannot be determined under Article 154(1) of the Swiss PIL Act, Article 154(2) of the Swiss PIL Act applies and the company shall be subject to the ‘law of the State in which it is actually managed’. The lex societatis is determined by a system of rules operating ‘in cascade’, which applies differently depending on the requirements of formation of the law of the organization State. If this law prescribes certain publicity or registration requirements for the formation of a company, the law of the place of organization applies only if such requirements are fulfilled under Article 154(1) of the Swiss PIL Act (first level of the cascade). Otherwise, the subsidiary rule of Article 154(2) of the Swiss PIL Act applies (second level of the cascade), and the law of the actual administration is the lex societatis. In cases where there are no special re15 For a general survey of the incorporation theory and its application in English, Dutch, Swiss and Italian laws, see GUILLAUME F. (note 3), pp. 115 et seq. 16 For a general survey of the real seat theory and its application in French, German and Belgian laws, see GUILLAUME F. (note 3), pp. 133 et seq.

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quirements of formation, the primary rule applies and the governing law is the organization law, provided the company is organized in accordance with that law (first level of the cascade). If the organization State cannot be identified with certainty because of the lack of requirements of formation, the subsidiary rule applies, and the law of the State in which the company has its actual administration is applicable (second level of the cascade). If a company has more than one place of management, it is not quite clear if the State in which the company is ‘actually managed’, as specified in Article 154(2) of the Swiss PIL Act, should be interpreted as referring to any of the places of administration of the company or only to its central administration. In our opinion, where a company does not meet the formation or organization requirements laid down by the law of the State where it is organized, it is to be governed by the law of the place of its central administration.17 For reasons of legal security and predictability, in such a case the lex societatis cannot be determined by the law of any place of administration of the company. This would lead to an extremely large range of possible governing laws, which cannot be the intention of a system of conflict of law rules operating in cascade. Such a system aims indeed to determine one governing law with certainty. Hence, the subsidiary rule of Article 154(2) of the Swiss PIL Act must be read as referring to the central administration of the company. In this respect, one can say that Swiss private international law refers to the incorporation theory as a primary rule and to the real seat theory as a subsidiary rule.18 The law of the real seat is subsidiarily applicable when the connection with the place of incorporation does not work. Hence, it appears that the two classical conflict of law rules determining the lex societatis complement each other and are not mutually exclusive.19

17

Same opinion: VON PLANTA A. (note 5), ad Art. 154, No 14, p. 1143. See DUTOIT B. (note 5), ad Art. 154, No 5, p. 494; KLEY-STRULLER A., ‘Die Staatszugehörigkeit juristischer Personen’, in: Revue suisse de droit international et de droit européen 1991, pp. 163-202, at p. 16; REYMOND PH., ‘Les personnes morales et les sociétés dans le nouveau droit international privé suisse’, in: DESSEMONTET F. (ed.), Le nouveau droit international privé suisse, 2nd ed., Lausanne 1989, pp. 143-207, at p. 179. 19 Article 154 of the Swiss PIL Act has been inspired by the Hague Convention Concerning the Recognition of the Legal Personality of Foreign Companies, Associations and Institutions of 1 June 1956, which has not yet entered into force. This Convention refers primarily to the place of incorporation for the recognition of foreign companies (see Article 1), but reserves the possibility to refuse the recognition if the statutory seat is not situated in the State of the real seat (see Article 2). The connection with the State of the real seat of the company is considered here as a corrective to the primary conflict of law rule which refers to the State of incorporation. 18

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2.

Scope of Application of the Lex Societatis (Article 155 Swiss PIL Act)

The law governing a company determined in accordance with Article 154 of the Swiss PIL Act applies to all aspects of its legal status; hence, it is applicable to both its internal and external relationships. In particular, the lex societatis determines the legal nature of the company, its formation and dissolution, its legal capacity to hold and exercise rights and obligations, its name or trade name, its organization, its internal relationships (in particular the relationships between the company and its members), the liability for the violation of company law provisions, the liability for its debts and the power of representation of persons acting on behalf of the company in accordance with its organization.20

B.

Recognition Ipso Jure of the Existence of a Foreign Company

The existence of a foreign company duly created under its governing law is automatically recognized in Switzerland. This rule seemed so obvious to the Swiss legislator that he did not consider it useful to formulate an express rule: the recognition ipso jure of foreign companies in Switzerland is implicit in the Swiss PIL Act.21 Thus, any foreign company which is duly created under the law of its place of organization (see Article 154(1) Swiss PIL Act) or under the law of its place of central administration (see Article 154(2) Swiss PIL Act) is recognized as a company ipso jure in Switzerland. Accordingly, foreign companies are legally capable of having rights and incurring obligations and can both sue and be sued in their corporate capacity in Swiss courts. But if neither the formation requirements of the place of organization nor those of the place of central administration are satisfied, the company has not been formed validly and its existence cannot be recognized in Switzerland.22 The Swiss legislator anticipated the number of cases in which such a situation would happen to be very small, as it is expected that foreign companies will be formed validly either under the law of their place of organization or under that of their place of central administration. Thus, the system of recognition under Swiss private international law is very flexible, as even the existence of foreign companies which have not been validly formed according to the law of their place of incorporation is recognized

20

See Article 155 of the Swiss PIL Act. See GUILLAUME F. (note 3), pp. 68 et seq. 22 If such a foreign company has a branch in Switzerland, the branch will also be regarded as non-existent in Switzerland due to the lack of an existing central administration. See a former decision of the Swiss Federal Court at ATF 50 II 507 (512). 21

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ipso jure in Switzerland based on the subsidiary rule.23 This is a consequence of the system of connecting rules operating in cascade under Article 154 of the Swiss PIL Act.

C.

Branches of Foreign Companies in Switzerland

1.

Application of the Lex Societatis of the Mother Company

A foreign company may have a branch in Switzerland. Under Swiss substantive law, a branch does not have its own legal status, as a result of which its existence is dependent on that of its main office.24 It therefore follows that a branch is governed by the law applicable to the company that has created the branch, which is determined by Article 154 of the Swiss PIL Act.25 Therefore, there is no need for a special conflict rule determining the law governing a branch of a foreign company.

2.

Application of Swiss Law to Certain Matters (Article 160 Swiss PIL Act)

Applying the law of the place of their organization to companies runs the risk that a company will be organized under a foreign law although it acts merely, if not only, through a Swiss branch in Switzerland. In such cases, the foreign company may be an empty shell and the Swiss branch its only place of business. In order to avoid such risk and to protect persons entering into relationships with the Swiss branch of a foreign company, the Swiss legislator decided that certain matters must be governed by Swiss law.26 The application of Swiss law here is clearly the manifestation of Swiss public policy. Swiss law applies in particular with regard to the representation power of the branch (Article 160(2) Swiss PIL Act cum Article 935(2) Swiss CO), the rules applying to the duty to register the branch in the Register of Commerce (Arti23 See SCHWANDER I., ‘Das Statut der internationalen Gesellschaft’, in: Revue suisse de droit international et de droit européen 2002, pp. 57-77, at pp. 65-66. 24 There is no legal definition of the branch of a company in Swiss law. However, the Swiss Federal Court has provided a definition that is not disputed, see ATF 108 II 122 (124); ATF 117 II 85 (88). 25 See, nevertheless, Article 160(1) of the Swiss PIL Act, the wording of which is misleading and disputable as it refers to the registered office of a company, designating Swiss law as applicable to the branch. In reality this provision only states the principle that foreign companies may have a branch in Switzerland. For further comments, see GUILLAUME F. (note 3), pp. 41 et seq. 26 See Article 160(1), second sentence, of the Swiss PIL Act. The application of the provisions of Swiss law on branches to specific matters in order to protect local business is the only meaning of this provision.

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cle 160(3) Swiss PIL Act cum Article 935(2) Swiss CO and Articles 75 and 75a of the Swiss Register of Commerce Ordinance), the company name of the branch (Article 952(2) Swiss CO and Article 70(2) of the Swiss Register of Commerce Ordinance) and commercial accounting (Article 957 Swiss CO).27 As a result, even if the internal relationships of a Swiss branch are governed by the foreign lex societatis of the mother company, some of the external relationships are governed by Swiss substantive law if the protection of local business so requires. However, the scope of application of Swiss substantive law to a Swiss branch of a foreign company is limited to the aim pursued, i.e., to protect local business. Hence, Swiss law does not apply to the representation power when the Swiss branch is active abroad. From the point of view of Swiss private international law, in such a case the lex societatis of the mother company applies when determining an organ’s or a legal representative’s power of representation.28

D.

The Incorporation Theory in European Community Law

It is of interest to mention here that the principle of connection with the place of incorporation is also admitted as a primary rule in European Community law. Although European Community law does not provide any connecting factor for companies, one can refer to Article 48 of the Treaty establishing the European Community of 10 November 1997 (hereinafter: EC), which concerns the freedom of establishment. Article 48 EC reads: ‘Companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the European Union shall, for the purposes of this Chapter, be treated in the same way as natural persons who are nationals of Member States.’ Literally, this provision seems to stipulate two requirements: (1) the company must be formed in accordance with the law of a Member State; and (2) the registered office or central administration or principal place of business of the company must be situated within the European Union. However, the national law of all the Member States at that time required companies to have their registered office in the State whose law governed their legal status. Thus it follows that in reality only one requirement must be fulfilled under Article 48 of the EC Treaty: the incorporation

27 MARTZ J.-D., Die inländische Zweigniederlassung einer ausländischen Unternehmung nach schweizerischem IPRG, Bern 1995, pp. 48 et seq. 28 EBENROTH C.T./MESSER U. (note 10), p. 95; GIRSBERGER D., in: HONSELL/VOGT/ SCHNYDER (eds.), Kommentar zum schweizerischen Privatrecht - Internationales Privatrecht, Basel/Frankfurt am Main 1996, ad Art. 160, No 14, p. 1195.

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of the company in a Member State.29 This interpretation of Article 48 EC has been confirmed by the European Court of Justice, which held that Member States must apply the incorporation theory towards companies formed in another Member State.30 Furthermore, the principle of the recognition ipso jure of the existence of a company incorporated in another Member State has now been established in the case law of the ECJ.31 The ECJ stated also that, in accordance with the freedom of establishment, any company incorporated in a Member State may freely establish branches in another Member State.32 It follows from this case law of the ECJ that the mother company need not be active in the Member State where it is incorporated: it may pursue all its activities in the Member State where its branch is established. The ECJ clearly stated that the reasons for a company’s incorporation in another Member State other than the one where it is active through its branch are of no significance. This case law of the ECJ has had important repercussions in practice as many companies are now formed in Member States whose company law is deemed to be more permissive (such as limited companies in England), although they are exclusively active in another Member State. By doing this, the managers of the company can reduce the scope of the company’s liability and their own personal liability, thus resulting in a serious risk for third parties who enter into relationships with such companies.33 Nevertheless, it seems that the Registers of Commerce of the Member States have no way of refusing the registration of such branches. On the other hand, Member States may continue to apply their conflict of law rules – such as the connecting factor of the real seat – towards companies formed in a non-Member State, for instance, in Switzerland. With respect to its relations with Member States, Switzerland is indeed considered a third State. It follows from this that Member States whose conflict of law rules refer to the real seat may apply this connecting factor to companies whose seat is in Switzerland. Furthermore, the requirements for establishing a branch of a Swiss company in a 29

See GOLDMAN B., ‘La nationalité des sociétés dans la Communauté Economique Européenne’, in: TFCDIP 1966-1969, pp. 215-246, at p. 222; LOUSSOUARN Y., ‘Le rattachement des sociétés et la Communauté Economique Européenne’, in: Mélanges offerts à Pierre-Henri Teitgen, Paris 1984, pp. 239-270, at p. 245. However, this issue is disputed; see EDWARDS V., EC Company Law, Oxford 1999, pp. 339 et seq. 30 ECJ, 9 March 1999, Centros case, C-212/97; ECJ, 5 November 2002, Überseering BV case, C-208/00; ECJ, 30 September 2003, Inspire Art Ltd case, C-167/01. 31 ECJ, 9 March 1999, Centros case, C-212/97. 32 ECJ, 9 March 1999, Centros case, C-212/97; ECJ, 30 September 2003, Inspire Art Ltd case, C-167/01. 33 Thus it appears that, in addition to tax law, company law is an important factor in the choice of the State of incorporation. To provide protection to the creditors of companies, it will probably be necessary to adopt European company law instruments which regulate the liability in respect of insolvency proceedings.

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Member State are determined by the national law of each Member State as Swiss companies cannot take advantage of the above-mentioned case law of the ECJ. However, if a Swiss company creates a subsidiary in a Member State, such a company will benefit from the freedom of establishment within the European Union. As a result, this subsidiary will be allowed to freely establish a branch in another Member State, even if it has no activity in its State of incorporation.

IV. Correctives to the Incorporation Theory in Favour of Third Parties Article 154 of the Swiss PIL Act is completed by special conflict of law rules which are correctives to the general principle that connects companies to their place of organization.

A.

Necessary Correctives to the Incorporation Theory

1.

Restriction of the Freedom of Incorporation in Cases of Abuse or Fraudulent Conduct

The incorporation theory is characterized by the inherent risk that a company can be incorporated in a foreign State whose law prescribes only minimal requirements of formation and restricts the liability of the founders and directors of companies. This theory is derived from English private international law, according to which the legal nature of companies is first determined by the domicile of origin – by analogy with a natural person. The domicile of origin being situated in the State where the company has been formed, the place of incorporation replaces the domicile of origin. Due to its source, the connection with the State of incorporation cannot be changed under English law and companies are in principle governed by the same law from their formation until their dissolution.34 When the Swiss legislator adopted the incorporation theory (Article 154(1) Swiss PIL Act), he referred to the place of organization of the company and developed the connecting system by making it possible for companies to change their governing law. This reflects the acceptance of corporation law shopping among States. Nevertheless, although the basic rule leaves the founders a certain latitude

34

NORTH P.M./FAWCETT J.J., Private International Law, 13th ed., London 2004,

p. 175.

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in their freedom of choice, the Swiss legislator has made it clear that this freedom must be restricted in cases of abuse or fraudulent conduct.35 To prevent companies from evading their obligations, especially those relating to representation power and liability, Swiss private international law contains rules safeguarding the rights of the creditors of a company whose business is carried out in Switzerland although it is incorporated abroad (‘pseudo-foreign companies’). The idea is to avoid situations where the creditors of a pseudo-foreign company find themselves confronted with a debtor who is a financial lure.

2.

Development of Community Case Law

Before identifying the correctives to the incorporation theory in Swiss private international law, it is of interest to mention the development of the case law of the ECJ relating to the connection of companies. This case law is closely connected to the freedom of establishment inside the European Union (Articles 43 and 48 EC). In the Daily Mail case36, the ECJ first decided that Member States are free to choose the connecting factor for companies. In this case, the ECJ held that the possibility for a company to transfer its seat from one Member State to another without losing its legal capacity is not resolved by European Community law, in particular by the rules concerning the right of establishment, and thus must be dealt with by the legislation of the Member States. Later the ECJ held in the Centros case37 that, in accordance with the freedom of establishment, a company formed under the law of a Member State may set up a branch in another Member State. Furthermore, it made clear that ‘the fact that a company does not conduct any business in the Member State in which it has its registered office and pursues its activities only in the Member State where its branch is established is not sufficient to prove the existence of abuse or fraudulent conduct which would entitle the latter Member State to deny that company the benefit of the provisions of Community law relating to the right of establishment’. By these words, the ECJ implicitly admitted that the real seat theory is contrary to the principle of the freedom of establishment. Nevertheless, the ECJ stated that Member States may adopt appropriate measures for preventing or penalizing fraud ‘either in relation to the company itself, if need be in cooperation with the Member State in which it was formed, or in relation to its members, where it has been es35 See Message du Conseil fédéral, du 10 novembre 1982, concernant une loi fédérale sur le droit international privé (loi de DIP), FF 1983 I 255 et seq., Nos 294.44. 36 ECJ, 27 September 1988, Daily Mail case, C-81/87. 37 ECJ, 9 March 1999, Centros case, C-212/97.

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tablished that they are in fact attempting, by means of the formation of a company, to evade their obligations towards private or public creditors established in the territory of the Member State concerned’. Thus, the ECJ established in the Centros case the general principle of fraus legis in European Community company law.38 This case law was confirmed by the ECJ later in the Überseering BV case,39 in which it held that Member States must apply the incorporation theory towards companies formed in another Member State. Nevertheless, the ECJ stated again that ‘it is not inconceivable that overriding requirements relating to the general interest, such as the protection of the interests of creditors, minority shareholders, employees and even the taxation authorities, may, in certain circumstances and subject to certain conditions, justify restrictions on freedom of establishment. Such objectives cannot, however, justify denying the legal capacity and, consequently, the capacity to be a party to legal proceedings of a company properly incorporated in another Member State in which it has its registered office. Such a measure is tantamount to an outright negation of the freedom of establishment conferred on companies by Articles 43 EC and 48 EC.’ In the Inspire Art Ltd case,40 the ECJ took a step forward by deciding that a Member State could not impose certain conditions prescribed in domestic company law in respect of company formation relating to minimum capital and directors’ liability to a branch of a company formed in accordance with the law of another Member State. Hence, a Member State cannot invoke ‘grounds of protecting creditors, nor combating improper recourse to freedom of establishment or safeguarding fairness in business dealings or the efficiency of tax inspections’ in order to justify the application of mandatory provisions of its domestic legislation, even for the purpose of protecting the interests of other persons dealing with the company. It follows from this case law that, although European Community law refers to the incorporation theory within the European Union, the necessity to provide correctives to the connecting factor in cases of abuse or fraudulent conduct is admitted by the ECJ. However, it is not quite clear what kind of correctives can still be invoked in this matter. Swiss private international law is clearer than European Community law in this respect: it provides two main correctives with regard to representation power

38 Same opinion: MENJUCQ M., Liberté d’établissement et fraude à la loi communautaire, Paris 1999, pp. 550 et seq. 39 ECJ, 5 November 2002, Überseering BV case, C-208/00. 40 ECJ, 30 September 2003, Inspire Art Ltd case, C-167/01.

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and liability.41 Where none of these two special correctives is applicable, one may invoke the general rules of public policy, the exception clause and the general principle of fraus legis42 in order to apply a law other than the organization law determined by Article 154(1) of the Swiss PIL Act.

B.

Restriction of Representation Power (Article 158 Swiss PIL Act)

A company can only create legal relationships with third parties through organs or legal representatives. Since the laws of some States contain rules which limit representation power, the good faith of contracting parties must be protected by restricting the grounds on which obligations entered into in the name of the company are not valid. For this purpose, Article 158 of the Swiss PIL Act provides that a company may not invoke a restriction of an organ’s or legal representative’s representation power if such restriction is unknown to the law of the State in which the other party has its place of business or ordinary residence, unless the other party knew or should have known of the restriction. The consequence of the said rule is that, although the lex societatis determines the powers of representation of persons acting for a company (see Article 155(i) Swiss PIL Act), the scope of the powers of representation is determined by Swiss law if the foreign company has contracted with a third party whose place of business or ordinary residence is in Switzerland. Therefore, a foreign company cannot invoke restrictions of its representation power under its own lex societatis when such restrictions do not exist for Swiss companies of the same legal form. The purpose of this rule is to protect the third contracting party who thought that an organ or a legal representative of the foreign company43 had a valid representation power.44 In other words, the third party must have been acting in good faith when he contracted with the person who was representing the company.

41 See infra, IV, B and C. The Swiss PIL Act contains two other correctives which are not discussed here; one relates to claims arising out of the public issue of equity and debt instruments (Article 156 Swiss PIL Act), the other to the protection of name and company name (Article 157 Swiss PIL Act). 42 See infra, IV, D, E and F. 43 Article 158 of the Swiss PIL Act is only applicable to the acts of the formal representatives of a company, i.e., an organ or a legal representative, and not to the acts of a contractual agent, which are governed by Article 126 of the Swiss PIL Act. 44 See Article 9 of the First Council Directive 68/151/EEC of 9 March 1968 (68/151/EEC), OJ No L 65 of 14 March 1968, p. 8, which contains the same rule.

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C.

Liability for a Foreign Company (Article 159 Swiss PIL Act)

1.

Application of Swiss Law Instead of the Lex Societatis

The liability for the debts of a foreign company plays a central role in the protection of third party interests. The main risk connected with the incorporation theory is that, when choosing the place of incorporation, the founders of a company are able to choose the legal framework that best suits them. Therein lies the fundamental weakness of the incorporation principle, which is the risk of formation of companies abroad only pro forma. The Swiss legislator tried to establish a special rule which would correct this risk by taking account of the interests of the Swiss creditors of pseudo-foreign companies.45 The basic idea was that the application of Swiss law would be more profitable for Swiss creditors than the foreign lex societatis. Furthermore, the Swiss legislator thought that creating the institution of liability of the organs or legal representatives of the foreign company was the most realistic way of fighting abuse or fraudulent conduct of the founders as such liability would efficiently protect the interests of the foreign company’s creditors. However, the elaboration of this special rule turned out to be very problematic and the scope of the final version is still highly debated.46 According to Article 159 of the Swiss PIL Act, the liability of persons acting in the name of a company created under a foreign law whose activities are carried out in or from Switzerland is subject to Swiss law. This provision is the Swiss legislator’s reply to the pernicious effects of the incorporation theory on the liability for the debts of a foreign company and the violation of requirements of Swiss company law. Unfortunately, as we will see, the final wording of Article 159 of the Swiss PIL Act is unable to resolve the problems for which it was created. The main characteristic of Article 159 of the Swiss PIL Act is that this provision adds an objective element to the application of the incorporation theory. In principle, in the said theory the lex societatis is determined on the basis of a subjective element: the will of the founders to incorporate the new company in a specific State. When there is no material element to support the formal element, the connection of the company with its State of incorporation is purely virtual, thus placing third parties at risk of being misled by the false appearance created by the founders of the company. In order to remedy this risk, the material element of the place where the activities of a company are carried out intervenes by way of Article 159 of the Swiss PIL Act. According to the said provision, Swiss courts may apply Swiss liability law instead of the lex societatis if the foreign company has a close connection with Switzerland. This rule reconciles the basic principle of the incorporation theory, which is the freedom of the founders to choose the place of incorporation of a new company. It also safeguards the interests of the company’s 45 46

Projet de loi (note 2), p. 352. See GUILLAUME F. (note 3), pp. 213 et seq.

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creditors against the disadvantages arising from a purely subjective incorporation where the latter does not correspond with the place where the company is active in reality.

2.

Conditions of Application of Article 159 Swiss PIL Act

The application of Article 159 of the Swiss PIL Act is subject to the following conditions. The first condition is that a company – in the sense of Article 150 of the Swiss PIL Act – must have been formed validly under foreign law. Therefore, the lex societatis of a company must not be Swiss law. Furthermore, Article 159 of the Swiss PIL Act applies only if the lex societatis can be determined by applying Article 154(1) of the Swiss PIL Act, which means that a company must have fulfilled the requirements of the law of its organization State. Article 159 of the Swiss PIL Act cannot apply when the law governing a company must be determined according to Article 154(2) of the Swiss PIL Act, which refers to the law of the State in which the company is actually managed. In such case the said State can only be Switzerland and thus the application of Article 159 of the Swiss PIL Act is to no avail. The second condition is that the activities of the foreign company must be managed in or from Switzerland. The place where the company carries out its business is not relevant here.47 The company may carry out business in Switzerland or abroad: the fact that it is managed in Switzerland is sufficient for the application of Article 159 of the Swiss PIL Act. On the contrary, if the company is managed abroad, Article 159 of the Swiss PIL Act is not applicable even if the company carries out business in Switzerland. What is important in this context is that, although governed by a foreign law, the company gives the appearance of being a Swiss company because of its place of management. Furthermore, Article 159 of the Swiss PIL Act must be interpreted in the sense that the company must actually be managed in Switzerland: Switzerland must be the place with which the company is most closely connected from a management point of view.48 As a result, the applicability of Article 159 of the Swiss PIL Act depends on the determination of the place of central administration of the company, which is a particularly difficult exercise. As seen above, it is left to the Swiss judge in each case to decide whether the level of management of the company in Switzerland is sufficient in the sense of Article 159 of the Swiss PIL Act.

47

See GHANDCHI J. (note 11), p. 72; REYMOND PH. (note 18), p. 190. Thus the mere fact that a dummy representative of the company is domiciled in Switzerland is not sufficient for Article 159 of the Swiss PIL Act to be applicable. 48

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The third condition is that the claimant must have believed in good faith that the company managed in Switzerland was Swiss.49 In other words, the claimant must have been misled about the fact that foreign and not Swiss substantive law was applicable to the liability of the company. As a result, only third parties may file a claim based on this provision. If the action for liability concerns internal relationships (i.e., relationships between the company and its members), Article 159 of the Swiss PIL Act is not applicable, and the lex societatis is exclusively applicable to the liability of the company.50 The fourth condition is that the defendants in an action for liability must be the persons acting in the name of the company. The said wording must be interpreted as including every person who actually acts for the management or the administration of the company.51 Thus, the defendants can be any organ of a company in the terms of Article 55 of the Swiss Civil Code (hereinafter: Swiss CC) or any de facto organ of a company.52 According to this provision, any representative or agent of a company who is charged by law or the company statutes to fulfill company tasks or who in reality fulfills such tasks autonomously should be considered as a company organ.53 The representatives, agents, directors, managers, administrators or liquidators of the company (natural persons or legal entities) are concerned in particular.

3.

Consequences of Application of Article 159 Swiss PIL Act

When Article 159 of the Swiss PIL Act is applied, Swiss law governs the liability of persons acting in the name of a company for violation of any company law provision. Article 159 of the Swiss PIL Act is a corrective to the rule under which the lex societatis should, in principle, govern the liability for violation of company law provisions (Article 155(g) Swiss PIL Act) and the liability for the company’s debts

49 Decision of the Swiss Federal Court of 13 June 1994, published in Semaine Judiciaire 1994, pp. 687 et seq., at p. 689. See VISCHER F. (note 5), ad Art. 159, No 8, p. 1785; VON PLANTA A. (note 9), ad Art. 159, No 8, p. 1182. 50 See Article 155(f) and (h) of the Swiss PIL Act. 51 DUTOIT B. (note 5), ad Art. 159, No 7, p. 508; GHANDCHI J. (note 11), pp. 111 et seq.; REYMOND PH. (note 18), p. 192. 52 Swiss law is applicable when determining the persons liable under Article 159 of the Swiss PIL Act. This exception to Article 155(e) of the Swiss PIL Act is imposed by the ratio legis of Article 159 of the Swiss PIL Act, whose application could be hindered if none of the persons acting in the name of a company in Switzerland is regarded as an organ of the company under its lex societatis. Same opinion: GHANDCHI J. (note 11), p. 112; REYMOND PH. (note 18), p. 192. 53 See ATF 117 II 570.

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(Article 155(h) Swiss PIL Act).54 On the other hand, Article 159 of the Swiss PIL Act does not apply to tortious or contractual liability. The liability of the organs of a pseudo-foreign company is governed by the rules of the Swiss Code of Obligations or the Swiss Civil Code relating to the liability of organs of the type of company that is most similar to the foreign company concerned. The application of Article 159 of the Swiss PIL Act implies the transposition of the foreign company into the Swiss legal system, i.e., its classification in one of the legal categories of Swiss company law. When the foreign company does not correspond to any of the forms of companies existing in Swiss law, the application of Article 159 of the Swiss PIL Act appears to be very problematic. This can easily occur since the notion of ‘company’ under Swiss private international law is very broad (see Article 150 Swiss PIL Act). If the classification of the foreign company reveals that it does not correspond to any form of Swiss company, the Swiss general rules of liability apply by analogy (see Articles 41 et seq. and 55 Swiss CO). The same rule applies when the legal status of the corresponding form of Swiss company does not contain any special rule concerning the company’s liability. As a conflict of law rule, Article 159 of the Swiss PIL Act does not create a new form of liability in Swiss law: the said provision only allows the claimant for liability to invoke Swiss law instead of the lex societatis. In this context, we should point out that the conditions under which the corporate veil can be pierced are very restrictive under Swiss law.55 Article 159 of the Swiss PIL Act does not provide for the possibility of such a piercing: this provision is only a conflict of law rule and has no substantive content.56 Invoking Swiss law is left to the claimant’s discretion: he will invoke Article 159 of the Swiss PIL Act only if the application of Swiss law would lead to a result in his favour, which would not be the case should the lex societatis apply. In our opinion, Article 159 of the Swiss PIL Act is not a mandatory provision: it only applies when the protection of the so-called weaker party would be possible only by applying Swiss law to the liability of persons acting in the name of a foreign 54 Therefore, Swiss substantive law applies not only to liability for violation of company law provisions but also to liability for the company’s debts. As regards the liability for a company’s debts, the scope of liability of the organs of the company will depend on the Swiss legal form to which the pseudo-foreign company is most similar. Same opinion: REYMOND PH. (note 18), p. 191. However, some legal authors are of the opinion that Swiss substantive law applies only to liability for violation of company law provisions: EBENROTH C.T./MESSER U. (note 10), p. 90; GHANDCHI J. (note 11), p. 95. 55 According to the case law of the Swiss Federal Court, the piercing of the corporate veil is allowed only to regard a single shareholder of a company as constituting an economic entity with the company (see, e.g., ATF 85 II 111; ATF 102 III 165) or to hold the mother company liable for the debts of one of its subsidiaries (see, e.g., ATF 120 II 331) in certain circumstances. 56 For further comments, see GUILLAUME F. (note 3), pp. 246 et seq.

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company.57 Otherwise, the general rule applies and the lex societatis governs the question of the company’s liability.

4.

Jurisdiction of Swiss Courts (Article 152 Swiss PIL Act)

When Article 159 of the Swiss PIL Act applies, Swiss courts at the defendant’s domicile or ordinary residence or at the place where the company is actually managed have jurisdiction (Article 152 Swiss PIL Act). The latter is particularly important when the defendant is not domiciled in Switzerland because it is the only possible forum in Switzerland. In such case, if the claimant wishes to file his action for liability before a Swiss court, he must invoke Article 159 of the Swiss PIL Act and in this case Swiss law is necessarily the governing law.58 The place where a company is actually managed pursuant to Article 152 of the Swiss PIL Act is the place of its central administration, as it is when Article 159 of the Swiss PIL Act applies. However, if the defendant is domiciled abroad in a contracting State of the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters adopted in Lugano on 16 September 1988 (hereinafter: Lugano Convention), the said Convention is exclusively applicable and the forum will in principle be the defendant’s domicile (Article 2 Lugano Convention). In such case, Article 159 of the Swiss PIL Act cannot apply, unless the jurisdiction of Swiss courts can be based on a different provision of the Lugano Convention.

D.

Public Policy Exceptions

If the conditions of application of neither of the two above-mentioned special correctives to the incorporation theory are fulfilled, it is possible to invoke the general rules of public policy and the exception clause in order to apply another law other than the one determined under Article 154(1) of the Swiss PIL Act in cases where it is necessary to protect the interests of creditors of the pseudo-foreign company. 57

Same opinion: DESSEMONTET F., ‘La responsabilité des organes en droit international privé’, in: Aspects du droit international des sociétés – Journée suisse de droit international du 25 novembre 1994 à Neuchâtel, Zurich 1995, pp. 149-174, at p. 164; DUTOIT B. (note 5), ad Art. 159, No 9, pp. 508-509; VON OVERBECK A., ‘Droit des sociétés: l’article 159 de la loi fédérale sur le droit international privé revu’, in: MEIER/SIEHR (eds.), Rechtskollisionen – Festschrift für Anton Heini zum 65. Geburtstag, Zurich 1995, pp. 295304, at p. 303; SCHWANDER I. (note 10), No 807, p. 353; VISCHER F. (note 5), ad Art. 159, No 3, p. 1784. 58 See decision of the Swiss Federal Court of 13 June 1994, published in Semaine Judiciaire 1994, pp. 687 et seq., at p. 688. Same opinion: VISCHER F. (note 5), ad Art. 152, No 5, p. 1739.

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Public Policy Clause (Article 17 Swiss PIL Act)

According to Article 17 of the Swiss PIL Act, the application of provisions of foreign law is excluded if such application would lead to a result that is incompatible with Swiss public policy. The said provision addresses the ‘defensive’ or ‘negative’ facet of public policy by providing a mechanism that allows the judge to refuse the application of the foreign law designated as applicable under the Swiss conflict of law rules. Such refusal is justified when the facts of the case are such that the application of the relevant foreign rule would produce a result that departs so radically from the Swiss concepts of fundamental justice that its application would be intolerably outrageous to Swiss basic values.59 Article 17 of the Swiss PIL Act aims at safeguarding the basic moral, social, economic and political values of Swiss society.60 The public policy clause must be applied on a case-by-case basis. It may be invoked only if the application of the foreign applicable law would lead to a shocking result from the point of view of Swiss law. The intervention of the public policy clause in the field of company law implies that the application of a provision of the lex societatis would violate Swiss public policy in a specific case. In the well-known Chilon Valeurs case,61 the Swiss Federal Court held that, as a general limit to the incorporation theory, it is possible to apply Article 17 of the Swiss PIL Act to correct the connection of a foreign company to its State of organization (determined under Article 154(1) Swiss PIL Act). In the Chilon Valeurs case, the legal capacity of the foreign company was disputed. In particular, the defendant contested the claimant’s legal capacity to sue in Swiss courts because of the allegedly fraudulent formation of the company abroad. According to the Swiss Federal Court, the mere fact that the laws of its State of organization allow a foreign company to proceed before the courts obviously does not contravene the basic values of Swiss legal order.62 As a result, the debtors of a foreign company cannot invoke the public policy clause as a means of attempting to evade their obligations towards a pseudo-foreign company.63

59

See ATF 102 Ia 574 (581). See BUCHER A., ‘L’ordre public et le but social des lois en droit international privé’, Recueil des Cours 1993 II (239), pp. 9-116; LAGARDE P., Recherches sur l’ordre public en droit international privé, Paris 1959; OTHENIN-GIRARD S., La réserve d’ordre public en droit international privé suisse, Zurich 1999. 61 ATF 117 II 494 (501). 62 ATF 117 II 494 (502). 63 Such means of defence were allowed under the previous case law of the Swiss Federal Court with the so-called réserve du siège fictif. See ATF 108 II 398 (f): the Swiss Federal Court declared the incorporation of a company in Liechtenstein null and void; as a result, it held the company to be without legal capacity in Switzerland because its real seat was in Switzerland and its seat in Liechtenstein only fictious. Due to the intervention of 60

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The public policy clause could be applied for the purpose of protecting creditors, as this comes under the social role of a State and is included in its public policy.64 Article 17 of the Swiss PIL Act allows, for instance, the application of Swiss law instead of the lex societatis to liability when the restricted conditions of application of Article 159 Swiss PIL Act prevent the intervention of the said provision. The Swiss Federal Court, for instance, has ruled that Article 17 of the Swiss PIL Act could apply as a means of imposing the application of the principle of piercing the corporate veil when the application of the lex societatis would lead to a result incompatible with Swiss public policy.65 However, the Court found that such requirement was not fulfilled in the case at hand.

2.

Application of Mandatory Provisions of Swiss Law (Article 18 Swiss PIL Act)

Article 18 of the Swiss PIL Act provides that, due to their particular purpose, the application of mandatory provisions of Swiss law shall remain reserved, regardless of the law designated as applicable by the Swiss PIL Act. This provision addresses the ‘offensive’ or ‘positive’ facet of public policy by providing a mechanism requiring a specific rule of Swiss law to be applied although the Swiss conflict of law rules designate another law as applicable. The so-called lois d’application immédiate are the provisions of Swiss law which apply without taking account of the law designated as applicable by the conflict of law rules. Although every mandatory provision of Swiss law could be considered as a loi d’application immédiate, it is quite rare that the said classification is admitted in a concrete case. The application of a mandatory provision of Swiss law to the legal status of a foreign company instead of its lex societatis implies that the said provision belongs to the international public policy of Switzerland and that its application in the case at hand is necessary in light of all circumstances of the case. Article 335 of the Swiss Civil Code provides, for instance, that a family foundation can be constituted for the purpose of paying the costs of the education, outfitting or maintenance of the members of the family or for similar purposes. However, as a general rule, it is prohibited to tie up property for generations (prohibition of fideicommissa). With respect to this provision, the Swiss Federal Court ruled that so-called ‘support foundations’ are illegal under Swiss law; by allowing a person or family to use the foundation for a purpose other than that specified in public policy, the pseudo-foreign company was not allowed to institute proceedings in Switzerland against its debtors. For further comments on the réserve du siège fictif, see GUILLAUME F. (note 3), pp. 124 et seq. 64 See Message du Conseil fédéral, du 10 novembre 1982, concernant une loi fédérale sur le droit international privé (loi de DIP), FF 1983 I 255 et seq., Nos 291 and 294.44. 65 See ATF 128 III 346 (350).

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Article 335 of the Swiss Civil Code, such foundations aim at circumventing the prohibition of fideicommissa.66 However, the Federal Justices did not regard Article 335 of the Swiss Civil Code as a loi d’application immédiate: they merely referred to the fraus legis in order to declare the foundation at issue non-existent under Swiss law. Later in a similar case, the Swiss Federal Court ruled that Article 18 of the Swiss PIL Act does not apply to the formation of companies, thus invoking the incorporation theory.67 On the contrary, in our opinion, Article 335 of the Swiss Civil Code is one of the rare rules of Swiss law which could be regarded as a loi d’application immédiate. In particular, the said provision should be applicable when the beneficiary of a foreign foundation is domiciled in Switzerland because the formation of a pseudo-foreign foundation can undermine international public policy in Switzerland.68 But this does not mean that the foreign foundation should be regarded as non-existent in Switzerland. There are other possible correctives, such as the reintegration of the property of the foundation into the founder’s inheritance. The Swiss Federal Court should have nuanced its decision by making it clear that Article 18 of the Swiss PIL Act was not applicable in the case at hand because the beneficiary of the foundation was domiciled abroad. That being the case, the affair lacked a sufficient connection with international public policy in Switzerland to justify the application of Article 18 of the Swiss PIL Act. One should note, however, that Article 18 of the Swiss PIL Act may apply in other circumstances, in particular when a company has been formed abroad for the purpose of avoiding certain mandatory provisions of Swiss law.69

3.

Observance of Mandatory Provisions of Foreign Law (Article 19 Swiss PIL Act)

According to Article 19(1) of the Swiss PIL Act, mandatory provisions of another law may be taken into consideration in lieu of the law designated by the Swiss PIL Act if interests which are legitimate and clearly preponderant under the Swiss conception of law so require and if the case has a close connection with such law. The purpose of such a provision and the consequences of its application shall be con-

66

See ATF 108 II 398 (403). ATF 117 II 494 (501-502). 68 Same opinion: VON PLANTA A. (note 5), ad Art. 154, No 18, pp. 1144 et seq.; VISCHER F. (note 5), ad Art. 154, No 34, p. 1755. For further comments on Article 18 Swiss PIL Act cum Article 335 Swiss CC, see GUILLAUME F. (note 3), pp. 282 et seq. 69 See PERRIN J.-F., ‘Théorie de l’incorporation et cohérence de l’ordre juridique’, in: DOMINICÉ/PATRY/REYMOND (eds.), Etudes de droit international en l’honneur de Pierre Lalive, Basel/Frankfurt am Main 1993, pp. 141-150, at pp. 149 et seq. 67

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sidered when deciding whether it is to be taken into account so as to reach a decision compatible with the Swiss conception of law (Article 19(2) Swiss PIL Act). This provision, which is rarely applied, allows Swiss judges to take account of a mandatory provision of a third State in certain circumstances. Its application is subject to the following conditions: (1) the foreign provision must be mandatory in its legal system; (2) the application of the said provision must be justified by interests which are legitimate and clearly preponderant under the Swiss conception of law; and (3) the case must have a close connection to the law to which the mandatory provision belongs. Swiss judges will take account of a foreign mandatory provision if so required by a clearly preponderant interest, from the Swiss point of view, having regard for the consequences of the application of the lex societatis in the concrete case. The application of Article 19 of the Swiss PIL Act presupposes that the foreign mandatory provision concerned is the only provision that can uphold the public policy of Switzerland. This can occur only if no loi d’application immédiate of Swiss law is applicable. Under Article 19 of the Swiss PIL Act a mandatory provision of a foreign law other than the lex societatis may be applied to the legal status of a foreign company instead of its lex societatis; however, in light of the restrictive conditions of application of this provision, it is unlikely that the said provision would apply in this case. If necessary, the Swiss judge will try to find a loi d’application immédiate in Swiss substantive law instead of applying a mandatory provision of foreign law in lieu of the lex societatis.

E.

Exception Clause (Article 15 Swiss PIL Act)

Article 15(1) of the Swiss PIL Act provides that the law designated as applicable by the Swiss PIL Act shall, as an exception, not apply if, in the circumstances, it is obvious that the case has only a remote connection with that law, but a much closer connection with another law. Furthermore, this provision shall not apply if the parties have made a choice of law (Article 15(2) Swiss PIL Act). Article 15 of the Swiss PIL Act allows Swiss judges to exclude the application of the law designated by the conflict of law rule without weighing the interests at stake, but only by considering the closest connection of the case with a specific State. The purpose of Article 15 of the Swiss PIL Act is not to reserve the application of public policy of Switzerland but rather to uphold the so-called principe de proximité (proximity principle). 70 It therefore follows that, if the parties have made a choice of law, there is no need to correct an inappropriate connection resulting from the blind mechanism of the conflict of law rules.

70 See LAGARDE P., ‘Le principe de proximité dans le droit international privé contemporain. Cours général de droit international privé’, Recueil des Cours 1986 I (196), pp. 9-237.

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Applying Article 15 of the Swiss PIL Act to correct the connection of companies to the State of their incorporation pursuant to Article 154(1) of the Swiss PIL Act would be contrary to the system of incorporation. Such a system institutes a purely formal connecting factor (the place of incorporation), without taking account of the closest connection. Since the founders are totally free to choose the place of incorporation of their company under Swiss private international law, the application of Article 15 of the Swiss PIL Act would be meaningless in company law. Furthermore, this provision cannot apply if there is a choice of law clause. Since the formation of a company is an act which permits freedom of choice, the choice of a place of incorporation can be considered as a choice of law in the sense of Article 15(2) of the Swiss PIL Act. The application of Article 15 of the Swiss PIL Act as a corrective to the incorporation theory is therefore excluded. The Swiss Federal Court has already made such a ruling on two occasions.71

F.

The Fraus Legis Principle

1.

Application of the Fraus Legis Principle in Company Law

Prior to the entry into force of the Swiss PIL Act in 1987, companies were governed by the law of the State designated in their Articles of Association or, in the absence of such a designation, by the law of the State where they were actually managed. This rule had been established by the Swiss Federal Court, whose decisions were indirectly based on the incorporation theory for about forty years.72 However, this conflict of law rule provided a corrective to the incorporation theory called the réserve du siège fictif (reservation of the fictitious seat). According to this corrective, the seat designated in the Articles of Association was considered as fictitious when: (1) it had no connection with the factual reality; and (2) it was chosen only to escape the mandatory provisions of the State where the company was actually managed.73 As a result, the application of this corrective meant that the foreign company was considered as non-existent from the point of view of Swiss law. Accordingly, it was denied legal capacity and consequently the capacity to be a party to legal proceedings. The réserve du siège fictif is a good example of the application of fraus legis or misuse of rights in the field of company law. Since the Swiss legislator opted in Article 154 of the Swiss PIL Act for a conflict of law rule directly inspired by the former case law, the question arises whether the so-called réserve du siège fictif is still applicable today. The Swiss 71

ATF 117 II 494 (501); ATF 128 III 346 (350-351). See ATF 76 I 150; ATF 108 II 122; ATF 108 II 398; ATF 110 Ib 213. For further comments on these cases, see GUILLAUME F. (note 3), pp. 323 et seq. 73 See ATF 76 I 150 (159). 72

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Federal Court answered this question negatively in 1991,74 arguing that one of the principal aims of Article 154 of the Swiss PIL Act is to avoid that a foreign company could be regarded as non-existent under Swiss law. This statement deserves approval in light of the undesirable consequences of the application of the réserve du siège fictif. In the same decision, the Swiss Federal Court recalled that Swiss private international law refers to the incorporation theory, whose system does not include any corrective to combat fraus legis (in contrast to the system of the real seat). But paradoxically, the Swiss Federal Court continued its reasoning, trying to identify which provision of the Swiss PIL Act could apply as a corrective to the incorporation theory. The Federal Justices decided that Articles 17 and 18 of the Swiss PIL Act may in theory apply as correctives to the incorporation theory, but not in the case at hand. The above decision has been highly debated by legal scholars.75 Later the Swiss Federal Court held – in a matter relating to contract law – that the prohibition of misuse of rights (Article 2 Swiss CC) is part of the public policy of Switzerland and may be invoked as a loi d’application immédiate by way of Article 18 of the Swiss PIL Act.76 In another case, the Swiss Federal Court applied the above reasoning to company law and ruled that the principle of piercing the corporate veil may not be invoked in the name of prohibiting the misuse of rights as a loi d’application immédiate, unless the application of the lex societatis would lead to a result incompatible with Swiss public policy (Article 17 Swiss PIL Act).77 We can conclude from this case law that, if the prohibition of misuse of rights may be invoked as a corrective to the incorporation theory as a manifestation of public policy in Switzerland (Article 17 Swiss PIL Act), the application of the fraus legis principle is also possible as a corrective to Article 154(1) of the Swiss PIL Act. 74

ATF 117 II 494. For further comments on this case, see GUILLAUME F. (note 3), pp. 334 et seq. 75 All legal scholars regard the réserve du siège fictif as no longer applicable under the Swiss PIL Act, however, some view the fraus legis principle as a general principle of law in the field of company law: DESSEMONTET F. (note 57), p. 166; DUTOIT B. (note 5), ad Art. 154, No 6, pp. 495 et seq., while others maintain that the fraus legis principle applies under cover of other correctives, such as Articles 17, 18 or 19 Swiss PIL Act: PERRIN J.-F. (note 69), p. 149; REYMOND J.-A., ‘Sociétés étrangères en Suisse: exit fraus legis’, in: DOMINICÉ/PATRY/REYMOND (eds.), Etudes de droit international en l’honneur de Pierre Lalive, Basel/Frankfurt am Main 1993, pp. 173-179, at p. 179; SCHWANDER I., ‘Note concernant l’ATF 117 II 494’, in: Revue suisse de droit international et de droit européen 1993, pp. 96-98, at p. 97; and others contend that the fraus legis principle does not apply at all in the field of company law: HEINI A., ‘Note concernant l’ATF 117 II 494’, in: Revue suisse de droit des affaires 1993, pp. 64-65; VON PLANTA A. (note 5), ad Art. 154, No 16, pp. 1143 et seq.; VISCHER F. (note 5), ad Art. 154, Nos 19-20, p. 1751. 76 See ATF 128 III 201. 77 See ATF 128 III 346 (349-350).

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Two conditions must be fulfilled for a fraus legis to be admitted in the law applicable to companies: (1) misuse of the private international law rule, i.e. Article 154(1) of the Swiss PIL Act; and (2) the intent of the founders of the company to evade the law normally applicable in favour of another law that is more attractive.78 More precisely, the application of the fraus legis principle implies that the main purpose of the incorporation of a company in the chosen State is to avoid the application of a specific mandatory provision relating to the legal status of companies.

2.

Consequences of Application of the Fraus Legis Principle as a Corrective to the Incorporation Theory

The application of the fraus legis principle as a corrective to Article 154(1) of the Swiss PIL Act cannot result in the non-existence of the foreign company in Swiss law, but in a statement that the fraudulent act (i.e., the incorporation of the company in the chosen State) is not opposable to third parties. This allows Swiss judges to ignore the law of organization of the company and to apply the law of the State in which the company is actually managed instead. In this way, the law applicable to the company is no longer determined by applying the primary rule (Article 154(1) Swiss PIL Act) but by the subsidiary rule (Article 154(2) Swiss PIL Act). In such case, the connecting factor of the place of central administration acts as a corrective to the connecting factor of the place of organization. However, when the company has been organized under a foreign law for the purpose of avoiding a prohibition existing in Swiss law, the intervention of fraus legis may lead to the nullity of the company because of its unlawful object.79 This may cause damages to the creditors of the company. Therefore, Swiss judges must take account of the practical consequences of the sanction of fraus legis in the light of the circumstances of the case in hand before applying this corrective to the incorporation theory.80

78

For further comments on the conditions of application of fraus legis in the field of company law, see GUILLAUME F. (note 3), pp. 298 et seq. 79 See Article 52(3) of the Swiss CC, which reads as follows: ‘The companies and establishments that have an unlawful or immoral object cannot acquire the status of a legal person.’ 80 For further comments on the sanction of fraus legis in the field of company law, see GUILLAUME F. (note 3), pp. 341 et seq.

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V.

Changing the Lex Societatis

Swiss private international law allows the lex societatis to be changed without any prior liquidation of the company or new formation in the host State. There are four ways of changing the governing law of companies in Swiss private international law: (1) the international transfer of a company; (2) the international merger of companies; (3) the international demerger of companies; and (4) the international transfer of assets and liabilities.81

A.

The Law Applicable to the International Transfer of a Company

The international transfer of a company allows a company to change its lex societatis without any prior liquidation or new formation.82 Since Swiss private international law follows the incorporation theory, the international transfer of a company cannot be realized by a single transfer of the seat of the company. Moreover, the transfer of the seat of the company is not a requirement for changing the governing law of a company; it is only a consequence of its new incorporation in the host State. Any company wishing to change its lex societatis has to fulfill all the conditions of departure of the law of its State of origin, as well as all the formal requirements of establishment of the law of the host State. The private international law rules aim to determine the scope of application of both laws involved, in particular to avoid a company which is in the process of changing its lex societatis going through a period of time during which it is governed by neither of the two laws concerned.

81

The international merger, demerger and transfer of assets and liabilities were introduced into the Swiss PIL Act by the new Swiss Merger Law, which came into force on 1 July 2004. This new law, which provides for all types of reorganization of entities under private law, has revised and amended the provisions of the Swiss PIL Act relating to the transfer of a company. 82 International transfers of a company do not occur often in practice because such form of reorganization is not yet regulated in European Community law, thus limiting the possibilities of transferring a company to or from Switzerland. The pre-draft of Proposal for a 14th Company Law Directive on the cross-border transfer of the registered office of limited companies of 20 April 1997 provided for the possibility to realize an intra-Community transfer of seat; however, it has since been abandoned. The case law of the European Court of Justice concerning the transfer of a company from one Member State to another (ECJ, 27 September 1988, Daily Mail case, C-81/87; ECJ, 5 November 2002, Überseering BV case, C-208/00; see supra, IV.A.2.) is of course not applicable to the transfer of a company to or from Switzerland.

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1.

Transfer of a Foreign Company to Switzerland (Articles 161 and 162 Swiss PIL Act)

A foreign company may change its lex societatis to Swiss law without being liquidated or newly formed (i.e., an immigration) if the following prerequisites are fulfilled: (1) the law of origin must allow the international transfer of companies; (2) the prerequisites set forth in the law of origin must be fulfilled; and (3) the company must be able to adapt itself to one of the forms of legal organization provided by Swiss law (Article 161(1) Swiss PIL Act). The company is subject to Swiss law when it has effected its adaptation to Swiss law and has a sufficient connection with Switzerland (Article 162 Swiss PIL Act). A company that is required under Swiss law to register in the Swiss Register of Commerce shall be deemed to have a sufficient connection with Switzerland when it proves that it has transferred the center of its business activities to Switzerland (Article 162(1) Swiss PIL Act), or if it is not required under Swiss law to register in the Swiss Register of Commerce, when it becomes clear that the company intends to be governed by Swiss law (Article 162(2) Swiss PIL Act). Furthermore, a company with stated capital – which has to be registered in the Swiss Register of Commerce – must submit a report by a specially qualified auditor providing evidence that its capital stock is covered, as required by Swiss law, in order to be authorized to register in the Swiss Register of Commerce (Article 162(3) Swiss PIL Act). This obligation aims to protect the creditors of the new Swiss company.

2.

Transfer of a Swiss Company Abroad (Article 163 Swiss PIL Act)

A Swiss company may subject itself to a foreign law without liquidation or new formation (i.e., an emigration) if the following prerequisites are fulfilled: (1) all the requirements of Swiss law are met; (2) the company must continue to exist under the law of the host State; and (3) the creditors of the company must have been protected against the risk of losing their right of action against the company (Article 163 Swiss PIL Act). The rights of the company’s creditors are secured by public notification in Switzerland announcing the imminent transfer abroad and requesting creditors to announce their claims (Article 163(2) Swiss PIL Act). Furthermore, the company cannot be deleted from the Swiss Register of Commerce, and the places of debt enforcement and of jurisdiction remain in Switzerland as long as the rights of the creditors of the company are not safeguarded (Articles 164 and 164a Swiss PIL Act).

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B.

The Law Applicable to International Merger, Demerger and Transfer of Assets and Liabilities

The international merger, demerger and transfer of assets and liabilities offer a wide range of possibilities for reorganizing corporate entities on an international level. Contrary to the international transfer of a company, these tools always imply the participation of at least two companies which are governed by different laws.

1.

The Law Applicable to International Merger

A merger combines two or more companies in such a manner that at least one initial company (i.e., an absorption) or all of the initial companies (i.e., a combination) are dissolved.83 Since an international merger presupposes that the two companies are governed by different laws, the two substantive laws are applicable in parallel, and it is necessary to distinguish between the laws governing each of the two companies involved.

a)

Merger from abroad to Switzerland (Article 163a Swiss PIL Act)

A Swiss company may take over a foreign company (i.e., an absorption by immigration) or merge with it to form a new Swiss company (i.e., a combination by immigration). As regards the foreign company, its lex societatis applies to all aspects concerning the transferring company; in particular, the following prerequisites must be fulfilled: (1) its lex societatis must allow the international merger; and (2) the requirements of its lex societatis regarding the legal aspects of merger concerning the transferring company must be fulfilled (Article 163a(1) Swiss PIL Act). In particular, the rights of the creditors and partners of the company must be secured by the lex societatis of the transferring company. This law will also govern the requirements to be fulfilled before the company is deleted from the foreign Register of Commerce. As regards the Swiss company, Swiss law and in particular the Swiss Federal Law on Merger, Demerger, Conversion and Transfer of Assets and Liabilities of 3 October 2004 (hereinafter: Swiss Merger Law) apply to all aspects which 83 The international merger is not yet regulated in European Community law; however, there is a Proposal for a Directive of the European Parliament and Council on cross-border mergers of companies with share-capital of 18 November 2003 (2003/0277 (COD)), which should enter into force in the near future. Since the Directive will apply only to intra-Community mergers, it will not apply to a merger between a Swiss company and a company incorporated in a Member State. In such case, all the international aspects of the merger will be governed by the private international law of each State involved.

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concern the surviving company, as well as the transfer of assets and liabilities (Article 163a(2) Swiss PIL Act). In particular, the transfer of contracts is governed by Swiss law.

b)

Merger from Switzerland abroad (Article 163b Swiss PIL Act)

A foreign company may takeover a Swiss company (i.e., an absorption by emigration) or merge with it to form a new foreign company (i.e., a combination by emigration). As regards the Swiss company, Swiss law applies to all aspects concerning the transferring company; in particular, the following prerequisites must be fulfilled: (1) the constitutive elements of a merger under Swiss law must be respected: in particular, the entire assets and liabilities must be transferred to the foreign company uno actu and the participation or membership rights must be adequately protected in the foreign company (Article 163b(1)(a) and (1)(b) Swiss PIL Act); (2) all the provisions of Swiss law applicable to the transferring company must be fulfilled (Article 163b(2) Swiss PIL Act); and (3) the creditors must be informed by public notification in Switzerland about the imminent merger and requested to announce their claims (Article 163b(3) Swiss PIL Act). If the Swiss company is registered in the Swiss Register of Commerce, it cannot be deleted until the claims of its creditors or partners have been secured or satisfied (Article 164 Swiss PIL Act). Furthermore, the places of debt enforcement and of jurisdiction also remain in Switzerland until the claims of its creditors or partners have been secured or satisfied (Article 164a Swiss PIL Act). As regards the foreign company, its lex societatis applies to all aspects concerning the surviving company, as well as the transfer of assets and liabilities (Article 163b(4) Swiss PIL Act). In particular, the transfer of contracts is governed by the foreign law applicable to this company.

2.

The Law Applicable to International Demerger

In a demerger, portions of the assets and liabilities of the demerging company are transferred to at least one newly formed or already existing company in such a manner that the shareholders of the transferring company obtain participation or membership rights in the absorbing companies. This may occur either by the transfer of all the assets and liabilities (i.e., a division) or the transfer of one or several parts of the assets and liabilities (i.e., a spin-off) to other companies.84 The only special rule governing international demerger in the Swiss PIL Act provides that the provisions of the Swiss PIL Act concerning mergers shall apply by analogy to an international demerger (Article 163d(1) Swiss PIL Act). Since a 84

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demerger is not a symmetrical operation of a merger, Articles 163a and 163b of the Swiss PIL Act cannot be applied by analogy without adjustments. As in the case of merger, one must distinguish between the laws governing each of the companies involved.

a)

Demerger from abroad to Switzerland (Article 163d cum Article 163a Swiss PIL Act)

A foreign company may transfer portions of assets and liabilities to a newly formed or already existing Swiss company (i.e., a demerger by immigration). As regards the foreign company, its lex societatis applies to all aspects concerning the demerging company; in particular, the following prerequisites must be fulfilled: (1) its lex societatis must allow the international demerger; and (2) the requirements of its lex societatis concerning the legal aspects of a demerger in respect of the demerging company must be fulfilled (Article 163a(1) Swiss PIL Act applied by analogy). In particular, the rights of the creditors and partners of the company must be secured by the lex societatis of the transferring company. This law will also govern the requirements to be fulfilled until the company is deleted from the foreign Register of Commerce. The transfer of assets and liabilities is also governed by the lex societatis of the demerging company (Article 163d(2) Swiss PIL Act). In particular, the transfer of contracts is governed by foreign law of the demerging company. As regards the Swiss company, Swiss law and in particular the Swiss Merger Law apply to all aspects concerning the overtaking company.

b)

Demerger from Switzerland abroad (Article 163d cum Article 163b Swiss PIL Act)

A Swiss company may transfer portions of assets and liabilities to a newly formed or already existing foreign company (i.e., a demerger by emigration). As regards the Swiss company, Swiss law applies to all aspects concerning the demerging company; in particular, the following prerequisites must be fulfilled: (1) the constitutive elements of a demerger under Swiss law must be respected: in particular, in the case of a division by emigration, the entire assets and liabilities must be transferred to the foreign company uno actu and the participation or membership rights must be adequately protected in the foreign company (Article 163b(1)(a) and (1)(b) Swiss PIL Act applied by analogy); in the case of a spinoff by emigration, the participation or membership rights must be adequately protected in the foreign company (Article 163b(1)(b) Swiss PIL Act applied by analogy); (2) all the provisions of Swiss law applicable to the demerging company must be fulfilled (Article 163b(2) Swiss PIL Act applied by analogy); and (3) the creditors must be informed by public notification in Switzerland about the immi-

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nent demerger and requested to announce their claims (Article 163b(3) Swiss PIL Act applied by analogy). The transfer of assets and liabilities is also governed by Swiss law (Article 163d(2) Swiss PIL Act). In particular, the transfer of contracts is governed by Swiss law. If the Swiss company is registered in the Swiss Register of Commerce, it cannot be deleted until the claims of its creditors or partners have been secured or satisfied (Article 164 Swiss PIL Act). Furthermore, the places of debt enforcement and of jurisdiction remain in Switzerland until the claims of its creditors or partners have been secured or satisfied (Article 164a Swiss PIL Act). As regards the foreign company, its lex societatis applies to all aspects concerning the overtaking company.

3.

The Law Applicable to International Transfer of Assets and Liabilities

A transfer of assets and liabilities entails the transfer by law of a list of all the assets and liabilities or parts thereof, in accordance with an inventory, of the transferring company to another company.85 The difference between a transfer of assets and liabilities and a demerger is that a transfer does not affect the rights of the shareholders. Except for this basic difference, a transfer of assets and liabilities is very similar to a demerger.86 As for an international demerger, the only special rule of the Swiss PIL Act governing the international transfer of assets and liabilities provides that the provisions of the said Act concerning mergers shall apply by analogy to an international transfer of assets and liabilities (Article 163d(1) Swiss PIL Act). Here again, one must distinguish between the laws governing each of the companies involved.

a)

Transfer of Assets and Liabilities from abroad to Switzerland (Article 163d cum Article 163a Swiss PIL Act)

As regards the immigration of assets and liabilities, a foreign company may transfer portions of its assets and liabilities to at least one newly formed or already existing Swiss company. The same rules apply mutatis mutandis to a demerger by immigration.

85

The international transfer of assets and liabilities is not yet regulated in European Community law. 86 This form of reorganization will most probably be often chosen because it allows the same kind of reorganization as a merger or a demerger from an economic point of view, without the legal difficulties arising due to the incompatibility of the different legal forms of companies involved.

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b)

Transfer of Assets and Liabilities from Switzerland abroad (Article 163d cum Article 163b Swiss PIL Act)

As regards the emigration of assets and liabilities, a Swiss company may transfer portions of its assets and liabilities to at least one newly formed or already existing foreign company. As regards the Swiss company, Swiss law applies to all aspects which concern the transferring company; in particular, the following prerequisites must be fulfilled: (1) the constitutive elements of a transfer of assets and liabilities under Swiss law must be respected: if the transferring company transfers the entire assets and liabilities, they must be transferred to the foreign company uno actu (Article 163b(1)(a) Swiss PIL Act applied by analogy); (2) all the provisions of Swiss law applicable to the transferring company must be fulfilled (Article 163b(2) Swiss PIL Act applied by analogy); and (3) if the transferring company transfers the entire assets and liabilities, the creditors must be informed by public notification in Switzerland about the imminent transfer of assets and liabilities and requested to announce their claims (Article 163b(3) Swiss PIL Act applied by analogy).87 The transfer of assets and liabilities is also governed by Swiss law (Article 163d(2) Swiss PIL Act). In particular, the transfer of contracts is governed by Swiss law. If the Swiss company transfers its entire assets and liabilities, the places of debt enforcement and of jurisdiction remain in Switzerland until the claims of its creditors have been secured or satisfied (Article 164a Swiss PIL Act). Furthermore, if the Swiss company is registered in the Swiss Register of Commerce, it cannot be deleted until the claims of its creditors have been secured or satisfied (Article 164 Swiss PIL Act). As regards the foreign company, its lex societatis applies to all aspects concerning the overtaking company.

4.

The Law Applicable to Merger, Demerger and Transfer Contracts (Article 163c Swiss PIL Act)

The law applicable to merger, demerger and transfer contracts follows the general system existing in Swiss private international law88: the contract is governed by the

87 Although the application by analogy of Article 163b(3) of the Swiss PIL Act is excluded by the last sentence of Article 163d(1) of the Swiss PIL Act, the said provision must apply to a transfer of the entire assets and liabilities to a foreign company. Otherwise, the situation of the creditors of the Swiss transferring company would be worse in an emigration of the entire assets and liabilities than in a division by emigration, although the economical situation is exactly the same. 88 See Articles 116 and 117 Swiss PIL Act.

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law chosen by the parties89; in the absence of a choice of law clause, the contract is governed by the law of the State with which it is most closely connected (see Article 163c(2) and (3) Swiss PIL Act). Furthermore, the Swiss PIL Act presumes that the closest connection exists with the State whose law governs the surviving company in the case of a merger (Article 163c(2) Swiss PIL Act), the demerging company in the case of a demerger (Article 163d(3) Swiss PIL Act) and the transferring company in the case of a transfer of assets and liabilities (Article 163d(3) Swiss PIL Act). However, the nature of a merger, demerger or transfer contract is specific as it constitutes the basis of the reorganization of the companies and specifies all the rules applicable to the modification of the social structure of the companies involved. As a result, the said contract has a mixed nature: in certain aspects, it is classified in the legal category of ‘contracts’ and, in others, in the legal category of ‘companies’. As regards the aspects of company law, a merger, demerger or transfer contract must comply with the mandatory provisions of the company law applicable to the merging companies, including the provisions as to form, without taking account of the law chosen by the parties (Article 163c(1) Swiss PIL Act). In practice, this means that the strictest lex societatis is applicable to the aspects of company law of the contract, although the other aspects are governed by the law chosen by the parties or the law of the most closely connected State.

C.

Common Provisions Applicable in Cases of Emigration of a Swiss Company

The specific provisions previously described are completed by common provisions applicable to the four types of reorganization of companies. The common provisions aim to protect the rights of creditors or partners of a Swiss company which emigrates by operation of a transfer, merger, demerger or transfer of assets and liabilities.

1.

Protection of Rights of Creditors and Partners prior to Deletion from the Register of Commerce (Article 164 Swiss PIL Act)

As regards the rights of creditors, if a Swiss company is registered in the Swiss Register of Commerce, a specially qualified auditor must confirm that the claims of its creditors are secured or satisfied before the company is deleted or its creditors must have agreed with the deletion (Article 164(1) Swiss PIL Act). 89 The choice of law by the parties is laid down in Article 116 of the Swiss PIL Act, which provides that the choice of law must be explicit or clearly evident from the contract or the circumstances. Furthermore, the contract is governed by the chosen law.

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The rights of partners of a Swiss company are also protected: a specially qualified auditor must confirm that the foreign company has attributed the participation or membership rights to the partners of a Swiss company entitled thereto or has made or secured a compensation payment or a settlement (Article 164(2) Swiss PIL Act).

2.

Jurisdiction over Actions for Examination of Participation and Membership Rights (Article 164a(1) Swiss PIL Act)

The members of a Swiss company who deem their participation or membership rights not to have been adequately safeguarded by the operation of a merger or demerger may file a special action to examine the participation or membership rights.90 According to Article 164a(1) of the Swiss PIL Act, this special action may be filed either at the foreign domicile of the overtaking company or at the Swiss domicile of the transferring company. A foreign judgment will be recognized in Switzerland on the basis of Articles 25 et seq. and 165 of the Swiss PIL Act. However, if the Lugano Convention is applicable, Article 164a(1) of the Swiss PIL Act does not apply and the place of jurisdiction is determined by Article 16(2) of the Lugano Convention, which has priority over Article 2 of the Lugano Convention.91 Article 16(2) of the Lugano Convention confers exclusive jurisdiction on the courts of the seat of a company whose decision on participation or membership rights is disputed.92 In the case of a merger or demerger, the decision on participation or membership rights is in fact taken by all companies involved. As a result, the members of a Swiss company who deem their participation or membership rights not to have been adequately safeguarded by the operation of a merger or demerger may file the special action for examining participation or membership rights either at the foreign domicile of the overtaking company or at the Swiss domicile of the transferring company, even though the Lugano Convention is applicable.

90

See Article 105 of the Swiss Merger Law. Although this question is debated, Article 16(2) of the Lugano Convention should be interpreted broadly; see KROPHOLLER J., Europäisches Zivilprozessrecht, 7th ed., Heidelberg 2002, ad Art. 22, No 37, p. 257. In our view, an action for examining participation or membership rights under Article 105 of the Swiss Merger Law falls within the scope of Article 16(2) of the Lugano Convention. Same opinion: GIRSBERGER D./RODRIGEZ R., in: WATTER/VOGT/TSCHÄNI/DAENIKER (eds.), Basler Kommentar zum Fusionsgesetz, Basel/ Geneva/Munich 2005, ad Art. 164a IPRG, No 14, p. 1369. 92 The application of Article 16(2) of the Lugano Convention means that the Lugano Convention is applicable when the seat of the company whose decision on the participation or membership rights is disputed is situated in a Contracting State of the Lugano Convention. 91

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If the said action is filed in both jurisdictions, Article 23 of the Lugano Convention provides that the second court at which the action was brought shall decline its jurisdiction in favour of the first court. The judgment shall then be recognized in the other contracting State without any special procedure being necessary (Articles 25 et seq. of the Lugano Convention).

3.

Retention of the Place of Debt Enforcement and Jurisdiction in Switzerland (Article 164a(2) Swiss PIL Act)

The rights of the creditors and members of a Swiss company are protected by retaining the place of debt enforcement and jurisdiction in Switzerland until their claims are secured or satisfied (Article 164a(2) Swiss PIL Act). As a result of this protection, the creditors or members of a dissolved company are not obliged to bring an action based on company law against the overtaking company abroad. However, if the overtaking company has its seat in a contracting State of the Lugano Convention, the courts of the seat of the overtaking company have in principle exclusive jurisdiction (Article 16(2) Lugano Convention).93 The above assertion, although true in cases of an international transfer of company, has to be qualified in the case of a merger, demerger or transfer of assets and liabilities because the organs of all the companies involved have taken the disputed decision. In such cases, action may be brought either at the foreign domicile of the overtaking company or at the Swiss domicile of the transferring company, even though the Lugano Convention is applicable. If action is brought in both courts, the second court at which the action was brought shall decline its jurisdiction in favour of the first court (Article 23 Lugano Convention). A foreign judgment will be recognized in Switzerland on the basis of Articles 25 et seq. of the Swiss PIL Act or Articles 25 et seq. of the Lugano Convention.

D.

Recognition of International Transfers of a Company, Mergers, Demergers or Transfers of Assets and Liabilities among Foreign Companies (Article 164b Swiss PIL Act)

Swiss private international law allows the recognition in Switzerland of international transfers of a company, mergers, demergers or transfers of assets and liabilities among foreign companies if they are valid under each law involved in the transaction (Article 164b Swiss PIL Act). Accordingly, any reorganization made abroad which does not involve a Swiss company will be recognized in Switzerland, regardless of whether the reorganization involves companies incorporated in different States. 93

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VI. Conclusion The place of organization of a company is the primary rule chosen by the Swiss legislator. This connecting factor is directly inspired by the incorporation theory. In principle, the place of incorporation of the company is where the company has fulfilled publicity or registration provisions (see Article 154(1) Swiss PIL Act). However, the Swiss legislator developed this connecting system by adding two important characteristics. The fact that the founders of a company are allowed to choose the State of incorporation shows that the Swiss legislator favours the freedom of choice. When choosing this purely formal connecting factor, the legislator was aware that it implied a certain risk of corporation law shopping between States. When making their choice, the founders will take account of the possibilities offered by the legal framework of the particular State. As regards the Swiss connecting system, the first important characteristic is the restriction of the freedom of choice in cases of abuse or fraudulent conduct as a means of protecting the interests of third parties, such as the creditors of a company whose business is carried out in Switzerland despite its incorporation abroad. Thus, Swiss private international law contains rules safeguarding the rights of the creditors of pseudo-foreign companies (see Articles 158, 159, 17 and 18 Swiss PIL Act). These provisions are complemented by the general principle of fraus legis, which is to be applied with caution, taking account of the possible effects on the rights of creditors in practice. The second important characteristic of the Swiss connecting system is the possibility for companies to change their governing law without any prior liquidation or new formation. This can be done in four ways: (1) the international transfer of a company; (2) the international merger of companies; (3) the international demerger of companies; and (4) the international transfer of assets and liabilities. The last three are in place only since 1 July 2004 and thus it is difficult to predict how they will work in practice. At present, there are no corresponding provisions in European Community law providing for the international transfer of a company, the international merger or demerger of companies, or for the international transfer of assets and liabilities. Therefore, one can expect that these tools will not be used very often until corresponding regulations enter into force in European Community law. The absence of legislation governing corporate restructuring and mobility within the European Union prevents the realization of such operations between companies incorporated in a Member State and in Switzerland or at least makes it contingent on complicated legal arrangements. The number of cases of international reorganization involving companies incorporated in a Member State and in Switzerland will probably remain small until the Member States have grown accustomed to reorganizing companies on an international level within the European Union. However, thanks to its progressive law on this matter, Switzerland is ready to actively participate in the international reorganization of companies, which will most probably occur in the near future.

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THE LAW APPLICABLE TO CROSS-BORDER ENVIRONMENTAL DAMAGE: FROM THE EUROPEAN NATIONAL SYSTEMS TO ROME II* Katia FACH GÓMEZ**

I.

Introductory Remarks

II.

The Law Applicable to Cross-Border Environmental Damage A. International Instruments B. National Conflict Rules 1. Characterisation of Environmental Damage 2. Connecting Factors a) Which version of the lex loci delicti? b) Different ways of weakening the lex loci delicti 3. Scope of the Applicable Law 4. Mandatory Rules, Rules of Conduct and Safety and Administrative Authorisations a) General remarks b) Rules of conduct and safety standards c) Administrative authorizations C. Proposal for an EC Regulation (Rome II)

III.

Concluding Remarks

I.

Introductory Remarks

The natural resources of our planet have suffered considerable damage for some time as a result of human intervention. Constant industrial activity in many different areas, accidents with environmental repercussions, harmful elements generated by individuals (refuse, noise, vehicle emissions, etc.) are some of the numerous cumulative causes of environmental pollution. Moreover, such pollution frequently *

This article summarizes some of the ideas expressed in Katia FACH GÓMEZ’s book: La contaminación transfronteriza en Derecho Internacional Privado. Estudio de derecho aplicable (‘Transboundary Pollution in Private International Law: A Study of the Applicable Law’), Barcelona 2002, 486 pp. The article has been written within the framework of the research project C- 264-36 of the University of Zaragoza (Spain). ** Assistant Lecturer in Private International Law at the Faculty of Law of the University of Zaragoza (Spain).

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crosses the borders of the country of origin, having negative effects on goods and persons in other States. In this regard, pollution has no regard for national frontiers and, ignoring political divisions, spreads onto the territories of other sovereign States. The law has an important role to play in preventing and compensating environmental damage. In particular, the judicial framework needs to act as a coherent entity to respond to environmental pollution in a truly effective manner. To this end, measures adopted in the areas of administrative, criminal and civil law are insufficient: private international law must also provide its own solutions. The element of internationality that characterises cross-border environmental damage requires the specialised intervention of this discipline.1 This study focuses on how the law applicable to cases of cross-border pollution is regulated in Europe. Reference is first made to the international conventions in force in this area; this is followed by an analysis of the most relevant features of national conflict rules and of the Proposal for a Regulation of the European Parliament and the Council on the law applicable to non-contractual obligations (known as ‘Rome II’),2 which was presented by the European Commission on 22 July 2003.

II.

The Law Applicable to Cross-Border Environmental Damage

A.

International Instruments

In international law environmental issues have proved to be fertile ground for the drafting of diverse legislation on uniform substantive law. Whereas the scope of some international instruments is limited to a specific type of pollution (nuclear, oil, etc.),3 others take a unitary approach to the subject matter (e.g., Council of Europe Convention on Civil Liability for Damage resulting from Activities Dangerous to the Environment).4 Some instruments enjoy a certain ‘standing’ by virtue 1

Paradigmatic in this sense is the express reference made by the Institute of International Law to cross-border pollution: see ‘La responsabilité en droit international en cas de dommages causés à l’environnement’, in: Yearbook of the Institute of International Law, Session of Strasbourg 1997, Vol. 67, part II, pp. 486-513. 2 See Brussels, 22.7.2003, COM (2003), 427 final, 2003/0168 (COD), in www.europa.eu.int. 3 See footnotes 8 and 9 infra. 4 See DE SADELEER N., ‘La Convention du Conseil de l’Europe sur la responsabilité civile des dommages resultant de l’exercice d’activités dangereuses pour l’environnement’, in: Revue générale des assurances et des responsabilités 1994, pp. 12367.1-12367.6;

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of their early adoption date (e.g., Convention on Third Party Liability in the Field of Nuclear Energy of 1960), while others have only been adopted recently (e.g., Basel Protocol on Liability and Compensation for Damage resulting from Transboundary Movements of Hazardous Wastes and their Disposal of 1999).5 Although environmental issues are often regulated by international conventions, the European Union has also addressed some aspects of environmental liability in the form of Directives.6 The main aim of this study is to analyse pollution from the perspective of private international law; however, the influence of unified substantive law in this area cannot be overlooked. It follows that, if uniform substantive law would prove to be sufficient, this could be taken as an indication that legislation in the area of private international law is not necessary and, vice versa, the lack of international substantive instruments could boost the need for conflict rules.7 Taking Spanish law as an example, it can be seen that, although international instruments such as the Brussels International Convention on Civil Liability for Oil Pollution 19698 and the Convention on Third Party Liability in the Field of Nuclear Energy 19609 are in force in this country, a large number of pollution cases with international effects could be tried by Spanish courts and settled by reference to the national conflict rule (Article 10.9 of the Spanish Civil Code).10 For example, the national conflict MARTIN G.J., ‘La responsabilité civile pour les dommages à l’environnement et la Convention de Lugano’, in: Revue juridique de l’environnement 1994, pp. 121-136; LARROUMET C., ‘La responsabilité civile en matière d’environnement. Le projet de Convention du Conseil de l’Europe et le livre vert de la Commission des Communautés européennes’, in: Recueil Dalloz Sirey 1994, pp. 101-107 and at www.coe.int. 5 In this respect, see especially CUBEL SANCHEZ P., Comercio Internacional de residuos peligrosos, Valencia 2001; BITAR F., Les mouvements transfrontières des déchets dangereux selon la Convention de Bâle, Paris 1997 and http://untreaty.un.org/ French/sample/notpubl.asp. 6 See ORTIZ-ARCE DE LA FUENTE A., ‘La responsabilidad civil referida al medio ambiente en el marco de la Comunidad Europea. Las relaciones entre las disposiciones materiales y las disposiciones jurisdiccionales y conflictuales’, in: Revista de la Facultad de Derecho de la Universidad Complutense de Madrid 1997, pp. 165-224. More recently, see the Proposal for a Directive on the Prevention and Restoration of Significant Environmental Damage (COM (2002) 17 final - 2002/0021 (COD)), 23.1.2002. 7 In this way, some international instruments admit a partial dependence on private international law. In this sense, see Article 19 of the Basel Protocol (regarding this text, see VAISSIERE T., ‘Le projet de Protocole à la Convention de Bâle sur la responsabilité et l’indemnisation des dommages resultant des mouvements transfrontières de déchets dangereux et leur élimination’, in: Actualité et droit international 1999, in www.ridi.org/adi). 8 See www.imo.org. 9 See www.nea.fr. 10 On Article 10.9 of the Spanish Civil Code, see ESLAVA RODRÍGUEZ M., ‘Responsabilidad extracontractual, gestión de negocios ajenos y enriquecimiento sin causa’, in:

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rule would apply not only in cases not covered by the respective international Conventions, such as marine pollution by hydrocarbons and nuclear damage, but also in cases concerning aspects of specific matters that fall within the scope of the Conventions but are not regulated by special substantive rules.11 In addition, a wide variety of cases of cross-border environmental damage that are not governed by any convention of uniform substantive law in Spain (acid rain, heat emissions, nonnuclear radiation, river pollution, electromagnetic waves, noise damage, etc.) could also be dealt with by Article 10.9 of the Spanish Civil Code. In a detailed study of the current international instruments of uniform law on substantive environmental issues, which was carried out within the scope of the Hague Conference, the general conclusion was reached that ‘a worldwide private international law Convention would come to fill a yawning gap’ in this sector.12 Thus it is not surprising that, in addition to the above-mentioned initiatives on uniform law, various international draft instruments containing conflict rules for cross-border pollution are currently being developed.13 One should keep in mind

Derecho Internacional Privado, Vol. II, Granada 1998, p. 603 (‘su ámbito material alcanza en definitiva a ilícitos que cuantitativamente ocupan un lugar central en el Derecho de la responsabilidad civil’). 11 See, e.g., Article 14.b) of the Convention on Third Party Liability in the Field of Nuclear Energy. On this Convention, see KÜHNE G., ‘Haftung bei grenzüberschreitenden Schäden aus Kernreaktorunfällen’, in: Neue Juristische Wochenschrift 1986, p. 2141; FISCHERHOFF H., Deutsches Atomgesetz und Strahlenschutzrecht, Kommentar, Bd. I, 2nd ed., 1978, p. 914. 12 See BERNASCONI C., ‘Civil liability resulting from transfrontier environmental damage: a case for the Hague Conference?’, in: Hague Yearbook of International Law 1999, pp. 39 and 54-55 (or www.hcch.net); HOHLOCH G., Das Deliktsstatut. Grundlagen und Grundlinien des internationalen Deliktsrechts, Frankfurt 1984, pp. 223-228; VON BAR C., ‘Environmental Damage in Private International Law’, in: Recueil des Cours 1997, p. 360. 13 On European initiatives on this matter see the project of the Hague Conference (BERNASCONI C., note 12); the proposal elaborated by the European Group for Private International Law (FALLON M., ‘Proposition pour une convention européenne sur la loi applicable aux obligations non contractuelles’, in: European Review of Private Law 1999, pp. 45-68 and DUINTIER TEBBENS H., ‘Proposal for an European Convention on the law applicable to non-contractual obligations’, in: Netherlands International Law Review 1998, pp. 465-471), and initiatives of the European Union such as Rome II (see Section II, C infra). In the Americas, the Inter-American Specialized Conference on Private International Law (CIDIP) presented a draft document in 2000 containing rules on jurisdiction and the applicable law in matters of transboundary pollution. This project has generated considerable discussion but it is doubtful whether it will be adopted. In this respect, see FERNÁNDEZ ARROYO D., ‘La CIDIP VI está más cerca’, in: Anuario español de derecho internacional privado 2000, pp. 1005-1006; Conflict of laws on tort liability, with emphasis on jurisdiction and the law applicable to international civil liability for transboundary pollution (Document prepared by the delegation of Uruguay); FERNÁNDEZ ARROYO D./ KLEINHEISTERKAMP J., ‘The VIth Inter-American Specialized Conference on Private

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that the entry into force of such legislation (Rome II, for example) would significantly reduce the role of national conflict rules in this area.

B.

National Conflict Rules

1.

Characterisation of Environmental Damage

When determining the substantive law applicable to a claim arising from an event causing cross-border environmental damage, the question arises as to which conflict rule should apply. As regards the substantive regulation of environmental pollution by different legal systems, we find that, in addition to the principle of civil liability aiming at the liquidation of damages in the form of compensation, some legal systems also have legislation providing for the resolution of disputes involving interference with real property on the basis of proximity, allowing claims aimed at preventing or terminating the harmful activity.14 Such substantive approach makes a difference in the nature of the claim, thus affecting the way certain international pollution cases are settled. In this sense, German and Austrian courts have defined their international judicial jurisdiction on a number of occasions by resorting to the forum of rights in rem,15 and have also applied the lex rei sitae to disputes between pieces of real estate.16 However, applying the conflict rule for rights in rem to environmental matters has now been replaced by the Swiss and German solution17 according to which International Law (CIDIP VI): A New Step Towards Inter-American Legal Integration’, in: this Yearbook 2002, Vol. IV, pp. 252-253. 14 For an analysis of the laws of countries such as Germany, Austria, Denmark and Holland, see VON BAR C., Gemeineuropäisches Deliktsrecht, Part I, München 1996, pp. 533-537. 15 In Germany, see judgment of the BGH of 10.3.1978 concerning the Salzburg airport, in: Deutsches Verwaltungsblatt 1979, p. 226, and judgment of the LG WaldshutTiengen of 11.2.1982 concerning the Zurich airport, in: Umwelt- und Planungsrecht 1993, p. 15. In Austria, see judgment of the OLG Linz of 15.6.1987, in: Juristische Blätter 1987, p. 578, judgment of the OGH of 13.1.1988, in: Juristische Blätter 1988, p. 324, and judgment of the OGH of 23.2.1988, in: Österreichische Juristenzeitung 1988, p. 562. 16 Following this last criterion, German courts have applied their own substantive law to resolve the claim of German owners who were damaged in Germany by noise originating at the Zurich airport in Switzerland. This decision mentions the application of the lex rei sitae rule. See the judgment of the LG Waldshut-Tiengen of 11.2.1982, in: Umwelt- und Planungsrecht 1993, p. 15; REST A., ‘International environmental law in German courts’, in: Environmental Policy and Law 1997, p. 415; KRIECH M., Grenzüberschreitender Umweltschutz im schweizerischen Recht, Zürich 1986, p. 5. 17 Art. 99(2) of the Swiss PIL Act of 18 December 1987 reads: ‘Claims arising out of nuisances originating from real property are governed by the provisions of this Act re-

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the conflict rule for non-contractual liability is applied to all actions involving polluting emissions. This solution (which contains some basic proposals similar to those in the new wording of Article 5(3) of Regulation 44/01 and in the case-law of the European Court of Justice relating to Article 5(3) of the Brussels Convention)18 is generally considered appropriate as it enables all the claims of the injured party arising in a cross-border pollution case to be treated equally as far as the conflict of laws is concerned.

2.

Connecting Factors

a)

Which version of the lex loci delicti?

After characterization the next step is to determine the law applicable to a case of transboundary pollution. Traditionally, liability claims for harmful acts with a foreign element have been settled by applying the law of the place where harmful event occurred (lex loci delicti). This territorial connecting factor is found in many national conflict rules, including Article 10.9 of the Spanish Civil Code which provides: ‘Non-contractual obligations shall be governed by the law of the place where the event giving rise to them occurred.’19 Despite the apparent simplicity of this rule, it is well known that problems arise when interpreting the locus delicti criterion due to the transboundary character of pollution, thus resulting in a considerable diversity of conflict solutions. It is understood that reference to the lex loci delicti invariably leads to the application of the law of the place where one of the events involved in the tort occurs. For example, Article 31 of the Polish Private International Law Act and Article 1129 of the Belarus law20 provide that the law of the State shall apply in which the harmful act was performed.21 In contrast, provisions such as that of the Belgian Private International Law Act give priority in cases of transnational pollu-

garding torts’ (that is Art. 138). Art. 44 of the German EGBGB reads: ‘Claims arising out of nuisances originating from real property are governed by Art. 40(1) of this law.’ 18 See FACH GÓMEZ K., ‘Acciones preventivas en supuestos de contaminación transfronteriza y aplicabilidad del artículo 5.3 CB’, in: Zeitschrift für Europarechtliche Studien 1999, pp. 583-607 and SCJEC of 1 October 2002, Case C-167/00, Verein für Konsumenteninformation and Karl Heinz Henkel, available at www.curia.eu.int. 19 See AMORES CONRADI M.A., ‘Comentario al artículo 10.9’, in: Comentarios al Código Civil y Compilaciones forales, Part I, vol. II, 2nd ed., Madrid 1995, pp. 729-769. 20 MOSGO O., ‘Das neue internationale Privatrecht Weissrusslands’, in: IPRax 2000, p. 154. 21 VON HOFFMANN B., ‘Article 38’, in: Staudinger’s Kommentar zum EGBGB, th 13 ed., Berlin 1998, pp. 97-98.

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tion to the law of the State where the damage or injury occurred or is likely to occur.22 Despite the importance given to such exclusive connecting factors in legislation and case law, their use in cases involving cross-border damage seems to ignore the fact that the case is closely connected with at least two States territorially affected by the tort. For this reason, the ubiquity theory is often used to determine the applicable law in this area. This theory, which has its origin in criminal law and is also relevant when interpreting Article 5(3) of the Brussels Convention/Regulation 44/01,23 results in a splitting of the locus delicti: the place of origin of the harmful event and the place where the damage occurred are both regarded as the place where the tort occurred. As a result of this splitting imposed by the ubiquity theory, the law applicable to cases of transboundary pollution may be determined by various criteria, which may distinguish according to whether several or only one legal system are finally involved in the solution of the case. On the one hand, when interpreting the concept of locus delicti in terms of the ubiquity theory, it is possible that both the lex loci actus and the lex loci damni concur in a case of cross-border environmental damage. From this perspective, it would be possible to apply both laws on a distributive basis by applying each of them to particular aspects of the tort. In this sense, Articles 107 and 108 of the Rumanian PIL Act provide that the capacity of the tortfeasor is governed by the lex loci actus, while the lex loci damni applies to the remaining aspects of a transboundary tort.24 However, such approach may give rise to uncertainties (for example, a party may be held liable for an unlawful act under the lex loci damni that is lawful under the lex loci actus). Therefore, it does not seem appropriate to retain it as a connecting factor for non-contractual obligations. Another method for resolving cases of non-contractual liability by concurrently applying two legal systems is 22

Article 99 of the new Belgian Law of Private International Law, which entered into force on 1 October 2004 (see ERAUW J., ‘Brief Description of the Draft Belgian Code of Private International Law’, in this Yearbook 2002, Vol. IV, pp. 159-160); see also http://www.drt.ucl.ac.be/gedip/gedip-documents-8pe.html (as in the British and Turkish Acts, these provisions admit some ways of weakening the lex loci damni). 23 SCJEC Handelskwekerij GJ Bier BV v. Mines de Potasse d’Alsace SA, case 21/76, Recueil 1976, pp. 1735-1758. See comments on this judgment by REST A., ‘Plaintiff can choose his court’, in: Environmental Policy and Law 1977, pp. 41-45; REST A., ‘Wahl des zuständigen Gerichtes bei Distanzdelikten nach dem EG-Zuständigkeits- und Vollstreckungsübereinkommen. Ein erster Schritt zum Schutz des Geschädigten im internationalen Umweltrecht’, in: RIW 1977, pp. 669-674; BOUREL P., in: Rev. crit. dr. int. pr. 1977, pp. 563-576; DROZ A.L., in: Recueil Dalloz Sirey 1977, pp. 613-615; HUET A., in: Clunet 1977, pp. 728-734; CALLORI M., ‘Giurisdizione in materia di responsabilità extracontrattuale: l’art. 5.3 della Convenzione di Bruxelles del 1968 e la questione della localizzazione del forum damni’, in: Riv. dir. int. priv. proc. 1997, pp. 615-642. 24 CAPATINA O., ‘La réforme du droit international privé roumain’, in: Rev. crit. dr. int. pr. 1994, pp. 167-195, p. 184.

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the traditional common law method, which favours the cumulative application of the lex fori and the foreign lex loci delicti when determining the unlawfulness of the act giving rise to the damage.25 Recent developments in the United Kingdom, however, have shifted away from this approach, as it is deemed incompatible with the tendency in substantive law to give priority to the party harmed by the pollution.26 On the other hand, it is widely held that only one of the laws territorially connected with the tort should be applied in cases of cross-border environmental damage (but not in a pre-determined way). Various criteria have been suggested for determining which of the laws should apply. When making the choice, the competent court should analyse the facts of the case on the basis of the principle of proximity and apply the law most closely connected with the case.27 Adopted in Article 2 of the Resolution on tort obligations proposed by the Institute of International Law,28 this criterion was applied in a recent French judgment on cross-border damage.29 Its application on a regular basis, however, would require overcoming the fear of legal uncertainty. As in the Portuguese Civil Code,30 it would also be possible to determine the law applicable to liability cases of international pollution by examining the foreseeability of the damage. Such criterion, however, would require an autonomous definition of the concept of ‘foreseeability’, which would 25 COLLINS L., Dicey and Morris on the Conflict of Laws, Part II, 2º supplement to the 13th ed., London 2000, pp. 288-297. 26 On the application of this double actionability rule in the UK in a hypothetical case of damages caused by acid rain, see PALLEMAERTS M., ‘Judicial recourse against foreign air polluters: a case study of acid rain in Europe’, in: The Harvard Environmental Law Review 1984, pp. 164-194. 27 In this sense, see XU GOUJIAN D., ‘Torts in Chinese Private International Law: A Case Note’, in: I.C.L.Q. 1991, pp. 684-691; BYSTRICKY R., ‘Les traits généraux de la codification tchécoslovaque en droit international privé’, in: Recueil des Cours 1968, pp. 479480, and the judgment of the Cour d’appel of Paris in the Mobil North Sea case, LÉGIER G., ‘Responsabilité civile extra-contractuelle. Comment on the Mobil case’, in: Clunet 1997, p. 989. 28 See ‘Les obligations délictuelles en droit international privé’, in: Annuaire de l’Institut de Droit International, Session d’Edinbourg 1969, Part II, Basel, 1969, pp. 370374. 29 See BISCHOFF J.M., ‘Mobil North Sea Ltd. et autres c. Compagnie française d’entreprises métalliques et autres’, in: Rev. crit. dr. int. pr. 2000, pp. 199-206; LÉGIER G., ‘Bulletin de jurisprudence française. Responsabilité’, in: Clunet 1999, pp. 1048-1057. 30 On Article 45 of the Portuguese Civil Code (this provision has been reproduced in the Acts of the former Portuguese colonies of Angola and Mozambique, as well as in Article 2097 of the Peruvian Civil Code), see NETO A., Código Civil anotado, 10th ed., Lisboa 1996, p. 41; NEUHAUS P.H./RAU H., ‘Das internationale Privatrecht im neuen portugiesischen Zivilgesetzbuch’, in: RabelsZ 1968, pp. 500-512 and 513-524. In Austria, see judgment of the OGH of 29 April 1981, in: Juristische Blätter 1983, pp. 380-382.

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undoubtedly give rise to problems.31 Legal scholars have also proposed that a distinction could be made in the conflict of laws between fault-based and no-fault liability, with the law applicable to each type of liability being determined either by the lex loci actus or the lex loci damni, respectively.32 In light of the difficulties that would arise in qualifying the nature of the liability, this proposal has found no support in legislation or in the case law.33 Finally, the choice between the lex loci actus and the lex loci damni can be made in each individual case on the basis of the principle of the most favourable law (in German, Günstigkeitsprinzip). In the environmental sector, this criterion is codified in Article 138 of the Swiss Private International Law Act.34 The lex favorabilior has also been used in German case law to settle some cross-border environmental cases in which the tort occurred in France, causing damages in Germany.35 As the German experience shows, this criterion gives rise to a number of questions, for example, who should be responsible for determining the most favourable law,36 according to what criteria should the choice be made37 and, in the 31

See BEITZKE G., ‘Kritische Bemerkungen zum Deliktsrecht’, in: Freiburger Kolloquium über den schweizerischen Entwurf zu einem Bundesgesetz über das internationale Privatrecht, Freiburg 27-28 April 1979, Zürich 1979, p. 58. 32 RABEL E., The Conflict of Laws. A Comparative Study, 2nd ed., Part II, Michigan Law School, Ann Arbor 1960, pp. 328 and 333; EHRENZWEIG A.A., ‘Der Tatort im amerikanischen Kollisionsrecht der außervertraglichen Schadenersatzansprüche’, in: Festschrift für Ernst Rabel, Part I, 1953, pp. 655-683. 33 Such distinction is ignored in environmental cases; see judgment of the AG Bonn of 29.9.1987, in: IPRax 1988, pp. 351-354 and International Law Reports, vol. 80, Cambridge 1989, pp. 377-388. 34 Art. 138: ‘Claims arising out of damaging nuisances originating from a real property are governed at the option of the injured party by the law of the state in which the real property is located or by the law of the state in which the result occurred.’ See DASSER F. ‘Article 138’, in: Kommentar zum Schweizerischen Privatrecht. Internationales Privatrecht, Basel 1996, pp. 1030-1038; HEINI A., ‘Article 138’, in: IPRG Kommentar, Zürich 1993, pp. 1201-1204 and DUTOIT B., Droit international privé suisse. Commentaire de la loi fédérale de 18 décembre 1987, 2nd ed., Bâle 1997, pp. 399-400. 35 See IPRspr. 1956-57, vol. 42, p. 151 et seq; REST A., ‘International environmental liability law before German courts’, in: Environmental Liability Law Review 1997, p. 118 and judgment of the LG Saarbrücken of 4.7.1961, in: IPRspr. 1960-1961, vol. 38, pp. 125128. 36 On the binomial facultative, alternative connecting factor, see KREUZER K., ‘Article 38’, in: Münchener Kommentar, Bürgerliches Gesetzbuch, Internationales Privatrecht, München 1998, pp. 2030-2031; SIEHR K., ‘Deutsches Haftpflichtrecht für grenzüberschreitende Immissionen’, in: Grenzüberschreitende Verschmutzung; Tschernobyl/ Schweizerhalle, Beihefte zur Zeitschrift für Schweizerisches Recht, Basel 1989, pp. 78-79. 37 WOLFRUM R./LANGENFELD C., Umweltschutz durch internationales Haftungsrecht, Umweltforschungsplan des Bundesministeriums für Umwelt, Naturschutz und Reaktorsicherheit, 8th Report, Berlin 1998, p. 385.

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event of a plurality of claims, would it be possible for them to be submitted to different legal systems?38 Recent codifications of private international law have given a new formulation to the principle of the most favourable law, thus facilitating the task of the courts by eliminating uncertainties such as those cited above. For example, § 40(1) of the German BGB provides that cross-border torts shall be settled by applying the lex loci actus, unless the claimant requests application of the lex loci damni.39 An approach generally deemed to be even more appropriate is found in the Italian and Venezuelan conflict rules, both of which provide for the application of the lex loci damni, unless the injured party requests application of the lex loci actus.40 This solution is based on the presumption that the injured party frequently has recourse to the courts of his country when claiming compensation for damages caused by a polluter located in another State, thus leading to the application of the local law of the court seized, unless the injured party chooses otherwise. In our opinion, the last-mentioned solution should be adopted in a conflict rule for transboundary environmental damages, as it allows the injured party to choose the law that best suits his interests. In this way, the principle of the most favourable law also would have a positive effect on the protection and restoration of the environment.41

38 BUCHER A., ‘Les actes illicites dans le nouveau droit international privé suisse’, in: Le nouveau droit international privé suisse. Travaux des journées d’étude organisées par le centre de droit de l’entreprise à l’Université de Lausanne, Lausanne 1989, pp. 128-129 and 136; also BUSCH R., Die Ubiquitätsregel im Internationalen Deliktsrecht unter besonderer Berücksichtigung des schweizerischen IPRG, Pfaffenweiler 1996. 39 On the German § 40(1), see PFEIFFER T., ‘Die Entwicklung des internationalen Vertrags-, Schuld- und Sachenrechts 1997-1999’, in: Neue Juristische Wochenschrift 1999, pp. 3674-3687; JUNKER A., ‘Die IPR-Reform von 1999, Auswirkungen auf die Unternehmenspraxis’, in: RIW 2000, pp. 241-255 and KOCH R., ‘Zur Neuregelung des Internationalen Deliktsrechts: Beschränkung des Günstigkeitsprinzips und Einführung der vertragsakzessorischen Bestimmung des Deliktsstatuts?’, in: Versicherungsrecht 1999, pp. 1453-1460. The same wording appears in Article 164(3) of the Estonian Act, Article 8(4) of the Kazakhstan Act and Article 70 of the Tunisian PIL Act. 40 POCAR F., ‘Le droit des obligations dans le nouveau droit international privé italien’, in: Rev. crit. dr. int. pr. 1996, p. 60; KINDLER P., ‘Internationale Zuständigkeit und andwendbares Recht im italienischen IPR-Gesetz von 1995’, RabelsZ 1997, pp. 227-284; PARRA ARANGUREN G., ‘The Venezuelan 1998 Act on Private International Law’, in: Netherlands International Law Review 1999, pp. 383-394; HERNÁNDEZ-BRETÓN E., ‘Neues venezolanisches Gesetz über das Internationales Privatrecht’, in: IPRax 1999, pp. 194-200; DE MAEKELT T.B., ‘Das neue venezolanische Gesetz über Internationales Privatrecht’, in: RabelsZ 2000, pp. 299-343. 41 This is the solution in the Rome II initiative. For more details see Part II C of this article.

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b)

Different methods of weakening the lex loci delicti

Legal scholars have consistently pointed out that it is inappropriate to resolve all international cases of non-contractual liability by reference to the law of the State where the tort occurred.42 In this sense, many European conflict of laws systems have incorporated various criteria to reduce the role of the lex loci delicti.43 In U.S. law, the rigid application of the territorial connection has also been rejected and more casuistic methods are now advocated.44 Such mechanisms deserve to be considered in a positive light, insofar as they offer a ‘more personalized’ solution for resolving the multiplicity of cases of non-contractual liability occurring in practice. It should first be noted that the application of the lex loci delicti could give rise to problems if the pollution has occurred in an area not yet subject to territorial sovereignty. In the event of damages arising or suffered on the high seas, at the poles or in outer space, recourse to the locus delicti would lead to a place with no legal system. It has appropriately been suggested that other criteria should be taken into consideration in such cases, such as the lex fori or the law of the State of the ship’s flag.45 The question also arises as to whether any personal circumstance should be used as a connecting factor in the conflicts system for cases of transboundary pollution. Although the common place of habitual residence of the parties involved in the tort has been adopted in some foreign PIL codes,46 the view is generally held that reference to the lex communis habitationis is not effective in typical cases of transboundary pollution because the parties usually do not habitually reside in the same State. Moreover, it does not necessarily lead to more reasonable results than would be achieved by the application of the lex loci delicti. Therefore, using the common habitual residence of the parties as a connecting factor instead of the lex loci delicti should be viewed with caution. As for nationality, it is generally not considered a suitable replacement the lex loci delicti in environmental matters and

42 E.g., BOUREL P., ‘Un nouveau champ d’exploration pour le droit international privé conventionnel: les dommages causés à l’environnement’, in: L’internationalisation du droit. Mélanges en l’honneur de Yvon Loussouarn, Paris 1994, pp. 102-104. 43 However, the Spanish legislator did not insert any criteria to weaken Article 10.9 of the Civil Code. 44 E.g., MC DOUGAL III L.L., ‘The so-called Choice of Law Revolution in the United States’, in: Comparative Law Review 1995, pp. 54-88. 45 WU C., La pollution du fait du transport maritime des hydrocarbures, Monaco 1994, pp. 13-34 and LORENZ E., ‘Das anwendbare Recht bei Schiffs- und Flugzeugunfällen’, in: Vorschläge und Gutachten zur Reform des deutschen internationalen Privatrechts der außervertraglichen Schuldverhältnisse, Tübingen 1983, pp. 442-463. 46 See, e.g., Article 40(2) of the German EGBGB, Article 133(1) of the Swiss PIL Act, Article 3126(2) of the Québec Civil Code, Article 70(3) of the Tunisian PIL Act.

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should thus not be considered when resolving conflicts in this sector of predominantly asset-based claims.47 The application of the lex loci delicti may be excluded in liability cases where a legal relationship already existed between the parties (contractual, property, partnership or family). Such conflicts are resolved in comparative law by the theory of ancillary connection. If certain requirements are fulfilled, the application of the lex loci delicti can be excluded and the question of liability resolved by applying the law governing the existing relationship. In the field of environmental liability, the rule of secondary connection can be useful in certain cases, for example, where labour relationships are involved. If an employee suffers injuries while performing his duties in a foreign country due to diffused pollution caused by the same company that hired him, the employer’s liability for the physical injuries of his employee should be determined by recourse to the law applicable to the contract of employment.48 The principle of freedom of choice is also becoming increasingly important in torts. Giving the parties the option to choose the law to govern matters of tort liability is receiving greater support among legal scholars and in legislation as well.49 For instance, Dutch courts admitted the optio legis in cases of cross-border environmental damage in the potash mines of Alsace.50 While the optio legis should be accepted as a mechanism that makes the conflicts system more flexible, its application is subject to restrictions set forth either in legislation or the case law. In this sense, it is questionable whether an agreement made before the tort was committed is admissible.51 Furthermore, there is a tendency to exclude the possibility of a tacit choice,52 and certain codified rules restrict the legal systems that may be chosen by the parties.53 It is also desirable to prevent the choice of a law that 47 LÉGIER G., ‘Détermination de la loi applicable. Sources extra-contractuelles des obligations.’, in: Juris-Classeur de droit comparé, fascicle 553-1, Paris 1993, especially No. 16. 48 NYGH, P.E., ‘The reasonable expectations of the parties as a guide to the choice of law in contract and tort’, in: Recueil des Cours 1995, p. 357. 49 Article 132 of the Swiss PIL Act, Article 142 of the German EGBGB, Article 71 of the Tunisian PIL Act, Article 9 of the Hungarian PIL Act, Article 10 of the Rome II Proposal (see more details in Part II C of this article). 50 See judgment of the District Court of Rotterdam of 8.1.1979, in: Netherlands Yearbook of International Law 1980, pp. 329-333 and of the District Court of Rotterdam of 16.12.1983, in: Netherlands Yearbook of International Law 1984, pp. 479-482. 51 VON OVERBECK A., ‘L’irrésistible extension de l’autonomie en droit international privé’, in: Noveaux itinéraires en droit. Hommage à François Rigaux, Bruxelles 1993, p. 627. 52 SCHACK H., ‘Rechtswahl im Prozess?’, in: Neue Juristische Wochenschrift 1984, p. 2736. 53 E.g., Article 132 of the Swiss PIL Act: ‘Parties may, any time after the damage occurred, agree to apply the law of the forum.’

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would have a negative effect on third parties or on the party injured by the harmful event. To this end, protective measures could be introduced for non-contractual liability similar to those protecting the weaker party to international contracts (Articles 5(2) and 6(1) of the Rome Convention).54 The recognition of an optio legis in cases of non-contractual liability also raises other questions: what is the relationship between unilateral and consensual autonomy, may the conflict solutions contained in an international instrument be replaced by invoking the freedom of choice, and is renvoi appropriate in such cases?55 As regards environmental damages, the freedom of choice as a method of determining the law applicable to cross-border cases should not be dismissed lightly. However, as has been pointed out, it is important that its use be regulated so as to ensure that the injured party is not negatively affected by the inter partes agreement. Another way of excluding the application of the lex loci delicti is by introducing a ‘closest connection’ clause into the PIL instrument. This criterion may be expressed either as a generic type of declaration that is later defined by a series of presumptions56 or as a saving clause that would take effect if a closer connection with a legal system is detected other than the one determined by the main conflict rule.57 In national legal systems where this latter approach is admitted, the legislator does not specify conclusively how and in what cases such an exception is to take effect, thus leaving such issues to the discretion of the competent court. It should therefore be taken into account that recourse to this theory could undermine legal certainty and de facto imply a means of applying the lex fori. If we further consider that the essence of the ‘closest connection’ approach is also found in some of the above-mentioned exceptions, such as the ancillary connection, then it follows that this generic exception should only be included as a testing clause of the conflicts system.

3.

Scope of the Applicable Law

This brings us to the question whether the law designated as applicable governs all the aspects of a case of cross-border environmental damage. Although codified rules have a tendency to grant a broad scope to the lex causae,58 legal scholars and 54 HOHLOCH G., ‘Rechtswahl im internationalen Deliktsrecht’, in: Neue Zeitschrift für Verkehrsrecht, 1988, pp. 165-166 and VON HOFFMANN B., ‘Article 38’, in: Staudinger, EGBGB, 13th ed., Berlin 1998, p. 168. 55 See, in general, FACH GÓMEZ K., La contaminación transfronteriza en Derecho Internacional Privado. Estudio de derecho aplicable, Barcelona 2002, pp. 236 et seq. 56 See Article 3 of the Proposal of the European Group of Private International Law. 57 See, e.g., Article 48.1.2 of the Austrian PIL Act, Article 52.1.2 of the Liechtenstein PIL Act, Article 12 of the British PIL Act, Article 25(3) of the Turkish PIL Act. 58 This trend is found, for example, in the wording of Article 10.10 of the Spanish Civil Code (‘La ley reguladora de una obligación se extiende a los requisitos del cumpli-

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the case law indicate that other legal systems might concurrently apply in transboundary cases. Some examples are mentioned to illustrate the various situations in which depéçage could be taken into consideration in an international pollution case: the judge could determine the tort capacity of the tortfeasor by reference to his personal law;59 the law governing a previous relation between the parties could determine the existence of a right to be released from liability;60 the lex fori could be applied in matters of public law such as where compensation is paid through compensatory funds or compensation for damage is suffered by the environment itself;61 a creditor’s liability could be determined by reference to the law governing the loan;62 the lex societatis could be applied in matters where a company is liable for unlawful activities of its organs;63 the law governing the relationship between creditor and subrogee could be taken into account in respect of the subrogation64 and the lex contractus could play a role in questions such as the admissibility of

miento y a las consecuencias del incumplimiento, así como a su extinción’). See DE ANGULO M., ‘Artículo 10.10’, in: Comentarios a las reformas del Código Civil, Part I, Madrid 1977, pp. 556-558; VIRGÓS SORIANO M., ‘Artículo 10.10’, in: Comentarios al Código Civil y Compilaciones Forales, 17th Part, Madrid 1995, pp. 769-788; see also Article 11 of the Rome II Regulation. 59 SCHWIND F., Internationales Privatrecht, Wien 1990, p. 231; SCHWIMANN M., Grundriss des internationalen Privatrechts mit besonderer Berücksichtigung der IPRStaatsverträge, Wien 1982, p. 172; AGUILAR BENÍTEZ DE LUGO M., ‘El estatuto personal’, in: Lecciones de derecho civil internacional, Madrid 1996, pp. 32-33. 60 FIRSCHING K., ‘Anwendungsbereich des Deliktstatuts’, in: Vorschläge und Gutachten zur Reform des deutschen internationalen Privatrechts der außervertraglichen Schuldverhältnisse, Tübingen 1983, p. 185; VON BAR C., Internationales Privatrecht, Part II, München 1991, pp. 521-522. 61 VON BAR C. (note 10), pp. 394-395. 62 See ‘Note on the law applicable to civil liability for environmental damage, Preliminary Document 9, May 1992’, in: Actes et documents de la 17. Session de la Conférence de La Haye de Droit International Privé, 10 au 29 mai 1993, Part I, The Hague 1995, p. 199. 63 In this sense, see Articles 155 (g) and (h) and 159 of the Swiss PIL Act in: VON PLANTA A., ‘Article 155’ and ‘Article 159’, in: Kommentar zum Schweizerischen Privatrecht. Internationales Privatrecht, Basel 1996, pp. 1151-1152 and 1178-1188. On the application of the lex societatis see SONNENBERGER H.J., ‘Empfiehlt es sich, die außervertragliche Haftung von Gesellschaften und ihren Organen durch akzessorische Anknüpfung dem Gesellschaftsstatut zu unterstellen?’, in: Vorschläge und Gutachten zur Reform des deutschen internationalen Privatrechts der außervertraglichen Schuldverhältnisse, Tübingen 1983, pp. 464-474. 64 LÉGIER G., ‘Domaine de la loi compétente. Sources extra-contractuelles des obligations’, in: Juris-Classeur de droit comparé, fascicle 553-2, Paris 1993, vol. 84.

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clauses restricting liability65 or some aspects of the inter vivos assignment of claims.66 The above-cited matters show that in practice the law governing an obligation may be fragmented. Although some of the proposals do not have unanimous backing, other exceptions to the lex causae have already been introduced into the national legislation of some States and thus reflect a broader consensus on restrictions of the monopoly of the lex causae in torts. For instance, various rules of national conflicts systems deal specifically with the question of direct action by the injured party against the insurer. Reflecting a pro damnato approach, these provisions admit a direct action if so permitted by the law governing the tort or the lex contractus (which may be related in various ways).67

4.

Mandatory Rules, Rules of Conduct, Safety Standards and Administrative Authorisations

a)

General remarks

Mandatory rules may also affect the decision in a case of transboundary pollution. In torts, the legislator sometimes has recourse to such provisions as a means of expressing the State’s interest in protecting a group of individuals or safeguarding collective interests against harmful activities. Thus, legal scholars have held that in the environmental sector there could be mandatory rules on liability for nuclear damage,68 on quantifying compensation for environmental damage69 or on imposing compulsory insurance. The characterization of such precepts as internationally mandatory does not seem controversial provided their scope of application is expressly determined; however, rules without any express reference require the interpretation of the courts and thus give rise to greater doubts.70 Today, various conflict 65 SIEHR K., ‘General Report on non-contractual obligations, general problems and the final provisions’, in: LANDO O./VON HOFFMANN B./SIEHR K., European Private International Law of Obligations, Tübingen 1975, p. 57, and BRANDT G., Die Sonderanknüpfung im internationalen Deliktsrecht, Göttingen 1993, p. 89. 66 KELLER M./GIRSBERGER D., ‘Article 145’, in: IPRG Kommentar, Zürich 1993, pp. 1247-1248. 67 See Article 141 of the Swiss PIL Act, Article 109 of the Rumanian law, § 40(4) of the German EGBGB, Article 74 of the Tunisian law, Article 14 of the Rome II initiative. 68 SCHWIMANN M., Grundriss des internationalen Privatrechts mit besonderer Berücksichtigung der IPR-Staatsverträge, Wien 1982, p. 174. 69 XU D., Le droit international privé de la responsabilité délictuelle, Fribourg 1992, pp. 84-85. 70 VIRGÓS SORIANO M., ‘El Convenio de Roma de 19 de junio de 1980 sobre ley aplicable a las obligaciones contractuales’, Tratado de Derecho Comunitario Europeo (Estudio sistemático desde el derecho español), Part III, Madrid 1986, p. 813;

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rules permit the application of the mandatory rules of the law of the forum.71 In this respect, it is held that internationally mandatory rules must be applied if it is clear that they are intended to be applied to a particular dispute. On the other hand, the application of mandatory rules of third countries in cross-border torts is considered more controversial. Although such intervention should, in principle, be seen in a positive light (provided it results in the international harmonisation of judicial decisions), it should be pointed out that in this area various legislations require certain factors to be taken into account (nature and purpose of the rule, effects of its application, etc.). In particular, there must be a close connection between the situation and the State of origin of the rule. Even when all the requirements are met, the court may modify the effects of a mandatory rule on a non-contractual obligation to the point of rejecting its strict application and even its legal effects.72 Finally, doubts exist among legal scholars as to the legal treatment to be given to mandatory rules originating in the lex causae. However, it is understood that a reference to conflict rules also includes such provisions and that the mandatory rules of the applicable law that protect public interests must be treated in the same way as the mandatory rules of third countries.73 There is definitely a growing trend favouring the application of mandatory rules in cases of non-contractual liability. The codification of this phenomenon considerably reduces the uncertainty that has traditionally surrounded the application of certain provisions, some of which contain public law features. Progress, however, must continue in defining profiles of the principle of mandatory rules and in specifying the limits of court action in this area.

BATIFFOL H./LAGARDE P., Traité de droit international privé, Part I, 8th ed., Paris 1993, p. 427. 71 Article 3076 of the Québec Civil Code, Article 17 of the Italian PIL Act, Article 1100 of the Belarus PIL Act, Article 38 of the Tunisian PIL Act, Article 10 of the Venezuelan PIL Act; also Article 12(2) of Rome II. 72 BONOMI A., Le norme imperative nel diritto internazionale privato, Zürich 1998; SCHURIG K., ‘Lois d’application immédiate und Sonderanknüpfung zwingenden Rechts: Erkenntnisfortschritt oder Mystifikation?’, in: Internationales Privatrecht. Internationales Wirtschaftsrecht, Köln 1985, pp. 55-76. 73 KREUZER K., ‘Parteiautonomie und fremdes Außenwirtschaftsrecht’, in: Zum deutschen und internationalen Schuldrecht. Kolloquium aus Anlass des 75. Geburtstages von Ernst Caemmerer, Tübingen 1983, pp. 95-106; GARCIMARTÍN ALFÉREZ F. J., Contratación internacional y medidas de coerción económica, Madrid 1993, pp. 39 and 125.

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b)

Rules of conduct and safety standards

The environmental sector is governed by rules of conduct and safety standards, breaches of which usually have repercussions in criminal or administrative law. In cases of cross-border environmental damage, doubts may arise as to the role to be granted to the safety standards and rules of conduct of the State where the tort occurred, especially when the law applicable to a case of non-contractual liability differs from that of the loci delicti.74 In pollution matters, it is possible that, on the one hand, these provisions may determine the unlawfulness of an act. This is a result of the fact that the legal categories of the lex causae are normally formulated as open principles. Such generality implies that the unlawfulness of an act must be determined by referring to the safety standards and rules of conduct of the locus delicti (understood in a ubiquitous sense), because these rules define ad casum the requirements of diligence (which are relative and therefore depend on place and time). In such cases, a mere material assessment is carried out of the safety standards of the locus actus (which are only granted de facto effect), while the amount and consequences of liability are governed exclusively by the law applicable to the tort. For this reason, the conflict rules dealing with this question state that the relevant safety standards and rules of conduct shall be taken into account.75 Therefore, legal scholars recommend that these standards and rules be consulted in order to adapt the rules of the lex causae to the internationality of the case.76 On the other hand, when proving causality in a case of cross-border environmental damage, the rules of conduct of the lex loci actus may also be subsumed under the cause of action of a substantive rule of the torts statute. Such situation would arise, for example, if § 6(1) of the German rule on environmental liability were involved in the determination of the dispute. This rule presumes that there is a causality relationship between an installation and the damage caused, provided that the installation is capable of having caused such damage. This presumption, however, does not apply if the owner of the installation proves that his conduct complied with the rules.77 When analysing international pollution cases, 74

STOLL H., ‘Deliktstatut und Tatbestandswirkung ausländischen Rechts’, in: Multum non Multa. Festschrift für K.Lipstein aus Anlass seines 70. Geburtstages, Heidelberg 1980. 75 Art. 45(3) of the Portuguese law, Article 142(2) of the Swiss PIL Act, Article 75(2) of the Tunisian law, Article 33 of the Hungarian law, Article 110 of the Rumanian law, Article 13 of the Rome II initiative. 76 UMBRICHT R.P./BURKHALTER T., ‘Article 142’, in: Kommentar zum Schweizerischen Privatrecht. Internationales Privatrecht, Basel 1996, pp. 1060-1061. 77 See LANDSBERG G./LÜLLING W., ‘Die Ursachenvermutung und die Auskunftansprüche nach dem neuen Umwelthaftungsgesetz’, in: Der Betrieb 1991, pp. 479-484; LEIPOLD D., ‘Beweis und Beweislast im Umwelthaftungsprozess’, in: Umweltschutz und Recht in Deutschland und Japan, Heidelberg 2000, pp. 191-213; SCHMIDT-SALZER J.,

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some authors take the rules of the locus actus as data, which leads them to accept that operation in accordance with the provisions of the locus actus also excludes this presumption of causality of the lex causae78.

c)

Administrative authorisations

Polluting emissions often originate from an installation that has been authorised by the public administration of the country concerned. Thus, in a cross-border pollution case, the polluter could allege that he holds an administrative licence permitting the activity carried out. The question of civil liability and how it is affected by the possession of such an authorisation differs in various legal systems. In most cases, the fact that the polluter holds an administrative licence does not release him from his liability to compensate for damages.79 A public authorisation, however, sometimes excludes prohibitory actions by private persons. For example, the German rule of Article 14 of the Law on Protection Against Environmental Emissions provides that the shutdown of a polluting installation may not be requested if the firm holds a licence.80 Similarly, § 364a of the Austrian Civil Code expressly restricts certain actions81 by providing that a party suffering damages caused by an authorised installation may not request that the activity be stopped or that special protective measures be adopted. The only action that can be taken is to sue for compensation of damages.82 Bearing in mind this substantive law substrate (which should not be exaggerated because, as was pointed out, in most cases, the possession of an administrative licence only prevents prohibitory actions), the question Kommentar zum Umwelthaftungsrecht. Betrieblichen Risiken und innerbetriebliche Verantwortung, Heidelberg 1992, pp. 502-641; ZEUNER A., ‘Article 6. Ursachenvermutung’, in: SOERGEL, Bürgerliches Gesetzbuch, Part 5/2, Stuttgart 1998. 78 WOLF U., Deliktsstatut und internationales Umweltrecht, Berlin 1995, p. 257; HAGER G., ‘Article 6 Umwelthaftungsgesetz’, in: LANDMANN/ROHMER, Umweltrecht, München 1999, paras. 61-66. 79 PRIEUR M., ‘Zivilrechtliche Schadenersatz und Unterlassungsklagen. Anwendbares Recht – Rapport du groupe de travail: La reconnaissance des autorisations étrangères’, in: Les problèmes juridiques posés par les pollutions transfrontières, Colloque Saarbrücken 1982, Berlin 1984, p. 214; KREUZER K., ‘Umweltstörungen und Umweltschäden im Kollisionsrecht’, in: Berichte der Deutschen Gesellschaft für Völkerrecht, 22. Tagung in Trier 1991, Heidelberg 1992, p. 268. 80 ‘Gesetz zum Schutz vor schädlichen Umwelteinwirkungen durch Luftverunreinigungen, Geräusche, Erschütterungen und ähnliche Vorgänge. Bundes-Immissionsschutzgesetz’, 14.5.1990. 81 STOLL H., in STAUDINGER, in: Internationales Sachenrecht, 13th ed., Berlin 1996, pp. 144-145. 82 OBERHAMMER P., in: Praxiskommentar zum ABGB samt Nebengesetzen, 2nd ed., Part II, Wien 1998, pp. 123-129.

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arises as to the value to be attributed to a licence issued in the locus actus in a transboundary pollution case tried by the courts of the locus damni under the lex fori. Initially, legal scholars and case law argued on the territorial character of public law and denied the restrictive effects of foreign authorisations.83 Later, this position became more flexible, and there were various commendable approaches striving to avoid the misregarding of the foreign administrative authorisation. As a result, it has been proposed that foreign licences should be taken into account as data within the scope of the lex causae. In this respect, foreign authorisations would be accorded the same restrictive effects as those accorded to domestic authorisations under applicable law, provided certain requirements are met (similarity of the conditions for granting the licences, possibility for the claimant to intervene in the issuing of the foreign authorisation, etc).84 In connection with this solution, which was adopted by the Austrian court in a cross-border emissions case,85 legal scholars have proposed drafting a rule (similar to those existing in the area of mandatory rules) that would permit, under certain circumstances (such as the right of nationals and foreigners to intervene in the process of the granting of licences), the intervention of the administrative authorisation irrespective of the legal system applicable to the case (and without this meaning that the possession of a foreign administrative authorisation would necessarily lead to the effects prescribed by the lex causae).86 Another possibility which is being considered and may produce interesting results is the possibility of regarding as internationally mandatory the legal rules that determine the civil consequences of administrative authorisations (which are the ones that really limit the ability to bring an action).87

83 NASSR-ESFAHANI S., Grenzüberschreitender Bestandsschutz für unanfechtbar genehmigte Anlagen, Berlin 1991, pp. 52-66. 84 JAYME E., ‘Haftung bei grenzüberschreitenden Umweltbelastungen’, in: Prävention im Umweltrecht. Heidelberger Kolloquium; Technologie und Recht, Heidelberg 1988, pp. 216-217; WILHELM G., ‘Ionisierende Strahlung als grenzüberschreitende Immission’, in: Juristische Blätter 1986, pp. 696-701; DUCHEK A., ‘Umweltrecht’, in: Österreichischen Juristentages, Part II, Section IV, Wien 1988, pp. 136-140. 85 Judgment of the OLG Linz of 15.6.1987, in: Juristische Blätter 1987, pp. 577-580 and a French summary in: Clunet 1991, pp. 432-433. 86 HAGER G., ‘Zur Berücksichtigung öffentlich-rechtlicher Genehmigungen bei Streitigkeiten wegen grenzüberschreitender Immissionen’, in: RabelsZ 1989, pp. 293-319. 87 WANDT M., ‘Deliktsstatut und Internationales Umwelthaftungsrecht’, Versicherungsrecht 1998, p. 536-537; PETITPIERRE D., Zivilrechtliche Haftpflicht für Umweltschädigungen nach schweizerischem Recht. Unter Berücksichtigung der Bestimmungen von Art. 138 IPRG und Art. 59 a USG (Entwurf), Basel 1993, pp. 177-178.

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C.

Proposal for an EC Regulation (Rome II)

It is important to point out that the European scenario described above will be undergoing substantial changes in the near future as a result of the ‘communitarisation’ of judicial cooperation in civil matters laid down in the Amsterdam Treaty.88 In this sense, current Article 65 of the EC Treaty reads: ‘Measures in the field of judicial cooperation in civil matters having cross-border implications, to be taken (…) in so far as necessary for the proper functioning of the internal market, shall include: promoting the compatibility of the rules applicable in the Member States concerning the conflict of laws (…)’. This led in 2002 to a Preliminary Draft Proposal for a Council Regulation on the Law Applicable to Non-contractual Obligations.89 As regards its contents, the provisions of the Preliminary Draft are far more elaborate and complete than national rules such as Article 10.9 of the Spanish Civil Code.90 Moreover, it substantially improves a Draft Convention presented in 1998 during the term of the Austrian presidency.91 The Preliminary Draft Proposal was considerably influenced by a Proposal of the European Group of Private Inter-

88

On the ‘communitarisation’ of Private International Law, see BORRÁS A., ‘Derecho Internacional Privado y Tratado de Amsterdam’, in: REDI 1999, Part II, pp. 383426. In light of this development, some EU Member States should perhaps reconsider the need to continue with the reform of their national conflict rules. Similarly, some new EU Member States have recently modified their national rules governing these matters (whose validity could be endangered in the future due to the Rome II initiative). Moreover, national legislators and the European legislator sometimes use different criteria. For example, the Lithuanian rule contains a broad definition of the locus damni, which is not restricted to the place where the direct damages occurred. (‘nach dem Recht […] in dem die schädlichen Wirkungen eingetreten sind’). See RAVLUSEVICIUS P., ‘Die Reform des Internationalen Privatrechts in Litauen’, in: IPRax 2003, pp. 275 and 303). In Slovenia, transboundary torts are resolved by applying the lex loci actus, unless the claimant requests the application of the lex loci damni, if there was foreseeability on the part of the tortfeasor (see GEC-KOROSEC M., ‘Die Reform des slowenischen Internationalen Privat- und Verfahrensrechts und seine Anpassung an das Recht der Europäischen Union’, in: RabelsZ 2002, pp. 736 and 754). 89 http://europa.eu.int/comm/justice_home/unit/civil/consultation/index_en.htm. As stated in the Explanatory Memorandum of this same text, ‘the purpose of this preliminary draft proposal for a Council Regulation is to launch a public debate on a future Community instrument on the law applicable to non-contractual obligations, provided by the Vienna Action Plan (point 40.b) and the Mutual Recognition Programme (point II B 3)’. 90 On the need for reform of the Spanish conflict rule see GONZÁLEZ CAMPOS J.D., ‘La reforma del sistema español de Derecho Internacional Privado. Algunas propuestas para un debate’, in: REDI 2000, pp. 351-369. 91 Proyecto de Convenio sobre ley aplicable a las obligaciones extracontractuales, Nota de la Presidencia al Grupo ‘Convenio de Roma II’, Conseil des Ministres du 9 novembre 1998, Doc. 12356/98.

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national Law for a European Convention on the Law Applicable to Non-contractual Obligations.92 The presentation of the Draft Proposal93 generated a broad and lively debate among scholars and European lobbies.94 After considering the various opinions, the European Commission presented on 22 July 2003 a new Proposal for a Regulation of the European Parliament and the Council on the Law Applicable to Non-contractual Obligations (Rome II, hereinafter also referred to as ‘PR’).95 As pointed out in its Explanatory Memorandum, the Proposal is regarded as complementary to the other PIL instruments already in force in the Community (Regulation 44/01 or Rome Convention) and is not incompatible with the harmonisation of substantive law desired in the future.96 This text will eventually acquire considerable importance: like all EU Regulations, it shall be binding in its entirety and directly applicable in all Member States.97 In light of the universal character of this Proposal (Article 2 PR), it will replace the national conflict rules of the Member States falling within the scope of the new Regulation.98 92 The influence of the European Group of Private International Law – GEDIP – is evident in various articles of the Preliminary Draft Proposal. For instance, Article 14 of the Preliminary Draft Proposal is modelled on Article 6 of the GEDIP draft. The rules on direct action and the scope of the applicable law are also very similar to the GEDIP proposal. 93 On this Preliminary Draft Proposal, see, e.g., NOURISSAT C./TREPPOZ E., ‘Quelques observations sur l’avant-projet de proposition de règlement du Conseil sur la loi applicable aux obligations non contractuelles – Rome II’, in: Clunet 2003, pp. 7-32; RUEDA VALDIVIA R., ‘La unificación europea del derecho conflictual: presente y futuro’, in: La cooperación judicial en materia civil y la unificación del derecho privado en Europa, Madrid 2003, pp. 169-176; FERNÁNDEZ MASIÁ E., ‘Primeras consideraciones sobre el Anteproyecto de Reglamento sobre la ley aplicable a las obligaciones extracontractuales (Roma II)’, in: Actualidad Civil 2003, 34, pp. 907-929. 94 A large number of differing views on the Preliminary Draft Proposal can be found in: Follow-up of the consultation on a preliminary draft proposal for a Council Regulation on the law applicable to non-contractual obligations (‘Rome II’), http://europa.eu.int/ comm/justice_home/unit/civil/consultation/contributions_en.htm. 95 See Brussels, 22.7.2003, COM (2003), 427 final, 2003/0168 (COD), at www.europa.eu.int. 96 In the EU, harmonisation of the substantive law is not regarded as a short-term project. See MARTÍN CASALS M., ‘El European Group on tort law y la elaboración de unos principios europeos del derecho de la responsabilidad civil (Grupo Tilburg/Viena o Spier/Koziol)’, in: Derecho Privado Europeo, Madrid 2003, pp. 217-226; KADNER GRAZIANO T., Europäisches Internationales Deliktsrecht, Tübingen 2003. 97 Article 1(3) of the Proposal reads: ‘Member State means any Member State other than (the United Kingdom, Ireland or) Denmark’. This means that these EU Member States will continue to apply their own conflict rules in cases decided by their respective courts . 98 Some conflict rules dealing with matters outside the scope of Rome II will remain in force (such as nuclear damage: Article 1(2)(f) of the Rome II initiative. See, e.g., the rule in the Austrian Atomic Energy Law of 1999, KISSICH S., ‘Der Ersatz für Nuklearschäden

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The Proposal is divided into four Chapters (Scope, Uniform Rules, Other Provisions and Final Provisions); Chapter II is subdivided into three Sections: ‘Rules applicable to non-contractual obligations arising out of a tort or delict’ (Articles 3-8); ‘Rules applicable to non-contractual obligations arising out of an act other than a tort or delict’ (Article 9), and ‘Common rules applicable to noncontractual obligations arising out of a tort or delict and out of an act other than a tort or delict’ (Articles 10-17). Comparing the scope of the future Regulation (Article 1) with the text of the Preliminary Draft Proposal, we see that the new version does not expressly prohibit the application of the Regulation to cases of liability incurred in the exercise of public authority.99 On the other hand, in addition to obligations arising out of certain family, partnership or commercial relationships, the Rome II Proposal adds non-contractual obligations arising out of nuclear damage to the list of matters excluded from the material scope of the Regulation.100 In the view of the drafters, the general conflict rule of Article 3 of the future Regulation aims to guarantee legal certainty, seeking to strike a reasonable balance between the person claimed to be liable and the person sustaining damage. The starting point of this conflict rule is as follows: ‘The law applicable to noncontractual obligation shall be the law of the country in which the damage arises or is likely to arise, irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event arise.’101 Accordingly, this conflict rule adopts the direct nach der Convention on Supplementary Compensation for Nuclear Damage und dem österreichischen AtomHG 1999’, in: Österreichische Juristen-Zeitung 1999, pp. 661-673 and 718-723). Similarly, conflict rules governing non-contractual obligations contained in international Conventions to which the Member States were already party prior to the adoption of Rome II will remain in force (a list of such Conventions is mentioned in Article 26 of Rome II; including e.g. the Hague Convention on the Law Applicable to Traffic Accidents and the Hague Convention on the Law Applicable to Products Liability), as well as international Conventions which unify some aspects of substantive law (see Part II A of this article). 99 If doubts arise in the future on this matter, it would be appropriate for the European Court of Justice to follow its case law relating to the Brussels Convention (see cases such as Eurocontrol, Rüffer, Sonntag) when distinguishing between acts of iure imperii and acts of iure gestionis (including the latter falling under the scope of the Rome II Regulation). 100 The Explanatory Memorandum states: ‘This exclusion is explained by the importance of the economic and State interest at stake and the Member States’ contribution to measures to compensate for nuclear damage in the international scheme of nuclear liability established by the Paris Convention of 29 July 1960 and the Additional Convention of Brussels of 31 January 1963, the Vienna Convention of 21 May 1963, the Convention on Supplementary Compensation of 12 September 1997 and the Protocol of 21 September 1988.’ 101 A recent example of this conception can be found in M. J.-P. Pays-Fourvel et autres v. Soc. Axa courtage et autres: ‘La loi applicable est celle du lieu où ce dommage

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damage as the connecting factor, an approach that is in keeping with the abovementioned interpretation of Article 5(3) Brussels Convention/Regulation 44/01 by the Court of Justice in cases such as Dumez, Marinari or Henkel.102 The Rome II initiative introduces two exceptions to the application of the lex loci damni in Article 3(2) and (3). The first rule in para. 2 states: ‘Where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country when the damage occurs, the non-contractual obligation shall be governed by the law of that country.’ As mentioned above, this rule does not have a real impact on transboundary pollution cases. The second rule in para. 3 reads: ‘Notwithstanding paragraphs 1 and 2, where it is clear from all the circumstances of the case that the non-contractual obligation is manifestly more closely connected with another country, the law of that country shall apply. A manifestly closer connection with another country may be based in particular on a pre-existing relationship between the parties, such as a contract that is closely connected with the non-contractual obligation in question.’ It has already been observed that comparative legislation and legal scholars in Europe increasingly consider it appropriate, in certain circumstances, to replace the territorial criterion (lex loci delicti) by connecting factors, such as the common place of residence or by a ‘substantially closer connection’, thus leading to the application of a law that is truly connected with the facts of the case. In regard to Article 3(3), it is important to note that the Explanatory Memorandum emphasizes that its application should remain exceptional. Therefore, to prevent judges from incorrectly converting this exception into the starting point for resolving a conflicts issue,103 the text of the rule s´est réalisé et non celle du lieu oú ce préjudice moral est subi’ (French Cour de cassation, 28 October 2003, in: Rev. crit. dr. int. pr. 2004, pp 83-95). 102 See SCJEC 11.1.1990, Case C-220/88, Dumez France and Tracoba v. Hessische Landesbank, Recueil 1990, pp. 49-81. On this distinction, see GAUDEMET-TALLON H., in: Rev. crit. dr. int. pr. 1990, pp. 363-379; HUET A., in: Clunet 1990, pp. 498-503 and FONT SEGURA A., ‘La disociación y los daños indirectos en la aplicación del artículo 5.3 del Convenio de 1968 de Bruselas’, in: Noticias CE 1990, pp. 131-136. SCJEC, 19.8.1995. Case C-364/93, Antonio Marinari v. Lloyd’s Bank and Zubaidi Trading Company, Recueil 1995, pp. 2719-2743. See HOHLOCH G., ‘Erfolgsort und Schadenort – Abgrenzung bei Ansprüchen auf Ersatz von primären und sonstigen Vermögenschäden’, in: IPRax 1997, pp. 312-314; MARI L., ‘Problematica del forum damni nella convenzione di Bruxelles del 27 settembre 1968 concernente la competenza guirisdizionale e l’esecuzione delle decisioni in materia civile e commerciale’, in: Mélanges Fritz Sturm, Part II, Bruxelles 1999, pp. 1573-1590, and CRESPO HERNÁNDEZ A., ‘Precisión del lugar del hecho dañoso en los supuestos de daños sobrevenidos’, in: Iniuria 1995, pp. 99-111. A recent example of the application of this conception by national courts is the Henderson case (see All England Law Reports 2002, nº 2, pp. 705 et seq.): claimant’s health worsened in the United Kingdom; however, English courts did not have jurisdiction (ex Article. 5(3) Brussels Convention) because the car accident occurred in France. 103 Sometimes rather broad discretion is given to the British courts by the use of the phrase ‘substantially more appropriate law’ in the English Private International Law (Mis-

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highlights its subsidiary nature (‘Notwithstanding paragraphs 1 and 2’) and stresses that the connection with another national system must be truly ‘significant’ by resorting to the adverbs ‘manifestly’ and ‘closely’.104 Following the general rule, the Rome II proposal contains a series of specific conflict rules for certain types of torts: products liability (Article 4); unfair competition (Article 5); violations of privacy and rights relating to personality (Article 6); violations of the environment (Article 7); and infringement of intellectual property rights (Article 8). The conflict rule of Article 7 determines the law applicable to a claim involving environmental damages connected with more than one State. In the Explanatory Memorandum repeated reference is made to the importance of environmental protection in Community law.105 In this context, it points out that the conflict rule applies not only to cases of damage to property and persons, but also to the difficult subject of damage to the environment itself.106 Having regard to the reference made in the rule to Article 3(1), it follows that the law applicable to cases falling under Article 7 are to be determined by the law of the place where the direct damage is suffered. The Commission justifies this solution by referring to various national conflict rules adopting the same approach107 and by emphasizing the important correlation between this connecting factor and the principles of strict liability and prevention. Whereas the old Article 8 of the Preliminary Draft Proposal designated ‘the law of the country in whose territory the damage occurs or cellaneous Provisions) Act of 1995; see Edmunds s. Simmonds, 2001, in: 1 W.L.R, 1003 (traffic accident caused in Spain but connected with the UK). 104 It is possible that the solutions of Article 3 of Rome II would provide greater predictability than those of Article 4 of the Rome Convention (which contains the ‘closest connection’ clause + presumptions). This Rome II initiative is the European legislator’s way of avoiding the flexibility of the U.S. law (SEDLER R.A., ‘Choice of Law in Conflicts Torts Cases: A Third Restatement or Rules of Choice of Law?’, in: Indiana Law Journal 2000, pp. 615-633). 105 See, e.g., STONE P., ‘The Rome II Proposal on the Law Applicable to NonContractual Obligations’, in: The European Legal Forum 4-2004, p. 227. 106 Opposed to this solution, see BOUZA VIDAL N./VINAIXA MIQUEL M., ‘La responsabilidad por daños ambientales transfronterizos: propuesta de regulación europea y derecho internacional privado’, in: Anuario español de derecho internacional privado 2003, pp. 75106. The Proposal of the European Group for Private International Law was more restrictive in this respect: Article 4: ‘It shall be presumed that a non-contractual obligation is most closely connected in case of damage or injury to persons or goods, resulting from harm to the environment, with the country in which the damage or injury occurred or is likely to occur.’ 107 The statement of the Explanatory Memorandum saying that Article 10.9 of the Spanish Civil Code also provides for the application of the law of the place where the damage occurs is not considered reliable because there is no uniform Spanish court practice or doctrine on this matter.

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threatens to occur’ as applicable, this rule introduces an innovative element by allowing the person sustaining damage to base his claim on the law of the country in which the event giving rise to the damage occurred, if this law is more favourable to him than the lex loci damni.108 This option should be viewed in a positive light109 because it grants favourable treatment to the injured party (whose interests are taken into account)110 and makes the principle of the ‘polluter pays’ more real.111 A number of controversial issues also arise within the framework of an analysis of Article 7 of the Rome II Regulation. For instance, from the wording of Article 7, it appears that the clauses giving a greater degree of flexibility in Article 3(2) and (3) of the Rome II initiative do not apply to violations of the environment. Consequently, the law applicable to claims in such matters will be determined by applying the lex loci damni or the lex loci actus, unless the parties have made a choice of law pursuant to Article 10 of the Regulation. In our opinion, it would not be inappropriate to allow the application of the exception clause of Article 3(3) (closest connection) in certain cases of cross-border environmental damage. In particular, this could be useful in cases where a relationship already existed between the parties.112 It should be noted that the wording of Article 7 PR (‘the country in which the event giving rise to the damage occurred’) omits a reference to preventive actions such as that contained in Article 3(1) (‘or is likely to arise’). Despite this omission, we believe that the connecting factor of the locus actus would also cover 108 This is clarified as follows in the Explanatory Memorandum: ‘The question of the stage in proceedings at which the victim must exercise his option is a question for the procedural law of the forum, each Member State having its own rules to determine the moment from which it is no longer possible to file new claims.’ 109 A favourable view is taken, e.g., in the ‘Commentaire au texte de l’avant-projet de proposition de Règlement CE sur la loi applicable aux obligations non contractuelles’, by the Universitat Pompeu Fabra and Autónoma of Barcelona, at http://europa.eu.int/ comm/justice_home/unit/civil/consultation/contributions/univ_aut_barcel_fr.pdf. 110 See the recent opinion on Rome II of the European Economic and Social Committee states: ‘Clearly, by providing an exception to the general rule which, disguised as a conflict of law provision, allows the injured party the choice of applicable law, the Commission is pursuing objectives which actually have nothing to do with conflict of laws, but which are rather intended to encourage potential environmental polluters to take environmental protection very seriously by threatening them with the application of a more stringent system of substantive law.’ INT/209, 2 June 2004 (in www.europa.eu.int). In the same sense, see AMORES CONRADI M.A./TORRALBA MENDIOLA E., ‘XI Tesis sobre el estatuto delictual’, at www.reei.org, 2004. 111 However, favouring the application of the lex loci damni as the sole solution, see PALAO MORENO G., ‘Hacia la unificación de las normas de conflicto en materia de obligaciones extracontractuales en Europa (una visión crítica del Anteproyecto de Propuesta de Reglamento Roma II)’, in: Derecho patrimonial europeo, Navarra 2003, p. 293. 112 See Part II. B. 2.b of this article.

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prohibitory claims in which the damage is hypothetical. It should not be overlooked, however, that formulas such as ‘or is likely to arise’ generate fear on the part of corporations and insurance companies, because this wording could encourage the filing of legal claims.113 Finally, some doubts have been voiced about the need for such a rule as Article 7 of the Rome II initiative. In this regard, some authors argue that, if a violation of the environment gives rise to material damage or body injuries, these could be settled by recourse to the general rule,114 and if the biodiversity itself is damaged, administrative provisions of Community law would come into play rather than civil law provisions.115 On the other hand, it can be argued that, if the Community legislator intended to create a vertical division of conflict rules in this area (following, for example, the Swiss conflict rules), then Article 7 of the initiative should be retained because it provides an appropriate solution for a typology of cases with distinctive features. As regards the common rules applicable to non-contractual obligations arising out of a tort or delict and out of an act other than a tort or delict, Article 10 PR allows an ex post choice of law by the parties, except in violations of intellectual property rights. Permitting the freedom of choice in this matter is an interesting development that will undoubtedly have repercussions in future legal practice. A number of restrictions are placed on the optio legis in this rule, some of which are clearly inspired by the Rome Convention. Due to the potential impact of mandatory rules on determining the applicable law in cross-border environmental cases, reference should also be made to Article 12.116 This provision deals not only with mandatory rules of the law of the forum – as did the Preliminary Draft Proposal – but also introduces a welcomed paragraph on the application of mandatory rules of other countries, the wording of which is very similar to Article 7(1) of the Rome Convention. The remaining provisions of this Chapter deal with safety standards and rules of conduct, direct action against the insurer of the person liable, subrogation and multiple liability, formal validity and burden of proof. 113 In this sense, see Deutscher Industrie- und Handelskammer, at: http://europa.eu.int/comm/justice_home/unit/civil/consultation/contributions/feder_german_industries_ de.pdf, and the example cited by the Government of the United Kingdom at: http://www.dca.gos. uk/consult/general/eurocom.htm. 114 See note 113 supra. 115 See the documents of the Austrian Wirtschaftskammer, at: http://europa. eu.int/ comm/justice_home/unit/civil/consultation/contributions/wirtschaftskammer_osterreichd_de .pdf, and those of the Austrian Bundesministerium für Justiz, at: http://europa.eu.int/ comm/justice_home/unit/civil/consultation/contributions/minist_justice_aut_de.pdf. 116 In this respect, see the Comments by the Permanent Bureau of the Hague Conference on Private International Law on the provisions relating to environmental damage at: http://europa.eu.int/comm/justice_home/unit/civil/consultation/contributions/ bureau_perm_conference_lahaye_en.pdf.

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Law Applicable to Cross-Border Environmental Damage

In light of its possible repercussions on environmental claims, Article 4 of the Preliminary Draft Proposal, which provided alternative applicable laws for torts occurring in areas not subject to the territorial sovereignty of a State,117 has been deleted from the Rome II proposal. Instead, Article 18 of the proposed Regulation provides that, in certain circumstances, a series of territories and means of transport shall be treated as belonging to the territory of a State.118 It is also worth noting that Article 24 of the Rome II Regulation expressly deals with the question of non-compensatory damages, providing that it shall be contrary to Community public policy to apply a provision of the applicable law which awards exemplary or punitive damages.119

III. Concluding Remarks After showing that the current instruments of international uniform law are not adequately self-sufficient to resolve cross-border environmental cases, this article analyses the different conflicts solutions provided by the national conflict rules and case law of some European States. The modernity and flexibility of some national European systems, such as the German system, serve as a starting point for the European Union, which is currently elaborating a Regulation on the law applicable to non-contractual obligations. The adoption of the Regulation would be a very decisive step in resolving the conflict of laws in cross-border environmental cases. While the Rome II proposal can be regarded as an innovative example of the Community goal to achieve harmonisation of legislation in private international law, its entry into force would also substantially improve the conflicts regulation of torts in countries like Spain, where the national conflict rules do not provide for any derogation from the principle of the lex loci delicti. As regards environmental damages, Article 7 of the Rome II proposal offers a well-balanced solution in this matter: application of the law of the place where the direct damage is suffered, unless the injured party opts to base his claim on the law of the country where the event giving rise to the damage occurred. It would be

117 For defects of this rule see the Bar Council of England and Wales, at: http:// europa.eu.int/comm/justice_home/unit/civil/consultation/contributions/bar_council_position _en.pdf. 118 Instead of making use of the conflicts method, the legislator provides an autonomous (and broad) definition of the term ‘territory of a State’. 119 On the granting of punitive damages in pollution cases in the USA, see BOSTON G. W., Punitive damages in tort law, second part, specific tort actions, chapter 22, New York 1993, pp. 1-71; ACKERMAN P., ‘Some don’t like it hot: Louisiana eliminates punitive damages for environmental torts’, in: Tulane Law Review 1997, pp. 327-350.

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important for this article and the proposed option to be included in the future Rome II Regulation.

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TEXTS, MATERIALS AND RECENT DEVELOPMENTS ________________

LAW OF 16 JULY 2004 HOLDING THE CODE OF PRIVATE INTERNATIONAL LAW* (BELGIAN OFFICIAL JOURNAL 27 JULY 2004 – IN FORCE AS FROM 1 OCTOBER 2004)

CHAPTER I GENERAL PROVISIONS SECTION 1 PRELIMINARY PROVISION Article 1 Referred Matter The present statute deals with a matter as referred to in article 78 of the Constitution, with the exception of articles 5 up to 14, 23, §§1 and 2, 27§1 part 4 and §2, 31 §1, part 3, 32, 33, 36, 40, 42, 43, 59, 61, 66, 73, 77, 85, 86, 96, 97, 109, 118, 121, §4, 123, 126, §1, 134,135,136 and 139, 5° and 8°, that regulate a matter referred to in article 77 of the Constitution.

* English translation by: Caroline CLIJMANS (LLM, NYU), Assistant Professor, Department of Private International Law, University of Ghent, Belgium and Prof. Dr. Paul TORREMANS, Department of Private International Law, University of Ghent, Belgium and University of Nottingham, England.

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SECTION 2 SUBJECT Article 2 Subject The present statute regulates in an international situation the jurisdiction of Belgian courts, the designation of the applicable law and the conditions for the effect in Belgium of foreign judgments and authentic instruments in civil and commercial matters without prejudice to the application of international treaties, the laws of the European Union or provisions of special statutes.

SECTION 3 DETERMINATION OF NATIONALITY, DOMICILE AND RESIDENCE Article 3 Nationality §1.

The issue whether a natural person has the nationality of a State is governed by the law of that State.

§2.

The references in the present statute to the nationality of a natural person, who possesses two or more nationalities, refer to: 1° the Belgian nationality, if it is one of the nationalities; 2° in the other cases, the nationality of the State with which that natural person, taking all circumstances and notably his habitual residence into account, has the closest connections.

§3.

The references in the present statute to the nationality of a natural person, who by law or international conventions binding Belgium has the quality of stateless person or refugee, are replaced by a reference to his habitual residence.

§4.

The references in the present statute to the nationality of a natural person, whose nationality cannot be established, are replaced by a reference to his habitual residence.

Article 4 Domicile and habitual residence §1.

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2°

the place where a natural person has his main residence according to the civil register of the population, the register of foreigners or the ‘waiting register’; the place in Belgium where a body with separate legal personality has its statutory seat.

§2.

For the purpose of the present statute, habitual residence means: 1° the place where a natural person has established his main residence, even in the absence of registration and independent of a residence or establishment permit; in order to determine this place, the circumstances of personal or professional nature that show durable connections with that place or indicate the will to create such connections are taken into account; 2° the place where a body with separate legal personality has its main establishment.

§3.

For the purposes of the present statute the main establishment of a body with separate legal entity is determined by taking into account primarily the place of administration, as well as the center of its business and activities, and in subsidiary order the statutory seat.

SECTION 4 JURISDICTION Article 5 International jurisdiction based on the domicile or habitual residence of the defendant §1.

Except when otherwise provided for by the present statute, the Belgian courts have jurisdiction if the defendant has his domicile or habitual residence in Belgium when the action is introduced. In the event of multiple defendants, the Belgian courts will have jurisdiction if one of them has his domicile or habitual residence in Belgium, unless the action has been introduced solely to remove a defendant from the jurisdiction of his domicile or habitual residence abroad.

§2.

The Belgian courts have also jurisdiction to hear actions relating to the exploitation of a secondary establishment of a body with separate legal entity, which has neither its domicile nor its habitual residence in Belgium, if the establishment is located in Belgium when the action is introduced.

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Article 6 Widening of international jurisdiction by agreement between the parties §1.

When parties, in a matter in which, according to Belgian law, they can freely dispose of their rights, validly agreed to confer jurisdiction on the Belgian courts or a Belgian court to hear the disputes, which have arisen or may arise in connection with a legal relationship, the latter courts or court shall have exclusive jurisdiction. Except when otherwise provided for in the present statute, a Belgian court before which a defendant enters an appearance is competent to hear the action brought against the latter, unless the appearance has as its main purpose to contest such jurisdiction.

§2.

In the cases described in §1, the court may however decline its jurisdiction when it appears from the combined circumstances that the dispute has no meaningful connection with Belgium.

Article 7 Exclusion of international jurisdiction by agreement When in a matter in which, according to Belgian law, the parties can freely dispose of their rights, the parties validly agreed to confer jurisdiction on foreign courts or on a foreign court to hear the disputes which have arisen or may arise in connection with a legal relationship; and the case is pending before a Belgian court, the latter must stay its proceedings, unless it is anticipated that the foreign judgment is not amenable to recognition and enforcement in Belgium or unless the Belgian courts have jurisdiction according to article 11. The Belgian courts must decline jurisdiction when the foreign decision can be recognized according to the present statute.

Article 8 Actions on a warranty, intervention actions and counterclaims A Belgian court has jurisdiction to hear an action on a warranty or an intervention action, if it has accepted its jurisdiction to hear the original action. The original action may however not be brought to remove the defendant, from the jurisdiction of the court that would normally have jurisdiction. The court, with jurisdiction to hear an action, also has jurisdiction to hear the counterclaim arising from the fact or act on which the original action is based.

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Article 9 Related actions Belgian courts, with jurisdiction to hear an action, also have jurisdiction to hear an action so closely related to it that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments if the actions were heard separately.

Article 10 Provisional, protective and executory measures In case of urgency, Belgian courts have jurisdiction to grant provisional, executory and protective measures with respect to persons present or property located in Belgium at the time the action was introduced, even if, under the present statute the Belgian courts would not have jurisdiction to adjudicate the merits.

Article 11 Exceptional attribution of international jurisdiction Notwithstanding the other provisions of the present statute, the Belgian courts will exceptionally have jurisdiction when the matter presents close connections with Belgium and proceedings abroad seem impossible or when it would be unreasonable to demand that the action be brought abroad.

Article 12 Verification of international jurisdiction The court seized verifies its international jurisdiction of its own motion.

Article 13 Internal jurisdiction When Belgian courts have jurisdiction by virtue of the present statute, the territorial jurisdiction of the court will be established according to the relevant provisions of the Code of Civil Procedure and special statutes, except in the case provided for in article 23. In the absence of a provision that determines the territorial jurisdiction of the court, the latter will be established according to the provision of the present statute regarding the international jurisdiction. If these provisions do not allow designating the court that has territorial jurisdiction, the action may be brought before the court of the district of Brussels.

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Article 14 International lis pendens When an action is pending before a foreign court and it is anticipated that the foreign decision shall be amenable to recognition or enforcement in Belgium, the Belgian court that is later seized of an action between the same parties, with the same object and cause of action, may stay its proceedings until the foreign decision has been rendered. The court takes into account the requirements of due process. The court declines jurisdiction when the foreign decision can be recognized by virtue of the present statute.

SECTION 5 CONFLICT OF LAWS Article 15 Application of foreign law §1.

The judge establishes the content of the foreign law designated by the present statute. That law is applied in accordance with the interpretation given to it in the foreign country.

§2.

The judge may require the cooperation of the parties if he cannot establish the content. When it is clear that the content of the foreign law cannot be established timely, Belgian law is applied.

Article 16 Renvoi Within the meaning of the present statute and unless special provisions state otherwise, the reference to the law of a State is to the legal rules of that State with the exclusion of its rules of private international law.

Article 17 States with more than one legal system §1.

When the present statute refers to the law of a State with two or more legal systems, each system is considered to be the law of a State for the purposes of the designation of the applicable law.

§2.

A reference to the law of the State of which a natural person has the nationality refers, within the sense of §1, to the legal system that is designated by

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the rules in force in that State, or in the absence of such rules, the legal system with which the natural person has the closest connections. A reference to the law of a State with two or more legal systems, which are applicable to different categories of persons, relates within the meaning of §1 to the legal system that is designated by the rules in force in that State or, in the absence of such rules, to the legal system that has the closest connections with the legal relationship.

Article 18 Evasion of the law For the determination of the applicable law in a matter where parties may not freely dispose of their rights, facts and acts committed with the sole purpose to evade the application of the law designated by the present statute are not taken into account.

Article 19 Exception clause §1.

By way of exception, the law designated by the present statute does not apply if from the combined circumstances it appears manifestly that the matter has only a very slight connection with the State of which the law was designated, but is very closely connected to another State. In such case, the law of that other State will be applied. When applying §1 special consideration is given to the need of predictability of the applicable law and to the circumstance that the relevant legal relationship was validly established in accordance with the private international law of the States with which the legal relationship was connected when it was created.

§2.

Paragraph 1 does not apply if parties made a choice of law in accordance with the provisions of the present statute, or if the designation of the applicable law is based on its content.

Article 20 Mandatory rules The provisions of the present statute do not prejudice the application of the Belgian mandatory or public policy provisions, which, by virtue of the law or their particular purpose, are aimed to govern the international situation irrespective of the law designated by the conflict rules.

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When the law of a State applies by virtue of the present statute, effect may be given to the mandatory or public policy provisions of the law of another State with which the situation has a close connection, if and in so far as, under the law of the latter State, those rules apply irrespective of the law otherwise applicable. In considering whether to give effect to these mandatory rules, regard shall be given to their nature and purpose and to the consequences of their application or their nonapplication.

Article 21 Public policy exception The application of a provision of the foreign law designated by the present statute is refused in so far as it would lead to a result that would be manifestly incompatible with public policy. In determining this incompatibility, special consideration is given to the degree in which the situation is connected with the Belgian legal order and to the significance of the consequences produced by the application of the foreign law. If a provision of the foreign law is not applied because of this incompatibility, another relevant provision of that law or, if required, of Belgian law applies.

SECTION 6 EFFECT OF FOREIGN JUDGMENTS AND FOREIGN AUTHENTIC INSTRUMENTS Article 22 Recognition and enforcement of foreign judgments §1.

A foreign judgment, which is enforceable in the State in which it was rendered, will be declared enforceable in whole or in part in Belgium, in accordance with the procedure set out in article 23. A foreign judgment will be recognized in Belgium, in whole or in part, without there being a need for the application of the procedure set out in article 23. If the recognition issue is brought incidentally before a Belgian court, the latter has jurisdiction to hear it. The judgment may only be recognized or declared enforceable if it does not violate the conditions of article 25.

§2.

Any interested party, and in matters regarding the status of natural persons also the advocate-general, can in accordance with the procedure set out in

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article 23 request that the judgment be recognized or declared enforceable, in whole or in part, or that it be declared not recognizable or not enforceable, in whole or in part. §3.

For the purpose of the present statute: 1° the term judgment means any decision rendered by an authority exercising judicial power; 2° the recognition gives legal power to the foreign judgment.

Article 23 Jurisdiction and procedure for recognition and enforcement §1.

Except in the cases provided for in article 121, the court of first instance has jurisdiction to hear actions for recognition and enforcement of a foreign judgment.

§2.

Except in the case provided for in article 31, the court with territorial jurisdiction, is the court of the domicile or habitual residence of the defendant; in the absence of such domicile or habitual residence, it is the court of the place of execution. When an action for recognition cannot be introduced before the court referred to in the first part, the plaintiff may seize the judge of its domicile or residence in Belgium. In the absence of such domicile or residence in Belgium, the plaintiff can seize the court of the district of Brussels.

§3.

The action is introduced and treated in accordance with the procedure referred to in articles 1025 to 1034 of the Code of Civil Procedure. The petitioner has to elect domicile within the district of the court. The judge decides within a short delay.

§4.

The foreign judgment subject or open to an ordinary recourse can be enforced provisionally. The judge may make the enforcement subject to the provision of a guarantee.

§5.

Contrary to articles 1029 of the Code of Civil Procedure, only conservatory measures can be taken with respect to the property of the party against whom the enforcement is sought during the period provided for an appeal against the decision that allows enforcement, and until a decision with respect to the appeal is taken. The decision, which allows the enforcement, contains the permission to take these measures.

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Article 24 Documents to be submitted with a view to the recognition and enforcement §1.

The party that invokes the recognition of or seeks to declare a foreign judgment enforceable must produce the following documents: 1° a certified copy of the decision, which according to the law of the State where it was rendered meets the conditions required for the authenticity thereof; 2° if it concerns a decision by default, the original or a certified copy of the document establishing that the act that introduced the proceeding or the equivalent document was served or brought to the notice of the defaulting party in accordance with the law of the State where the decision was rendered; 3° any document on the basis of which it can be established that, according to the law of the State where the decision was rendered, the decision is enforceable and has been served or brought to notice.

§2.

In the absence of the production of the documents mentioned in §1, the judge may impose a delay in which they are to be produced or accept equivalent documents or, if he believes to be sufficiently informed, grant an exemption.

Article 25 Grounds for refusal of recognition and enforcement §1.

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A foreign judgment shall not be recognized or declared enforceable if: 1° the result of the recognition or enforceability would be manifestly incompatible with public policy; upon determining the incompatibility with the public policy special consideration is given to the extent in which the situation is connected to the Belgian legal order and the seriousness of the consequences, which will be caused thereby; 2° the rights of the defense were violated; 3° in a matter in which parties cannot freely dispose of their rights, the judgment is only obtained to evade the application of the law designated by the present statute; 4° according to the law of the State where the judgment was rendered and without prejudice to article 23, §4, the judgment would still be subject to an ordinary recourse in the said State; 5° the judgment is irreconcilable with a Belgian judgment or an earlier foreign judgment that is amenable to recognition in Belgium;

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7° 8°

9° §2.

the claim was brought abroad after a claim which is still pending between the same parties and with the same cause of action was brought in Belgium; the Belgian courts had exclusive jurisdiction to hear the claim; the jurisdiction of the foreign court was based exclusively on the presence of the defendant or the assets located in the state of such court, but without any direct relation with the dispute; or the recognition or enforceability would be contrary to the grounds for refusal provided for in articles 39, 57, 72, 95, 115 and 121.

Under no circumstances will the foreign judgment be reviewed on the merits.

Article 26 Foreign judgments as evidence §1.

A foreign judgment is evidence in Belgium of the findings of fact made by the judge if it meets the conditions required for the authenticity of judgments according to the law of the State where it was rendered. The findings of fact made by the foreign judge are not taken into account to the extent that they would produce an effect manifestly incompatible with the public policy.

§2.

Evidence to the contrary relating to facts established by the foreign judge can be brought by any legal means.

Article 27 Recognition and executory force of foreign authentic instruments §1.

A foreign authentic instrument is recognized by any authority in Belgium without the need for any procedure if the validity is established in accordance with the law applicable by virtue of the present statute and more specifically with due regard of articles 18 and 21. The instrument must satisfy the conditions necessary to establish authenticity under the law of the State where it was drawn up. To the extent that is required, article 24 is applicable. In the event that the authority refuses to recognize the validity of the instrument, an appeal may be lodged before the court of first instance

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without prejudice to article 121, in accordance with the procedure set out in article 23. §2.

A foreign authentic instrument which has executory force in the State were the instrument was drawn up, will be declared enforceable in Belgium by the court of first instance, without prejudice to article 121 in accordance with the procedure set out in article 23 and after verification of the conditions provided for in §1.

§3.

A judicial settlement, which has been approved by a foreign judge and is enforceable in the State where the settlement was approved, can be declared enforceable under the same conditions as authentic instruments.

Article 28 Foreign authentic instruments as evidence §1.

A foreign authentic instrument is evidence in Belgium of the finding of facts made by the authority that has drawn up the instrument, if the authentic instrument cumulatively satisfies: 1° the conditions required by the present statute for the form of the instruments; 2° the conditions required, by the law of the State where the instrument was drawn up, for the authenticity thereof. The finding of facts made by the foreign authority is not taken into account to the extent that they would produce an effect manifestly incompatible with the public policy.

§2.

Evidence to the contrary relating to facts established by the foreign authority can be brought by any legal means.

Article 29 Factual effect of foreign judgments and authentic instruments In Belgium consideration is given to the existence of a foreign judgment or authentic instrument without verification of the conditions required for recognition, enforcement or its value as evidence.

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Article 30 Legalization §1.

In order to be produced in Belgium a foreign judgment or authentic instrument has to be legalized in its entirety or as an excerpt, in original or copy. The legalization confirms only the authenticity of the signature, the capacity in which the signatory acted and, as the case may be, the identity of the seal or stamp on the document.

§2.

The legalization is done: 1° by a Belgian diplomatic or consular agent who is accredited in the State where the judgment is rendered or where the instrument has been drawn up; 2° in the absence thereof, by a diplomatic or consular agent of a foreign State who looks after the Belgian interests in that State; 3° in the absence thereof, by the Minister of Foreign Affaires.

§3.

The King determines the specific rules of the legalization.

Article 31 Mention and transcription of foreign judgments and authentic instruments with respect to status and capacity §1.

A foreign authentic instrument regarding the civil status can only be mentioned on the side of the instrument of civil status or be transcribed in the civil register or serve as basis of inscription in the population register, foreigners’ register or a ‘waiting register’ after verification of the conditions set out in article 27, §1. The mention or transcription of a foreign judgment can only take place after investigation of the conditions set out in articles 24 and 25 and, as the case may be, in articles 39, 57 and 72. In the event that the keeper refuses to proceed to the mention or transcription, an appeal may be lodged before the court of first instance of the district where the register is kept, in accordance with the procedure set out in article 23.

§2.

The keeper of the instrument or register is charged with this investigation. The Minister of Justice can draft guidelines with a view to the uniform application of the conditions referred to in §1. In case of doubt upon determining the conditions referred to in §1, the keeper of the instrument or register can submit the instrument or judgment

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to the advocate-general for advice. If required, the advocate-general proceeds with an additional investigation. §3.

The King can open and organize a new register for the judgments and instruments that meet the conditions referred to in §1, when they relate to a Belgian citizen or a foreigner who resides in Belgium.

CHAPTER II NATURAL PERSONS SECTION 1 STATUS, CAPACITY, PARENTAL AUTHORITY AND PROTECTION OF THE INCAPABLE Article 32 International jurisdiction with respect to status and capacity In addition to the cases provided for in the general provisions of the present statute and except in matters where the present statute provides otherwise, the Belgian courts have jurisdiction to hear actions regarding the status or capacity of a person, if: 1° this person has his habitual residence in Belgium when the action is introduced; or 2° this person is Belgian when the action is introduced.

Article 33 International jurisdiction with respect to parental authority, guardianship and protection of incapable persons The Belgian courts have jurisdiction to hear actions regarding the parental authority or guardianship, the establishment of incapacity of an adult as well as the protection of incapable persons in the cases provided for by the general provisions of the present statute and article 32. In addition to the cases provided for by the general provisions of the present statute and article 32, the Belgian courts have jurisdiction to hear actions regarding the administration of the assets of incapable persons if the action concerns assets located in Belgium. The Belgian courts also have jurisdiction to hear actions regarding the exercise of the parental authority and the right to personal contact of the parents with children

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that are less than 18 years old, when they are seized with an action in annulment of the marriage, divorce or legal separation. In urgent cases, the Belgian courts also have jurisdiction to take all measures required by the situation vis-à-vis a person who is present in Belgium.

Article 34 Law applicable to status and capacity §1.

Except in matters where the present statute provides otherwise, the law of the State whose nationality that person has governs the status and capacity of a natural person. Belgian law governs the capacity if the foreign law leads to the application of Belgian law. The capacity acquired according to the law that is applicable by virtue of part 1 and 2 will not be lost as a result of a change in nationality.

§2.

Incapacities concerning a specific legal relationship are governed by the law applicable to that legal relationship.

Article 35 Law applicable to parental authority, guardianship and protection of incapable persons §1.

The parental authority and guardianship, the establishment of the incapacity of an adult and the protection of incapable persons or their assets are governed by the law of the State on the territory of which the person has his habitual residence when the facts giving rise to the determination of the parental authority, the guardianship, or the approval of protective measures occur. In case of change of the habitual residence, the determination of the parental authority or the guardianship to the advantage of a person who does not carry the responsibility yet, is governed by the law of the State of the new habitual residence. The exercise of the parental authority or the guardianship is governed by the law of the State on the territory of which the child has its habitual residence when the exercise is invoked.

§2.

In the event that the law designated by §1 does not provide the possibility to safeguard the protection required by the person or the assets, the protection is governed by the law of the State of which the person has the nationality. Belgian law applies if it turns out to be materially or legally impossible to take the measures provided for by the applicable foreign law.

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SECTION 2 SURNAME AND NAMES Article 36 International jurisdiction with respect to surname and names In addition to the cases provided for in the general provisions of the present statute, the Belgian courts have jurisdiction to hear actions to determine the surname and names of a natural person, if that natural person has the Belgian nationality or has his habitual residence in Belgium when the action is introduced. The Belgian authorities also have jurisdiction to hear actions to change the names or surname of a natural person if the latter has the Belgian nationality when the action is introduced.

Article 37 Law applicable to the determination of surname and names The determination of the surname and names of a natural person is governed by the law of the State of which that person has the nationality. The consequences of a change in nationality on the surname and names of a natural person are governed by the law of the State of the new nationality.

Article 38 Law applicable to the change of surname and names The change of surname or names of a natural person by voluntary act or by operation of law is governed by the law of the State of that person’s nationality at the time the change is made. When the law of the State of the nationality of one of the spouses permits him to choose a name on the occasion of the marriage, the officer of the civil service mentions this name on the marriage deed.

Article 39 Determination or change of surname and names in foreign countries A foreign judgment or administrative decision regarding the determination or change of the names or surname of a natural person will not be recognized in Belgium if, in addition to the existence of a ground for refusal provided for in article 25: 1° in case of voluntary change, the natural person was Belgian at the time of the change, unless the name received is in conformity with

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2°

3°

the rules regarding the determination of the name applicable in the member state of the European Union of which the natural person also has the nationality; or the determination of the surname or names is not in conformity with Belgian law while the natural person was Belgian at the time of the determination; or in the other cases, the determination or the change is not recognized by the State of which the natural person has the nationality.

SECTION 3 ABSENCE Article 40 International jurisdiction with respect to absence In addition to the cases provided for in the general provisions of the present statute, article 5 excluded, the Belgian courts have jurisdiction to hear actions to establish the absence or to determine the effects thereof, if: 1° the person who disappeared was a natural person who had the Belgian nationality or had his habitual residence in Belgium when he disappeared; or 2° the claim relates to assets of the absentee that are located in Belgium when the action is introduced.

Article 41 Law applicable to absence The absence is governed by the law of the State of which the natural person had the nationality when he disappeared. The provisional administration of the assets of the absentee is governed by the law of the State on the territory of which the natural person had his habitual residence upon his disappearance or, if that law does not provide for such possibility, by Belgian law.

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CHAPTER III MARRIAGE AND MATRIMONIAL CAUSES SECTION 1 INTERNATIONAL JURISDICTION Article 42 International jurisdiction with respect to marriage and matrimonial causes In addition to the cases provided for in the general provisions of the present statute, Belgian courts have jurisdiction to hear actions regarding the marriage or its effects, matrimonial property, divorce or legal separation, if: 1° in case of a joint application, either spouse was habitually resident in Belgium when the application was introduced; 2° not more than twelve months before the application was introduced, the last joint habitual residence of the spouses was in Belgium; 3° the spouse who introduces the application was habitually resident in Belgium since at least 12 months when the application was introduced; 4° both spouses had the Belgian nationality when the application was introduced.

Article 43 Expansion of the jurisdiction with respect to marriage and divorce The Belgian courts also have jurisdiction to hear any action: 1° to convert a legal separation rendered in Belgium into a divorce or to review a judgment with respect to the effects of the marriage, divorce or legal separation rendered in Belgium; 2° introduced by the advocate-general with respect to the validity of the marriage, if the latter was celebrated in Belgium or if one of the spouses has the Belgian nationality or is habitually resident in Belgium when the action was introduced.

Article 44 Jurisdiction of the Belgian authorities to celebrate the marriage The marriage can be celebrated in Belgium if one of the prospective spouses has the Belgian nationality or has his domicile in Belgium or has since more than three months his habitual residence in Belgium when the marriage is celebrated.

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SECTION 2 LAW APPLICABLE TO THE PROMISE OF MARRIAGE Article 45 Law applicable to the promise of marriage The promise of marriage is governed: 1° by the law of the State where both prospective spouses are habitually resident at the time of the promise of marriage; 2° in the absence of habitual residence on the territory of the same State, by the law of the State of which both prospective spouses have the nationality at the time of the promise of marriage; 3° in other cases, by Belgian law.

SECTION 3 LAW APPLICABLE TO THE MARRIAGE Article 46 Law applicable to the valid celebration of marriage Subject to article 47, the conditions regarding the validity of the marriage are governed, for each spouse, by the law of the State of the spouse’s nationality when the marriage is celebrated. A provision of the law designated by part 1, which prohibits the marriage between to natural persons of the same sex, is not applicable if one of the natural persons has the nationality of a State of which the law allows such marriage or has his habitual residence on the territory of such State.

Article 47 Law applicable to the formal validity of the marriage §1.

The formalities regarding the celebration of the marriage are governed by the law of the State on the territory of which the marriage is celebrated.

§2.

That law determines if and according to which specific rules: 1° that State requires a declaration and publicity in advance of the marriage; 2° that State requires the determination and registration of the deed of marriage;

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3° 4°

a marriage celebrated before a religious authority has legal effect; a marriage can take place by proxy.

Article 48 Law applicable to the effects of the marriage §1.

Subject to articles 49 up to 54, the effects of the marriage are governed: 1° by the law of the State on the territory of which both spouses have their habitual residence at the time the effects are invoked or if the invoked effect affects a legal act at the time the act took place; 2° in the absence of a habitual residence on the territory of the same State, by the law of the State of which both spouses have the nationality at the time the effects are invoked or if the invoked effect affects a legal act at the time the act took place; 3° in the other cases, by Belgian law.

§2.

The law designated in §1 determines notably: 1° the duties of cohabitation and fidelity; 2° the contribution of the spouses to the charges of the marriage; 3° the receipt of revenues by each spouse and their disposition; 4° the admissibility of contracts and gifts between spouses and their revocation; 5° the specific rules under which one spouse may represent the other; 6° the validity of an act of one spouse that may be detrimental to the family’s interests, vis-à-vis the other spouse, the modes of reparation of its harmful effects.

§3.

Contrary to paragraphs 1 and 2, the law of the State on the territory of which the immovable property that serves as principal family residence is located governs the exercise of the rights by one spouse with respect to that good or to the chattels furnishing it.

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SECTION 4 LAW APPLICABLE TO THE MATRIMONIAL PROPERTY REGIME Article 49 Choice of law applicable to the matrimonial property regime §1.

The matrimonial property regime is governed by the law chosen by the spouses.

§2.

The spouses can only designate one of the following legal systems: 1° the law of the State on the territory of which they will establish their first habitual residence after the celebration of the marriage; 2° the law of the State on the territory of which one of the spouses has his habitual residence at the time of the choice; 3° the law of the State of one spouse’s nationality at the time of the choice.

Article 50 Specific rules regarding the choice of law §1.

The choice of law may be made before the marriage celebration or in the course of the marriage. It may modify a previous choice.

§2.

The choice must be in accordance with article 52, part 1. It shall relate to all the goods of the spouses.

§3.

The change of applicable law resulting from a choice by the spouses will only have effect for the future. The spouses may depart from this rule by agreement without adversely affecting third parties’ rights.

Article 51 Applicable law in the absence of choice of law In the absence of a choice of law of the spouses, the matrimonial property regime is governed by: 1° the law of the State on the territory of which both spouses establish their first habitual residence after the celebration of the marriage; 2° in the absence of a habitual residence on the territory of a same State, by the law of the State of which both spouses have the nationality at the time of the celebration of the marriage;

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in the other cases, by the law of the State on the territory of which the marriage was celebrated.

Article 52 Law applicable to the formal validity of the choice of matrimonial property regime The choice of the matrimonial property regime is valid as to the form if it satisfies the requirements of the law applicable to the matrimonial regime at the time a choice was made or the law of the State of the place where the choice was made. The choice has to be at least expressed in written form, dated and signed by both spouses. The modification of the matrimonial property regime has to be made in accordance with formal requirements of the law of the State of the place where the modification is made.

Article 53 Scope of the law applicable to the matrimonial property regime §1.

Without prejudice to article 52, the law applicable to the matrimonial property regime determines notably: 1° the validity of the consent to the choice of law; 2° the admissibility and validity of the marital agreement; 3° the possibility and the scope of the choice of a matrimonial property regime; 4° if and to which extent the spouses can change the matrimonial property regime, and whether the new regime has retroactive effect or whether the spouses can give it such effect; 5° the composition of the properties and the attribution of the administration powers; 6° the dissolution and the liquidation of the matrimonial property regime, as well as the distribution rules.

§2.

The manner of composition and attribution of the shares are governed by the law of the State on the territory of which the assets are located during the distribution.

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Article 54 Protection of third parties §1.

The law applicable to the matrimonial property regime governs the question whether or not the matrimonial property regime is opposable to third parties. However, if at the time a debt is created, the spouse and his third-party creditor have their habitual residence on the territory of the same State, the law of that State will be applicable, unless: 1° the publicity or registration requirements under the law applicable to the matrimonial property were fulfilled; or 2° the third party either knew, at the time the debt was created, the matrimonial property regime or was unaware of it solely through his own negligence; or 3° the publicity rules in relation to rights in property required under the law of the State on whose territory the immovable property is located were fulfilled.

§2.

The law applicable to the matrimonial property regime determines if and to which extent a debt contracted by one of the spouses for the needs of the household or the education of the children engages the other. However, if at the time a debt is created, the spouse and his third-party creditor have their habitual residence on the territory of the same State, the law of that State will apply.

SECTION 5 LAW APPLICABLE TO DIVORCE AND LEGAL SEPARATION Article 55 Law applicable to divorce and legal separation §1.

Divorce and legal separation are governed: 1° by the law of the State where both spouses have their habitual residence when the action is introduced; 2° in the absence of a habitual residence on the territory of one State, by the law of the State on the territory of which the last joint habitual residence of the spouses was located if one of them has his habitual residence on the territory of that State when the action is introduced; 3° in the absence of the habitual residence of one of the spouses on the territory of the State where the last joint habitual residence was lo-

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cated, by the law of the State of which both spouses have the nationality when the action is introduced; in other cases, by Belgian law.

§2.

The spouses may however choose the law, which will apply to the divorce or the legal separation. They can only designate one of the following laws: 1° the law of the State of both spouses’ nationality when the action is introduced; 2° Belgian law. The choice has to be expressed at the time of the first appearance in court.

§3.

The application of the law designated by virtue of §1 will be excluded to the extent that that law ignores the institution of divorce. In that case, the law determined by the subordinate criterion provided for in §1 is applied.

Article 56 Scope of the law applicable to divorce and legal separation The law applicable to divorce and legal separation determines notably: 1° the admissibility of legal separation; 2° the grounds of and conditions for divorce and legal separation or, in case of a joint application, the conditions with respect to consent, including the manner in which the latter should be expressed; 3° the obligation of the spouses to enter into an agreement with respect to the measures regarding the person, maintenance and property of the spouses and regarding the children for which they are responsible; 4° the dissolution of the matrimonial bond, or in case of legal separation, the extent of the relaxation of such bond.

Article 57 Foreign divorce based on the will of the husband §1.

A foreign deed establishing the intent of the husband to dissolve the marriage without the wife having the same right cannot be recognized in Belgium.

§2.

Such deed can however be recognized in Belgium after verifying whether the following cumulative conditions are satisfied:

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1° 2°

3°

4° 5°

the deed has been sanctioned by a judge in the State of origin; neither of the spouses had at the time of the certification the nationality of a State of which the law does not know this manner of dissolution of the marriage; neither of the spouses had at the time of the certification their habitual residence in a State of which the law does not know this manner of dissolution of the marriage; the wife has accepted the dissolution in an unambiguous manner and without any coercion; none of the grounds of refusal provided for in article 25 prohibits the recognition.

CHAPTER IV THE RELATIONSHIP OF CO-HABITATION Article 58 The concept of a relationship of ‘co-habitation’ For the purposes of the present statute, the term ‘relationship of co-habitation’ refers to a situation of co-habitation that requires registration with a public authority and that does not create a bond equal to marriage.

Article 59 International jurisdiction with respect of the relationship of co-habitation Article 42 applies by analogy to any action regarding the relationship of co-habitation. The registration of the conclusion of the relationship of co-habitation can only take place in Belgium if parties have at the time of the conclusion their joint habitual residence in Belgium. The registration of the termination of the relationship of co-habitation can only take place in Belgium if the creation of the relationship has been registered in Belgium.

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Article 60 Law applicable to the relationship of co-habitation The relationship of co-habitation is governed by the law of the State on the territory of which the relationship was first registered. This law determines in especially the conditions of establishment of the relationship, the effects of the relationship for the assets of parties as well as the causes and conditions for termination of the relationship. Article 54 applies by analogy. In the event that the relationship of co-habitation does not exist in the designated law, the law of the State on the territory of which the relationship is registered applies.

CHAPTER V FILIATION SECTION 1 FILIATION BY BIRTH Article 61 International jurisdiction with respect to filiation In addition to the cases provided for in the general provisions of the present statute, the Belgian courts have jurisdiction to hear any action regarding the establishment or contestation of parentage, if: 1° the child has his habitual residence in Belgium when the action is introduced; 2° the person whose parenthood is invoked or contested has his habitual residence in Belgium when the action is introduced; or 3° the child and the person whose parenthood is invoked or contested have the Belgian nationality when the action is introduced.

Article 62 Law applicable to filiation §1.

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The establishment or the contestation of the parenthood of a person are governed by the law of the State of the person’s nationality upon the birth of the child or, if the establishment results from a voluntary act, at the time such act is carried out.

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If the law applicable by virtue of this article does not require such consent, the requirements and conditions for the consent of the child as well as the manner in which such consent is expressed are governed by the law of the State on the territory of which the child has his habitual residence at the time of the consent. §2.

If the bond of filiation is validly established according to the law applicable by virtue of the present statute vis-à-vis various persons of the same sex, the law applicable to the filiation that results from the operation of the law on its own, will determine the consequence of a voluntary act of recognition. In case of a conflict between various filiations that result by operation of law from the law, the law of the State with which the case has the closest connections amongst all designated legal regimes will apply. If various persons according to the law applicable by virtue of the present statute validly legitimate the child, the law applicable to the first recognition determines how a later recognition affects the first.

Article 63 Scope of the law applicable to filiation The law applicable by virtue of article 62 determines notably: 1° who is authorized to establish or contest the filiation; 2° the burden of proof and the elements to be proven regarding the filiation, as well as the evaluation of the evidence; 3° the conditions and consequences of the possession of status; 4° the term for introducing the action.

Article 64 Law applicable to the formal validity of the recognition The declaration of acknowledgment is drawn up in accordance with the formal requirements prescribed by the law that by virtue of article 62, §1, part 1 is applicable to the filiation or by the law of the State on the territory of which the deed is drawn up.

Article 65 Jurisdiction in relation to declarations acknowledging natural children Declarations acknowledging natural children can be drawn up in Belgium, if:

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2° 3°

the person who recognizes has the Belgian nationality or has its domicile or habitual residence in Belgium at the time the declaration is drawn up; the child is born in Belgium; or the child has its habitual residence in Belgium at the time the declaration is drawn up.

SECTION 2 FILIATION BY ADOPTION Article 66 International jurisdiction with respect to adoption Contrary to the general provisions of the present statute, the Belgian courts have only jurisdiction to make an adoption order if the adopter, one of the adopters or the adoptee is Belgian or has its habitual residence in Belgium at the time the action is introduced. The Belgian courts have jurisdiction to pronounce the conversion of an adoption that does not lead to the termination of the existing bond of filiation into a full adoption under the conditions as set out in part one, or if the adoption has been established in Belgium. The Belgian courts have jurisdiction to revoke the adoption if the conditions referred to in part 1 are fulfilled or if the adoption order has been made in Belgium. The Belgian courts have jurisdiction to pronounce the revision of the adoption under the conditions referred to in part 1 if the adoption is established in Belgium or if the judgment determining the adoption is recognized or declared enforceable in Belgium.

Article 67 Law applicable to the conditions for adoption Without prejudice to the application of article 357 of the Civil Code, the establishment of the filiation by adoption is governed by the law of the State whose nationality the adopter or both adopters have at that time. If the adopters do not have the nationality of one State, the establishment of the filiation by adoption is governed by the law of the State on the territory of which both have their habitual residence at that time, or in the absence of a habitual residence in the same State, by Belgian law.

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However, the judge applies Belgian law if he considers the application of the foreign law clearly harmful to the higher interest of the adoptee and if the adoptee or the adopters have clear narrow links with Belgium.

Article 68 Law applicable to the consent of the adoptee Without prejudice to the application of article 358 of the Civil Code, the consent of the adoptee and his parents or legal representatives, as well as the manner in which the consent is expressed, are governed by the law of the State on the territory of which the adoptee has his habitual residence at the time immediately preceding the transfer for adoption, or in the absence of such transfer, at the time of the adoption. However Belgian law governs the consent of the adoptee if the law applicable by virtue of §1 does not provide for the necessity of such consent or ignores the institution of adoption.

Article 69 Law applicable to the way in which an adoption is carried out Belgian law governs the way in which an adoption is carried out in Belgium. If a deed of adoption is drawn up abroad in accordance with the law of the State where it was drawn up and such law prescribes judicial proceedings, the proceedings can be initiated in Belgium under the procedure provided for by Belgian law.

Article 70 Nature of the relation created by adoption The law applicable by virtue of article 67 determines the nature of the bond created by the adoption and whether the adoptee ceases to be part of his original family.

Article 71 Law applicable to the conversion, revocation and revision of the adoption §1.

Without prejudice to the application of article 359-2 of the Civil Code, the conversion of the adoption is governed by the law applicable by virtue of article 67 up to 69.

§2.

The revocation of an adoption is governed by the law applicable by virtue of article 67 up to 69. The contact points are evaluated taking into account

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the extent that they have taken shape at the time of the establishment of the adoption. §3.

The revision of an adoption is governed by Belgian law.

Article 72 Recognition of adoptions established abroad Contrary to the provisions of the present statute, a foreign judgment or administrative decision holding the establishment, the conversion, the revocation or revision of an adoption will not be recognized in Belgium if the provisions of articles 365-1 up to 366-3 of the Civil Code are not taking into account and if a decision as referred to in article 367-1 of the same Code is not registered in accordance with article 367-2 of that Code.

CHAPTER VI MAINTENANCE OBLIGATIONS Article 73 International jurisdiction in respect of maintenance obligations §1.

In addition to the cases provided for in the general provisions of the present statute, Belgian courts have jurisdiction to hear actions regarding a maintenance obligation, if: 1° the maintenance creditor has his habitual residence in Belgium when the action is introduced; or 2° the maintenance creditor and debtor are Belgian when the action is introduced.

§2.

If it concerns a claim that is accessory to an application regarding the status of the persons, the Belgian court that has jurisdiction to hear such application, will also have jurisdiction to hear the maintenance claim.

Article 74 Law applicable to the maintenance obligation §1.

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The maintenance obligation is governed by the law of the State on the territory of which the maintenance creditor has his habitual residence at the time the maintenance obligation is invoked.

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The maintenance obligation is however governed by the law of the State of the maintenance creditor and debtor’s nationality at the time the maintenance obligation is invoked, if the debtor of the maintenance has his habitual residence in the territory of that State at that time. §2.

If the law designated by §1 does not grant the creditor a right to maintenance; the maintenance obligation between spouses or vis-à-vis a minor is governed by the law of the State of which the maintenance creditor and debtor have the nationality at the time the obligation is invoked. If that law does not grant any maintenance right Belgian law shall apply.

Article 75 Agreement in respect of maintenance §1.

Agreements relating to maintenance resulting from parenthood, marriage or filiation will, by the choice of the parties, be governed by the law of the State of which at the time of the choice one of them is a national or on the territory of which one of them has its habitual residence at that time.

§2.

In the absence of a choice of law, the agreement will be governed by the law of the State on the territory of which the maintenance creditor has its habitual residence at the conclusion of the agreement. The agreement will however be governed by the law of the State of the maintenance creditor and debtor’s nationality at the conclusion of the agreement if at that time the maintenance debtor has his habitual residence on the territory of that State.

§3.

The agreement will be valid as to the form if it meets the requirements of the law that is applicable by virtue of paragraphs 1 and 2 or if it meets the requirements of the law of the State on the territory of which the agreement was concluded.

Article 76 Scope of the law applicable to the maintenance obligation §1.

The law applicable to the maintenance obligation determines, notably: 1° to which extent and from whom the maintenance creditor can claim maintenance; 2° who can lodge a claim for maintenance and within which delay this must be done; 3° if and under which circumstances the maintenance can be modified;

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the causes of the extinction of the right to maintenance; the limits of the duty of the maintenance debtor if the person who gave maintenance to the maintenance creditor, claims repayment.

The subrogation in the rights of the creditor by a third party that compensated him, is governed by the law applicable to the obligation of the third party to compensate the creditor, without prejudice to §1, 5°.

CHAPTER VII SUCCESSION Article 77 International jurisdiction with respect to succession In addition to the cases provided for in the general provisions of the present statute, excluding article 5, the Belgian courts have jurisdiction to hear actions regarding succession if: 1° the deceased had his habitual residence in Belgium at the time of his death; or 2° the claim relates to assets that are located in Belgium when the action is introduced.

Article 78 Law applicable to succession §1.

Succession is governed by the law of the State on the territory of which the deceased had his habitual residence at the time of his death.

§2.

Succession to immovable property is governed by the law of the State on the territory of which the immovable is located. However if foreign law refers to the law of the State on the territory of which the deceased had his habitual residence at the time of his death, the latter will be applied.

Article 79 Choice of the law applicable to succession A person may designate the law applicable to his entire estate.

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The choice will only have effect if that person upon the designation or at the time of his death had the nationality of the State concerned or had its habitual residence on the territory of that State. Such designation cannot result in depriving an heir of the reserved part, which is guaranteed by the law applicable in accordance with article 78. The designation and revocation thereof must be expressed in a declaration taking the form of a will.

Article 80 Scope of the law applicable to succession §1.

The law applicable to the succession determines notably: 1° the elements causing an estate’s declaration and the time of its declaration; 2° the title to the inheritance of heirs and legatees, including the rights of surviving spouse, as well as other rights against the estate as a result of the estate’s declaration; 3° the State’s title to the inheritance; 4° the causes of exclusion and unworthiness to inherit; 5° the validity as to the content of wills; 6° the available part, the reserved part and other restrictions on the freedom to make a will; 7° the nature and scope of the rights of the heirs and legatees, as well as the charges imposed by the deceased; 8° the conditions and effects of the acceptance or rejection without prejudice to §2; 9° the special causes of incapacity to dispose or accept; 10° the contribution and reduction of gifts as well as the taking into account thereof upon the calculation of the accruing portion.

§2.

The acceptance or rejection of the inheritance takes place according to the manner determined by the law of the State on the territory of which the relevant asset is located at the time of death, if that law requires special formalities. The movable assets are deemed to be located at the habitual residence of the deceased at the time of death.

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Article 81 Specific rules regarding distribution The manner of the composition and attribution of the shares is governed by the law of the State on the territory of which the assets are located upon the distribution.

Article 82 Administration and transmission of the succession §1.

The administration and transfer of the inheritance is governed by the law that is applicable to the succession by virtue of articles 78 and 79. Contrary to part 1, the administration and transfer of an asset is governed by the law of the State on the territory of which the asset is located, if the intervention of the authorities of that State are required by the latter law.

§2.

The competences of a person who is authorized according to §1 to administrate the inheritance do not prejudice the competences by virtue of a judgment given or recognized in Belgium.

Article 83 Formal validity of a will The form of wills and revocation thereof is governed by the law applicable by virtue of the Convention regarding the conflicts of law with respect to the form of wills concluded in The Hague on 5 October, 1961. The application of this Convention is extended to other wills.

Article 84 Interpretation of the will The interpretation of a will and the revocation thereof is governed by the law that the testator designated in accordance with article 79. The choice has to be express or has to appear unambiguously from the will or the revocation thereof. In the absence of a choice, the interpretation is governed by the law of the State with which the will or revocation has the closest connections. The legal act is presumed to have the closest connections with the State on the territory of which the testator has his habitual residence at the date of the will or revocation, until proof of the contrary is brought.

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CHAPTER VIII GOODS SECTION 1 INTERNATIONAL JURISDICTION Article 85 International jurisdiction with respect to rights in rem In addition to the cases provided for in the general provisions of the present statute, the Belgian courts have jurisdiction to hear actions regarding rights in rem in respect of an asset, if the asset is located in Belgium or is deemed to be located there by virtue of article 87, §2 when the action is introduced or in case of an action regarding rights in a receivable, if the debtor has his domicile or habitual residence in Belgium when the action is introduced.

Article 86 International jurisdiction with respect to intellectual property In addition to the cases provided for in the general provisions of the present statute, the Belgian courts have jurisdiction to hear actions regarding the protection of intellectual property rights, if the action relates to a protection limited to the Belgian territory. Contrary to the general provisions of the present statute, the Belgian courts only have jurisdiction to hear actions regarding the registration and validity of the intellectual property rights that involve a deposit or registration, if the deposit and registration is applied for, has taken place or is considered to have taken place in the sense of an international convention in Belgium.

SECTION 2 APPLICABLE LAW Article 87 Law applicable to rights in rem §1.

The rights in rem in respect of an asset are governed by the law of the State on the territory of which the asset is located when they are invoked. The acquisition and loss of these rights is governed by the law of the State on the territory of which the assets are located when the actions or facts that are invoked as basis of the acquisition or the loss occur.

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§2.

If the asset referred to §1 consists of a patrimony formed by a whole of assets with a special purpose, like a business concern, it is deemed to be located on the territory of the State with which the patrimony has the closest connections.

§3.

The creation of rights in rem in respect of a receivable as well as the effects of the transfer of the receivable on such rights is governed by the law of the State on territory of which the party that created the rights or that has transferred the rights had his habitual residence at the time of creation or transfer. The effects of conventional subrogation on rights in rem is governed by the law of the State on the territory of which the party who subrogated has his habitual residence at the time of the transfer.

Article 88 Law applicable to goods in transit The rights in and the titles to goods in transit are governed by the law of the State of destination.

Article 89 Law applicable to means of transportation The rights in an aircraft, vessel, boat or other means of transportation which is registered in a public register are governed by the law of the State on the territory of which the registration took place.

Article 90 Law applicable to cultural property If an item, which a State considers as being included in its cultural heritage, has left the territory of that State in a way, which is considered to be illegitimate at the time of the exportation by the law of that State, the revindication by the State is governed by the law of that State, as it is applicable at that time, or at the choice of the latter, by the law of the State on the territory of which the item is located at the time of revindication. Nevertheless, if the law of the State that considers the item part of its cultural heritage does not grant any protection to the possessor in good faith, the latter may invoke the protection, that is attributed to him by the law of the State on the territory of which the item is located at the time of revindication.

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Article 91 Law applicable to negotiable instruments §1.

The rights in a negotiable instrument, for which registration in a register is required by law, are governed by the law of the State on the territory of which the register in which the registration on the individual accounts of the holders of instruments appears, is located. The register is presumed, except if proven otherwise, to be located in the place of the main establishment of the person that holds the individual accounts.

§2.

The rights in an instrument which is not subject to registration as referred to in §1, are governed by the law of the State on the territory of which the security is located when they are invoked. The acquisition and the loss of these rights are governed by the law of the State on the territory of which the instrument is located when the actions or facts that are invoked as basis of the acquisition or loss of those rights occur.

§3.

The law of the State on the territory of which the instrument has been issued determines whether the instrument represents an asset or a movable value as well as whether the instrument is negotiable and which rights are linked to it.

Article 92 Law applicable to stolen goods The revindication of a stolen good is governed, at the choice of the original owner, by the law of the State on the territory of which the good was located upon its disappearance or by the law of the State on the territory of which the good is located at the time of revindication. Nevertheless, if the law of the State on the territory of which the good was located upon its disappearance does not grant any protection to the possessor in good faith, the latter may invoke the protection, that is attributed to him by the law of the State on the territory of which the property is located at the time of revindication.

Article 93 Law applicable to intellectual property Intellectual property rights are governed by the law of the State for the territory of which the protection of the intellectual property is sought.

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Nevertheless, the determination of the original owner of the industrial property right is governed by the law of the State with which the intellectual activity has the closest connections. If the activity takes place within a framework of contractual relations, that State is presumed to be the State of which the law applies to these contractual relations, until proof to the contrary is brought.

Article 94 Scope of application of the law applicable to the regime of goods §1.

The law applicable by virtue of this section determines notably: 1° whether an asset is movable or immovable; 2° the existence, nature, content and scope of the rights in rem that can affect an asset, as well as of intellectual property rights; 3° the holders of such rights; 4° the possibility to dispose of such rights; 5° the manner of constitution, modification, transfer and extinction of those rights; 6° the effects of the rights in property vis-à-vis third parties.

§2.

With a view to the realization of an asset from a debtor, the law applicable by virtue of this section also establishes the existence of a right of priority and the hierarchy, as well as the distribution of the proceeds of the realization without prejudice to article 119.

SECTION 3 EFFECTS OF FOREIGN JUDGMENTS Article 95 Effect of judgments with respect to intellectual property rights In addition to the grounds for refusal provided for in article 25, foreign judgments regarding the registration or validity of intellectual property rights which require a deposit or registration are not recognized in Belgium if the deposit or registration was requested or done or had to be done in Belgium according to an international convention.

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CHAPTER IX OBLIGATIONS SECTION 1 INTERNATIONAL JURISDICTION Article 96 International jurisdiction regarding contractual and non contractual obligations In addition to the cases provided for in the general provisions of the present statute, the Belgian courts have jurisdiction to hear actions with respect to obligations regarding: 1° a contractual obligation, a) if the latter came into existence in Belgium; or b) if the latter is or has to be executed in Belgium. 2° an obligation resulting from a tort, a) if, the fact giving rise to the obligation occurred or is likely to occur entirely or partially in Belgium; or b) if and to the extent that the damage occurred or is likely to occur in Belgium. 3° a quasi-contractual obligation, if the fact from which the obligation results took place in Belgium.

Article 97 International jurisdiction with respect to consumer relationships and individual employment relationships §1.

In addition to the cases provided for in article 96 of the present statute, Belgian courts have jurisdiction to hear actions regarding an obligation referred to in article 96, brought by a natural person who acted with a purpose other than his professional activity, namely as consumer, against a party that has supplied or had to supply a good or service within the framework of its professional activities, if: 1° the consumer completed the actions required to execute or conclude the agreement in Belgium and had his habitual residence in Belgium at that time; 2° the good or service is supplied or should have been supplied to a consumer who had his habitual residence in Belgium upon placing the order, if the order was preceded by an offer or by publicity in Belgium.

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§2.

With respect to the individual labor relationship the contractual obligation is performed in Belgium in the sense of article 96 if the employee habitually carries out his duties in Belgium at the time of the dispute.

§3.

An agreement that attributes international jurisdiction will only produce effects vis-à-vis the employee or consumer if entered into after the dispute has arisen.

SECTION 2 APPLICABLE LAW Article 98 The law applicable to the contractual obligations §1.

The law applicable to contractual obligations is determined by the Convention on the law applicable to contractual obligations concluded in Rome on 19 June 1980. Except in the cases otherwise provided for by law, the contractual obligations who are excluded from the scope of application of that Convention are governed by the law that is applicable by virtue of the articles 3 until 14 thereof.

§2.

The law applicable to bills of exchange and promissory notes is determined by the Convention for the settlement of certain conflicts of laws in connection with bills of exchange and promissory notes concluded in Geneva on 7 June 1930.

§3.

The law applicable to checks is determined by the Convention for the settlement of certain conflicts of laws in connection with checks concluded in Geneva on 19 March 1931.

Article 99 The law applicable to obligations resulting from a tort §1.

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3° §2.

rise to the damage and the damage itself occurred in their entirety or are likely to occur; in all other cases, by the law of the State with which the relevant obligation has the closest connections.

Obligations resulting from a tort are nevertheless governed: 1° in the event of defamation or violation of privacy or personality rights, at the choice of the plaintiff, by the law of the State on the territory of which the act leading to the damage or the damage occurred or is likely to occur, unless the person liable proves that he could not have foreseen the damage to occur in that State; 2° in the event of unfair competition or unfair trade practices, by the law of the State on the territory of which the damage occurred or is likely to occur; 3° in the event of damage to assets or persons as a result of pollution of the environment, by the law of the State on the territory of which the damage occurred or is likely to occur; 4° in the event of product liability of the producer, the importer or the supplier, by the law of the State on the territory of which the injured person has his habitual residence at the time that the damage occurs; 5° in the event of a road traffic accident, by the law applicable by virtue of the Convention on the law applicable to road traffic accidents concluded in The Hague on 4 May 1971.

Article 100 Accessory attachment Contrary to article 99, obligations resulting from a tort, which have a close connection with an existing legal relationship between parties, are governed by the law, which is applicable to that relationship.

Article 101 Choice of law applicable to the obligations resulting from a tort Parties may, after the dispute has arisen, choose which law will be applicable to the obligations resulting from the tort, without prejudice to the Convention on the law applicable to road traffic accident concluded in The Hague on 4 May 1971. The choice has to be express and may not prejudice the rights of third parties.

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Article 102 Taking into account the safety and conduct rules Notwithstanding the law applicable to an obligation resulting from a tort, consideration has to be given to the safety and conduct rules, which are in force at the place and time of the tort upon determining the liability.

Article 103 Scope of application of the law applicable to the obligations resulting from a tort The law applicable to obligations resulting from a tort determines notably: 1° the conditions for and the scope of the liability; 2° the liability for acts of third persons, objects or animals; 3° the grounds for exclusion of liability, as well as for limitation and division of liability; 4° the existence and nature of the damage which is taken into account for compensation; 5° the measures which the judge can take to prevent or stop the damage from occurring; 6° the specific rules regarding and the size of the compensation; 7° the persons that are entitled to compensation of the damage they incurred; 8° the extent to which the right to compensation of the injured person to compensation can be exercised by his heirs; 9° the limitation and time bar based on the expiration of a time period, including the date of commencement, expiration and suspension of the time period; 10° the burden of proof and the legal presumptions.

Article 104 Law applicable to the quasi-contractual obligations §1.

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The law of the State with which they have the closest connections governs quasi-contractual obligations. Except if proven otherwise, the obligation is presumed to have the closest connections with the law of the State on the territory of which the fact that results in the obligations has occurred. The obligation which results from the payment of someone else’s debt is however presumed to have its closest connections with the law of the State of which the law governs the debt, until proof to the contrary is brought.

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Upon assessing the closest connections, existing and envisaged relations between parties can be taken into account. §2.

Parties may, after the dispute has arisen, choose which law will apply to the relevant quasi-contractual relation. The choice has to be express and may not prejudice the rights of third parties.

Article 105 Law applicable to the obligations resulting from a unilateral expression of will Obligations resulting from a unilateral expression of will are governed by the law chosen by the person who commits himself. In the absence of such choice, they will be governed by the law of the State on the territory of which that person has its habitual residence at the time he entered into the obligation.

Article 106 Law applicable to the direct action against the insurer The law applicable by virtue of articles 98 to 105 determines whether the person who suffers damage has a direct action against the insurer of the person liable. If the law, applicable by virtue of part 1, ignores the action the latter can still be instituted if it is available under the law applicable to the relevant insurance contract.

Article 107 Law applicable to subrogation The subrogation in the rights of the creditor by a third party that has compensated the latter is governed by the law applicable to the obligation of the third party to compensate the creditor. Part 1 is also applicable if different persons are bound by the same non-contractual obligation and the creditor is compensated by one of them.

Article 108 Law applicable to the effects vis-à-vis third parties of a representation The question whether an intermediary can represent the person for which he pretends to act vis-à-vis third parties is governed by the law of the State on the territory of which the intermediary acts. Except if proven otherwise, the latter is presumed to be the State on which he has his habitual residence.

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CHAPTER X BODIES WITH SEPARATE LEGAL PERSONALITY Article 109 International jurisdiction with respect to bodies with separate legal personality Contrary to the general provisions of the present statute, Belgian courts only have jurisdiction to hear actions regarding the validity, the functioning and the dissolution or liquidation of a body with separate legal personality, if the main establishment or statutory seat of this body with separate legal personality is located in Belgium when the action is introduced.

Article 110 Law applicable to bodies with separate legal personality Bodies with separate legal personality are governed by the law of the State on the territory of which they had their main establishment since the time of the incorporation. If the foreign law refers to the law of the State under which the body with separate legal personality has been created, the latter will apply.

Article 111 Scope of application of the law applicable to bodies with separate legal personality §1.

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The law applicable to bodies with separate legal personality determines notably: 1° the existence and legal nature of the body with separate legal personality; 2° the name or the corporate purpose; 3° the incorporation, dissolution and liquidation; 4° the legal capacity of the body with separate legal personality; 5° the composition, powers and functioning of its organs; 6° the internal relations between shareholders or members, as well as the relation between the body with separate legal personality and its shareholders or members; 7° the acquisition or loss of the capacity of shareholder or member; 8° the rights and obligations related to the profit shares or shares and their exercise; 9° the liability for a violation of the provisions of company law or the articles of incorporation;

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10° §2.

the extent to which the body with separate legal personality is held vis-à-vis third parties to pay the debt contracted by its organs.

A body with separate legal personality can however not invoke the incapacity based on limitations in the power of representation by virtue of the applicable law vis-à-vis a third party, if such incapacity is unknown in the law of the State on the territory of which it acted and the third party at that time did not know or should not have known the incapacity.

Article 112 Transfer of the main establishment The transfer of the main establishment of a body with separate legal personality from one State to another can only take place without interruption of its incorporation and legal personality, if done with due regard for the conditions under which the law of these States permits it. If a body with separate legal personality transfers its main establishment to the territory of another State, the law of that other State will apply as of the transfer.

Article 113 Merger The merger of bodies with separate legal personality is governed for each of them by the law of the State, which applied to the body with separate legal personality before the merger.

Article 114 Claims resulting from a public issue Claims resulting from a public issue of titles are governed, at the choice of the security holder, by the law applicable to the body with separate legal personality or by the law of the State on the territory of which the public issue took place.

Article 115 Effect of foreign judgments In addition to the existence of refusal grounds provided for in article 25, a foreign judgment in respect of the validity, the functioning, the dissolution or liquidation of a body with separate legal personality will not be recognized in Belgium if the main establishment of that body with separate legal personality was established in Belgium at the time the claim was brought abroad.

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CHAPTER XI COLLECTIVE INSOLVENCY PROCEEDINGS Article 116 Scope of application This chapter applies to collective proceedings, that entail the divestment of the debtor.

Article 117 Definitions In this chapter: 1° ‘insolvency proceeding’ shall mean the collective proceedings referred to in article 116. 2° ‘principal proceeding’ shall mean an insolvency proceeding of which the effects concern the entirety of the assets of the debtor; 3° ‘territorial insolvency proceeding’ shall mean the insolvency proceeding with effects that only concern assets of the debtor that are located on the territory of the State where the proceedings are opened; 4° ‘insolvency regulation’ shall mean Council Regulation 1346/2000/EC of 29 May 2000 on insolvency proceedings; 5° ‘liquidator’ shall mean any person or body that is appointed on the basis of a foreign decision, to administer or liquidate assets of which the debtor has been divested; or in absence of such person the debtor himself;

Article 118 International jurisdiction with respect to insolvency §1.

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Contrary to the general provisions of the present statute, Belgian courts only have jurisdiction to open insolvency proceedings in the cases provided for by article 3 of the insolvency regulation. In the other cases, they have however jurisdiction: 1° to open a principal proceeding: if the main establishment or statutory seat of the body with separate legal entity is located in Belgium, or if the domicile of a natural person is located in Belgium; 2° to open territorial proceedings: if the debtor has an establishment in Belgium.

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§2.

If a Belgian court has declared itself competent to open insolvency proceedings, on the basis of the insolvency regulation or on the basis of §1, the court will also have jurisdiction to hear disputes which directly result thereof.

§3.

The recognition in Belgium of a foreign judgment which opens a principal proceeding does not affect the competence of the Belgian court to open a territorial proceeding.

Article 119 Law applicable to collective insolvency proceedings §1.

The insolvency proceeding opened on the basis of article 118, §1 second part and the effects thereof are governed by Belgian law. Belgian law shall determine the conditions for the opening of those proceedings, their conduct and their closure. It shall determine in particular the legal issues mentioned under article 4, §2 (a) up to (m) of the insolvency regulation.

§2.

Contrary to §1, but without prejudice to the application of the law designated by virtue of §1 on the actions in nullity, avoidance or non-enforceability of actions which are disadvantageous for all creditors, the effects of the opening of the insolvency proceedings: 1° on the rights in rem of third parties in respect of assets belonging to the debtor and which are located within the territory of another State, are governed by the law applicable to those rights in rem; 2° on the rights of a creditor to demand set-off of his claim against the claim of the debtor, are governed by the law applicable to the insolvent debtor’s claim; 3° on the reservation of title of the seller of an asset that at the time of the opening of the proceedings is located within the territory of another State, are governed by the law applicable to the rights in rem on the asset.

§3.

Contrary to §1, the effects of the opening of the insolvency proceeding on: 1° a contract conferring the right to acquire or make use of immovable property are governed by the law applicable to the contract; 2° the rights and obligations of the parties to a payment or settlement system or to a financial market, are governed by the law applicable to that system or market;

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3° 4°

§4.

employment contracts and relationships are governed by the law applicable to the employment contract; the rights of the debtor in immoveable property, a ship, or an aircraft, that is subject to registration in a public register, are governed by the law applicable to those rights.

Contrary to §1: 1° where the person who benefited from an act detrimental to all creditors provides proof that the said act is subject to the law of an other state and that such law does not allow any means of challenging that act in the relevant case, the actions in nullity, avoidance or nonenforceability of that act are governed by the law of that State; 2° where by an act concluded after the opening of the insolvency proceedings, the debtor disposes, for consideration, of an immoveable asset, or ship or an aircraft subject to registration in a public register, or securities whose existence presupposes registration in a register laid down by law; the validity of that act against the third-party purchaser, is governed by the law of the State within the territory of which the immoveable asset is located or the register is kept. 3° the effects of an opening of an insolvency proceeding on a lawsuit pending concerning an asset or a right of which the debtor has been divested are governed by the law of the State in which that lawsuit is pending.

Article 120 Duty to inform and cooperate The liquidator of principal proceedings or territorial proceedings opened by a court having jurisdiction on the basis of article 118, §1 part 2 is duty bound to cooperate and communicate information with the liquidators of foreign insolvency proceedings concerning the debtor. This duty applies only if the law of the State where the proceedings were opened, provides on a reciprocal basis for an equivalent cooperation and communication duty in respect of the relevant proceedings. The duties, described in the preceding part, are to be fulfilled in as far as the costs of registration, publicity and co-operation are not unreasonable, taking into account the assets of the estate, even if the law of the foreign State would legally require some local measures. If the liquidation of the estate of territorial proceedings offers the possibility to satisfy all admitted claims in full, the liquidator appointed in this proceeding will transfer the balance immediately to the liquidator of the principal proceedings, on

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condition of a reciprocal co-operation and communication duty in the relevant proceedings.

Article 121 Effect of foreign insolvency judgments §1.

A foreign judgment concerning the opening, the conduct or the closure of insolvency proceedings, which is not rendered on the basis of the insolvency regulation, will be recognized or declared enforceable in Belgium in accordance with article 22: 1° as a judgment in principal proceedings, if the judgment was given by a judge in a State where the debtor had its main establishment at the time when the action was introduced 2° as a judgment in territorial proceedings, if the judgment was given by a judge in a State where the debtor had another establishment than its main establishment at the time when the action was introduced; in this event the recognition and enforcement of the judgment may only relate to assets located in the territory of the State where the proceedings were opened.

§2.

A foreign judgment referred to in §1 may not produce any effect in Belgium that is contrary to the rights of parties according to the rules laid down in article 119, §2 to §4.

§3.

The recognition entails that the liquidator may exercise all powers conferred on him by the foreign judgment. He may in particular in his capacity of liquidator of foreign principal proceedings request territorial proceedings or temporary and conservative measures in Belgium.

§4.

Contrary to article 23, the commercial court has jurisdiction to hear actions based on §1. The commercial courts has also jurisdiction to hear actions for the recognition or enforcement of foreign judgments which were given on the basis of the insolvency regulation. However, these derogations do not apply to judgments regarding collective debt arrangements of a person that is not a tradesman in the sense of Belgian law.

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CHAPTER XII TRUSTS Article 122 Characteristics of the trust For the purposes of the present statute, the term ‘trust’ means a legal relationship created by an act of the settlor or by a judicial decision, by which assets are placed under the control of a trustee in order to be administrated in the interest of the beneficiary or for a certain purpose. This legal relationship presents the following characteristics: 1° the assets of the trust form a separate estate and are not part of the estate of the trustee; 2° the title to the assets of the trust is drafted in the name of the trustee or the name of another person on behalf of the trustee; 3° the trustee has the authority and the duty, in respect of which he has to justify himself, to manage, administer or dispose of the goods in accordance with the provisions of the trust and the special duties imposed by law on the trustee.

Article 123 International jurisdiction with respect to trusts §1.

In addition to the cases provided for by the general provisions of the present statute, the Belgian courts have jurisdiction to hear actions regarding the relations between the settlor, the trustee or the beneficiary of the trust, if: 1° the trust is administrated in Belgium; 2° the claim concerns assets located in Belgium at the time when the action is introduced.

§2.

If in the trust deed jurisdiction is attributed to Belgian or foreign courts, or to one of them, articles 6 and 7 apply by analogy.

Article 124 Law applicable to the trust §1.

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The trust is governed by the law chosen by the settlor. The choice has to be made expressly or it has to be implied by the provisions of the deed of incorporation of the trust, the written document out of which the existence of the trust appears or by the circumstances of the case. The settlor can designate the applicable law for the entire trust or only for a part thereof.

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If, except for the choice of law, all meaningful elements of the trust are connected with a State, the law of which does not know the institution of the trust, the choice will not have any effect. §2.

In the absence of choice of law in accordance with §1 or if the chosen law does not consider the trust to be valid, the trust will be governed by the law of the State on the territory of which the trustee had his habitual residence at the time of the incorporation.

§3.

The choice cannot result in the fact that an heir looses its reserved part in the inheritance, which is guaranteed by the law applicable by virtue of article 78.

Article 125 Scope of application of the law applicable to the trust §1.

The law applicable to the trust determines notably: 1° the incorporation of the trust and its modalities; 2° the interpretation of the trust; 3° the administration of the trust as well as the rights and obligations which result thereof; 4° the consequences of the trust; 5° the termination of the trust.

§2.

The law applicable does not determine the validity of the deeds of acquisition or transfer of rights in rem in relation to the assets of the trust nor the transfer of the rights in rem in relation to those assets or the protection of the third-part acquirers of those assets. The rights and obligations of a third party who possesses an asset of the trust remain governed by the law applicable by virtue of chapter VIII.

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CHAPTER XIII FINAL PROVISIONS SECTION 1 TRANSITION PROVISIONS Article 126 International jurisdiction and effect of foreign judgments and authentic instruments §1.

The articles regarding the international jurisdiction of the courts are applicable to actions introduced after the present statute enters into force. The articles regarding the international jurisdiction of authorities are applicable to instruments drawn up after the present statute enters into force.

§2.

The articles regarding the effect of the foreign judgments and foreign authentic instruments are applicable to judgments and instruments rendered or drawn up after the present statute enters into force. A decision or instrument rendered or drawn up before the present statute enters into force can however have effect in Belgium if it satisfies the conditions of the present statute. Contrary to part 2, a marriage between persons of the same sex may produce effects in Belgium as of 1 June 2003, if the marriage satisfies the conditions of the present statute.

Article 127 Conflict of laws §1.

The present law determines the law applicable to the legal acts and facts, which take place after the present statute enters into force. The present statute determines the law applicable to the consequences, which after the present statute enters into force result from a legal act or fact which took place before it entered into force; the consequences of an act or fact referred to in articles 98, 99, 104 and 105 excluded.

§2.

A choice of law made by parties before the present statute enters into force is valid if it satisfies the conditions of the present statute.

§3.

Article 46, part 2, applies to any marriage concluded as of 1 June 2003.

§4.

Articles 55 and 56 are applicable to claims brought after the present statute enters into force.

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§5.

Articles 62 and 64 are applicable to claims brought after the present statute enters into force. However, they do not affect the filiation established prior to such date.

§6.

Articles 67 and 69 are applicable to instruments drawn up after the present statute enters into force.

§7.

Article 90 applies to the item that has unlawfully left the territory of the State after the present statute enters into force.

§8.

Articles 124 and 125 are applicable to instruments drawn up before the present statute enters into force. However, they do not affect the instruments validly drawn up prior to such date.

SECTION 2 MODIFYING PROVISIONS Article 128 Transcription of foreign instruments of civil status regarding Belgians Article 48 of the Civil Code, abolished by the law of 15 December 1949, is restored in the following version: ‘Art. 48. – §1. Each Belgian, or its legal representative, may request that an instrument with respect to civil status drawn up in a foreign country in respect of him be transcribed in the civil register of the local authority of his domicile or of his first establishment upon returning to the Kingdom. Of this transcription mention is made in the side of the current registers, according to the date of the fact to which the instrument relates. In the absence of a domicile or residence in Belgium, the transcription of an instrument referred to in the previous part can be done in the registers of the civil status of the local authority of the last domicile in Belgium of the relevant person or of one of his ascendants or of the local authority of his place of birth or in the absence hereof, in the registers of the civil status of Brussels. §2.

The advocate-general may request that an instrument of the civil status regarding a Belgian draw up in a foreign country is transcribed in the registers of civil status in accordance with §1.’

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Article 129 Evidence presented when the intention to marry is declared Article 64, §1, 5° of the same Code, reinstated by the law of 4 May 1999 is completed as follows: ‘as well as, as the case may be, evidence of the habitual residence in Belgium since more than three months’.

Article 130 Mentioning of the choice of the law applicable to the matrimonial property regime In article 76, 10° of the same Code, introduced by the law of 16 December 1851 and replaced by the law of 14 July 1976, the following words are added after the words ‘the matrimonial property regime of the spouses’: ‘and, in international cases, the possible choice of the national law that will be applicable to the matrimonial property regime made by the spouses’. Article 131 Scope of the law on adoption In article 359-3 of the same Code, introduced by the law of 24 April 2003, the words ‘the rules of international private law and’ are deleted.

Article 132 Choice of the matrimonial property regime when one of the spouses is Belgian In article 1389 of the same Code, modified by the law of 14 July 1976, the words ‘or, if one of them is Belgian, to a foreign legislation’ are deleted.

Article 133 Changing the matrimonial property regime abroad To article 1395 of the same Code, modified by the laws of 14 July 1976 and 9 July 1998, the following paragraph is added: ‘§6. A foreign instrument changing the matrimonial property regime can, if it fulfils the conditions required for its recognition in Belgium, be mentioned on the side of the instrument drawn up by a notary public and be added to that instrument. This formality is effected with a view to the publication of the change and has not as effect that it can be opposed to third parties.’

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Article 134 Jurisdiction of the court of first instance Article 570 of the Code of Civil Procedure is replaced by the following provision: ‘Article. 570. – The court of first instance hears actions referred to in articles 23, §1, 27 and 31 of the law of […] holding the Code of Private International Law regardless the value of the dispute. Contrary to part 1 the commercial court renders judgments on the actions referred to in article 121 of that same law.’

Article 135 Territorial jurisdiction regarding bankruptcy Article 631, §1 part 2 of the same Code, modified by the laws of 8 August 1997 and 4 September 2002, is replaced by the following provision: ‘The commercial court that has jurisdiction to declare a territorial or secondary bankruptcy by application of article 3, §2 or §3 of Council Regulation 1346/2000/EC of 29 May 2000 on insolvency proceedings, is the court that is located in the district in which the debtor has the said establishment. If there are several establishments, the court, which is first seized, has jurisdiction.’

Article 136 Territorial jurisdiction regarding the collective debt arrangement In article 1675/2 part one of the same Code the words ‘with domicile in Belgium’ are deleted.

Article 137 Recognition of foreign companies In article 58 of the Companies Code, introduced by the law of 7 May 1999, the words ‘real seat’ are replaced by the words ‘main establishment’.

Article 138 Territorial bankruptcy of the debtor In article 3 of the law of 8 August 1997 on bankruptcy, amended by the law of 4 September 2002, the following modifications are made: A)

The first part is replaced as follows:

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Ԥ1.

If territorial insolvency proceedings are opened by virtue of article 3, §2 of Council Regulation 1346/200/EC on insolvency proceedings or by virtue of article 118, §1 part 2, 2° of the Law of … holding the Code of Private International Law, the status of bankruptcy of the establishment is determined independently from the debtor’s status of the trader and the status of his establishment abroad. If territorial insolvency proceedings are opened by virtue of article 3, §3 of Council Regulation 1346/200/EC on insolvency proceedings or by virtue of article 118, §1 part 2, 2° of said law, as a result of the recognition of a foreign judgment to open principal proceedings, the declaration of bankruptcy takes place without verifying the status of the debtor in any way.’

B.

The second part becomes §2.

SECTION 3 ABOLISHED PROVISIONS Article 139 Provisions that are abolished The following provisions are abolished: 1° the articles 3, 15 and 47 of the Civil Code; 2° article 170 of the Civil Code, modified by the laws of 12 July 1931, 1 March 2000, and 13 February 2003; 3° article 170ter of the Civil Code inserted by the law of 12 July 1931; 4° article 171 of the Civil Code, replaced by the law of 12 July 1931 and modified by the aw of 13 February 2003; 5° articles 359-5 of the Civil Code, modified by the law of 24 April 2003; 6° article 912 of the Civil Code, modified by the law of 15 December 1980; 7° article 999 of the Civil Code, modified by the laws of 15 December 1949 and 29 July 1971; 8° the articles 586, 2° and 3°, 635, 636 and 638 of the Code of Civil Procedure; 9° the law of 27 June 1960, on the admissibility of the divorce if at least one of the spouses is a foreigner; 10° article 56 of the law of 7 May 1999 holding the Companies Code;

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11° 12°

article 145 of the law of 2 August 2002 regarding the supervision on the financial sector and financial services; article 24, §1 of the law of 24 April 2003 reforming the adoption.

SECTION 4 ENTRY INTO FORCE Article 140 Entry into force The present statute enters into force the first day of the third month following the month in which it is published in the Belgian Official Journal. Chapter V, section 2, article 131 and 139, 5° and 12° will not enter into force before the entry into force of the law of 24 April 2003 reforming the adoption. Chapter I is only applicable on adoption or the revocation of adoption as of the date of the entry into force of Chapter V, section2. Article 15 of the Civil Code and the articles 635,636 and 638 of the Code of Civil Procedure remain in force until the same date in as far as they relate to adoption or revocation of adoption.

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BOOK REVIEWS ________________

Heinz-Peter MANSEL, Thomas PFEIFFER, Herbert KRONKE, Christian KOHLER, Rainer HAUSMANN (eds.), Festschrift für Erik Jayme, vol. 1 and 2, Munich (Sellier European Law Publishers) 2004, 1849 pp. It is a great pleasure to write this brief review of the Festschrift dedicated to one of the greatest private international law experts and comparativists of our time, Professor Erik Jayme, on the occasion of his seventieth birthday. It is not easy to present Professor Jayme to the broader public, especially because of his multifaceted interests and constant readiness to tackle new challenging topics of private international law and other related fields. After being professor at the Universities in Mainz, Munster, and Munich, he spent over 20 years until retirement as professor and co-director of the Institut für ausländisches und internationales Privat- und Wirtschaftsrecht at the Law Faculty of the University of Heidelberg, teaching, writing legal opinions and schooling new generations of talented young scholars by serving as mentor to a large number of doctoral and habilitation candidates. He has lectured widely throughout the world. Among other achievements, he has received four honorary doctorates: from the University of Ferrara in 1991, the University of Budapest in 2000, the University of Montpellier in 2003 and the University of Porto Allegre also in 2003. Of his numerous activities in various international associations, it suffices to mention three which aptly illustrate his prestige among legal scholars: He is a member of the distinguished Institut de droit international and served as its president from 1997 to 1999; he is also a member of the Curratorium of the Hague Academy for International Law, member of the Philosophical-Historical Department of the Academy of Science, etc. Published in two large volumes, the Festschrift contains a total of 1849 pages. In the second volume, readers are given an insight into Professor Jayme’s work in a well-elaborated bibliography of his publications between 1961 and 2004. This impressive bibliography, which covers nearly 50 pages (1801-1849), is the best witness of his enormous working capacity and values, as well as the broad spectrum of his interests and expertise. The 131 contributions written by colleagues, friends, pupils and admirers from 19 different countries are a tribute to Professor Jayme’s worldwide renommée. The volumes are divided into five Parts. Devoted to questions of private international law and international procedure law, Part I consists of 74 contributions, all in the first volume of the Festschrift. This volume contains a number of very important and extremely interesting articles, making it a real must for all those

Yearbook of Private International Law, Volume 6 (2004), pp. 377-378 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Book Reviews

interested in private international law and procedural law. The articles are written mostly in English and German; some are also in French and Italian. Part II, which is called ‘Fundamentals’, consists of 15 contributions dealing with fundamental legal issues. Part III, entitled ‘Comparison, Unification and Europeanization of Private Law’, contains 13 articles on topics ranging from methods of comparison to the international harmonization of law and the European harmonization of private law. As the title of Part IV reveals – ‘Foreign and German Private Law’ – the 16 articles are devoted to special issues of private law, both foreign and German. Finally, Part V, entitled ‘Art, Culture, History’ comprises 13 articles on issues such as illegal trade and cultural property, history of the law of copyright and others. Dealing with difficult legal issues relating to culture and history, this Part offers numerous illustrious examples which make interesting reading for all those who regard law not only as a legal science dealing with ‘dry’ facts but also as a social science with a strong connection to culture, history, social change etc. It is well known that Professor Jayme has put his creative talents to work and become a leading figure in the interdisciplinary fields of law, art, culture and history. Thus it is fitting that this monumental Festschrift closes with articles focusing on his special interests. The two volumes are very well structured: the brief introduction by the editors is followed by a moving biographical note on the life and main achievements of Erik Jayme written by Herbert Kronke, the current Secretary General of UNIDROIT, pupil and later colleague of Professor Jayme (XIX to XXII). A list of the contributors and their affiliation follows. As mentioned above, a detailed bibliography of Professor Jayme’s publications is found at the end of the second volume. While monographs, textbooks and casebooks traditionally play an important role in the field of private international law, a Festschrift devoted to a wellknown lawyer can also be a real Fundgrube with sources of inspiration for scholars and all those interested in the special fields covered in the book. Good libraries are renown precisely for their collections of the most important Festschriften. This particular Festschrift certainly belongs to the category of valuable reference books that should be available not only in the best libraries but also on the bookshelves of all specialists. It is my pleasure to recommend this Festschrift very highly to everybody working in the fields covered by the two volumes dedicated to Erik Jayme. Petar ŠARýEVIû

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BOOKS RECEIVED ________________

ABARCA JUNCO Ana Paloma (directora), Derecho internacional privado, 4a ed., 2 voll., Madrid (Colex) 2003 ADAM MUÑOZ Dolores / GARCÍA CANO Sandra, Sustracción internacional de menores y adopción internacional, Madrid (Colex) 2004 AGUILAR GRIEDER Hilda, Acumulación de procesos en los litigios internacionales, Valencia (Tirant lo Blanch) 2004 ANCEL Bertrand / AUDIT Bernard [etc.], Le droit international privé: esprit et méthodes, Mélanges en l’honneur de P. Lagarde, Paris (Dalloz) 2005 AÑOVEROS TERRADOS Beatriz, Los contratos de consumo intracomunitarios, Barcelona (Marcial Pons) 2003 AUDIT Bernard, Le droit international privé en quête d’universalité, Cours général de droit international privé, Recueil des Cours 2003, t. 305, The Hague [etc.], (Martinus Nijhoff) 2004 AZZI Tristan, Recherche sur la loi applicable aux droits voisins du droit d’auteur en droit international privé, Paris (L.G.D.J.) 2005 BARATTA Roberto, Scioglimento e invalidità del matrimonio nel diritto internazionale privato, Milano (Giuffré) 2004 BARIATTI Stefania, Casi e materiali di diritto internazionale private comunitario, Milano (Giuffré) 2003 BARRETO Delgado César / MENÉNDEZ María Antonieta / CANDELA SÁNCHEZ César Lincoln, Introducción al Derecho Internacional Privado, t. I, Conflicto de leyes – Parte general, Lima (Pontificia Universidad Católica del Perú) 2002 BATLINER Herbert / GASSER Johannes, Litigation and Arbitration in Liechtenstein, Berne (Staempfli) 2004 BIGOT Agnès, L’autorité parentale dans la famille désunie en droit international privé (Préface H. FULCHIRON), Aix-en-Provence (PUAM) 2003

Yearbook of Private International Law, Volume 6 (2004), pp. 379-389 © Sellier. European Law Publishers & Swiss Institute of Comparative Law

Printed in Germany

Books Received

BILLARANT Serge, Le caractère substantiel de la réglementation française des successions internationales, Réflexions sur la méthode conflictuelle (Préface P. LAGARDE), Paris (Dalloz) 2004 BITTERLICH Klaus, Die Neuregelung des Internationalen Verbrauchervertragsrechts in Art. 29a EGBGB, Frankfurt a. M. [etc.] (Peter Lang) 2003 BLACK Vaughan, Foreign currency obligations in private international law, Recueil des cours 2003, t. 303, Leiden/Boston (Martinus Nijhoff) 2004 BOLLACHER Philipp, Internationales Privatrecht, Urheberrecht und Internet, Das auf länderübergreifende Sachverhalte anwendbare Recht, Frankfurt a. M. [etc.] (Peter Lang) 2005 BOLLÉ Sylvain, Les méthodes du droit international privé à l’épreuve des sentences arbitrales, Paris (Economica) 2004 BOU FRANCH Valentín, Nuevas controversias internacionales y nuevos mecanismos de solución, Valencia (Tirant Lo Blanch) 2005 BOULANGER François, Droit international des successions, Nouvelles approches comparatives et jurisprudentielles, Paris (Economica) 2004 BUCHER Andreas / BONOMI Andrea, Droit international privé, 2e éd., Bâle [etc.] (Helbing & Lichtenhahn) 2004 BUCHER Andreas, Le couple en droit international privé, Bâle [etc.] (Helbing & Lichtenhahn) 2004 CADET Fabien, Les transformations méthodologiques de l’ordre public en droit international privé de la famille, Etude comparée France / Espagne, Paris (ANRT) 2004 CALLÉ Pierre, L’acte public en droit international privé, Paris (Economica) 2004 CALVO CARAVACA Alfonso-Luis / CARRASCOSA GONZÁLEZ Javier (directores), El Derecho de familia ante el siglo XXI: Aspectos internacionales, Madrid (Colex) 2004 CALVO CARAVACA Alfonso-Luis / CARRASCOSA GONZÁLEZ Javier, Derecho internacional privado, 5a ed., 2 voll., Granada (Comares) 2004 CALVO CARAVACA Alfonso-Luis / CARRASCOSA GONZÁLEZ Javier, Derecho concursal internacional, Madrid (Colex) 2004

380

Yearbook of Private International Law, Volume 6 (2004)

Books Received

CALVO CARAVACA Alfonso-Luis / CARRASCOSA GONZÁLEZ Javier, Derecho de familia internacional, 2 ed., Madrid (Colex) 2004 CALZADILLA MEDINA María Aránzazu, La adopción internacional en el derecho español, Madrid (Dykinson) 2004 CARRILLO CARRILLO Beatriz L., Adopción internacional y Convenio de La Haya de 29 de mayo 1993, Granada (Comares) 2003 CHEIKHOLESLAMI Sayed Mohsen, L’applicabilité d’office du droit étranger et ses limites en droit international privé, Paris (ANRT) 2003 CHEN Weizuo, Rück- und Weiterverweisung (Renvoi) in staatsvertraglichen Kollisionsnormen, Frankfurt am Main [etc.] (Peter Lang) 2004 COMMISSIONE TICINESE PER LA FORMAZIONE PERMANENTE DEI GIURISTI, La Convenzione di Lugano nella pratica forense e nel suo divenire, Basilea [etc.] (Helbing & Lichtenhahn) 2004 CORBION Lycette, Le déni de justice en droit international privé (Préface Y. LEQUETTE) Aix-en-Provence (PUAM) 2004 CORNELOUP Sabine, La publicité des situations juridiques, Une approche francoallemande du droit interne et du droit international privé (Préface P. LAGARDE), Paris (L.G.D.J.) 2003 DALHUISEN Jan, Dalhuisen on International Commercial, Financial and Trade Law, Oxford and Portland (Hart Publishing) 2004 DAMASCELLI Domenico, I conflitti di legge in materia di società, Bari (Cacucci) 2004 DANNEMANN Gerhard, Die ungewollte Diskriminierung in der internationalen Rechtsanwendung, Zur Anwendung, Berücksichtigung und Anpassung von Normen aus unterschiedlichen Rechtsordnungen, Tübingen (Mohr) 2004 DE ARAUJO NADIA, Direito Internacional Privado, Teoria e Prática Brasileira, 2nd ed., Rio de Janeiro (Renovar) 2004 DE LIMA PINHEIRO Luís (coord.), Estudos de Direito Comercial Internacional, Vol. I, Coimbra (Almedina) 2004 DEVERS Alain, Le concubinage en droit H. FULCHIRON), Paris (L.G.D.J.) 2004

international

privé

Yearbook of Private International Law, Volume 6 (2004)

(Préface

381

Books Received DOLINGER Jacob, Direito internacional privado (Parte geral), 7a edição, Rio de Janeiro - São Paulo (Renovar) 2003 DONIZETI LIBERATI Wilson, Adoção internacional, doutrina e jurisprudência, 2a edição, São Paulo (Malheiros editores) 2003 DRAPPATZ, Thomas, Die Überführung des internationalen Zivilverfahrensrechts in eine Gemeinschaftskompetenz nach Art. 65 EGV, Tübingen (Mohr) 2002 DURÁN AYAGO Antonia, La protección internacional del menor desamparado: regimen jurídico, Madrid (Colex) 2004 DUTOIT Bernard, Droit international privé suisse, Commentaire de la loi fédérale du 18 décembre 1987, 4e éd. revue et augmentée, Bâle [etc.] (Helbing & Lichtenhahn) 2005 EILINGHOFF Maren B., Das Kollisionsrecht der ungerechtfertigten Bereicherung nach dem IPR-Reformgesetz von 1999, Frankfurt a. M. [etc.] (Peter Lang) 2004 FAWCETT James / HARRIS Jonathan / BRIDGE Michael, International Sale of Goods in the Conflict of Laws, Oxford (Oxford University Press) 2005 FERNÁNDEZ ROZAS José Carlos / SÁNCHEZ LORENZO Sixto, Derecho Internacional Privado, 3a ed., Madrid (Thomson Civitas) 2004 FETSCH Johanne, Eingriffsnormen und EG-Vertrag,Tübingen (Mohr) 2002 FONGARO Eric, La loi applicable à la preuve en droit international privé (Préface B. BEIGNER et J. FOYER), Paris (L.G.D.J.) 2004 FORKERT Meinhard, Eingetragene Lebenspartnerschaften im deutschen IPR: Art. 17 EGBGB, Tübingen (Mohr) 2003 FRICKE Verena, Der Unterlassungsanspruch gegen Pressenunternehmen zum Schutze des Persönlichekeitsrecht im IPR, Tübingen (Mohr) 2003 FRIGO Manlio / FUMAGALLI Luigi, L’assistenza giudiziaria internazionale in materia civile, Notificazione, Assunzione di prove, Informazioni sul diritto straniero, Padova (Cedam) 2003 FUCHS Angelika / MUIR WATT Horatia / PATAUT Etienne, Les conflits de lois et le système juridique communautaire, Paris (Dalloz) 2004

382

Yearbook of Private International Law, Volume 6 (2004)

Books Received

GANSSAUGE Niklas, Internationale Zuständigkeit und anwendbares Recht bei Verbraucherverträgen im Internet, Tübingen (Mohr) 2004 GARDEÑES SANTIAGO Miguel, Las fundaciones en Derecho internacional privado español, Madrid (Eurolex) 2003 GEIMER Reinhold / SCHÜTZE Rolf, Europäisches Zivilverfahrensrecht, 2. Aufl., München (Beck) 2004 GEIMER Reinhold, Internationales Zivilprozessrecht, 5. Aufl., Köln (O. Schmidt) 2005 GERMANY NOTARY INSTITUTE, Conflict of Law of Succession in the European Union, Perspective of Harmonisation, Brussels 2004 GIRSBERGER / HEINI / KELLER / KREN KOSTKIEWICZ / SIEHR / VISCHER / VOLKEN, Zürcher Kommentar zum IPRG, Kommentar zum Bundesgesetz über das internationale Privatrecht (IPRG) vom 18. Dezember 1987, Zürich (Schulthess) 2004 GOLDSCHMIDT Werner, Derecho internacional privado, 9a ed., Buenos Aires (De Palma) 2002 GÖRDES Anna Christina, Internationale Zuständigkeit, Anerkennung und Vollstreckung von Entscheidungen über die elterliche Verantwortung, Frankfurt a. M [etc.] (Peter Lang) 2004 GOTTSCHALK Eckhart, Allgemeine Lehre des IPR in kollisionsrechtlichen Staatsverträgen, Berlin (Duncker & Humblot) 2002 GÖTZ Claudia, Der Gerichtsstand der rügelosen Einlassung im Zivilprozessrecht der Schweiz, Basel [etc.] (Helbing & Lichtenhahn) 2004 GRUNDMANN Stefan, Europäisches Gesellschaftsrecht: eine systematische Darstellung unter Einbeziehung des europäischen Kapitalmarktrechts, Heidelberg (C.F. Müller) 2004 HERRANZ BALLESTEROS Mónica, El interés del menor en los Convenios de la Conferencia de La Haya de Derecho Internacional Privado, Valladolid (Lex nova) 2004 JÄNTERÄ JAREBORG Maarit, Foreign law in national courts – A comparative perspective, Recueil des cours 2003, t. 304, Leiden/Boston (Martinus Nijhoff) 2004

Yearbook of Private International Law, Volume 6 (2004)

383

Books Received

JUÁREZ PÉREZ Pilar, Orden social y litigios internacionales: competencia judicial, Granada (Comares) 2002 JUENGER Friedrich K, Choice of Law and Multistate Justice, Special Edition, Ardsley NY (Transnational Publishers) 2005 KADNER GRAZIANO Thomas, La responsabilité délictuelle en droit international privé européen, Bâle [etc.] (Helbing & Lichtenhahn) 2004 KALICHSZSTEIN Juliana, Homologação de Sentenças e Laudos Arbitrais Estrangeiros no Brasil, Rio de Janeiro (Lumen Iuris) 2002 KATI-KATI, Hamba, Les pratiques matrimoniales dans et hors du droit positif: le cas des Congolais de France, Paris (ANRT) 2004 KAUFMANN Sebastian, Parol Evidence Rule und Merger Clauses im internationalen Einheitsrecht, Frankfurt a. M [etc.], (Peter Lang) 2004 KAUFMANN-KOHLER Gabrielle / STUCKI Blaise, International Arbitration in Switzerland, A Handbook for Practitioners, The Hague [etc.] (Kluwer Law International - Schulthess) 2004 KEGEL Gerhard / SCHURIG Klaus, Internationales Privatrecht, 9. Aufl., München (Beck) 2004 KESSLER Guillaume, Les partenariats enregistrés en droit international privé (Préface P. LAGARDE), Paris (L.G.D.J.) 2004 KLEINHEISTERKAMP Jan, International commercial arbitration in Latin America: regulation and practice in MERCOSUR and the associated countries, Dobbs Ferry N.Y. (Oceana Publications) 2005 KNIPRATH Lutz, Die Schiedsgerichtsbarkeit der Chinese International Economic and Trade Arbitration Commission (CIETAC), Köln [etc.] (Carl Heymann) 2004 KNOEPFLER François / SCHWEIZER Philippe / OTHENIN-GIRARD Simon, Droit international privé suisse, 3e éd., Berne (Staempfli) 2005 KOCH Harald / MAGNUS Ulrich / WINKLER VON MOHRENFELS Peter, IPR und Rechtsvergleichung Ein Studien- und Übungsbuch zum Internationalen Privat- und Zivilverfahrensrecht und zur Rechtsvergleichung, 3. Aufl., München (Beck) 2004 KROPHOLLER Jan, Internationales Privatrecht, 5. Aufl., Tübingen (Mohr) 2004

384

Yearbook of Private International Law, Volume 6 (2004)

Books Received

KRUISINGA Sonja, (Non-)conformity in the 1980 UN Convention on Contracts for the International Sale of Goods: a Uniform Concept?, Antwerp (Intersentia) 2004 KÜHL Isabel, Der internationale Leihverkehr der Museen, Köln (Carl Heymann) 2004 LEIBLE Stefan, Die Bedeutung des Internationalen Privatrechts im Zeitalter der neuen Medien, Stuttgart [etc.] (Richard Boorberg) 2003 LIEBSCHER Christoph, The Healthy Award, Challenge in International Commercial Arbitration, The Hague (Kluwer Law International) 2003 LOOSCHELDERS Dirk, Internationales Privatrecht - Art. 3-46 EGBGB, Berlin [etc.] 2004 LORENZ Verena, Annexverfahren bei internationalen Insolvenzen: Internationale Zuständigkeitsregelung der Europäischen Insolvenzverordnung, Tübingen (Mohr) 2005 LOUSSOUARN Yvon / BOUREL Pierre / DE VAREILLES SOMMIÈRES Pascal, Droit international privé, 8e éd., Paris (Dalloz) 2004 LOWE Nigel / EVERALL Mark QC / NICHOLLS Michael, International Movement of Children, Law Practice and Procedure, Bristol (Jordan Publishing) 2004 LUDWIG Daniel, Neuregelungen des deutschen Internationalen Insolvenzverfahrensrecht, Frankfurt a. M. [etc.] (Peter Lang) 2004 MÄHR Hannes, Das internationale Zivilprozessrecht Liechtensteins, Schaan (GMG Iuris) 2002 MALAGUTI Maria Chiara, Crisi dei mercati finanziari e diritto internazionale, Milano (Giuffré) 2003 MANSEL Heinz-Peter / PFEIFFER Thomas / KRONKE Herbert / KOHLER Christian / HAUSMANN Reiner (Hrsg.), Festschrift für Erik Jayme (2 Bände), München (Sellier) 2004 MARKUS Alexander / KELLERHALS Andreas / JAMETTI GREINER Monique, Das Haager Trust-Übereinkommen und die Schweiz, Zürich (Schulthess) 2003 MARQUES DOS SANTOS Antonio, Estudios de Direito Internacional Privado e de Direito Público, Coimbra (Almedina) 2004

Yearbook of Private International Law, Volume 6 (2004)

385

Books Received MAYER Pierre / HEUZÉ Vincent, Droit international privé, 8e éd., Paris (Montchrestien) 2004 MC GUIRE Mary-Rose, Verfahrenskoordination und Verjährungsunterbrechung im Europäischen Prozessrecht, Tübingen (Mohr) 2004 MEDEIROS RÉGNIER Leonardo, Nacionalidade das sociedades comerciais, Curitiba (Juruá) 2002 MEEUSEN Johan / PERTEGÁS Marta / STRAETMANS Gert (eds.), Enforcement of International Contracts in the European Union, Convergence and Divergence between Brussels I and Rome I, Antwerp (Intersentia) 2004 MÉLIN François, La faillite internationale, Paris (L.G.D.J.) 2004 MONTI Antonio / TREZZINI Francesco / WICKI Francesco, Three Essays on International Commercial Arbitration, Lugano (ADV Publishing House) 2003 MOSCONI Franco / CAMPIGLIO Cristina, Diritto internazionale privato e processuale, Parte generale e contratti, 3a ed., Torino (UTET) 2004 MOSK Richard M., The role of facts in international dispute resolution, Recueil des cours 2003, t. 304, Leiden/Boston (Martinus Nijhoff) 2004 MÜLLER Achim, Grenzüberschreitende Beweisaufnahme im Europäischen Justizraum, Tübingen (Mohr) 2004 MÜLLER Christoph, International Arbitration, A Guide to the Swiss Case Law (Unreported and Reported), Köln (Otto Schmidt) – Bruxelles (Bruylant) – Zürich (Schulthess) 2004 NAJM Marie-Claude, Principes directeurs du droit international privé et conflits de civilisations, Relations entre systèmes laïques et systèmes religieux (Préface Y. LEQUETTE), Paris (Dalloz) 2005 NOBEL Peter (Hrsg.), Internationales Gesellschaftsrecht: einschliesslich internationales Kapitalmarktrecht, Bern (Staempfli) 2004 OLANO Oscar, Der Sitz der Gesellschaft im Internationalen Zivilverfahrens- und Insolvenzrecht der EU und der Schweiz, Basel (Helbing & Lichtenhahn) 2004 PEREZ Oren, Ecological sensitivity and global legal pluralism: rethinking the trade and environment conflict, Oxford [etc.] (Hart Publishing) 2004

386

Yearbook of Private International Law, Volume 6 (2004)

Books Received

PÉROZ Hélène, La reception des jugements étrangers dans l’ordre juridique français (Préface H. GAUDEMET TALLON), Paris (L.G.D.J.) 2004 PICONE Paolo (a cura di), Diritto internazionale privato e diritto comunitario, Padova (Cedam) 2004 PIRODDI Paola, La subfornitura nel diritto internazionale privato e comunitario, Padova (Cedam) 2004 PONTIER Jannet A. / BURG Edwige, EU Principles on Jurisdiction and Recognition and Enforcement of Judgments in Civil and Commercial Matters, according to the case law of the European Court of Justice, The Hague (T.M.C. Asser Press) 2004 RECHSTEINER Beat Walter, Direito Internacional Privado – Teoria e Prática, 6a ed., São Paulo (Saraiva) 2003 RICCI Carola, Il richiamo di ordinamenti plurilegislativi nel diritto internazionale privato, Padova (Cedam) 2004 ROSSANI GARCEZ José Maria, Curso de direito internacional privado, 2a ed., Rio de Janeiro (Editora Forense) 2003 ROSSOLILLO Giulia, Mutuo riconoscimento e tecniche conflittuali, Padova (Cedam) 2002 RÜTTEN Michael, Gesetzesumgehung im internationalen Privatrecht, Dissertation der Universität Zürich, Zürich (Schulthess) 2003 SALERNO Francesco, Giurisdizione ed efficacia delle decisioni straniere nel Regolamento (CE) N. 44/2001 (La revisione della Convenzione di Bruxelles), Padova (Cedam) 2003 SANCHO VILLA Diana, Trasferencia internacional de datos personales, Madrid (Agencia de Protección de datos, D.L.) 2003 SANTOS BELANDRO Ruben, Derecho internacional privado: 50 años de estudio de casos reales originados en el ámbito notarial, Montevideo (Asociación de Escribanos del Uruguay) 2003 ŠARýEVIû Petar, Essays in Private International Law, Rijeka (Faculty of Law, University of Rijeka) 2004 SCHEFOLD Andrea Verena, Werbung im Internet und das deutsche Internationale Privatrecht, Frankfurt a. M. [etc.] (Peter Lang) 2004

Yearbook of Private International Law, Volume 6 (2004)

387

Books Received

SCHERER Maxi, Le nom en droit international privé, Etude de droit comparé français et allemand (Préface P. LAGARDE), Paris (L.G.D.J.) 2004 SCHEUERMANN Isabel, Internationales Zivilverfahrensrecht bei Verträgen im Internet, Tübingen (Mohr) 2003 SCHIBLI Hans R., Multistate-Werbung im internationalen Lauterkeitsrecht mit besonderer Berücksichtigung der Internet-Werbung, Dissertation der Universität Zürich, Zürich (Schulthess) 2004 SCHRAMM Dorothe, Ausländische Eingriffsnormen im Deliktsrecht, Ein Beitrag zu Art. 19 UPRG und Art. 123 Abs. 1 des Entwurfes einer Rom II-Verordnung, Bern (Stämpfli) 2005 SCHÜTZE Rolf A., Prozessführung und -risiken im deutsch-amerikanischen Rechtsverkehr, Heidelberg (Verlag Recht und Wirtschaft) 2004 SLOT Piet Jan / BULTERMAN Mielle (editors), Globalisation and Jurisdiction, The Hague (Kluwer Law International) 2004 SOULEAU-BERTRAND Mathilde, Le conflit mobile (Préface de P. LAGARDE), Paris (Dalloz) 2005 STANKEWITSCH Peter, Entscheidungsnormen im IPR als Wirksamkeitsvoraussetzungen der Rechtswahl, Frankfurt a. M. [etc.] (Peter Lang) 2003 STRENGER Irineu, Direito internacional privado, Parte Geral, 5a ed., São Paulo (LTr editora) 2003 TONOLO Sara, Il rinvio di qualificazione nei conflitti di leggi, Milano (Giuffré) 2003 TORSELLO Marco, Common Features of Uniform Commercial Law Conventions, A Comparative Study Beyond the 1980 Uniform Sales Law, München (Sellier) 2004 VERWILGHEN Michel (directeur), Régimes matrimoniaux, successions et libéralités dans les relations internationales et internes (Union internationale du notariat latin), vol. I, Bruxelles (Bruylant) 2003 VOEGELE Katija, Full Faith and Credit – Die Anerkennung zivilgerichtlicher Entscheidungen zwischen den US-amerikanischen Bundesstaaten, Berlin (Duncker & Humblot) 2003

388

Yearbook of Private International Law, Volume 6 (2004)

Books Received

YEO T.M., Choice of Law for Equitable Doctrine, Oxford (Oxford University Press) 2004 ZEECK Sebastian, Das Internationale Anfechtungsrecht in der Insolvenz, Tübingen (Mohr) 2003

Yearbook of Private International Law, Volume 6 (2004)

389

INDEX ________________

Accessory connection torts 148 corporations 257-258 (see also ‘Connecting factor’) Acta iure imperii 35, 52-55 Admnistrative authorisations and PIL (torts) 308 Adoption 188 Agency 119 Agency without authority (negotiorum gestio) 129, 134, 148-149 American Law Institute (‘ALI’)’s project on intellectual property 74 Amsterdam Treaty 136 Austrian PIL torts 141, 147, 309 Bankruptcy foreign mandatory rules 249 Polish PIL 187 recognition of foreign proceedings 250 Bartin 166 Belarus PIL torts 296 Belgian PIL cohabitation légale 187-188 foreign mandatory rules 247 names 92, 106 registered partnerships 188 torts 297 Belgian PIL Code of 2004 (English translation) 319-375 Berne Convention of 1886 for the Protection of Literary and Artistic Works 71, 77, 78 Bilateral conflicts rule 76, 116

characterisation 156 neutrality 76, 78, 81 objectives 76, 147, 179, 164 Brussels Convention on jurisdiction and recognition of judgements in civil and commercial matters 157, 172, 176-178, 180 Canadian PIL inter-jurisdictional support orders 233 Capacity Lizardi doctrine 185 Polish PIL 183, 185 registered partnerships 198199 torts 304 Centros judgement 86, 121, 264 Characterization conflict of 156 EC Law 132, 155-169 environmental damages 295 foreign public law 22-23, 30-31, 39, 41, 62, 64 Polish PIL 182 registered partnerships 9596 Swiss company law 255-256 Child abduction 242, 243-244 Child protection 165, 239, 242243, 243-244 Choice of court 238-239, 241 Intellectual Property 79-80 (see also ‘Hague Draft Convention on Exclusive Choice of Court Agreements’) Choice of law see ‘Party autonomy’

Index

Citizenship see ‘Nationality’ Classification see ‘Characterisation’ Close connection registered partnership 15 foreign mandatory rules 247, 249 Closest connection principle (also see ‘Escape clause’) Rome II Proposal 145, 147, 313 PIL on companies 274 torts 303, 313 Polish PIL 181 Codification of PIL Intellectual Property 71-83 rules vs. principles 74 Cohabitation 185-188 (see also ‘Registered partnerships’) Cohabitation légale 187-188 Commonwealth (British) foreign tax laws 9-10 Community public policy 44, 152153 Companies see ‘Corporations’ Comunidades autónomas and PIL 188-196 Conflit mobile 122, 196 Conflict of nationalities see ‘Nationality’ Connecting factor 117 company law 257-258 environmental damage 308309 Polish PIL 183-187 primary vs. subsidiary 148, 253-255 registered partnerships 194 torts 305, 308-309 Constitution and PIL Spain 193-194, 196 Poland 177-180 392

Contractual obligations Polish PIL 186 Corporations 251-289 (see also ‘Swiss PIL on companies’) Counterfeiting 83 Country of origin principle 118 Cross-border pollution see ‘Environmental damages’ Danish PIL registered partnerships 186 Denmark and EC-PIL 87 Dépeçage 147, 304 Divorce Polish PIL 183 Italian PIL 162 Domicile Polish PIL 184 Dual nationality see ‘Nationality’ Due process maintenance claims 229 Dutch PIL registered partnerships 187, 193 same sex marriage 188 EC and PIL matters 85-132 ‘incorporation theory’ 261 ‘reverse discrimination’ 88 Avello case 89-93, 97, 105, 126-127 Baumbast case 109 characterisation 155-169 Centros case 86, 121, 264 company law 121 country of origin principle 118 cross border requirement 86, 104 divorce matters 104 external competences 159 Fiona Shevill case 146 freedom of establishment 96, 127

Index

freedom of movement 107, 110, 127, 163 Hoorn case 103 Ingmar case 119 Inspire Art case 121, 265 Johannes case 105 mandatory rules 126-127 Micheletti case 95 mutual recognition principle 118 primacy of EU law 117 principle of non discrimination 91, 92, 100, 125 public policy 128, 152, 171183 Rome II proposal 129-153 Rutili case 124 scope of application of EU law 108, 110, 112, 115 smuggling of goods 3, 69 Walt Wilhelm case 101 Überseering case 121, 265 Zhu case 95, 107, 126-127 EC-Regulation on jurisdiction and recognition of judgements in civil and commercial matters (No. 44/2001) (‘Brussels I Regulation’) 87, 136, 228, 296, 297, 172, 180-181 public policy 172, 180-181 EC-Regulation No. 1346/2000 on insolvency proceedings public policy 172-181 EC-Regulation No. 805/2004 on the European enforcement order 181-182 EC-Regulation No. 2201/2003 concerning jurisdiction and the recognition and enforcement in matrimonial matters and the matters of parental responsibility, repealing EC-Regulation No. 1347/2000 165

EC Draft Regulation ‘Rome II’ see ‘Rome II Regulation (Draft)’ EC Treaty Article 12 84 Article 65 116, 136, 164, 310 Article 68 160 Article 17 125 Article 220 133, 169 public policy 172, 174 EC-Directive 2004/38/EC on the freedom of movement and residence within the EU territory of EU citizens and their families 26 E-commerce and PIL 240, 245 Environmental damages 291-318 characterisation 295 connecting factors 296-301 international instruments 292-295 lex loci damni 297, 299, 300 lex rei sitae 295 lex loci delicti 296 lex fori 301 scope of the applicable law 304 ‘ubiquity theory’ 300 ERTA doctrine 159 Escape clause Austrian PIL 147 Intellectual Property 79 Rome II Proposal 142, 148149 Swiss PIL on companies 274 EU and the Hague Conference 241242 European Group of Private International Law 135 Expropriation 20-21 False conflicts 164 ‘Favor’ principle see ‘Lex favorabilior’ 393

Index

Foreign law ex officio application 182 foreign public law 1-70 foreign tax law 1-70 Foreign mandatory rules 247-250, 273-274 Foreign revenue claims 1-70 Foreign judgements see ‘Recognition’ Formal validity 180, 187 Forum shopping 147 Fraus legis Swiss PIL on companies 267 Freedom of movement 95, 107, 168, 176-177 Freedom of establishment 96, 127 French PIL environmental torts 298 foreign public laws 44-57 foreign revenue claims 4457 PACS 186, 193 German PIL foreign public laws 33-44 foreign revenue claims 44-57 pensions matters 103 nationality in divorce matters 124 registered partnerships 187 torts 141, 295, 299 Günstigkeitsprinzip see ‘Lex favorabilior’ Habitual residence see ‘Residence (habitual)’ Hague Conference on Private International Law 237-245 EU membership 241, 242 maintenance obligations 221-236 Poland’s participation 188 Japan’s participation 245 Hague Convention on Conflict of Nationality Laws (1930) 94, 183 394

Hague Convention on the Civil Aspects of International Child Abduction (25 October 1980) 243-244 Hague Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary (13 December 2002) 237-238 Hague Convention on the Law Applicable to Maintenance Obligations (24 October 1956) 222-232 Hague Convention on the Law Applicable to Maintenance Obligations (2 October 1973) 222-232 Hague Convention on the Recognition and Enforcement of Decisions Relating to Maintenance Obligations (15 April 1958) 222-230 Hague Convention on the Recognition and Enforcement of Decisions Relating to Maintenance Obligations (2 October 1973) 222-230 Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (15 November 1965) 245 Hague Draft Convention on Exclusive Choice of Court Agreements 238-239, 241 Hague Draft Convention on the International Recovery of Child Support and other Forms of Family Maintenance …239-240 Hague Convention on Protection of Children and Cooperation in Respect of Intercountry Adoption (29 May 1993) 224

Index

Hague Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Cooperation in Respect of Parental Responsibility and Measures for the Protection of Children (19 October 1996) 224-225, 230 Hague Convention Concerning the Powers of Authorities and the Law Applicable in Respect of the Protection of Minors (5 October 1961) 230 Hambourg group for private international law 137 Illegal exports 6 Incidental question foreign public law 61, 65-66 (see also ‘Preliminary question’) Incorporation theory 257-263 Insurance 305 Intellectual property and PIL 7183, 240 American Law Institute project 73 bilateralism vs. unilateralism 76-77 codification 71-83 connecting factors 88, 145 country for which protection is sought 78, 145 country of registration 78 jurisdiction 79-80 law of first publication principle 78 licensing agreements 82 Lis pendens 75 recognition of foreign judgements 83 Rome II proposal 145 territoriality principle 71, 79 Interregional conflicts Poland 176 Spain 196

Irish nationality law 94-95 Israel PIL maintenance obligations 116 Italian PIL divorce 162 foreign public laws 57-63 foreign revenue claims 57-63 product liability 143 torts 141, 143, 300 Iure imperii 35, 52-55 Kinship Polish PIL 184 Japan membership of the Hague Conference 245 Jurisdiction immunity of foreign State 35 Intellectual Property 79-80 maintenance 227-232, 233234 Swiss PIL on companies 271, 286-287 torts 295 Jurisdictional approach 158, 162 Law of registration registered partnership 199, 201 Intellectual Property 78 Labor contracts 186 Legal persons Polish PIL 185 (also see ‘Corporations’) Lex communis habitationis see ‘Residence (habitual)’ Lex favorabilior torts 299, 300-301, 305, 314 Polish PIL 179 German PIL 299 Lex loci commissi delicti 132, 140, 296-301 Lex loci damni 297 Lex loci actus torts 297-299, 307 Polish PIL 185 395

Index

Lex rei sitae 185 Lex societatis 251-289, 304 Licensing agreements 82 Lis pendens 75 Lizardi doctrine 185 Lois d’application immédiate see ‘Mandatory rules’ Lois de police see ‘Mandatory rules’ Maastricht Treaty 135 Maintenance obligations 221-236, 239 applicable law 232-233 jurisdiction 227-232, 233234 Mandatory rules EU law 118 foreign mandatory rules 275, 247-250, 305-306 Intellectual Property 82 Polish PIL 182 Rome Convention on Contractual Obligations 247 Rome II Proposal 316 Swiss PIL on companies 273, 275 torts 151, 305-306, 316 Materialisation of PIL 127, 166 Matrimonial property Polish PIL 183 Mergers 285-286 Montevideo Convention on Support Obligations (1989) 222, 228, 232 Name Belgian PIL 92 Spanish PIL 92 Polish PIL 182 Nationality compatibility with EU law 89, 93, 100-103 conflict of nationalities 94, 183 396

EU nationality and applicability of EU law 85-128, 112 Irish law on 94 Polish PIL 193 Negotiorum gestio see ‘Agency without authority’ New Zealand foreign public laws 18-20 Non discrimination principle 91, 92, 100, 125 Non marital cohabitation 185-202 Non-contractual obligations ‘double actionability rule’ 131-132 bilocal torts 141 environmental damages 291-318 foreseeability of the damage 299 Hague Conference 133 lex loci delicti commissi 140 lex loci actus vs. lex loci damni 140-141, 298-300, 307 party autonomy 150, 302 product liability 143 resolution of the Institute of International Law 298 rules of conduct 307 Rome II proposal 129-153 UK PIL 131-132 unfair competition 143 Optio legis 302 (see also ‘Party autonomy’) Ordinamento competente 118, 166 Ordre public see ‘Public policy’ Outer space 301 PACS 186, 193 Parental responsability 224-225 Paris Convention of 1886 for the Protection of Industrial Property 71, 77, 78

Index

Party autonomy rights of personality 85 licensing agreements 82 torts 139, 150, 300, 302 Polish PIL 186 company law 267 characterisation 160 injured party’s choice 300 Place of injury rule 140-141 Polish PIL 175-192 case-law 190-192 domicile 184 ex officio application 182 insolvency 187 history 175-177 lex fori 186 lex loci actus 185 lex rei sitae 185 mandatory rules 182 nationality 193 party autonomy 186 Polish constitution 177, 180 preliminary questions 182 renvoi 180 succession 191 torts 296 Portuguese PIL torts 299 Preliminary question Polish PIL 182 foreign public law 61, 65-66 Principe de proximité 274 (also see ‘Closest connection principle’ and ‘Escape clause’) Product liability 143 Professio iuris see ‘Party autonomy’ Proportionality (Principle of) 179 Pseudo-foreign companies 264 Public policy EC law 151-152, 171-183 foreign tax decisions 10, 31, 39

Intellectual Property 82 Polish PIL 181 registered partnership 199 Swiss PIL on companies 271 torts 151 Punitive damages 3, 140, 182, 317 Québec PIL Foreign mandatory rules 247 Rabel 166 Recognition foreign companies 259-260 foreign insolvency 250 foreign judgments 83 foreign tax judgements 9, 24-25, 30-33, 47, 56, 57-58, 66-67 legal situations 167 principle of mutual recognition in EC law 118-119 registered partnerships 199 Registered partnerships 113, 185202 capacity 198 characterization 195 connecting factor 195 dissolution 201 Dutch PIL 187, 193 effects 200 Germany PIL 187, 193 public policy 199 PACS 186, 187 parties’ expectations 197 recognition 199 scandinavian model 186187 Spanish PIL 188-192 Renvoi 167 EC conflict rule 160 Polish PIL 180 Rome II proposal 139, 151 Renvoi de qualifications 166 397

Index

Result-selecting rules 166 (see also ‘lex favorabilior’) Residence (habitual) of the child 226-227 common residence in torts 148, 301 Polish PIL 183 Reverse discrimination 88 Revenue rule 1-30 Right of personality applicable law 81 Rome II proposal 144 Rome Convention on the Law Applicable to Contractual Obligations (19 June 1980) 134, 195 Rome II Regulation (Draft) 129153, 171-172, 292, 310 closest connection 147, 313 entry into force 129-130 environmental damages 144, 309-317 European Group of Private International Law 135 history 129-138, 309-310 Lex loci damni 313 material scope 129, 139 party autonomy 139, 316 privacy rights and rights of personality 144 structure 139, 312 universal application 140 Rumanian PIL torts 297 Safety standards 307 Same-sex marriage 113, 188, 193, 200, 201 Savigny 122-127 Smuggling 3, 5-6, 69 Spanish PIL constitution and PIL 193194, 196, 199 interregional conflicts 196 ordre public 200 398

registered partnerships 185202 torts 296 vecindad civil 193-194 Subsidiary connection see ‘Accessory connection’ Succession Polish PIL 183 Swiss PIL product liability 143 foreign mandatory rules 247-250 insolvency 250 Swiss PIL on companies foreign branches 260-263 fraus legis 267, 276-278 incorporation theory 257263 international transfer 279 jurisdiction 271, 286-287 mandatory rules 275, 277 merger, demerger, transfer of assets and liabilities 280 notion of company 253-255 power of representation 266 public policy 272 recognition of foreign companies 259, 288 scope of application of lex societatis 259 Tampere conclusions 136 Tax law 1-70 Territoriality principle 71-72 Third parties Intellectual Property 82-83 Swiss company law 263-278 Third school doctrine 166 Torts see ‘Non contractual obligations’ Trademarks and PIL 78 registered vs. unregistered 78 Transfer of companies 117, 280

Index

Trust 256 Ubiquity theory in torts 297 UK PIL ‘double actionability’ rule 131, 298 Boys vs. Chaplin 131-132 foreign public laws 5-30 foreign revenue claims 5-30 non-contractual obligations 131 Phillips vs. Eyre 131 public policy 152 recognition of tax judgements 9, 24-25 UN Conventions on the Rights of the Child 224-225, 242

UN Convention on the Recovery Abroad of Maintenance (1956) 222 UNCITRAL 245 Unfair competition 143 Unilateral conflicts rules 76, 158 Unjust enrichment 148 US jurisdiction on maintenance claims 228-229 Venezuelan PIL torts 300 Weaker party Intellectual Property 82 torts 300 , 303 contracts 303 Zitelmann 40

399