Content and Meaning of National Law in the Context of Transnational Law [1 ed.] 9783866538740, 9783866531277

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Content and Meaning of National Law in the Context of Transnational Law

Content and Meaning of National Law in the Context of Transnational Law

edited by

Henk Snijders Stefan Vogenauer

ISBN (print) 978-3-86653-127-7 ISBN (e-book) 978-3-86653-874-0

The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available on the Internet at http://dnb. d-nb.de. © 2009 by sellier. european law publishers GmbH, Munich. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior permission of the publisher. Design: Sandra Sellier, Munich. Production: Karina Hack, Munich. Typeface: Goudy Old Style and Goudy Sans from Linotype. Printing and binding: Friedrich Pustet KG, Regensburg. Printed on acid-free, non-ageing paper. Printed in Germany.

General Introduction Henk Snijders* Stefan Vogenauer** Transnational law, in particular the law of the European Union and the Council of Europe, does not only require to be applied as a separate set of rules. It also requires attention as a factor of interpretation of national law and, as such, an instrument for ensuring that national law is consistent with transnational law. To the extent that transnational interpretation of national law is not sufficient for getting the required consistency, the national law has to be adapted. That adaptation can be realised both by the legislator and by the judge, though the power of the latter is more limited. The judge will be able to adapt the national law by application of the rule of thumb that a lex specialis derogat legi generali, which allows him to amend and even to disregard national law as far as it is not in conformity with transnational law. However, this possibility does not exist everywhere as far as the national law in question is not consistent with a European Directive or cannot be made consistent with it by way of interpretation. The position of the legislator is different. He is able and even obliged to implement European Directives. He only has to ask himself whether the national law does not already meet the aims of a particular Directive, which would make it unnecessary to provide for implementing legislation. The last paragraph shows that the influence of transnational law on national law depends on the kind of transnational law involved and that the influence also differs according to the addressee (the legislator or the judge). This book deals with a variety of types of transnational law, including soft law, and it explores the influence and impact of transnational law on national law through national legislation and case law. The book starts with a general contribution of Evert Alkema who mainly deals with two questions: how does the constitution provide for the process of implementation and how does implementation affect the constitution itself? The influence of European conventions on the interpretation of national law is at stake in the contributions of Eric Lawson, Déirdre Dwyer and Maya Hertig Randall. Eric Lawson argues in his contribution that it may be undesirable for domestic courts to afford “too much” protection to individual rights and freedoms – not because the State’s interests would be prejudiced, but rather *

**

Professor of Civil Law and Civil Procedural Law at Leiden University. Professor of Comparative Law, Faculty of Law, and Fellow of Brasenose College, Oxford University.

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because the position of third parties may be negatively affected by an overly generous interpretation of the ECHR. Déirdre Dwyer analyses the judicial interpretation of the English Civil Procedure Rules in the context of article 6 of the European Convention on Human Rights. Maya Hertig Randall examines the impact of the ECHR and the influence of the bilateral Agreement on the Free Movement of Persons (‘AFMP’) concluded by Switzerland and the European Community and its member states on Swiss case law. The influence of European Union Law on the interpretation of national law is at stake in the contributions of Wim Voermans, Jaap Hijma, Steef Bartman, Maurice Polak and Henk Snijders. Wim Voermans discusses the phenomena of ‘gold-plating’ and ‘double banking’ in connection with the problem of the over-implementation of European Directives by national legislators. Jaap Hijma discusses the influence of European Directives on the judicial interpretation of domestic law on the sale of consumer goods. Steef Bartman deals with the influence of some European Directives on national company law which provide for – what he calls – optional harmonisation. Maurice Polak discusses the influence of transnational case law on the applicability and judicial interpretation of national rules, in particular on the interpretation of national rules on jurisdiction in civil and commercial matters. Henk Snijders also deals with this influence of EU case law, in particular on rules in domestic legislation and national case law for ex officio raising of points of Community law by national courts. Soft transnational law is dealt with in the contributions of Stefan Vogenauer and John Cartwright. Stefan Vogenauer analyses the different ways in which the UNIDROIT Principles of International Commercial Contracts may become relevant in national courts. He then explores the techniques that the courts must apply in interpreting this important soft law instrument. John Cartwright looks at a particular issue which arises from the Draft Common Frame of Reference; he considers the extent to which English law could interpret or develop its own law of contract consistently with the model of contract which is set up by the DCFR. Another transnational source which may be considered as a kind of soft law is at stake in the contribution of Erik-Jan Zippro. He deals with the influence of the White Paper on Damages Actions for Breach of the EC Antitrust Rules on the availability of court actions for victims of that kind of breaches. This survey of types of transnational law and their different influences on national laws does not only demonstrate the enormous impact of transnational law on domestic law practice in the European Union and Council of Europe and beyond. It also shows that the use that domestic legislators and courts make of transnational law in the application and interpretation of national law differs according to the type of transnational law involved. This book contains the results of the third academic staff exchange between the Law Faculties of the Universities of Oxford and Leiden in the new millennium (Leiden, 25-27 September 2008). This time, the staff exchange in-

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cluded the participation of the University of Genève. Quite a few colloquium papers were further elaborated and updated before publication. We are most grateful to ms Margie Breugem (student-assistant Civil Law Division of Leiden) and to the E. M. Meijers Institute of Leiden University for their organisational support to the staff exchange. We received invaluable editorial support from, again, Margie Breugem and Tomas Furlong (formerly Merton College, Oxford). Furthermore, we are deeply indebted to the Institute of Anglo-American Law, the Europaeum and the Leidse Universiteitsfonds for their generous financial support to both the staff exchange and the publication of this collection of articles, which may help all of us to improve the way of dealing with transnational law in our work on domestic law in theory and practice. Leiden/Oxford, May 2009

Henk Snijders and Stefan Vogenauer (editors)

Table of Contents General Introduction Henk Snijders and Stefan Vogenauer Abbreviations Channelling International Law into the Domestic Legal Order – Some Practices and Constitutional Problems Evert Alkema

V

XI

1

Beyond the Call of Duty? Domestic Courts and the Standards of the European Court of Human Rights Rick Lawson

21

The Interpretation of the English Civil Procedure Rules in the Context of Article 6 of the European Convention on Human Rights Déirdre Dwyer

39

The Europeanisation of Fundamental Rights Protection in Switzerland: Two Steps Forward, One Step Back Maya Hertig Randall

53

Gold-plating and Double Banking: an Overrated Problem? Wim Voermans Sale of Consumer Goods: the Adaptation of (Dutch) National Law to Transnational Demands Jaap Hijma EU Law-making and its Impact on National Company Law Steef M. Bartman Inspiration From Above: Making and Interpreting Dutch Law on Jurisdiction in Civil and Commercial Matters in Light of European Law Maurice Polak

79

89

101

113

X

Table of Contents

Interpretation of National Rules for ex officio Raising of Points of Community Law by National Courts Henk Snijders

133

Interpretation of the UNIDROIT Principles of International Commercial Contracts by National Courts Stefan Vogenauer

157

Interpretation of English Law in Light of the Common Frame of Reference John Cartwright

197

The White Paper on Damages Actions for Breach of the EC Antitrust Rules Erik-Jan Zippro

213

Abbreviations ACQP AFMP

Acquis Principles Agreement on the Free Movement of Persons

BConv BReg I BReg II-bis BRT

Brussels Convention Brussels I Regulation Brussels II-bis Regulation Better Regulation Task Force

CISG CPR

United Nations Convention on Contracts for the International Sale of Goods Civil Procedure Rules 1998 (England and Wales)

DCC DCFR DCCPr DCI

Dutch Civil Code Draft Common Frame of Reference Dutch Code of Civil Procedure Directive compliant interpretation

ECHR ECJ ECN ECtHR

European Convention on Human Rights European Court of Justice European Competition Network European Court of Human Rights

FIDIC FRG

International Federation of Consulting Engineers Federal Republic of Germany

HRA

United Kingdom Human Rights Act 1998

ICC ICCPR ICESCR

International Chamber of Commerce International Covenant on Civil and Political Rights International Covenant on Economic, Social and Cultural Rights

MOT-test

Car safety test of the Ministry of Transport

NATO NCA

North Atlantic Treaty Organisation National Competition Authority

Abbreviations

XII

OHADA

Organisation for the Harmonization of Business Law in Africa

PECL PICC

Principles of European Contract Law UNIDROIT Principles of International Commercial Contracts

RSC

Rules of the Supreme Court (United Kingdom)

SE SPE

Societas Europaea Societas Privata Europaea

ULF ULIS UNECE

Uniform Law on the Formation of Contracts Uniform Law on the International Sale of Goods United Nations Economic Commission for Europe

Channelling International Law into the Domestic Legal Order – Some Practices and Constitutional Problems Evert Alkema* 1. Introduction This contribution considers the influx of international law into the Netherlands domestic legal order. The central issue will be the manner in which international law is implemented. As an old constitutional lawyer, my focus on the constitution will be two-fold. First, how does the constitution regulate the process of implementation? Second, how does implementation affect the constitution itself? As a caveat, I note that this study primarily concerns Dutch practice and experience. Public law will be the focus here; however other branches of law (e. g. private and penal law) may use special implementing techniques of their own. Further, I will rarely go into European Community law. Not just for lack of adequate knowledge, but also to resist a temptation. The Communities and their development vis-à-vis the legal orders of their member States could be in many respect exemplary for our topic. However, they might also work like a strong magnet, attracting the debate towards and shaping the possible solutions in their own image. Other international law may be less sophisticated in its relationships to the State than Community law, but this is precisely what justifies studying it in its own right.

2. International law – its legally binding force Firstly, a few observations about international law: over the last sixty years its expansion has been enormous. The ensuing impact of international law on daily life – for citizens, lawyers and politicians – is conspicuous. Here, however, I would point to some major changes in international law that seem especially relevant for their implementation. International law has always been known for its heterogeneity. It stems from different sources: treaties, custom, general principles, judicial decisions *

Holder of the Van Asbeck chair and professor emeritus of constitutional and administrative law, Faculty of Law, Leiden University.

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and teachings as well as resolutions of international organisations. However over time, matters are changing drastically. To take customary law as an example: much customary law has been transformed through codification into treaties, particularly in conventions. At the same time a new type of international (customary?) law is emerging among the membership of some international organisations, such as the Council of Europe1 and OECD,2 based on the loyalty which the States owe to the organisation.3 So much so, that these days the question can be raised seriously whether Russia – as a member of the Council of Europe – is still at liberty not to ratify the 14th protocol to the ECHR, given that all the other member States have done so.4 The traditional answer, of course, is that Russia does have that negative power. However, it seems doubtful that most of the other member States of the Council of Europe could have indulged in one of their members being so ‘uncooperative’. Apparently, international legal norms do not have the same normative value for – say – Russia or the USA as for the Netherlands or Norway. No doubt, uncertainty about the binding force of international law in its various forms is a major problem. Binding force, if any, is principally subject to and dependent on rules of both international and domestic law. On the international plane, the 1969 Vienna Convention on the Law of Treaties sets the standard. The legal nature of resolutions of international organisations is not so clear.5 Statutory rules of those organisations rarely stipulate their binding force6 or exceptionally, their superiority.7 Mostly, however, they are silent as to the question of binding effect. Neither the resolutions of many of the intergovernmental international organisations, nor the ‘views’ of the UN bodies supervising compliance with 1

2

3 4

5

6

7

See A. Drzemczewski, ‘Monitoring by the Committee of Ministers of the Council of Europe : A Useful ‘Human Rights’ Mechanism?’ in Ziemele (ed.), Baltic Yearbook of International Law (Vol. 2, 2002), 83-103. See generally S. Douma and F. Engelen (eds.), The Legal Status of the OECD Commentaries, IBFD, Conflict of Norms in International Tax Law Series, (Vol. 1, Amsterdam 2008). See also EC Treaty (Treaty of Rome, as amended), art. 10. Cf Council of Europe Liaison Committee with the European Court of Human Rights, 19 November 2008, requesting from the Steering Committee for Human Rights a preliminary opinion on the advisability and modalities of inviting the Court to put into practice certain procedures which are already envisaged to increase the Court’s case-processing capacity. See generally H. G. Schermers and N. M. Blokker, International Institutional Law (4th rev ed, Nijhoff: Boston 2003), §§ 1217-1230. E. g. art. 33 juncto art. 52 para 1 of the Constitution of the International Civil Aviation Organisation. So art. 103 of the Charter of the UN.

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human rights conventions, formally provide for their binding force. Binding force, if any, may be explained in different ways. It can be construed as a custom or established State practice, but also as a matter of foreign policy or of loyal membership to an international organisation. These factors are not purely international; they also stem from considerations of internal policy and can be triggered by public opinion (‘mobilisation of shame’). Those motives are so diverse that one could speak of a sort of ‘circumstantial’ binding force. In creating international law, the State’s role continues to be predominant. As noted before, nowadays much of that creative activity takes the shape of cooperation within international organisations; in that respect, supranational organisations are notable for having gained importance. Moreover, the States are not only involved in international organisations through their diplomats and other high-ranking officials; in Europe, national parliamentarians as delegates to the Parliamentary Assembly of the Council of Europe, and directly elected members of the European Parliament also participate in norm-setting. Within the national legal order this leads to a staggering of tasks with respect to international law over persons and institutions. We will return to that later.

3. Internal effects of international law 3.1 General remarks Traditionally, the effect of international law within the domestic legal order has been related to the well-known dichotomy: monism versus dualism. Monism in its pure and simple denotation presupposes that international law is not only superior to domestic law but also that the international legal order and the domestic legal orders constitute one entirety. Thus, in theory, international law would permeate without further ado into the national legal order. By contrast, dualism holds that the two legal orders are separate: the internal effects fully depend on the conditions set by national constitutional law. Over time the distinction between monism and dualism seems to have lost its original and primarily theoretical sharpness, particularly where States cooperate very closely, as is the case in some regional organisations. This change is notable in the European Union, where EC Regulations bestow rights and duties directly on European citizens. Usually, international law itself is silent, if not indifferent, about the ways and means by which national authorities ought to implement international legal obligations into the domestic legal order; what matters, according to international law, is the result. As a consequence, implementation is predominantly subject to domestic law, especially constitutional law. Before elaborating this view, a few words about the exceptions. Treaties, resolutions of international organisations or decisions of international tribunals, rarely specify how those documents or certain elements thereof have to

Evert Alkema

4

be implemented: through legislation or – by contrast – through direct application by the domestic courts. So, more recently, the European Court of Human Rights (ECtHR) in some of its so-called ‘pilot’ judgments has given guidelines for their implementation;8 since the alternative was likely to be a massive number of similar applications, it seems only natural that the ECtHR sought to prevent such claims by issuing guidelines to the national authorities about the measures to be taken. This reaching out of international authorities – exceptional as it still may be – seems a promising development.

3.2 Implementation of international law by the Netherlands 3.2.1 Generalities

The Netherlands, although being considered as a monistic State, never fully lived up to that epithet. That international law is binding on the executive and the legislature is considered a matter of domestic customary constitutional law.9 As far as the judiciary is concerned, the Constitution restricts monism, in principle, to treaties and resolutions of international organisations. Other sources, such as custom and general principles of law, are not considered by the Constitution; their effect is a matter of case-law. Customary international law is applied by the courts, but not for judicial review of Acts of Parliament, following explicit consideration by the Supreme Court,10 reflecting a doctrine that was reaffirmed on the occasion of the major revision of the Constitution of 1983.11 With regard to the general principles of law, this exclusion is less explicit, perhaps because there is no clear boundary between general principles of domestic law and of international law. Moreover, some general principles of international law have been ‘codified’ in international conventions, most notably the principle of equality and the ban on discrimination. As a rule, testing of legislation against general principles is not permitted.12 In this respect there is a remarkable difference with the Federal Republic of Germany (FRG). Though usually labelled as dualistic, the FRG recognises in art. 25 of its Grundgesetz those general principles as part of federal law.

18

19

10 11 12

E. g. ECtHR 22 June 2004, Broniowski vs Poland (Appl. No. 31443/96 § 192) and – in the same case – the friendly settlement of 28 September 2005 § 34. An early exception is ECtHR 26 March 1985, X and Y vs The Netherlands (Series A no 91 § 27). J. W. A. Fleuren, Een ieder verbindende bepalingen van verdragen [Provisions of treaties that are binding on all persons] (Boom: The Hague 2004), 18-19. HR [Supreme Court] 6 March 1959 (Nyugat), NJ 1962, 2. See Fleuren (note 9), 26-30. HR 14 April 1989 (Staat vs Landelijke Studenten Vak Bond), NJ 1989, 469.

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Another source of international law, namely resolutions of international organisations, has been recognised in the Constitution. In 1953 the present art. 92 prepared the ground. Furthermore, resolutions of international organisations were introduced and placed on a par with treaties by articles 93 and 94. By contrast, the Constitution has no specific provisions about the European Union or European Community law, so far.

3.2.2 Specific constitutional provisions

For our subject articles 90 through 94 of the Constitution are the most relevant.13 The importance attributed to the international rule of law is reflected in art. 90: ‘The Government shall promote the development of the international rule of law’. The involvement of Parliament with regard to treaty law is laid down in art. 91: ‘1. The Kingdom shall not be bound by treaties, nor shall such treaties be denounced without the prior approval of the States General. The cases in which approval is not required shall be specified by Act of Parliament. 2. The manner in which approval shall be granted shall be laid down by Act of Parliament, which may provide for the possibility of tacit approval. 3. Any provisions of a treaty that conflict with the Constitution or which lead to conflicts with it may be approved by the Houses of the States General only if at least two-thirds of the votes cast are in favour’. This is an essential provision for the legitimacy of international law within the domestic legal order and the ensuing implementing measures. The democratic element consisting of parliamentary control, however, is being watered down. So, the Act of Parliament mentioned in paragraph 1 provides for several exceptions for international obligations engaged in by treaty. 14 More importantly, with respect to some treaties, notably the statutes of international 13

14

E. A. Alkema, in JMJ Chorus et al. (eds.), Introduction to Dutch Law (4th ed, Kluwer Law International: Alphen a d Rijn 2006), 326 and the literature quoted there in note 32. Kingdom Act provided for in art. 91 of the Constitution on the Approval and Publication of Treaties and the Publication of Decisions of International Organisations of 7 July 1994 (Stb. 542) (Rijkswet goedkeuring en bekendmaking verdragen).

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organisations, parliamentary approval can often be weakened in the course of time. When approving treaties creating international organisations and implying a transfer of power in the sense of art. 92 of the Constitution (see below), neither Parliament nor Government are able to exactly foresee how these organisations and the scope of their activities might develop. An example is provided by the North Atlantic Treaty Organisation (NATO).The bilateral agreement about the deployment of cruise missiles with nuclear charges was formally considered an executive agreement in the sense of former art. 62 para. b of the Constitution and therefore, not subject to parliamentary approval. Nevertheless, because of its political load, the agreement was submitted to Parliament for approval.15 Similarly, it is hard to predict at the moment of ratification the scope of human rights treaties and other treaties which subsequently are subject to interpretation by international (quasi-) judicial bodies. A case in point is the European Convention on Human Rights of 1950 (ECHR) and its development through the case-law of the European Court of Human Rights (discussed below in Part 4). At the moment of approval it was, of course, impossible to imagine such developments and to predict their long-term effects on the domestic legal order. Legitimacy is even weaker where resolutions of international organisations are concerned. Only exceptionally is Parliament’s prior approval required.16 Nevertheless, those resolutions may be legally binding. The lack of parliamentary cooperation cannot be fully compensated for by political control of the administration by Parliament. Whereas at the international level (except for the European Parliament) most parliamentary bodies such as the Parliamentary Assembly of the Council of Europe cannot compensate for that loss of domestic parliamentary control. Even if the administration provides Parliament with adequate information, parliamentary influence on international decision-making remains modest. Parliament may instruct the national delegation, but that is of little avail where international resolutions are adopted not unanimously but by majority. Then the national delegate may be outvoted and cannot be held responsible by Parliament. Legitimacy of international resolutions is further impaired by poor publicity. Hardly any such resolution has been officially translated and published, in defiance of the Constitution (art. 93) and the above-mentioned Act provided for in art. 91 para. 1 of the Constitution. The public simply is not adequately informed, and neither are the courts. Only persons and groups which are oc15

16

See E. A. Alkema, ‘Foreign Relations in The Netherlands Constitution’, (1984) XXXI-NILR, 319. The Act of 24 December 1998 on approval of the treaties of the European Union (Amsterdam Treaty) and European Communities, Stb. [Official Gazette] 1998, 737, art. 3 provides for approval with respect to decisions taken by virtue of Title VI of the amended treaty about police and judicial cooperation in criminal matters.

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cupationally or professionally concerned with the subject matter of such international resolutions may receive an official notification.17 Moreover, the procedure in art. 91 para. 3 has hardly ever been applied. Especially remarkable is that, so far, the procedure has not been followed with respect to adopting (amending) treaties concerning the European Communities and the European Union, in spite of their considerable potential effects on the Netherlands constitution.18 Article 92 provides for the transfer of essential State powers to international organisations: ‘Legislative, executive and judicial powers may be conferred on international institutions by or pursuant to a treaty, subject, where necessary, to the provisions of Article 91 paragraph 3’. This provision also presupposes that at the moment of parliamentary approval the constitutional consequences of any transfer of power can be foreseen. Articles 93 and 94 of the Constitution probably contain the most significant provisions regarding implementation. They read: ‘Art 93 Provisions of treaties and of resolutions by international institutions, which may be binding on all persons by virtue of their contents shall become binding after they have been published’. ‘Art 94 Statutory regulations in force within the Kingdom shall not be applicable if such application is in conflict with provisions of treaties that are binding on all persons or of resolutions by international institutions’. These articles envisage the internal effect of treaties and resolutions of international organisations only for provisions that are ‘binding on all persons’. At the same time they lend them a very high rank in the hierarchy of (domestic) legal norms: they have priority over any statutory law, including the Constitution itself. In doctrine it is further held that the condition ‘binding on all persons etc.’ refers only to judicial review of Acts of Parliament, does not have to be fulfilled for the review of delegated legislation, and is not addressed to the administration. So, in principle, the delegated law-makers and the administration are bound by other international law as well.19

17 18

19

Art. 20 of the 1994 Act. However, Van der Staaij MP has introduced an amendment to the Constitution to the effect that such approval needs a two-thirds majority, Bill Kamerstukken (Parliamentary Documents) 30874 (R 1818). Royal Decree of 19 February 1993 (Eems-Dollard Treaty ) AB [Administratiefrechtelijke Beslissingen Nederlandse Jurisprudentie] 1993, 385.

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There are other statutory provisions that give precedence to international law. The Penal Code in art. 8 stipulates that the preceding articles 2 through 7 are subject to the ‘exceptions recognised in international law’. By virtue of art. 13a of the 1829 Wet houdende algemene bepalingen der wetgeving voor het Koninkrijk [General Provisions [Kingdom Legislation] Act] (as amended), the jurisdiction of the courts, and the execution of judgments and of authentic deeds, are equally subject to ‘the exceptions recognised in international law’.20 It is noteworthy that this formula speaks generally of international law and does not differentiate between its sources. Finally, in order to prevent double taxation, in virtue of the 1959 Algemene Wet inzake Rijksbelastingen [State Taxes Act] (articles 37-39), decisions of international organisations and foreign domestic law can be made applicable following a special Royal or Ministerial Decree. The articles of the Constitution just mentioned refer to provisions ‘that are binding on all persons’. That concept is to some extent comparable to the American legal notion of ‘self-executing’ which can be both of a domestic legal and international legal nature.21 Usually, this doctrine is related to international treaties, whereas in Netherlands law it also relates to resolutions of international organisations. The concept of self-executingness in the sense of the Constitution is crucial for Netherlands legal practice. It is also notorious for its indefiniteness, as it leaves the courts a great deal of latitude. A Supreme Court judgment of 1986 about the right to strike is a case in point.22 For a long period the legislature had failed to pass any legislation on the matter, although the judiciary and the legal practice were badly in need of guidelines for handling strike disputes. In the relevant case, the Supreme Court eventually took the lead in the matter. Via a bold interpretation it derived a right to strike and some additional norms regulating strikes from the 1961 European Social Charter, particularly Art. 6 para. 4. Before doing so it had to establish that the provision is self-executing. The Supreme Court adopted an unusual negative test. It consulted both the Charter’s text and the States’ intention through its travaux préparatoires and found that self-executingness was not excluded. It inferred that nothing prevented it from applying Art. 6 para. 4 directly. The case is a clear example of the courts assuming power to implement international law where the legislature fails to act. Any interpretation or application of articles 93 and 94 may have significance for the distribution of power within the State, but in this judgment the 20

21

22

See also art. 3a Gerechtsdeurwaarderwet [Bailiff’s Act] of 26 January 2001; President of the Judicial Division of the Council of State of 24 November 1986, Kort Geding 1987, 38. See T. Buergenthal, ‘Self-Executing and Non-Self-Executing Treaties in National and International Law’, (1992-IV), 235 RCADI, 313-400. HR 30 May 1986 (NS vs FNV), NJ 1986, 688.

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issue was particularly prominent. Therefore, it is remarkable that it lasted until the 1980s before the judiciary availed itself of the power which dates from 1953. Originally, the courts apparently shrank back from using this reviewing power, which may put them in direct opposition to the legislature and thus drag them into political questions. Also in 1986 the Supreme Court used this power in a number of cases about the adjudication of parental authority. Here it concerned divorced parents and parents living in cohabitation without formal marriage.23 It found that those parents are entitled to a similar common parental authority as legally wed parents. In doing so the Supreme Court based itself on the ECtHR judgment Marckx vs Belgium.24 Although that judgment is, strictly speaking, only binding inter partes that reference is in line with the Netherlands courts’ case-law. All ‘Strasbourg’ judgments are considered as authoritative interpretations of self-executing treaty law, ‘incorporated’ into the text of the treaty and, therefore, as such self-executing as well. The Supreme Court’s extensive interpretation of Marckx was surprising however. Whereas Marckx had dealt with the difference in legal position between children born within and outside wedlock, the Supreme Court extended that judgment’s scope to parents who are no longer married, and to their children. It delineated a set of rules as to the circumstances in which such common parental authority could substitute guardianship and supervisory or co-guardianship. In 1989 the Supreme Court returned from its adventurous approach to extrapolating the Strasbourg case-law. In a judgment – also about the right to family life and the ban on discrimination – it openly conceded that it had gone further than the ECtHR’s case-law and adapted its own course accordingly.25 Apparently, this was an attempt to find the proper balance not only in relation to the legislator but also vis-à-vis the ECtHR. The stark constitutional overtone in applying international law under articles 93 and 94 may evoke evasive reactions. In some instances the courts refused to apply self-executing international law, notably the bar on discrimination (art. 26 of the International Covenant on Civil and Political Rights (ICCPR)).26 The standard reasoning in those cases is that applying the bar on discrimination would require the court to choose between several options, a choice which in the court’s opinion is a matter reserved for the legislature (literally: niet behorend tot de rechtsvormende taak van de rechter (not pertaining to the judiciary’s law-making power)). In this manner, an escape is created in order to avoid judging a political matter or, to put it differently, the judiciary is marking the borders of its negative competence with regard to the legislature. 23 24 25 26

HR 21 March 1986, NJ 1986, 585-588. ECtHR 13 June 1979 (Series A no 31). HR 10 November 1989, NJ 1990, 628. E. g. HR 12 May 1999, BNB [Beslissingen in belastingzaken] 1999/271C.

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There is some resemblance here with the US Supreme Court’s case-law on ‘the political question’ which also serves as a ground for judicial abstention.27 Articles 93 and 94 of the Constitution also determine the effect of resolutions of international organisations. They suppose that those resolutions are binding according to international law. This is confirmed by a Supreme Court judgment of 1984 concerning the applicability of the Universal Declaration of Human Rights.28 It ruled that the Declaration could not be qualified as a resolution in the sense of the Constitution since it was founded on the UN General Assembly’s power to make – non-binding – recommendations. Therefore, it could not be applied. On other occasions, however, the binding force of resolutions has not been denied. Illustrative are the attitudes with respect to the ‘views’ of the Human Rights Committee in the cases of Broeks vs The Netherlands29 and Zwaan-de Vries vs The Netherlands.30 The Committee found that art. 26 ICCPR, the principle of equality and non-discrimination, was applicable to the Netherlands social security system, as the system was discriminatory with respect to sex. The ‘views’ resulted in several court decisions and, finally, in a general overhaul of the social security for discrimination based on sex.31 Those events were preceded, though, by a panicked reaction by the administration. It was even suggested that the Kindgom denounce the ICCPR in order to ratify it again with a reservation concerning art. 26. Strikingly from our point of view is the fact that at the time neither the administration, the legislature nor the courts questioned the legally binding force of the Committee’s views. Nor did the courts – in spite of the political reactions – make use of the said escape to qualify the matter as political and, consequently, within the exclusive realm of the legislature, nor did they refer to these views explicitly as an authoritative interpretation of the ICCPR. It is uncertain which motives prevailed for compliance with the implementation of the views. The most probable explanation for accepting the views as legally binding obligations may lie elsewhere. At the same time the European Community issued specific Directives providing for binding rules forbidding discrimination based on sex, underscoring the ‘views’.

27 28 29 30 31

US SC Baker vs Carr, 369 U. S. 186, 217 (1962). HR 7 November 1984, NJ 1985, 247.

Committee of Human Rights 9 April 1987 Communication 172/1984. Committee of Human Rights 9 April 1987 Communication 182/1984. See, generally, A. W. Heringa, ‘Judicial Enforcement of art. 26 of the International Covenant on Civil and Political Rights in The Netherlands’, (1993) XXIV NYIL, 139-182.

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4. Implementing the case-law of the ECtHR 4.1 Effects of the individual cases This paragraph surveys further experiences and difficulties encountered with the implementation of international law. The European Convention of Human Rights serves as an illustration. The first reason to concentrate on the ECHR and, particularly, the case-law of the ECtHR is that it constitutes a special source of international law. Most of the case-law has been developed in interstate cases rather than following individual applications. The ECHR mechanism is unique for its supervision on the implementation of the ECtHR’s judgments through the Council of Europe’s Committee of Ministers.32 That may also explain why the Netherlands judiciary – as noted before – considers the judgments of the Strasbourg Court as authoritative, directly applicable interpretations of the ECHR, irrespective of which State is the respondent party. Another reason for a focus on the ECtHR’s decisions is their relative quantity.33 In some fifty judgments the ECtHR found against the Netherlands. Here we present only those cases which called for implementation with special constitutional implications. A handful of cases concern the special legal status of the enlisted military. A central question is the extent to which that status affects the enjoyment of Convention rights. According to the ECtHR, members of groups with special status (including also civil servants and detainees), in principle, are entitled to Convention rights and any limitation of their rights has to be based on the wording of the provisos in the articles. The line taken by the Strasbourg Court differed from the Dutch practice at the time and, for that matter, from the practice of most other States parties to the ECHR. However, the first case Engel e. a. coincided with a changing attitude in the Dutch public opinion and legal doctrine. Therefore, the criticism eventually voiced in the ECtHR’s judgment did not meet with stark opposition. On the contrary, on the occasion of the 1983 revision of the Constitution the Court’s doctrine was embraced by the ‘constituante’.34 The implementation itself of this case-law was ridden by the slowness of the legislative process. Although directly after the pronouncement of Engel e. a. the Government claimed that Dutch law had already been brought into 32

33

34

See L. Zwaak, ‘The Supervisory Task of the Committee of Ministers’ in P. van Dijk et al. (eds.), Theory and Practice of the European Convention on Human Rights (4th ed, Intersentia: Antwerp and Oxford), 291-321. See L. F. Zwaak, ‘The Netherlands’, in R. Blackburn and J. Polakiewicz, Fundamental Rights in Europe (OUP: Oxford 2001), 595-624. I. e. the bodies (Government, Parliament and electorate) which in accordance with the procedure laid down in art. 137 sqq. of the Constitution are empowered to amend the Constitution.

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conformity, the Minister of Defence had to give provisional instructions to the military commanders. Contrary to the ordinary hierarchy of legal norms, these Ministerial Orders curtailed the commanders’ powers based on an Act of Parliament to interfere with the freedom of speech of military men for the sake of discipline. Moreover, the general overhaul of the Military Criminal Code and the Military Disciplinary Act caused by this case-law – abrogating inter alia the Supreme Military Court – took several years35 and, in some instances, came too late. As a consequence, some further breaches of the ECHR took place, which led to condemning Strasbourg judgments.36 The experience with the case-law on the procedural guarantees for the (continuation of the) detention of mentally ill persons was similar; triggered through Winterwerp vs The Netherlands, judicial review with respect to the legality of the detention was held to be inadequate.37 Led by the Supreme Court, the judiciary attempted to comply with Winterwerp. Again, compliance was neither prompt nor perfect. The enactment of new rules took over ten years.38 Therefore, in the meantime further violations occurred 39 and friendly settlements had to be made.40 The Feldbrugge-case41 evoked a special reaction from the judiciary. The ECtHR had found that claims about (continuation of) sickness benefits concerned ‘civil rights’ in the sense of art. 6 ECHR. Such claims used to be decided by the Presidents of the Appeals Tribunals in social matters (Raden van beroep); there was a summary procedure in which the Presidents were advised by a medical expert. Only under certain conditions did appeal lie with the full bench of the Appeals Tribunals. Since the ECtHR found a breach of art. 6 ECHR, the Presidents adopted a common practice in informing the parties that they could oppose their judgments with the full bench of the Appeals Tribunals. It lasted until 1991 before the Appeals Act was amended accordingly. 35

36

37 38

39

40

41

I. e. Rijkswet tot herziening van het militair tuchtrecht [Act for the Revision of the Military Disciplinary Act] 1990 Stb 367. De Jong, Baljet and Van den Brink vs The Netherlands 22 May 1984 Series A no 77; Van der Sluijs, Zuiderveld and Klappe vs te Netherlands 22 May 1984 Series A no 78 and Duinhof and Duijf vs te Netherlands 22 May 1984 Series A no 79. 24 October 1979 Series A no 33. Wet buitengewone opnemingen in psychiatrische ziekenhuizen [Internment in Psychiatric Hospitals Act] 1992 Stb 669. Van der Leer vs The Netherlands 21 February 1990 Series A no 170A; Wassink vs The Netherlands 27 September 1990 Series A no 185A; Koendjibihari vs The Netherlands 25 October 1990 Series A no 185B. ECommissionHR Report 7 March 1985 Schuurs vs The Netherlands (Appl. No. 10518//83 D & R 41, 186) and ECommissionHR Report 7 March 1985 Van Waegeningh vs The Netherlands (Appl. No. 10535/83). 29 May 1986 Series A no 99; see Zwaak in Blackburn and Polakiewicz (n 33), 611 and 621.

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There are several examples of the implementation of judgments that established violations of art. 6 ECHR with respect to the entitlement to a fair trial within a reasonable time. Abdoella42 and Bunkate43 concerned the length of proceedings in criminal cases, which also has been important for civil and administrative proceedings. Usually, adaptation of the case handling procedures is a matter for the courts themselves. Nevertheless, the Supreme Court, both in criminal and administrative matters, considered it necessary to lay down explicit standards for the measures to be taken – indemnification and other sanctions – in cases where the delays had been too long.44 The court assumed, it seems without hesitation, the role of law-maker. The Kostovskijudgment 45 exposed an idiosyncrasy of Dutch criminal procedure: the courts used to be inclined to rely heavily on evidence in writing. As a consequence relatively little evidence was being presented or, as the case may be, being challenged in open court. Adaptation to the Strasbourg case-law meant a drastic change, substantially prolonging the duration of the sessions in court. The precise implications of this and similar judgments were unclear and caused considerable uncertainty and confusion about the most appropriate ways and means to implement them.46 Haak, a former president of the Supreme Court, referred to the reactions of the judiciary and legislature to this case-law as a ‘disruption’ (ontwrichting) of the judiciary.47 Other instances of (provisional) implementation by the judiciary can be mentioned here, e. g. Van Mechelen48 about the anonymity of the witnesses and Lala49 and Pelladoah50 about trial in absentia. The implementation of X and Y vs The Netherlands,51 a case about about the sexual abuse of a handicapped female minor, was exemplary. Here the apparent flaw in the law had already been repaired by the time the ECtHR pronounced its (negative) judgment. Some judgments of the ECtHR were especially relevant for the independence of the Raad van State (Council of State), a Supreme Court in administra-

42 43 44

45 46 47

48 49 50 51

25 November 1992 Series A no 248-A. 26 May 1993 Series A no 248-B. HR 3 October 2000, NJ 2000, 721 and HR 22 April 2005, AB 2006, 11; the latter case seems inspired by ECtHR 10 November 2004, Riccardi Pizzati vs Italy (Appl. No. 62361/00). 20 November 1989 A 166. Cf Zwaak in Blackburn and Polakiewicz (n 33), 623. W. E. Haak, ‘De taak van de Hoge Raad in Europa en het Koninkrijk’ (The task of the Supreme Court in Europe and the Kingdom), NJB 2004, 885. Van Mechelen et al./The Netherlands 23 April 1997 Rep. 1997-III fasc. 36. 22 September 1994 Series A no 297-A. 22 September 1994 Series A no 297-B. 26 March 1984 Series A no 91.

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tive matters and also the principal adviser of the legislator. In Benthem52 the Strasbourg Court ruled that one particular type of proceedings in use within the Council of State, the ‘Appeal to the Crown’ (Kroonberoep), was not in conformity with art. 6 ECHR. In such proceedings private parties could submit a dispute with the administration to the Council of State’s Litigation Division. The Division exercised a quasi-judicial function: although it used to investigate the submitted case, the Division only prepared a draft decision, while the decision itself was taken by the administration, the Crown. Consequently, the Division could not be regarded an independent tribunal in the instant case. In order to implement Benthem the Crown Appeals (Interim Measures) Act was adopted.53 Pending the preparation of that Act the applicant in another case,54 Oerlemans, relying on Benthem, challenged the independence of the Council of State. The ECtHR, however, declared the application inadmissible for not exhausting local remedies. Since the Court had found that the Council of State could not be regarded as an adequate specific remedy (according to well-established domestic case-law) the civil courts were to be considered generally competent in cases where the specific administrative courts offer too few guarantees for a fair trial. Thus, Oerlemans could have submitted the dispute with the administration to a civil court instead. The curious inference can be made that the implementation through the Interim Act was – in principle – superfluous. In Procola vs Luxembourg the ECtHR found a violation of art. 6 as the Luxembourg Council of State showed a lack of independence having exercised a twofold function: first as an advisor to the legislator and next as an administrative court.55 The judgment raised comparable doubts about the independence of the Netherlands Council of State with its similar dual structure. The issue was decided in Kleyn e. a. vs The Netherlands. There the Court ruled – although critical of the accumulation of functions – that art. 6 had not been violated, as the earlier advice rendered, and the court decision, did not concern “‘the same case” or “the same decision”.56 This episode is of interest for two reasons. On the one hand, since Procola, attempts have been made to better separate the Council of State’s advisory and judicial functions, both through internal regulations and through (pending) legislation.57 On the other hand, the Council of State’s authority has been perceptibly affected through public criticism, and through a frequent 52

53 54 55

56 57

23 October 1985 Series A no 97; see also Zwaak in Blackburn and Polakiewicz (n 33), 607 and 621. Tijdelijke wet Kroongeschillen 1987 [Crown Appeals (Interim Measures) Act]. Oerlemans vs The Netherlands 27 November 1991 Series A no 219. 28 September 1995 A 326 § 200; cf ECtHR 8 February 2000, McGonnell vs UK (Appl. No. 28488/95). 6 May 2003 (Appl. No. 39343/98 etc.), § 200. Bill about the reorganisation of the Council of State Kamerstukken 30585.

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challenging of the independence of its councillors. Without exaggeration it can be said that the constitutional position of a centuries-old institution, and therewith the Constitution itself, has changed considerably as a consequence of these few judgments. A final example of implementation of the ECHR occurred in 2003 which cannot, however, be attributed to a specific judgment. It concerns an amendment to art. 457 of the Code of Criminal Procedure which provides in para. 1 sub 3 for a new ground for reopening criminal cases after the conviction has become final, where the ECtHR has found a violation in the domestic proceedings underlying that conviction, or where in another case not submitted to the ECtHR a conviction is based on the same underlying facts and evidence.58

4.2 A few lessons to be learned from the Netherlands’ implementation of the ECHR It can be concluded that the implementation of the ECHR, notably of the ECtHR’s case-law, shows some common and typical characteristics. Firstly, there is frequently uncertainty about meaning and scope of the international texts – the treaty itself and the judgments. Courts and law-makers often have to find solutions by trial and error. Secondly, implementation sometimes calls for the search of a new balance of power between the judiciary and the law-maker. According to the circumstances, the judiciary must sometimes – provisionally – find a solution itself whenever the legislature is unable to act swiftly and adequately. Here there are different modalities: non-application of domestic law; application of domestic law in conformity with the ECtHR’s interpretation; acting in lieu of the legislator through setting (provisional) rules for procedural questions and judicial organisation, notably with respect to the calculation of indemnification in case of undue delay. It may be added that – rarely – the courts abstained from application of the ECHR as they considered the matter to be outside the judicial competence.59 Usually, however, the powers of Parliament as a co-legislator have been curtailed. Parliament’s implementation task has been reduced in most instances to the formal enactment of new legislation, for often it has little or nothing to say about the normative contents of those rules since the ECtHR sets and prescribes the minimum standard. Thirdly, the constitutional position of the administration is also affected. Admittedly, the duty to stay aloof from the independent courts has been successfully impressed upon the administration, at least at the level of domestic law. However, in Strasbourg, at the international level, the picture is different. 58 59

Stb 2006, 479. HR 18 February 1986, NJ 1987, 62.

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Evert Alkema

The administration represents the State during the giving and taking of the international norm setting. It also plays the role of ‘conductor of the case’ in international litigation. There, in theory, it may present in court an opinion that deviates from the position taken by the domestic legislature or by the courts during the domestic legal proceedings. In doing so, the administration would encroach upon the legislative power of Parliament or the authority of final judicial decisions (res judicata). Frequently, the implementation of the ECHR touches upon the classical constitutional issues of separation of powers or affects the balance of power. Nevertheless, in domestic Dutch law almost no specific instruments for the implementation of the ECHR are available. The only exception is the just-mentioned newly introduced possibility to reopen criminal cases following a judgment of the ECtHR. For decades the Dutch have cherished the illusion that the direct applicability of the Convention would and could answer all constitutional problems. It only is the beginning of an answer. There is a stark contrast here with Great Britain. In spite of – or rather owing to – its dualist attitude with regard to international law Great Britain took more principled and drastic measures by introducing the Human Rights Act in 1998.60 The HRA incorporates the ECHR and also lays down the procedure to be followed by the courts when they are satisfied that a legal provision is incompatible with a Convention right. The Act further spells out the respective roles of the legislature and the administration. The procedural details are of little relevance here. What is important, however, is that the (re)distribution of powers takes place in a very precise manner. This ingenious specific arrangement bridges the gap between the ECHR and the British legal order and at the same time diminishes the uncertainty about the constitutional division of roles. The unruly impact of the ECHR on the Dutch domestic constitutional structure sketched before is not corrected or counterbalanced at the European level. In spite of the pre-eminence of the rule of law, professed in the ECHR’s preamble, neither the Court nor the Committee of Ministers of the Council of Europe pay regular attention to the domestic legal effects of their decisions. Occasionally – as noted above – the Court indicates the manner and the branch of government in which implementation has to take place e. g. in the so-called ‘clone’ or ‘lead’ judgments where it calls upon the State to adopt appropriate legislation. In some instances, with regard to other States parties, constitutional idiosyncrasies have been respected.61 There are examples of direct confrontation between the Convention and the national constitution in which the ECtHR

60

61

See R. Blackburn, ‘The United Kingdom’, in Blackburn and Polakiewicz (n 33), 960 and passim. E. g. Süszmann vs Germany 16 September 1996 Rep. 1996-IV, fasc 15 § 96.

Channelling International Law into the Domestic Legal Order

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found a violation of the latter.62 In the majority of cases, however, as demonstrated in the quoted case-law concerning the Dutch Council of State, the Court is silent about the manner in which its judgments have to be fitted into the domestic constitutional order or how to restore the disturbed internal balance of power. The Committee of Ministers is entrusted with supervising compliance with judgments. Yet, it is unclear to what extent the Ministers are taking into account constitutional effects in negotiating and accepting the mode of implementation proposed by the State concerned.

5. Concluding observations These experiences with implementing the ECHR and the Strasbourg case-law are far from exceptional. For the reasons set out, the variety and problems of implementing international law are great, and aggravated by uncertainty about its binding force. Accordingly, the way to implement such international law is not routine and not systematic. Few treaties or international organisations provide for special bodies charged with authoritative interpretation. Therefore, interpretation will often be a subject of negotiation between the individual State concerned and the organisation or other member States. Supervision of compliance, if any, takes place rarely and at random. Hardly ever will indications or guidance be given for how implementation in domestic law should take place. In sum, the problems with implementing international law are even more severe than those connected with the ECHR. International norms nowadays penetrate so deeply and intensely into daily life that concern for their quality becomes more acute and urgent. Resolutions of international organisations may have the support of the majority of the member States, but that does not necessarily warrant a solid social basis among the populations concerned. Particularly so, when the support has come from the smaller less-populated States only. Without this ‘democratic’ underpinning there is a defect in legitimacy. Legitimacy can also be defective in the contents of international law. The political bias in international decision-making within international organisations potentially affects the moral standard of the norms. International forums consisting of experts will only be able to inspire confidence if the experts’ independence is assured. And, even so, there lurks the risk of one-sidedness for those forums charged with one single issue such as racial discrimination,

62

See the case-law about the bans and dissolutions of Turkish political parties in A. W. Heringa and F. van Hoof, ‘Freedom of Association and Assembly’ in van Dijk (n 32), 828-831; see also Y. Özdek and E. Karacaoglu, ‘Turkey’ in Blackburn and Polakiewicz (n 33), 893-895.

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or with protecting the human rights of one particular group of persons such as women or children. Next to the legitimacy of international law, its compliance with the rule of law deserves special attention. International actores have to be aware of the possible internal effects of their decisions. Whereas the attitude to stay aloof from these legal effects is still predominant, sooner or later international organisations will have to ascertain that their decisions do not unduly destabilize domestic constitutional relations. Otherwise they may get involved willy-nilly in the internal conflicts between administration and judiciary or administration and Parliament. The foregoing does not alter the fact that the main responsibility for implementing international law still lies with the State. As outlined above, at least in The Netherlands, a shift of power is discernable among the three main state powers and, especially, a loss of function of Parliament. The ensuing uncertainty and even constitutional instability require a redistribution of powers with regard to international relations, and reorganisation of the State’s participation in international law-making. The instruction of, and the control over, officials representing the State at the international level, need to be more transparent and accountable. Parliamentary engagement must be ensured as long as the still few international parliamentary bodies cannot fully replace the national Parliament. Also, adaptation of the parliamentary procedures for approval of international treaties and of other instruments attuned to the different forms of international decisions is called for. There is also a growing need for appropriate structures and procedures which better meet the demands of the rule of law. This may, eventually, imply the reformulation and resetting of the national separation of powers. The present situation shows an uneasy relationship between international and domestic law, in particular in the Netherlands. It questions the moral superiority of international law, as far as contents are concerned, and in a hierarchical sense, as far as priority over domestic law is concerned. A similar question presented itself earlier within European Community law. Over the years constitutional courts, especially those of Italy and Germany, have intimated that Community law is not always superior to domestic constitutional principles and values.63 It was not considered sufficient that the Court of Justice of the EC takes into account those constitutional principles and values. These constitutional courts have reserved their positions; they may, eventually, review community law for its compatibility with domestic constitutional law, at any rate as far as the so-called ‘secondary’ or delegated community law is concerned. 63

Corte Costituzionale [Constitutional Court of Italy] 18 December 1973 and Bundesverfassungsgericht [Constitutional Court of Germany] 29 May 1974 (Solange I) (1974) CML Rev. 540, and 12 October 1993 (Solange II) (1988) CML Rev. 201; see Kapteyn & VerLoren van Themaat (4th rev ed Austin etc. 2008), 537 sqq.

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The question has got a special dimension with respect to the UN and EU lists of terrorist organisations. Here the Court of Justice vindicated precedence of Community law notably, for the fundamental principle of fair trial, in the instant case the rights of the defence.64 This seems to imply that the traditional hierarchy of norms, viz. the precedence of international law, is subject to exceptions. For the Netherlands this poses a special problem. As noted, its constitution provides categorically for priority of some sources of international law and fails to distinguish between treaty law and delegated norms. For international law itself this development may even pose a more principal question: when, and to what extent, ought international law (notably resolutions of international organisations) respect other international laws or domestic (constitutional) law and, if necessary, give way to it? 64

ECJ Joined Cases C-402/05P and C-415/05P Yassin Abdullah Uadi et al. v. Council

of the European Union.

Beyond the Call of Duty? Domestic Courts and the Standards of the European Court of Human Rights Rick Lawson* 1. The danger of being too generous In a recent case before the British courts, Al Skeini, the key question was whether British forces in Iraq were bound by the European Convention of Human Rights (ECHR). The case-law of the Strasbourg Court did not provide a clear answer. In Bankovic the Grand Chamber ruled that the Convention is in principle not applicable to military operations outside ‘ECHR territory’, but later cases suggest that the Court has developed second thoughts on this issue and various Chamber decisions point in the opposite direction.1 What does this mean for the national judge, who looks for guidance but finds none? Lord Brown of Eaton-under-Haywood knew the answer: ‘There seems to me, indeed, a greater danger in the national court construing the Convention too generously in favour of an applicant than in construing it too narrowly. In the former event the mistake will necessarily stand: the member state cannot itself go to Strasbourg to have it corrected; in the latter event, however, where Convention rights have been denied by too narrow a construction, the aggrieved individual can have the decision corrected in Strasbourg’.2

*

1

2

Prof.dr. R. A. Lawson, Europa Instituut, Faculty of Law, Leiden University. The present article is based in part on a contribution, in Dutch, to Geschakeld recht (Kluwer: Deventer 2009), a collection of essays written on the occasion of prof. Alkema’s 70th birthday. Compare ECtHR 12 December 2001, Bankovic a. o. v. 17 NATO member states (Appl. No. 52207/99, dec.) to ECtHR 3 June 2008, Andreou v. Turkey (Appl. No. 45653/99, dec.), 11. See also the recent order of the ICJ 15 October 2008, Georgia v. Russia, para. 109: ‘these provisions of CERD generally appear to apply, like other provisions of instruments of that nature, to the actions of a State party when it acts beyond its territory’. House of Lords 13 June 2007, Al-Skeini and others v Secretary of State for Defence [2007] UKHL 26.

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At first sight this is perhaps too cautious an approach to human rights – and for an outsider it is interesting to realise the extent to which British courts are prepared to rely on the wisdom of a court based on the continent. But the quote came to mind recently, when a number of Dutch courts gave a high level of protection to the freedom of expression. The Dutch courts referred extensively to the ECHR in order to justify their decisions, but arguably they went further in protecting free speech than the European Court would have done in these cases. Could it be “dangerous”, to use Lord Brown’s expression, for national courts to be so generous? Indeed it will be argued in this contribution that it may be undesirable to afford “too much” protection to individual rights and freedoms – not because the State’s interests would be prejudiced, but rather because the position of third parties may be negatively affected by an overly generous interpretation of the ECHR.

2. The European Convention: a minimum standard (?/!) Lord Brown’s statement in Al Skeini raises a broader question. How are domestic courts supposed to approach the rights guaranteed by the Convention? The starting point must be that the ECHR is now part of the domestic legal systems of all 47 Contracting Parties,3 that domestic courts are in a position to apply the Convention, and that in doing so they will take into account the case-law of the European Court. In practice this may not be entirely true,4 but for present purposes that is not so relevant. The question remains whether domestic courts can be ‘more generous’, as Lord Brown put it, than the Strasbourg Court. Are they free to offer a higher level of protection?

2.1 Of course: an international minimum standard! An affirmative answer seems obvious: the ECHR was never meant to harmonise human rights in Europe, but rather to define common minimum stand3

4

In Blečić the Grand Chamber considered that the ECHR ‘directly creates rights for private individuals within their jurisdiction’ (ECtHR 8 March 2006, Blečić v. Croatia (Appl. No. 59532/00), par. 90). The well-known case of Ireland v. UK, para. 239, was cited as authority, but that would seem less than accurate. See e. g. ECtHR 27 March 2008, Shtukaturov v. Russia (Appl. No. 44009/05), para. 38, in which the St Petersburg court explains why it will not give any followup to an interim measure indicated by the ECtHR (stipulating that the applicant should be allowed to have access to his lawyer): ‘The Russian Federation as a special subject of international relations enjoys immunity from foreign jurisdiction, it is not bound by coercive measures applied by foreign courts and cannot be subjected to such measures ... without its consent’.

Beyond the Call of Duty?

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ards. Of course States are free to go beyond this minimum. If the Strasbourg Court decides that the Convention does not prohibit the imposition of prior restraints on publication,5 then that finding does not affect the existing Dutch constitutional ban on prior restraints. Likewise the fact that the Strasbourg Court often leaves a margin of appreciation to national authorities, may be seen as an acknowledgment of the diversity that still prevails in Europe today. And there is nothing in the Convention to prevent the High Contracting Parties from offering a higher level of protection – be it unilaterally, or in the context of the EU.6 The ECHR allows for all this; it does not have the ambition to unify human rights in Europe. Along similar lines the Council of Europe itself does not seek to achieve uniformity: its Statute refers, in almost shy words, to the achievement of “a greater unity”. Admittedly, to allow for national variations sits ill with the universal vocation of human rights, and it may seem out of step with the process of European integration. Along these lines the late S. K. Martens – a former judge in the Strasbourg Court, and at the time president of the Dutch Supreme Court – reflected in 2000 on the future status of the ECHR. What does it mean if we regard the ECHR as “a constitutional instrument of European public order”?7 ‘This implies, I would hope, that the Court will increasingly regard Europe, as far as human rights are concerned, as a single legal area where legal equality and therefore legal unity should be the starting point for the protection of human rights. This would entail that the European Court of Human Rights, as the supreme court for this legal area, is called upon to secure legal unity. This would in turn mean that the position of the domestic judge becomes in substance identical to the position he has under the EC Treaty as interpreted by the ECJ: in principle he would be obliged to conform to the case-law of the Strasbourg Court’.8 But that stage has not been reached. When the introduction of same-sex marriage was contemplated in the Netherlands, no-one argued that this would be illegal because Article 12 ECHR only protects “the traditional marriage 5

6

7

8

ECtHR 26 November 1991, Observer and Guardian v. UK (Appl. No. 13585/88), para. 60. Thus Art. 52 para. 3 of the EU Charter of Fundamental Rights stipulates that for those rights that correspond to rights guaranteed by the ECHR, the meaning and scope will be the same; but ‘this provision shall not prevent Union law providing more extensive protection’. For a concrete example see ECJ 27 June 2006 (Parliament v. Council ), case C-540/03, para. 60. An expression introduced in ECtHR 23 March 1995, Loizidou v. Turkey (Appl. No. 15318/89), para. 76. S. K. Martens, ‘Het EHRM en de nationale rechter’, in NJCM-Bulletin (vol. 25, 2000), 757 (translation by the present author).

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between persons of opposite biological sex”.9 Coincidentally the example also points to a very different argument against the imposition of uniform standards in Europe: it might easily kill the ‘living instrument’ that the ECHR purports to be. Where could the Court find its inspiration to interpret the Convention in accordance with present day conditions if there was no breathing space for national experiments?10 It seems wiser to allow for the gradual emergence of European consensus. And when, eight years after Martens, the Luxembourg Advocate General Miguel Maduro describes his vision of a ‘European space for the protection of fundamental rights’, he does not use notions such as hierarchy or legal unity. Rather, Maduro envisages a continuous process of legal development to which both domestic and European courts contribute.11 In short: it is obvious that states may pioneer. They may offer ‘more’ or ‘better’ protection than the ECHR requires by way of common minimum. The present author being Dutch, this view will not come as a surprise: already in the 1980s Egbert Myjer noted that the Netherlands found themselves quite often in the front lines.12

2.2 But what does Strasbourg itself think? What does the Strasbourg Court itself actually have to say on this matter? An answer – combined with a reproach – was recently given in E. B. v. France. The case was about Ms. B’s wish to adopt a child. French law allowed for single-parent adoption, but in the case of Ms. B no permission was granted because – or so she alleged – she had a stable relationship with another woman. Ms. B complained to Strasbourg about discrimination on the basis of sexual orientation. In technical terms: a violation of Article 8 in conjunction with Article 14 ECHR. France responded that Article 8 ECHR does not protect a right to adoption in the first place. The Court did not accept this argument: ‘the State, which has gone beyond its obligations under Article 8 in creating a right [to apply for authorisation to adopt] – a possibility open to it 9 10

11

12

ECtHR 17 October 1986, Rees v. UK (Appl. No. 9532/81), para. 49.

Cf. the classic words of Tyrer: ‘the Convention is a living instrument which ... must be interpreted in the light of presentday conditions. In the case now before it the Court cannot but be influenced by the developments and commonly accepted standards in the penal policy of the member States of the Council of Europe in this field’ (ECtHR 25 April 1978, Tyrer v. UK (Appl. No. 5856/72), para. 31). Opinion of AG Poiares Maduro, 9 September 2008, in case C-465/07 (Elgafaji), para. 22. E. Myjer, ‘Dutch interpretation of the European Convention: A Double System?’, in Protecting Human Rights: The European Dimension – Studies in Honour of Gérard J. Wiarda (Carl Heymanns Verlag: Köln 1988), 421-430.

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under Article 53 of the Convention – cannot, in the application of that right, take discriminatory measures within the meaning of Article 14’.13 One may conclude that a State is free to be “generous”, that is, to do more than the Convention requires it to do – but once it decided to take that step, the State should not discriminate.14 Or, in the spirit of the E. B. case itself: it is fine to adopt a child, but it must be treated well. The same result flows from Protocol 12 to the Convention, for those States that have ratified it.15 And in the context of a fair trial we are familiar with the same construct: Article 6 ECHR does not require the existence of appellate courts, but if a State introduces such courts, they too must comply with the requirements of a fair trial.16 The special thing about E. B. is that the Court accepts, in so many words, that a State ‘may go beyond its obligations’ when giving substance to the rights protected by the Convention. Such an express statement does not seem to exist in previous case-law. The fact that this recognition was part of a Grand Chamber judgment, lends extra weight to it. At least, that is what we are supposed to believe, because exactly a week before E. B. the Court arrived at a seemingly opposite position in the case of Micallef.17 Let me stress at the outset: this is a Chamber judgment adopted with a narrow majority (4 votes to 3), 18 and the case is currently pending before the Grand Chamber for a rehearing on the basis of Article 43 ECHR. Having said that, we read in Micallef that ‘the Convention reinforces, in accordance with the principle of subsidiarity, the protection afforded at national level (...), but never limits it (Article 53 of the Convention)’.19 That sounds familiar: the ECHR should not undermine or diminish the protection of human rights as realised at the national level. But the next sentence is quite puzzling:

13

ECtHR 22 January 2008, E. B. v. France (Appl. No. 43546/02), para. 49.

14

In the classic case of Abdulaziz the Court adopted a similar position, without referring to Article 53: ECtHR 28 May 1985, Abdulaziz v. UK (Appl. No. 9214/80), para. 82. Art. 1 of Protocol 12 reads: ‘The enjoyment of any right set forth by law shall be secured without discrimination on any ground such as sex, ...’ . Hence the prohibition of discrimination is made contingent on the free choice of the State to adopt legislation in which rights are introduced. See ECtHR 17 January 1970, Delcourt v. Belgium (Appl. No. 2689/65), para. 25. ECtHR 15 January 2008, Micallef v. Malta (Appl. No. 17056/06), para. 44. The Micallef judgment was delivered by the Fourth Section. The majority consisted of Judges Bonello, Garlicki, Mijović and Šikuta; Judges Bratza, Traja and Hirvelä were dissenting. Micallef, para. 44.

15

16 17 18

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‘The Court does not countenance the view that human rights protection in any particular area should be weaker in Strasbourg than it is in domestic tribunals’. 20 Is that true? Would Strasbourg find it unbearable to do less than a Contracting Party? How should we reconcile this with the acknowledgment in E. B. that a State may go “beyond” its obligations? And how could one explain, for instance, the Court’s traditional interpretation of Article 12 ECHR now that a number of States recognise same-sex marriages? But perhaps the “countenance”-quote, despite its very broad formulation, should be seen in the light of the specific case at hand. In Micallef the question arose if Article 6 applies to injunction proceedings. The domestic courts had started from that presumption, but in Strasbourg the government argued that there were no civil rights and obligations at stake. On that point the Court disagreed. It avoided the “judicial schizophrenia”21 that Article 6 ECHR would be regarded as applicable at the national level, but inapplicable in Strasbourg. In doing so, the Chamber based itself on the reasoning adopted previously by the Grand Chamber in the case of Eskelinen: ‘If a domestic system bars access to a court, the Court will verify that the dispute is indeed such as to justify the application of the exception to the guarantees of Article 6. If it does not, then there is no issue and Article 6 § 1 will apply’.22 In Micallef the Court clarified this: ‘In other words Eskelinen recognised the principle that Article 6 protection should not be less in Strasbourg than under the domestic system’. The conclusion seems to be that, at least where Article 6 ECHR is concerned, the Convention does not have a minimum character. May we suggest it is of a latex nature? If domestic authorities go beyond the standards generally set in Strasbourg, then the Court will stretch its understanding of the ECHR – deflating its position in the next case, when it involves a less ambitious State. In other words: the Court applies an autonomous interpretation of the ECHR and defines minimum standards that apply to all States. But this autonomous nature does not prevent States from taking measures that expand the scope 20 21

22

Ibidem. The expression comes, of course, from Judge Bonello, who wrote one of his vintage concurring opinions in Micallef: ‘Article 6 protection flourishes in the domestic jurisdiction, but falls effortlessly dead on the doorstep of the Strasbourg Court’. ECtHR 19 April 2007, Vilho Eskelinen v. Finland (Appl. No. 63235/00), para. 61 (emphasis added).

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of rights (E. B.), or lead to a wider field of application (Eskelinen). And if the State does that, then the Court will adopt that national standard and see if the State lives up to its self-imposed obligations (Micallef). The autonomy of the Convention “operates as it were, one way only”.23 I am not sure if this interpretation is correct. But if it is, one may predict that this construction will not be limited to Article 6 ECHR. And indeed: this is exactly what happened in relation to Article 10 ECHR. Here too there has been the odd decision in which a higher national standard was ‘fixated’ in Strasbourg.24 And what about the right to life? In the case of Vo the Court ruled that Article 2 does not apply to the unborn child if it does not have a right to life under domestic law.25 The converse, one would expect, will also be true. All in all, the story is becoming rather complicated. The Strasbourg minimum is creeping up here and there, and whereas this may increase judicial protection in individual cases (if the complaint is addressed against a country that happens to treat the Convention generously), it does not bring uniformity any closer. And the fact remains that the broad Micallef formula really creates the impression that the minimum character of the Convention has simply been abolished. Whether that is really the case, we will soon know: Micallef is currently pending before the Grand Chamber. But one thing is sure. Whether the truth lies in E. B. or in Micallef, or in both, both judgments refer to Article 53 ECHR. Apparently it is there – and strangely nowhere else – that we have to search in order to discover more about the nature of the ECHR.

23

24

25

ECtHR 8 June 1976, Engel e. a. v. Netherlands (Appl. No. 5100/71), para. 81, quoted in a similar context J. G. C. Schokkenbroek, ‘Algemene verkenning naar de taken van de Straatsburgse en de nationale organen’, in 40 jaar ECRM en de Nederlandse rechtsorde (NJCM: Leiden 1990), 84. ECtHR 10 July 2006, Matky v. Czech Republic (Appl. No. 19101/03, dec.): Art. 10 ECHR does not protect a right of access to documents, but since Czech law does protect this right, a refusal to grant access will amount to an interference with Art. 10 ECHR. ECtHR 8 July 2004, Vo v. France (Appl. No. 53924/00), para. 82, confirmed in ECtHR 10 April 2007, Evans v. UK (Appl. No. 6339/05), para. 56.

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2.3 On article 53 ECHR Minimum or standard? Article 53 ECHR reads as follows: Article 53 – Safeguard for existing human rights Nothing in this Convention shall be construed as limiting or derogating from any of the human rights and fundamental freedoms which may be ensured under the laws of any High Contracting Party or under any other agreement to which it is a Party. That is a bit disappointing: even Article 53 does not say with so many words that the ECHR is just about minimum standards. It is clear that Article 53 does not allow for the argument that the domestic prohibition of prior restraints on publications must be abolished because Strasbourg allows for them. Our legislator could choose to abolish the relevant provision in the Constitution, and Article 53 ECHR would not be opposed to that, but that decision should then be motivated by independent arguments. In any event, it is clear that Article 53 starts from the presumption, albeit implicit, that there may be standards in national law, or in other treaties, that provide for a higher level of protection. Otherwise the provision would be useless. Apart from that, Article 53 ECHR is an obscure provision, as Evert Alkema observed in 1978.26 Twenty years later he referred to an “enigmatic” provision.27 Thus it is not always clear which rule is the most favourable one, and who should decide this. How to apply Article 53 in situations where rights collide? When private parties are in dispute, such as a former husband and spouse, either of them can invoke Article 8 ECHR and at the same time rely on any more protective rule – of an international or national origin – to their liking.28 One may also think of the case of Jersild, in which a journalist was convicted for producing a TV programme in which skinheads were interviewed, as a result of which racist statements were broadcasted.29 Does Article 53 entail in these circumstances that the freedom of expression should not be construed 26

27

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E. A. Alkema, Studies over Europese grondrechten, diss. Leiden (Kluwer: Deventer 1978), 15. E. A. Alkema, ‘The Enigmatic No-Pretext Clause: Article 60 ECHR’, in Klabbers & Lefeber (ed.), Essays on the Law of Treaties (Nijhoff: Den Haag 1998), 41-56. When Protocol 11 entered into force, Art. 60 was renumbered and became Art. 53 ECHR. The example comes from Alkema (n 27 above), 52. ECtHR 23 September 1994, Jersild v. Denmark (Appl. No. 15890/89). In para. 30 the Court observed that ‘Denmark’s obligations under Article 10 must be interpreted, to the extent possible, so as to be reconcilable with its obligations under the UN Convention’– but it did not explain why that was so. Nor did it refer to Article 60 (now 53) ECHR.

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as limiting or derogating from the obligations under CERD to counter racial discrimination? Or can the journalist derive from Article 53 a claim that the European Court must interpret Article 10 in line with the high level of protection that Danish courts tend to give to the freedom of expression in general? As Alkema observed: ‘if the case at hand is complicated, Article [53] serves no useful purpose at all’.30 That might explain why Article 53 plays a very marginal role in the Strasbourg case-law.31 More generally, the minimum nature of the Convention seemed to be as inevitable as uninteresting. But Lord Brown’s remark in Al Skeini changed all that, and a number of recent Dutch court decisions also brought into question the nature of Convention rights.

3. Freedom of expression à la hollandaise: a taste of recent practice 3.1 Adolf H. enters cyber-space On 2 June 2008 the District Court of Amsterdam decided a series of cases that revolved around the freedom of expression. Among the persons prosecuted was the author of an essay in a student magazine published in Amsterdam (‘Since the Nazi days it is not really cool to say negative things about Jews, but sometimes I can understand very well how things could develop the way they did in 1937’). All persons charged were acquitted by the Amsterdam Court, except for one case were a small conditional fine was imposed. For present purposes I should like to discuss one case, in which a certain Joseph Adolf H. (1943) was charged with insult and discriminatory remarks on the internet.32 He had put a number of texts on an internet forum called 30 31

32

Alkema (n 27 above), 55. The HUDOC database – which in this instance did not prove to be very reliable – suggests that Art. 53 was at stake in only four judgments. One concerned a Ukrainian shot in the dark, a second one a Belgian case that the Court brushed aside. The third case was Open Door in which the Irish government tried to invoke Art. 53 – in vain. One case remains (apart from the key judgments of E. B. and Micallef, which HUDOC ignores): the case of Okyay. If domestic law guarantees an enforceable right to live in a healthy and balanced environment (as the Turkish Constitution does), then the Court’s somewhat twisted concept of a ‘civil right’ under Article 6 § 1 ‘cannot be construed as limiting an enforceable right in domestic law within the meaning of Article 53 of the Convention’: see ECtHR 12 July 2005, Okyay v. Turkey (Appl. No. 36220/97), para. 68. The full text of the judgment – in Dutch – can be found on the website rechtspraak. nl, under number LJN BD2977. All quotes are my own translations. In accordance with Dutch practice, the last name of the accused was not revealed.

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‘polinco.nl’ (for ‘politically incorrect’). Lengthy quotes are better avoided. But in order to understand the case, we cannot avoid one example: ‘Princess Maxima, who is pregnant, paid a visit to former KZ Auschwitz. … Doesn’t she realise that these grounds there are contaminated; contaminated with the evil radiation of the unsound minds of the scum that was once imprisoned here? Doesn’t the princess realise that this spot may be harmful, if not lethal, for her unborn child? Doesn’t the princess realize that she needlessly endangers the dynasty by taking the risk that she will give birth to a child suffering from paranoid schizophrenia?’ This was only one of several statements, and the Amsterdam Court had no difficulty in qualifying these as ‘clearly homophobic, racist, islamophobic and anti-Semitic’. The Court continued that the texts were ‘clearly insulting’ and ‘unacceptable’. That settles the case, one would think. But then the Court turns to the requirements of Article 10 ECHR. What follows is an elaborate discussion of the principles as developed in the Strasbourg jurisprudence – although no specific cases are mentioned – and a conclusion: ‘Although the statements of the defendant did not reflect any compassion or respect, the right of the defendant to express these views must be guaranteed’. With that, Adolf H. was acquitted. Admittedly, the acquittal was also based on a more or less technical (but equally unconvincing) consideration: Adolf had posted his remarks on what the trial court called a ‘semi-public’ part of internet. That is, one needed to be registered with ‘polinco.nl’ before one could post his or her comments. Overlooking the fact that the statements were then freely accessible for any internet user, the Court found that Adolf never had the intention to confront the wider public with his statements. That line of reasoning in itself seems to be flawed.33 But what is worse, is the overall impression conveyed by the judgment: we may abhor your views but we are obliged by Article 10 ECHR to tolerate them. As will be argued below, this image of the Strasbourg caselaw simply does not correspond with reality. One gets the impression that the Amsterdam court applied its own – and certainly most generous – interpretation of Article 10 ECHR, disguised in European wrapping paper.

33

See ECtHR 18 October 2005, Perrin v. UK (Appl. No. 5446/03, dec.): ‘As to the applicant’s further argument that websites are rarely accessed by accident and normally have to be sought out by the user, the Court notes that the web page in respect of which the applicant was convicted was freely available to anyone surfing the internet’.

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3.2 The prosecution of a politician: the Geert Wilders saga (parts 1, 2 & 2.5) Our second example may be dealt with summarily, as it has already been the subject of much publicity. In recent years Dutch Parliamentarian Geert Wilders became known for his anti-Islamic statements.34 In March 2008 his film Fitna triggered international comment35 as well as legal steps. A Dutchbased Muslim organisation applied for an injunction against Mr Wilders, essentially seeking an order that he should refrain from similar statements in the future. But the District Court of The Hague – referring to Article 10 ECHR and to the Court’s Giniewski judgment36 – considered that ‘parliamentarians should be able to present their views in public, also outside of parliament, if necessary using strong expressions’.37 The Court accepted that Mr Wilders’s statements may be provocative, but found that they do not call for hatred or violence against Muslims. For these reasons his statements were not unlawful: ‘The right to freedom of expression should prevail’ . Meanwhile a number of criminal complaints were lodged as well. Thus the Openbaar Ministerie (Public Prosecutor’s Office) was confronted with the classical dilemma whether democracy required recourse to criminal law in this case, or was opposed to it. We will leave ethics aside and limit ourselves to noting that, in June 2008, it was decided not to bring criminal proceedings against Mr Wilders: ‘Mr Wilders is a politician who made his statements in the context of the public debate about Islam. As the European Court of Human Rights has decided, there should be ample space for strong statements in public debate. The freedom of expression plays an essential role in the public debate in a democratic society. This means that in a political debate offensive remarks 34

35

36 37

Some quotes (again all my translations): ‘The Koran is a fascist book which, just like Mein Kampf, must be prohibited’; ‘I feel ashamed for all those in the government and in parliament who refuse to stop the Islamic invasion’; ‘No more Muslim immigrants, no more mosques’; ‘If Muslims want to stay here, they should tear out half of the Koran and throw it away’. See for instance the statement by Mr Ban Ki-moon of 28 March 2009 (UN doc. SG/SM/11483): ‘I condemn, in the strongest terms, the airing of Geert Wilders’ offensively anti-Islamic film. There is no justification for hate speech or incitement to violence. The right of free expression is not at stake here. ... Freedom must always be accompanied by social responsibility’. In similar vein SG Terry Davis of the Council of Europe: ‘a distasteful manipulation which exploits ignorance, prejudice and fear. ... we defend freedom of expression, but in this case we do so with disappointment and concern’ (press release Council of Europe, 28 March 2008). ECtHR 31 January 2006, Giniewski v. France (Appl. No. 64016/00). District Court of The Hague 7 April 2008 (LJN BC8732), para. 4.9.

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may be made that are offensive or shocking to certain groups, without them being punishable’.38 Whilst there are many obvious differences between the acquittal of CyberAdolf and the decision not to prosecute Mr Wilders, there is also one parallel: reference is made to the Strasbourg Court in order to justify both decisions. In itself, that is understandable: the Court has stated on many occasions that free debate is vital to democracy and that politicians are entitled to a strong protection of their freedom of expression.39 But no reference is made to the other side of the coin: the Strasbourg case-law also allows for restrictions on the freedom of expression when that is necessary for the protection of the rights of others. The net result is a generous interpretation of Article 10 ECHR which, in the words of Lord Brown in Al-Skeini, will necessarily stand: the member state cannot itself go to Strasbourg to have it corrected. The Wilders saga did not end here: this was just part 1. Disagreeing with the decision of the Prosecutor’s Office, a number of the complainants turned to the Amsterdam Court of Appeal (gerechtshof). They invoked Article 12 of the Code of Criminal Procedure which makes it possible to challenge the refusal to bring a prosecution. Indeed, in January 2009 the Court of Appeal found in favour of the applicants and ordered the prosecution of Mr Wilders. The Court of Appeal based its decision to a significant extent on a different reading of the European Convention on Human Rights and the jurisprudence of the European Court. The Court of Appeal found that a criminal prosecution would not necessarily conflict with the freedom of expression of Mr Wilders, ‘since statements which create hate and grief made by politicians, taken their special responsibility into consideration, are not permitted according to European standards either’.40 At the time of writing the actual trial against Mr Wilders has yet to start.41 But already the trial casts its shadow ahead. This became clear in an unrelated case, in which a Mr B had displayed a poster with the words ‘Stop het gezwel dat Islam heet’ (‘Stop the Cancer Called Islam’). B was charged, like Mr Wilders, with a breach of Article 137c of the Criminal Code (deliberately insulting a group of people on grounds of race, religion, sexual orientation or handicap). In a judgment of March 2009, the Hoge Raad (Supreme Court)

38 39 40

41

Press release of 30 June 2008, at www.om.nl (author’s translation). See e. g. ECtHR 23 April 1992, Castells v. Spain (Appl. No. 11798/85), para. 42. Press release (in English) of the Amsterdam Court of Appeal 21 January 2009, at www.rechtspraak.nl. The latest news being that an extraordinary remedy pursued by Mr Wilders – by which he tried to have the Court of Appeal’s order to prosecute overruled – was unsuccessful. See Press release of the Procureur Generaal bij de Hoge Raad (Procurator General at the Supreme Court) 20 May 2009, at www.rechtspraak.nl.

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emphasised that a narrow reading of Article 137c was warranted. 42 If the insult is aimed not at the group but at their religion, Article 137c does not come into play, the Supreme Court held. The mere fact that believers may be offended by statements that are offensive to their religion is not enough to trigger the application of Article 137c. Thus the case could be decided solely on grounds of Dutch domestic law, and there was no need to involve Article 10 ECHR. B was acquitted. Different opinions will exist on the distinction made between insults aimed at groups because of their religion (punishable), and insults aimed at religions adhered by groups (not punishable). But what makes the case more interesting for present purposes, is that although the judgment did not refer to the Wilders case at all, the accompanying press release by the Supreme Court’s registry did just that. The trial court hearing the Wilders case, the press release underlined, will have to follow the test developed by the Supreme Court in the B case – a fact which is so obvious in the Dutch constitutional order that it is never mentioned in press releases: it will have to decide whether Mr Wilders’ statements are unmistakeably aimed at a certain group of people who because of their religion distinguish themselves from others.

4. A short look at the dark side of article 10 ECHR Whilst the available space does not allow for a thorough analysis of the Strasbourg case-law on Article 10 ECHR,43 it is submitted here that the Dutch cases discussed above have a particularly “generous” interpretation of that right in common. Leaving aside the B case, which was decided on a construction of Dutch criminal law, both the internet case and the initial decision not to prosecute Mr Wilders reflected a belief that Strasbourg grants an almost absolute protection to the freedom of expression. The Strasbourg practice, however, is much more nuanced. It may be less known than the grand old Sunday Times case – perhaps that is why the subtitle refers to ‘the dark side’ – but in recent years the Court seems to place increasingly more weight to the “responsibilities” that come with the use of the freedom of expression. In the case of I. A., for instance, the Court had no difficulties with a prohibition of ‘offensive attacks on matters that Muslims regard as sacred’: i. e. the person of Mohammed.44 One will note, between parentheses, that the Strasbourg Court adopted a different position than the Dutch Supreme Court in the B case when interpreting domestic criminal law. 42 43

44

Supreme Court 10 March 2009 (LJN BF0665), para. 2.5.1. For an attempt (unfortunately in Dutch) see R. A. Lawson, ‘Wild, wilder, wildst – Over de ruimte die het EVRM laat voor de vervolging van kwetsende politici’, in NJCM-Bulletin 2008, 469-484. ECtHR 13 September 2005, I. A. v. Turkey (Appl. No. 42571/98), para. 29-30.

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For Strasbourg, the right to respect for one’s freedom of thought, conscience and religion, may also be affected by offensive attacks aimed not at the individual but rather at central concepts of the religion. Admittedly in Giniewski and Tatlav the Court did find breaches of Article 10 ECHR, but an important factor in these case was that the impugned publications did not call for “disrespect” or hatred.45 Then came the case of Mr Soulas who co-authored and published a pamphlet called “La colonisation de l’Europe – Discours vrai sur l’immigration et l’islam”. He warned that an Islamic invasion of Europe was imminent and that we are at the eve of the most horrible events, compared to which the most serious pests and wars of the past will be nothing. The publication led to a criminal conviction. When Mr Soulas complained about this in Strasbourg, the Court underlined the importance of the fight against discrimination and intolerance. It noted that, when convicting Mr Soulas, the French courts had found that the book was meant to give rise to feelings of rejection and antagonism, exacerbated by the use of military language, with regard to the communities in question, which were designated as the main enemy, and to lead the readers to share the solution recommended by the author, namely a war of ethnic reconquest. The Strasbourg Court found that these were relevant and sufficient reasons for a criminal conviction and it did not find a violation of Article 10 ECHR.46 What do judgments like these mean for cases like that of Cyber-Adolf? The trial court does not tell us. In Erbakan the Strasbourg Court considered that one may expect from politicians, just because of their influential position, that they will refrain from public statements that will foster intolerance.47 What did that mean for the case of Mr Wilders? The Prosecutor’s Office, when initially deciding not to prosecute him, did not tell us. In addition the Dutch authorities in the cases discussed above conveniently ignored that Article 10 ECHR finds its limits in Article 17, which prohibits abuse of rights. Article 17 does not allow that Article 10 is used to disseminate statements that go against the underlying values of the Convention, as the Court observed in 1998.48 In 2003 the Court added: ‘there is no doubt that, like any other remark directed against the Convention’s underlying values, expressions that seek to spread, incite or justify hatred based on intolerance, including religious intolerance, do not enjoy the protection afforded by Article 10 of the Convention’.49 45

46 47 48

49

ECtHR 31 January 2006, Giniewski v. France (Appl. No. 64016/00), para. 44; ECtHR

2 May 2006, Tatlav v. Turkey (Appl. No. 50692/99). ECtHR 10 July 2008, Soulas a. o. v. France (Appl. No. 15948/03), esp. para. 42. ECtHR 6 July 2006, Erbakan v. Turkey (Appl. No. 59405/00), para. 64. ECtHR 23 September 1998, Lehidieux & Isorni v. France (Appl. No. 24662/92), para. 53. ECtHR 4 December 2003, Gündüz v. Turkey (Appl. No. 35071/97), para. 51.

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A recent example was provided by the British case of Norwood. The applicant, an active member of the British National Party, had displayed a poster showing the Twin Towers burning, accompanied by the text ‘Islam out of Britain – Protect the British People’. Unlike the suspect in the Dutch B case – who had a rather similar poster and was acquitted – Mr Norwood was fined 300 pounds. The European Court of Human Rights did not need much words to reject his complaint.50 And finally, at the risk of repeating myself, the case of Witzsch. Reacting to a newspaper interview with a historian, the applicant sent the historian a letter claiming that Hitler had not been involved in the Holocaust. For this he was sentenced to three months’ imprisonment. Strasbourg had no difficulties with that: ‘The Court finds that the views expressed by the applicant ran counter to the text and the spirit of the Convention. Consequently, he cannot, in accordance with Article 17 of the Convention, rely on the provisions of Article 10 as regards his statements at issue. The fact that they were made in a private letter and not before a larger audience is irrelevant insofar’.51 The Court’s line of reasoning here is quite the opposite of the argumentation followed by the Amsterdam Court in the internet case. The starting point in Strasbourg was that Mr Witzsch’s statements were not protected by Article 10. The fact that he did not make these statements in public thereby became irrelevant.

5. How to make up for generosity The preceding pages may be summarised as follows. Although it is stated nowhere expressly, one must assume that the European Convention on Human Rights protects minimum guarantees. Some doubt remains, also after the recent E. B. and Micallef judgments, about the precise nature of the Convention’s minimum character and about the meaning of Article 53 ECHR in this connection – but it seems clear that the domestic legislator and courts may protect rights “better” than Strasbourg requires. Recent events suggest that in the Netherlands a relatively high level of protection is given to the freedom of expression. By way of justification Article 10 ECHR is often referred to, and the impression is created that Strasbourg would not allow for any other approach. It is suggested in this contribution, however, that this is not correct: Strasbourg does allow for restrictions, especially if statements seek to spread, incite or justify hatred based on intolerance. 50 51

ECtHR 16 November 2004, Norwood v. UK (Appl. No. 23131/03, dec.). ECtHR 13 December 2005, Witzsch v. Germany (Appl. No. 7485/03, dec.).

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At this stage one might be inclined to ask what the problem is. The Convention is not opposed to a higher level of protection, and there are of course strong arguments to have a free public debate on matters of common concern. But in the Dutch cases described above, strong protection of the freedom of expression meant weak protection for the groups that were targeted: Muslims, Jews, gays, women. We have two communicating barrels here – be it that the communication in this case is of a rather one way nature. And if Lord Brown in Al Skeini was concerned that a Contracting Party could not go to Strasbourg to remedy the mistakes of a ‘generous’ domestic court – then my fear is that the victims of hate speech cannot go to Strasbourg either. As the Strasbourg case-law stands today, it is not obvious that for instance Muslims or Jews could complain about the failure to punish Cyber-Adolf: the Convention does not contain an independent ‘right to private revenge’ or a ‘right to see another prosecuted’.52 In order to lodge a successful complaint in Strasbourg, one would have to argue that the Netherlands were under a positive obligation to prosecute and convict Cyber-Adolf. Such an obligation would than have to be based on Articles 8 or 9 ECHR, perhaps in conjunction with Article 14 ECHR. In the past, the European Commission was not willing to go down that road, as a case about the British refusal to prosecute Salmon Rushdie for his Satanic Verses illustrates.53 More recent case-law, however, seems to leave some space. In October 2008, for instance, the Court found a violation of Article 8 in a Romanian case. Reporters had claimed that a politician, Mr Petrina, had worked for the Securitate during the communist era. Mr Petrina, who denied any ties with the Securitate, wanted to see his name cleared, but he lost his case: the Romanian courts, referring to Article 10 ECHR and the well-known Lingens-case, found in favour of the reporters. In Strasbourg, Mr Petrina met with more understanding. The European Court accepted that the right to respect for family life also included the right to protection of reputation. In a case like this the Court had to decide whether the right balance was struck between the interests protected by Article 8 ECHR on the one hand, and those of Article 10 ECHR on the other. In the instant case the scales had been off balance, inter alia because the reporters had never presented any factual evidence for their allegations against Mr Petrina. To that extent the State had failed to offer adequate protection of Mr Petrina’s reputation.54 It is interesting to see that the Court has delivered more similar judgments in recent times.55 It is submitted that this new trend, if that is what it is, makes 52 53

54 55

ECtHR 12 February 2004, Perez v. France (Appl. No. 47287/99), para. 70. ECRM 5 March 1991, Choudhury v. UK (Appl. No. 17439/90, dec.). This cases

points out how touchy the subject is. ECtHR 14 October 2008, Petrina v. Romania (Appl. No. 78060/01), para. 27-29. See ECtHR 15 November 2007, Pfeifer v. Austria (Appl. No. 12556/03), para. 35, with references to other case-law. See also, in a somewhat different context,

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a significant contribution to the jurisprudence about Article 10 ECHR. Of course there have been cases, such as I. A. and Soulas, where the Court rejected a complaint under Article 10 ECHR: the applicant had simply gone too far, and his conviction could be justified as ‘necessary in a democratic society’. But the European Court can only say this if the domestic court has convicted the applicant. If the applicant is acquitted, for instance because of a ‘generous’ interpretation of Article 10 ECHR, then the case will simply never be brought to Strasbourg – unless one allows the interested party to bring the case. That is the value of Petrina. However, so far the case-law only concerns individuals who had been expressly named when they came publicly under attack, for example Mr Petrina or Princess Caroline of Monaco. I would argue here that it is time for Strasbourg to take the next step.56 It should be possible to complain to Strasbourg about public statements that attack, offend or stigmatise groups in society on the basis of their race, colour, religion, sexual orientation, residence status or national background. If the author of the impugned statements has not been prosecuted and/or convicted, then individuals who have not been named individually, but who do belong to the ‘injured group’ at hand, should be able to petition the European Court (of course after exhaustion of domestic remedies etc.) and rely on Articles 8 and/or 9 ECHR, possibly in conjunction with Article 14. The Court will then have to review whether the State has done enough to protect the reputation and dignity of the applicant. Clearly such an obligation cannot be absolute. The so-called Osman test, which has been developed in connection to other types of positive obligations, may prove to be useful here too: the question is whether the State has adopted “reasonable and appropriate measures”. Also it would seem wise for the Court to leave a certain margin of appreciation to the national authorities in this area.57 To avoid misunderstandings: this is not a call for lower standards of protection in the area of free speech. Of course it is important that racism and intolerance are countered effectively, but the Strasbourg Court is very well aware of that.58 Cases such as I. A., Soulas and Norwood illustrate this. The point then is

56

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ECtHR 24 June 2004, Von Hannover v. Germany (Appl. No. 59320/00, violation of Art. 8). Again in different contexts: ECtHR 9 April 2009, A. v. Norway (Appl. No. 28070/06, violation of Art. 8), ECtHR 16 April 2009, Egeland & Hanseid v. Norway (Appl. No. 34438/04, no violation of Art. 10 because of ‘Art. 8 considerations’), and ECtHR 4 June 2009, Standard Verlags GmbH v. Austria (No. 2) (Appl. No. 21277/05, again no violation of Art. 10 because of ‘Art. 8 considerations’). Cf. CERD 6 March 2006, Gelle v. Denmark (Comm. 4/2004), para. 7.3-7.5. See also General Recommendation No. 30 of the same Committee. ECtHR 28 October 1998, Osman v. UK (Appl. No. 23452/94), para. 116. See e. g. ECtHR 9 May 2000, Sander v. UK (Appl. No. 34129/96), para. 23: ‘in today’s multicultural European societies, the eradication of racism has become a common priority goal for all Contracting States’; and ECtHR 6 July 2005, Nachova

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not that something is wrong with the Court’s substantive case-law; it is about a procedural matter. It is, in more abstract terms, about removing the existing lack of symmetry between the speaker and the object of his words. As the case-law stands today, the former knows that he can always go to Strasbourg, should he lose at the national level, whereas the latter is not so sure. For the Strasbourg Court this means that it is not always in a position to ensure that a fair balance was struck between the freedom of expression and the right to respect for reputation. The step advocated here is all the more sensible if we take into account the minimum character of the European Convention. Where at the national level a choice is made to be ‘generous’ and grant a higher level of protection, that in itself creates the need for a remedy in Strasbourg. One has to ensure that generosity for one party does not lead to a disproportionate burden for the other. v. Bulgaria (Appl. No. 43577/98), para. 145: ‘Racial discrimination is a particularly invidious kind of discrimination and, in view of its perilous consequences, requires from the authorities special vigilance and a vigorous reaction. It is for this reason that the authorities must use all available means to combat racism, thereby reinforcing democracy’s vision of a society in which diversity is not perceived as a threat but as a source of enrichment’.

The Interpretation of the English Civil Procedure Rules in the Context of Article 6 of the European Convention on Human Rights Déirdre Dwyer* 1. The first ten years of the CPR and the HRA The year 1998 saw the passing of two pieces of legislation in England and Wales that were of procedural significance. The Human Rights Act 1998 (‘HRA’) was a piece of primary legislation that incorporated the substantive guarantees of the European Convention on Human Rights 1950 (‘ECHR’) into English domestic law.1 The Civil Procedure Rules 1998 (‘CPR’) were issued as a piece of secondary legislation, under authority granted by the Civil Procedure Act 1997.2 The CPR represented the first major reform of English civil procedure rules since the introduction of the Rules of the Supreme Court (‘RSC’) *

1

2

British Academy Postdoctoral Fellow, Faculty of Law, University of Oxford. I am grateful to Paul Roberts for his comments on an earlier version of this paper. The HRA could have followed a similar route to the European Communities Act 1972 s 2 which made European Community law directly effective in England and Wales, with the same strength as domestic law. Instead, the implementation of the HRA respects the dualist nature of the United Kingdom constitution, in that the Convention, as an international treaty, does not itself become normatively effective. The HRA restates most of the substantive ECHR rights (Schedule 1), and directs that the courts ‘must take into account’ Convention jurisprudence when determining a question arising in connection with an ECHR right (HRA s 1), and must read domestic legislation ‘so far as it is possible to do so’ in a way compatible with Convention rights (s 3). Although for most purposes we talk about the ECHR as if it were incorporated into English law, in a strict sense the art. 6 ‘right to a fair trial’, which appears in HRA schedule 1, is a separate norm from the identically worded art. 6 that appears in the ECHR. Signs of the continued dualism occasionally appear. For example, A v SoS Home Dept [2004] UKHL 56 raised the possibility of a situation in which the UK could derogate from an ECHR right as a matter of international law, while that derogation might having no effect domestically: D. Dwyer, ‘Rights Brought Home’ (2005) 121 LQR 359. Section 1(3) of that Act charges the Civil Procedure Rules Committee to ‘make Civil Procedure Rules... with a view to securing that the civil justice system is accessible, fair and efficient’.

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in 1883.3 This paper considers how the interpretation of the CPR might be affected by the UK’s obligations under article 6 of the ECHR. The CPR have a twofold relationship with the ECHR, through the HRA. First, the court is required to ‘read and give effect to’ the CPR, as a piece of secondary legislation, ‘in a way which is compatible with the Convention rights’ ‘so far as it is possible to do so’.4 If the court were satisfied that a provision of the CPR were incompatible with an ECHR right, it has the power to quash that provision, since secondary legislation is the result of an executive act.5 Secondly, the court, as a public authority for the purposes of the HRA, must not act ‘in a way which is incompatible with a Convention right’.6 Where, therefore, the CPR allow a range of discretion in judicial interpretation, for example in case management, the court must not exercise that discretion in a way incompatible with the ECHR. The body of this paper is divided into two sections. In this first section, I consider questions that have arisen concerning the compatibility of the CPR with article 6 over the first decade of the HRA and the CPR.7 In the second section, I then consider how the normative foundation of the CPR, the ‘Overriding Objective’ contained in CPR part 1, should be interpreted in the broader procedural context of article 6. It is concluded that there have been no significant article 6 challenges to English civil litigation under the CPR to date. However, article 6 does constrain the possible lawful interpretations of the Overriding Objective open to the courts, and it is suggested that the more extreme consequentialist possibilities of the CPR are therefore avoided. The CPR were introduced to address problems of cost, delay, complexity and excessive adversarialism that were being encountered in English civil litigation under the RSC.8 A set of interconnecting procedural devices were 3

4 5

6 7

8

The 1883 RSC replaced the 1875 Rules of Court that had been introduced for the new Supreme Court of Judicature, following the Judicature Acts 1873 and 1875. The RSC underwent a number of changes during its history, but the CPR 1998 represented more fundamental reforms. HRA, s 3. If, however, the primary legislation that gave rise to a piece of secondary legislation would prevent the removal of the incompatibility by the court, then the court may make a declaration of incompatibility: HRA, s 4(4). HRA, ss 6(1), 6(3). The term ‘decade’ is used here loosely. Although both CPR and HRA were passed in 1998, the CPR came into effect in April 1999, but the HRA did not come into effect until October 2000. Lord Woolf, Access to Justice: Final Report (HMSO: London 1996). Cost and delay were, however, far from being uniquely English problems. See, for example, A. Zuckerman (ed) Civil Justice in Crisis. Comparative Perspectives of Civil Procedure (OUP: Oxford 1999); C. H. van Rhee (ed), The Law’s Delay (Intersentia: Antwerp 2004).

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deployed to this end: the rules were to be interpreted in the context of an ethos of ‘dealing with cases justly’ (the ‘Overriding Objective’); courts were to manage cases actively, with penalties (particularly in costs) for parties that failed to comply with case management orders and more generally with the Overriding Objective, and powers that included limiting the use of experts and other evidence, and striking out unmeritorious claims or giving summary judgment; parties were to cooperate with the court and with one another, with cards being played ‘on the table’, and pre-trial agreement being actively sought.9 The nature of the Overriding Objective is discussed in the second section of this chapter. Article 6 of the Convention can be seen as giving rise to ten rights applicable to fair civil process.10 Four of these are express rights: the right to a fair hearing; the right to a public hearing (subject to certain exceptions); the right to a hearing within a reasonable time; the right to an independent and impartial tribunal. There are also at least six implied rights that have so far been recognized: the right of access to court; the right to an adversarial hearing; the right to equality of arms; the right to fair presentation of the evidence; the right to cross-examine; the right to a reasoned judgment. Although these ten rights might be taken together to constitute a ‘right to a fair trial’, article 6 is broader than simply the concepts of ‘fairness’ and ‘trial’. For example, in the Dutch text of the Convention, the trial is described as ‘eerlijk’, which means ‘honest’ as well as ‘fair’. In addition, the ten rights that arise under article 6 are not all trial-specific, because the trial itself is only a small part of most European civil processes.11 If one consults one of the leading civil procedure commentaries, such as the barristers’ practice manual The White Book,12 or Zuckerman’s Civil Procedure,13 one would gain the impression that there are no real grounds on which to doubt compatibility of the CPR with article 6. This assumption of compatibility may not be surprising, since United Kingdom lawyers helped to draft the ECHR, and so we might assume that pre-existing English notions of fairness, in both civil and criminal process, would be woven into the fabric of article

9 10

11

12

13

See generally CPR part 1. A. Zuckerman, Civil Procedure: Principles of Practice, 2nd edn (Sweet and Maxwell: London 2006), 55. In England and Wales, as in the United States of America, fewer than 5 % of civil actions commenced are actually resolved at trial: E. Sward, The Decline of the Civil Jury (Carolina Academic Press: Durham NCL 2001), 13; see also M. Galanter, ‘The Vanishing Trial: An Examination of Trials and Related Matters in Federal and State Courts’ (2004) 1 J Empirical Legal Studies 459. Waller, Lord Justice and others (eds), Civil Procedure, 2 vols (Sweet and Maxwell: London 2008) (‘The White Book’). Zuckerman, Civil Procedure (n 10), ch 2.

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6 and its jurisprudence.14 Further, article 6 was written in the aftermath of the Second World War, to safeguard against a repeat of the flagrant abuses of civil and criminal process that had then recently occurred, particularly under the National Socialist regime in Germany. We might therefore expect article 6 to be interpreted in that context. However, as the jurisprudence of the European Court of Human Rights has developed, the ECHR began to take on a normative life of its own, separate from the events of the 1930s and 1940s. In particular, notions of what constitutes a fair trial have changed over the last half century. For example, in the posthumous English criminal appeal decision of Bentley, the Lord Chief Justice, Lord Bingham, concluded that the original 1950s trial had been unfair ‘even by the standards prevailing at the time’.15 There appears to have been a similar assumption of procedural compatibility in the Netherlands, where the ECHR took effect from 1954. In a 1999 article on the influence of article 6 on Dutch criminal procedure, Bert Swart of the Amsterdam Court of Appeal suggested that from 1954, well into the 1960s and perhaps for part of the 1970s, the view prevailed in his country that article 6 may well be applicable in some other, less enlightened, jurisdictions, but not in the Dutch courts.16 In light of a series of rulings of incompatibility, Swart considers that view of non-applicability to have been naïve. Article 6 has affected not only criminal practice but also civil practice in the Netherlands. Generally, however, civil practice in Europe has been much less affected by article 6 than has criminal practice. In a recent article on the future of European civil procedure, Mirjam Freudenthal, at the University of Utrecht, chose to focus solely on the influence of European Community law, and excluded the influence of the ECHR, presumably as she considered it to be negligible.17 Examples of incompatibility do arise, however. For example, in the Dutch civil case of Dombo Beheer, the European Court held that the practice of not allowing a party to testify as a witness, a practice inherited from the Roman-canon tradition, may constitute a breach of article 6.18 Although English citizens had had the right of individual petition to the European Court since 1965, it was only with the HRA that it became possible to enforce Convention rights before the English domestic courts. The HRA did not come into force until October 2000, because of concerns that there would be a flood of rights-related litigation, and the perceived need, therefore, 14

15 16

17

18

See also J. Jacob, Civil Justice in the Age of Human Rights (Ashgate: Aldershot 2007), 38. Bentley (Derek) [2001] 1 Cr App R 21, eg [65], [67], Bingham LCJ. B. Swart, ‘The European Convention as an Invigorator of Domestic Law in the Netherlands’ (1999) 26 J Law and Society, 38. M. Freudenthal, ‘The Future of European Civil Procedure’, (2003) 7.5 Electronic J Comparative L, http://www.ejcl.org/75/art75-6.html (last accessed 13 November 2008). ECtHR 27 October 1993, Dombo Beheer BV v The Netherlands (Series A, no 274).

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not only to send all judges on training courses relating to human rights law, but also to issue judges with laptops for the first time, to enable them to access what was expected to be a rapidly changing, rights-related jurisprudence. It was particularly expected that there would be an avalanche of challenges to criminal practice, principally under article 6. In the event, the effect of the Convention on criminal practice has been more gradual.19 The main article 6 changes have instead been in the areas of administrative law and mental health law. There have been a few challenges to the CPR under article 6, but none has been significant, and none has been successful. The compatibility of various provisions of the CPR with article 6 ECHR has been considered before the Court of Appeal in a very small number of cases. The leading case is perhaps Daniels v Walker, 20 in which Lord Woolf, then Master of the Rolls, was required to consider the article 6 compatibility of CPR part 35, on the use of separate party experts and single joint experts. This article 6 challenge was somewhat precocious, as the HRA was not to come into force for another five months. Daniels was a high value personal injury case, in which the Court of Appeal was asked to consider a case management decision concerning the appointment of experts to advise on the size of the damages award, known as quantum. One of the central innovations of the CPR had been the possibility of using single experts, who would be jointly instructed by the parties. In this case, a single joint expert had been instructed to a give a report on the future care requirements for Daniels. Walker’s insurers were not happy with the report of the single joint expert, nor that the court would not allow their own expert to produce a further full report. The central part of the Court’s judgment, on the correct use of the different expert roles, is not of relevance here.21 Instead, we are concerned with the subsidiary matter of whether the use of single joint experts, at least on the facts of Daniels, might be incompatible with article 6 ECHR, particularly in light of the leading ECHR case of Mantovanelli v France on expert evidence,22 in that such use violated the right of the party to an adversarial hearing.

19

20 21

22

The effect includes developments in relation to disclosure, public interest immunity, the right to silence, access to legal advice, entrapment and anonymous witnesses clearly reflects post-HRA influence from the Convention, as does the significant shift from ‘burden and standard of proof’ to ‘presumption of innocence’: P. Roberts, ‘Criminal Procedure, the Presumption of Innocence and Judicial Reasoning under the Human Rights Act’ in H. Fenwick, R. Masterman and G. Phillipson (eds), Judicial Reasoning under the UK Human Rights Act (CUP: Cambridge 2007), 377. Daniels v Walker (Practice Note) [2000] 1 WLR 1382, 1386. On the correct use of expert roles, see D. Dwyer The Judicial Assessment of Expert Evidence (CUP: Cambridge 2008), ch 6. Mantovanelli v France (1997) 24 EHRR 370.

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Lord Woolf had three objections to the application of article 6 in Daniels.23 First, ‘article 6 could not possibly have anything to add to the issue on this appeal’ because the CPR makes it clear that the court must deal with cases justly. So, if the party wished to call additional expert evidence, and it would be unjust not to allow this, then the court would allow it. This first objection can be seen as being directed more towards the way in which the courts would apply the CPR, and would be a response to a challenge under section 6 of the HRA (on the actions of public bodies). Secondly, ‘no one suggests that the way matters are conducted in civil (ie continental European) jurisdictions could contravene article 6 in the normal manner, nor could the proper use of the Civil Procedure Rules’. This objection can be read as being more focused towards responding to a challenge under HRA sections 3 and 4, concerning whether the provisions of CPR part 35 themselves, rather than their interpretation, are compatible with article 6. Thirdly, the invocation of article 6 added significantly to the length of written and oral submissions, and therefore the cost of the hearing, for what was effectively going ‘down blind alleys’. This objection concerns whether the cost of an article 6 challenge would constitute proportionate, necessary expense for the purposes of the Overriding Objective. Lord Woolf then added an admonition against any further attempts to use article 6 in relation to the CPR: ‘It would be unfortunate if case management decisions in this jurisdiction involved the need to refer to the learning of the European Court of Human Rights in order for them to be resolved. In my judgment, cases such as this do not require any consideration of human rights issues, certainly not issues under article 6. It would be highly undesirable if the consideration of case management issues was made more complex by the injection into them of article 6 style arguments. I hope that judges will be robust in resisting any attempt to introduce those arguments … When the Act of 1998 becomes law, counsel will need to show self-restraint if it is not to be discredited.’ This dictum is problematic as a matter of public law, for two reasons. First, it is at least arguable that Lord Woolf, as the extra-judicial architect of the CPR (known colloquially as ‘the Woolf Reforms’), was not competent to hear an article 6 challenge to a central part those rules, under the principle of nemo iudex in causa sua. Secondly, judges are required to decide cases according to the law, and counsel are required to fearlessly present their client’s case, but here judges and counsel are warned off from such conduct, in the interests of keeping cases straightforward.24 In the instant case, however, there was no real 23 24

Daniels, at 1386. Jacob, Civil Justice (n 14), 4.

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prospect of a challenge succeeding, and so the dictum might charitably be read as an expression of frustration and concern by Lord Woolf at the inappropriate mounting of an article 6 challenge. Lord Woolf’s central proposition in Daniels in relation to HRA challenges to the CPR appears to have been that the provisions of the CPR are themselves fully compliant with article 6, and that the only feasible area for an article 6 challenge was in relation to the way in which the CPR is applied in any given case. For the purposes of developing doctrinal law, it is unfortunate that Lord Woolf did not elaborate on his reasons for concluding that CPR part 35 was article 6 compliant. In Woodhouse v Consignia plc, the Court of Appeal considered the circumstances under which a stay of proceedings imposed under the RSC/CPR transitional arrangements of CPR part 51 might be removed, as part of a more general question about how relief from case management sanctions should be granted under CPR r 3.9 (‘relief from sanctions’).25 The view of the court, given by Lord Justice Brooke, was that although there was a risk that a case management decision such as a stay of proceedings might fall foul of the article 6 right of access to the court, that risk was unlikely to materialize where the court followed the general framework of CPR r 3.9 as a whole, within the context of CPR r 1.1: ‘Judges (and particularly less experienced judges) should submit themselves to the discipline of considering each of the matters listed in CPR r. 3.9 which appear to them to be relevant … They must carry out the necessary balancing exercise methodically and explain how they reached their ultimate decision’.26 The view that the right of access to the courts is not an absolute right is supported by the ECHR case of Ashingdane.27 In that case, the European Court held that the right of access is implicitly subject to regulation by the State, to reflect the needs and resources of the community. That regulation must ‘pursue a legitimate aim’, and there must be ‘a reasonable relationship of proportionality between the means employed and the aim sought to be achieved.’28 In 2004, the Court of Appeal, obiter and seemingly motu proprio, expressed the view that the way in which the Admiralty Court, a specialist court of the Queen’s Bench Division, was using assessors under CPR r 35.15 might constitute a breach of the article 6 right to adversarial process.29 This was because 25 26 27 28 29

Woodhouse v Consignia plc [2002] EWCA Civ 275, [2002] 1 WLR 2558. Woodhouse, [42]-[43]. Ashingdane v United Kingdom (1985) 7 EHRR 528, 546. Tinnelly and Sons Ltd v United Kingdom (1998) 27 EHRR 249, 288. Owners of the Ship ‘Bow Spring’ v Owners of the Ship ‘Manzanillo II’ [2004] EWCA Civ 1007; [2005] 1 WLR 144. See also L. Blom–Cooper, ‘Experts and Assessors: Past, Present and Future’ (2002) 21 Civil Justice Quarterly, 341, 352.

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the parties were not provided with an opportunity to challenge the advice that the assessors gave to the court, in breach of the principle of audi alteram partem. The Admiralty Court therefore amended its practice, so that the parties would be informed of the assessors’ opinions, and be entitled to respond.30 The Bow Spring is a notable case because it is perhaps the only example of English civil procedure being amended to reflect article 6 concerns. At the same time, however, the practice that was amended was not one prescribed by the CPR, and so the CPR itself appears to remain unaffected by the ECHR.31 The experience of the last ten years, as exhibited in the case law, suggests that there have been no article 6 challenges of note, successful or otherwise, to the CPR itself, or to its application. At first blush, we might take this absence as strong evidence of the CPR’s article 6 compliance. The situation may not, however, be as straightforward as it at first seems, and so the absence of evidence need not be evidence of absence in this situation. It is in fact extremely difficult to bring an article 6 challenge against a case management decision. The HRA requires public authorities to act in a way not incompatible with Convention rights, and the term ‘public authority’ includes the courts.32 However, although the usual route by which to enforce article 6 against a public body would be through the administrative law remedy of judicial review,33 the HRA requires that where the public authority is a court, the action must be by appeal through the court system.34 Under the RSC, this approach would probably have meant that a court’s decision would be more likely to be the subject of a successful article 6 challenge than would the decision of other public bodies. As Lord Hoffman said in Kemper Reinsurance Company v Minister of Finance, ‘judicial review is quite different from an appeal. It is concerned with the legality rather than the merits of the decision... [It] seldom involves deciding a question which someone else has already decided’.35 So an article 6 appeal on a case management decision would have allowed a reconsideration of the merits under the RSC. Under the CPR, on the other hand, ‘the role of the appeal court is now that 30 31

32 33 34 35

The Global Mariner [2005] EWHC 380. There do remain possible article 6 incompatibilities with the way in which the CPR provides for the use of assessors. For example, it would in theory be possible for an assessor to produce a court report before trial adverse to one of the parties, that could be adduced as evidence by the opposing party, and for that assessor then to advise the court after the trial had ended, even though the assessor had publicly expressed a view on the merits of the case prior to its completion. See D. Dwyer, ‘The Future of Assessors Under the CPR’ (2006) 25 Civil Justice Quarterly 219; Dwyer, Judicial Assessment (n 21), ch 6. Above, text at n 6. HRA, s 7. HRA, s 9. Kemper Reinsurance Company v Minister of Finance [2000] 1 AC 1, 14.

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of a court of review and not of a court which conducts a complete rehearing of the application and exercises its discretion afresh’.36 Permission to appeal in the civil courts is granted on the basis of a realistic prospect of success, and so a case management decision is unlikely to be allowed to be appealed, because it is unlikely to succeed. The principal reasons for this deference of the appellate court to the first instance court appear to be the protection of the exercise of discretion, the reduction in the use of procedural precedents, and the need for finality in litigation. The CPR requires active case management, and allows wide judicial discretion in this. This discretion is similar to that of executive bodies in their policy-based decisions. It would be an usurpation of role for a court to second-guess the decision of a trial or case management judge, or the decision of an executive body, and to do so might weaken the authority of the judge in relation to the litigants. The CPR tries to move away from the situation under the old rules, where every case management hearing was subject to reference to endless precedents of how similar decisions had been made in the past. Appeals on procedural points are therefore discouraged lest the appellate system be swamped with the full complexity of the facts in the courts below. The effect of this is that an article 6 challenge to a procedural point, unless it has resulted in a significant error, is unlikely to be heard. It is therefore possible that there are features of the CPR, and the interpretation of the CPR, that do technically breach article 6, but which have never been heard before an appellate court. There do remain areas of the CPR that appear likely candidates for an article 6 challenge.37 One is the discretion of a judge, under CPR part 24, to issue summary judgment. In other words, the court may decide a claim, or a particular issue within a claim, without a trial, and without necessarily receiving all the evidence. Summary judgment may therefore breach a number of express and implied rights arising under article 6. Another candidate for an article 6 challenge is the duty imposed on the court to ration the resources allocated to cases, under CPR part 26, so that larger, more important, more complex cases receive more of the court’s time. If an incompatibility were to arise, it is likely to be because of a more fundamental normative incompatibility between the Overriding Objective and article 6. This potential incompatibility is the subject of the following section.

36

37

Woodhouse (n 25), [45], following Tanfern Ltd v Cameron-MacDonald (Practice Note) [2000] 1 WLR 1311, 1317, [31]. See also Zuckerman, Civil Procedure (n 10), 832-833, [23.5]-[23.7]. See generally Jacob, Civil Justice (n 14).

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2. The interpretation of the overriding objective in the context of article 6 The Overriding Objective is laid out in CPR r 1.1, and it is worth quoting it in full, as it is central to a proper understanding of the relationship between the CPR and article 6: (1) These Rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly. (2) Dealing with a case justly includes, so far as is practicable (a) ensuring that the parties are on an equal footing; (b) saving expense; (c) dealing with the case in ways which are proportionate – (i) to the amount of money involved; (ii) to the importance of the case; (iii) to the complexity of the issues; and (iv) to the financial position of each party; (d) ensuring that it is dealt with expeditiously and fairly; and (e) allotting to it an appropriate share of the court’s resources, while taking into account the need to allot resources to other cases. The court must seek to give effect to the Overriding Objective when it exercises any power given to it under the CPR,38 but at the same time, since the courts are a public body for the purposes of the HRA, they must not exercise that power in a way incompatible with article 6, or any other ECHR right. There are three, interweaving reasons for suggesting the possibility of incompatibility between the Overriding Objective and article 6. First, the Overriding Objective places duties on the court, in terms of the court’s treatment of individuals, in the context of the court’s duty to manage the whole case list. In contrast, article 6 focuses on the entitlement of individuals to receive certain types of treatment from the court. So we are not only comparing rights with duties, but when there are potential conflicts of rights we look at them from the view of the individual, while potential conflicts of duties are viewed from the perspective of the court. Secondly, the requirement that the court allocates resources to a case in a manner proportionate to particular features of that case reflects the consequentialist nature of the Overriding Objective. This is in contrast to article 6, which is deontological. The tendency of consequentialist procedure would be to balance a number of factors in order to achieve the goals of (relatively) quick 38

CPR r 1.2. It follows that the Overriding Objective cannot be applied to a civil pro-

cedural matter which does not involve the court exercising a power granted under the CPR: ‘Overriding Objective of Civil Procedure Rules’ (1999) 6 Civil Procedure News 4, regarding Maltez v Lewis The Times 4 May 1999.

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and cheap justice, with some implicit consideration of rectitude of decision. The tendency of a deontological procedure, in contrast, would be to consider the inherent, non-negotiable dignity of the individual. Where there is more than one individual involved, as happens in a civil dispute, then there would need to be regard to possibilities of the conflicting demands of recognizing the dignity of all those individuals. However, under a deontological approach individual dignity should not be compromised to further an extraneous goal. Thirdly, the criteria for ‘justly’ in CPR r 1.1 appear to go beyond the requirement that a trial be ‘fair’. CPR r 1.1(2)(a) and (d) contain the relevant express rights of article 6, regarding the right to a fair hearing, and the right to a hearing within a reasonable time. These rules at least arguably also embrace the implicit rights to an adversarial hearing, equality of arms, the fair presentation of evidence and the right to cross-examine. The right of access to the court is partly supported by CPR r 1.1(2)(b). Other article 6 rights, such as an impartial tribunal, a public hearing and a reasoned judgment fall primarily outside the scope of the CPR. But this leaves us with rr 1.1(2)(c) and 1.1(2) (e), which set criteria for ‘justly’ that are not implicit in ‘fairly’, namely proportionality and the balancing of resources between cases. There would appear to be a real danger that situations may arise under the CPR where the court may choose to manage certain categories of case in such a way as to make effective use of court resources while creating a high likelihood of a wrong decision. This is particularly manifested in the practice of ‘track allocation’. One of the innovations of the CPR is that a case must be allocated at an early stage to one of three case management tracks: the small claims track, fast track and multi-track.39 The small claims track is available for cases with a value below £5,000. The fast track is intended for cases of (relatively) low value (£5,000 to £25,000), which are expected to be resolved promptly (within thirty weeks) and straightforwardly (expected to be listed for a single day). The multi-track is for all other cases, in other words those that are of high value or are not straightforward. Higher value cases are likely to receive more court time, before and during trial, but are also likely to be more expensive for the litigants, and take longer to reach trial and to be heard. Each track allows for a greater allocation of court resources.40 Problems are perhaps most likely to arise where a judge allocates a case to the wrong track, or makes other case management decisions that are not correctly proportionate to the nature of the case. The problems may be exacerbated where a party is a litigant in person, or represented by an inexperienced 39

40

CPR r 26. Small claims and fast track cases are heard in the county courts, while

the multi-track is heard in the High Court. This proportionate allocation of court resources may not be entirely novel under the CPR. See, for example, Ashmore v Corp of Lloyds [1992] 2 All ER 486, 588: ‘Litigants are only entitled to so much of the trial judge’s time as is necessary for the proper determination of the relevant issues’ (Lord Roskill).

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or unqualified representative. For example, in the case of Gregory v Turner, 41 an action for trespass between residential neighbours, the district judge took the seemingly erroneous view, in law and fact, that the case had ‘few, if any factual disputes’ and was of low value, and therefore allocated it to the small claims track, despite objection from the claimant. Two straightforward expert reports were ordered, but oral evidence was not given at trial, even though witness statements had been exchanged late in the day. The Court of Appeal in Gregory had only the claimants’ version of events before it, but it would appear that not only was the case incorrectly allocated to the small claims track, but also it received insufficient attention within that track. The claimants’ submissions, and subsequent unsuccessful appeals on merits and costs, appear ultimately not to have been assisted by their representation by a non-lawyer friend, who produced over-long written submissions, and on occasions failed to highlight to the court the key aspects of his clients’ case. Track allocation is particularly problematic because, as with the proportionality criteria in CPR r 1.1(2)(c), the decision on resource allocation not only requires that one balance the demands of the differing criteria, but ultimately that one weights them. If, for example, the court were asked to consider a case that was factually very complex, but worth only £20, would it be justified in following r 1.1(2)(c)(i) and, implicitly, 1.1(2)(e), and allocating the case very little time, or even striking it out as an abuse of the process of the court under r 3(4)? The Overriding Objective might seem to point in that direction. But the effect of this would not only be injustice to the individual claimant denied recovery of the £20, but more broadly there would be policy implications for the enforceability of contracts worth less than £20. A similar problem of a case management decision that seems unfair in the instant case occurs where a party inadvertently fails to comply with a case management direction. For example, in the case of Popek the claimant, a litigant in person, did not accept the opinion of the single joint expert appointed in the case.42 However, the claimant’s application to use his own expert was refused, because the application was made too close to trial, and such a late appointment would have jeopardized the case timetable. At trial, the claimant was then not allowed to cross-examine the single joint expert, with whose report he disagreed, because the general rule is that the report of a single joint expert is agreed, and so cannot be challenged at trial.43 Popek was therefore denied any effective way of responding to the opinion of the single joint expert, which is, at least at first blush, contrary to article 6. 41 42 43

Gregory v Turner [2003] EWCA Civ 183, [2003] 1 WLR 1149. Popek v National Westminster Bank Plc [2002] EWCA Civ 42. Following Peet v. Mid–Kent Healthcare NHS Trust [2001] EWCA Civ 1703; [2002] 1 WLR 210; [2002] 3 All ER 688. This view is seemingly contrary to what Woolf indicated in his Access to Justice report: Lord Woolf, Access to Justice: Final Report (HSMO: London 1996) [13.17].

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The CPR may be saved here by the concept of the ‘margin of appreciation’. This concept, developed by the European Court, tends to allow the member state a wide discretion in questions of compliance. We should distinguish between two senses in which the European Court uses the term ‘margin of appreciation’. In the first sense, the domestic court will grant an ‘appropriate degree of latitude’ to the executive in the making of policy decisions.44 The courts will intervene only when it is apparent that Parliament and ministers have given insufficient weight to human rights.45 In the second sense, the European Court expects, under a principle of subsidiarity, that the domestic courts and legislature will examine the actions of the executive in more detail, and with more regard to the national legal and political context, than occurs at the European level. It is the first sense that concerns us here. The margin of appreciation, in the first sense, applies to civil case management because the CPR represent a significant policy decision, about how the state will manage the high level of demand placed on the civil justice system. This is a policy decision that needs to be made in every western legal system.46 Other alternatives might be to maintain the resources available to the civil courts at the same level, and so allow the case waiting lists to grow, or alternatively to increase the court budget. To let the case waiting lists grow would itself lead to a breach of article 6. At the same time, the argument runs, there must be a ceiling to the budget for the Court Service, in much the same way that there must be a ceiling to the budget for the National Health Service.47 However, such a line of argument is far from being non-contentious. First, it is not clear that the court service is simply a service, in the same way as the postal service or health service. Full consideration of this question is outside the scope of this present paper, but it is worth noting that we might alternatively view the proper function of the courts as being to play a central role in the maintenance of the rule of law. This is a core function of the state, rather than being simply a service. The second reason for viewing this line of argument as being contentious is that the current HMCS Business Strategy, issued in 2006, states an intention that the civil courts will ‘return to full cost

44

45 46

47

The determination of what is ‘appropriate’ depends on three things: (a) the subject matter under consideration, (b) the importance of the human rights in question, and (c) the extent of the encroachment upon that right. A v Secretary of State for the Home Department [2004] UKHL 56, [80] Lord Nicholls. See also Ashingdane v United Kingdom (1985) 7 EHRR 528, 546; Tinnelly and Sons Ltd v United Kingdom (1998) 27 EHRR 249, 288. Zuckerman, Civil Procedure (n 10), 8.

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recovery (less remissions and exemptions) for the civil courts’ by 2008 (at 24), rather than relying on general taxation.48 An alternative approach to squaring the circle in relation to article 6 and the Overriding Objective may be to say that questions of ‘just’ resource allocation and case management that arise under the Overriding Objective must be decided in the context of article 6. The ECHR/HRA ‘right to a fair trial’ should then be seen as the context within which the concept of ‘dealing with a case justly’ must be understood. Fairness ultimately overrides other, utilitarian, concepts of ‘justly’, such as the efficient delivery of civil justice.49 The margin of appreciation would allow us to go so far in our active management of resources in relation to a case, but there remains a threshold beyond which a fair trial would be denied. In this way, the more extreme possible consequentialist interpretations of the Overriding Objective are prevented, and compliance of the CPR with article 6 is maintained. 48

49

See also H. Brooke, ‘Foreword’ in Zuckerman, Civil Procedure (n 10), viii. However, ‘remissions and exemptions’ may constitute a sizeable part of the Court Service budget. According to the HMCS National Business Plan 2008 (at 26) the budget for 2008/9 is that only 37 % of court service revenue will come from fines and fees. The CPR should be understood within a three-dimensional model of ‘accessible, fair and efficient’ civil justice. Section 1(3) of the Civil Procedure Act 1997, which provides the statutory authority for the CPR, stipulates that, ‘The power to make Civil Procedure Rules is to be exercised with a view to securing that the civil justice system is accessible, fair and efficient.’ There is no statutory requirement that the CPR enables the courts to deal with cases ‘justly’, and this suggests that we should see ‘justly’ as equivalent to ‘accessible, fair, and efficient’. As it is statutory, this three-dimensional model is normatively more fundamental than the one proposed by Zuckerman (Civil Procedure, n 10, 3-15), that would balance the ascertainment of truth, proportionality, and the timely resolution of disputes.

The Europeanisation of Fundamental Rights Protection in Switzerland : Two Steps Forward, One Step Back Maya Hertig Randall* 1. Introduction Although not a member of the European Union, Switzerland is strongly embedded in the European continent not only from an economic1 and cultural perspective, but also from an institutional point of view. A member of the Council of Europe since 1963, it ratified the Convention for the Protection of Human Rights and Fundamental Freedoms2 in 1974. As regards the European Union, the Free Trade Agreement of 19723 and two series of bilateral treaties concluded in 19994 and in 20045 respectively are aimed at reducing the costs of non membership. Their cumulative effect provides for a substantial level of integration, making Switzerland in many policy areas a de facto Member

*

1

2

3

4

5

Professor at the Department of Constitutional Law, Geneva University. According to the statistics of the federal customs authority, approximately 80 % of Switzerland’s foreign trade refers to the EU (see http://www.ezv.admin.ch/ themen/00504/01506/01533/index.html?lang=de, 2 December 2008). CETS No. 005 STE (adopted on 4 November 1950, entered into force 3 September 1953); hereafter ‘European Convention on Human Rights’ or ‘Convention’ or ‘ECHR’. Agreement adopted 22 July 1972, entered into force 1 January 1973 (Switzerland – European Economic Community), SR 0.632.401. Known as ‘Bilateral Agreements I’. The seven agreements in question cover the following areas: public procurement, free movement of persons, technical barriers to trade (MRA), agriculture, transport, aviation and research. Known as ‘Bilateral Agreements II’. The nine agreements cover the following areas: Schengen-Dublin, taxation of savings, fighting against fraud, media, education, statistics, environment, pensions and processed agricultural products.

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State.6 Swiss Courts, including the Swiss Federal Supreme Court,7 have not ignored the strong interdependence between the Swiss legal order and the European Convention on Human Rights as well as EU-law. The present study analyses the influence of European law on fundamental rights’ protection in Switzerland. It will mainly focus on the impact of the Convention and EU-law on the role of the Swiss judiciary in enforcing fundamental rights. The aim is to examine the extent to which European law has altered the separation of powers between the judicial and the legislative branch and reshaped the relationship between domestic and international law. The paper is divided into three parts. The first part will sketch the main principles governing the relationship between international and Swiss law, the second and third will analyse the Europeanisation of fundamental rights’ protection in Switzerland. They will first examine the impact of the ECHR and thereafter the influence of the bilateral Agreement on the Free Movement of Persons (“AFMP”) concluded by Switzerland and the European Community 6

7

In addition to the bilateral treaties, Switzerland has adopted the so-called politics of ‘Eurocompatibility’ since the rejection of Swiss membership of the European Economic Area in 1992. This implies that the conformity with EU-law of legislative proposals is systematically examined so as to avoid divergence between both legal orders, and in particular new barriers to market access (see Martin Philip Wyss, ‘Europakompatibilität und Gesetzgebungsverfahren im Bund’ (2007) no. 6 AJP, 717-728). Moreover, Switzerland adapts its legislation systematically to the law of the European Union, and courts interpret Swiss law in the light of EU-law and the case law of the European Court of Justice (see the study by Andreas Furrer, ‘Der Einfluss der EuGH-Rechtsprechung auf das schweizerische Wirtschaftsprivatrecht’ (2006) SZIER, 311-334), sometimes even in policy areas which are not subject to the politics of Eurocompatibility (see e. g. BGE 123 I 152, G. and others, a case concerning affirmative actions in favour of women, in which the Supreme Court referred to Case C-450/93, Kalanke v Freie Hansestadt Bremen [1996] ECR 314). The paradoxical term used for this practice – ‘autonomous taking over’ of EU-law (‘autonomer Nachvollzug’) – shows to what extent Switzerland’s attachment to a formal understanding of sovereignty clashes with factual limits imposed on the country’s independence (for an analysis of ‘Eurocompatibility’ and the ‘autonomous taking over’ of EU-law, see Thomas Cottier, Daniel Dzamko and Erik Evtimov, ‘Die europakompatible Auslegung des schweizerischen Rechts’ Schweizerisches Jahrbuch für Europarecht 2003, 357-392, 360 et seq.; Bruno Spinner and Daniel Maritz, ‘EGKomptabilität des schweizerischen Wirtschaftsrechts: Vom autonomen zum systematischen Nachvollzug’, in Peter Forstmoser, Hans Caspar von der Crone, Rolf Weber et al. (eds), Der Einfluss des europäischen Rechts auf die Schweiz, Festschrift für Professor Roger Zäch zum 60. Geburtstag (Schulthess: Zurich 1999), 127 et seq.; see the same volume for further contributions on this subject). Bundesgericht/Tribunal fédéral/Tribunale federale. Hereafter referred to as ‘Supreme Court’.

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and its member states in 1999.8 The AFMP, which purports to extend the EU fundamental freedom of free movement of persons to Switzerland, has had a considerable impact on fundamental rights. It contains a specific provision on the interpretation of the Agreement which reinforces its impact on the Swiss legal order: Art. 16(2) AFMP is aimed at ensuring that the Agreement be construed in the light of European Community law.

2. The relationship between international and domestic law 2.1 Basic principles The Swiss legal order is generally considered as being favourable to international law.9 In the absence of a specific provision in the first federal Constitution of 1848/7410 on the relationship between international and domestic law, the Supreme Court decided already in the 19th Century to adopt monism. Ever since, international treaties have formed part of the Swiss legal order and do not require transformation into domestic law. However, the requirement that treaty provisions be self-executing so as to be relied upon in courts has partly reduced the effectiveness of monism.11 The Supreme Court held, for instance, 8

9

10

11

Agreement on Free Movement (Switzerland – European Community and its Member States) (adopted on 21 June, entered into force on 1 June 2002). On the AFMP, see e. g. Astrid Epiney, ‘Das Abkommen über die Personenfreizügigkeit – Überblick und ausgewählte Aspekte’ in Alberto Achermann, Astrid Epiney, Walter Kälin et al. (eds), Jahrbuch für Migrationsrecht 2004/2005 (Stämpfli: Bern 2005), 45 et seq. On the relationship between international and Swiss law, see e. g. Helen Keller, Rezeption des Völkerrechts (Springer: Berlin, Heidelberg, New York et al. 2003); Thomas Cottier, Alberto Achermann, Daniel Wüger and Valentin Zellweger, Der Staatsvertrag im schweizerischen Verfassungsrecht: Beiträge zu Verhältnis und methodischer Angleichung von Völkerrecht und Bundesrecht (Stämpfli: Bern 2001); Thomas Cottier and Maya Hertig, ‘Das Völkerrecht in der neuen Bundesverfassung: Stellung und Auswirkungen’ in Ulrich Zimmerli (ed.), Die neue Bundesverfassung. Konsequenzen für Praxis und Wissenschaft (Stämpfli: Bern 2000), 1-34; Anne Peters and Isabella Pagotto, ‘Das Verhältnis von Völkerrecht und Landesrecht in der Schweiz’ (2004) 2 ius.full: Forum für juristische Bildung, 54-65, www.iusfull.ch/letztehefte/documents/ basics_2_2004.pdf, 14 November 2008. The first federal Constitution, which created the Swiss Federation, was adopted on 14 September 1848 and fundamentally revised in 1874. On the direct applicability of international treaties in Swiss law, see Daniel Wüger, Anwendbarkeit und Justiziabilität völkerrechtlicher Normen im schweizerischen Recht: Grundlagen, Methoden und Kriterien (Stämpfli: Bern 2005); Edgar Holzer, Die Ermittlung der innerstaatlichen Anwendbarkeit völkerrechtlicher Vertragsbestimmungen (Schulthess: Zurich 1998).

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that the rights enshrined in the ICESCR12 are insufficiently precise to confer justiciable rights to individuals and require implementation by the legislature.13 In a similar vein, the Swiss highest Court found that the provisions of the Free Trade Agreement between Switzerland and the European Community of 1972 lacked direct effect.14 As regards treaty norms contained in the Agreement on Free Movement of Persons and human rights conventions enshrining civil and political rights (in particular the ECHR and the ICCPR15), their self-executing character has never been questioned. In addition to monism, the Supreme Court has long recognised the principle of supremacy of international law over domestic law. It follows from this principle that domestic law needs to be interpreted consistently with international law, which enables courts to ‘avoid conflicts between both legal orders’.16 In cases where the Supreme Court considered that it was unable to bring domestic law in line with international law through consistent interpretation, it has generally solved conflicts in favour of treaty norms. This practice was codified in Article 5(4) of the new federal Constitution of 199917, which holds that ‘[t]he Confederation and the Cantons shall respect international law.’18 The German wording of the provision uses however a term slightly softer than ‘respect’.19 The choice of terminology is not innocent. It shows that the framers of the Constitution conceived Article 5(4) as a general guiding principle rather than a precise rule of conflict. Whilst primacy of international law has been generally accepted, courts and legal scholars have debated possible exceptions to the supremacy principle. The controversy pertains to two areas: the relationship between international treaties and federal Acts (section 2.2) and the relationship between constitutional provisions and international law (section 2.3).

12

13

14 15

16

17 18

19

International Covenant on Economic, Social and Cultural Rights (adopted 16 December 1966, entered into force 23 March 1976, 993 UNTS 3). BGE 120 Ia 1, 11-13 Hurst; confirmed but nuanced in BGE 126 I 240, 242 et seq. Technikum Winterthur, and BGE 130 I 113, 123 A. The Supreme Court’s judgments are accessible on www.bger.ch. BGE 104 IV 175, 179 Adams; BGE 105 II 49, 59 et seq. ‘Omo’. International Covenant on Civil and Political Rights (adopted 16 December 1966, entered into force 23 March 1976, 999 UNTS 171). BGE 94 I 669, 678 Frigerio, which was the first case in which the Supreme Court had recourse to the principle of consistent interpretation with international law; for further cases, see BGE 122 II 234, 239 Schweizerischer Bund für Naturschutz and others; BGE 117 Ib 367, 373 Eidgenössische Steuerverwaltung. Any further references to the Constitution refer to the Constitution of 1999. An English version of the Swiss Constitution is accessible on www.admin.ch/ch/e/ rs/c101.html, 13 November 2008. ‘Beachten’.

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2.2 International treaties and federal acts The acceptance of absolute supremacy of international law has long been disputed as it clashes with the Swiss understanding of democracy and the relationship between the legislative and the judicial branch. Similar to the two other jurisdictions discussed in this book – the Netherlands and the United Kingdom – the Swiss constitutional order is based on the supremacy of the legislature vis-à-vis the judiciary. Importantly, in Switzerland the legislature does not only consist of the Parliament20 but also of the people. The idea of self-government through direct democracy is an essential pillar of Swiss national identity and the legitimacy of the constitutional order.21 As regards federal Acts,22 the Swiss citizens are associated to the law making process through the referendum procedure: following the adoption of an Act by both chambers of the Federal Parliament (named Federal Assembly), the Act needs to be approved by popular vote if 50’000 signatures are collected within a three months’ deadline. Reflecting the (direct) democratic legitimacy of federal Acts, the Swiss Constitution precludes their constitutional review: Article 190 of the Constitution – known as the immunity clause – imposes on all Swiss authorities (mainly courts, including the Supreme Court) the duty to apply federal Acts. It is however interesting to note that the immunity clause is not limited to federal Acts but also extends to provisions of international law.23

2.2.1 The duty to apply federal acts and international law

The immunity of both federal Acts and international law from constitutional review has raised the question of how to solve conflicts between Acts adopted by the federal legislature and international treaty norms. Scholars have been divided into two camps. According to a first view, which is dominant nowadays, Article 190 of the Constitution does not provide an answer to conflicts between international and domestic statutory law, since both sets of norms 20 21

22 23

Which includes the Queen, in the case of the United Kingdom. On direct democracy in Switzerland, see Gregory A. Fossedal, Direct Democracy in Switzerland (Transaction Publ.: New Brunswick et al. 2002); Bruno Kaufmann, Rolf Büchi and Nadja Braun, Guidebook to Direct Democracy in Switzerland and Beyond (The Initiative & Referendum Institute Europe: Marburg 2006); Kris William Kobach, The Referendum: Direct Democracy in Switzerland (Aldershot: Brookfield et al. 1993). Many research papers are accessible on the webpage of the Centre for Research on Direct Democracy (c2d), www.c2d.ch, 19 November 2008. Art. 163(1) Constitution. Art. 190 Constitution reads as follows: ‘The Federal Supreme Court and the other judicial authorities shall apply the federal acts and international law.’

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need to be applied. Their relationship is governed by the principle of supremacy of international law, which applies to all three branches of government.24 Scholars falling into the second camp view Article 190 of the Constitution mainly as enshrining the principle of separation of powers: it is up to the legislature and not the judiciary to assess the conformity of a legislative act with higher norms, regardless of whether they are enshrined in the federal Constitution or in international treaties.25 The separation of powers’ argument has had particular relevance to human rights treaties as they contain to a large extent guarantees identical to those embedded in the federal Constitution. In other words, does Swiss membership to the ECHR allow courts to introduce constitutional review of federal Acts through the back door?26 The Supreme Court’s position on this question will be analysed in more detail below.27 24

25

26

See e. g. Olivier Jacot-Guillarmod, Le juge national face au droit européen (Helbing & Lichtenhahn/Bruylant: Basle, Brussels 1993), 79, 108 et seq, 243 et seq., 152; Walter Kälin, ‘Der Geltungsgrund des Grundsatzes « Völkerrecht bricht Landesrecht »’ in Die Schweizerische Rechtsordnung in ihren internationalen Bezügen, Festgabe zum Schweizerischen Juristentag (1988) 124bis ZBJV, 45 et seq.; Id., ‘Kolumne: Schubert und der Rechsstaat oder: Sind Bundesgesetze massgeblicher als Staatsverträge?’ (1993) 112 ZSR I, 73 et seq.; Astrid Epiney, ‘Ende oder Weiterführung der Schubert-Praxis?’ (1997) AJP, 634 et seq.; Id., ‘Das Primat des Völkerrechts als Bestandteil des Rechtsstaatsprinzips’ (1994) 95 ZBl, 537 et seq.; Luzius Wildhaber, ‘Bemerkungen zum Fall Schubert betreffend das Verhältnis von Völkerrecht und Landesrecht’ (1974) 30 SJIR, 195-201. See e. g. Francis Cagianut, ‘Die Bedeutung der Konvention zum Schutze der Menschenrechte und Grundfreiheiten für den Schweizer Richter’ in Yvo Hangartner and Stefan Trechsel (eds), Völkerrecht im Dienste des Menschen: Festschrift für Hans Haug (Haupt: Bern, Stuttgart 1986), 53 et seq.; Hansjörg Seiler, ‘Das völkerrechtswidrige Bundesgesetz; Artikel 113 Absatz 3 BV im Verhältnis zu Völkerrecht, EG und EWR’ (1992) 88 SJZ, 377-387; Id., ‘Noch einmal: Staatsvertrag und Bundesgesetz. Replik auf den Diskussionsbeitrag von Astrid Epiney 1994 537-561’ (1995) 96 ZBl, 451456. For scholars answering in the affirmative, see e. g. Giorgio Malinverni, ‘L’article 113, alinéa 3 de la Constitution fédérale et le contrôle de la conformité des lois fédérales à la Convention européenne des droits de l’homme’ in Francis Cagianut et al. (eds), Aktuelle Probleme des Staats- und Verwaltungsrechts, Festschrift für Otto K. Kaufmann (Haupt: Bern 1989), 381-391, 383 et seq.; Claude Rouiller, ‘Le contrôle de la constitutionnalité des lois par le Tribunal fédéral suisse’ (1990) 23 Revue française d’études constitutionnelles et politiques, 147-158, 157; contra: Andreas Auer, Die schweizerische Verfassungsgerichtsbarkeit (Helbing&Lichtenhahn: Basle, Frankfurt 1984), no. 170 et seq.; Arthur Haefliger, Die Europäische Menschenrechtskonvention und die Schweiz: Die Bedeutung der Konvention für die schweizerische Rechtspraxis (Stämpfli: Bern 1993);

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2.2.2 The Schubert doctrine

Outside the human rights context, the Supreme Court has shown some sympathy for the separation of powers argument. In a highly controversial case named Schubert28, the court adopted in 1973 a qualified lex posterior rule: it held that federal Acts would exceptionally prevail over an international treaty if the legislature knowingly and willingly departed from a treaty norm. The clear intention of the legislature also sets limits to the courts’ ability to avoid conflicts by interpreting national law in conformity with international law.29 Since it handed down Schubert, the Supreme Court has adopted an approach described by an eminent international lawyer as ‘muddling through’.30 In some cases, emphasis is laid on the supremacy principles, in others, the Schubert doctrine is still invoked.31

2.3 International law and constitutional provisions In addition to its influence on the principle of supremacy of international law with respect to Federal Acts, direct democracy has also had an impact on the relationship between international law and the federal Constitution. The so-called popular initiative enables 100,000 citizens to trigger the amendment procedure of the Swiss founding document and to submit a proposal of a new constitutional provision to popular vote.32 Like constitutional amendments initiated by the federal authorities, the adoption of those emanating from the citizens require a double majority of both the Swiss people and the

27 28 29 30

31

32

Michel Hottelier, La Convention européenne des droits de l‘homme dans la jurisprudence du Tribunal fédéral: contribution à l’étude des droits fondamentaux (Payot: Lausanne 1985); Dietrich Schindler, ‘Die Schweiz und das Völkerrecht’ in Alois Riklin, Hans Haug and Raymond Probst (eds), Neues Handbuch der schweizerischen Aussenpolitik (Haupt: Bern 1992), 99-119, 115. Section 3.1. BGE 99 Ib 39. BGE 112 II 1, 13 Wohnbau AG Giswil. Luzius Wildhaber, ‘Diskussionsvotum’, in René Rhinow, Stephan Breitenmoser and Bernhard Ehrenzeller, Fragen des internationalen und nationalen Menschenrechtsschutzes, Symposium zum 60. Geburtstag von Luzius Wildhaber, (Helbing&Lichtenhahn: Basle, Frankfurt 1997), ZSR Beiheft no. 25, 93; for a similar view, see Yvo Hangartner, ‘Ende oder Weiterführung der Schubert-Praxis?’ (1997) no. 5 AJP, 634 et seq. For cases confirming Schubert, see BGE 112 II 13, E. 8 Wohnbau AG Giswil; BGE 116 IV 262, 269 X; BGE 117 Ib 367, 370 Eidgenössische Steuerverwaltung; BGE 117 IV 124, 128 Staatsanwaltschaft des Kantons Zürich; BGE 118 Ib 277, 281 S; BGE 111 V 201, 203 Caisse de compensation du canton du Jura; BGE 119 V 171, 177 X. Art. 139(1) and 194(1) Constitution.

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cantons.33 Popular initiatives play a crucial role in the Swiss political system, as they enable minorities to make their voices heard. Since the creation of the federal state, 268 initiatives obtained the necessary support of at least 100,000 signatures, of which 169 were submitted to popular vote and 16 accepted.34 As the frequent use of initiatives shows, Swiss citizens do not view the Constitution as an intangible document removed from ordinary politics but rather as a policy instrument enabling the people to shape and participate in the political process. Against this background, the Swiss Constitution has always been perceived as flexible. Although legal scholars have discussed for decades whether some, and if so, which constitutional provisions and principles were unchangeable,35 the view prevailed for a long time that neither the Constitution nor public international law set any limits to the people’s power to alter the founding document. In the last decade of the 20th Century, the absolute nature of popular sovereignty was challenged: in 1996, the Federal Parliament (which is the competent body to decide on the validity of popular initiatives)36 for the first and only time declared a popular initiative invalid because it was incompatible with mandatory norms of international law (ius cogens).37 The Constitution of 1999 codified this precedent, subjecting the validity of all constitutional amendments to the condition that they comply with ius cogens.38 A contrario, a literal reading of the Constitution implies that 33

34

35

36 37

38

Art. 140(1) let. a with Art. 142(2) Constitution. Constitutional amendments are thus subject to a mandatory referendum, which is to be distinguished from the optional referendum which applies to federal Acts. The statutory referendum is optional to the extent that the popular vote needs to be triggered by the collection of signatures (see section 2.2), whereas in the case of the mandatory referendum, the act in question is automatically subject to popular vote. The federal authorities frequently react to an initiative in elaborating a so-called counter-proposal, which consists in most cases in statutory amendments. If they are satisfied with the counter-proposal, the authors of the initiative generally decide on its withdrawal, which explains why a substantial number of initiatives is not submitted to popular vote despite having gathered the necessary number of signatures. For an overview, see Luzius Wildhaber, ‘Art. 118’ in Jean-François Aubert, Kurt Eichenberger, Jörg Paul Müller et al. (eds), Kommentar zur Bundesverfassung der Schweizerischen Eidgenossenschaft vom 29. Mai 1874 (Helbing&Lichtenhahn: Schulthess, Stämpfli, Basle, Zurich, Bern 1996), no. 39 et seq. Art. 139(3) Constitution. The initiative in question was named ‘Initiative For a Reasonable Asylum Policy’ and provided for the automatic expulsion of all asylum seekers who had entered the country illegally (see BBl 1994 III 1486). It was declared invalid for infringing the principle of non-refoulement (BBl 1996 I 1355). Art. 139(2), Art. 193(4) and 194 (2) Constitution. See Arnold Pascal, ‘Ius cogens als materielle Schranke der Verfassungsrevision’ in Thomas Fleiner et al. (eds) Die

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constitutional amendments which infringe rules of international law that are not considered mandatory are valid and need to be subject to popular vote. As we will see, the literal understanding of the Constitution clashes with Switzerland’s obligations flowing from international human rights treaties. Due to the supervisory function of the European Court of Human Rights, potential conflicts between popular initiatives and Convention rights have thus become the focus of debate.

3. The impact of the European Convention on Human Rights Switzerland’s ratification of the ECHR has raised the question to what extent the need to ensure compliance with the Convention has had an impact on the aforementioned rules governing the relationship between domestic and international law and the scope of judicial review. As outlined above, difficulties arise in cases where Convention rights clash with either federal Acts (section 3.1) or constitutional provisions originating from a popular initiative (section 3.2).39

3.1 Federal acts 3.1.1 Evolution of the case law

Confronted with federal Acts considered incompatible with the Convention, the Supreme Court first took a cautious stance. In a series of judgments handed down in the 1980s, it held that the ECHR had not affected the immunity clause and in no way interfered with the internal division of powers between the legislature and the judiciary. Consequently, the Court found that the Convention did not grant it any more powers than those based on the federal Constitution and federal rules of procedure.40

39

40

neue schweizerische Bundesverfassung: Föderalismus, Grundrechte, Wirtschaftsrecht und Staatsstruktur (Institute of Federalism, Helbing & Lichtenhahn: Fribourg, Basle, Geneva et al. 2000), 53-70, 53 et seq.; Robert Baumann, ‘Völkerrechtliche Schranken der Verfassungsrevision’, (2007) 108 ZBl, 181 et seq. For studies on the reception of the ECHR, its status in the Swiss legal order and its relationship with federal Acts and the Constitution, see Keller (n 9) 602 et seq (with many further references); Daniela Thurnherr, ‘The Reception Process in Austria and Switzerland’ in Helen Keller and Alec Stone Sweet (eds) A Europe of Rights. The Impact of the ECHR on National Legal Systems (OUP: Oxford 2008), 311-391. Unpublished decisions of 14 June 1983, (1984) SJIR 203 et seq. and of 18 October 1984, (1985) SJIR 250 et seq. and of 11 February 1985, (1986) SJIR, 127; See Keller (n 9), 610.

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As was to be expected, the Supreme Court’s deferential approach towards the legislature was difficult to reconcile with Switzerland’s obligations under the Convention. The European Commission pointed in some cases to the absence of an effective national remedy to review federal Acts and considered that the domestic remedies had been exhausted41 although the applicant had failed to appeal to the Swiss Supreme Court before filing an application with the Strasbourg organs.42 The Supreme Court hinted at a reconsideration of its practice in a judgment named Eidgenössische Steuerverwaltung of 15 November 1991.43 It held that the principle of supremacy of international law implied that all domestic law – including the Constitution and the immunity clause – had to be interpreted in conformity with international law. As international law was binding on all state organs, the judiciary did not breach the principle of separation of powers if it refused to leave the harmonisation of domestic and international law to the province of the other branches of government. Although the Court lacked the power to strike down an Act incompatible with the ECHR, it was able to assess its conformity with the Convention could even refuse to apply a statutory provision infringing Convention rights. As the Court was of the view that the Act in question could be construed in the light of the ECHR, it concluded that in the absence of a conflict, it did not have to make a final ruling on the relationship between federal Acts and the Convention.44 Two cases decided the year following Eidgenössische Steuerverwaltung failed to establish more clarity. In the first case, the Supreme Court held in an obiter dictum that the judiciary’s refusal to apply a statutory provision in order to avoid a conflict with the ECHR was problematic in the light of the immunity clause and the principle of separation of powers. The Court could, however, assess the compatibility of the Act and issue a declaratory judgment, inviting the legislature to bring domestic law in conformity with international law.45 A month later, the Court opted for yet another approach. It left the question open as to whether the Convention was hierarchically superior to federal Acts and brought the disputed statutory provision in conformity with the ECHR through interpretation. Again in an obiter dictum, it stated its willing41 42

43 44 45

See Article 35 para. 1 ECHR. Cf. Mark E. Villiger, ‘Prozessvoraussetzungen von Beschwerden an die Europäische Menschenrechtskonvention’, (1997) no. 8 AJP, 990-996, 993; Keller (n 9), 610. BGE 117 Ib 367. BGE 117 Ib 367, 373. BGE 118 Ia 341, 353, M. With respect to the control of constitutionality of federal statutes, the Supreme Court has adopted the same line of reasoning, holding that the immunity clause imposed on the Court a duty to apply federal legislation but did not enjoin the court from making an assessment of the constitutionality of a federal Act (see Andreas Auer, Giorgio Malinverni and Michel Hottelier, Droit constitutionnel suisse, vol. I [2nd edn, Stämpfli: Bern 2006], 661).

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ness to solve conflicts based on the lex posterior rule. In cases where the principle of consistent interpretation failed as a harmonising strategy, the Court would thus decide in favour of the Convention if the conflicting statutory provision predated the ratification of the ECHR.46 To complicate matters even further, the subsequent case law displayed some divergence between the various sections of the Supreme Court. Whilst the cases mentioned so far were handed down by the second public law division of the Court, the second civil law division delivered some judgments which showed that the civil law judges were not as willing to enforce international human rights as their public law colleagues, in particular in cases where the alleged violation originated in a provision of the Swiss Civil Code,47 the most ancient and highly esteemed statutory codification in the field of private law.48 The second civil law division either summarily denied a breach of Convention rights, questioning whether the judgments rendered by their public law colleagues were fully applicable to private law,49 or flatly denied its power to review provisions of the Swiss Civil Code in the light of the Convention based on the immunity clause.50 In the PKK judgment, decided in 1999 by the first public law division, the Supreme Court was squarely confronted with an obvious conflict between a federal Act and the Convention.51 The case arose from the seizure of propaganda material in favour of the PKK by the Swiss customs authorities. Subsequent to this decision, the Swiss Federal Council (the Swiss Government) ordered the confiscation of the material. The owner of the propaganda leaflets appealed to the Supreme Court, invoking a violation of the right to freedom of expression, enshrined in Article 10 ECHR. The judges declared the appeal admissible, although the federal Act governing the procedure before the Court explicitly excluded judicial review of the Swiss Federal Council’s decisions. They based the admissibility of the appeal directly on Art. 6(1) ECHR and were thus willing to set aside a clear provision contained in a federal Act so as to avoid a breach of the fair trial guarantees enshrined in the Convention.52 Moreover, 46 47 48

49 50 51 52

BGE 118 Ia 473, 480, S. and F; see also BGE 118 Ib 277, 281 S. Swiss Civil Code of 10 December 1907, RS 210.

On the divergence between the case law of the private and the public law divisions of the Supreme Court, see Keller (n 9), 359 and 615. BGE 122 II 414, 416, B., M. and M. BGE 120 II 384, 387, E. and B. BGE 125 II 417, confirmed in BGE 130 I 312, 318 A. The European Court of Human Rights confirmed in its Linnekogel judgment that the procedural guarantees enshrined in Article 6(1) ECHR applied to cases where a national Act excluded an appeal. Based on the specific wording of the Swiss Act, the applicant omitted to appeal against a decision of the Swiss Government to the Supreme Court and filed an application with the European Court of Human Rights. As the application was lodged in Strasbourg before the Supreme Court handed

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the judgment made some general statements on the relationship between domestic and international law. The starting point was that the immunity clause was not a rule of conflict in favour of the legislature, as it declared that both international law and federal Acts had to be applied. The Court recalled its holding in Eidgenössische Steuerverwaltung, based on which the principle of supremacy of international law applied to all the domestic authorities, including courts. As a consequence, the judiciary had the power to disapply federal Acts infringing international law. In the judges’ view, this outcome was all the more necessary when the international norms in question ‘served the protection of human rights’53. Making reference to the Schubert case,54 the Court left open the question ‘whether in other cases different solutions were envisageable’. In referring to ‘other cases’, the Supreme Court Judges seem to indicate their willingness to abandon the qualified lex posterior rule developed in Schubert as far as human rights treaties are concerned and to disapply even federal Acts which were enacted in full awareness – or even with the intention – of breaching international human rights norms.

3.1.2 The Revision procedure

The effectiveness of the ECHR in the Swiss legal order was not ensured by the judiciary alone. The legislature recognised the need to comply with Strasbourg judgments and adopted in 1991 a statutory provision enabling the Supreme Court to revise its judgments held to infringe a fundamental right under the Convention: based on Article 122 of the Supreme Court Act,55 revision can be sought when the European Court of Human Rights finds an infringement of a Convention right in a final judgment, on the condition that revision is necessary to eliminate the consequences of the human rights violation, monetary compensation being insufficient to this effect.

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down the PKK judgment, the European Court of Human Rights considered that the applicant had legitimately considered that no domestic remedies were available to him. The PKK case, which had been decided in the mean time and had been brought to the Strasbourg Court’s attention, could not be opposed to the applicant. Based on this reasoning, the Court held that the domestic remedies had been exhausted and found a violation of the Convention (App. No. 42874, ECtHR 1 March 2005 Linnekogel v Switzerland (App no 43874/98)). BGE 125 II 417, 425. BGE 99 Ib 39, see section 2.2.2. Federal Act on the Swiss Supreme Court of 17 June 2005, RS 173.110, which replaced Art. 139a of the Federal Act on the Organisation of Judicial Proceedings (RS 173.110), including its Art. 139a on the revision following a judgment by the European Court of Human Rights.

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In providing for a special revision procedure to bring domestic law in compliance with the ECHR, the Federal Parliament may well have encouraged the Supreme Court’s bold line of case law adopted in the PKK judgment. In a judgment handed down in 1998,56 the Court reiterated that the immunity clause was not a rule of conflict. The special revision procedure, however, was of such nature. Its aim and spirit seek to prevent the Court from continuing to apply a statutory provision which the European Court of Human Rights found to be incompatible with the Convention. Put differently, Article 122 of the Supreme Court Act is a lex specialis with respect to Article 190 of the Constitution. The immunity clause thus does not prevent the Court from revising a judgment which had given precedence to a federal Act over a Convention right. From the duty implied in the Supreme Court Act to disapply a federal act following a binding judgment of the European Court of Human Rights, it was a relatively small step for the Court to claim the same power so as to prevent a violation of the Convention and a disapproval by Strasbourg in the first place.

3.1.3 Uncertainties and inconsistencies

As the previous section has shown, when faced with a conflict between a federal Act and the ECHR, the Supreme Court’s case law has been gradually evolving from initial deference to the federal legislature towards disapplication of statutory provisions clashing with Convention rights. This evolution has not, however, been a linear progression. Although the PKK judgment57 has not been overruled, the case law still sometimes reveals the Court’s reluctance to disavow the Federal Parliament and to set aside a statutory provision which leads to conflicts with the European Court of Human Rights. Two recent Strasbourg judgments are examples in point: in Verein gegen Tierfabriken,58 which has been deferred to the Grand Chamber,59 the chamber judgment held that the Supreme Court’s refusal to revise its judgment following the finding of a violation by the Strasbourg Court60 amounted to a new breach of the Convention. The finding of a new violation has triggered lively debates on the European Court’s power to enforce its judgments. It reveals the Strasbourg judges’ exasperation at the Supreme Court’s reluctance to give the revision procedure its full effectiveness. As some scholars have highlighted, although the Court has affirmed its power to set federal Acts aside through the 56 57 58

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BGE 124 II 480, 487 Erben P. BGE 125 II 417. ECtHR 4 October 2007, Verein gegen Tierfabriken Schweiz (VGT) v Switzerland (App

no 32772/02). The Grand Chamber held a hearing on 9 July 2008. ECtHR 2001-VI, VGT Verein gegen Tierfabriken v Switzerland (App no 24699/94).

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revision procedure, it sometimes shies away from using it and prefers to hold that revision is not absolutely necessary in the case at hand.61 Emonet is another example showing that the European Court of Human Rights disapproves of the Supreme Court’s excessive deference towards the legislature.62 The Strasbourg Judges found a violation of Article 8 ECHR and openly criticised the Swiss judgment, holding that it had opted for a ‘blind, mechanical application of the provisions of the law’ instead of taking into account the applicants’ biological and social reality. This lack of sensitivity ‘flew in the face of the wishes of the persons concerned, without actually benefiting anybody’.63 Not surprisingly, the criticised judgment of the second private law division concerned the application of the Swiss Civil Code.64 The three applicants, who had formed a de facto family for many years, had invoked a breach of their family life in the context of adoption proceedings. Based on mutual agreement, Mr Emonet filed a request to adopt his partner’s adult daughter, who was dependent upon his support following a serious illness resulting in severe physical disability. The Swiss authorities allowed the request but informed the applicants that the adoption would have the consequence of severing the mother–daughter relationship, since the Swiss Civil Code specifically only provided for the right to adopt one’s spouse’s (and not one’s partner’s) child. Accordingly, the Act contained only one explicit exception to the principle that the adoption severed all existing family ties: that in favour of the legal relationship uniting one’s spouse with the adopted child.65 Faced with an appeal alleging a violation of Article 8 ECHR, the Supreme Court refused to find a lacuna or an implied exception in the Swiss Civil Code, preferring a literal reading. After a lengthy analysis of the Act’s history and Parliament’s intention, the Court swept aside the human rights challenge, holding that the right to one’s family life could hardly be understood as conferring a right to adopt that was not provided for by statute.66 This reasoning shows how deeply 61

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See the review and criticism of the case law by Michel Hottelier, ‘La procédure suisse de révision consécutive à un arrêt de condamnation par la Cour européenne des droits de l’homme’(2001) RTDH, 743-764. ECtHR 13 December 2007, Emonet and others v Switzerland (App no 39051/03). Ibid. para. 86. See 129 III 656 Office fédéral de la justice. Art. 267C(2) of the Swiss Civil Code (n 47), pursuant to which ‘[t]he existing parent-child relationships shall be severed, save in respect of the spouse of the adoptive parent.’ BGE 129 III 656, 663 Office fédéral de la justice; for a similar reasoning, see BGE 120 II 225, 227, D. v W. and BGE 120 II 76, 82 Hertel, in which the Supreme Court held that freedom of expression did in any case not confer the right to express opinions in violation of the law. This reasoning led the Court to uphold an injunction which was based on the Unfair Competition Law Act and enjoined a scientist from

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rooted the pre-eminence of the legislature is in Swiss political culture. Instead of viewing fundamental rights as hierarchically superior to federal Acts, judges sometimes implicitly adopt the opposite vision, confining human rights to the sphere not occupied by statutory provisions.

3.2 Popular initiatives By contrast with violations originating in federal Acts, the European Court of Human Rights has so far not been called upon to examine alleged infringements resulting from provisions of the Swiss Constitution. This may soon change. During the first decade of the new millennium, populist, xenophobic parties have steadily been gaining ground. The claim that international law, and the rule of foreign judges have displaced popular sovereignty forms an important part of their nationalist rhetoric. In support of this claim, a series of popular initiatives have been launched, the effect of which – and probably also their aim67 – is to violate international human rights norms. In 2008, for instance, the necessary number of signatures was gathered in support of two initiatives highly problematic in the light of international human rights: the first initiative provides for a total ban to build minarets in Switzerland,68 the second for the automatic expulsion of foreign residents who have either committed a serious crime or abused the social security system.69 In both cases, the Federal Government has so far voiced the opinion that the Federal Assembly ought to declare the initiatives valid and to submit them to popular vote, arguing that neither initiative violated mandatory norms of international law.70

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highlighting the health hazards of microwaved food on the grounds that his opinions represented minority views; the European Court of Human Rights, however, found that the injunction violated Art. 10 ECHR (see ECtHR 1998-VI, 2298 Hertel v Switzerland (App no 25181/94 (1982)). See Pierre Tschannen, ‘Wem gehört die Verfassung? Neuer Streit um die Gewaltenteilung’ (2007) 143 ZBJV, 793 et seq. BBl 2007 3231. For an analysis of the initiative in the light of fundamental rights, see Alexander Schaer, ‘Das Minarett im (politischen) Kreuzfeuer’(2008) no. 9 AJP, 1133-1138. BBl 2007 4969. For an analysis of the initiative in the light of fundamental rights, see Thomas Gächter and Matthias Kradolfer, ‘Von schwarzen Schafen, Gedanken zur Ausschaffungsinitiative aus juristischer Sicht’ (2008) no. 1 ASYL 12-20. As regards the minaret initiative, the Swiss Federal Council has already published its official assessment of the initiative in the Federal Bulletin (BBl 2008 7603, accessible on www.admin.ch/ch/d/ff/2008/index.html, 17 November 2008). As regards the initiative on the expulsion of foreigners, the official assessment is due in summer 2009. The Federal Council has however issued a preliminary assessment considering that the initiative does not violate mandatory norms of international law: see www.

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As regards the second initiative, this assessment is not only highly debatable but legally flawed: as the initiative provides for no exception whatsoever, the automatic expulsion of foreigners is incompatible with the principle of nonrefoulement,71 which is generally considered as forming part of ius cogens.72 It remains to be seen whether the Federal Assembly will adopt an equally narrow interpretation of ius cogens. Its decision to confirm the validity of one particular initiative despite its incompatibility with the procedural safeguards enshrined in Art. 5(4) ECHR shows Parliament’s reluctance to adopt an extensive reading of ius cogens. The said initiative was adopted by a majority of the people and the cantons on 8 February 2004.73 It provides for life internment of sexual offenders deemed incurable without the possibility to request early release, and thus excludes periodic judicial review of the legality of the detention, as is required by Art. 5(4) ECHR.74 Faced with the difficulty of reconciling the new constitutional provision with the Convention, Parliament first refused to implement the initiative but later adopted a new provision amending the Swiss Penal Code75 which, based on a highly creative reading of the new constitutional provision, attempted to bring it in line with Art. 5(4)

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bfm.admin.ch/bfm/de/home/dokumentation/medienmitteilungen/2008/ref_200810-154.html, 18 November 2008. See Art. 33 of the Geneva Convention Relating to the Status of Refugees (adopted 28 July 1951, entered into force 22 April 1954, 189 UNTS 150), Art. 3 ECHR, Art. 6 and 7 ICCPR, and Art. 3 of the Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment (adopted 10 December 1984, entered into force 26 June 1987, 1465 UNTS 85). As mentioned above (section 2.3), the Federal Parliament had previously declared an initiative invalid because it infringed the principle of non-refoulement, a norm considered as part of ius cogens. See also the assessment of the UNHCR of the initiative, UNHCR-Verbindungsbüro für die Schweiz und Liechtenstein, ‘UNHCRStellungnahme zur Eidgenössischen Volksinitiative “für die Ausschaffung krimineller Ausländer (Ausschaffungsinitiative)”, 15 October 2008, www.unhcr.ch/include/ fckeditor/custom/File/ausschaffungsinitiative%202008(6).pdf, 20 November 2008. See Art. 123a Constitution. The initiative provides for one exception: the justification of the incarceration (which is based on the dangerous nature of the offender) can be reviewed if new scientific findings exist which prove that the offender can be cured. Based on Art. 5(4) ECHR, periodic review of the lawfulness of the detention implies that the court can assess whether the conditions justifying the detention (i. e. the dangerous nature of the offender) still exist and is able to order the release of the detained person if this is not the case. Art. 56(4)bis; art. 64(1)bis; art. 64c of the Swiss Penal Code of 21 December 1937, RS 311.0.

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ECHR. The resulting compromise76 reduces the potential for conflicts with the ECHR, without ensuring full compliance.77 At the same time, it is difficult to

reconcile with the clear wording and intent of the initiative, which makes it a target of criticism of both human rights groups and supporters of unlimited popular sovereignty. Faced with the challenge of avoiding violations of international human rights norms, some scholars have placed their hopes on the Supreme Court. In cases where a popular initiative incompatible with human rights is adopted by popular vote, they hold that the Court ought to apply a similar reasoning to the PKK case and refuse to apply a constitutional provision clearly infringing fundamental rights.78 Whilst this solution offers the advantage of avoiding conflicts with the European Court of Human Rights, it entails the risk of appearing inconsistent: it would indeed be difficult to explain to voters that a 76

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The implementing provisions of the Swiss Penal Code enable the interned person to seek review by a specialised panel, which would focus on the question whether new scientific evidence exists. If this is the case, treatment would be offered to the offender, who could following his or her successful treatment ask the competent Court to be released. So as to provide for period judicial review of the legality of the detention, it is suggested to interpret ‘new scientific evidence’ broadly, as encompassing also changes affecting the personality of the offender or outside circumstances (see Peters and Pagotto [n 9] 57). See the assessment on www.humanrights.ch/home/de/Schweiz/Politik/Justiz/Freiheitsentzug/idart_5700-content.html, 19 November 2008 and ‘Schlussspurt bei der Verwahrungsinitiative’ NZZ of 19 December 2007 (accessible on www.humanrights. ch/home/upload/pdf/071219_NZZ_mrip_verwahrung.pdf, 19 November 2008). See Andreas Auer and Bénédicte Tornay, ‘Aux limites de la souveraineté du constituant: l’initiative “Pour des naturalisations démocratiques”’ (2007) no. 6 AJP, 740-747; Bénédicte Tornay, La démocratie directe saisie par le juge (Schulthess: Zurich 2008), 139 et seq.; Regina Kiener and Walter Kälin, Grundrechte (Stämpfli: Bern 2007), 21. Other scholars argue that initiatives violating international human rights norms ought to be declared invalid by the Federal Parliament based on an extensive interpretation of the ius cogens concept (see e. g. Tristan Zimmermann, ‘Quelles normes imperatives du droit international comme limite à l’exercice du droit d’initiative par le peuple?’ (2007) no. 6 AJP, 748-760). According to a third opinion, initiatives violating human rights enshrined in treaties which cannot be terminated, either de facto (as is the case for the ECHR) or de iure (as is the case for the ICCPR) ought to be declared invalid because it is legally impossible to implement them (see Giusep Nay, ‘Sollen Volksinitiativen ungültig sein, wenn sie nur gegen nichtzwingendes Völkerrecht verstossen?’ (2007) no. 3 Plädoyer, 29); a last strand of scholarship holds that the validity of popular initiatives violating human rights norms not forming part of ius cogens has to be respected, unless the Constitution is revised and provides for larger limits than ius cogens (see Baumann [n 38], 206).

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new constitutional provision which they had approved would then be deprived of its effect by the Supreme Court even though the Federal Parliament had previously declared the initiative valid.79

4. The impact of the Agreement on Free Movement of Persons In contrast with the European Convention on Human Rights, the Agreement on Free Movement of Persons concluded between Switzerland and the European Union is not a human rights treaty. Its main aim is to extend the market freedoms granted to the citizens of the EU-member states to Switzerland. The rationale of the Agreement is mainly economic: it grants free movement rights to Swiss and EU-citizens as well as to their family members so as to enable them to exercise an economic activity, as a worker or a self-employed person. Nevertheless, the Agreement touches upon many areas related to human rights, such as the right of foreigners to move and choose their residence freely,80 questions related to expulsion, and more generally family reunification. The strong connection between free movement rights and fundamental 79

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Authors supporting the disapplication of constitutional provisions violating human rights norms (see Auer and Tornay [n 78]) argue that an extensive interpretation of ius cogens is incompatible with the clear wording of Art. 139(3) Constitution, which requires the Federal Parliament to submit initiatives that do not infringe mandatory norms of international law to popular vote. Moreover, the assessment whether an initiative is compatible with human rights raises difficult legal questions which the Supreme Court is in a better position to assess than a political body. As the Constitution does not provide for the possibility to appeal to the Supreme Court against the Federal Parliament’s decision on the validity of initiatives, the judges cannot exercise a preventive control but can only intervene after the new constitutional provision has been adopted. Lastly, whilst the Constitution does not grant the Federal Parliament the power to invalidate initiatives infringing human rights norms, it requires that constitutional provisions which are incompatible with international human rights be disapplied. This argument is based on the principle of supremacy of international law (Art. 5(4) Constitution), the general duty of all state authorities to respect fundamental rights (Art. 35(2) Constitution) and the immunity clause (Art. 190 Constitution), which imposes on the authorities the duty to apply federal Acts and international law but does not immunize constitutional provisions (the latter argument is advanced by Pierre Tschannen, Staatsrecht der Schweizerischen Eidgenossenschaft, 2nd éd. (2nd edn, Stämpfli: Bern 2007), § 9, note 22; for a criticism highlighting the formalistic nature of this argument, see Peters and Pagotto [n 9], 61, footnote 39). See Art. 12 ICCPR and Article 2 of the Additional Protocol no. 4 to the ECHR. Switzerland has made a reservation to the first provision and has not ratified the mentioned Protocol.

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rights is reflected in the case law of the European Court of Justice (ECJ). As the Court first highlighted in Rutili v Minister for the Interior, the exception clause to the free movement provision needs to be interpreted in the light of fundamental rights.81 Moreover, although not a classic fundamental right, the market freedoms’ rationale is not exclusively instrumental. Apart from furthering economic growth, they also protect the autonomy of the individual. In that vein, the ECJ has conferred direct effect on all four freedoms and described free movement of workers as a ‘fundamental right’.82 This perception is not alien to the Swiss legal order: whilst the first federal Constitution did not contain a systematic and comprehensive human rights catalogue, it protected economic freedom83 and freedom of establishment84. Although the initial aim of both provisions was the creation of a Swiss single market, they have meanwhile also recognised as fundamental rights protecting the individual’s self-development.85 Against this background, it can be argued that the Agreement on Free Movement has a complementary function to the role of the European Convention on Human Rights. Both international instruments thus contribute to the Europeanisation of fundamental rights protection in Switzerland. For a better understanding of this process, it is thus also necessary to examine the reception and the impact of the AFMP.

4.1 The reception of the Agreement on Free Movement of Persons As for the European Convention on Human Rights, the effectiveness of the Agreement on Free Movement depends on its relationship with domestic law. Moreover, in the absence of an international tribunal that supervises the interpretation and application of the Agreement within the contracting parties, the meaning and scope conferred to the Agreement provisions by domestic courts play a crucial role

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Case 35/75, Rutili v Minister for the Interior [1975] ECR 1219; for a recent case, see Case 60/00, Mary Carpenter v Secretary of State for the Home Department [1992] ECR I-6279. See Case C-415/93, Royal club liégeois SA v Jean-Marc Bosman and others [1995] ECR I-4921, para. 129; Case C-616/96, El-Yassini v Secretary of State for the Home Department [1999] ECR I-1209, para. 45. Art. 31 of the Constitution of 1848/74 (Art. 27 of the Constitution of 1999). Art. 45 of the Constitution of 1848/74 (Art. 24 of the Constitution of 1999). For a comparison of the protection of fundamental rights in the EU and in Switzerland, see Maya Hertig Randall, ‘Der Schutz von Grundrechten und individuellen Freiheiten in der Europäischen Union aus schweizerischer Sicht’ (2007) 126 ZSR I, 497-527.

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4.1.1 Conflicts between the Agreement and federal acts

The Agreement on Free Movement soon confronted the Supreme Court with the same thorny question as the European Convention on Human Rights: in case of a clear conflict with a federal Act, was the treaty norm or the statutory provision to prevail? The legal problem the Court faced was remarkably similar to the PKK case. Whilst the AFMP clearly provided for a right to appeal to a court, the Supreme Court Act explicitly excluded appeals in the field of immigration and asylum law. It came as no surprise that the Supreme Court opted for the same solution as in the PKK judgment. Noting that Article 190 of the Constitution does not solve conflicts between international law and federal Acts, the Court referred to the principle of supremacy of international law. It held, however, that it was not necessary to decide whether the AFMP generally prevailed over conflicting federal Acts, as both the lex posterior and the lex specialis rule86 supported an outcome favourable to the Agreement.87 With this cautious approach, the Supreme Court has left open the question whether the Schubert doctrine applies to the AFMP.

4.1.2 Interpretation of the Agreement

Contrary to the EC Treaty, the AFMP does not establish a court with the exclusive competence to ensure the uniform interpretation and application of its provisions. Unlike the national courts of the EU Member States, the Swiss Supreme Court cannot request a preliminary ruling from the ECJ. With the view of guaranteeing consistency between the provisions of the AFMP and EU law, the contracting parties included a special provision in the Agreement: Article 16 holds that terms used in the Agreement which are concepts of Community law need to be interpreted in the light of the ECJ’s case law decided up to the Agreement’s date of signature (21 June 1999).88

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The Court held that the AFMP specifically concerned EU citizens, whilst the Supreme Court Act governed the right to to appeal in the field of immigration and asylum in general. BGE 131 II 352, 355 et seq. On the interpretation of the AFMP, see Astrid Epiney and Robert Mosters, ‘Un exemple d’interprétation des accords conclus entre la Suisse et l’Union européenne: l’accord sur la libre circulation des personnes’ in Astrid Epiney and Florence Rivière (eds), Auslegung und Anwendung von „Integrationsverträgen“. Zur Übernahme des gemeinschaftlichen Besitzstandes durch Drittstaaten, insbesondere die Schweiz (Schulthess: Zurich 2006), 57 et seq.; Astrid Epiney, ‘Zur Bedeutung der Rechtsprechung des EuGH für Anwendung und Auslegung des Personenfreizügigkeitsabkommens’ (2005) 143 ZBJV 2005, 1 et seq.

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Although many Supreme Court judgments contain detailed references to the case law of the ECJ,89 the Swiss federal judges have set some limits to the principle of consistent interpretation, ensuring that they retain considerable discretion to determine the meaning and scope of the treaty provisions. They have done so essentially by two means. The first is the selective choice of whether ECJ judgments handed down after 21 June 1999 will be considered; the second consists in highlighting the different purpose of the AFMP and full EU membership. Both these strategies played an important role concerning the interpretation of the provisions on family reunification.

4.2 Example of the right to family reunification Soon after the signature of the Agreement on Free Movement, legal scholars pointed out that the AFMP granted EU citizens more extensive rights to family reunification than those conferred by domestic legislation to Swiss citizens whose close family member was a foreign national.90 Whilst Swiss law, for instance, set the age limit for family reunification with children at 18,91 Community law and the AFMP extended this limit to 21.92 The divergence between the Agreement on Free Movement and Swiss law thus gave rise to the problem of reverse discrimination.93 One solution to this problem would have been for the Supreme Court to declare that the statutory provisions on family reunification are incompatible with the constitutional prohibition of discrimination based on nationality.94 Although the Supreme Court considers that the immunity clause prevents it from disapplying an unconstitutional provision of a federal Act, it has long held that Article 190 of the Constitution does not prevent it from examining 89 90

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For analysis with detailed references, see Furrer (n 6). For an overview of Swiss law at the time of the entry into force of the AFMP, see Michel Hottelier and Hanspeter Mock, ‘Le Tribunal federal suisse et la « discrimination à rebours » en matière de regroupement familial’ 2003 RTDH, 1275-1304, 1280 et seq. Art. 17(2) of the Act on the Residence and the Establishment on Foreigners (adopted on 26 March 1931) which has meanwhile been replaced by the Federal Act on Foreigners, (adopted on 16 December 2005, RS 142.20). The latter Act has extended the age limit from 18 to 21 so as to remedy the problem of reverse discrimination, subjecting the right to family reunification to the condition that the applicant has been granted a residence permit in a country which has concluded with Switzerland a treaty on free movement (see Art. 42[2]). For the reason of this requirement, see below, text accompanying footnote 102. See the comparison between Swiss law and the AFMP in BGE 129 II 249, A. X. See Hottelier and Mock (n 90). Article 8(2) Constitution.

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the Act’s constitutionality, leaving it up to the legislature to make the necessary amendments.95 Another – and bolder – solution would have been to apply the PKK line of case law96 and to disapply the federal statutory provision on the grounds that they breached the accessory non-discrimination clause enshrined in the European Convention on Human Rights (Article 14), in conjunction with the right to family reunification (Article 8 ECHR). The Supreme Court did not follow either approach. In a judgment handed down in 2003, the Court held that the legislature had been aware of the problem of reverse discrimination when it adopted various legislative measures to prepare the entry into force of the AFMP but had declined to revise the legislation on immigration and residence of foreigners.97 In the light of the clear intention of Parliament, the Court concluded that it was unable to remedy the discrimination of Swiss citizens vis-à-vis EU nationals. Having refused to disapply the Swiss legislation on the ground that it was discriminatory, the Court soon found a way to minimise the inequality of treatment between Swiss and EU-nationals. The solution consisted in a narrow interpretation of the rights to family reunification contained in the Agreement. On 4 November 2003, the Supreme Court dismissed an appeal of an Italian citizen who had invoked the AFMP to request a residence permit for his Slovak wife’s son.98 In doing so, it relied on the judgment of the ECJ in the Akrich case handed down in 2003,99 after the signature of the AFMP. Without explaining why it was justified in taking this case into account, the Supreme Court held that Akrich limited the right to family reunification of EU citizens to third country nationals who were already lawfully residing in a member state. The requirement of prior lawful residence drastically reduces the effectiveness of the right to family reunification: due to strict rules on citizenship, and a strong influx of foreign labour in the sixties and seventies of the 20th Century, a high percentage of immigrants from EU countries have been long term residents or were even born in Switzerland.100 For them, the Supreme Court’s reading of Akrich essentially means that they would first need to return to their country of origin or to another EU country in order to get a permit for their third country family member. Only once the lawful residence requirement was fulfilled would 95

96 97 98 99

100

See BGE 105 Ib 165, 168 et seq.; BGE 103 Ia 53, 55, X. and Y.; BGE 117 Ib 367, 373 Eidgenössische Steuerverwaltung; BGE 125 III 209, 214 et seq. X.; BGE 121 V 229, 230 B. See section 3.1. BGE 129 II 249, A. X. BGE 130 II 1, A. and B. Case C-109/01, Secretary of State for the Home Department v Hacene Akrich [2003] ECR 2811. The AFMP applies to all EU-nationals, independently on whether they took residence in Switzerland before or after the entry into force of the Agreement (see BGE 130 II 1, 7, A. and B.).

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they be able to benefit from the right to family reunification granted by the AFMP. In reaching this conclusion, the Supreme Court did not engage in a detailed analysis of Akrich. Had it done so, it may have reached the same conclusion as some legal scholars, who highlighted the specific facts of the case.101 They differ markedly from the situation of long term EU residents who wish to be united with third country family members. Akrich concerned a Moroccan citizen who illegally entered the United Kingdom and attempted to regularise his stay after marrying a British citizen. The British authorities refused to grant Mr Akrich a residence permit and ordered his expulsion. Having been informed of the rights of family reunification flowing from EU law, Mr Akrich requested that the authorities expel him to Ireland, where his wife had meanwhile taken residence pursuant to the free movement of workers provisions of the EC Treaty. After a short stay in Ireland, the couple returned to the United Kingdom, arguing that the exercise of free movement brought them within the scope of EU law and entitled Mr Akrich to a residence permit. In this specific case, it can be argued that free movement rights were relied upon to evade domestic immigration rules. Against this background, the ECJ’s ruling can be understood as an attempt to prevent the abuse of rights. From the Supreme Court’s perspective, relying on Akrich had the advantage that most challenges to the Swiss immigration rules brought by Swiss citizens wishing to unite with non-EU nationals could be dismissed as raising no problem of reverse discrimination.102 However, in 2007, the ECJ delivered its Yunying Jia judgment103 sending a first signal that Akrich did not have the value of a precedent. Based on this ruling, the Supreme Court was requested to overrule its case law and to construe the rights to family reunification granted under the AFMP more broadly. The Court refused to do so in a judgment of 30 November 2007.104 It pointed out that overruling Akrich would exacerbate the problem of reverse discrimination. This was mainly the case because the Supreme Court’s judgment of 4 November 2003, which adopted the narrow interpretation of the AFMP based on Akrich, had meanwhile inspired the Federal Parliament: whilst revising and considerably tightening the legislation on foreigners, the Federal Assembly decided to subject family reunification for Swiss citizens to the same conditions as for EU nationals and extended the lawful residence requirement to family members of Swiss nationals.105 101

102 103

104 105

See Hanspeter Mock and Fabrice Filliez, ‘Libre circulation des personnes et regroupement familial: à propos de la prise en compte de la jurisprudence de la Cour de Luxembourg par le Tribunal fédéral’ (2006) RSDIE, 237-256. See BGE 130 II 137 IMES and BGE 134 II 10, 20, A. X. and B. X. Case C-1/05, Yunying Jia v Migrationsverket [2007] ECR I-1; for a comment, see M. Elsmore and P. Starup (2007) 44 CMLRev, 787-801. BGE 134 II 10, A. X. and B. X. Art. 42(2) of the Federal Act on Foreigners (n 91).

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Put differently, the immunity of federal Acts and the problem of reverse discrimination had triggered a spiral race to the bottom, leading first to a narrow interpretation of the rights enshrined in the AFMP, which then justified reducing the level of protection granted to Swiss citizens. This legislative change in turn gave further support to maintain a precedent based on a controversial ECJ judgment which failed to convince commentators and the ECJ itself. In its judgment of 30 November 2007, the Supreme Court moreover held that the criticism levelled at Akrich did not justify a reconsideration of its case law, stating that many arguments critical of Akrich were linked to the specificity of the Community legal order and in particular to more recent legislation on European citizenship.106 Akrich, however, was in the Court’s view fully compatible with the more modest aims pursued by the AFMP. In addition, the judges pointed out that both the Akrich and the Yunying Jia judgment were handed down after the signature of the Agreement, which meant that the Court was under no obligation to take either case into consideration. Through the selective consideration of the ECJ’s case law and the emphasis laid on the less ambitious objective of the AFMP as compared with full EU membership, the case law grants the Supreme Court a wide margin of appreciation. This discretion, coupled with the deference to the federal legislature, makes it unlikely that the Court will be willing to abandon its Akrich-inspired jurisprudence. From the point of view of Community law, however, reconsideration would be in order. Following Yunying Jia, the ECJ took a further step in Metock107 and clearly stated that Akrich was overruled.

5. Conclusion The Europeanisation of fundamental rights’ protection in Switzerland has had a profound impact on the relationship between the judicial and the legislative branch. The need to comply with European human rights standards has collided with the Swiss attachment to popular sovereignty and direct democracy. The immunity of federal Acts from constitutional review, and the validity of popular initiatives infringing international human rights standards (except those forming part of ius cogens) have been fundamentally questioned. Nevertheless, it remains a challenge to abandon the idea of absolute popular sovereignty, and to replace it with a concept of limited sovereignty – sovereignty which is to be exercised within the framework of human rights.

106

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The clearest emphasis of the divergent aims of the AFMP and full EU-membership is found in another judgment on family reunification, BGE 130 II 113, 120 et seq. X. ECJ 25 July 2008 (Metock and others v Minister for Justice, Equality and Law Reform), Case C-127/08.

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The Supreme Court has been gradually moving in this direction, showing its willingness to disapply federal Acts which infringe the European Court of Human Rights. This process has been slow, cautious and marked by inconsistencies between various sections of the Court. The federal judges have tended to move two steps forwards and one step back, sending signals favourable to judicial review and supremacy of international law, whilst retreating in subsequent cases. Moreover, the Court’s approach differs depending on the policy field in question. So far, the cases in which the Supreme Court judges have been willing to disapply statutory provisions in order to secure compliance with the Convention concerned rules of federal procedure. The Court has by contrast shown deference to the legislature when substantive provisions were at issue. This holds particularly true for norms enshrined in old and highly esteemed federal Acts, like the Swiss Civil Code, or sensitive policy fields, like immigration. Case law on the right to family reunification under the Agreement on Free Movement of Person concluded between Switzerland and the European Union is a particularly clear example of the Court’s deference towards the legislative branch in the field of immigration. It shows that the relationship between European and domestic law is not a one way street. Whilst both the European Convention on Human Rights and the Agreement on Free Movement have had an impact on the scope and meaning of the constitutional provisions on judicial review and on the relationship between international and domestic law, the opposite is also true: the immunity of federal Acts from constitutional review prevented the Court from setting aside federal provisions on family reunification on the grounds that they gave rise to reverse discrimination of Swiss citizens. The Court then chose to interpret the rules on family reunification under the Agreement on Free Movement in a restrictive manner with a view to minimising the inequality between Swiss and EU citizens. The constitutional immunity clause and the deference to the federal legislature thus had an indirect impact on the scope and the meaning of the Agreement, which shows that deeply rooted constitutional myths like unlimited popular sovereignty die hard.

Gold-plating and Double Banking: an Overrated Problem? Wim Voermans*

1. The red tape reduction mantra: strict interpretation of EC Law as a source of administrative burden In the last decade business and industry throughout Europe have complained bitterly about the administrative burden imposed by legislation. Administrative requirements resulting from domestic or EU legislation are an important determinant of the business environment, since businesses across the EU are obliged to spend considerable amounts of time filling in forms and reporting on a wide range of issues. In 2007 the costs thereof were estimated to amount to 3.5 % of the GDP in the EU.1 Obviously burdens like these impede economic growth, and inevitably throw up obstacles when trying to achieve the Lisbon targets the EU has set itself for the year 2010.2 Reducing administrative burdens – or ‘cutting red tape’ 3 as it is also commonly labelled – has therefore become topi*

1

2

3

Professor of Constitutional and Administrative Law, Faculty of Law, Leiden University. President of the Dutch Association for Legislation and vice-president of the International Association for Legislation (formerly the European Association for Legislation), Steenschuur 25, P. O. Box 9520 2300 RA Leiden, the Netherlands. The research in this contribution constitutes part of the research programme Trias Europea. Communication of the Commission COM (2007) 23 final, Action Programme for Reducing Administrative Burdens in the European Union, 4. At the March summit of 2000, the EU Heads of States and Governments in Lisbon agreed to make the EU ‘the most competitive and dynamic knowledge-driven economy by 2010’. From the outset these targets have seemed somewhat overambitious. At present (2008), it is obvious that the targets set in 2000 will not be met by far. See for a sobering 2005 overview of the targets and the amount of (then) 25 that have met these targets. http://prawo.uni.wroc.pl/~kwasnicki/EkonLit1/the_quatifiable_lisbon.pdf. The origin of the term is not quite clear but it is generally held that ‘red tape’ refers to the 17th and 18th century English practice of binding documents and official papers with red tape. Another explanation holds that the 19th century records of US Civil War veterans were bound in red tape, which was particularly difficult to remove.

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cal: it ties in well with economic policies, and has become a very popular electoral promise Europe wide. Red tape reduction is at the heart of a great deal of the regulatory reform projects that have spread like wildfire throughout many EU member state countries.4 The European Commission itself has embarked on a Better Regulation strategy aiming for a reduction of administrative costs by as much as 25 % by 2012. This would – it is believed – have a significant economic impact on the EU economy – and an increase in GDP of about 1.5 % or around € 150 billion.5 Typically red tape reduction policies try to reduce administrative burden by way of screening the legislative stock and cutting away excessive burdens. In many EU countries however, one also aims to prevent disproportional burden from arising when drafting legislation. In this respect European legislation, especially EC Directives, come into focus. EC Directives are believed to be a source of a great deal of red tape, both in themselves and indirectly. Businesses and industry in the UK and the Netherlands alike – until recently – believed that in the act of transposing a Directive, governments and government agencies were rather inclined to do more than what was strictly required by the Directive. Exceeding the strict terms of EC Directives governments and agencies were suspected – wilfully6 or unconsciously – to “tag on” additional national measures on the back of European Directives, resulting in unnecessary burdens and competitive disadvantages for domestic businesses. In the UK these national add-ons are commonly referred to as gold-plating.7 Burdens as a result of the transposition of EC Directives into national law are not only kept in check by limiting the burden to the bare minimum required, but also by requiring a keen eye for the coordination of the regimes required by EC law and existing national regimes. So called ‘double-banking’, i. e. the situation when European legislation covers the same ground as existing domestic legislation, and where the two regimes have not been made fully consistent or merged into one, also needs to be avoided in order to circumvent unnecessary burdens for businesses and industry.

4

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6

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At present, 23 out of 27 EU Member states have regulatory reform projects underway: http://www.administrative-burdens.com. See for the EU-regulatory reform programme (the administrative burden reduction part): http://ec.europa.eu/governance/better_regulation/admin_costs_en.htm. See the Commission’s Working Document, COM(2008) 35 final, Reducing administrative burdens in the European Union 2007 progress report and 2008 outlook. In Italy this technique of piggybacking a Directive is believed to be often used as a device to pass through controversial measures and to ensure a lower degree of parliamentary scrutiny. The Dutch wording for this is: ‘nationale kop’.

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1.1 Gold-plating, double banking and the interpretation of law For our present object of study, content and meaning of national law in the context of transnational law, the phenomena of gold-plating and double banking are very interesting. First, because transposition of EC Directives is – to a very large extent – an act of interpretation. Under article 249 of the EC Treaty, Directives are binding as to the result to be achieved, but they leave national authorities a choice of methods. This allows the Member states a double margin of discretion: first, states are, within certain confines,8 free to choose form and methods, integrating EC legislation in the most optimal way into domestic legislation. Secondly, the Member state needs to interpret the result to be achieved. Even though they are under the scrutiny of the European Commission, and ultimately the European Court of Justice (ECJ), as regards their interpretation, in most cases they have a significant margin of appreciation. The very nature of EC Directives as instruments of EC policymaking is such (at least originally the meaning was) that it allows member states to adjust their national regimes to the Directive as they see fit. This means that some room to manoeuvre must be left to the national authorities; an element of subsidiarity is present in the Directive instrument. Not that they are always used as such: a great deal of the present day Directives are cemented shut. That is why the Interinstitutional Agreement on Better Lawmaking 2003,9 its point 13, calls upon the institutions not to use a Directive as if it were a Regulation. This, as well as the tendency to over detail provisions, distorts the character of a Directive. Second, gold-plating and double banking are interesting because they are relative concepts. The bite of gold-plating, for instance, only becomes painful when one Member state is overzealous in relation to another member state. A competitive disadvantage will present itself if this is the case. Third, these phenomena are interesting in view of our present theme. When we discuss the interpretation of law (be it national or transnational) we tend to focus on judicial interpretation. We study the way national judges interpret national law with an eye for what is happening at the transnational level (e. g. the doctrine of Directive conform interpretation), or what is hap-

8

9

There is a host of case law of the European Court of Justice as regards the proper forms and methods to achieve the results required. Point 13 of the Interinstitutional Agreement on Better Lawmaking, OJ C 2003, 321, 1 reads: The three Institutions recall the definition of the term ‘directive’ (Article 249 of the EC Treaty) and the relevant provisions of the Protocol on the application of the principles of subsidiarity and proportionality. In its proposals for directives, the Commission will ensure that a proper balance is struck between general principles and detailed provisions, in a manner that avoids excessive use of Community implementing measures.

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pening in other member states, or countries.10 However, it is not only judges who interpret the law, and not every interpretation of national law in view of transnational law is subject to judicial scrutiny. Implementation of both national and transnational law requires interpretation of national (administrative) authorities. As regards the interpretation and implementation of EU legislation, national authorities tend recently to communicate and cooperate in formal and informal networks to learn from one another.11 Fourth, gold-plating and double banking are very topical, but were – until recently – not well researched. They were more or less “buzz” words popping up in public debates on red tape reduction. Everyone had an example, but no one quite knew how big the problem was.

1.2 This contribution In 2006 and 2007 both the United Kingdom and the Netherlands – the vanguard countries of regulatory reform – decided to see whether the emperors of gold-plating and double banking actually wore clothes. On either side of the Channel, two teams were asked to review the existence and effect of these practices. This contribution deals, in a comparative way, with the reports that resulted from the reviews. The contribution especially focuses on the element of interpretation of EC Directives as a source of gold-plating. In conclusion this contribution will consider how gold-plating by way of interpretation can be controlled.

2. The gold-plating conundrum in the UK: the Davidson review Ever since the 1990’s, British businesses – spurred on by OECD-reports on the damaging effects of legislative burden – have been deeply concerned about the effect of red tape in respect of their competitiveness. This concern resulted in the establishment of an independent body, the Better Regulation Task Force (BRT) in 1997, whose mission was to advise government – on request or on its 10

11

See for instance Eyal Benvenisti, ‘Reclaiming Democracy: The Strategic Uses of Foreign and International Law by National Courts’, (2008) 102 American Journal of International Law 241. A very well known one is The European Union Network for the Implementation and Enforcement of Environmental Law (IMPEL) of the environmental authorities of EU Member states. This network provides a framework for policy makers, environmental inspectors and enforcement officers to exchange ideas, and encourages the development of enforcement structures and best practices. See http://ec.europa. eu/environment/legal/implementation_en.htm.

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own accord – on matters pertaining to (unnecessary) regulatory and administrative burdens. The task force threw some heavy stones into the pond when it estimated the total cost of regulation of the UK economy to be 10-12 % of the GDP, or £100 billion, taking into account the related policy work. Already in its first reports the BRT targeted EC legislation as a possible source of red tape. It was at the very moment when the BRT was replaced by a permanent body, the Better Regulation Commission, on 1 January 2006, that the Lord Chancellor of the Exchequer decided to take a more in-depth look into the existence and effects of gold plating and double banking. Lord Neil Davidson Q. C.12 was commissioned to conduct an independent review into the UK’s implementation of EU legislation, focusing on the issue of ‘over-implementation’. Over-implementation was used as an umbrella term for gold-plating, double banking and “regulatory creep” denoting over-zealous enforcement due to lack of clarity about the objectives or status of regulations and guidance.13

2.1 The agenda of the review The first item on the review agenda was to get to grips with the definitions of gold-plating and double banking (we will – for reasons of brevity – not deal with regulatory creep). As it happened, the UK Transposition Guide – a guide for policy-makers and lawyers responsible for transposition issues in the UK14 – held a common definition for the two concepts. The Davidson review built on that and defined gold-plating – in very broad terms – as the process of when implementation goes beyond the minimum necessary to comply with a Directive, by: • extending the scope, adding in some way to the substantive requirement, or substituting wider domestic legal terms for those used in the Directive; or • not taking full advantage of any derogations which keep requirements to a minimum (e. g. for certain scales of operation, or specific activities); or • providing sanctions, enforcement mechanisms and matters such as burden of proof which go beyond the minimum needed (e. g. as a result of picking up the existing criminal sanctions in that area); or • implementing early, before the date given in the Directive. The first two points in particular are interesting in light of the interpretative perspective we have chosen. Double-banking – according to the definition of the Davidson Review – can occur when European legislation covers the same ground as existing do12 13 14

Created a life peer on 22 March 2006 as Baron Davidson of Glen Clova. See Davidson Review, Implementation of EC Legislation, Final report (2006), 3. Cabinet Office, Transposition guide: How to implement European directives effectively. (London 2005, revised in 2007).

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mestic legislation, though possibly in different ways and to a varying extent, effectively resulting in a double (extra burdensome) regime – both European and domestic.

2.2 Findings of the Review In order to find out whether the UK tends to gold plate (and double bank) more than other EU countries – as was suggested by some commentators15 – the Davidson Review adopted a multi-stage approach. In line with its terms of reference, the Review first launched a public call for evidence in the spring of 2006. The call asked businesses, organisations and the general public whether they thought over-implementation was a significant issue for the UK and if so, what should be done about it. Subsequently it invited the addressees of the call to come up with examples of what to their mind were clear cut cases of over-implementation. This generated 160 written responses from a wide range of respondents. These responses in turn were used as input for the selection of significant cases of potential over-implementation to be studied in more detail. Governmental departments, comparative insights, and external stakeholders assisted to the case study selection. The Review debunks the idea that the UK is a systemic over achiever when it comes down to the transposition of EC Directives, as in the past some critics have argued, on the basis of comparison of transposition ratios (dividing the number of words in the national implementing legislation by the number of words in the original Directive). The Review dismisses this simplistic and misconceived approach to assessing gold-plating: it totally fails to take account of whether elaboration of Directives increases or reduces burdens for those being regulated. In addition, the Review did not find any compelling evidence that the UK is systematically over-implementing. Over-implementation is an elusive concept, the Review noted, and there are as many myths as concrete examples. The Review certainly found that assessing whether a particular piece of European legislation had been over-implemented and whether that overimplementation was justified is not straightforward: it requires careful research into the background and context. The Review did find some examples of gold-plating and double banking. The Insurance Mediation Directive, (2002/92/EC) for instance has been goldplated by extending the scope of the rules on sales of insurance so that they apply to sales by direct insurers as well as sales by insurance intermediaries. At the time of implementation (2002) this extension was widely supported by stakeholders, including the insurance industry, but at present the same industry has withdrawn its support because they think the regime is expensive 15

See Davidson Review, 4.

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and difficult to comply with, and is not really designed to deal with direct sales by insurers. Under the same Directive, the national legislation also extends the scope to all motor warranties (where the Directive allows an exception for contracts costing less than 500 Euros a year). The UK did not use the exception in order to avoid market distortions. This is widely accepted and the Review received no complaints about this. National implementation of the Insurance Mediation Directive, as well as that of the car safety test of the Ministry of Transport (commonly known as the MOT-test), 16 provide examples of gold-plating by imposing higher standards than the Directive itself imposes. Directive 91/328/EC on the approximation of the laws of the Member States relating to the roadworthiness test for motor vehicles and their trailers imposes a regime that – basically – allows for a bi-annual test of seasoned cars, while the UK regime requires an annual test. At face value this is over-implementation by way of gold-plating but the Review then asks itself the question whether the over-implementation is justified and whether it creates a competitive disadvantage. The Review concludes that in the recent past other EU countries, notably Luxembourg, the Netherlands and Slovakia have had the same testing pattern as the UK, but that the Netherlands in 2008 were moving toward the minimum regime of the Directive, which, making the UK case of MOT testing in turn – a relative – example of problematic gold-plating. The Davidson Review gives still more examples of gold-plating and some of double banking (Consumer Sales Directive, Fisheries Regulation, Waste and IPPC Regulation, Unfair Terms in Consumer Contracts Directive) but – on the basis of the evidence – holds that even the few examples (out of the 160 reports) expressing inappropriate over-implementation may not be as big a problem – in absolute terms and relative to other EU countries – as is sometimes believed.17 A number of factors seem to indicate that over-implementation is not all that serious a threat. First of all, a great deal of the respondents answering to the call of evidence complained about issues which were not about over-implementation in the UK, but about EU legislation itself. In general many of the allegations regarding over-implementation are misplaced and often represent concerns about other issues. Even when some over-implementation does occur, it is sometimes beneficial for the UK economy to maintain regulatory standards rather than the minimum requirements of European Legislation. Many businesses that operate across Europe reported that differential implementation across Member States, thereby undermining the single market, matters more than whether there is over-implementation in a particular country. The idea of over-implementation and rigorous enforcement of the UK in relation to other 16

17

The MOT test is an annual test of car safety and roadworthiness aspects, applicable to most vehicles over a certain age in the United Kingdom if they are used on public roads. Davidson Review, 4.

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EU Members States is persistent in business and industry, although the Review

did not come across any hard evidence to support these assertions. Perceptions of under-implementation of other countries are widespread however – even in the Netherlands, Denmark, Spain and Germany, countries that were also involved in the enquiry.18 The World Bank and the OECD in 2007 reported that the UK has one of the most favourable regulatory environments of doing business in the EU, which does not support the idea or suspicion that the UK overburdens business on a large scale when implementing EU legislation. The Davidson Review gives a well balanced portrait of gold-plating and double banking, demonstrating how the process of elaboration of national law in order to implement EU legislation sometimes results in gold-plating or double banking, but neither as a systemic process nor as a general intent. In most of the 160 reported cases no over-implementation as such was found, and where it was found it was in most cases for a good reason. The Review, however, does recommend that to undo some gold-plating and double banking the MOT testing pattern ought to be reversed it back to bi-annual testing.

3. The search for golden rims in the Netherlands – the Europe-Asser Institute-report Parallel to the Davidson Review a similar review was held in the Netherlands. In 2005 and 2006 the Ministry of Economic Affairs commissioned a research project into over-implementation in the Netherlands. A group of researchers and experts from Leiden’s European Institute and the Hague-based Asser Institute analysed 119 reports of alleged over-implementation.19 The Dutch team used an approach comparable to the Davidson Review but deployed a less sophisticated working definition of over-implementation. Over-implementation occurs according to the Europe-Asser Institute when an EC Directive has been transposed correctly into Dutch Law and the Dutch regulatory regime goes beyond the minimum requirements imposed by the Directive. Like the definition of the Davidson Review the definition is inspired by a common definition stemming from drafting guidelines (the Dutch Drafting Guidelines). 20 18 19

20

Davidson Review, 15. See P. J. Slot, W. J. M. Voermans, S. F. Blockmans, M. K. Bulterman, M. van der Harst, S. A. L. Josaputra, B. Platell, P. Willemsen, A. Cuyvers, S. H. Romein, M. Park, H. Park, Nationale koppen op EG-regelgeving (Over-implementation of EC Legislation), (Leiden/Den Haag 2007). Aanwijzingen voor de regelgeving (Dutch Drafting Guidelines 1992). Article 347 of these Guidelines – in the somewhat criptic official translation – reads: ‘No other rules will be included in the implementation rule other than necessary for the implementation.’

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As a result of better regulation initiatives of the Balkenende-II and –III administrations21 a first call for evidence of over-implementation had already been issued in 2005. It yielded some 105 reports of potential over-implementation. On request of the Dutch House of Representatives (Tweede Kamer van de Staten-Generaal) – that wished to secure that all possible over-implementation came to the surface – a new inventory was drawn up assisted by the European-Asser Institute groups. The second call yielded 119 reports. These reports were analysed and screened by the Ministry of Economic Affairs. In more than a third of the reports (42) it was directly apparent that they did not constitute any over-implementation. The 77 remaining reports of alleged overimplementation were handed over to the research team for closer study. Like the Davidson Review the Dutch report did not find conclusive evidence of widespread or deliberate over-implementation. In fact only 18 cases of outright over-implementation were found and 11 debatable ones. Again, as with the Davidson Review, most of the true cases of over-implementation were justified and not very serious or damaging to the competitiveness of Dutch industry or businesses. As regards our current topic of ‘interpretation’, the Dutch team encountered some 10 cases of over-implementation. Two of these examples resulted from widening the scope of the Directive underlying the implementation. The first concerns the implementation of EC Directive 2003/54/EC concerning common rules for the internal market in electricity, in which Dutch legislation effectively protects private consumers at the cost of the supplier where the Directive does not. The second concerns Regulation 561/2006/EC on the harmonisation of certain social legislation relating to road transport. The regulation imposes a regime for truck driving and resting hours for vehicle categories with a permissible mass over 3500 kg. Dutch legislation equally applies this regime to vehicle categories between 500-3500 kg, thus constituting over-implementation.

4. Golden plates and red herrings: a common heritage Gold-plating and double banking have become catch phrases in the regulatory reform debates throughout Europe. They convey the evocative notion that over zealous governments are systematically hurting domestic business and industry by over-implementing EC legislation, where other member states are not. Recent research in both the UK and the Netherlands shows that – although over-implementation is elusive and hard to assess – no widespread or systematic practices of over-implementation exist. What is apparent from both projects is that perceptions of over implementation in one’s own country 21

See W. Voermans, ‘The Sisyphus paradox of cutting red tape and managing public risk’, Utrecht Law Review, 4 (3), 128-144.

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and suspected under-implementation in other countries are widespread and tenacious. Although over-implementation is not widespread it does occur, only with less damaging effect to business and industry than is commonly believed. Businesses and industries that operate throughout Europe seem to suffer more from differentiated implementation in different countries than from overimplementation at home. In most cases over-implementation is – even to the present day – justifiable. In view of this evidence one might wonder whether the discussion on over-implementation is not a red herring. To our minds, this would be a hasty conclusion: there may possibly be a deeper point to the complaints voiced in the over-implementation debate. Over-implementation has an absolute aspect to it (doing more than is strictly necessary) but, as the Davidson Review reveals, a relative aspect too (are we doing more than other EU countries). When implementing, EC member states may well keep within the margins of over-implementation (avoiding gold-plating, double banking etc.) but the implementing domestic legislation may be suboptimal for business and industry anyway in view of what other countries are doing. The Davidson Review hinted at this by comparing the MOT-regime to that in other Member States. Along these lines, business and industry may have a lot to gain by comparing the way their domestic legislature has implemented EC legislation to that of other member states. Best practices of implementation may prove to be the future goldmines of regulatory reform. They are to be preferred over the tar pits of suspicion of neighbourly under-implementation.

Sale of Consumer Goods: the Adaptation of (Dutch) National Law to Transnational Demands Jaap Hijma* 1. Introduction The New Dutch Civil Code (DCC) was enacted on January 1st 1992. Now, seventeen years later, the still young Code has already experienced a notable number of amendments. In part, this is the result of a natural evolution: society keeps developing, and therefore the law – Codes included – will keep developing too. There is, however, a more specific reason for large numbers of changes to the Dutch Civil Code. This reason derives from the fact that our country is a Member State of the European Union. The European bodies produce legislation on a transnational level, which triggers consequential legislation on the national level. This national legislation is often put in special laws, apart from the Civil Code, but sometimes it is considered preferable to weave it into the Code itself. Our new Civil Code has seen quite a number of alterations on this transnational basis. In this contribution, I will discuss the impact of European Directives on the existing legal system as incorporated into the DCC of 1992. The focus will be on questions of an interpretational nature. In a codified system like ours interpretation issues arise at (at least) two different levels. In the first place: at the level of the legislator. The maxim that words are never clear is valid for European Directives as well. More often than not, Directives are the product of compromise, and the exact nuances of the compromise are seldom unmistakeable. When the legislator has finished, we are in proud possession of a national version of the Directive (the so-called law of implementation). But again, the words of this national product will not always be clear. And so we meet a second level of interpretational issues: the level of the judiciary.

2. Legislative policy The European Union does not demand that its Directives are implemented word by word. The Union is concerned with the level of protection as such; *

Professor of Civil Law, Faculty of Law, Leiden University.

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it is not concerned with the exact formulas by which this protection level is reached. Within the European Union, Member States follow different strategies.1 Some countries adopt the European Directives literally, or almost literally. Countries that possess a valued Civil Code tend to refrain from this policy and tend to a non-literal implementation. They will try to fit the new provisions, somewhat polished, into the framework of the existing Code. Indeed, the latter is the way the Dutch legislator conceives his task. This fitting-in can be, and often is, a delicate and time-consuming job. This is one of the reasons, and probably the main reason, for the fact that the Netherlands regularly fails to meet the implementation deadlines prescribed in the European Directives. We would like to be well-behaved of course, but do not always manage to sit in the front row.

3. Consumer protection The impact of European Union legislation on the national Civil Code is most noticeable in the field of consumer protection. The Netherlands does not know a separate Consumer Code, such as France has developed.2 In our view, civil law is one and indivisible. Neither the fact that one of the parties is a merchant nor the fact that one of them is a consumer means that a special codification will apply. A merchant is a civilian, a consumer is a civilian too. And so their actions are all governed by the – one and only – Civil Code. On the one hand, this concept has the advantage of being fundamental and simple. On the other hand, it means that every time a European consumer Directive is issued, the legislator will (have to) ponder upon the question whether the new rules shall be applicable to consumers only, or shall be expanded to all private parties. Europe is satisfied with the minor solution, but legal harmony and coherence within the Code are important national values, which a legislator cannot ignore.

4. Relatively simple cases Relatively easy is the situation when the existing Code does not possess a set of rules like the one incorporated into the Directive, so when the Directive introduces really new (written) law. In our country, like in most other Member States, such was the case with the European Directive on distance contracts, e. g. the sale by means of mail or telephone or – more important every day – by 1

2

See H. Schulte-Nölke, C. Twigg-Flesner and M. Ebers (eds.), EC Consumer Law Compendium, (Sellier: Munich 2008), 10-78. Code de la Consommation, divided into a legislative part and an administrative part.

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means of the internet. In 1997, the European Community issued a Directive on this subject, comprised of 19 articles and an appendix.3 The task of the national legislator was relatively simple, because there were no existing (“old”) provisions which had to be restudied and carefully altered. He could simply add a new section to the Civil Code. And so he did: Book 7, Title 1, Section 9A, devoted to Distance Contracts (art. 7:46a-46j DCC). In this new Section the provisions of the European Directive, somewhat reformulated, smoothly found their place.4 Similar observations can be made regarding the timeshare contract (i. e. the sale of rights of use of immovable property on a timeshare basis). This phenomenon has never been much of a problem in the Netherlands, so we had no written law on it. When Europe developed a Directive on the subject,5 we opened a new section of Book 7, Title 1 (Sale), Section 10A, in which the new articles 7:48a-48g DCC were laid down. The adaptation of the existing Civil Code to a posterior European Directive is more difficult when the Code already comprises a well-balanced set of rules, especially when the material difference between the Code and the Directive is small or even very small. I will concentrate on two examples: the General Conditions Directive and the Consumer Sales Directive.

5. The General Conditions Directive Our first example is the European Directive on unfair clauses in consumer contracts. Our former Civil Code, from 1838, paid no attention to this subject. When the new Code was enacted, however, it contained an elaborate chapter on standard conditions.6 In 1993, one year after the enactment of the Dutch Code, the European Directive on this subject was issued. Our legislator studied this new Directive carefully to find out whether the Dutch standard of consumer protection was equal to the standard required by the Directive. This was a rather complex task, because there were thirteen Dutch articles and eleven Directive articles (plus an appendix), dealing with the same topics and problems but not always in an identical way. Our legislator reached the conclusion that although different words and divisions were used, the protection levels were compara3

4

5

6

Directive 97/7/EC (OJ 1997, L 144) on the protection of consumers in respect of distance contracts. It can be argued, however, that Title 5 of Book 6 DCC would have made a better choice. Directive 94/47/EC (OJ 1994, L 280) on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis. Art. 6:231-247 DCC.

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ble, actually one and the same, so that the fresh Civil Code could stay as it was. We informed the European Commission that our country implemented the Directive of 1993 by means of its Civil Code of 1992. This was a trifle imprudent, of course. But understandable too, because our newly obtained protection level really was very close to the protection level prescribed by the European Directive. The European Commission objected to the Dutch point of view. Like the Dutch legislator, the Commission compared the protection level of the Directive with the protection level of the Civil Code. And its finding was, that the Dutch level nearly met the demands of the Directive. Nearly, but not quite. The difference lay in a couple of rules which are explicitly mentioned in the Directive, but which under Dutch law are unwritten. One of them is the so-called contra proferentem rule, regarding contract clauses which can be interpreted in more than one way. The Directive mentions that if there is doubt as to the meaning of a stipulation, the interpretation most favourable to the other party shall prevail.7 According to Dutch law the same rule is followed, but only in the form of an unwritten principle, applied by the judiciary. Materially speaking, the protection level will be the same: whether a rule is written or unwritten makes no difference, as long as it is applied. But the European Commission took the case to the European Court of Justice, and the Court ruled against the Netherlands.8

6. The Consumer Sales Directive It stands to reason that after this reprimand our country has taken a more careful approach. When Europe issued the Consumer Sales Directive in 1999,9 again we were confronted with a Directive containing a protection level very close to the one we already had. But our legislator examined the – minor – differences carefully, and issued a considerable number of adaptations of the existing articles. We consider it quite a blow to be sentenced by the European Court of Justice and prefer to minimise such incidents. The Consumer Sales Directive posed some hefty problems, though not from the point of view of consumer protection. In a general sense we can surely maintain that our Civil Code treated the consumer as kindly as the Directive does. But as we saw before, the European Commission and the European Court do not accept that “roughly speaking” the protection levels are identical. The 7

8

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Art. 5 of Directive 93/13/EEC (OJ 1993, L 95) on unfair terms in consumer contracts. ECJ 10 May 2001(European Commission/the Netherlands), C-144/99, ECR 2001, I-3541. Directive 99/44/EC (OJ 1999, L 171) on certain aspects of the sale of consumer goods and associated guarantees.

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various Directive provisions have to be implemented individually; no kind of package deal will be accepted. The sting of the Consumer Sales Directive is that it is not concerned with (what can be called) a fringe subject, like distance contracts, timesharing or even general conditions. Its subject is the very core of the sales contract: nonconformity (i. e. non-performance) and the remedies of the buyer in case of non-performance. Sale is the prototype of all contracts, and can still be regarded as the most important representative of the contract species. Therefore, indirectly, the Consumer Sales Directive touches on the heart of general contract law. It is therefore understandable that the implementation process in our country took a lot of time – and a lot of sweat. The legislator had to navigate between, on the one hand, changing too little (which might induce another European Court sentence) and on the other hand, changing too much (which would put unnecessary pressure on the national contract law system). During the implementation process, the legislator changed his mind on various issues. Clearly he was unsure about the intensity of the Directive demands. He had to interpret the Directive, had to stick his neck out in this respect, and this proved to be anything but easy. Let us zoom in on two specific aspects: firstly questions of elaboration, secondly a question of labelling.

7. Questions of elaboration In various respects, Directive 99/44 contains details which our Civil Code left unmentioned. An example: regarding the remedies of repair and replacement, the Directive mentions explicitly that the repair or replacement shall be done free of charge,10 and that: ‘any repair of replacement shall be completed within a reasonable time and without any significant inconvenience to the consumer’.11 These are rather obvious rules, to which every reasonable interpretation will lead. I doubt whether Member States are obliged to copy obvious elaborations like these in their written law. As far as I know, no one has ever pleaded that a repairing seller is allowed to cause major inconvenience to the buyer, and no one has ever (seriously) presumed that the seller of defective goods could send a bill for their repair. Nevertheless our legislator lived by the instruction of Safety First, and added all such details to the existing Civil Code articles. On most occasions, he voluntarily broadened the scope from consumers to all private parties. Towards a professional buyer too, rules like these are

10 11

Directive 99/44, art. 3 (2) and 3 (4). Directive 99/44, art. 3 (3).

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justified. But by absorbing them, the Code has grown fatter, and some would say uglier.

8. A question of labelling A strange problem arose regarding the remedy of price reduction, granted to the consumer/buyer in case of nonconformity.12 Before the implementation of Directive 99/44, this option already existed in our law, albeit not as a separate remedy. The possibility of price reduction was regarded as a partial rescission of the contract (partial setting aside). We consider this to be not a consumer sales issue, not even a sales issue, but an issue of contract law in general. In Dutch law, in other contract types too, the aggrieved party should have the right to reduce the price and thereby establish a new contractual balance, which reflects the actual situation between the parties. Therefore, in our general contract law, it says that: ‘Every failure of one party in the performance of one of its obligations gives the other party the right to set the contract aside in whole or in part (...)’.13 Being a general rule, this provision is applicable to consumer sales as well, so there can be no doubt whatsoever that a consumer/buyer can reduce the price if the goods are imperfect. This conclusion is reached in an indirect way, however. It is not mentioned explicitly, and is not mentioned in the sales law but in the general law of contract. Our legislator had to interpret the demands of the Directive. Does the granting of the right of price reduction imply that a consumer must be able to find this specific remedy easily in the sales section of the Code? At first the legislator gave a negative answer to this question,14 also after some criticism in the literature,15 but finally he changed course and acknowledged the right of price reduction as an independent remedy in Title 7.1 DCC.16 In doing so, the legislator followed a rather strict interpretation of the European Directive, in the sense that the remedy does not only have to exist, but should also be easily visible.

12 13

14 15 16

Directive 99/44, art. 3 (2) and (5). Art. 6:265 (1) DCC. In regard to the English text of DCC-articles, I follow the translation by Haanappel, Mackaay, Warendorf & Thomas, Netherlands Business Legislation, Civil Code Book 6, Civil Code Book 7 (loose leaf). MvT, TK 27 809, nr. 3 (8). J. M. Smits, WPNR 2002 (6419), 686; J. M. Smits, WPNR 2001 (6470), 1048. Nota, TK 27809, nr. 8, 3; NvW, TK 27 809, nr. 9 (2).

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On the national level this interpretation has provoked a number of problems. Art. 7:22 (1) DCC, as amended with effect from 1 May 2003, reads as follows: ‘Where the thing delivered does not conform to the contract, the buyer in a consumer sale shall (...) be entitled to: (a) set aside the contract (...), or (b) reduce the price in proportion to the divergence from what was agreed’. And paragraph (3) adds, that: ‘the provisions of (…) Book 6 in respect of the setting aside of contracts shall apply mutatis mutandis’ to the right of price reduction as mentioned in paragraph (1).’ So a right to price reduction for consumers is mentioned, to which the settingaside articles apply mutatis mutandis. For a Dutch lawyer, these are puzzling provisions. Many law students, and even some practising lawyers, read the new art. 7:22 (1) to mean that because only the consumer is mentioned, a business apparently will go without the right of price reduction. And because the legislator speaks of an application mutatis mutandis – instead of the direct application we were used to – the consumer sales price reduction has become an island in the system of our codified law. So while it may be safe to copy-and-paste a European provision, it may be less easy to cope with the consequences. I might add that in my opinion the Dutch legislator has tended to take a too precautionary approach. The Consumer Sales Directive neither implies that its provisions have to be put in the law of sales, nor that its remedies cannot be part of a broader national instrument. A Directive is nothing to be (too) afraid of. European Directives condone – and deserve – a reasonable interpretation, like any other type of legislation.

9. Judicial interpretation The fact that our legislator carefully examines and assimilates European Directives, does not mean of course that there is no interpretative role for the judiciary. The judge is the interpreter of all national laws; therefore he will have to interpret national implementation laws as well. According to the settled case law of the European Court of Justice, the judge has the duty to interpret in conformity with the Directive(s), i. e. to interpret the national legislation, as much as possible, according to the words and the aim of the rel-

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evant European Directives.17 Therefore, after implementation, a Directive will retain value as a source of interpretation for the judiciary on a national level.

10. Judicial correction according to the Directive Occasionally, the judge will reach the conclusion that a national Dutch provision points to decision A, whereas the underlying European Directive leads to the contrary decision B. Clear-cut cases like this can be the result of an implementation mistake. Such mistakes – by the legislator – are scarce, but do exist. The implementation of Directive 99/44 provides an example. The Directive prescribes, that there: ‘shall be deemed not to be a lack of conformity (...) if, at the time the contract was concluded, the consumer was aware, or could not reasonably be unaware of, the lack of conformity (...)’.18 A similar provision is embodied in the Vienna Sales Convention.19 Its purpose is not to put a duty to investigate on the buyer. The provision only concerns facts that ‘are before the eyes of one who can see’. Its aim is ‘slightly to lighten the burden of proving that facts that were before the eyes reached the mind’ (Honnold).20 Therefore, the buyer of a second-hand car with a dent cannot complain of non-performance, arguing that a car like this should be dent-free. Whatever he saw or knew he cannot complain about. And if he says he did not notice the dent, the law will object that he could not reasonably have been unaware, and so his claim will be denied. The Dutch Code contained no such provision. Our legislator took it in, but (in my opinion) made a mistake in the translation. Art. 7:17 (5) DCC reads: ‘The buyer may not invoke non-conformity of the thing to the contract if he was, or reasonably ought to have been, aware of it at the time the contract was concluded’. So the article says ‘reasonably ought to have been aware’, whereas the Directive reads ‘could not reasonably be unaware’. The latter criterion is stricter than the former. This means that the Dutch exception, if taken literally, is broader 17

18 19 20

E. g. ECJ 27 June 2000 (Océano/Murciano Quintero et al.), C-240/98-244/98, ECR 2000, I-4941. Directive 99/44, art. 2 (3). Art. 35 (3) CISG. J. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention (Kluwer Law and Taxation: Deventer/Boston 1991), 308-309.

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than the Directive permits. The way I see it, the Dutch judiciary is obliged to close this gap. Whenever a buyer ought to have been aware, but can have been unaware, the judge will have to read the Dutch text according to the European example.

11. Judicial elaboration according to the Directive Of course, such situations are rare. More often the judge will turn to a European Directive because the national law of implementation does not provide sufficient information on the issue concerned, whereas the transnational law perhaps does. In such cases the judge will look beyond his national law, with the aim of becoming (better) informed. Let us discuss an interesting example, regarding the burden of proof. Principally, to get any remedy, the buyer will not only have to prove that the goods are defective, but also that they were already defective at the moment of their delivery. In practice this is often a heavy burden. The European Directive protects consumers by prescribing that: ‘Unless proved otherwise, any lack of conformity which becomes apparent within six months of delivery of the goods shall be presumed to have existed at the time of delivery unless this presumption is incompatible with the nature of the goods or the nature of the lack of conformity’.21 Originally our law did not know a provision like this, so we copied it into the Civil Code.22 When the Consumer Sales Directive was drafted, some states – the Netherlands among them – fruitlessly proposed to delete the burden of proof reversal. Germany furthermore tried to get livestock excluded.23 Indeed there is a relevant difference between animals and machines. Animals get ill spontaneously, and when an animal gets ill, it will often be unreasonable to presume that it was already defective months ago. Yet this German effort, too, was to no avail. So livestock will follow the general rule: whenever a defect shows within six months after delivery, the burden of proof (i. e. that the defect originated later) will rest with the seller, unless – as the article adds – this presumption is incompatible with the nature of the goods or the lack of conformity. Only a few years later, Dutch law boasts three different approaches to this issue. The first opinion is stated by Minister of Justice Donner, during the preparation of the law of implementation.24 The Minister refers to the general 21 22 23 24

Directive 99/44, art. 5 (3). Art. 18 (2) DCC. See Handelingen I d. d. 04-03-2003, EK 19, 596-598. NMvA, EK 27 809, nr. 32a (3).

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principles of Dutch law regarding the burden of proof. In our law, the fact that the burden of proof is reversed does not necessarily mean that the seller has to prove that at the moment of delivery the object – e. g. animal – was without a defect (proof of the contrary). It only means, less stringently, that the seller will have to create serious doubt about the reasonableness of the presumption. If he creates enough doubt, the presumption will not apply, with the result that the parties return to the standard situation, wherein the buyer has the burden to prove that the goods were not in conformity with the contract when they were delivered. In this view, proof of the contrary is not necessary. This is the way we generally see it;25 the Minister follows this national insight in interpreting art. 7:18 (2) DCC. The final two approaches are found in court decisions regarding Luchtzuigers, wind-suckers (a horse’s disease). The first Judge, of the Arnhem County Court, stresses that wind-sucking is a stable disease which any horse can develop within a few days. He rules that it would be improper to apply the six-month rule, and therefore applies the exemption given at the end of the provision (contrary to the nature of the nonconformity).26 The last opinion comes from the Arnhem Court of Appeal, again regarding a wind-sucking horse, but in a different case.27 This Court explicitly rejects the interpretation given by the Minister of Justice, because it is too national and neglects the transnational roots of the article. But (implicitly) it also rejects the view of the County Court Judge, who applied the exception mentioned in the article. The Court of Appeal cites the English, the French and the German text of the Directive provision, and reaches the conclusion that the article has to be interpreted to mean that with the sale of horses too, the burden of proof is fully reversed. According to this opinion the seller will be liable, unless he succeeds in proving that at the time of delivery the defect did not yet exist.28 One provision, three readings. The interpretation of national and transnational law is no easy task; esteemed voices contradict one another. As yet, in the absence of a clarification by the European Court of Justice, I am sympathetic to the approach chosen by the Arnhem County Court Judge. The opinion of the Minister of Justice may be too national, but the decision of the Arnhem Court of Appeal, which refuses to accept an exception for (certain) diseases of horses, is possibly over-European.

25 26 27 28

See W. D. H. Asser, Bewijslastverdeling (Kluwer: Deventer 2004), nrs. 45-48 (46). Vzngr. Rb. Arnhem 24-05-2004, LJN AP4372. Hof Arnhem 02-05-2006, LJN AX6541, NJF 2006, 342. It deserves mentioning that in casu the seller succeeded in producing this evidence.

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12. The ink(s) of the Civil Code The multi-level legislation as we know it poses questions of interpretation both on the transnational level and on the national level, and often the two are entwined. Judges and courts can no longer make do with knowledge of national views and customs. They will have to be alert to the existence of European roots, and interpret the national law accordingly. To help them do so, some scholars suggest printing the European articles in a different colour.29 Alarming Red, or maybe European Blue. The result will be a Duotone Code. Practical as this may be, it is a discomforting thought. On the other hand: our law itself has become duotone, so why should not our printed provisions become duotone too? Multi-level legislation is nothing to be ashamed of. 29

W. H. van Boom, in Europese integratie, Handelingen NJV 2006-2 (Deventer 2007), 29.

EU Law-making and its Impact on National Company Law Steef M. Bartman*

1. Introduction Ever since the European programme on the harmonisation of company law started at the end of the 1960s there have been topics that turned out to be just too difficult and often too politically sensitive to deal with effectively and conclusively. These “touchy” topics include: 1. workers’ participation at (supervisory) board level; 2. creating a level playing field on hostile take-overs for listed companies; 3. creditor and minority shareholder protection in group company structures. After decades of fruitless drafting, discussion, rejection and amending, EC Directives were finally adopted concerning the first two topics in 2001 and 2004 respectively. Also, the Commission’s Action Plan on Company Law of 2003 announces a Directive on groups of companies in the medium term, i. e. ultimately in 2008. However, the first two Directives are to a large extent the result of political deal making, which is shown in their legal character. As far as the announced Directive on group law is concerned, in 2008 no draft has been presented and serious doubt is justified as to whether such a Directive will ever be drafted and adopted.1 Group-related issues were also carefully bypassed in the Societas Europaea (SE) Regulation that came into effect on 8 October 2004.2 EC Directives vary in form and intensity. A distinction is made between total harmonisation, partial harmonisation, alternative harmonisation, mini*

1

2

Professor of Company law at the Leiden University, the Netherlands, lawyer at the Supreme Court in The Hague and co-ordinating director of the Centre for European Company Law (www.cecl.nl). This is an updated version of an article published in ECL, Vol. 5 No. 6 (2008), 271-276. See the communication from the Commission on the future priorities for the Action Plan on Company Law and Corporate Governance and the minutes of a public hearing held on 3 May 2006 in Brussels, available at the Commission’s website. See Erik Werlauff, SE – The Law of the European Company, (Djøf Publishing: Copenhagen 2003), 18.

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mum harmonisation, positive harmonisation and negative harmonisation.3 The regulative approach of the aforementioned two Directives is characterised by the fact that the European legislature itself tries to harmonise firmly endorsed principles and values of company law by obliging Member States to offer framework regulations based on these principles and values, although subsequently it is left to the discretion of the entrepreneurs of each Member State whether to make use of these regulations or not. The European legislature increasingly tends to oblige national governments to create legal frameworks to which entrepreneurs may opt in or from which they may choose to opt out. I call this optional harmonisation. It seems that the introduction of optional Directives is closely related to the Commission’s Better Regulation initiative and the growing criticism of EU harmonisation in recent years.4 Some have openly advocated the legal options approach as the best means to further EU company law.5 The inclination to deal with issues of European company law by means of optional instruments is not limited to EC Directives but can also be recognised in Council Regulations, in particular the SE Regulation of 2001 and the SCE Regulation of 2003, when compared with the recently presented draft Regulation for a European Private Company (SPE = Societas Privata Europaea). The 2001 and 2003 Regulations offer framework rules for corporate entities which entrepreneurs may use to set up and perform their businesses in a cross-border situation, provided that the so-called “Community Test” is met. This test relates to the formation requirement that, as a rule, the activities of the company must be located in at least two different Member States. But again, entrepreneurs are free to use national corporate vehicles to that end as well, e. g., the German Aktiengesellschaft or the UK Cooperative.6 This 3

4

5

6

Cf. Mgr. Bartlomiej Kurcz, ‘Harmonization by means of Directives – never-ending story?’, EBLR Nov./Dec. 2001, 287-307. On the last two mentioned forms of harmonization in company law see Luca Enriques, ‘Company Law Reconsidered: What Role for the EC?’, in: European Company Law in Accelerated Progress, ed. S. M. Bartman, CECL book series, part 1 (Kluwer Law International: Alphen a d Rijn 2006), 59-82. Cf. Daniela Weber-Rey, ‘Effects of the Better Regulation Approach on European Company Law and Corporate Governance’, ECFLR, Vol. 4, No. 3, 370-416. For a critical assessment of the possibilities to harmonize EU company law by means of Directives see Luca Enriques, op. cit. in n. 3. On the differences in the EU and the US in this respect see Maarten J. Kroeze and Helene M. Vletter-van Dort, ‘History and Future of Uniform Company Law in Europe’, ECL, Vol. 5, Issue 3 (2008), 114122. Gerard Hertig and Joseph A. McCahery, ‘Optional rather than Mandatory EU Company Law’, ECFLR, Vol. 3, No. 4 (2006), 341-362. See also their article ‘Optional EU Banking Supervision?’, ECL, Vol. 6, Issue 1 (2009), 4-5. Moreover, even if entrepreneurs opt for the use of an SE they are still free to determine the main structure of the company, i. e. one-tier or two-tier (Art. 38 SE

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discretion has even been strengthened by case law from the ECJ over the last decade. It follows from, inter alia, Centros, Überseering, Inspire Art and Sevic that a company, once incorporated in accordance with the rules of one EU Member State, must be recognised in all respects as a legal entity in another – host – Member State, even if the involved company has no economic ties with the state of incorporation whatsoever.7 One of the consequences of this case law is that the Community Test, as a precondition to form an SE or an SCE, could negatively influence the future popularity of these EU corporate vehicles compared to national equivalents. Perhaps being aware of this, the Commission, in its initial draft SPE Regulation, has dropped this requirement altogether. In a second version, after the first draft had been discussed in the European Parliament, the Commission introduced what one could call an intentional Community Test, i. e. only the intention of the incorporators to become active in various Member States will be sufficient. Also, the SPE may be set up ex nihilio, i. e. no participation of any pre-existing company in its formation is required. An SPE may be used as an alternative for e. g. the UK private company limited by shares, the German GmbH, the French Sàrl or the Dutch BV, even if the company has no commercial ties with any other EU Member State but the state of incorporation.8 Given the fact that not just EC Directives but also EC Regulations increasingly reflect the European legislature’s growing preference to create optional rules in the field of company law, it would be more accurate to speak of optional (Community) law-making instead of optional harmonisation. This contribution deals with the question whether optional law-making has any impact on the interpretation of and limitations on national company law that goes beyond the mere choice of the entrepreneur to apply the EU-inspired legal framework or not. More specifically, I see two relevant questions for research here: 1. Does optional law-making have any impact on the national legislature’s leeway to limit the scope of the fundamental freedom of establishment (Article 43 EC) in accordance with the so-called rule of reason? 2. Does optional law-making leave any room for the mandatory application of the doctrine of directive compliant interpretation (DCI) by the national ju-

7

8

Regulation). Member States are unable to enforce their national standard in this respect. For an analysis of the scope of companies’ freedom of establishment in light of this case law, in particular Sevic, see Gert-Jan Vossestein, ‘Companies’ Freedom of Establishment after Sevic’, ECL, Vol. 3, Issue 4 (2006), 177-182. For comments on the draft SPE Regulation, as amended, see Adriaan F. M. Dorresteyn and Odeya Uziahu-Santcroos, ‘The Societas Privata Europaea under the Magnifying Glass’ (Part 1), ECL, Vol. 5, No. 6 (2008), 277-283 and ‘The Societas Privata Europaea under the Magnifying Glass’ (Part 2), to be published in ECL, Vol. 6, No. 4 (2009).

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diciary, in a situation where the addressed Member States or entrepreneurs preferred not to make use of the national legal framework offered on the basis of an EU legal instrument? I am inclined to answer both questions in the affirmative. I will illustrate this in the next paragraphs by elaborating further on the aforementioned SE Directive and the Takeover Directive.

2. Optional Law-making and freedom of establishment The EC Directive on the involvement of employees, supplementing the Statute for a European Company (SE), prescribes negotiations between the incorporators and the representatives of the employees to enter into some sort of arrangement on employee involvement. That is, if the entrepreneur wishes to make use of the SE as his corporate vehicle. The Preamble to the SE Directive underscores the importance of employee involvement in the eyes of the European legislature under consideration (3) and consideration (18), the first sentence of which reads as follows: ‘It is a fundamental principle and stated aim of this Directive to secure employees’ acquired rights as regards involvement in company decisions’. Employee involvement is defined in Article 1 (h)-(k) of the Directive. It covers mere information and consultation rights as well as the role of employees in electing, appointing or otherwise influencing the selection of the members of the board of the SE, be it a one-tier or a two-tier board structure.9 This last form of involvement is characterised as employee participation. Any variant between these forms of involvement, as a result of negotiations under the Directive, is allowed.10 Without such arrangement though, the SE cannot be entered into the Commercial Register and, consequently, will not come into existence.11 However, if the arrangement entails that employees have explicitly decided to waive any involvement rights, let alone employee participation at board level, this prerequisite requirement is deemed to be fulfilled and the formation of the SE can validly take place. In short, agreement not to involve employees is also an agreement. The enforcement of the fundamental principle of employee involvement, so strongly endorsed by the European legislature in the Directive’s preamble, is ultimately left at the entrepreneurs’ and employees’ 9

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Paul L. Davis, ‘Employee involvement in the European Company’, in: The European Company, ed. Jonathan Rickford (Intersentia: Antwerp-Oxford-New York 2003), 67-82. On the various conceivable forms of workers’ participation, also in respect of the SE Statute, see Catherine Barnard, EC Employment Law (3rd ed., OUP: Oxford 2006), Ch. 15. Art. 12 (2) SE Regulation.

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full discretion. Nonetheless, the recognition by the European legislature that employee involvement is something that should be aspired to, or at least preserved, in corporate relations, has legal significance that should not be easily neglected. The fact that it has chosen to promote employee involvement by way of prescribed negotiations between entrepreneurs and employee representatives does not take away the importance of this recognition. Perhaps it goes too far to conclude that employee involvement is a principle of European company law, but it may certainly be considered a valid goal for law-making in the national public interest. This means that it may well serve as an overriding justification for a limitation of the freedom of establishment by national legislation, in accordance with the rule of reason as recognised by the ECJ.12 Let me give an example of this possible impact on the national company law of the Member States. Since 1971 the Second Book of the Dutch Civil Code contains specific provisions for large companies, the so-called Structure Regime.13 I will not go into the rather technical details of these provisions. However, an important consequence of the mandatory application of these rules is that the company involved must set up a supervisory board as a separate corporate body within the company’s structure.14 The supervisory board of a structure company has some far-reaching corporate powers by virtue of the law, inter alia the right to dismiss and appoint members of the management board. This of course makes the supervisory board the most powerful body of such a company. In addition, employees of the company, represented by its Works Council, have the right to give almost binding advice on the appointment of one-third of the supervisory board’s members. Although the Structure Regime was amended in 2004 to the effect that the members of the supervisory board no longer select their own successors, the remaining impact of this regime on the operation of a company is obvious.15 Hence the revolving appeals to the Dutch Government to abolish the Structure Regime altogether.16 Also, the mandatory creation of such a powerful supervisory board at subsidiary level is likely to scare off foreign investors to set up businesses in the Netherlands. To avoid this effect, the Dutch subsidiary that belongs to an international group 12

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On employee participation and the rule of reason see Paul Storm, ‘Cross-border Mergers, the Rule of Reason and Employee Participation’, ECL, Vol. 3, Issue 3 (2006), 130-138. Arts 152/262-164/274, Second Book, DCC. See on these rules in detail Cornelis de Groot, Corporate Governance as a Limited Legal Concept, CECL book series, part 4 (Kluwer Law International: Alphen a d Rijn 2009), 97-112. On the recent law proposal introducing a one-tier board structure in the Netherlands see Michiel R. Martin, ‘Report from the Netherlands’, ECL, Vol. 5, Issue 4 (2008), 195-196. Cf. R. Kraakman et al., The Anatomy of Corporate Law (OUP: Oxford 2003), 36. An all over evaluation of the Structure Regime in the Dutch Parliament has been scheduled for 2009.

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of companies of which the majority of workers are employed abroad is partly exempt from the Structure Regime, in that the right to appoint and dismiss members of the management board remains with the shareholders’ meeting.17 The subsidiary of a Dutch NV, which itself applies the Structure Regime, is even fully exempt. The same goes for the Dutch subsidiary of a holding company SE formed in the Netherlands.18 However, the Dutch subsidiary of an SE incorporated outside the Netherlands or of a foreign local equivalent of the NV, like the German Aktiengesellschaft, the UK public company limited by shares or the French Societé Anonyme, is not exempt from the Structure Regime, not even if a similar – but foreign – system of employee participation governs the holding company. Is this compatible with current European law and the freedom of establishment? Surely, the non-discrimination provision of Article 10 of the SE Regulation forced the Dutch legislature to treat the SE on an equal footing with the Dutch NV. Still, as Cornelis de Groot correctly observed, the transposition of the SE Directive in the Netherlands does reflect a clear preference of the Dutch legislature for its own national Structure Regime over any other foreign (EU) system of employee participation.19 One might argue that this preference results in a violation of the fundamental freedom of establishment, since the creation of a subsidiary in another Member State also falls under the scope of this freedom.20 On the other hand one could argue that, as the SE Regulation and the SE Directive so firmly underscore the value of employee involvement – including employee participation – the national legislature’s preference in this respect deserves priority and justifies an infringement on the freedom of establishment for the sake of the public interest. In fact this would be my preferred approach. In a situation where the European legislature explicitly endorses a legal principle or value of company law but, for reasons of political disagreement, is simply not able to effectuate such principle at Community level, the choices of the national legislature in this field should prevail. Of course this would also hold true for any other form of employee participation within the EU, such as that applicable in Germany, the Scandinavian countries and the new Member States from eastern Europe.21 17

18 19

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On inter alia the amended Structure Regime see Wilco J. Oostwouder and Sandra M. van den Braak, ‘The Amended Position of Shareholders in a Dutch Public Limited Company’, ECL, Vol 1, Issue 4 (2004), 166-171. Art. 23 of the Dutch law on the SE Regulation. See the contribution of Cornelis de Groot to M. E. Koppenol et al., De Europese Vennootschap (SE) in de praktijk (Kluwer: Deventer 2005), 66, who seems to doubt the compatibility of Dutch law with European law in this respect. Art. 43 EC, as interpreted by the ECJ in, inter alia, Überseering, par. 77. On employee participation at board level in these various countries see the special issue of ECL, Vol. 6, No. 2 (2009), with contributions by Loe Sprengers (Editorial), Robbert H. van het Kaar (Europe), Bernd Waas (Germany), Lone L. Hansen and

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3. Optional Law-making and directive compliant interpretation Ever since the famous Von Colson ruling of the ECJ in 1984, followed by Marleasing in 1990, courts of the Member States are under the obligation to interpret national law, as far as possible, in conformity with Community law applying to the same subject matter.22 Sometimes this rule is referred to as “sympathetic interpretation”.23 As this does not reflect the mandatory nature of this judicial task based on Article 10 EC (previously Article 5 EC), I prefer the term “directive compliant interpretation” (“DCI”). I will not go into the specific and still somewhat disputed scope of this Community doctrine,24 but will focus directly on my second question: does optional law making leave any room at all for the application of this doctrine? In other words, can an optional Directive have any legal significance, in terms of interpretation of national law by the courts of the Member States, beyond the question whether or not a specific entrepreneur has decided to opt in to a certain set of EU-inspired national rules or not? I think it does and I shall illustrate this by analysing the Takeover Directive.25 The EC Directive on Takeover Bids has a character rather similar to that of the SE Directive. Its Preamble as well as its General Principles expressed in Article 3 reflect the idea that shareholders of a listed company must have a final say when it comes to accepting an offer on their shares. The General Principles of Article 3 under (b) and (c) combined read as follows: ‘the holders of the securities of an offeree company must have sufficient time and information to enable them to reach a properly informed decision on the bid; (. . .) the board must not deny the holders of securities the opportunity to decide on the merits of the bid.’

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Erik Werlauff (Nordic countries), Rafal Stroinski and Slawomir Stanuch (Eastern Europe). ECJ 10 April 1984 (Von Colson), Case 14/83 and ECJ 13 November 1990 (Marleasing), Case C-106/89. See on Directive compliant interpretation M. H. Wissink, Richtlijnconforme interpretatie van burgerlijk recht (Kluwer: Deventer 2001). Cf. Christiaan W. A. Timmermans, ‘Application of Community law by national courts: (limits to) direct effect and supremacy’, in: European Ambitions of the national Judiciary, eds. R. H. M.Jansen, D. A. C. Koster and R. F. B. van Zutphen (Kluwer Law International: Boston/Mass. 1990), 29-39. See Nigel Foster, Foster on EU Law (OUP: Oxford 2006), 181. See also G. Bethlem, ‘Richtlijnconforme interpretatie’, in A. S. Hartkamp et al. (ed.), De Invloed van het Europese recht op het Nederlandse privaatrecht, serie Onderneming en Recht, deel 42-I (Kluwer: Deventer 2007). For an extensive analysis of the Takeover Directive see Beate Sjåfjell, Towards a Sustainable European Company Law, CECL book series, part 3 (Kluwer Law International: Alphen a d Rijn 2009).

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This principle of shareholders’ primacy requires, inter alia, that shareholders are adequately and in good time informed of any defensive mechanism that the company’s board may create or has created to frustrate the bid, and that such device should not be activated without their prior consent. Not surprisingly this principle has been further worked out in the Takeover Directive, notably in the rather technical and detailed provisions of Articles 9 and 11, which create an “open”, investor-friendly takeover regime for the company involved. So far so good. But then this whole set up of the Takeover Directive is undermined again because Article 12 allows Member States to reserve the right not to require companies to apply Articles 9 and 11. If a Member State chooses to opt out of these articles, it is still obliged to create a legal framework on their subject matter but, in turn, it must then leave the relevant listed companies in its jurisdiction the choice to opt in or to opt out of such legal framework. Although it can be held that standards of corporate governance under certain circumstances demand entrepreneurs to opt in to the open regime of the Takeover Directive,26 again as a rule entrepreneurs’ discretion is the name of the game. Member States and listed companies alike are free in their choice to apply the key rules of the Takeover Directive. In fact this turned out to be the only basis to reach political agreement on this topic in the EU, after decades of quarrels and negotiations.27 At the end of the day the realisation of the principle of shareholders’ primacy in takeover scenarios, so strongly endorsed by the European legislature in Article 3 of the Takeover Directive and in its Preamble, is left at the full discretion of the entrepreneurs themselves. A more extreme example of optional EU law-making is hardly conceivable. If an EC Directive has a highly optional character, like the Takeover Directive, can it still serve as a (mandatory) basis for a national court to interpret national law as far as possible in conformity with that Directive? My first, perhaps somewhat superfluous observation would be that, irrespective of the answer one is inclined to give to this question, it should make no difference if the target company involved in a takeover dispute has opted in to the key rules of the Directive (i. e. Articles 9 and 11) or not. DCI has to do with the correct interpretation of national law, a subject that is not affected by the regulative choice of a single company.

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Cf. Steef M. Bartman, ‘The EC Directive on Takeover Bids: Opting in as a Token of Good Corporate Governance’, in: European Company Law in Accelerated Progress, ed. S. M. Bartman, CECL book series, part 1 (Kluwer Law International: Alphen a d Rijn 2006), 1-7. See on corporate governance Cornelis de Groot, Corporate Governance as a Limited Legal Concept, CECL book series, part 4 (Kluwer Law International: Alphen a d Rijn 2009). See the various contributions on this subject in Guido Ferrarini (ed.), Reforming Company and Takeover Law in Europe (OUP: Oxford 2004).

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My second observation would be that DCI is rooted in the aims and rationale of the relevant EC Directive, as expressed in or to be derived from its Preamble and sometimes its explicit provisions. Given the fact that DCI for the most part comes into the picture in cases that are not completely, not directly, or not at all covered by the rules of the Directive, one could say that DCI is by definition principle-based instead of rule-based. This seems a fortiori to be the case if the Directive involved opens the possibility to completely or substantially neglect its rules by opting out of the whole system, either by a Member State or by an individual company. Then there simply are no rules applicable, just principles. However, the nature of a Directive – hard or soft law – does not affect the judiciary’s duty to interpret national law in conformity with that Directive as far as possible.28 Moreover, it follows from Marleasing that the interpretative obligation of the national court under DCI relates to all national law, whether passed before or after the Directive.29 Therefore, I would argue that yes, the basic principles behind the Takeover Directive must be used as a mandatory reference by the national courts in interpreting national law that in itself is not the result of implementation of said Directive, but which does or might relate to the subject matter of that Directive. I will illustrate the consequences of this view by analysing the case underlying the decision of the Dutch Supreme Court regarding the takeover dispute involving ABN Amro Bank.30 As I co-represented one of the parties in these proceedings I cannot comment on the specifics of this case. However, that will not be necessary to make my point. I shall go from the basic facts of the case, then I will slightly change the outcome of proceedings in first instance before I present this amended case to the Supreme Court. In other words, I turn it into a casus non dabilis. When analyzing the ABN Amro/VEB takeover ruling it is of the utmost importance to bear in mind that the court in first instance in these proceedings, the Enterprise Chamber of the Amsterdam Court of Appeals, did not consider the sale of ABN Amro’s US LaSalle division as a protective device aimed at shaking off the RBS group, which had announced a hostile offer for the ABN Amro shares. Since October 2004 Article 2:107a DCC grants the 28

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M. H. Wissink, Richtlijnconforme interpretatie van burgerlijk recht (Kluwer: Deventer 2001), 28. ECJ 13 November 1990 (Marleasing), Case C-106/89, par. 8. See on this Paul Craig, ‘Directives: Direct Effect, Indirect Effect and the Construction of National Legislation’, E. L. Rev. Dec., 1997, 519-538. Supreme Court ruling 13 July 2007, JOR 2007, 178 (ABN Amro/VEB), with commentary by Marco Nieuwe Weme. For an outline of the facts and procedural phases of this dispute I refer to Cornelis de Groot, Anne van Nood and Frederick Lambert, ‘The ABN AMRO Ruling: Some Commentaries’, ECL, Vol. 4, Issue 4 (2007), 168176 and Wilco Oostwouder, ‘Can You Trust the Dutch (Company Law System)?’, ECL, Vol. 4, Issue 5 (2007), 211-216.

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shareholders of an NV the right to approve corporate actions that affect the identity or character of the company. A non-exhaustive number of corporate actions are listed in this article. The Enterprise Chamber ruled that, although strictly speaking Article 2:107a DCC did not cover the sale of LaSalle, this sale was nevertheless considered so important that it required shareholders’ prior consent, in analogy with this legal provision and based on the overriding principle of reasonableness and fairness. On appeal the Supreme Court did not agree with this last view and quashed the Enterprise Chamber’s ruling. Note that the Dutch Supreme Court does not decide purely factual issues, so it accepted – and had to accept – the Enterprise Chamber’s finding that the LaSalle deal was not intended as a defensive measure.31 The Supreme Court is not allowed to do its own research on the factual merits of a case.32 Moreover, it cannot ex officio come up with an additional legal basis for the claim at hand, save if this would be rooted in “super mandatory obligations” of EU origin33 – but again, not if that would require a new investigation into the facts.34 As a consequence, the interpretation of Article 2:107a DCC by the Supreme Court in ABN Amro/VEB did not – and could not – take place on the assumption that this was a takeover dispute, involving defensive mechanisms from the target’s side.35 Although in consideration 4.6 of its ruling the Supreme Court does refer to Article 2:359b DCC, by which the Dutch legislature has opted out of Articles 9 and 11 of the Takeover Directive, this is only to illustrate that the US-originated Revlon doctrine, giving priority to shareholders’ interests after the company has been publicly put up for sale, is not part of current Dutch company law. This consideration is not considered a DCI attempt to interpret Article 2:107a DCC in conformity with the Takeover Directive. But what if the Enterprise Chamber would have decided that the LaSalle deal should be qualified as a defensive measure to scare off RBS? In my opinion that would certainly have made a big difference. Then the Supreme Court would be bound to treat that as a court-established fact and it would have to interpret Article 2:107a DCC in light of a pending takeover dispute. The Supreme Court could then not avoid the key question of whether Article 2:107a DCC should be interpreted in conformity with the rationale of the Takeover Directive, i. e. the protection of shareholders against non-consented actions by the board aimed at frustrating a hostile, but perhaps – for shareholders – beneficial offer. This 31 32 33

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Supreme Court ruling, consideration 4.2. Art. 419 (2), (3) Rv. See Veegens-Korthals Altes-Groen, Cassatie (Kluwer: Deventer 2005), No. 154. On the EU exception to this rule see ECJ 14 December 1995 (Van Schijndel), Case 430/93 and Case 431/93, NJ 1997, 118, with commentary by P. J. Slot and HJS. Cf. H.J. Snijders, ‘Ambtshalve aanvulling van gronden van Europees recht in burgerlijke zaken herijkt’, WPNR 2008 (6761), 541-552. This is confirmed in consideration 4.6, first paragraph, of the Supreme Court ruling, which in turn refers to consideration 4.2.

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would set the interpretation of this legal provision in a completely different light. In such a scenario the Supreme Court might very well have ruled that the sale of LaSalle required the ABN Amro shareholders’ consent after all, taking into account that the Takeover Directive should have been transposed into national Dutch law almost one and a half years earlier. It follows from the ECJ ruling regarding Adeneler that the interpretative duty of the national court under DCI operates as of the ultimate transposition date of the Directive.36

4. Summary and conclusions Since the turn of the millennium the European legislature shows a growing tendency to introduce optional Community instruments to deal with sensitive issues of company law. The SE Directive on employee involvement and the Takeover Directive are examples of this. These instruments give either the Member States or the entrepreneurs the possibility to completely or substantially opt out of the new set of rules. At the same time the European legislature firmly endorses certain basic principles, like employee involvement and shareholders’ primacy in takeover disputes, expressed in the Preamble or even in the provisions of the relevant Directive itself. This shift in approach has two consequences, with opposite effects as regards Member States’ regulative autonomy in the field of company law. Firstly, since the European legislature shows itself to be unable to enforce its own principles of company law at Community level, an outspoken and concrete national legislature’s choice in this respect deserves priority and justifies an infringement on the freedom of establishment for public interest’s sake, in accordance with the so-called rule of reason. The Dutch Structure Regime, laying down a specific form of workers’ involvement at supervisory board level, is a good example of this, but of course this would apply equally to any other form of employee participation effective in any other EU Member State. Secondly, the impact of optional Community law-making is not limited to the question of whether or not Member States or entrepreneurs have actually opted in or out of the instrument’s set of rules. The General Principles of the Takeover Directive, for instance, urge the courts of the Member States to interpret national law in conformity with these principles if this would serve as an adequate remedy against defensive mechanisms created or activated by the board of directors without prior shareholders’ consent. The national judiciary’s duty to interpret national law as far as possible in conformity with EC Directives is not limited to mandatory rules but also includes basic prin36

The ultimate transformation date of the Takeover Directive was 20 May 2006, while the date of the ABN Amro ruling of the Supreme Court was 13 July 2007. The Directive was not transformed into Dutch law until 28 October 2007 (Stb. 2007, 390). On ECJ 4 July 2006 (Adeneler), Case C-212/04 see Bethlem (n 24 above).

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ciples reflected in optional Directives. A similar effect is to be expected if and whenever the announced Directive on group law will be adopted.37 Both consequences illustrate the same phenomenon, namely that the European legislature’s inability to create mandatory law imposing a self-endorsed principle of company law, due to lasting and insurmountable disagreement in the European political arena, nonetheless has its impact in the European legal arena. The Commission would do well to take this – presumably unintended – effect into account when proceeding on the road of optional law-making. 37

Cf. Steef M. Bartman, ‘Of Groups and Ostriches’, ECL, Vol. 4, Issue 5 (2007), 190.

Inspiration From Above: Making and Interpreting Dutch Law on Jurisdiction in Civil and Commercial Matters in Light of European Law Maurice Polak*

1. Introduction In the course of the 1990’s, the Dutch legislature took up the task of revising the rules of civil procedure prevailing in the Netherlands. The result – the revised Code of Civil Procedure (“CCPr”) 1 – entered into force on 1 January 2002. Part of this revision project was the adoption of a new set of rules on the Dutch courts’ international jurisdiction in civil and commercial matters: the present Articles 1-14 CCPr. These rules apply to cases not covered by conventions or EC regulations, as Article 1 DCCPr points out. The legislative history of the new rules on jurisdiction2 acknowledges that the legislature, when drafting Articles 1-14 CCPr, drew inspiration from conventions to which the Netherlands is a party,3 in particular the Brussels *

1

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3

Maurice V. Polak (LL. M. Leiden ’83; LL. M. Columbia ’84; LL. D. Leiden ’88) is Professor of Private International and Comparative Law, Faculty of Law, Leiden University; Fellow of the E. M. Meijers Institute of Legal Studies, Leiden University; Advocaat, De Brauw Blackstone Westbroek, Amsterdam; and Member of the Netherlands Standing Government Committee on Private International Law. Wet van 6 december 2001, Stb. 580, tot herziening van het procesrecht in burgerlijke zaken, in het bijzonder de wijze van procederen in eerste aanleg; Wet van 6 december 2001, Stb. 581, tot aanpassing van de wetgeving aan de herziening van het procesrecht in burgerlijke zaken, in het bijzonder de wijze van procederen in eerste aanleg. See, for the legislative history of the revised Code of Civil Procedure, A. I. M. van Mierlo and F. M. Bart red., Parlementaire Geschiedenis Herziening van het burgerlijk procesrecht voor burgerlijke zaken, in het bijzonder de wijze van procederen in eerste aanleg (Kluwer: Deventer 2002) (hereinafter referred to as: Parlementaire Geschiedenis Herziening Rv). See, e. g., MvT, Parlementaire Geschiedenis Herziening Rv, 80 (Articles 1-14 DCCPr in general), 102-103 (Article 6 DCCPr in general), 104 (Article 6 (a) and (b) CCPr), 105 (Article 6 (d) and (e) CCPr) , 105-106 (Article 6 (f) CCPr), 106 (Article 6 (h)

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Convention of 1968 (as amended)4 and the Lugano Convention of 1988.5 In this context, the legislature repeatedly expressed the wish that the existing and future case law on the Brussels Convention promulgated by the Court of Justice of the European Communities be a source of inspiration for the Dutch courts when asked to interpret and apply the new rules on jurisdiction.6 This wish for inspiration from above was accompanied by the statement that, in this context, there is no room for the direct involvement of the Court of Justice, since this tribunal has no competence to give preliminary rulings on the interpretation of provisions of national law.7 In my contribution, I will analyse both the making and the interpretation of the new rules on jurisdiction, as they have taken place and will take place in light of European law. As far as the making is concerned, I will first (see Section 2.1) address the problems concerning the timing of the revision of the Code of Civil Procedure, which were caused by the fact that this revision project took place during a period in which (i) the Brussels Convention was transformed into the Brussels I Regulation,8 and (ii) the Brussels II Regulation9 was adopted. Moreover, soon after the entry into force of the revised Code of Civil Procedure, (iii) the Brussels II Regulation was replaced by the Brussels II-bis Regulation.10 I will subsequently (see Section 2.2) analyse the extent to which the various European regimes inspired the Dutch legislature in drafting the new rules on jurisdiction. As far as the interpretation is concerned, I will CCPr), 108 (Article 7 CCPr), 111-112 (Article 8 CCPr), 113 (Article 9 (a) CCPr), 119 (Article 12 CCPr) and 120 (Article 13 CCPr). 4

5

6

7 8

9

10

Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, Brussels, 27 September 1968 (as amended by the Accession Conventions of 1978, 1982, 1989 and 1996), OJ C 27, 26.1.1998, 1 (consolidated version). Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, Lugano, 16 September 1988, OJ L 319, 25.11.1988, 9. See, e. g., MvT, Parlementaire Geschiedenis Herziening Rv, 102-103, 105 and 111; NV II, Parlementaire Geschiedenis Herziening Rv, 107. See also NV II, Kamerstukken II 2003/04, 28 863, nr. 5 (8); MvA I, Kamerstukken I 2004/05, 28 863, D, 5. See MvT, Parlementaire Geschiedenis Herziening Rv, 103. Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ L 12, 16.1.2001, 1. Council Regulation (EC) No 1347/2000 of 29 May 2000 on jurisdiction and the recognition and enforcement of judgments in matrimonial matters and in matters of parental responsibility for children of both spouses, OJ L 160, 30.6.2000, 19. Council Regulation (EC) No 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and in matters of parental responsibility, repealing Regulation (EC) No 1347/2000, OJ L 338, 23.12.2003, 1.

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first (see Section 3.1) deal with the possibilities or impossibilities of directly involving the Court of Justice in interpreting Articles 1-14 CCPr. This is followed (see Section 3.2) by an analysis of the pro’s and con’s of using the Court of Justice’s case law as a source of inspiration for the interpretation of the new rules on jurisdiction. These analyses lead to a number of conclusions (see Section 4). I end this introduction with a brief warning. Although the new rules on the Dutch courts’ jurisdiction in civil and commercial matters have been in force since 1 January 2002, only a few cases on their interpretation have so far reached the Supreme Court of the Netherlands. Moreover, these Supreme Court cases do not concern the provisions of the revised Code of Civil Procedure, which I will analyse in my contribution, nor do they touch upon the issues which I will discuss hereinafter.11 In other words: the following observations are mainly of a theoretical nature, at least for the time being.

2. Making Dutch law on jurisdiction in civil and commercial law 2.1 The best of times? The revision of the Code of Civil Procedure was not an operation which took place overnight. The preliminary drafting process at the Ministry of Justice started in the early 1990’s and resulted in the introduction of a bill in Parliament in 1996.12 This bill was withdrawn in 1998, because there was insufficient support in Parliament for the structure which the Ministry of Justice had designed for the organisation of the judiciary.13 The proposals for a mod11

12 13

See, e. g., HR 19 March 2004, NJ 2004, 295 (PV), para 3.2 (concerning the continued application of the pre-2002 DCCPr provisions on jurisdiction to cases instituted before 1 January 2002, but litigated on appeal after 1 January 2002); HR 19 March 2004 (Philips v Postech), NJ 2007, 585 (PV), para 3.4.3 (concerning the competence of the Dutch courts, in a case instituted before 1 January 2002, to issue an injunction, either in a judgment on the merits or by way of provisional measure, to stop an infringement, occurring outside the Netherlands, of an intellectual property right granted under foreign law); HR 27 April 2007, NJ 2008, 546 (ThMdB), para 3.2 (concerning Article 5 DCCPr on jurisdiction in matters of parental responsibility outside the context of divorce proceedings); HR 30 November 2007 (Roche v Primus), NJ 2008, 77 (PV), paras 2.5.1-2.5.4 (concerning the application of Article 126 (7) of the pre-2002 CCPr, in a case instituted before 1 January 2002). Kamerstukken II 1995/96, 24 651, A en nr. 1-3. See Brief van de Minister van Justitie, Kamerstukken II 1997/98, 24 651, nr. 7; Brief houdende intrekking van het wetsvoorstel, Kamerstukken II 1998/99, 24 651, nr. 8.

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ernized civil procedure, which, on the contrary, were supported by Parliament, were reintroduced by a new bill in 1999.14 This bill was soon followed by two other bills, mostly containing technical provisions.15 The bill that was introduced in 1999 – like its predecessor of 1996 – contained a new set of rules on the Dutch courts’ jurisdiction in civil and commercial matters: the present Articles 1-14 CCPr. For the drafting of these provisions, in particular Articles 6, 7, 8, 9, 12 and 13 CCPr, inspiration was drawn from the conventions prevailing at the time, i. e. the Brussels and Lugano Conventions, as the accompanying explanatory memorandum explicitly acknowledges.16 Unfortunately, however, during the parliamentary deliberations on the bill introduced in 1999, the European landscape changed, with the transformation of the Brussels Convention into the Brussels I Regulation and the adoption of the Brussels II Regulation. These developments gave rise to the question of whether and, if so, to what extent the bill of 1999 was to be amended. As for the above-mentioned provisions, which were “merely” inspired by the Brussels and Lugano Conventions, the Ministry of Justice quickly decided not to engage in a redrafting process on the basis of the modifications which the Brussels I Regulation contained vis-à-vis the Brussels Convention. The proposed Articles 6, 7, 8, 9, 12 and 13 DCCPr were left as they had been proposed, with the promise that the necessary updating would be taken up in a separate bill to be introduced at a later stage.17 Thus, the revised Code of Civil Procedure, which entered into force on 1 January 2002, contained provisions concerning the Dutch courts’ jurisdiction in civil and commercial matters, which were modelled on the Brussels and Lugano Conventions. Two months later, on 1 March 2002, the Brussels Convention itself was replaced by the Brussels I Regulation, containing several new jurisdictional provisions which were not mirrored in Articles 1-14 CCPr. This dichotomy between the national rules and the European rules was only repaired in 2005, as I will explain later. The Ministry of Justice followed a different path as far as the Brussels II Regulation was concerned. The prevailing view was that, given this European instrument’s direct applicability with regard to the Dutch courts’ jurisdiction in matters of divorce and parental responsibility, the originally proposed Article 4 CCPr, which encompassed all international divorce cases, needed to be replaced by a provision which was confined to providing additional rules for subject-matters and situations which were beyond this European instrument’s

14 15

16 17

Kamerstukken II 1999/00, 26 855, A-B en nr. 1-3. Kamerstukken II 2000/01, 27 824, A-B en nr. 1-3; Kamerstukken II 2001/02, 27 748, A-B en nr. 1-3. See, for references, supra note 3. See MvA I, Parlementaire Geschiedenis Herziening Rv, 60.

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scope.18 This amendment took place in the course of 2001, with the effect that the updated Article 4 DCCPr could enter into force on 1 January 2002, as part of the revised Code of Civil Procedure. Soon after the entry into force of the revised Code of Civil Procedure, the Ministry of Justice decided to prepare a new bill, in order to straighten out the errors which had been not been corrected during the parliamentary deliberations on the bill introduced in 1999. This new bill, which was put before Parliament in 200319 and resulted in a statute which entered into force on 15 October 2005,20 was used to keep the earlier promise to update Articles 1-14 DCCPr in light of the modifications which the Brussels I Regulation contained vis-à-vis the Brussels Convention. In fact, the update was limited to a revision of Articles 6 and 8 DCCPr and to the introduction of a new Article 6a CCPr. The third – and so far: last – revision of the rules on the Dutch courts’ jurisdiction in civil and commercial matters occurred on the basis of a bill introduced in Parliament in 2005,21 and resulted in a statute which entered into force on 1 May 2006.22 Apart from a revision of Articles 3 and 5 CCPr, this operation led to a modification of Article 4 CCPr, in that its reference to the Brussels II Regulation was replaced by a reference to the Brussels II-bis Regulation, which had replaced the Brussels II Regulation as of 1 March 2005. This brief overview of the legislative history of Articles 1-14 DCCPr demonstrates that the revision of the rules on the Dutch courts’ jurisdiction in civil and commercial matters took place during a peculiar period of time. Due to concurrent legislative activities on the European stage, the most important source of inspiration for the Dutch legislature, i. e. the Brussels Convention, was replaced by a new instrument, the Brussels I Regulation, which contained partly modified rules, while another new instrument, the Brussels II Regulation (as well as its successor, the Brussels II-bis Regulation), made an important inroad upon the scope of the Dutch national rules for jurisdiction in matters of divorce and parental responsibility. To digest all these changes brought about by the Community legislature, the Dutch legislature was forced to engage in a threefold revision of the Code of Civil Procedure, in the period between 1999 and 2006. With hindsight, one could say that it was not the best of times to revise the rules on the Dutch courts’ jurisdiction in civil and commercial matters. 18 19 20

21 22

See MvT AW, Parlementaire Geschiedenis Herziening Rv, 96. Kamerstukken II 2002/03, 28 863, A en nr. 1-3. Wet van 8 september 2005, Stb. 455, tot aanpassing van enkele onderdelen van het Wetboek van Burgerlijke Rechtsvordering en enige andere wetten in verband met het nieuwe procesrecht. Kamerstukken II 2004/05, 29 980, nr. 1-4. Wet van 16 februari 2006, Stb. 123 (Uitvoeringswet internationale kinderbescherming).

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2.2 Copy pasted or handled with care? In this Section, I will analyse the extent to which the various European regimes inspired the Dutch legislature in drafting the new rules on the Dutch courts’ jurisdiction in civil and commercial matters. My aim is not to give a detailed and comprehensive overview, but to highlight a few of the most interesting aspects. To this end, I will arrange the various Dutch provisions in six clusters. The first cluster of Dutch provisions with a European background, is constituted by Articles 6 and 6a CCPr. These provisions contain several heads of jurisdiction for litigation on specific matters. The common element of these heads of jurisdiction is that they offer so-called alternative bases for jurisdiction, which entails that the party initiating the litigation – the plaintiff in cases instituted by serving a writ of summons on the defendant and the petitioner in cases instituted by lodging a petition with the court – may invoke such a basis if the Dutch courts’ jurisdiction cannot be based on the principal rules of jurisdiction to be found in Articles 2 and 3 CCPr, i. e. where the relevant domicile – the domicile of the defendant or the petitioner – is not located in the Netherlands. Some (but not all) of these heads of jurisdiction have a corresponding provision in the Brussels Convention or the Brussels I Regulation. Yet, the Dutch legislature has only drawn inspiration from some of these European provisions. This is summarized in the following table.

I. Jurisdiction for specific matters Subject-matter of the litigation

CCPr Article

BConv Article

BReg I Article

1. Contractual obligations

6 (a) 6a

[5 (1)] –

5 (1) (a) 5 (1) (b)

2. Employment / agency contracts

6 (b) and (c)

5 (1)

[19-20]

3. Consumer contracts

6 (d)

[13-15]

15 (1) (c)

4. Delictual obligations

6 (e)

[5 (3)]

5 (3)

5. Rights in rem / tenancies

6 (f)

16 (1)

[22 (1)]

6. Succession matters

6 (g)

no corresponding provision in BConv or BReg I

7. Corporate matters

6 (h)

16 (2)

8. Insolvency matters

6 (i)

no corresponding provision in BConv or BReg I

[22 (2)]

More precisely, the drawing of European inspiration for Articles 6 and 6a DCCPr occurred in three different forms.

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For Articles 6 (a) and 6a, respectively Article 6 (e) CCPr, their text as well as their legislative history show that the Dutch legislature has opted for an almost word-by-word copying of the European jurisdictional rules for contractual and delictual disputes, i. e. Articles 5 (1) and 5 (3) of the Brussels Convention, as they have been amended by the Brussels I Regulation.23 This entails, according to the legislature, that the Court of Justice’s case law on these European provisions is to be regarded as an important guideline for the Dutch courts’ interpretation of the corresponding national provisions.24 A lighter form of inspiration took place in the framework of Article 6 (d), (f) and (h) CCPr, on consumer contracts, rights in rem and corporate matters respectively. Here, the Dutch legislature only used some of the elements provided by the corresponding European provisions, i. e. Articles 16 (1) and 16 (2) of the Brussels Convention and Article 15 (1) (c) of the Brussels I Regulation.25 Finally, the Dutch legislature deliberately refrained from using the special European rules on jurisdiction for employment disputes, i. e. Articles 19-20 of the Brussels I Regulation, as a model for Article 6 (b) and (c) CCPr. Instead, it opted for a less detailed and less restrictive set of rules, for which inspiration was drawn from Article 5 (1) of the Brussels Convention.26 The second cluster of Dutch provisions, inspired by European regimes, is to be found in Article 7 CCPr. This provision contains several heads of jurisdiction designed for procedural complications, which also serve as alternative bases of jurisdiction.

23

24

25

26

See MvT, Parlementaire Geschiedenis Herziening Rv, 104 (Article 6 (a) CCPr) and 105 (Article 6 (e) CCPr); MvT, Kamerstukken II 2002/03, 28 863, nr. 3 (5) (Article 6 (e) and 6a CCPr); NV II, Kamerstukken II 2003/04, 28 863, nr. 5 (9) (Article 6 (e) CCPr); MvA I, Kamerstukken I 2004/05, 28 863, D, 4-5 (Article 6a CCPr). See MvT, Parlementaire Geschiedenis Herziening Rv, 104 (Article 6 (a) CCPr) and 105 (Article 6 (e) CCPr); MvA I, Kamerstukken I 2004/05, 28 863, D, 5 (Article 6a CCPr). See MvT, Parlementaire Geschiedenis Herziening Rv, 105 (Articles 6 (d) and 6 (f) CCPr) and 106 (Article 6 (h) CCPr); MvT, Kamerstukken II 2002/03, 28 863, nr. 3 (5) (Article 6 (d) CCPr); NV II, Kamerstukken II 2003/04, 28 863, nr. 5 (8) (Article 6 (d) CCPr). See MvT, Parlementaire Geschiedenis Herziening Rv, 104-105 (Article 6 (b) CCPr); MvT, Kamerstukken II 2002/03, 28 863, nr. 3 (1) (Article 6 (b) CCPr); NV II, Kamerstukken II 2003/04, 28 863, nr. 5 (2-3 and 7) (Article 6 (b) CCPr).

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II. Jurisdiction for procedural complications Procedural complication

CCPr Article

BConv Article

BReg I Article

1. Multiple defendants

7 (1)

6 (1)

[6 (1)]

2. Counter-claims

7 (2)

6 (3)

[6 (3)]

3. Third party proceedings, including warranty / guarantee

7 (2)

6 (2)

[6 (2)]

According to the legislative history, the model provisions for these national rules were paragraphs (1), (2) and (3) of Article 6 of the Brussels Convention and the accompanying case law of the Court of Justice.27 A closer look, however, reveals at least one remarkable difference: whereas the European rule for multiple defendants vests jurisdiction in the court of the domicile of one of them, Article 7 (1) DCCPr can be applied if the Dutch courts have jurisdiction vis-à-vis one defendant, the precise basis for this latter jurisdiction being irrelevant. The third cluster of Dutch provisions with a European background contains the rules on choice of forum. By agreeing on the competent court – either explicitly or implicitly – the parties may confer jurisdiction on the Dutch courts, or exclude the Dutch courts by agreeing instead to confer jurisdiction on a court outside the Netherlands.

III. Jurisdiction based on choice of forum Type of choice of forum

CCPr Article

BConv Article

BReg I Article

1. Explicit prorogation

8 (1)

17

[23]

2. Explicit derogation

8 (2)

17

[23]

3. Protection for employees and consumers

8 (3)-(4)

15 and 17 (5)

[17 and 21]

4. Choice of forum for the benefit of only one of the parties

[8 (3)]

[17 (4)]

23

5. Formal validity

8 (5)

[17]

[23]

6. Implicit prorogation

9 (a)

18

[24]

The rule on explicit choice of forum of Article 8 (1) and (2) DCCPr has been modelled on – but is not identical to – Article 17 of the Brussels Convention, the latter provision being, to a large extent, similar to Article 23 of the Brussels I Regulation. The influence of Articles 15 and 17 (5) of the Brussels Convention may be traced in the rules on protection for employees and con27

See MvT, Parlementaire Geschiedenis Herziening Rv, 108 (Article 7 (1) CCPr); MvT, MvA I and NMvAI, Parlementaire Geschiedenis Herziening Rv, 108, 109 and 110 (Article 7 (2) CCPr).

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sumers provided for in Article 8 (3) and (4) CCPr.28 The Dutch legislature also took the trouble of amending Article 8 (3) CCPr, by striking out the special rule for choice of forum clauses concluded for the benefit of only one of the parties, on the ground that its model provision, to be found in Article 17 (4) of the Brussels Convention, has not been maintained in Article 23 of the Brussels I Regulation.29 On the other hand, the rule on the formal validity of choice of forum clauses, i. e. Article 8 (5) CCPr, has been formulated in a less complicated way than Article 17 (1) of the Brussels Convention and Article 23 (1) of the Brussels I Regulation.30 Article 9 (a) DCCPr on implicit choice of forum is based on Article 18 of the Brussels Convention, which corresponds to Article 24 of the Brussels I Regulation.31 The fourth cluster contains a single item only: the Dutch provision on lis pendens, which has been modelled on Article 21 of the Brussels Convention, 32 the latter provision corresponding to Article 27 of the Brussels I Regulation. The Code of Civil Procedure does not contain a provision on related actions, comparable to Article 22 of the Brussels Convention or Article 28 of the Brussels I Regulation.

IV. Lis pendens

Lis pendens

CCPr Article

BConv Article

BReg I Article

12

21

[27]

A few differences between Article 12 DCCPr and Article 21 of the Brussels Convention (as well as Article 27 of the Brussels I Regulation) should be mentioned. First, Article 12 DCCPr deliberately abstains from providing a mandatory rule on the staying of proceedings: a Dutch court may stay its proceeding on the basis of lis pendens with a case pending abroad, whereas the staying of proceedings is mandatory in the European instruments.33 Secondly, Article 12 DCCPr employs the “European” concepts of “the same parties” and “the same subject-matter”, but does not refer to “the same cause of action”, a difference not explained in the legislative history. Finally, Article 21 DCCPr is not accompanied by a rule similar to Article 30 of the Brussels I Regulation to establish the moment at which a court, for the purposes of the rule on lis 28

29 30 31 32 33

See MvT, Parlementaire Geschiedenis Herziening Rv, 111-112 (Article 8 DCCPr in general, Article 8 (1) and (2) DCCPr and Article 8 (3) and (4) CCPr). See MvT, Kamerstukken II 2002/03, 28 863, nr. 3 (6). See MvT, Parlementaire Geschiedenis Herziening Rv, 112. See idem, 113. See idem, 119. See idem, 119.

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pendens, is deemed to be seised. Here, the Dutch legislature has chosen to build on the Court of Justice’s case law preceding Article 30 of the Brussels I Regulation.34 The fifth cluster also consists of a single provision, i. e. the rule on the Dutch courts’ jurisdiction to issue provisional or protective measures.

V. Jurisdiction to issue protective or protective measures

Protective or provisional measures

CCPr Article

BConv Article

BReg I Article

13

24

[31]

Here, the relationship with the European model provision, i. e. Article 24 of the Brussels Convention (identical to Article 31 of the Brussels I Regulation), is also somewhat complicated. On the one hand, the Dutch legislature has employed the “European” concepts of “protective or provisional measures” in Article 13 CCPr, suggesting that these concepts should be interpreted in the same way as their European antipodes.35 On the other hand, as far as the demarcation of the Dutch courts’ jurisdiction in this area is concerned, the Dutch legislature has explicitly distanced itself from the Court of Justice’s case law on Article 24 of the Brussels Convention.36 Finally, the sixth cluster is of an altogether different nature, in that it contains a provision on the Dutch courts’ jurisdiction in divorce matters, which extends the jurisdictional rules of the relevant European instrument – previously Articles 2, 5 and 6 of the Brussels II Regulation, currently Articles 3, 4 and 5 of the Brussels II-bis Regulation – to cases where the European instrument is inapplicable.

VI. Jurisdiction for divorce, legal separation and conversion of legal separation into divorce, marriage annulment, nullity and validity of marriages as well as registered partnerships CCPr Article

BReg II Article

BReg II-bis Article

1. Divorce / legal separation / conversion / annulment / nullity / validity of marriages

4 (1)

[2, 5 and 6]

3, 4 and 5

2. Idem for registered partnerships

4 (4)

[2, 5 and 6]

3, 4 and 5

34 35 36

See idem, 119 (referring to Case 129/83 Zelger v Salinitri [1984] ECR 2397). See MvT, Parlementaire Geschiedenis Herziening Rv, 120. See idem, 120.

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The rule of Article 4 (1) DCCPr may be explained by the legislature’s uncertainty – in 2001 and beyond37 – about the precise scope of the European instruments. Apart from the obvious cases where these instruments are applicable, in which case there is no room for any national provision on jurisdiction, the legislature was faced with several hard cases. Are the European instruments applicable – ratione materiae – to divorce proceedings concerning a same-sex marriage? And should the Dutch courts apply these instruments – ratione loci – to divorce proceedings where the defendant is not linked to any Member State through his domicile or his nationality? These and other questions led the Dutch legislature to the extension rule of Article 4 (1) CCPr: in cases where the European instrument – previously the Brussels II Regulation, currently the Brussels II-bis Regulation – is inapplicable, the Dutch courts’ jurisdiction with regard to (i) divorce, (ii) legal separation, (iii) conversion of legal separation into divorce, (iv) marriage annulment, (v) nullity of marriages, and (vi) validity of marriages, is (nevertheless) exclusively governed by the jurisdictional rules of the European instrument.38 In Article 4 (4) CCPr, the extension rule of Article 4 (1) DCCPr is, once again, extended, in order to also cover registered partnerships, albeit with an additional national rule on jurisdiction.39 This overview of the rules on the Dutch courts’ jurisdiction in civil and commercial matters and their European sources of inspiration leads to the conclusion that the Dutch legislature has not merely copy-pasted all European provisions in the Code of Civil Procedure or, put otherwise, that Articles 1-14 DCCPr are not a replica of their European antipodes. It is true that in some cases the Dutch rules are essentially identical to their European counterparts and that the legislature has explicitly referred to the Court of Justice’s existing and future case law on the Brussels Convention or the Brussels I Regulation. However, a closer look at the precise wording of the majority of provisions in the Code of Civil Procedure or at their legislative history reveals – more often than not – crucial differences. On the whole, the European rules have been handled with the necessary care during the drafting of Articles 1-14 CCPr. Given the repeated references in the legislative history to the Court of Justice’s case law, it is time to analyse the possibilities or impossibilities of directly involving the Court of Justice in the interpretation of the Dutch rules on jurisdiction (see Section 3.1) and the relevance of the European case law in the national context (see Section 3.2).

37

38 39

Some of this uncertainty has meanwhile been taken away by the Court of Justice. See Case C-435/06 Re C [2007] ECR I-10141; Case C-68/07 Sundelind Lopez v Lopez Lizazo [2007] ECR I-10403. See MvT AW, Parlementaire Geschiedenis Herziening Rv, 96-101. See idem, 101.

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3. Interpreting Dutch law on jurisdiction in civil and commercial matters 3.1 A role for the Court of Justice? The explanatory memorandum on Article 6 DCCPr contains the statement that the interpretation of this provision cannot result in preliminary rulings by the Court of Justice: even where some of the paragraphs of Article 6 DCCPr are identical to provisions of the Brussels Convention, they are and remain provisions of Dutch law only.40 Although this statement is not supported by any reference, it is likely that the drafters were relying on the Court of Justice’s 1995 decision in Kleinwort Benson v City of Glasgow District Council.41 And indeed, in that case the Court ruled that it did not have jurisdiction to give a preliminary ruling on a question submitted by the Court of Appeal concerning the interpretation of a provision of the Brussels Convention, in a case where this instrument was applicable on the basis of a national Act, which extended the provisions of the Brussels Convention – with certain amendments – to the allocation of civil jurisdiction as between the separate jurisdictions within the United Kingdom (England and Wales, Scotland and Northern Ireland). Nevertheless, by the time the explanatory memorandum on the revised Code of Civil Procedure was published in 1999, the Court of Justice had already developed a much more nuanced approach than the one suggested in the explanatory memorandum. In its 1997 decision in Leur-Bloem v Inspecteur der Belastingdienst, the Court of Justice ruled: ‘[T]he Court of Justice has jurisdiction under Article 177 of the Treaty to interpret Community law where the situation in question is not governed directly by Community law but the national legislature, in transposing the provisions of a directive into domestic law, has chosen to apply the same treatment to purely internal situations and to those governed by the directive, so that it has aligned its domestic legislation to Community law.’42 In a further series of cases, this approach has been developed, resulting in the criteria recently formulated in the 2007 case of Autorità Garante v ETI: ‘In adjudicating on references for a preliminary ruling in which the rules of Community law whose interpretation was requested were applicable only because of a reference made to them by national law, the Court has held 40 41

42

See MvT, Parlementaire Geschiedenis Herziening Rv, 103. Case C-346/93 Kleinwort Benson v City of Glasgow District Council [1995] ECR I-615. Case C-28/95 Leur-Bloem v Inspecteur der Belastingdienst [1997] ECR I-4161, para 34.

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consistently that, where, in regulating purely internal situations, domestic legislation provides the same solutions as those adopted in Community law, it is clearly in the Community interest that, in order to avoid future differences of interpretation, provisions or concepts taken from Community law should be interpreted uniformly, irrespective of the circumstances in which they are to apply.’43 According to the Court of Justice, its decision in Kleinwort Benson must be construed in a strict manner: ‘In that judgment, the Court held that it had no jurisdiction to interpret national legislation which did not make a direct and unconditional reference to Community law, but which merely took the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (OJ 1978 L 304, p. 1) as a model and did not wholly reproduce the terms thereof. It is apparent from paragraph 18 of that judgment that express provision was made in that legislation for the national authorities to adopt modifications ‘designed to produce divergence’ between any provision of that legislation and a corresponding provision of the Convention. Moreover, that legislation distinguished between the provisions applicable to Community situations and those applicable to domestic situations.’44 In other words: the Court of Justice may be approached for a preliminary ruling on the interpretation of a provision of national law, such as Articles 1-14 DCCPr on the Dutch courts’ jurisdiction in civil and commercial matters, provided the relevant national provision provides the same solutions as those adopted in Community law. On the other hand, such a request for a preliminary ruling is rejected if the relevant national provision merely takes Community law as a model and does not wholly reproduce the terms thereof.

3.1.1 Applying the above-mentioned criteria to Articles 1-14 DCCPr results in the following grouping of these provisions.

The first group consists of the national provisions, which provide the same solutions as those adopted in Community law, and are thus capable of being interpreted by the Court of Justice. This is undoubtedly true for Article 4 (1) DCCPr on divorce matters, which, on the one hand, extends the jurisdictional provisions of Articles 3, 4 and 5 of the Brussels II-bis Regulation to subject43

44

Case C-280/06 Autorità Garante v ETI [2007] ECR I-10893, para 21 (references omitted). Case C-217/05 Confederación v CEPSA [2006] ECR I-11987, para 21. See also Case C-306/99 BIAO v Finanzamt [2003] ECR I-1, para 93.

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matters and situations not covered by the latter instrument, and, on the other, contains no modifications vis-à-vis the European rules. Article 4 (4) DCCPr on registered partnerships is slightly more complicated. This provision refers to Article 4 (1) CCPr – and thus indirectly to the Brussels II-bis Regulation – but also provides for an additional jurisdictional basis. Nevertheless, to the extent that Article 4 (4) – via Article 4 (1) – refers to the Brussels II-bis Regulation, there would still seem to be room for a preliminary ruling by the Court of Justice. The second group encompasses the national provisions, which, to a certain extent, take Community law as a model, but do not wholly reproduce the terms thereof – and may even explicitly deviate from these terms. The earlier analysis of the national rules (see Section 2.2) indicates that this criterion applies to the following rules in the Code of Civil Procedure on the Dutch courts’ jurisdiction in civil and commercial matters: a) Article 6 (b)-(c) on employment and agency contracts; b) Article 6 (d) on consumer contracts; c) Article 6 (f) on rights in rem and tenancies; d) Article 6 (h) on corporate matters; e) Article 7 (1) and (2) on multiple defendants, counter-claims and third party proceedings, including actions on a warranty or guarantee; f) Article 8 on explicit choice of forum; g) Article 9 (a) on implicit choice of forum; h) Article 12 on lis pendens; and i) Article 13 on protective or provisional measures. It follows from the above-mentioned case law that the Court of Justice will not assume jurisdiction for preliminary rulings on the interpretation of these national provisions. The third group contains borderline cases, where the national provisions do not directly refer to the European instruments, but provide virtually the same solutions as those adopted in Community law. This is true for the national provisions on jurisdiction for contractual obligations, i. e. Articles 6 (a) and 6a CCPr, and for the national provision on jurisdiction for delictual obligations, i. e. Article 6 (e) CCPr. Although there are some textual differences between these national provisions and their European antipodes, i. e. Articles 5 (1) and 5 (3) of the Brussels I Regulation, their legislative history (see Section 2.2) clearly evidences the Dutch legislature’s wish for an identical result. This is probably sufficient for the Court of Justice to allow requests for preliminary rulings on the interpretation of these provisions of national law. The conclusion must be that the statement in the explanatory memorandum on the impossibility of preliminary rulings on the interpretation of national rules on jurisdiction is insufficiently nuanced. Although this statement is true for most of the rules to be found in Articles 1-14 CCPr, for some national provisions – namely Article 4 (1) and (4) CCPr, and probably also

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Articles 6 (a), 6a and 6 (e) CCPr – the situation is different, in that the Court of Justice is likely to admit requests for preliminary rulings on their interpretation.

3.2 The Court of Justice’s case law as a source of inspiration? In several places in the legislative history of the revised Code of Civil Procedure, the suggestion is made that the Dutch courts use the Court of Justice’s existing and future case law on the Brussels Convention or the Brussels I Regulation for the interpretation of Articles 1-14 CCPr.45 What is to be made of this suggestion? There would seem to be no room for discussion on the desirability of using the Court of Justice’s case law for the interpretation of the national rules on the Dutch courts’ jurisdiction in civil and commercial cases, in those instances where national law provides the same solutions as those adopted in the European instruments, i. e. the national provisions of the first and the third group, mentioned earlier (see Section 3.1). Leaving aside the question of whether requests for preliminary rulings for these two groups of national provisions are allowed, it is evident that the case law on the European instruments is to be followed as strictly as possible in interpreting these national rules. The situation is different for the national provisions of the second group, mentioned earlier (see Section 3.1), thus for the majority of provisions in the Code of Civil Procedure. The need for – indeed, the possibility of – a close following of the Court of Justice’s case law depends on the level of similarity between the national provision and its European model provision. In many instances, the similarity is limited to certain paragraphs, or to specific elements of the national provision, so that the case law on the European model provision will only be relevant for that specific domain. And in all cases, the catchword is “carefulness”: the use of European case law in the national context demands careful analysis and application. I will illustrate this with three examples. The first example concerns Article 7 (1) CCPr: the rule which attributes jurisdiction to the Dutch courts in multiple defendants’ cases, provided the Dutch courts have jurisdiction as against one of the defendants and the claims are so closely connected that it is expedient to hear them together. The legislature has drafted this rule on the basis of Article 6 (1) of the Brussels Convention, but has also included wording derived from the Court of Justice’s decision in Kalfelis v Bank Schröder,46 which has been incorporated in Article 6 (1) of the Brussels I Regulation as well. The legislative history suggests that

45 46

See, for references, supra note 6. See MvT, Parlementaire Geschiedenis Herziening Rv, 108 (referring to Case 189/87 Kalfelis v Bank Schröder [1988] ECR 5565).

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Article 7 (1) DCCPr and the European provisions are identical,47 which would seem to justify the use of the Court of Justice’s post-Kalfelis case law on Article 6 (1) of the Brussels Convention and the Brussels I Regulation for the interpretation of Article 7 (1) CCPr. However, the earlier analysis of Article 7 (1) DCCPr (see Section 2.2) revealed a remarkable difference: whereas the European rule for multiple defendants vests jurisdiction in the court of the domicile of one of them, Article 7 (1) DCCPr can be applied if the Dutch courts have jurisdiction vis-à-vis one defendant, the precise basis for this latter jurisdiction being irrelevant. In other words: jurisdiction on the basis of Article 7 (1) DCCPr as against foreign defendants X and Y can be linked to the Dutch courts’ jurisdiction as against foreign defendant Z on the basis of, for instance, mere attachment of Z’s assets in the Netherlands (Article 10 DCCPr in connection with Article 767 CCPr). However weak this basis of jurisdiction for litigation in a Dutch court vis-à-vis Z may be, it suffices, at least in principle, to also commence litigation in the same Dutch court vis-à-vis X and Y on the basis of Article 7 (1) CCPr. The European rule for multiple defendants, on the other hand, only operates on the basis of Z’s domicile in the forum state, which constitutes a much stronger ground for jurisdiction than mere attachment of assets. Given this difference between Article 7 (1) CCPr, on the one hand, and Article 6 (1) of the European instruments, on the other, the Court of Justice’s post-Kalfelis case law should not be automatically and unthinkingly applied for the interpretation of Article 7 (1) CCPr. In particular, the decision in the 2007 case Freeport v Arnoldsson, ‘that Article 6 (1) of Regulation No 44/2001 applies where claims brought against different defendants are connected when the proceedings are instituted, that is to say, where it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings, without there being any further need to establish separately that the claims were not brought with the sole object of ousting the jurisdiction of the courts of the Member State where one of the defendants is domiciled’48 is probably unfit for unrestricted application in the context of Article 7 (1) CCPr. Where the latter provision accepts a much wider range of grounds for jurisdiction than the domicile of one of the defendants in the Netherlands, it would seem to call for a mechanism in the hands of the Dutch courts to counter possible abuse. In this respect, the Dutch courts better not apply the above-cited rule of Freeport where it abandons a separate check on abuse of Article 6 (1) of the Brussels I Regulation, and stick to the pre-2002 Dutch case law, which would create room for such a separate check in the framework of Article 7 (1) CCPr.49 47 48 49

See MvT, Parlementaire Geschiedenis Herziening Rv, 108. Case C-98/06 Freeport v Arnoldsson [2007] ECR I-8319, para 54 (emphasis added). See HR 23 February 1996 (Total Liban v Blue Aegean), NJ 1997, 276 (ThMdB), AA 1996, 642 (PV), S&S 1996, 69, para 3.3.2.

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Article 12 DCCPr on lis pendens presents a second example. This provision has been modelled on Article 21 of the Brussels Convention, 50 which, in turn, corresponds with Article 27 of the Brussels I Regulation. On the other hand, Article 12 CCPr’s earlier analysis (see Section 2.2) showed a few differences between this provision and its European antipodes. This calls for a nuanced approach vis-à-vis the relevance of the Court of Justice’s case law. To the extent that Article 12 DCCPr employs the same terminology as Article 21 of the Brussels Convention and Article 27 of the Brussels I Regulation – for instance by using the similar concepts of “the same parties” and “the same subject-matter” – the Court of Justice’s interpretation thereof51 deserves to be followed in the national context. Where Article 12 DCCPr deviates from Article 21 of the Brussels Convention and Article 27 of the Brussels I Regulation, the Court of Justice’s case law is not fit for application in the national context. This is particularly true for the case law concerning the consequences of the mandatory nature of the European rule on lis pendens. Since the legislature deliberately formulated, in Article 12 CCPr, a discretionary rule on the staying of proceedings in the Dutch courts on the basis of lis pendens with a case pending abroad,52 there is neither room nor need for an interpretation of this national provision in the same strict manner as the Court of Justice did for the mandatory lis pendens rule of Article 21 of the Brussels Convention in Gasser v MISAT.53 The third example is related to Article 13 CCPr: the rule on the Dutch courts’ jurisdiction to issue protective or provisional measures. The earlier analysis of this provision (see Section 2.2) showed that it builds on Article 24 of the Brussels Convention (identical to Article 31 of the Brussels I Regulation) as far as the use of the concepts of “protective or provisional measures” is concerned.54 On the other hand, for the demarcation of the jurisdiction of the Dutch courts to issue a protective or provisional measure, the Dutch legislature has explicitly distanced itself from the Court of Justice’s case law on Article 24 of the Brussels Convention.55 Article 13 CCPr’s dual character – partly

50 51

52 53

54 55

See MvT, Parlementaire Geschiedenis Herziening Rv, 119. See, e. g., Case 144/86 Gubisch v Palumbo [1987] ECR 4861, paras 6-19; Case C-406/92 The Tatry [1994] ECR I-5439, paras 29-48; Case C-351/96 Drouot v CMI [1998] ECR I-3075, paras 14-25; Case C-111/01 Gantner v Basch [2003] ECR I-4207, para 25; Case C-39/02 Maersk v De Haan [2004] ECR I-9657, paras 30-42. See MvT, Parlementaire Geschiedenis Herziening Rv, 119. Case C-116/02 Gasser v MISAT [2003] ECR I-14693, paras 41-54 and 70-73. See also Case C-351/89 Overseas Union v New Hampshire [1991] ECR I-3317, paras 1926. But see Case C-163/95 Von Horn v Cinnamond [1997] ECR I-5451, paras 6-27 (allowing for a limited exception in a transitional situation). See MvT, Parlementaire Geschiedenis Herziening Rv, 120. See idem, 120.

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European, partly national – demands a careful application of the Court of Justice’s case law on the European provisions. It could be argued that in order to answer questions concerning the subjectmatter scope of Article 13 CCPr, i. e. the question of which judicial measures qualify as “protective or provisional measures” for the purposes of this provision, the European case law on the (similar) concepts of protective or provisional measures in Article 24 of the Brussels Convention and Article 31 of the Brussels I Regulation, is to be regarded as a primary source of inspiration.56 On the other hand, questions concerning the grounds upon which a Dutch court may or must assume jurisdiction to issue a protective or provisional measure in accordance with Article 13 DCCPr should not be resolved by following the Court of Justice’s case law on the European instruments,57 because of the deliberate divergence between the national rule and the European provisions. Here, the Dutch courts are to develop an independent, national case law. This analysis indicates that the question of whether the Court of Justice’s case law on the Brussels Convention and the Brussels I Regulation should be used as a source of inspiration for the interpretation of the new rules on the Dutch courts’ jurisdiction in civil and commercial matters, cannot be answered with an unequivocal “yes” or “no”. For some national provisions, such as Articles 4 (1) and (4), 6 (a) and 6a as well as 6 (e) CCPr, a strict following of the case law on the European instruments is indicated, because the national rules and their European antipodes are nearly identical. For the majority of national rules, however, a careful analysis of the text and the legislative history is necessary before the decision is taken to use the Court of Justice’s case law on the European instruments in the national context. Such an analysis may reveal relevant differences between the national provisions and the European rules, which may preclude the drawing of inspiration from above.

4. Conclusions The revised Code of Civil Procedure contains a new set of rules on the Dutch courts’ jurisdiction in civil and commercial matters, some of which, according to the Dutch legislature, have been modelled upon corresponding provisions in various European instruments. The revision of the Code of Civil Procedure 56

57

See, e. g., Case 143/78 De Cavel v De Cavel [1979] ECR 1055, paras 8-9; Case 125/79 Denilauler v Couchet Frères [1980] ECR 1533, paras 15-16; Case 25/81 C. H. W. v G. J. H. [1982] ECR 1189, paras 11-12; Case C-261/90 Reichert v Dresdner Bank [1992] ECR I-2149, paras 32-35; Case C-99/96 Mietz v Intership Yachting [1999] ECR I-2277, paras 34-38; Case C-104/03 St. Paul Dairy v Unibel Exser [2005] ECR I-3481, paras 10-24. See, e. g., Case C-391/95 Van Uden v Deco-Line [1998] ECR I-7091, paras 19-47; Case C-99/96 Mietz v Intership Yachting [1999] ECR I-2277, paras 40-42.

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took place during a period in which these European sources of inspiration changed several times. This made the making of the national rules a difficult endeavour (see Section 2.1). An analysis of Articles 6, 6a, 7, 8, 9, 12 and 13 DCCPr as well as Article 4 DCCPr demonstrates the extent to which the legislature drew inspiration from the European instruments. The level of European influence differs from provision to provision, and sometimes even from paragraph to paragraph (see Section 2.2). The interpretation of Articles 1-14 DCCPr is primarily a matter for the Dutch courts, but for some of these provisions the Court of Justice would probably allow requests for preliminary rulings (see Section 3.1). The use of the Court of Justice’s case law on the European instruments for the interpretation of the national rules requires a careful investigation into the similarities and differences between national law and European law (see Section 3.2).

Interpretation of national rules for ex officio raising of points of Community law by national courts Henk Snijders* 1. Introduction In recent years there has deservedly been an intense interest in the issue whether national courts can or must raise, ex officio (of their own motion), points of European (civil) law.1 The subject matter presents hard and inevitable fare for courts adjudicating in civil cases and there are still many questions about the meaning of European case law on this matter.2 The main subject for the discussion is still the standard judgment by the Plenum – meanwhile Grand Chamber – of the Court of Justice in the case Van Schijndel and Van Veen vs. SPF3 from 1995 (hereinafter called Van Schijndel); there is also later case law including, among several other judgments to be discussed, (recently) the judgment in the case Van der Weerd/Netherlands of 7 June 20074and the judgment in Rampion/France of 4 October 2007.5 As this contribution focuses on the legal rules for the raising of points by courts of their own motion, specific cases will not be treated in great detail. However, under part 5 it will be indicated, for some obvious types of cases, *

1

2

3

4 5

Professor of Civil Law and Civil Procedural Law, Faculty of Law, Leiden University. See in addition to the sources mentioned below e. g. H. B. Krans, ‘Ambtshalve toepassing van gemeenschapsrecht’, MvV 2006, 147 ff. In the Netherlands the subject was raised prominently in the 2007 inaugural address held in Nijmegen by the former Procurator General of the Dutch Supreme Court dr. A. S. Hartkamp (Ambtshalve aanvulling van rechtsgronden naar Europees recht en naar Nederlands recht (Kluwer: Deventer 2007)). Not long before that address I myself had written contributions on this subject in the collection: De invloed van het Europese recht op het Nederlandse privaatrecht (edited by A. S. Hartkamp et al., (Kluwer: Deventer 2007), 79 ff). ECJ 14 December 1995, C-430/93 and C-431/93, Jur. 1995, I-4705, NJ 1997, 116, with note P. J. Slot and HJS under HR 22 December 1995, NJ 1997, 118. ECJ 7 June 2007, C-222-225/05, NJ 2007, 391 with note M. R. Mok. ECJ 4 October 2007 (Rampion v Franfinance and K par K), C-429/05, NJ 2008, 37 with note M. R. Mok.

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what the results of the rules found could be in national civil-law practice. Furthermore, attention will be devoted only to points of law raised by the national courts, but not the sua sponte raising of points of law by arbitrators.6 One more preliminary observation. Although this contribution concerns the raising of points of law by courts of their own motion, the raising of facts by courts of their own motion also calls for attention, as limitations pertaining to the latter can also affect the possibility of the raising of points of law by courts. Therefore, hereinafter there is regular mention of the raising of ‘points’ without referring to them as ‘points of law’.

2. The EU, in principle, follows national law (the one-on-one rule) Whenever national law requires courts to raise points of their own motion, EU law does so as well. National rules for the raising by courts of their own motion points in cases governed by national law apply in principle ‘one-onone’ to cases governed by Community law. When, e. g., a national legal rule must, according to national procedural law, be applied by the court of its own motion within the ambit of the dispute, this goes for a European rule as well. In principle European law requires neither more, nor less than national law systems do. The basis for this ‘one-on-one rule’ lies especially in the Van Schijndel decision, which concerns the question whether it is necessary for the court to apply, of its own motion, European competition law in a Dutch case (maybe due to that Dutch connection, discussion on this subject was, and remains, heated in the Netherlands). Van Schijndel constitutes an elaboration of earlier case law, particularly the judgment in Rewe, which also concerns directly effective Community law (a Treaty and a Regulation).7 The judgment given on the same day as Van Schijndel in Peterbroeck/Belgium is quite similar to Van Schijndel; to that extent this is left out of consideration8. The Van Schijndel doctrine, which pertains to directly 6

7

8

I discussed that subject in ‘Kwaliteit van arbitrage na 100 jaar, Enige bespiegelingen naar aanleiding van recente EU-rechtspraak en het Nader Voorontwerp tot herziening van de Nederlandse arbitragewetgeving’, published in: Honderd jaar Raad van Arbitrage voor de Bouw 1907 – 2007, edited by M. A. B. Chao-Duivis (Instituut voor Bouwrecht: The Hague 2007), 195 ff. ECJ 16 December 1976 (Rewe/Landwirtschaftskammer für das Saarland), case no. 33/76, Jur. 1976, 01989. ECJ 14 December 1995 (Peterbroeck/Belgium), C-312/93, Jur. 1995, I-4599. See further M. Freudenthal and R. H. Van Ooik, ‘Optimale handhaving van het Europese recht in het Nederlandse privaatrecht: invloed op regels van procesrecht en ambtshalve toepassing’, published in: De invloed van het Europese recht op het Nederlandse privaatrecht, o. c., 45 ff., esp. 68 ff.

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effective Community law, was confirmed again by the Court of Justice in its judgment in Van der Weerd of 7 June 2007 (a case of administrative law, but still important for civil-law cases as well). Van der Weerd concerned the case of direct vertical effect of a Directive (Directive 85/511/EEC for the control of foot-and-mouth disease). See also the judgment in Kempter of 12 February 20089 concerning art. 10 EC Treaty, which, again, confirms Van Schijndel. Now attention will be concentrated on Van Schijndel.10 The most relevant (phrases of) grounds of the European Court of Justice need to be quoted: The first question (…) ‘13. The competition rules mentioned by the national court are binding rules, directly applicable in the national legal order. Where, by virtue of domestic law, courts or tribunals must raise of their own motion points of law based on binding domestic rules which have not been raised by the parties, such an obligation also exists where binding Community rules are concerned (…). 14. The position is the same if domestic law confers on courts and tribunals a discretion to apply of their own motion binding rules of law. Indeed, pursuant to the principle of cooperation laid down in article 5 of the Treaty, it is for national courts to ensure the legal protection which persons derive from the direct effect of provisions of Community law (…). The second question (…) 17. In the absence of Community rules governing the matter, it is for the domestic legal system of each Member State to designate the courts and tribunals having jurisdiction and to lay down the detailed procedural rules governing actions for safeguarding rights which individuals derive from the direct effect of Community law. However, such rules must not be less favourable than those governing similar domestic actions nor render virtually impossible or excessively difficult the exercise of rights conferred by Community law (see, in particular, the judgments in Case 33/76 Rewe (…)). 19. For the purposes of applying those principles, each case which raises the question whether a national procedural provision renders application of Community law impossible or excessively difficult must be analysed by reference to the role of that provision in the procedure, its progress and its 9

10

ECJ 12 February 2008 (Kempter/Hauptzollamt Hamburg-Jonas), C-2/06, Jur. 2008, I-00411. See also ECJ 28 June 2007 (Bonn Fleisch/Hauptzollamt Hamburg-Jonas),

C-1/06, Jur. 2007, I-05609. See also about the Van Schijndel judgment, whether or not in combination with the judgment Peterbroeck/Belgium, e. g.: P. Slot, TvA 1996, 148 ff.); R. Briner et al., Arbitrage en Europees Recht (Brussels 1997); Sacha Prechal, CML.Rev 1998, 681 ff.; Freudenthal and Van Ooik, l. c., 65 ff.

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special features, viewed as a whole, before the various national instances. In the light of that analysis the basic principles of the domestic judicial system, such as protection of the rights of the defence, the principle of legal certainty and the proper conduct of procedure, must, where appropriate, be taken into consideration. 20. In the present case, the domestic law principle that in civil proceedings a court must or may raise points of its own motion is limited by its obligation to keep to the subject-matter of the dispute and to base its decision on the facts put before it. 21. That limitation is justified by the principle that, in a civil suit, it is for the parties to take the initiative, the court being able to act of its own motion only in exceptional cases where the public interest requires its intervention. That principle reflects conceptions prevailing in most of the Member States as to the relations between the State and the individual; it safeguards the rights of the defence; and it ensures proper conduct of proceedings by, in particular, protecting them from the delays inherent in examination of new pleas. 22. In those circumstances, the answer to the second question must be that Community law does not require national courts to raise of their own motion an issue concerning the breach of provisions of Community law where examination of that issue would oblige them to abandon the passive role assigned to them by going beyond the ambit of the dispute defined by the parties themselves and relying on facts and circumstances other than those on which the party with an interest in application of those provisions bases his claim.’ What happened is that the Court of Justice tested Dutch civil procedural law in Van Schijndel against the requirements of its own case law for domestic legal systems to ensure the legal protection afforded to individuals by the direct effect of Community law (see grounds 13-22). According to that case law (on which ground 17), Community rules, if any, prevail; in their absence, it is for the domestic legal system of each Member State to lay down the required procedural rules. Those rules will have to satisfy two criteria: they must ‘not be less favourable than those governing similar domestic actions’ (the principle of non-discrimination or principle of equivalence) and must further not ‘render virtually impossible or excessively difficult the exercise of rights conferred by Community law’ (the principle of effectiveness). As for the latter, the relevant procedural rule must be regarded in the light of its role in national law, its progress and its special features; this analysis must take into consideration ‘the basic principles of the domestic judicial system, such as protection of the rights of the defence, the principle of legal certainty and the proper conduct of procedure’ (ground 19). Subsequently the core rules of Dutch law concerning the raising by courts, of their own motion, of points, to which the Court of Justice draws attention, clearly prove to stand the test against the principles of

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equivalence and effectiveness. Thus, it can be established that the rules for the raising by courts, of their own motion, of points of purely domestic law, tested in Van Schijndel, also apply – notably one-on-one – to grounds of Community law. The one-on-one rule implies that, in general, national rules on ex officio raising of points by national courts for cases in general do not need to be interpreted in another way for European-law cases. The one-on-one rule does not merely concern grounds of directly effective Community law, as were raised in Van Schijndel and Van der Weerd, but a fortiori also concerns grounds of indirectly effective Community law, which may be raised in the form of the national legislation transposing Community law or at least national legislation that corresponds with such indirectly effective Community law. This will be elaborated later on in the context of Rampion. Further below the Van Schijndel doctrine will be compared to later judgments. In particular, this comparison will concern the judgments in – briefly – Benetton (also referred to by the name of the plaintiff Eco Swiss11), Océano12, Cofidis13, Renault14, Mostaza Claro15, Manfredi16 and recently – as mentioned before – Van der Weerd and Rampion. It will be examined, of course, whether the Van Schijndel doctrine requires adjustment in the light of those later judgments. First, attention will be devoted to the crop of national procedural rules for courts raising points of their own motion, which have turned out to be Van-Schijndel-proof or have not yet been subjected to the Van-Schijndel-test, but can be subjected to it by way of an experiment.

3. Rules of national procedural law 3.1 Which questions are at issue here? This article is not the place for a detailed discussion of domestic rules for courts raising points of their own motion, if only because they differ between member states. A brief indication of the national procedural rules tested in Van Schijndel, and some other (possible) rules, must suffice. The question at issue is which of those rules for courts raising points of their own motion tested in Van Schijndel (against the principles of equivalence and effectiveness) are 11

12

ECJ 1 June 1999, C-126/97, Jur. 1999, I-03055, NJ 2000, 339 with note HJS under HR 25 Feb. 2000, NJ 2000, 340. ECJ 27 June 2000, C-240/98 up to and including C-244/98, Jur. 2000, I-04941, NJ

2000, 730. 13

14 15 16

ECJ 21 November 2002, C-473/00, Jur. 2002, I-10875, NJ 2003, 703, with note MRM. ECJ 11 May 2000, C-38/98, Jur. 2000, I-2973, NJ 2003, 627, with note PV. ECJ 26 October 2006, C168/05, Jur. 2006, I-10421 ECJ 13 July 2006, C-295/04-C-298/04, Jur. 2006, I-06619.

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therefore considered acceptable as such insofar as they concern the application of Community law. With respect to other (possible) national rules for courts raising points of their own motion, their possible fate for Community-law matters will be considered. As the Van Schijndel judgment deals with a Dutch case, Dutch national procedural rules will be at stake in this paragraph as well. The Van Schijndel test of these rules is still interesting from the point of view of other member states than the Netherlands. Their rules often differ only slightly from the Dutch rules for courts raising points of their own motion, due to the common background of these rules. All of them are based on or provide for exceptions to the principle of party autonomy, which plays a role, more or less, in all member states (reference can be made, e. g., to the adversary system in England and Wales, the principe dispositive in France, Belgium and Luxembourg, and the Dispositions– oder Parteiherrschaftsgrundsatz in Germany) .

3.2 Courts raising facts of their own motion Attention must be devoted first to the national rules for courts raising facts of their own motion. Facts play a role here – as the judgment in Van Schijndel confirms in ground 22 – because points of law cannot be raised beyond the factual ambit of a dispute. Article 24 DCCPr (the Dutch Code of Civil Procedure) – at the time of Van Schijndel this was still art. 48 DCCPr (old) a contrario – prohibits courts raising facts of their own motion: courts cannot of their own motion rely on facts and circumstances other than those on which the party with an interest in the application of those provisions relies in order to substantiate his claim or defence. This national rule, which considerably limits courts in raising points of their own motion, explicitly satisfies the test in Van Schijndel. See especially ground 22. Inasmuch as cases concern matters of public policy, an exception is made to the prohibition of article 24 Rv: where matters of public policy are concerned, the courts are allowed and indeed obliged to base their decision on facts that have appeared in the procedure but have not been put forth by the interested party as the basis of his claim or defence, according to our Hoge Raad (Supreme Court).17 The judgment in Van Schijndel does not test this rule explicitly – indeed, Van Schijndel is not about extending possibilities for courts to raise points of their own motion – but does implicitly accept it in ground 21 jo. 20: the limitation for a court raising facts of its own motion is set aside where ‘the public interest requires its intervention’. These words seem to refer 17

See e. g. HR (i. e. Hoge Raad) 9 January 1970, NJ 1970, 342 in the first instance and HR 23 May 1997, NJ 1997, 530 on appeal.

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to matters of public policy in the sense of the exception to article 24 DCCPr as just mentioned. In fact, the Court of Justice in ground 21 jo. 20 does deal with Dutch national law as well: here it motivates(?) national limitations, especially the prohibition for courts to raise facts of their own motion. This equation of intervention required in the public interest with intervention pursuant to public policy will be addressed in detail later. For now it may suffice to give some basic examples. Both on the basis of the public interest criterion of the Court of Justice and on the basis of the public policy criterion of the Hoge Raad, it is clear that courts do not grant a claim for e. g. performance of a contract killing agreement or an agreement for the trafficking of women if they have evidence of such an agreement, even if the interested party does not rely on the factual detail of that agreement. Under Dutch civil procedural law, then, courts are not obliged of their own motion to examine the case with regard to facts that might be important, but did not appear in the procedure. Again, this rule is also compatible Van Schijndel, even though this is not directly evident from the judgment. Linking up with ground 21, one could say that courts are not obliged of their own motion to examine facts to assess whether there could be cause for the court to raise points of law of its own motion because ‘the public interest requires its intervention’. Under national procedural law the court is not an inspector or detective, nor does it need to act as such in issues of Community law according to the Court of Justice. Hence, courts do not need to examine beyond the facts that have become evident to them as to whether there could be a contract killing agreement or an agreement for the trafficking of women. These rules for courts raising facts of their own motion, which simultaneously constitute limitations for the raising of points of law, apply (along with several other particularities18 not discussed here) by virtue of Dutch civil procedural law in all instances, both in proceedings on the merits and in summary proceedings before national courts. The judgment in Van Schijndel appears to relate to all instances and types of procedures too. The fundamental approach to grounds 19-21 and the general reply in ground 22 are evidence of this. Specifically for the cassation procedure, a different rule applies to courts raising facts ex officio in matters concerning public policy: the Hoge Raad is not obliged or entitled to conduct a factual examination (art. 419 paragraphs 2-3 Rv) and therefore cannot ex officio raise any points of law or public policy if this would require it to conduct a factual examination.19 The third preliminary question posed by the Hoge Raad in the case Van Schijndel concerns the compatibility of this national rule with a matter of Community law. The Court of Justice holds that it is not necessary to reply to this question, in view 18

19

On which see e. g. Burg. Rv (Asser), art. 48 (old), note 7, Hugenholtz/Heemskerk (2006), nr. 117 and Snijders, Klaassen and Meijer (2007), nr. 45. On which see e. g. Asser Procesrecht, Veegens/Korthals Altes and Groen (2005), nr. 137.

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of the answers given to the first two questions (ground 23), thereby implying that this national rule for the cassation court is also Van Schijndel-proof. To this extent, the Dutch author Loos, who argues that the Hoge Raad should of its own motion raise certain points of European law despite the fact that this would necessitate a new examination of facts, appears to be wrong.20 This question will be considered again later insofar as it concerns courts ex officio raising points of law of public policy.

3.3 Courts raising points of law of their own motion within and beyond the ambit of the dispute defined by the parties themselves Article 25 DCCPr – at the time of Van Schijndel this was art. 48 DCCPr in its positive sense – obliges courts to raise points of law of their own motion. In principle this obligation applies only within the ambit of the dispute defined by the parties. This rule, too, is explicitly tested in Van Schijndel and found to be acceptable. See ground 20 jo. 22: Community law, too, does not require national courts to raise points of law of their own motion to the extent that this would oblige them ‘to abandon the passive role assigned to them by going beyond the ambit of the dispute defined by the parties themselves.’ However, the problem is: what lies within or beyond the ambit of the dispute? In the first instance this ambit is determined by the claims or appeals of the party initiating the proceedings and by the defences raised by the other party.21 On appeal the ambit is limited further by the system of defining grounds (apart from the positive side of the devolutionary effect and the possibility of a change of claim or request and new defence). No particulars are given here.22 In cassation the ambit is limited further again, as the examination by the Hoge Raad takes place on the basis of cassation complaints. Here, again, no particulars are given.23 The concept of ambit will be mentioned repeatedly below. Two marginal comments must do for now. The court can be instrumental in making the parties expand the ambit, for instance by eliciting supplementary actions or defences on the occasion of an 20

21

22

23

M. B. M. Loos, WPNR 2007 (6727) with reference to HR 22 June 2007, LJN BA3032, JBPr 2008, 3 with note B. T. M. van der Wiel. See also A. H. Hartkamp in his reaction to Loos in WPNR 2007 (6736), followed by a postscript by Loos l. c. See further e. g. Burg. Rv (Asser), art. 48 (old), notes 6, 8-10, Hugenholtz/Heemskerk (2006), nr. 117 and Snijders, Klaassen and Meijer (2007), nr. 47 ff. See further e. g. Ras/Hammerstein (2004), nr. 16 ff. and Snijders and Wendels (2003), nr. 229 ff. See further e. g. Burg. Rv (E. Korthals Altes), art. 419, notes 1-2 and Korthals Altes and Groen, l. c., nr. 163-164.

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appearance of the parties, via an exchange of documents asked for to the parties or on the occasion of oral pleadings of the counsel;24 however, the court’s attitude or, more accurately, its policy in the matter, is not at issue here. Furthermore, there is no indication that the Court of Justice would not accept limitations on courts raising points of law of their own motion due to limitations of the ambit of the dispute in appeal and in cassation,. On the contrary, the Court of Justice seems to appreciate the reverse funnel model, which limits the ambit more and more according to the instance (first instance, appel respectively cassation). This can be seen, e. g., at the end of ground 21, where it justifies the importance of preventing delays in the proceedings resulting from the examination of new pleas. The Dutch author Hartkamp25 has argued that the Hoge Raad would (nevertheless) have found in the judgment in Vreugdenhil/BVH26 (ground 3.6) that fundamental, indispensable and binding provisions of Community law such as (today) art. 81 EC, which are not provisions of public policy, should yet be applied of its own motion beyond the ambit of the dispute. Like Mok in his note on the judgment, in the author’s opinion it is doubtful whether this may be read in Vreugdenhil/BVH. The passage in Vreugdenhil/BVH which is referred to by Hartkamp, concerns a decision of the Court of Appeal in this case, holding that, indeed, art. 81 EC should be applied of its own motion beyond the ambit of the dispute. The Hoge Raad mentions, only en passant and ad obitum, to deem this decision by the Court of Appeal ‘rightly’ uncontested. This is too casual an observation to be considered a serious decision of the Hoge Raad itself. The author shares the views of Mok and of Advocate General Keus in his well-wrought opinion for the judgment that such a decision by the Hoge Raad would be incorrect; this is true both for national procedural law, as it has been shaped by the Hoge Raad itself over the years, and for European law, as it has been formed particularly by Van Schijndel and confirmed by Van der Weerd and, moreover, as it has been applied to cases of administrative law.27 Meanwhile, Hartkamp’s opinion that our national courts would be allowed to raise non-public policy issues of mandatory law beyond the ambit should also be treated with caution.28 No convincing argument for this can be found, and surely there ought to be one in such a differentiation of procedural law. Nor is this opinion supported in case law at all, except perhaps in a phrase that was included casually and unnecessarily in the Vreugdenhil judgment. 24 25 26 27

28

See e. g. HR 14 March 2008, RvdW 2008, 309 (ground 4.3.2). L. c., 26-27 and 36. HR 3 December 2004, NJ 2005, 118 with note MRM. Hartkamp discards Van der Weerd on 29 as irrelevant for the court’s application of nullity provisions in a private-law context, but does not motivate this. Van der Weerd forms both a crown on the private-law-oriented Van Schijndel judgment and a confirmation for administrative-law cases. L. c., 18 and 38.

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3.4 Rules of public policy in this context and article 81 EC in particular Special attention must now be given to the concept of rules of public policy. Under domestic Dutch law the obligation for courts to raise points of their own motion is again expanded beyond the ambit of the dispute where it concerns matters of public policy. This applies in the first instance and on appeal (i. e. also beyond the grounds for appeal).29 Even though this rule was not explicitly tested in Van Schijndel, implicitly, it appears to have been deemed acceptable by the Court of Justice. Linking up with ground 21 one might say that a court is obliged to act of its own motion where ‘the public interest requires its intervention’. Conversely, one may say that where national courts should, according to Community-law standards, act of their own motion in the public interest, there will be occasion for intervention under national law as well, namely on the basis of rules with respect to public policy. It is now time to produce further arguments for this equation, which was defended above in connection with the question of the limits to courts raising facts of their own motion. The argument is that where the Court of Justice suggests an exception to the passive role it should adopt according to domestic law, notably in cases where ‘the public interest requires its intervention’, it basically appears to refer to matters of public policy. Of course one could object that the public interest (in French “l’intérêt public”, in German “das öffentliche Interesse”) is textually different from public policy. The word ‘interest’ could refer to the general interest, which seems to be broader than public policy. Still, the Court of Justice must mean public policy, referring not just to the public interest per se, but to the situation when this interest ‘requires’ the court to intervene of its own motion. That is the case, one might argue, in matters of public policy. In addition, as stated, the Court of Justice seems to refer here to Dutch law. Ground 21, from which the words are derived, refers to ground 20, which concerns the national limitations of a national principle. It is those national limitations, explained by the Court of Justice in ground 21, which must therefore indisputably lie in national law. Our national law does not place the turning point for intervention by the court of its own motion at the public interest, but at public policy. Therefore from this point of view it again appears obvious that the Court of Justice in essence refers to public policy. One caveat is called for here. It is clear, inter alia from the Benetton judgment, that a provision of Community law in the context of the rules for courts raising points of their own motion does not have to count as being of public policy, whereas this may be true in the context of other rules. Here reference may be made in particular to the prohibition of unfair competition of art. 81 29

See further e. g. Ras/Hammerstein (2004), nr. 56 ff. and Snijders and Wendels (2003), nr. 234 ff.

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EC. This is not a matter of public policy in the sense that this rule should be

applied by the court of its own motion beyond the ambit of the dispute, this being with a broader scope for the factual basis of the decision in general (as dealt with earlier in this paragraph), but it is a matter of public policy, or must at least be equated with rules of public policy within the meaning of arts. 1063, 1065 and 1075 DCCPr jo. the New York Convention of 10 June 1958 on the Recognition and Enforcement of Foreign Arbitral Awards, which provide for the refusal of leave for enforcement of an arbitral award if this is apparently in conflict with public policy and for setting aside an arbitral award which is contrary to the public policy.30 Conversely, the Renault judgment, which deals in particular with (today) art. 82, does not regard this provision as a provision of public policy within the meaning of art. 27 sub 1 EEX (meanwhile art. 34 sub 1 EEX-Vo), which lays down the grounds for refusal of leave for enforcement of a judicial judgment from one Member State in the other. Leave for enforcement of such a judgment must, according to these provisions, be refused if it is contrary to public policy, but art. 82 EC is not deemed to be a matter of public policy in Renault within the meaning of these provisions of European rules of enforcement. Van Schijndel concerns art. 81 EC, and clearly leaves no room for the courts to intervene of their own motion. Consequently, art. 81 EC is not a provision requiring courts to intervene of their own motion in the public interest or – in other words – which must be deemed a matter of public policy within the meaning of the rules for courts raising points of their own motion. This observation can be stated emphatically, because the judgment in Manfredi of 2006,31 which was given by the Third Chamber of the Court of Justice, holds the following, albeit in passing: 31. Moreover, it should be recalled that arts. 81 EC and 82 EC are a matter of public policy which must be automatically applied by national courts

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What is argued here for contravention of art. 81 EC applies (a fortiori) also to contravention of the Directive on unfair terms in consumer contracts, as I would briefly wish to object to H. B. Krans and M. H. Wissink, TCR 2008, 42 ff., esp. 45 ff., of which I could take cognizance only at the last moment, with reference to ‘Kwaliteit van arbitrage na 100 jaar’, o. c., 210-211. ECJ 13 July 2006, C-295/04-C-298/04, Jur. 2006, I-06619, NJ 2007, 34 with note M. R. Mok, which apparently also raises doubts with Freudenthal and Van Ooik, l. c., 73 ff. More or less the same words can be found in ECJ 4 juni 2009, C-08/08 (paragraph 49). This judgment in the case T-Mobile/NMA dates from after the deadline for delivery of this contribution. Again, it concerns a judgment by the Third Chamber, basing itself on Eco Swiss and – meanwhile of course – Manfredi. The considerations in this contribution on Manfredi apply to T-Mobile/NMA as well, at least.

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(see, to that effect, Case C-126/97 Eco Swiss [1999] ECR I-3055, paragraphs 39 and 40). This element of the Manfredi judgment is obviously ad obitumi,32 as the case concerns a subject different to the question which is at stake now. The consideration may be regarded as a ‘slip of the pen’. The reference to Eco Swiss (Benetton) is incorrect. Paragraph 40 of that judgment says nothing about the matter. Paragraph 39 of that judgment merely states that art. 85 – meanwhile art. 81 – is a matter of public policy within the meaning of the New York Enforcement Convention; this does not mean that art. 81 would also be a matter of public policy in the context of the rules concerning the raising of points of law by the courts of their own motion. The suggestion of the Court in Manfredi that it should merely be ‘recalled’ arts. 81 and 82 EC are matters of public policy in a general sense, at least in the sense that courts should apply them of their own motion, is incorrect. To that extent this judgment is also at odds with Van Schijndel. All this means that the national rules on ex officio raising of points by national courts in cases of (law of) ‘public order’ do not also refer to arts. 81-82 EC. It has been alleged, again by Hartkamp that Manfredi in the quoted consideration is not a ‘slip of the pen’.33 Manfredi at any rate rightly refers to ground 39 of Benetton, and Hartkamp states that ‘in that judgment the public policy nature of art. 81 is motivated with a reference to paragraph 2 of that provision, which provides that agreements in contravention are null’. Yet the Court of Justice in ground 39 of Benetton does not state that art. 81 is a matter of public policy plain and simple, but that it is ‘a matter of public policy within the meaning of the New York Convention’, which, as appears from ground 38, means the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Ergo, not a single argument can be derived from this judgment to uphold the proposition that art. 81 EC would also be a matter of public policy within the meaning of this concept for the question of whether courts must raise any points of their own motion.34 One might think for a brief moment that Manfredi could still be ‘saved’ if one assumed that the Court of Justice, when using the phrase ‘rules of public policy’ is merely referring to mandatory law, which must, even if it is not super-mandatory, be applied by courts of their own motion within the ambit and factual boundaries of the dispute – not every Member State has a tripartite system with regulatory law and mandatory rules of law that may or may not 32 33 34

In the NJ publication ground 31 has not even been recorded. L. c., 25, note 40 and 36-37. In a later publication – WPNR 2008 (6779) – in a discussion with the author of this contribution Hartkamp recognises that the meaning of Manfredi in this respect is questionable.

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be a matter of public policy. However, if explained in this way, the reference to Benetton would still be incomprehensible, given the other context of application of public policy in that judgment, namely that of criteria for refusal of leave for enforcement of an arbitral award, more particularly the New York Enforcement Convention. For that matter, the Court of Justice definitely does acknowledge the tripartite division between regulatory law, mandatory rules of public policy and other mandatory rules of law. See the recent judgment in Van der Weerd, in which the European-based national rules to control footand-mouth disease are considered to be mandatory but not, like various rules of judicial jurisdiction, a matter of public policy in the national sense (see ground 28 ff.). Manfredi is ignored altogether by the Court of Justice in Van der Weerd; instead, the private-law-oriented Van Schijndel is confirmed royally once and again, and crowned by being deemed applicable to cases of administrative law (this will be discussed again later). More generally, all this illustrates that the concept of public order, both in rules of transnational law such as art. II of the New York Convention on arbitral awards, and in rules of national law such as rules on ex officio raising of points by national courts and other national rules, can have a largely different meaning. The concept of public order does not really have an abstract meaning. We can only speak of the public order in the sense of a certain rule or provision. This is already understood to some extent, for instance in connection with the concept of public order in domestic private law versus private international law. But we now see that the same applies at the level of the interpretation of this concept by the European Court of Justice, and the carry-over from this in the interpretation of national rules using the concept of public order.

3.5 Cassation in particular All in all, Dutch national law fully satisfies (as most legal systems in European Union seem to do) the requirements for courts raising points of Community law of their own motion, as they may be derived from Van Schijndel. Yet there is possibly one exception not yet discussed. A problem arises when a cassation court such as the Hoge Raad deems a judgment contended in cassation to be in contravention of a point of European law of public policy not raised by the appellant in cassation, in the sense (referred to above) of ‘super-mandatory law’. If such a point is at issue, the national court will, by virtue of standards of Community law, still have to act of its own motion in the public interest so that national procedural law will have to yield, as already became apparent from Van Schijndel.35 It has already been 35

A judgment meshing with that theory is ECJ 15 November 1983 (Duijnstee/Goderbauer), Jur. 1983, 03663, NJ 1984, 695 with note LWH/JCS concerning art. 16 EEX.

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mentioned that a point in cassation has only to be raised by the Hoge Raad of its own motion provided that no new examination of the facts is required – and this is rare.36 That last-mentioned limitation was already raised in the analysis of the cassation court’s possibilities for raising facts of its own motion; the Court of Justice appears to accept it right away in this judgment. Or could it be conceivable that the highest national court should still conduct such a factual examination in the event that the public interest would require it to act of its own motion? It seems that this question cannot be answered in the affirmative without such an examination, and hence that the court does not need to conduct such an examination of its own motion a priori. The relevant cassation rule, which shows that our Hoge Raad is not a court deciding questions of fact, can be upheld without any problem. This leaves very little scope indeed for cassation courts to raise points of law of their own motion. It merely concerns points of European law of public policy, which, for example, do not include arts. 81-82 in this context. Consequently, cassation courts are only required to raise points of their own motion where this does not necessitate a new factual examination. Thus, European law is not incompatible with national limitations for the sphere of action of the highest court as regards the finding of facts. Cassation courts such as the Hoge Raad are still not courts deciding questions of fact, nor do they have to be by European standards.

3.6 Permission implies obligation in civilibus Still another aspect demands attention. In ground 14 the Court of Justice indicates that if domestic rules confer on courts a discretion to apply of their own motion points of law, there is not only permission but even an obligation to do so when it concerns a point of Community law. In this way the domestic rules for points of Community law could still differ from those for other points of law. However, such a domestic rule that merely confers on courts a discretion to raise points of their own motion, is one that we do not know in Dutch civil procedural law37. The Netherlands do have it in tax proceedings before the Hoge Raad; therefore the Tax Division of the Hoge Raad has drawn the

36

37

See here also the only case of a court in cassation in a civil case raising pleas of its own motion, which is mentioned in Burg. Rv (Korthals Altes), art. 419, note 1 and Asser/Korthals Altes and Groen (2005), nr. 163. This also to determine a position in the discussion between A. S. Hartkamp and M. B. M. Loos, WPNR 2007 (6736), 1055 ff. I leave aside here for now (see further nr. 4) whether the opinion proposed by Loos that certain EU consumer rights are a matter of public policy, appears correct. See also Hartkamp. Op.cit., 8 note 6.

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conclusion that within the ambit of the dispute it is obliged, not merely permitted, to raise points of European law of its own motion.38 39 Thus, the Hoge Raad interpreted the permission to ex officio raise points as an obligation, or, perhaps more accureately, changed this rule into an obligation.

3.7 Partial conclusions All in all, the one-on-one rule applies not only to the domestic rules of civil procedural law for courts raising points of their own motion, mentioned and tested explicitly in Van Schijndel, but also to other Dutch domestic rules of civil procedural law on this matter. An exception applies only for the cassation court raising points of its own motion, although this may be neglected in view of the factual ambit of the dispute in cassation. In this matter, Dutch civil procedural law is left intact almost entirely. The same applies to comparable domestic rules of civil procedural law in other European Union states. As far as the concept of public order is at stake in domestic rules of civil procedural law for courts raising points of their own motion, it appears that this concept has a specific meaning which is not the same as in e. g. art. II of the New York Convention on arbitral awards. In particular, questions on arts. 81 and 82 EC are not matters of public policy in a general sense, or in the sense that courts should apply them of their own motion, though they are of public policy in the sense of art. II of the New York Convention, as European case law has held.

4. Exceptions to the one-on-one rule 4.1 At least three kinds of exceptions One type of exception to the one-on-one rule has now been established: the exception arising directly from Van Schijndel, of which there is one only – the national rule prohibiting a cassation court from raising of its own motion points of public policy beyond the ambit of the dispute defined by the parties.

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See esp. HR 7 May 2004, BNB 2004, 262 with note Meussen in the light of the opinion of Advocate General Wattel sub 4. See also e. g. HR 12 January 2007, BNB 2007, 160 in the light of the opinion of Advocate General A-G Wattel sub 6.5 and HR 2 March 2007, BNB 2007, 219 in the light of the opinion of Advocate General A-G Wattel sub 2.27. See for administrative law in general e. g. R. W. J. Crommelin, Het aanvullen van rechtsgronden, diss. Leiden (Kluwer: Deventer 2007), 353 ff., Hartkamp, l. c., 8 note 6 and Freudenthal and Van Ooik, l. c., 67 ff.

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This national rule must completely be left out of consideration for matters of Community law. A second type of exception may also be derived from Van Schijndel (ground 17) and was also confirmed later, particularly in Van der Weerd (ground 28): Community law itself can contain provisions concerning courts raising points of their own motion, which supersede our civil procedural law. A third type of exception to the one-on-one rule was heralded by the judgment in Peterbroeck: a national provision limitating courts to raise points of their own motion may founder in a specific type of case due to the applicability of still another provision. This happens if the common application of these provisions would fail the test against the effectiveness. In Peterbroeck it concerned a Belgian time-limit provision for the lodging of complaints against a decision by the Director of Direct Contributions in the appeal procedure before the Belgian Cour d’Appel. In concrete terms the point against that decision was as follows: higher corporation tax for Dutch companies than for Belgian companies in Belgium would restrict the freedom of establishment by virtue of (then) art. 52 EEC. In principle the Cour d’Appel could not raise this point of its own motion, but in view of the limited period for submission of this plea by the individual in the light of the whole procedure – the Court of Justice mentions several circumstances, including the one that it concerned a sixty-day period that had already elapsed at the time of the hearing of the Cour d’Appel, being the first judicial body treating the case – it was permitted to do so. In other words: the combination of the procedural time-limit provision and the prohibition for the Cour d’Appel to raise points of its own motion failed the test against the principle of effectiveness and thus resulted in the Cour d’Appel yet being obliged of its own motion to raise a point of Community law. Or, as the Court of Justice justified its decision in the case Peterbroeck in summary in Van der Weerd (ground 40): ‘[there were] circumstances peculiar to the dispute, which led to the applicant in the main proceedings being deprived of the opportunity to rely effectively on the incompatibility of a domestic provision with Community law’. This third type of exception can be traced back directly to a test against the principle of effectiveness.

4.2 A fourth type of exception? Is there still a fourth type of exceptions? Reference may be made to cases within the range of a Directive intended for consumer protection, which would be insufficiently effective if the national court were not obliged to apply the relevant domestic legislation of its own motion, even if beyond the ambit of

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the dispute. This category of cases is considered in Océano, Cofidis and (albeit within a different context, viz. arbitration) Mostaza Claro, together with Rampion. The first three judgments concern the Directive on unfair clauses in consumer contracts, the fourth concerns the Directive on consumer credit. In all cases the Court of Justice found that ‘effective consumer protection can be attained only if the national courts are given power to evaluate terms of this kind of their own motion’ for ‘ensuring that the consumer enjoys effective protection, in view in particular of the real risk that he may be unaware of his rights or may encounter difficulties in exercising them’ (quoted is the pithy summary in the Rampion judgment; ground 61 resp. 62). It is interesting that the Court of Justice speaks of the need to allow national courts to apply of their own motion ‘provisions transposing [Directives] into national law’ (grounds 65 and 69). Advocate General Mengozzi speaks in his prior opinion (sub 95) of ‘national provisions implementing or corresponding to the provisions of a Community Directive’. This broader formulation deserves to be welcomed. It would be absurd if it were indicated for courts to raise points of law of their own motion only as far as they can be derived from the national legislation implementing a Directive. The same must apply to points of law as far as they can be derived from national legislation that corresponds to (but is not an implementation of) a Directive. It would be amazing if the Court of Justice held otherwise. It may be observed further that the Court of Justice in Rampion requires the court to apply this point of its own motion irrespective of the question whether the relevant consumer is or is not represented by a lawyer in a concrete case (the Rampion couple were represented by a lawyer); on this point the Court wishes to abstract from the concrete circumstances of the case (ground 65), following in the footsteps of its Advocate General. In light of the quoted motivation of Rampion, one can regard the cases concerned as an exception to the one-on-one rule, which is prompted by the principle of effectiveness. Similar exceptions may be defended in other cases where, often due to the socially slightly weaker position of the individual, Community law is not relied on by that individual and would thus be insufficiently effective in the absence of courts applying this point of their own motion. Within this context one may think of courts applying of their own motion the Directive on Anti-discrimination rules 200040 to applicants41 or employees.42

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Directive 2000/43 implementing the principle of equal treatment of persons irrespective of racial or ethnic origin. At stake in ECJ 10 July 2008 (Centrum voor Gelijkheid van Kansen en voor Racismebestrijding v Feryn), C-54/07. Courts raising points of law of their own motion is not the central issue here, though. See also Freudenthal and Van Ooik, l. c., 72 and Hartkamp, op.cit. 37.

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4.3 Or an application of the one-on-one rule? Above the fourth category of exceptions was cautiously positioned as such. Why? Earlier43 this author argued that the relevant consumer protection cases could also be ranged under that one-on-one rule. Two routes were indicated. Firstly, one might say that these cases concern rules of public policy or – in the words of Van Schijndel – rules of law whereby the public interest requires the court to intervene of its own motion. Hartkamp44 argues that, within this context, public interest is not the same as public policy. This view was commented on in another sense above. Hartkamp also writes that he does not regard the equation as desirable, since otherwise anyone could invoke a consumer protection provision, not only consumers but also their opposing parties. In part, it can be held that this should, indeed, be possible. The commercial user of standard terms including a jurisdiction clause, for instance, should, in a consumer case, also be able to summon his opposing party to a court other than that mentioned in the jurisdiction clause (namely the statutory court) while invoking the nullity of that clause before the latter (behold the mirror image of the Océano case). This also applies to the extent that there would be no contravention of a provision of public policy, but only contravention of other binding rules of law. More consequential is the author’s proposition that rules may also be a matter of public policy unilaterally, just like rules may be binding unilaterally without them being a matter of public policy (such as, for instance, rules providing that it is not permitted to deviate from certain provisions on consumer protection to the detriment of the consumer).45 One could assume that certain clauses, insofar as they harm consumers, are to that extent in contravention of public policy and cannot (to that extent) be invoked successfully by the other party, or that they must at least be set aside by courts of their own motion to that extent. It must also be indicated, however, that under Dutch procedural law, which deems law to be a matter of public policy in highly exceptional cases only, it is not obvious that consumer protection has such high status. For purely Dutch provisions of consumer protection, this would lead us too far afield altogether. Only very rarely are provisions considered to be so fundamental that courts must apply them beyond the ambit of

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‘De invloed van het Europese recht op het Nederlandse privaatrecht’, op.cit., 92 ff. L. c., 13, unlike writers such as M. H. Wissink, Richtlijnconforme interpretatie van burgerlijk recht, diss. Leiden (Kluwer: Deventer 2001), 363 and C. M. D. S. Pavillon, NTBR 2007, 149 ff. I refer to my considerations in Contractvrijheid edited by T. Hartlief and C. J. J. M. Stolker (Kluwer: Deventer 1999), 162 ff.

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the dispute.46 Consumer protection provisions, however binding they may be, do not as a rule attain that status.47 The second route is as follows. One might think that consumers always wish to invoke their protection in law, albeit subject to waiver of right, and that courts may assume this, thereby excluding the application of a clause in contravention of such provisions. The problem with this view is that the supposed consumers’ desire may be based on fiction. Furthermore, it is doubtful whether nullification by courts of their own motion is permissible under Dutch law. Arguments in favour of this are based on a passage in the legal history of our present (new) Burgerlijk Wetboek (the Dutch Civil Code) that is unclearly drafted48. A different point is that the penalty for contravention of a binding provision that has been written in one of the parties’ interest may be nullity, as indicated also by Hartkamp49 with justified reference to the end of art. 3:40 para. 2 in fine BW. Here, too, such nullity may exist insofar as the relevant clause works to the prejudice of that party. The third route is, indeed, that of an exception to the one-on-one rule. Failing the court’s application of its own motion, if necessary beyond the ambit of the dispute defined by the parties, Community law would be insufficiently effective, so that the prohibition for courts raising points of law of their own motion would founder on the principle of effectiveness for matters of Community law. The route chosen does not seem to make any difference for the result. The question which route must apply may well be material for another article. The same goes for other partial subjects with regard to courts raising points ex officio. This subject matter has not yet been fully considered, and will undoubtedly give rise to many further articles and future case law.

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Cf. Ras/Hammerstein (2004), nr. 56 ff. and Snijders and Wendels (2003), nr. 234 ff. and 378 for the ambit on appeal and Asser/Korthals Altes and Groen (2005), nr. 163-164 for the ambit in cassation. Cf. also Wessels c. s., l. c. See e. g. M. W. Wissink, Richtlijnconforme interpretatie van burgerlijk recht, diss. Leiden (Kluwer: Deventer 2001), nr. 467 junctis. PG Boek 3, 191-192 and W. Snijders, Tijdschrift voor Sociaal Recht 2002, 138 and 141 jo. MvA II, PG Boek 3, 192 at the top, where I do not read this in so many words, though. See also Hartkamp, l. c., 22. L. c., again jo. PG Boek 3, 191 ff. And also with reference to Asser/Hartkamp II (2005), nr. 250.

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5. Some cases from practice and some further findings 5.1 Down to earth Where do the above conclusions lead in domestic legal practice? Let us try to cover two obvious cases from the first instance right through to the third one.

5.2 A possibly unfair exoneration clause in a consumer purchase contract B sells and delivers a bicycle to consumer C. Due to an error in assembly made by B, the rear brake does not function properly. C does not realise, and immediately after delivery of the bike he drives down a hill without a helmet at increasing speed. At the end of the slope he tries to brake but only the front brake works properly. C crashes and incurs serious brain damage. In court he claims damages from B of € 500,000. B defends himself, saying that he is not liable because C should have checked the brakes before cycling down a hill. Moreover, C should have worn a helmet, which he did not; if C had worn a helmet, no (or at least far less serious) brain damage would have occurred. If B is responsible for the loss, he may invoke an exoneration clause in the general conditions of the purchase agreement, which limits his liability to the purchase price of the bicycle of € 1000. C then adopts the position that he was right in assuming that both brakes were functioning properly. He argues further that a helmet would in this case not have helped him or hardly at all. He does not go into the exoneration clause. The indicative list of unfair terms, attached to the Directive on unfair terms in consumer contracts, states (sub a) a clause ‘excluding or limiting the legal liability of a seller or supplier in the event of the death of a consumer or personal injury to the latter resulting from an act or omission of that seller or supplier’. May, or must, the court of first instance now assess of its own motion whether the exoneration clause is an unfair term within the meaning of the Directive on unfair terms in consumer contracts? May, or must, the court, if this question is answered in the affirmative, subsequently exclude the clause of its own motion? To all appearances, it cannot be derived from the court documents that C challenges the fairness or applicability of the exoneration clause; nor does C present any facts that prove unfairness or non-applicability. The court of first instance could encourage C still to speak out in that sense, by giving him the opportunity to do so during an appearance of the parties, in the counsel’s pleadings or in a document. If it does not do so, and still labels the exoneration clause unfair, it would be guilty of illegally raising facts (art. 24 Rv). Indeed, as indicated by the Directive itself in art. 4, the unfairness must be assessed ‘taking into account the nature of the goods or services for which the contract

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was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent’. For a jurisdiction clause, as in the case Océano, the unfairness may be adopted without any factual research (in the absence of concrete circumstances to be weighed) but this is different for an exoneration clause, so if the court allowed the claim, it would be required to limit the claim to € 1000. Therefore, the question can be left alone whether the court of first instance is allowed of its own motion to apply the relevant point of law – an exoneration clause is unfair under certain circumstances and as such its application must be excluded (hereinafter this will be referred to as the point of unfairness). Suppose, however, that it may be derived from the court documents, though not on the basis of the arguments adduced by C, that the exoneration clause is factually unfair, another outcome is conceivable. Indeed, the court may and must, if necessary beyond the ambit of the dispute, raise the point of unfairness and in doing so it may base itself on all facts that have appeared at the trial, even on facts which the interested party has not put forth as the basis for his claim or defence. Again, this may be assumed either pursuant to the EU rule that otherwise the relevant consumer protection provisions would be insufficiently effective, or because those provisions should be regarded as matters of public policy within the meaning of our civil procedural law regarding the raising of points. To the author’s opinion the first route, which can be connected to Van Schijndel, is more attractive than the second (for which case-law indications are lacking as yet). Anyway, in this case both routes lead to the same result. Suppose that the court of first instance rejects the claim for damages altogether, because it finds that B is not liable. C appeals, claims reversal of the judgment appealed against and award of the compensation claimed in the first instance. If the appellate court finds B liable it will, if necessary of its own motion, have to consider the reliance on the exoneration clause, insofar as this has not been abandoned by B on appeal. May or must the court then also, of its own motion, assess the unfairness if any of the exoneration clause and exclude it from application if it is unfair? Acting thus, the court would go beyond the ambit of the dispute. If a point of public policy is concerned, the court can and must do so. One should think that even if it is not, the court should act of its own motion, again pursuant to the Community requirement of effectiveness of the relevant consumer protection provisions. Like the court of first instance, though, it could assume unfairness only if this can be derived from facts that have appeared in the course of the proceedings, so in this case irrespective of whether those facts have been put forth by the interested party as the basis of his claim or defence, or whether they have appeared otherwise. Suppose that neither the parties nor the court of first instance and the appellate court raise the point of unfairness and the case is tried in cassation,

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after the claim has been rejected altogether twice. Suppose that the Hoge Raad does find B liable right away for the full 100 % of the damage, apart from the exoneration clause (a situation that will not occur, or hardly at all), would it be allowed to grant the claim right away or should it weigh the unfairness as well? It can be argued for that matter that the Hoge Raad should reverse the judgment appealed against and should refer the case back for further judgment by the factual court. This court would again be in the position of the appellate court and would as such have to consider the unfairness on the basis of the facts that have appeared in the course of the proceedings, as was argued above just now for the appellate procedure preceding cassation. Suppose the appellate court granted the claim up to an amount of € 1000. Suppose C institutes an appeal for cassation against this judgment without complaining that the appellate court should have found the exoneration clause unfair and as such should have excluded its application. Should the cassation court then examine of its own motion whether that clause may be regarded as unfair? The theoretical answer to that question may be ‘yes’, but, given that the cassation court should conduct an examination of facts for this and that it is not authorised to do so, it will not be able to get round to an examination of the point of unfairness of its own motion. A few more additional remarks after this trip from the court of first instance to the cassation court may be useful. The treatment above is ‘cutting corners’ to the extent that, strictly speaking, the raising of points is not about the application of the EC Directive in and of itself, but about the application of domestic law which may be regarded as a substitute for that EC Directive. Indeed, the Directive has no direct effect between private persons, but as the time-limit for implementation into national law has already elapsed, that domestic law must be interpreted in conformity with the Directive. Thus we may see that a clause is regarded as unfair within the meaning of the Directive and that its application is subsequently excluded on the basis of art. 6:248 para. 2 BW or possibly art. 3:40 para. 1 BW, because it is unacceptable in the light of the requirements of reasonableness and fairness respectively contrary to public policy.

5.3 A possibly unfair cartel agreement The second example can be discussed more briefly after the above. Producer A claims damages from colleague producer B by reason of a failure in the performance of a price-fixing agreement that A and B are alleged to have made. B acknowledges the agreement, but argues that there is no failure. Suppose the court of first instance holds the opinion that the agreement can be regarded as an act of competition prohibited by art. 81 EC, and is thus null and void: may, or must, the court then deny the claim for performance even on that ground?

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The answer to this question is negative right away. By doing so the court would go beyond the ambit of the dispute. If it cannot broaden the ambit in the manner indicated above (via an appearance of the parties, an exchange of documents between the parties or on the occasion of oral pleadings of the counsel), there is nothing to it but to disregard the point of art. 81 EC. Indeed, art. 81 EC is not a matter of public policy and consequently under domestic law the court of first instance cannot, of its own motion, apply such a provision beyond the ambit of the dispute. This rule applies one-on-one to matters of Community law barring exceptions, and there are none in this case (unlike the previous example). Considering that the interested party has not raised any facts indicating unfair competition within the meaning of art. 81 EC, the court of first instance would, moreover, be guilty of illegally raising facts, if it did accept such unfair competition nevertheless. This domestic rule of procedural law also applies one-on-one in a Community matter, and in this case, too, there is no exception (unlike the previous example). The same applies a fortiori on appeal. If B had invoked the prohibition of art. 81 EC in the first instance and raised the facts required therefor, but the court of first instance had rejected this plea, whereupon B had lodged appeal without complaining about the rejection of that plea, the appellate court would not be allowed to consider this of its own motion either. Otherwise it would go beyond the ambit on appeal as it is delineated by the grounds for appeal of the appellant. Similarly, the cassation court would not be allowed to test against art. 81 beyond the grounds for appeal in cassation.

6. Conclusion In principle the domestic rules for courts raising, of their own motion, facts and points of law are applicable one-on-one in matters of EU law as well. The standard judgment in the case Van Schijndel, which forms the main basis for this one-on-one rule, still holds firmly. The one-on-one rule has a number of exceptions. The first type directly follows from Van Schijndel itself. The application of the national rule prohibiting the court from raising, of its own motion, points of law of public policy in cassation beyond the ambit of the dispute defined by the parties, must be excluded altogether for Community law matters on the basis of Van Schijndel. However, this exception is hardly relevant because ex officio application of law would normally require a new examination of facts and the cassation court is not allowed to do such an examination. A second type of exception follows indirectly from Van Schijndel as well and also from the judgment in Van der Weerd. It is a very obvious one: European law itself can contain provisions concerning courts raising points of their own motion, which supersede our civil procedural law.

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A third type of exceptions was already heralded by the judgment in Peterbroeck: the national rules for courts raising points of their own motion may founder in, and by a combination with, other national procedural rules. Then, finally, one possible exception to the one-on-one rule, which concerns Directives intended for consumer protection. It concerns Directives which would be insufficiently effective if national courts were not obliged ex officio to apply the domestic legislation relevant to this matter, also beyond the ambit of the dispute. Within this context, legislation implementing Community law may be equated with other national legislation, insofar as it may be deemed to correspond with the contents of the relevant Directive. In the Netherlands one may think of provisions such as art. 6:248 para. 2 BW and possibly also of art. 3:40 BW. In the absence of legislation implementing Community law, these open standards can fulfil its function – briefly: application of Directive provisions.50 The obligation for courts to raise points of their own motion beyond the ambit of the dispute in cases like this may be thought of as an exception to the one-on-one rule. Above and elsewhere it has been explained that this obligation can also be constructed differently and thus remains within the limits of the one-on-one rule. In the discussion of the national provisions for the raising of points of law the distinction between national rules of public policy and other mandatory law proved to be crucial again. Thus, the appellate court must apply the rules of public policy beyond the ambit of the dispute; it cannot apply other mandatory rules beyond the ambit of the dispute. It was argued that art. 81 EC (formerly art. 85 EC) despite the Manfredi judgment cannot be considered to be a provision of public policy within the meaning of our national law concerning courts raising points of their own motion. On this point, too, Van Schijndel still holds firmly, as confirmed again by recent case law. In this respect the Manfredi judgment should be regarded as a ‘slip of the pen’. 50

On which more in my contribution in ‘De invloed van het Europese recht op het Nederlandse privaatrecht’, o. c., 91, with further references.

Interpretation of the UNIDROIT Principles of International Commercial Contracts by national courts Stefan Vogenauer* 1. Introduction There are many topics that lend themselves for discussion at a colloquium on the content and meaning of national law in the context of transnational law because they are both obvious and practically relevant. I have chosen one that is neither – or so it seems. First, the UNIDROIT Principles of International Commercial Contracts (‘PICC’)1 are not an obvious topic because, as opposed to other bodies of international and supranational legal rules discussed at this colloquium, they do not constitute hard and fast ‘law’. This, secondly, is the most important reason for their relatively modest relevance to the current daily practice of national courts: judges normally do not apply the PICC because they are not bound to do so, and therefore they do not need to be concerned with the interpretation of the instrument. There is reason to believe that all this will change in the foreseeable future. Even today, as I will attempt to show in Part 3 of this paper, there are many instances in which a national court may, and indeed must, have recourse to the PICC and engage in their interpretation. I will then, in Part 4, discuss the rules and principles of interpretation that must be followed in these cases. These rules and principles vary, depending on the rationale of the court’s recourse to the PICC. The court is usually faced with an interplay of domestic law and the PICC. In some cases, there is an added level of complexity because the rules and principles of contractual interpretation of both the PICC and the applicable contract law come into play. As far as I can see, these issues have never been fully explored, although they are of enormous importance. Before

*

1

Professor of Comparative Law, Faculty of Law, and Fellow of Brasenose College, Oxford University. UNIDROIT, UNIDROIT Principles of International Commercial Contracts 2004 (UNIDROIT, Rome, 2004), www.unidroit.org/english/principles/contracts/principles2004/integralversionprinciples2004-e.pdf, 1 May 2009.

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discussing them, I propose to provide some background information in Part 2, for readers who are not entirely familiar with the PICC.2

2. The UNIDROIT Principles of International Commercial Contracts 2.1 UNIDROIT The PICC are a set of contract law rules published by UNIDROIT, the Institut international pour l’unification de droit privé or ‘International Institute for the Unification of Private Law’, an independent intergovernmental organisation. As of 1 January 2009, it had 63 member states from all six continents, including the major trade nations. The purposes of UNIDROIT are, according to Art. 1 of its Statute, ‘to examine ways of harmonising and coordinating the private law of States and of groups of States, and to prepare gradually for the adoption by the various States of uniform rules of private law’. To this end, Art. 1 calls on UNIDROIT to ‘prepare drafts of laws and conventions with the object of establishing uniform internal law’. Thus, for example, UNIDROIT was involved in drafting the Ottawa Conventions on International Factoring and International Financial Leasing3 and the Cape Town Convention on International Interests in Mobile Equipment.4 It also participated in the elaboration of the Uniform Laws on the International Sale of Goods (‘ULIS’) and the Formation of Contracts (‘ULF’)5 which ultimately led to the United Nations Convention on Contracts for the International Sale of Goods (‘CISG’).6

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6

Throughout this paper frequent reference is made to contributions published in Commentary on the UNIDROIT Principles of International Commercial Contracts (‘PICC’), S. Vogenauer and J. Kleinheisterkamp (eds) (OUP: Oxford 2009), cited as ‘Vogenauer/Kleinheisterkamp/contributor’. UNIDROIT Convention on International Factoring (Ottawa, 28 May 1988); UNIDROIT Convention on International Financial Leasing (Ottawa, 28 May 1988). Convention on International Interests in Mobile Equipment (Cape Town, 16 November 2001). Convention relating to a Uniform Law on the International Sale of Goods (The Hague, 1 July 1964); Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods (The Hague, 1 July 1964). (Vienna, 11 April 1980).

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2.2 Content of the UNIDROIT Principles In 1994, UNIDROIT published the PICC, a codification of the general law of international commercial contracts. The scope of the instrument is not narrowly confined. The notions of both ‘international’ and ‘commercial contract’ are to be understood broadly. They potentially include all cross-border transactions in which none of the parties acts as a consumer.7 However, the PICC are not concerned with the rules pertaining to specific types of contracts, as is the case, for example, with the CISG or the Ottawa Conventions. Like the Principles of European Contract Law (‘PECL’)8 and the first three books of the recent Draft Common Frame of Reference (‘DCFR’),9 the PICC rather contain provisions on general matters of contract law that occur in all types of contracts, such as formation, interpretation, validity and the remedies for non-performance. A second, revised edition of the PICC was published in 2004. It deals with further areas of general contract law, such as limitation periods and contracts for the benefit of a third party. The full, or ‘integral’ version of the PICC consists of the ‘black-letter rules’ and an Official Comment with Illustrations.10 Despite the reference to ‘Principles’ in their title, the PICC are not confined to spelling out principles in the jurisprudential sense, i. e. standards that guide, but do not necessarily determine the outcome of a given case and that can be outweighed by countervailing principles.11 The PICC contain a fair number of such standards, for instance in the provisions concerning ‘good faith and fair dealing’ and ‘inconsistent behaviour’.12 However, the majority of the 185 articles are straightforward ‘rules’ that do not possess such a specific ‘dimension of weight’ but more or less dictate the outcome of the case at hand in an ‘all-or-nothing fashion’.13 The Preamble of the PICC proclaims the ambi-

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Vogenauer/Kleinheisterkamp/Michaels, ‘Preamble I’, paras 21-28. Commission on European Contract Law, Principles of European Contract Law: Parts I and II – Combined and Revised, O. Lando and H. Beale (eds) (Kluwer Law International: The Hague 2000); Commission on European Contract Law, Principles of European Contract Law: Part III, O. Lando et al. (eds) (Kluwer Law International: The Hague 2003). Study Group on a European Civil Code and Research Group on EC Private Law (Acquis Group), Principles, Definitions and Model Rules of European Private Law: Draft Common Frame of Reference (DCFR) – Outline Edition, C. von Bar et al. (eds) (Sellier: Munich 2009). See n. 1 above. For the jurisprudential distinction between rules and principles, see R. Dworkin, Taking Rights Seriously (Duckworth: London 1977), 22-28. Arts 1.7 and 1.8 PICC. For these characteristics of rules, see Dworkin, n. 11 above.

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tion to establish a set of ‘general rules for international commercial contracts’.14 In this regard, the PICC very much resemble a codification of general contract law as can be found in national Civil Codes or Contract Law Acts. The PICC contain two types of provisions. Some of the articles represent ‘an international restatement of general principles of contract law’.15 Where the drafters were able to identify a solution to a particular problem that is shared across domestic and international contract laws they restated this rule in an article of the PICC. However, frequently this was not possible because no global ‘common core’ of solutions could be established. In this event, the drafters either made choices between existing approaches or drew up new rules in order to ultimately adopt what they ‘perceived to be the best solutions’.16 It is not clear from the text of a given article whether the provision is a ‘restatement’ or a ‘best solution’, and sometimes it may be doubted whether a particular choice made by the drafters does indeed amount to the ‘best’ possible approach vis-à-vis a legal issue.17

2.3 Legal nature of the UNIDROIT Principles Traditionally, the unification of private law has been pursued by way of concluding bilateral and multilateral international treaties or conventions like the Warsaw Convention on International Carriage by Air,18 the Convention on the International Carriage of Goods by Road,19 the CISG or the Ottawa Conventions referred to above.20 Such treaties are negotiated by representatives of national governments who must reach unanimity. Once concluded, they are binding on the contracting states. The PICC follow a different approach. They are designed to be a ‘nonlegislative means of unification or harmonisation of law’.21 As such, they were elaborated by an international Working Group that consisted of eminent contract lawyers, mostly academics, who sat in their personal capacity, rather than 14 15

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Paragraph 1 of the Preamble (emphasis added). Governing Council, ‘Introduction to the 1994 Edition’, in UNIDROIT Principles of International Commercial Contracts 2004 (UNIDROIT, Rome, 2004), xiv. Ibid., xv. See Vogenauer/Kleinheisterkamp/Vogenauer, ‘Introduction’, paras 13, 23; Vogenauer/Kleinheisterkamp/Michaels, ‘Preamble I’, paras 3-4. For examples, see Vogenauer/Kleinheisterkamp/Vogenauer, Art. 4.8, paras 1-9, Art. 5.1.8, paras 1-5, Art. 5.1.9, para. 5. Convention for the Unification of Certain Rules Relating to International Carriage by Air (Warsaw, 12 October 1929, as amended at The Hague, 1955). (Geneva, 19 May 1956). See n. 3 above. Governing Council (n. 15 above), xiv. See also M. J. Bonell, ‘Unification of Law by Non-legislative Means’ (1992) 40 American Journal of Comparative Law, 617.

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representing their respective governments. There was no attempt by the member states of UNIDROIT to conclude an agreement to be bound by the results of these labours. The Governing Council of UNIDROIT explicitly decided that it ‘would not formally approve the Principles but rather authorise their publication’.22 As a result, the PICC are not binding on any of the member states, although any state may choose to endorse them by way of implementation or promulgation as domestic law. However, as long as a state refrains from doing so, the PICC do not constitute ‘law proper’ according to the traditional theory of legal sources that equates law with the rules emanating from the sovereign of the nation state.23 They are, as is frequently said, mere ‘soft law’: the Governing Council of UNIDROIT freely admits that the PICC ‘are not a binding instrument and that in consequence their acceptance will depend upon their persuasive authority’.24 National courts are therefore normally not bound to apply them. This even holds for the areas in which the PICC live up to their aspiration of being a ‘restatement’ of general principles of commercial contract law, representing a ‘common core’ of domestic legal solutions that are shared globally. In these – relatively rare – instances, a given article of the PICC does not add anything from the perspective of national judges since it simply reflects the existing domestic law that the court would have to apply in any event.

3. Recourse to the UNIDROIT Principles in national courts Once it is accepted that the PICC do not constitute hard and fast law, it does not necessarily follow that they are of no relevance to national courts. Certainly, courts will not normally recognize a choice of the parties to designate the PICC as the law governing their transaction (see below, Section 3.1). However, a court must apply the PICC if they are, exceptionally, applicable in the case that falls to be decided (see below, Sections 3.2 and 3.3). Furthermore, there are many other instances where the court may be free or even obliged to take the PICC into account (see below, Section 3.4).

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(1994) CD (73) 18, 22. See Vogenauer/Kleinheisterkamp/Vogenauer, ‘Introduction’, para. 20. For the classic exposition of the traditional theory, see J. Austin, The Province of Jurisprudence Determined (1832), H. L. A. Hart (ed.) (Weidenfeld & Nicholson: London 1954), 1-3. For recent attempts to establish the ‘legal’ character of the PICC by redefining the concept of law, see S. Schilf, Allgemeine Vertragsgrundregeln als Vertragsstatut (Mohr Siebeck: Tübingen 2005) and U. Teichert, Lückenfüllung im CISG mittels UNIDROIT-Prinzipien: Zugleich ein Beitrag zur Wählbarkeit nichtstaatlichen Rechts (Peter Lang: Frankfurt/Main 2006), 44-109. Governing Council (n. 15 above), xv.

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3.1 Limitations on the applicability of the UNIDROIT Principles in national courts .

Whether the PICC are applicable or not follows from the body of national, international and supranational law that binds the court in a given case. This body of law is made up of rules of substantive contract law, civil procedure and, most importantly, private international law (or ‘conflict of laws’). The PICC themselves, in paragraphs 2-4 of their Preamble, suggest a number of instances in which the instrument might be applicable in proceedings before state courts. However, the character of these provisions is merely aspirational. They are not, in themselves, capable of determining the applicability of the PICC.25 Domestic courts often take a different approach to arbitral tribunals on the applicability of ‘soft law’. As is well known, the applicability of the PICC in international arbitral proceedings is widely accepted. Most modern arbitration rules provide that arbitral tribunals must respect the choice of parties who agreed on a set of rules like the PICC as the applicable law governing their transaction. Furthermore, many arbitration rules enable tribunals to apply the PICC if the parties agreed that their contract be governed by ‘general principles of law’, ‘the lex mercatoria’ or the like, and even if the parties did not make any choice of law at all.26 By contrast, state courts are bound by their domestic conflict of laws rules. Such rules usually restrict the choice of law to the law of a state, so the courts will not give effect to the parties’ purported choice of a transnational instrument like the PICC as applicable law.27 A recent European Union proposal to allow the parties to ‘choose as the applicable law the principles and rules of the substantive law of contract recognized internationally’ was defeated,28 so that the US State of Oregon remains the only jurisdiction where the conflict of laws rules require the courts to respect the parties’ choice of the PICC as the governing law of a transaction.29 Given their focus on state law, domestic rules of private international law also exclude any recognition of a choice of ‘general principles’ or the ‘lex mercatoria’ as the proper law of the contract, so that national courts are unable to apply the PICC as a manifestation of such bodies of law. Similarly, domestic 25 26 27 28

29

Vogenauer/Kleinheisterkamp/Michaels, ‘Preamble I’, paras 2, 30. For details, see Vogenauer/Kleinheisterkamp/Scherer, ‘Preamble II’, paras 1-38. For details, see Vogenauer/Kleinheisterkamp/Michaels, ‘Preamble I’, paras 49-63. Art. 3(2)(1) of the Proposal for a Regulation of the European Parliament and the Council on the Law applicable to contractual obligations (Rome I), COM (2005) 650 final (15 December 2005), 5. Cf. Art. 3 of Regulation (EC) No. 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) [2008] OJ L 177/6. See Vogenauer/Kleinheisterkamp/Michaels, ‘Preamble I’, para. 58, referring to Oregon Revised Statutes 81.100-135 (2001).

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conflicts rules, as traditionally understood, leave no space for the PICC as the applicable law in the absence of a valid choice of law by the parties;30 a proposal to introduce this option in the Inter-American Convention on the Law Applicable to International Contracts of 1994 was explicitly rejected.31

3.2 Recourse to the UNIDROIT Principles as applicable law However, even in those legal systems where it is impossible to make the PICC applicable before a state court by way of a straightforward choice of law there are other means to achieve their applicability. In a very limited number of jurisdictions, the applicable law of civil procedure allows the parties to designate the judge as amiable compositeur.32 As a result, parties may request the judge to apply the PICC as they would be able to do with an arbitrator.33

3.3 Recourse to the UNIDROIT Principles as contract terms Furthermore, as a simple matter of freedom of contract, legal systems will normally not object to the parties incorporating the PICC in the substance of their contract.34 Indeed, a purported ‘choice’ of the PICC as the applicable law will usually be understood by a state court to be a mere agreement to incorporate the PICC in the contract.35 Incorporation may be complete or partial:36 it may be achieved by reference to the PICC as a whole or to one or more of their articles only. In this way, the PICC or at least some of their provisions 30

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32 33 34

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Vogenauer/Kleinheisterkamp/Michaels, ‘Preamble I’, paras 64-81 (with an argument for the development of a different solution in the United States in paras 75-78). See, for example, Art. 4 of the Rome I Regulation (n. 28 above). M. J. Bonell, An International Restatement of Contract Law: The UNIDROIT Principles of International Commercial Contracts (3 edn, Transnational Publishers: Ardsley/New York 2005), 184, n. 31. See, for example, Art. 12(3) and (4) of the French New Code of Civil Procedure. Vogenauer/Kleinheisterkamp/Michaels, ‘Preamble I’, para. 35. See, for example, Official Comment 2 to § 1-302 of the United States Uniform Commercial Code (‘UCC’) and Recital 13 of the Rome I Regulation (n. 28 above). UNIDROIT (n. 1 above), Official Comment 4 a to the Preamble (3). For German law, see J. Kropholler, Internationales Privatrecht (6th edn, Mohr Siebeck: Tübingen 2006), § 52 II 3, 464-465. For English law, see Shamil Bank of Bahrain EC v Beximco Pharmaceuticals [2004] EWCA Civ 19, [2004] 1 WLR 1784 [51] (Potter LJ, obiter), confirmed in Halpern v Halpern [2007] EWCA 291, [2007] 3 All ER 478 [31] (Waller LJ, obiter). See, for example, Art. 3(1)(3) of the Rome I Regulation (n. 28 above). See also Art. 1.5 PICC.

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become applicable as contractual terms within the framework of the applicable contract law. As such, they remain subject to the mandatory rules of the latter, although conflicts between the two bodies of law will be rare, and the PICC in any event accept that mandatory rules take precedence.37

3.4 Recourse to the UNIDROIT Principles as background law Even if a national judge is not bound to apply the PICC as the applicable law or as contract terms he may be permitted or obliged to take them into account in cases which involve the interpretation of rules that are otherwise applicable. These can be rules of domestic law, provisions of international uniform law or simply rules that the parties have given themselves as terms of their contract. In each of these cases, the PICC can function as a kind of ‘background law’38 that informs the content of the applicable law. Once again, this does not follow from the Preamble of the PICC which, in paragraphs 5 and 6, suggests that the instrument be used in the interpretation of domestic and international uniform law. It rather depends on the rules and principles of interpretation that are binding on the court in the case at hand. These rules and principles vary, depending on whether the court deals with domestic law, international uniform law or the contract of the parties, and they may differ from one jurisdiction to another.

3.4.1 Recourse to the UNIDROIT Principles in the interpretation of domestic law

With regard to the interpretation of domestic law, most legal systems consider it legitimate that judges read national law in the light of transnational law. This is well established for binding international law, such as the CISG or the European Convention on Human Rights (‘EHCR’).39 In some cases, such 37

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Art. 1.4 PICC, with Official Comment 2. See Vogenauer/Kleinheisterkamp/ Michaels, ‘Preamble I’, paras 33-34, 36, 38, 41. The notion of ‘background law’ (‘Hintergrundrecht’) is borrowed from R. Michaels, ‘Umdenken für die UNIDROIT-Prinzipien: Vom Rechtswahlstatut zum Allgemeinen Teil des transnationalen Vertragsrechts’ (2009) 73 Rabels Zeitschrift für ausländisches und internationales Privatrecht, 866, 876 who also characterizes the PICC as a ‘point of reference in the legal system’ (‘Referenzpunkt in der Rechtsordnung’). For references, see S. Vogenauer, Die Auslegung von Gesetzen in England und auf dem Kontinent: Eine vergleichende Untersuchung der Rechtsprechung und ihrer historischen Grundlagen (Mohr Siebeck: Tübingen 2001), 1259. Obviously, this is more controversial if an international instrument is binding but the state of the respective court has not acceded to the instrument, as can be seen by the recent debate on

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recourse is even mandatory. A well-known example is section 3(1) of the UK Human Rights Act 1998, according to which ‘legislation must be read and given effect in a way which is compatible with the Convention rights.’ In a similar fashion, the European Court of Justice infers from Art. 10 of the EC Treaty that the domestic courts of EU member states are under an obligation to interpret national law in conformity with pertinent EU law.40 It would seem that most national legal systems also allow recourse to non-binding transnational instruments, such as the PICC, for the purposes of interpreting domestic legislation and case law. There are only few reported decisions where state courts actually interpreted national law in the light of the PICC.41 However, the non-binding character of these instruments is not normally seen as precluding their use as an interpretative aid.42 They are, like binding international and supranational law, part of the wider context or background of domestic law. The case for recourse to the PICC is strong if the national contract law in question is vague and ambiguous whilst an article of the PICC provides a clear answer and lives up to the overall ambition of the PICC of reflecting either international consensus or the ‘best’ solution that can be found world-wide.43 It is even more powerful if the domestic law in question is modelled on a specific article of the PICC, a situation that occurs in a number of countries that have recently modernised their contract laws.44 Here, reference to the PICC may even be mandatory under domestic rules of statutory construction which might require recourse to the genesis and the legislative forerunners of the particular provision that falls to be interpreted.

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the United States Supreme Court practice of referring to, inter alia, the ECHR: R. Bader Ginsburg, ‘”A Decent Respect to the Opinions of [Human]Kind”: The Value of a Comparative Perspective in Constitutional Adjudication’ (2005) 64 Cambridge Law Journal, 575. ECJ Case 14/83 Von Colson and Kamann v Land Nordrhein-Westfalen [1984] ECR 1891; ECJ Case C-106/89 Marleasing SA v La Comercial Internacionale de Alimentacion SA [1990] ECR I-4135. See the references provided by Vogenauer/Kleinheisterkamp/Michaels, ‘Preamble I’, paras 111-117; O. Meyer, Principles of Contract Law und nationales Vertragsrecht: Chancen und Wege für eine Internationalisierung der Rechtsanwendung (Nomos: BadenBaden 2007), 193-263; E. Roca Trías and B. Fernández Gregoraci, ‘The Modern Law of Obligations in the Spanish High Court’ (2009) 5 European Review of Contract Law, 45, 50, 57-59. See the references provided by Bonell (n. 31 above), 234-243. See text following n. 24 above. For comprehensive overviews of the impact of the PICC in domestic law reform, see Vogenauer/Kleinheisterkamp/Michaels, ‘Preamble I’, paras 129-139; Meyer (n. 41 above), 140-192.

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So far I have only discussed whether legal systems allow recourse to the PICC in the construction of domestic law. This must be distinguished from

the question as to what weight these systems accord to arguments drawn from the PICC in the interpretative process. The issue arises if recourse to the PICC points in one direction, whilst other aids of interpretation, for example the travaux préparatoires of domestic legislation, point in another. National systems have developed their own rules and ‘maxims’ for the resolution of such conflicts, so the outcome may be different in different jurisdictions. The most important question in this regard is how arguments from the PICC relate to the wording of domestic law. If the case at hand is clearly covered by the text of a national rule most legal systems would not accord sufficient weight to the PICC to adopt a ‘restrictive interpretation’ of the national rule, i. e. to ‘read it down’, ‘displace’ it or ‘trump’ it in order to achieve conformity with the PICC. A good example is provided by the long established rule of English contract law, according to which precontractual negotiations may not be used as an aid to the construction of contracts.45 By contrast, Art. 4.3(a) PICC lists the ‘preliminary negotiations between the parties’ among the relevant circumstances of contractual interpretation. Recent judicial and extrajudicial criticism of the English rule referred to the ‘current international trend’ and, more particularly, to the solution of the PICC. However, the reference to the PICC was only one of a host of arguments in favour of a restriction of the English rule, ranging from practicability and efficiency to the overall coherence of English contract law.46 Standing on its own, the argument from the PICC would almost certainly not be regarded as sufficient for providing a restrictive interpretation (or a ‘reading down’) of the established English rule that, incidentally, remains good law for the time being.47 A similar problem arises if the wording of the domestic rule clearly does not cover the case at hand whilst the PICC provide a solution. Suppose the contract law of a given jurisdiction explicitly permits recourse to the parties’ preliminary negotiations for the purpose of interpreting sales contracts. Reference to Art. 4.3(a) PICC might lead the national court to interpret the national rule so that its scope also extends to other types of contract. Again, it 45

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Prenn v Simmonds [1971] 1 WLR 1381, 1384-1385, HL (Lord Wilberforce); reaffirmed in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 913, HL (Lord Hoffmann). Lord Nicholls, ‘My Kingdom for a Horse: The Meaning of Words’ (2005) 121 Law Quarterly Review, 577, 586; Yoshimoto v Canterbury Golf International Ltd [2001] 1 NZLR 523, 547-549, NZCA (Thomas J, obiter); Proforce Recruit Ltd v The Rugby Group Ltd [2006] EWCA Civ 69 [57] (Arden LJ, obiter); Chartbrook Ltd v Persimmon Homes Ltd [2008] EWCA Civ 183 [109] (Collins LJ). The Square Mile Partnership Ltd v Fitzmaurice McCall Ltd [2006] EWCA Civ 1689 [63]; Great Hill Equity Partners II LP v Novator One LP [2007] EWHC 1210 (Comm) [59].

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may be doubted that many legal systems would regard an argument drawn from the PICC alone as sufficiently weighty to justify such an extensive interpretation of domestic law. The solution of the PICC may, however, tip the balance if a number of other interpretative factors, such as the travaux préparatoires or policy arguments, similarly point towards extending the scope of the national rule. Many legal writers, incidentally, would not regard such a case as one of extensive ‘interpretation’ of the rule anymore. They would rather speak of ‘supplementation’ of the national law. Such a distinction is indeed drawn in paragraphs 5 and 6 of the Preamble and in the heading to Art. 1.6 PICC but, as I will try to show below, it is unhelpful and cannot be made with sufficient clarity.48 To a certain extent, the reluctance of national legal systems to employ the PICC in order to restrict or extend the scope of seemingly clear and unambiguous domestic rules by way of interpretation corresponds to their use of binding international and supranational law in similar situations. Section 3(1) of the Human Rights Act, for example, provides that UK legislation be read in a way which is compatible with the rights of the ECHR only ‘[s]o far as it is possible to do so’. The obligation of EU member state courts to interpret domestic law in conformity with EU law also exists only ‘as far as possible’.49 This is frequently understood to exclude ‘strained constructions’ of domestic law with the aim of bringing it in line with international and supranational law. However, there is huge uncertainty as to what is ‘possible’ in these circumstances, and at least in some cases domestic courts have embarked on interpretations that cannot be reconciled with the literal meaning of the text.50 Arguably, courts will not be disposed to go to such lengths in order to achieve conformity with the PICC. In other words, arguments from the PICC have less weight than arguments drawn from EU law or the ECHR. This, it may be assumed, reflects the fact that the PICC are ‘soft law’ only whilst the other regimes are binding – even if they are not applied by the national court in the case at hand. The situation resembles that of a court referring to a legal rule from another jurisdiction: whilst the rule is binding law in the other jurisdiction, it is not binding on the respective court, and such comparative arguments are normally accorded little weight.51 The non-binding character of the PICC therefore does not affect 48 49 50

51

See Section 4.1, pp. 174-175 below. Marleasing (n. 40 above). See, for example, Webb v EMO Air Cargo (No 2) [1995] 1 WLR 1454, HL; Ghaidan v Mendoza [2004] UKHL 30, [2004] 2 AC 557, HL; BGH 26 November 2008 (VIII ZR 200/05), [2009] Neue Juristische Wochenschrift, 427 – Quelle: restriction of § 439(4) of the German Civil Code in the light of Art. 3 of Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees [1999] OJ L 171/12. For a comparative overview, see Vogenauer (n. 39 above), 1276-1277. See also the discussion with regard to the United States Supreme Court (n. 39 above).

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their admissibility as an aid to the interpretation of domestic law. However, it has an impact on their weight in the case of conflict with other interpretative factors.

3.4.2 Recourse to the UNIDROIT Principles in the interpretation of international uniform law

In interpreting international uniform law,52 national courts may not simply apply their domestic canons of construction. International uniform law must be interpreted autonomously, i. e. according to the rules and principles that are appropriate for the construction of international uniform law in general and for the respective instrument in particular.53 The canons of interpretation of international uniform law are less settled than those of domestic laws. However, it may be safe to say that, as a general rule, international uniform law may be interpreted in the light of other binding instruments of international and supranational law.54 This is well established in EU law where legislative measures are routinely construed in conformity with the Treaties or with other pieces of EU legislation.55 In other areas of international uniform law, recourse to further international measures is less straightforward because these measures have frequently been enacted by different agencies, institutions or organisations. Furthermore, there is usually little thematic overlap between different international uniform law instruments with their characteristically specific and fairly narrow substantive scopes.56 But 52

53

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55 56

The following comments also apply to national courts having recourse to the PICC in the interpretation of non-binding transnational law, such as the PECL or the DCFR. These instruments might be applicable in a given case via the route outlined in Section 3.2 above, and they are as much subject to the requirements of ‘autonomous’ and ‘uniform interpretation’ as international uniform law (Art. 1:106 PECL; Art. I.–1:102(1) DCFR). Since the 1980s, most international uniform law instruments explicitly stipulate the requirement of autonomous interpretation by requiring the interpreter to have regard to the ‘international character’ of the instrument: Art. 7(1) CISG. See also the references provided in Vogenauer/Kleinheisterkamp/Vogenauer, Art. 1.6, para. 2, nn. 120-124. F. Ferrari, ‘The Relationship Between International Uniform Contract Law Conventions’ (2003) 22 Journal of Law and Commerce, 57, 64-66; U. Gruber, Methoden des Internationalen Einheitsrechts (Mohr Siebeck: Tübingen 2004), 157-163. Vogenauer (n. 39 above), 350, 352. These points are emphasised by F. Diedrich, Autonome Auslegung von Internationalem Einheitsrecht (Baden-Baden, Nomos, 1994), 69-70. See also the discussion in J. Kropholler, Internationales Einheitsrecht: Allgemeine Lehren (Mohr Siebeck: Tübingen 1975), 273-274.

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there is no reason to object to a court taking into account, for example, provisions of the 1974 UN Limitation Convention57 for the purposes of interpreting the CISG if the former can shed light on the meaning of a provision of the latter. This applies particularly to those provisions of the Limitation Convention which were introduced by the Vienna Protocol of 1980 in order to ensure consistency with the newly enacted CISG. In general, interpretation of international uniform law in the light of other binding measures of international law is particularly useful and necessary if the drafting of the former is strongly influenced by the latter. A number of provisions in the UNIDROIT Factoring Convention58 and the EU Consumer Sales Directive59 ought therefore to be interpreted in the light of the CISG. In the interpretation of international uniform law, reference may also be made to non-binding transnational measures, such as the PICC. Their lack of formal bindingness is no obstacle to having recourse to them for the purposes of construction.60 As with the interpretation of domestic law, such reference is particularly justified if an international uniform law instrument does not provide clear guidance on a given question and the PICC offer a straightforward answer that is based on a broad international consensus or reflects the ‘best solution’ that emerged from the extensive deliberations of the Working Group. Such recourse is all the more required if the international uniform instrument is explicitly modelled on the PICC. This has not yet occurred but it is a realistic prospect, as can be seen from the 2002 Draft Uniform Act of Contract of the Organisation for the Harmonization of Business Law in Africa (‘OHADA’) that is largely identical with the PICC.61 If the draft is enacted – which is far from clear at the time of writing this paper – it will have to be interpreted in the light of the PICC. Whilst recourse to the PICC as such does not seem to be problematic in the context of international uniform law, the weight accorded to arguments drawn from the PICC as opposed to other interpretative criteria is far from

57

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United Nations Convention on the Limitation Period in the International Sale of Goods (New York, 14 June 1974), as amended by the Vienna Protocol of 11 April 1980. See n. 3 above. See n. 50 above. For a similar view, see Vogenauer/Kleinheisterkamp/Michaels, ‘Preamble I’, para. 91; Bonell (n. 31 above), 228-233. The argument is fully developed by J. Basedow, ‘Uniform Law Conventions and the UNIDROIT Principles of International Commercial Contracts’ [2000] Uniform Law Review, 129, 133-137, 139. For further information, see Vogenauer/Kleinheisterkamp/Michaels, ‘Preamble I’, paras 123-125 and the contributions in special issue 1/2 of [2008] Uniform Law Review.

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clear.62 It may be doubted that national courts are willing to ‘read down’ a seemingly clear and unambiguous provision of an international instrument simply because the PICC provide for a different solution. However, the PICC may provide guidance if a particular issue is not expressly dealt with in the international instrument. A much discussed example concerns Art. 78 CISG. The provision establishes a right to recover interest on a sum with which the other party to the contract is an arrears but it is silent on how to measure the interest. Art. 7.4.9 PICC provides a detailed solution for the determination of the interest rate. Attempts to refer to Art. 7.4.9 PICC in order to resolve the issue in cases governed by the CISG have proved to be highly controversial, for several reasons.63 First, the travaux préparatoires of the CISG point in a different direction to the PICC: they clearly show that the drafters of the CISG deliberately refrained from settling this particular issue because they were not able to reach unanimity.64 Second, under Art. 7(2) CISG, questions concerning matters governed by the CISG ‘which are not expressly settled in it are to be settled in conformity with the general principles on which it is based’.65 For the majority of commentators, this provision explicitly limits recourse to the general principles underlying the CISG, i. e. those that are immanent to the Convention, and thereby excludes reference to external rules and principles, such as the PICC.66 It has been argued that this view is at least misguided to the extent that the PICC are a genuine restatement of an internationally shared solution and therefore enshrine general principles of international commercial contract law that are also underlying the CISG67 (whether this is the case with regard to Art. 7.4.9 PICC is, incidentally, far from clear68). It is not the purpose of this paper to contribute to the debate on the meaning of Art. 7(2) CISG. However, the example usefully shows that the weight attributed to the PICC in the interpretation of international uniform law depends on specific features of the international instrument and, even more specifically, of the particular provision that falls to be interpreted.

62

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For the distinction between admissibility and weight of interpretative criteria, see text following n. 44 above. K. Bacher, ‘Art. 78’, in Commentary on the UN Convention on the International Sale of Goods (CISG), P. Schlechtriem and I. Schwenzer (eds) (2nd edn, OUP: Oxford 2005), para 31a; Vogenauer/Kleinheisterkamp/McKendrick, Art. 7.4.9, para. 2. Bacher (n. 63 above), para. 29. Emphasis added. For a full discussion and an up to date overview of the literature, see F. Ferrari, ‘Art. 7’, in Kommentar zum Einheitlichen UN-Kaufrecht – CISG, P. Schlechtriem and I. Schwenzer (eds) (5th edn, Beck: Munich 2008), paras 59-69. Vogenauer/Kleinheisterkamp/Michaels, ‘Preamble I’, para. 101. Vogenauer/Kleinheisterkamp/McKendrick, Art. 7.4.9, para. 3.

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3.4.3 Recourse to the UNIDROIT Principles in the interpretation of contracts

Whether a national court may refer to the PICC in the construction of contracts depends on the applicable rules and principles of contractual interpretation, be they of national or international provenance (e. g. Art. 8 CISG). Contracts are drafted and interpreted against a complex background of law and facts. In English law, for example, most of these surrounding circumstances – sometimes also referred to as the ‘matrix of facts’ – are admissible as aids in the interpretation of contracts. Lord Hoffmann famously said of this background that, subject ‘to the requirement that it should have been reasonably available to the parties and to the exception [excluding recourse to the previous negotiations of the parties69 ], it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man’.70 The understanding of reasonable parties, a factor that seems to be relevant for the interpretation of contracts in most, if not all modern legal systems,71 is at least to some extent determined by the legal context or background of the contract. Depending on the nature of the transaction and the parties, this background may include trade usages, domestic contract law, international uniform law instruments and non-binding transnational law, such as the PICC. The PICC can thus serve as an ‘international yardstick for the interpretation’ of contracts.72 The weight accorded to the PICC in the interpretation of a contract may differ from jurisdiction to another. It will certainly depend on the circumstances of the case. For example, it will be stronger where the contract at issue is international, rather than national, and where the parties can reasonably be expected to know the PICC. It will be particularly strong if the relevant provisions of the PICC represent a broad international consensus on the issue that falls to be decided or if, in the absence of such consensus, the PICC can legitimately claim to set forth the most adequate or ‘best’ solution to this problem. Recourse to the PICC will hardly ever be a justification for overriding the clear and unambiguous literal meaning of a contract term. It will normally serve to confirm an outcome that has been reached on the basis of other canons of contractual interpretation of the applicable law, including reference to the contract law rules of that law.

69 70 71

72

See text at n. 45 above. Investors Compensation Scheme (n. 45 above), at 912-913. For an overview, see S. Vogenauer, ‘Interpretation of Contracts: Concluding Comparative Observations’, in A. Burrows and E. Peel (eds), Contract Terms (OUP: Oxford 2007), 123, 125-129; Vogenauer/Kleinheisterkamp/Vogenauer, Art. 4.1, para. 5. Meyer (n. 41 above), 292 (‘Principles als internationaler Auslegungsmaßstab’); see also ibid., 279-280.

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A good example for recourse to the PICC in the interpretation of contracts is provided by an arbitral award from 1995;73 arguably, a state court would have been able to use the PICC in a similar fashion. The parties had their places of business in Switzerland, Singapore and Belgium. They concluded an agreement that terminated a contract of distributorship. The applicable law was Swiss law. The question arose whether Art. 1(c) of the termination agreement contained an implied currency depreciation clause. The arbitrator applied the rules on the interpretation of contracts laid down in the Swiss Code of Obligations which, he held, required him ‘to discern what reasonable parties acting in good faith must have expressed as their common intentions at the moment of conclusion of the contract. … Starting from the wording of the contractual stipulation this objective interpretation has to take into account not only the conduct of the parties before and after the conclusion of the contract but also the purpose of the contract and of previous contracts concluded between the same parties and the economic context in which it was concluded’. The arbitrator went on to say that every attempt to read a currency clause into Art. 1(c) of the agreement ‘has to take into account the principle of nominalism. This principle provides that absent a specific provision in the agreement of the parties each debtor has to pay a monetary debt at its nominal value. Therefore, without any special agreement, each party carries the risk of currency depreciation. The principle of nominalism is a general principle of transnational law. It is laid down not only in Swiss court decisions and doctrinal writings … but also in Art. 6.1.9(3) of the Unidroit Principles of lnternational Commercial Contracts … As a consequence of this general principle of law, international arbitral tribunals are very reluctant to intervene into a contract because of inflation and currency depreciation in the absence of a specific currency depreciation clause’. The arbitrator accordingly refused to imply a currency clause in Art. 1(c) of the agreement.

73

Arbitral Award July 1995 (Brussels), ICC case no 8240, (1999) 10(2) ICC International Court of Arbitration Bulletin, 60, 62, Unilex.

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4. Interpretation of the UNIDROIT Principles by national courts As set out in the previous part of this paper, a state court may refer to the PICC in different circumstances and for different reasons. In all these cases, the court must be aware of the content and the meaning of particular provisions of the PICC. This requires the court to engage in the interpretation of the PICC, using the general rules and principles for interpretation provided by the PICC themselves. However, the justification for the court’s recourse to the PICC in a given case has an impact on the extent to which these rules and principles apply.

4.1 Interpretation of the UNIDROIT Principles as applicable law If the parties designated the judge as amiable compositeur and requested him to apply the PICC as the applicable law governing their transaction – a possibility that is only open to the parties in very limited circumstances74 – the PICC function as a free standing contract law code. It may be neither complete nor self-contained but the judge must construe it as he would interpret any other codified national or international contract law regime: on its own terms. As a consequence, the rules and principles for the interpretation of the PICC apply without qualification. In a short contribution like this it is not possible to set out these rules and principles in full. I have given a more comprehensive account elsewhere, on which I rely in the following paragraphs.75 The starting point for the interpretation of the PICC is Art. 1.6 of the instrument: ARTICLE 1.6

(Interpretation and supplementation of the Principles) (1) In the interpretation of these Principles, regard is to be had to their international character and to their purposes including the need to promote uniformity in their application. (2) Issues within the scope of these Principles but not expressly settled by them are as far as possible to be settled in accordance with their underlying general principles. Article 1.6 does not set forth a complete set of detailed rules and principles of interpretation. It rather provides a number of broad interpretative guidelines

74 75

See Section 3.2, p. 163 above. Vogenauer/Kleinheisterkamp/Vogenauer, Art. 1.6.

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that are well established in international uniform law, particularly under Art. 7 CISG76 on which Art. 1.6 is modeled. First, the court must have regard to the ‘international character’ of the PICC. This is a reference to the principle of ‘autonomous interpretation’.77 It requires the court to use the particular methods and techniques that have been developed for the PICC, rather than the rules and principles of interpretation of a particular domestic or international law. Furthermore, the terms and concepts used in the PICC must be interpreted autonomously. They have to be understood within the international context of the PICC and with a view to the specific purposes of this instrument. The meaning of a particular word in the PICC is not necessarily identical with the meaning that is attributed to this term in another legal system. Second, the court must ‘promote uniformity’ in the application of the PICC. It must ensure that a provision of the PICC is applied uniformly to all cases for which it is relevant, regardless of the jurisdiction in which the case arises. In order to avoid divergences of interpretation the court may not simply rely on the version of the PICC that is published in the language of the court. It must take into account all the five official language versions of the PICC (English, French, German, Italian and Spanish). The court must further have regard to the judgments of foreign courts and the awards of arbitral tribunals, as well as to the international body of legal scholarship on the PICC. These sources are by no means binding on the court, but Art. 1.6(1) requires the national judge to ‘have regard’ to them. Third, Art. 1.6 only mentions some of the interpretative criteria that are relevant in construing the PICC: the ‘purposes’ and the ‘underlying general principles’ of the instrument. In a somewhat elliptical fashion it does not refer to the other factors that need to be taken into account in interpreting the PICC. Apart from the text of the instrument in its different language versions, regard must be had to the internal and the external context of the PICC (including the Official Comment with its Illustrations and the background of other national, international and transnational contract law regimes), the drafting history that can be gleaned from the travaux préparatoires and policy arguments, such as fairness, reasonableness and economic efficiency. Fourth, Art. 1.6 does not provide much guidance on how these interpretative criteria have to be weighed if they point to different directions. As a general rule, in a dynamic and rapidly developing area like international commercial contract law, arguments drawn from the purposes and the underlying policies of the PICC carry greater weight than those from the drafting history. Particular weight is accorded to the text of the black letter rules, although in 76

77

For an up to date account of Art. 7 CISG and of methodological issues of the CISG in general, see A. Janssen and O. Meyer (eds), CISG Methodology (Sellier: Munich 2009). See text at n. 53 above.

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a multilingual instrument like the PICC textual arguments tend to have less force than in the interpretation of national law. Therefore the PICC do not set forth any kind of ‘literal’ or ‘plain meaning rule’ requiring adherence in every case to the supposedly ‘clear’ or ‘unambiguous’ wording of a provision. As a result, the court may engage in a restrictive interpretation (or ‘reading down’) of an article: it may decide not to apply the provision to a case that is clearly covered by its wording if other interpretative criteria strongly militate for such a result. Conversely, a provision may be applied to a case that is clearly not covered by its wording if other interpretative criteria strongly point in this direction. Such an extensive interpretation of the provision is sometimes referred to as a ‘supplementation’ of the PICC. Fifth, the heading of Art. 1.6 also suggests making a terminological distinction between the ‘interpretation’ and the ‘supplementation’ of the PICC. Such a distinction is made in some domestic systems, particularly in the Germanic tradition. According to this methodological strand of legal scholarship, the ‘interpretation’ of a legal text remains within the confines of the ‘borderline of the meaning of the words’, whilst the ‘further development of the law’ reaches a result that cannot be reconciled with the wording of the provision. However, courts rarely distinguish between an ‘extensive’ or ‘liberal interpretation’ of a legal text and its ‘supplementation’ – normally these activities cannot be separated. Difficult problems of interpretation require a degree of creative supplementation. At the same time, the supplementation of a provision requires recourse to the criteria that are also relevant in its interpretation, such as the drafting history, policy arguments and the underlying general principles and purposes of the PICC. As his been shown in the previous paragraph, the issue of ‘supplementation’ can be framed as one of extensive interpretation. A razorsharp distinction between interpretation and supplementation is therefore not only impossible, but also unnecessary. Sixth, regardless of the terminology adopted, Art. 1.6(2) requires that issues ‘within the scope of these Principles but not expressly settled by them are as far as possible to be settled in accordance with their underlying general principles’. Thus if the wording of the black letter rules does not provide a solution for the case at hand, the court may not simply fall back on the law that is applicable by virtue of the rules of private international law. It must first attempt to find a solution on the basis of the other interpretative criteria, particularly the general principles underlying the PICC. Only where this is not ‘possible’ may the court resort to the domestic or international law otherwise applicable. This does not apply to issues that are not ‘within the scope’ of the PICC, however, i. e. that do not concern the general rules of international commercial contracts as set out above.78 In such cases, the PICC are not the applicable law in the first instance, so their interpretation is only required to the extent necessary to delineate the scope of their application. 78

See text at n. 7 above.

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It may be noted that, in the cases that are relevant for the purposes of this paper, it is for the parties to determine the scope of the PICC. As has been seen above, the PICC can only become the applicable law in a state court if the parties have designated the judge as amiable compositeur and requested that he apply the instrument, or part of it, as the applicable law of their transaction. They may, for example, request the application of the entire instrument except the provisions on the validity of contracts set out in Chapter 3. For the purposes of this transaction, the question whether the requirements of, say, fraud are met is removed from the scope of the PICC; recourse must be had to the law otherwise applicable under private international law rules. If the law that is applicable to questions of validity requires the fraudulent party to pay damages, the assessment of damages is governed by the provisions in Section 7.4 of the PICC. Questions on the assessment of damages which are not expressly settled in Section 7.4 are primarily to be resolved in accordance with the underlying general principles of the PICC and without recourse to the law applicable to questions of validity.

4.2 Interpretation of the UNIDROIT Principles as terms of the contract The situation is rather more complex if the parties have incorporated the PICC into their contract – a possibility that is open to the parties in most, if not all domestic systems.79 The PICC become applicable as contractual terms within the framework of the applicable contract law. It seems to be the rule in all legal systems that the law applicable to the contract governs the interpretation of the contract.80 Although it is open to the parties to agree to the contrary it is not to be expected that they will normally do so:81 the content of the contract is nothing but the result of its interpretation, and contracts are normally construed in the light of the rules and principles of the applicable contract law, so choosing different laws for the contract and its interpretation will only make sense in exceptional circumstances. Thus, in the event of incorporation, the provisions of the PICC are usually, qua contract terms, subject to the rules and principles of contractual inter-

79 80

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See Section 3.3 above. See, for example, Art. 12(1)(a) Rome I Regulation (EU) (n. 28 above); § 204 Restatement 2d Conflict of Laws (USA); J. G. McLeod, The Conflict of Laws (Carswell: Calgary 1983), 500-501 (Canada). J. Schröder, ‘Auslegung und Rechtswahl’ [1985] Praxis des Internationalen Privat- und Verfahrensrechts, 131, 132; Dicey, Morris and Collins on the Conflict of Laws, L. Collins (ed.) (14th edn, Sweet & Maxwell: London 2006), §§ 32-191 to 32-193.

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pretation of the applicable law.82 These rules and principles vary across legal systems with regard to both the admissibility of certain interpretative factors and the weight accorded to them. Arguably, these differences are much less pronounced than is frequently assumed. However, some important variations remain.83 For example, as has been mentioned above, some jurisdictions do not admit evidence from the precontractual negotiations as an aid to interpretation, whilst others do.84 The supposedly clear and unambiguous ‘literal meaning’ of a contractual clause carries greater weight in some domestic systems than in others. Many jurisdictions have a rule that requires the interpretation of unclear standard terms against the supplier, and it is at least conceivable that this rule is applied to the clauses incorporating the PICC if the respective contract law classifies these clauses as standard terms.85 Most importantly, every national contract law has its own conceptual, doctrinal and broader cultural background, and domestic courts normally interpret contracts against this background.86 Depending on the applicable contract law, a rule from the PICC that has been incorporated in a contract may thus be construed with regard to the precontractual negotiations or not.87 It may be given a ‘literal’ or a ‘strained’ meaning. In case of doubt, it may or may not be automatically interpreted 82

83

84 85

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This consequence of contractual incorporation is frequently overlooked, but see W.-H. Roth, ‘Zur Wählbarkeit nichtstaatlichen Rechts’, in Festschrift für Eric Jayme, vol. I, H.-P. Mansel et al. (eds) (Sellier: Munich 2004), 757, 768; Vogenauer/Kleinheisterkamp/Michaels, ‘Preamble I’, paras 36, 39; Vogenauer/Kleinheisterkamp/Vogenauer, Art. 1.6, para. 3; Vogenauer/Kleinheisterkamp/Vogenauer, ‘Introduction to Chapter 4’, para. 3. For comparative overviews, see H. Kötz, European Contract Law, vol. I: Formation, Validity, and Content of Contracts; Contract and Third Parties (OUP: Oxford 1997), 106-123; C.-W. Canaris and H. C. Grigoleit, ‘Interpretation of Contracts’, in Towards a European Civil Code, A. Hartkamp et al. (eds) (3rd edn, Kluwer Law International: The Hague 2004), 445; Vogenauer (n. 71 above). See text at n. 45 above. At least under German law the PICC can arguably be classified as standard terms, see C.-W. Canaris, ‘Die Stellung der “UNIDROIT Principles” und der “Principles of European Contract Law” im System der Rechtsquellen’ in Europäische Vertragsrechtsvereinheitlichung und deutsches Recht (Mohr Siebeck: Tübingen 2000), 5, 21-26. The majority of writers opposes this view: Basedow (n. 60 above), 132; Bonell (n. 31 above), 182-183; Vogenauer/Kleinheisterkamp/Michaels, ‘Preamble I’, para. 34. For the separate issue as to when Art. 4.6 PICC applies to the interpretation of the clauses which incorporate provisions of the PICC, see text at n. 123 below. See text at n. 71 above and BGH 16 June 1969, [1969] Außenwirtschaftsdienst des Betriebsberaters, 415. For a well known case where different results with regard to the admissibility of extrinsic evidence in the light of an unambiguously worded contract clause where

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against the party that has suggested the incorporation of the PICC. It may receive a narrow or a wide meaning, depending on whichever is more in line with the respective domestic background assumptions and conceptions on a particular issue: judges from different jurisdictions may have different views, for example, as to whether a party acts ‘in accordance with good faith and fair dealing’ within the meaning of a contract clause that incorporates Art. 1.7 PICC; whether a party is given an ‘excessive advantage’ under the contract (Art. 3.10 PICC); or whether it ‘may reasonably be expected’ of the party to co-operate for performance (Art. 5.1.3 PICC). However, the rules and principles of the applicable law with regard to the interpretation of contracts may be superseded by the interpretative precepts of the PICC, or they may at least have to be qualified in the light of the latter. The extent to which this must be done depends on the circumstances of the case, particularly on the extent to which the parties have incorporated the PICC. For the purposes of our enquiry a variety of scenarios can be distinguished. The parties may have incorporated the PICC in their entirety or partially. In the latter event, they may have excluded the parts that deal with the interpretation of the PICC (Art. 1.6 PICC) or with the construction of contracts (Chapter 4, i. e. Arts 4.1-4.8 PICC).

4.2.1 Full incorporation of the UNIDROIT Principles

If the parties incorporate the PICC in their entirety all the articles of the PICC are transformed into contractual clauses. This includes Art. 1.6 PICC and the rules and principles on the interpretation of contracts that are set out in Chapter 4 of the PICC.

4.2.1.1 Interpretation of contract clauses under Chapter 4 of the UNIDROIT Principles

Articles 4.1-4.8 PICC run as follows: ARTICLE 4.1

(Intention of the parties) (1) A contract shall be interpreted according to the common intention of the parties. (2) If such an intention cannot be established, the contract shall be interpreted according to the meaning that reasonable persons of the same kind as the parties would give to it in the same circumstances. reached under the CISG and the UCC, see MCC-Marble Ceramic Center Inc. v. Ceramica Nuova D’Agostino SpA., 144 F.3d 1384 (C. A. 11th Cir. 1998).

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ARTICLE 4.2

(Interpretation of statements and other conduct) (1) The statements and other conduct of a party shall be interpreted according to that party’s intention if the other party knew or could not have been unaware of that intention. (2) If the preceding paragraph is not applicable, such statements and other conduct shall be interpreted according to the meaning that a reasonable person of the same kind as the other party would give to it in the same circumstances. ARTICLE 4.3

(Relevant circumstances) In applying Articles 4.1 and 4.2, regard shall be had to all the circumstances, including (a) preliminary negotiations between the parties; (b) practices which the parties have established between themselves; (c) the conduct of the parties subsequent to the conclusion of the contract; (d) the nature and purpose of the contract; (e) the meaning commonly given to terms and expressions in the trade concerned; (f) usages. ARTICLE 4.4

(Reference to contract or statement as a whole) Terms and expressions shall be interpreted in the light of the whole contract or statement in which they appear. ARTICLE 4.5

(All terms to be given effect) Contract terms shall be interpreted so as to give effect to all the terms rather than to deprive some of them of effect. ARTICLE 4.6

(Contra proferentem rule) If contract terms supplied by one party are unclear, an interpretation against that party is preferred. ARTICLE 4.7

(Linguistic discrepancies) Where a contract is drawn up in two or more language versions which are equally authoritative there is, in case of discrepancy between the versions,

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a preference for the interpretation according to a version in which the contract was originally drawn up. ARTICLE 4.8

(Supplying an omitted term) (1) Where the parties to a contract have not agreed with respect to a term which is important for a determination of their rights and duties, a term which is appropriate in the circumstances shall be supplied. (2) In determining what is an appropriate term regard shall be had, among other factors, to (a) the intention of the parties; (b) the nature and purpose of the contract; (c) good faith and fair dealing; (d) reasonableness. There are two further provisions of the PICC that concern the interpretation of contractual clauses in the broader sense although they are not contained in Chapter 4: ARTICLE 2.1.17

(Merger clauses) A contract in writing which contains a clause indicating that the writing completely embodies the terms on which the parties have agreed cannot be contradicted or supplemented by evidence of prior statements or agreements. However, such statements or agreements may be used to interpret the writing. ARTICLE 2.1.21

(Conflict between standard terms and non-standard terms) In case of conflict between a standard term and a term which is not a standard term the latter prevails. These two provisions are meant to be included if I refer to ‘Chapter 4 of the PICC’ or to ‘Arts 4.1-4.8 PICC’ in this paper – a terminology that is adopted in order to simplify matters. By way of incorporation, Arts 4.1-4.8 PICC become contractual interpretation clauses chosen by the parties to govern their transaction. The insertion of interpretation clauses or ‘construction clauses’ is a common phenomenon in international commercial contracts.88 In most cases, such clauses simply define a particular word or phrase that is used in the contract or they reinforce the 88

For an extensive overview of contractual practice, see M. Fontaine and F. De Ly, Drafting International Contracts: an Analysis of Contractual Clauses (Transnational Publishers: Ardsley/New York 2006), 103-186.

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choice of law clause by stipulating, for example, that ‘these terms and conditions shall be governed by and construed in accordance with the law of X’. However, some contracts also contain substantive interpretation clauses. These are used to highlight or to supersede particular interpretative rules and principles of the applicable contract law. Such clauses might, for example, explicitly require the construction of contractual provisions in accordance with good faith and fair dealing or in the light of other sets of rules, such as the INCOTERMS. They might exclude references to headings, article titles or paragraph titles in the contract for the purposes of interpretation. They might give guidance on how to deal with issues that are not expressly settled by the terms of the contract. And they might provide that the written contract constitutes the complete and exclusive agreement of the parties, so that it must not be contradicted by, or even interpreted with reference to the precontractual negotiations or any other documents (‘entire agreement’ or ‘merger clauses’). These substantive interpretation clauses are concerned with the admissibility and the weight of particular interpretative criteria in construing the agreement. If incorporated, Arts 4.1-4.8 PICC become contractual interpretation clauses of a similar kind. They do not only govern the part of the contract that contains the clauses which incorporate the provisions of the PICC (‘the PICC clauses’). They also apply to all the other clauses of the contract (‘the remaining clauses’) because the whole purpose of incorporating the PICC is to provide rules of general contract law for the specific transaction of the parties. However, the interpretative rules and principles of the PICC that are incorporated in the contract do not apply if the remaining clauses contain a particular substantive interpretative clause that is inconsistent with one of these rules and principles. In one international commercial contract, for example, the parties stipulated that their agreement ‘shall be construed in accordance with the UNIDROIT Principles of International Commercial Contracts, with the exception of Section [sic] 4.6 which is excluded due to the difficulty of providing explicit language to cover each possible interpretation that may arise in a multi-national legal structure’.89 Such a clause constitutes an express derogation from the effect of Art. 4.6 PICC which the parties are free to agree on even if they incorporate the PICC in their entirety (Art. 1.5 PICC). Derogation may also be implied.90 This would be the case if the parties stipulated that ‘evidence of statements or agreements made prior to the conclusion of a written contract may not be used to interpret the contract if the contract contains a clause that the writing completely embodies the terms on which the parties have agreed’. Such a clause would have to be treated as an implied derogation from the effect of Art. 2.1.17(2) PICC. In these cases, Arts 4.6 or 2.1.17(2) would be inapplicable despite having been incorporated by the 89 90

Bonell (n. 31 above), 274. See also Official Comment 2 to Art. 1.5 PICC.

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parties. Whether there is indeed an inconsistency between a PICC clause and a remaining clause is ultimately a matter of interpretation, and the rules and principles contained in Chapter 4 of the PICC, particularly Art. 4.4 PICC, govern the resolution of this issue.91

4.2.1.2 Mandatory rules of the applicable contract law and Chapter 4 of the UNIDROIT Principles

The clauses incorporating Arts 4.1-4.8 trump the rules and principles of contractual interpretation of the applicable contract law. If the latter, for example, operates on the basis of a ‘plain meaning’ or ‘literal rule’, according to which the interpretation may not deviate from the supposedly ‘clear’ and ‘unambiguous’ ordinary meaning of a contractual term, the national court may not apply this rule because it is not in line with Chapter 4 of the PICC.92 However, as contract terms, the clauses incorporating Chapter 4 of the PICC are subject to the mandatory rules of the applicable contract law.93 Mandatory rules are rules from which the parties, usually for reasons of public policy, may not derogate by agreement. Whether a contract law rule is mandatory or not must be established by the interpretation of this rule and the applicable conflict of laws rules.94 A clause incorporating Art. 4.7 PICC, for instance, would be inapplicable if the applicable law contained a mandatory rule, according to which contracts drawn up in two or more language versions must be interpreted on the basis of the version that is framed in the language of the forum. However, this is an entirely hypothetical example. Domestic rules on the interpretation of contracts are usually default rules which can be abrogated by agreement. In practice, there are only three instances where this may be in doubt, so that the court must examine whether it is barred from applying a clause incorporating a provision of Chapter 4 of the PICC. First, a clause incorporating Art. 4.6 PICC might be displaced by a mandatory contra proferentem rule of the applicable contract law. The rationale of the contra proferentem rule is varyingly held to be the penalisation of the supplier of unclear terms, the protection of the other party against the use of such terms, the allocation of risks between the parties or the prevention of

91 92

93 94

See text at n. 121 below. Official Comment 1 to Art. 4.1 PICC. See also Vogenauer/Kleinheisterkamp/Vogenauer, Art. 4.3, para. 28. See text at n. 37 above. See, for example, § 1-302 UCC and Official Comment 3 to § 1-103 UCC, § 187(2) (b) Restatement 2d Conflict of Laws with Official Comment g; Art. 9(1) of the Rome I Regulation (n. 28 above).

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the use of unclear terms in contractual relationships.95 These are important public policy concerns, so it may be argued that it is the very purpose of the rule to control and restrict the actions of the parties, and they may therefore not derogate from it. In French law and German law, for example, the contra proferentem rule is regarded as mandatory.96 In the US it has been held that the rule ‘rests on the public policy that the inept drafter of a form had the resources to do better’.97 At the same time, the American courts do not seem to object to the widespread use of contract clauses by which the parties to commercial transactions waive any potential benefits from the rule and stipulate expressly that no clause shall be interpreted against its drafter.98 Be that as it may, it is unlikely that a conflict between a domestic contra proferentem rule and a clause incorporating Art. 4.6 PICC will occur in practice. The rule comes in different guises in different legal systems.99 Frequently, it is confined to consumer contracts, so it does not even apply to a commercial contract that incorporates the PICC. In some legal systems, the contra proferentem rule also covers contracts between business people but at the same time it is restricted to the interpretation of standard terms, rather than individually negotiated clauses.100 In any event, a clause incorporating Art. 4.6 PICC would only be displaced by a mandatory contra proferentem rule of the applicable contract law if the latter imposed stricter sanctions on the supplier of an unclear term. Such a rule is hardly conceivable since Art. 4.6 PICC gives the rule a comparatively wide scope: it applies between business people, it applies to both standard terms and 95

96

97

98

99 100

See S. Vogenauer, ‘§ 305-310 (III)’, in Historisch-kritischer Kommentar zum BGB, vol. II/2, M. Schmoeckel, J. Rückert and R. Zimmermann (eds) (Mohr Siebeck: Tübingen 2007), para. 32. M. Lamoureux, ‘L’interprétation des contrats de consommation’ [2006] Recueil Dalloz, 2848, 2851, for Article L 133-2 of the French Consumer Code; J. Basedow, ‘Handelsbräuche und AGB-Gesetz: Spontane Regelbildung im Zeitalter kodifizierter Usancen’ (1986) 150 Zeitschrift für das gesamte Handels- und Wirtschaftsrecht, 469, 488, for § 5 of the 1976 German Standard Terms Act (now § 305 c of the German Civil Code). Estrin Construction Co. Inc. v. The Aetna Casualty and Surety Co., 612 S. W.2d 413 (Mo.App. 1981). Lamoureux (n. 96 above), 2851, n. 24. See also Fontaine and De Ly (n. 88 above), 181, n. 140. For an example of such a clause used in a transaction where the parties chose the PICC as the governing law, combined with an arbitration clause, see at n. 89 above. For an overview, see Vogenauer (n. 71 above), 146-149. This is the case in Germany: BGH 29 September 1987, [1988] Neue Juristische Wochenschrift – Rechtsprechungs-Report, 113, 114; BGH 19 September 2001, [2002] Neue Juristische Wochenschrift – Rechtsprechungs-Report, 1027, 1029. For the question whether the PICC clauses must be classified as ‘standard terms’, see text at n. 85 above.

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individually negotiated terms, and parties do not only ‘supply’ a term if they have actually drafted it but also if they introduce a term drafted by a neutral third party.101 However, there are two features of Art. 4.6 where domestic contra proferentem rules might conceivably impose a stricter regime that affords a higher level of protection for the other party: the provision only comes into play as a rule of last resort, once all the other interpretative rules and principles have failed to resolve the ambiguity of the term in question, and, more importantly, it does not apply invariably, i. e. its language permits that, in exceptional cases, the unclear term is interpreted in favour of the supplier.102 Second, courts may be barred from applying a contractual clause that incorporates Art. 4.3(a) and (c) PICC if a mandatory rule of the applicable contract law restricts the range of circumstances that may be referred to in the construction of contracts. As has been seen before, English law and some other common law jurisdictions do not permit recourse to the preliminary negotiations of the parties for the purposes of contractual interpretation.103 Reference to the subsequent conduct of the parties is equally held to be inadmissible.104 However, it is not to be expected that the courts will hold this rule to be mandatory as it is not normally justified on grounds of public policy. The rule exists at best ‘for reasons of practical policy’105 or, as it was said in the leading case on this question, the ‘reason for not admitting evidence of these exchanges is not … even mainly one of convenience… It is simply that such evidence is unhelpful’.106 Given that there is no issue of principle involved, English courts have not found it difficult to admit and consider evidence from prior correspondence and subsequent documentation in interpreting a contract if the

101 102

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105 106

Vogenauer/Kleinheisterkamp/Vogenauer, Art. 4.6, paras 6-8. Vogenauer/Kleinheisterkamp/Vogenauer, Art. 4.6, paras 4-5, 9. French law differs on the second point, but only with regard to consumer contracts: Cass civ (1) 21 January 2001, Bulletin civil I, no. 19, [2003] Recueil Dalloz, Jur., 2600; Cass civ (2) 13 July 2006, Bulletin civil II, no. 214, annotated by Lamoureux (n. 96 above). For English law, see text at n. 45 above; for New Zealand, see Yoshimoto (n. 46 above), at 549 [95] (Thomas J); for Australia, see the references in G. A. Moens, L. Cohn and D. Peacock, ‘Australia’, in A New Approach to International Commercial Contracts: the UNIDROIT Principles of International Commercial Contracts, M. J. Bonell (ed.) (Kluwer Law International: The Hague 1999), 19, 37-39. The position in the United States is less strict, see § 214(c) Restatement 2d Contracts and Baxter National Bank v. Talbot, 154 Mass. 213, 216-217, 28 N. E. 163 (Mass. 1891). James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583, 603, HL (Lord Reid); L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235, 261, HL (Lord Wilberforce). Investors Compensation Scheme (n. 45 above), at 913 (Lord Hoffmann). Prenn v Simmonds [1971] 1 WLR 1381, 1384-1385, HL (Lord Wilberforce).

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contract was governed by a law that allows recourse to such criteria,107 in one case even where the applicable law’s provisions on contractual interpretation were closely modelled on Chapter 4 of the PICC.108 Third, common law systems adhere to the parol evidence rule.109 The rule excludes the admission of extrinsic evidence from the preliminary negotiations and the subsequent conduct of the parties that is adduced in order to add to, vary or contradict the terms of a written contract, rather than for the purpose of interpreting it.110 The exact scope of the rule differs from one jurisdiction to another. Its various versions are riddled with exceptions and, in some cases, contested to an extent that casts doubt on the continuing existence of the rule. Under the PICC, the rule does not apply in any of its shapes, as can be inferred from the interplay of Arts 4.8(a), 4.1(1) and 4.3(a) and (c), as well as from some other provisions of the PICC.111 Parties incorporating the PICC would therefore purport to derogate from the parol evidence rule and would direct the court towards an admission of evidence that contradicts or supplements a written contract. Whether a state court will accept this depends on whether the applicable contract law considers the parol evidence rule to be mandatory. The rule addresses valid public policy concerns, namely the protection of the ‘integrity’ of written documents, acting as a disincentive to perjured testimony of purported collateral agreements, the promotion of procedural efficiency and the enhancement of legal certainty in the enforcement of contracts. As it was said by one of the UK Law Lords in 2004: ‘The rule that other evidence may not be adduced to contradict the provisions of a contract contained in a written document is fundamental to the mercantile law of this country; the bargain is the document; the certainty of the contract depends on it … This rule is one of the great strengths of English commercial law and is one of the main reasons for the international

107

108

109

110

111

St Pierre v South American Stores [1937] 1 All ER 206, 209-210, KBD (Branson J) (contract governed by Chilean law); affirmed by St Pierre v South American Stores [1937] 3 All ER 349, 351, 355, 358, CA (Greer, Slesser and Mackinnon LJJ). Svenska Petroleum Exploration AB v Government of the Republic of Lithuania (No 2) [2005] EWHC 2437 (Comm), [2006] 1 Lloyd’s Rep 181 [29], [81], [82], [89], [139] (Gloster J) (contract governed by Lithuanian law). Legal systems in the Romanistic legal tradition have a functionally equivalent rule on the exclusion of extrinsic evidence that is not relevant in the context of the PICC because it does not apply to commercial contracts (see e. g. Art. 1341 of the French Civil Code). For further information, see Vogenauer (n. 71 above), 135137. See, for example, § 2-202 UCC and § 213 Restatement 2d Contracts; Jacobs v Batavia and General Plantations Trust [1924] 1 Ch 287, 295, ChD (PO Lawrence J). Vogenauer/Kleinheisterkamp/Vogenauer, Art. 4.3, para. 29.

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success of English law in preference to laxer systems which do not provide the same certainty.’112 The English Court of Appeal has indeed refused to admit evidence of an oral agreement which would have added to the terms of a written agreement although such evidence would have been admissible under the applicable foreign contract law.113 However, the decision was not based on public policy reasoning. The rationale provided for the rule was only the ‘sound sense’ argument that ‘the writing is the grand criterion of what terms were intended to be contractual and what were not’. More importantly, the decision was based on the assumption that the parol evidence rule is not a rule of substantive contract law but rather a rule of evidence which is, as such, governed by the lex fori; a view that is at least questionable since the United Kingdom has incorporated the Rome Convention on the law applicable to contractual obligations.114 In the United States, the parol evidence rule has long been held to be a rule of substantive law, rather than evidence, and it is widely accepted that the court may have recourse to extraneous evidence in order to modify the contract if the governing contract law chosen by the parties permits it to do so, even if the law of the forum does not.115 American accounts of mandatory rules do not mention the rule.116 In Australia, the non-mandatory character of the rule 112

113

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116

Shogun Finance Co Ltd v Hudson [2003] UKHL 62, [2004] 1 AC 919 [49] (Lord Hobhouse). Korner v Witkowitzer [1950] 2 KB 128, 162-163, CA (Denning LJ) (contract governed by Czech law); the decision was affirmed in Vitkovice v Korner [1951] AC 869, HL, where counsel made submissions on the admissibility of the oral agreement but the point was not discussed in the judgments. See Dicey, Morris and Collins (n. 81 above), § 7-018, with reference to Art. 14(2) of the Rome Convention, given effect in English law by the Contracts (Applicable Law) Act 1990 (see now Art. 18(2) of the Rome I Regulation (n. 28 above)); the accounts of mandatory rules in §§ 32-070 to 32-075 and 32-132 to 32-153 do not mention the parol evidence rule. See also U. Spellenberg, ‘Art. 32 EGBGB’, in Münchener Kommentar zum Bürgerlichen Gesetzbuch, vol. 10, K. Rebmann et al. (eds), para. 171. § 140 with Comment c and § 205 with Comment e of the Restatement 2d Conflict of Laws. See already J. H. Beale, A Treatise on the Conflict of Laws, vol. 3: Administration and Procedure (Baker, Voorhuis & Co.: New York 1935), 1615; G. W. Stumberg, Principles of Conflict of Laws (3rd edn, Foundation Press: Brooklyn 1963), 140-141. Reference is usually made to the Baxter case (n. 103 above) although the decision explicitly refers to the interpretation, rather than to the modification of the contract. Official Comment 1 to § 1-302 and Official Comment 3 to § 1-303 UCC. See also, with particular focus on common law mandatory rules that might contradict the PICC, E. A. Farnsworth, ‘An International Restatement: the UNIDROIT Principles

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has been inferred from the legislation giving effect to the CISG which, inter alia, amended certain mandatory rules in the existing law on evidence that were believed to be incompatible with the CISG. These legislative changes did not extend to the parol evidence rule although it is not in line with the CISG.117 In the end, it is hardly conceivable that a common law court would refuse to uphold an explicit agreement of the parties that certain extrinsic evidence should be admissible to add to, vary or contradict the terms of a written contract.

4.2.1.3 Contract clauses incorporating the UNIDROIT Principles bearing the same meaning as the corresponding articles of the Principles

The interplay of the clauses incorporating Arts 1.6 and 4.1-4.8 PICC will usually ensure that a PICC clause is understood with the meaning that is attributed to the corresponding article of the PICC when interpreted as the applicable law. Under Art. 4.1(2) PICC, a contract is normally interpreted according to the meaning that reasonable persons of the same kind as the parties would give to it in the same circumstances. For this purpose, ‘regard shall be had to all the circumstances’, including those set out in Art. 4(3) PICC. The most important of the circumstances that must be taken into account is the natural and ordinary meaning of the words used or, in the case of legal terms of art, the specific legal meaning that is normally attributed to such terms.118 The specific legal meaning of the PICC clauses must be established by an interpretation of the relevant provision of the PICC. This activity is guided by Art. 1.6 PICC, another provision that the parties have incorporated in their contract and that has thus been transformed into a contractual interpretation clause. As a result, the rules and principles for the interpretation of the PICC, as outlined in Section 4.1 above, impact on the construction of the contract.

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of International Commercial Contracts’ (1997) 26 University of Baltimore Law Review, 1, 6. H. D. Gabriel, Contracts for the Sale of Goods: a Comparison of U. S. and International Law (OUP: Oxford 2008), 72-74, discusses the rule and compares it to the solution of the PICC without discussing the possibility of a conflict. B. Zeller, ‘The UNIDROIT Principles of Contract Law; is There Room for Their Inclusion into Domestic Contracts?’ (2007) 26 Journal of Law and Commerce, 115, 120-121. The argument has only limited force because such legislation was not strictly necessary: the CISG would in any event prevail over any other law in force to the extent of any inconsistency, cf., for example, section 6 of the Victoria Sale of Goods (Vienna Convention) Act 1987. For the position under Art. 8(3) CISG, see CISG Advisory Council, Opinion no 3: Parol Evidence Rule, Plain Meaning Rule, Contractual Merger Clause and the CISG (2004) paras 2.1-2.8; MCC-Marble Ceramic Center (n. 87 above). Vogenauer/Kleinheisterkamp/Vogenauer, Art. 4.3, para. 3.

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This is particularly relevant with regard to the requirements of ‘autonomous’ and ‘uniform’ interpretation. The national court must avoid reading the PICC clauses solely against the background of its national contract law. It must rather interpret them on their own terms, with reference to the different language versions, the travaux préparatoires and the underlying purposes and general principles of the PICC. The court must also take into account foreign case law and scholarship on the PICC. As a consequence, legal terms of art used in PICC clauses, such as ‘agency’, ‘avoidance’ and ‘damages’, must be given their PICC-specific meaning, rather than the meaning that is normally associated with such terms in the applicable contract law. The clause incorporating Art. 1.6 PICC also provides for the event that it turns out that the agreement of the parties has not dealt with a specific problem. Issues within the scope of the PICC clauses but not expressly settled by them are as far as possible to be settled in accordance with the underlying general principles of the PICC. If the interpretative guidance of the clause that incorporates Art. 1.6 PICC is followed, there is no reason to be concerned that PICC clauses might be interpreted from a strictly ‘national perspective’.119

4.2.1.4 Exceptional deviations from the PICC-specific meaning

In certain circumstances, the clauses incorporating Chapter 4 of the PICC may also require a deviation from the PICC-specific meaning of the other PICC clauses. This may be the case if it can be shown that both parties jointly understood the clause in a different sense at the time of the conclusion of the contract (Art. 4.1(1) PICC). Whether this is the case or not must be established with reference to all the relevant circumstances, including those set out in Art. 4.3 PICC. If, for example, evidence from the preliminary negotiations shows that the parties understood the term ‘damages’ as being limited to monetary losses, the common intention of the parties prevails, although Art. 7.4.2(2) PICC explicitly allows for the compensation of non-material harm. However, such instances will be exceptional;120 in almost all cases the PICC-specific meaning, being the meaning that reasonable persons of the same kind as the parties would give to the clause in the same circumstances, prevails. A deviation from the PICC-specific meaning of a PICC clause may also be indicated in the light of the remaining clauses of the contract. Their specific legal meaning must primarily be determined against the background of the applicable contract law. If the meaning accorded to a term of art under the domestic contract law differs from the PICC-specific meaning of this term one and the same word may have to be understood with a different meaning in dif119

120

See the concerns voiced by Roth (n. 82 above), 768. Cf. also Vogenauer/Kleinheisterkamp/Michaels, ‘Preamble I’, para. 39. Vogenauer/Kleinheisterkamp/Vogenauer, Art. 4.1, paras 11-12.

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ferent clauses of the contract. However, frequently it will be possible to avoid such frictions by way of application of Art. 4.4 PICC. This provision requires that inconsistencies must as far as possible be remedied by way of interpretation, again having regard to ‘all the circumstances’ (Art. 4.3 PICC). These might indicate that reasonable persons of the same kind as the parties would have preferred a meaning that deviates from the PICC-specific meaning. If the tension cannot be removed through interpretation, the meaning attributed to the remaining clause must prevail because this clause constitutes an implied derogation from the PICC clause under consideration (Art. 1.5).121 The need to attribute to a PICC clause a meaning that does not conform to the meaning given to the corresponding article in the PICC may also follow from the clause incorporating Art. 4.6 PICC. According to Art. 4.6 PICC, unclear contract terms supplied by one party are normally interpreted against that party. Unlike the contra proferentem rules of many domestic contract laws, Art. 4.6 PICC is limited neither to consumer contracts nor to the construction of standard terms. It is sufficient that one party has ‘supplied’ the term. This includes the introduction in the negotiations of a clause which was predrafted by a third party, be it a professional association to which the supplier belongs or a supposedly neutral agency that is equally representative of the interests of both contracting parties.122 Article 4.6 PICC might therefore apply to the PICC clauses if one of the parties has introduced them by suggesting the incorporation of the PICC.123 If one of these clauses is unclear it is interpreted against the supplier. As a result, ambiguities of articles of the PICC turn into interpretative disadvantages for the party suggesting incorporation of the PICC. However, Art. 4.6 PICC requires an irremediable ambiguity that has to persist even after the application of the basic rules of interpretation laid down in Chapter 4 of the PICC.124 Since it will normally be possible to resolve interpretative uncertainties by a combined application of Arts 1.6 and 4.1-4.5 PICC, Art. 4.6 PICC will only rarely apply in these cases. Article 4.7 PICC does not affect the interpretation of the PICC clauses. If there are linguistic discrepancies between two language versions of a PICC clause there is no automatic preference for the version in which the contract was originally drawn up. Discrepancies between different language versions of articles of the PICC must be reconciled by way of interpretation under Art. 1.6 PICC. The resulting PICC-specific meaning is the meaning that reasonable persons of the same kind as the parties would give to the corresponding PICC clause in the same circumstances (Art. 4.1(2) PICC). A different solution pre121 122

123

124

For an example, see text before n. 94 above. Vogenauer/Kleinheisterkamp/Vogenauer, Art. 4.6, paras 6-8. See also text at n. 101 above. For the separate question whether the PICC clauses can be classified as ‘standard terms’ under the applicable contract law, see text at n. 91 above. Vogenauer/Kleinheisterkamp/Vogenauer, Art. 4.6, para. 5.

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vails if it can be established that the parties jointly understood the respective clause to bear the meaning that follows from the version in which the contract was originally drawn up (Art. 4.1(1) PICC). Finally, the rule on ‘supplying omitted terms’ in Art. 4.8 PICC does not lead to deviations from the PICC-specific meaning of PICC clauses either. Issues within the scope of the PICC clauses but not expressly settled by them are as far as possible to be settled in accordance with the underlying general principles of the PICC (Art. 1.6(2) PICC).125 If this enquiry yields a result an ‘appropriate term’ (within the meaning of Art. 4.8 PICC) will have been found; if it does not the factors listed in Art. 4.8(2)(b)-(d) will point towards an interpretation that reasonable persons of the same kind as the parties would adopt in the same circumstances (Art. 4.1(2) PICC), unless it can be positively established that both parties had jointly intended to agree on a different term (Arts 4.8(2)(a) and 4.1(1) PICC).

4.2.1.5 Overview

Overall, if the PICC have been incorporated in their entirety Arts 1.6 and 4.1-4.8 PICC are transformed into contractual interpretation clauses. It is not to be expected that these will fall foul of any mandatory rules of the applicable contract law. As a consequence of the application of these interpretation clauses, a PICC clause will normally be accorded the same meaning as the corresponding article of the PICC. However, the rules and principles of contractual interpretation set out in Chapter 4 of the PICC might exceptionally lead to an understanding of a PICC clause that does not correspond to the PICC-specific meaning, particularly if it can be established that both parties jointly understood the provision in a different sense at the time of the conclusion of the contract.

4.2.2 Partial incorporation of the UNIDROIT Principles

The interpretation of the PICC clauses may follow a different pattern if the parties have only incorporated parts of the UNIDROIT Principles. There are four scenarios of partial incorporation that can be distinguished for the purposes of this paper. In the first scenario, the incorporation includes Art. 1.6 and Chapter 4 of the PICC. Here, the interpretative approach towards PICC clauses resembles the one followed in the case of full incorporation, as discussed in the previous Section of this paper. Of course the context of the PICC clauses within the contract is not identical to the situation analysed above because some of 125

See text at n. 78 above.

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the articles of the PICC have not been incorporated. Therefore an argument that could otherwise be made with reference to one of these articles is not as straightforward as it would be in the case of full incorporation. But these articles must still be explored in the course of establishing the PICC-specific meaning under Art. 1.6 PICC. In the second scenario, the incorporation includes Art. 1.6 PICC but does not extend to Chapter 4 of the PICC. Therefore the domestic rules and principles of contractual interpretation are not superseded by clauses in the agreement that incorporate Arts 4.1-4.8 PICC. Even in those cases, however, the PICC-specific meaning will normally prevail in the construction of the PICC clauses. All national regimes of contractual interpretation place strong emphasis on the natural and, if applicable, the specific legal meaning of the words used by the parties. The specific legal meaning of a PICC clause, as has been seen above,126 must be determined on the basis of Art. 1.6 PICC. As a result, the clause will normally be understood in the same way as the corresponding provision of the PICC. Whether deviations from this meaning are possible will entirely depend on the applicable contract law. It may permit that the generally accepted meaning of a contract term be trumped by the ‘common intention’ of the parties, as would be possible under Art. 4.1(1) PICC,127 but this option is not available to the national court if the applicable contract law follows a strictly ‘objective’ approach to the interpretation of contracts. The PICC-specific meaning of a PICC clause may also have to be abandoned in the light of a remaining clause if the latter contains similar terminology that is normally understood with a different meaning in the applicable contract law.128 Finally, deviations might be indicated if the domestic law contains a contra proferentem rule that applies to the PICC clauses and forces the court to construe an ambiguous PICC clause against the supplier of the clause.129 In the third scenario, the incorporation includes Chapter 4 of the PICC but does not encompass Art. 1.6 PICC. Here, the clauses incorporating Arts 4.1-4.8 PICC supersede the rules and principles of contractual interpretation of the applicable contract law, as set out in Section 4.2.1 above. However, the court cannot rely on a clause incorporating Art. 1.6 in order to establish the specific legal meaning of the PICC clauses. It does not follow, though, that the PICC-specific meaning of these clauses is irrelevant. On the contrary, most 126 127 128

129

See text at n. 118 above. See text at n. 120 above. Depending on the applicable contract law, the result may be similar to the one that would be reached if Art. 4.4 PICC had been incorporated, see Section 4.2.1.4, p. 188 above. Depending on the applicable contract law, the result may be similar to the one that would be reached if Art. 4.6 PICC had been incorporated, see Section 4.2.1.4, pp. 188-189 above. For the question whether domestic contra proferentem rules can apply to PICC clauses, see text at n. 85 above.

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national contract laws accept that contract clauses that have an internationally established meaning are normally given this meaning. This is a settled principle of interpretation in cases where the clause has its origin in a foreign national contract law, as is frequently the case in trade sectors that rely on certain standard form contracts that originated in one jurisdiction and are now used across the globe. In this event, it can be presumed that the parties usually intended to incorporate the clause with the meaning that has evolved in the jurisdiction in question and is now internationally accepted, not least because the uniform interpretation of the clause increases legal certainty and predictability in international commerce.130 Such a meaning will not normally be considered to be binding by the court deciding the issue, and it may be displaced by applying the rules and principles of contractual interpretation of the applicable contract law.131 However, as it was said in an American case concerning a marine insurance contract where the particular form of words originated in England: ‘The important thing is to secure uniformity of view in a commercial world, which now embraces and long has included more than one continent and more than one ocean. … American

130

131

RG 22 May 1897, RGZ 39, 65, 67-69; RG 7 November 1928, RGZ 122, 233, 235; BGH 13 November 1967, [1968] Außenwirtschaftsdienst des Betriebsberaters, 228;

C. Reithmann, ‘Zur Auslegung von Auslandsverträgen’, [1956] Recht der Internationalen Wirtschaft, 15, 16-17; B. von Hoffmann, ‘Zur Auslegung von Formularbedingungen des internationalen Handelsverkehrs’ [1970] Außenwirtschaftsdienst des Betriebsberaters, 247, 251-252; U. Magnus, ‘Art. 32 EGBGB’, in J. von Staudingers Kommentar zum Bürgerlichen Gesetzbuch: EGBGB/IPR Einleitung zu Art. 27 ff EGBGB… (Sellier – de Gruyter: Berlin 2002 edn), para. 30; D. Martiny, ‘Geltungsbereich des Vertragsstatuts’, in Internationales Vertragsrecht: das internationale Privatrecht der Schuldverträge, C. Reithmann and D. Martiny (eds) (6th edn, Otto Schmidt: Cologne 2004), paras. 206, 254; V. Triebel and S. Balthasar, ‘Auslegung englischer Vertragstexte unter deutschem Vertragsstatut – Fallstricke des Art. 32 I Nr. 1 EGBGB’ [2004] Neue Juristische Wochenschrift, 2189, 2192; U. Spellenberg, ‘Art. 11 EGBGB’, in J. von Staudingers Kommentar zum Bürgerlichen Gesetzbuch: EGBGB/ IPR Art. 7, 9-12, 47 EGBGB (Internationales Recht der natürlichen Personen und der Rechtsgeschäfte) (Berlin, Sellier – de Gruyter, 2007 edn), para. 110, n. 350. See, for example, Standard Oil Company of New Jersey v. United States, 340 U. S. 54, 59 (1950); followed in The Republic of China v. National Union Fire Insurance Company of Pittsburgh, 151 F.Supp. 211, 226 (D. Md. 1957); BGH 2 December 1991, [1992] Neue Juristische Wochenschrift – Rechtsprechungs-Report, 423, 425. For a strong argument in favour of a nuanced approach, see Triebel and Balthasar (n. 130 above), 2193-2195. See also Spellenberg (n. 130 above), para. 110; Spellenberg (n. 114 above), para. 10; Martiny (n. 130 above), para. 254.

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courts have emphasized the desirability of uniformity in decisions here and in England in interpretation and enforcement of marine insurance contracts.’132 A similar principle of interpretation prevails where a particular clause that is widely used internationally has no clear origin in a single jurisdiction. A good example is provided by the so-called ‘gold clauses’ that were contained in virtually all international bonds issued in the first decades of the twentieth century in order to protect creditors against the devaluation of currencies.133 With regard to such a clause, the English courts held that: ‘The gold clauses in bonds and obligations are very common in international contracts and in every part of the world. It would be a very serious matter if contracts of that character were treated by particular courts as having a different meaning, in the absence of language and surrounding circumstances of a decisive character compelling that conclusion. The construction of such commercial clauses ought to be as far as possible uniform, unless there are the strongest considerations involving a different construction.’134 The case for according an internationally established meaning to a clause is particularly strong if the clause forms part of an international standard form contract or ‘model contract’. Standard forms of contract are normally produced by representatives of interest groups that collaborate within the framework of an international organisation and aim to provide a neutral and even-handed contractual framework that reflects a compromise between the presumed interests of typical users. Well known examples include the Model Contracts and Clauses of the International Chamber of Commerce (‘ICC’), the Conditions of Contracts for Work of Civil Engineering Contracts of the International Federation of Consulting Engineers (‘FIDIC’) and the various General Conditions of Sale and Standard Clauses drawn up for a range of different products under the auspices of the United Nations Economic Commission for Europe (‘UNECE’).135 Such contracts are designed for the repeated use in a 132

133

134

135

Standard Oil Company of New Jersey v. United States, 340 U. S. 54, 59 (1950); followed in The Republic of China v. National Union Fire Insurance Company of Pittsburgh, 151 F.Supp. 211, 226 (D. Md. 1957). For the background, see A. Nussbaum, ‘Comparative and International Aspects of American Gold Clause Abrogation’ (1934) 44 Yale Law Journal, 53; O. Kahn-Freund, ‘Gold Clauses – Private International Law’ (1937) 1 Modern Law Review, 158. International Trustee for the Protection of Bondholders Aktiengesellschaft v R [1936] 3 All ER 407, 426, CA (Wright MR); this point of the decision was affirmed on appeal in [1937] AC 500, 556, HL (Lord Russell). For an overview of these model contracts, see http://www.iccwbo.org/policy/law/ id272/index.html, http://www1.fidic.org/resources/contracts/ and http://www.unece. org/leginstr/Annex.pdf, all 1 May 2009.

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multitude of international transactions between parties from different jurisdictions, so they are drafted against an international background and in a way that avoids any bias towards a particular legal system and the use of specific national legal terminology. International standard form contracts usually provide a very comprehensive set of rules dealing with the issues that are relevant for the particular type of contract at issue, but they do not normally contain a set of interpretative rules and principles. If such a contract falls to be construed by a national court the judge must adhere to the rules and principles of contractual interpretation of the applicable law. However, it is the very purpose of international standard form contracts that their terms be understood uniformly for all transactions that use the standard form, regardless of the applicable contract law and the forum:136 whenever the parties use standard form contracts, be they of national or international origin, the parties desire legal certainty and predictability, so that litigation can be avoided.137 They rely on the courts consistently giving a particular term the established meaning that this term is generally accepted to have: the purpose of standard clauses is ‘that they become the subject of exegesis by the courts so that the way in which they will apply … will be understood in the same sense by both the parties’.138 In international standard form contracts such a shared understanding evolves 136

137

138

For the following paragraph, see particularly von Hoffmann (n. 130 above), 251, 253; M. Wolf, ‘Auslegung und Inhaltskontrolle von AGB im internationalen kaufmännischen Verkehr’, (1989) 153 Zeitschrift für das gesamte Handels- und Wirtschaftsrecht, 300, 305-306, 318, 319; H.-W. Sieber, Die autonome Auslegung internationaler Standardverträge: Die Anwendbarkeit von Auslegungsklauseln auf die Standardverträge der internationalen Wirtschaft (Münster: PhD Thesis 2002), 14-18, 110-120. See further O. Prausnitz, The Standardization of Commercial Contracts in English and Continental Law (Sweet & Maxwell: London 1937), 133; A. Malintoppi, ‘The Uniformity of Interpretation of International Conventions on Uniform Laws and of Standard Contracts’, in The Sources of Law of International Trade, C. M. Schmitthoff (ed.) (Stevens & Sons: London 1964), 127, 128; G. Weick, ‘Zur Auslegung von internationalen Texten’, in Geschichtliche Rechtswissenschaft: Freundesgabe für Alfred Söllner, G. Köbler, M. Heinze and J. Schapp (eds) (Brühlscher Verlag: Gießen 1990), 607, 614; P. Schlosser, ‘§ 305 c’, in J. von Staudingers Kommentar zum Bürgerlichen Gesetzbuch: §§ 305-310; UKlaG (Recht der Allgemeinen Geschäftsbedingungen) (Sellier – de Gruyter: Berlin 2006 edn), para. 140; R. A. Schütze, Das Dokumentenakkreditiv im internationalen Handelsverkehr (6th edn, Verlag Recht und Wirtschaft: Frankfurt/ Main 2008) para. 22. A/S Awilco of Oslo v Fulvia S. p. A. Di Navigazione of Cagliari (The Chikuma) [1981] 1 WLR 314, 322, HL (Lord Bridge), with regard to clause 5 of the New York Produce Exchange form of charterparty. Federal Commerce and Navigation Co Ltd v Tradax Export SA [1978] AC 1, 8, HL (Lord Diplock), with regard to clause 3 of the Baltimore berth grain standard form of charterparty.

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without the need to adhere to the legal terminology of a particular jurisdiction or to secure coherence with a specific contract law. National courts may therefore not assume that a clause of an international standard form must be given a meaning that accords to the meaning established in the applicable contract law. They must try to find the neutral, internationally accepted meaning of the clause by interpreting the contract on its own terms. This is widely accepted across jurisdictions, as well as in international uniform law and in transnational instruments. Article 9(3) ULIS, for example, provided: ‘Where expressions, provisions or forms of contract commonly used in commercial practice are employed, they shall be interpreted according to the meaning usually given to them in the trade concerned.’139 Put differently, the principles of ‘autonomous’ and ‘uniform’ interpretation do not only apply to the construction of international uniform law instruments and of the PICC,140 but also to the interpretation of international standard form contracts. The PICC clauses very much resemble the clauses of international standard form contracts. The PICC were drafted by an international Working Group that aimed at establishing a neutral and balanced set of rules without any participation of the actual parties to the contract. They do not favour one legal tradition over the other in terms of substantive solutions or legal terminology. National courts must therefore interpret PICC clauses autonomously and uniformly even in the absence of a clause incorporating Art. 1.6 PICC. As a result, in the third scenario, the PICC clauses will also normally be given their PICC-specific meaning. Whether deviations from this meaning are possible or necessary is determined by Arts 4.1-4.8 PICC.141 In the fourth scenario, finally, the parties incorporate neither Art. 1.6 nor Chapter 4 of the PICC. Nevertheless the PICC clauses will normally be understood in the PICC-specific meaning for the same reasons as in the third scenario. Whether the court must deviate from this meaning depends on the applicable contract law.142 Its rules and principles of contractual interpretation might compel the court to give preference to a different meaning, for instance if both parties can show that they jointly intended the clause to have this meaning.

139

140 141 142

See H. J. Mertens and E. Rehbinder, Internationales Kaufrecht: Kommentar zu den einheitlichen Kaufgesetzen (Metzner: Frankfurt/Main 1975), Art. 9, paras 37-38. For an identical rule, see Art. 13(2) ULF. See also Art. 4.3(e) PICC (see Section 4.2.1.1, p. 179 above) and Art. 5:102(e) PECL (‘In interpreting the contract, regard shall be had, in particular, to: … the meaning commonly given to terms and expressions in the branch of activity concerned and the interpretation similar clauses may already have received’). See text at n. 77 above. As in the first scenario, see text at nn. 120-124 above. As in the second scenario, see text at n. 127 above.

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4.3 Interpretation of the UNIDROIT Principles as background law The position is much more straightforward if the national court refers to the PICC as background law in the interpretation of domestic law, international uniform law or contracts.143 In order to interpret any of these instruments in the light of a specific article of the PICC the court must first establish the meaning of this article. This is done by applying the rules and principles of interpretation of the PICC that can be inferred from Art. 1.6 PICC, as set out in Section 4.1 above. The rules and principles that the court must normally apply with regard to the construction of legislation, international uniform law or contracts have no impact on this exercise, although they determine the weight that is accorded to arguments drawn from the PICC in the interpretation of such instruments.144 It may, however, be expected that the full range of interpretative devices available under Art. 1.6 PICC will only rarely be employed in cases where the PICC are referred to as background law. Such recourse will normally only be had if the PICC offer relatively straightforward guidance. Courts that are primarily interested in the construction of other instruments will not be inclined to engage in complex interpretative exercises of the PICC, so it will be wholly exceptional for a court to ‘read down’ an article of the PICC or to extend the scope of a provision to an issue not expressly covered by its language.

5. Conclusion National courts may have recourse to the PICC for three different purposes: as applicable contract law, as contract terms and as background law. Each of these scenarios requires a domestic court to interpret the PICC. The PICC are subject to a specific set of rules and principles of interpretation that flows from Art. 1.6 of the instrument. The interpretative result reached on the basis of Art. 1.6 PICC is conclusive in cases where recourse is had to the PICC as applicable law and in the instances where the PICC are referred to as background law. The same result is also attained in most of the cases where the PICC become applicable as contractual terms but, depending on the extent to which the parties incorporated the PICC into their agreement, the court may have to arrive at a different meaning by applying the rules and principles of contractual interpretation of the PICC (Arts 4.1-4.8 PICC) or of the applicable contract law. 143 144

See Section 3.4, pp. 164-172 above. See text following nn. 44, 62 and 72 above.

Interpretation of English Law in Light of the Common Frame of Reference John Cartwright*

1. Introduction The purpose of this paper is to look at a particular issue which arises from the Common Frame of Reference, using as the basis for discussion the Acquis Principles (‘ACQP’)1 and the academic Draft Common Frame of Reference (‘DCFR’)2 in the forms in which they have now been published. It will not review the many provisions of these documents which inevitably lend themselves to a detailed discussion and criticism. Nor will it discuss the broader questions which arise from the fact that the DCFR is apparently constructing an autonomous concept of contract3 –a European definition of ‘contract’, which differs from the definition used in national systems (contract, contrat/convention, Vertrag, overeenkomst, etc). Rather, this paper will take the ACQP and the DCFR as they stand and, using a particular area (the role of good faith in negotiations and performance), will consider the extent to which English law could interpret or develop its own law of contract consistently with the model of contract which is set up by the Common Frame of Reference.

*

1

2

3

Professor of the Law of Contract, Faculty of Law, Oxford University; Professor of Anglo-American Private Law, Faculty of Law, Leiden University. Research Group on the Existing EC Private Law (Acquis Group), Principles of the Existing EC Contract Law (Acquis Principles), Contract I: Precontractual Obligations, Conclusion of Contract, Unfair Terms (2007). Study Group on a European Civil Code and Research Group on EC Private Law (Acquis Group), Principles, Definitions and Model Rules of European Private Law: Draft Common Frame of Reference (DCFR), Outline Edition (2009). Cf the Rome II Regulation, which admits that there is no unitary concept of noncontractual obligation amongst Member States, and so for the purpose of that Regulation, ‘non-contractual obligation should be understood as an autonomous concept’: Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II), recital 11.

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2. The purpose of the Common Frame of Reference (‘CFR’) On one view, this exercise may seem hypothetical, since the purpose and intended legal effect of the Common Frame of Reference are now apparently much more limited than we had once been led to believe. From an initial idea that we might be working towards a European Contract Code,4 and then a possible optional instrument,5 it now appears that the Common Frame of Reference is aimed at Community lawmakers: a ‘toolbox’ for better lawmaking at the Community level. In its Second Progress Report on the Common Frame of Reference, the Commission said:6 ‘According to its original conception the CFR is intended to be a ‘toolbox’ or a handbook for the Commission and the EU legislator to be used when revising existing and preparing new legislation in the area of contract law… The EP, in its resolutions of 2006, already pointed out the importance of this project and called on the Commission as a whole to participate in this work. It further called for the Commission to exploit the ongoing research work with a view to eventually using the results beyond those strictly related to the EU consumer acquis towards developing a system of Community civil law. In its September resolution it further reiterated its support for the preparation of a wide CFR project on general contract law issues going beyond the consumer protection field, which the Commission should continue in parallel with the acquis review. The Commission considers the CFR a better regulation instrument. It is a longer-term exercise with the purpose of ensuring consistency and good quality of EC legislation in the area of contract law. It would be used to provide clear definitions of legal terms, fundamental principles and coherent modern rules of contract law when revising existing and preparing new sectoral legislation where such a need is identified. Its scope is not a large scale harmonisation of private law or a European civil code’.

4

5

6

Resolution of the European Parliament 26 June 1989, OJ 1989 C 158/400; Communication from the Commission to the Council and the European Parliament on European Contract Law: COM(2001) 398 final (11.07.2001), paras 61-69; see also A. Hartkamp and others (eds), Towards a European Civil Code (Ars Aequi Libri: Nijmegen 1st edn 1994; 2nd edn 1998; 3rd edn 2004). Communication from the Commission to the European Parliament and the Council: a more coherent European contract law; an action plan: COM(2003) 68 final (12.2.2003) (OJ 2003/C63/01), paras 89-97. COM(2007) 447 final.

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This approach was also confirmed by the European Parliament in its resolution of 12 December 2007,7 welcoming the completion of the DCFR: ‘A. whereas the Common Frame of Reference (CFR), which the Commission intends to be a ‘toolbox’ or handbook for the EU legislator, to be used when revising existing and preparing new legislation in the area of contract law, is not intended at present to have any binding legal effect and thus remains in the nature of soft law, B. whereas the CFR, for which the Commission intends to submit its approach in the form of a White Paper, will have indirect legal and practical effects and will to a great extent determine future legislative measures in the area of contract law …’ Furthermore, the Committee on Civil Law Matters, in discussion in 2007 and 2008, has rejected the option of using the Common Frame of Reference to harmonise the contract law of the Member States, and has even rejected the option of a document consisting of a complete set of standard terms and conditions of contract law which could be chosen by companies and trade organisations as the law applicable to a specified contract.8 The Committee’s report was endorsed by the Council on 18 April 2008 with the following statement of the Council’s position on four fundamental aspects of the Common Frame of Reference: ‘(a) Purpose of the Common Frame of Reference: a tool for better lawmaking targeted at Community lawmakers; (b) Content of the Common Frame of Reference: a set of definitions, general principles and model rules in the field of contract law to be derived from a variety of sources; (c) Scope of the Common Frame of Reference: general contract law including consumer contract law; (d) Legal effect of the Common Frame of Reference: a set of non-binding guidelines to be used by lawmakers at Community level on a voluntary basis as a common source of inspiration or reference in the lawmaking process.’ This is not, however, the end of the story. The idea of a document emerging which can be chosen by the parties as the terms of their contract, and which might in the long term become accepted as a form of European Contract Code, is not entirely dead. At present, the DCFR (like any other non-State body 7 8

P6_TA(2007)0615. Draft report of the Committee on Civil Law Matters to the Council on the setting up of a Common Frame of Reference for European Contract Law, 11 April 2008, 8286/08, para 5.

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of law) cannot be the choice of law under the Rome I Regulation. But that Regulation contains the following recitals: ‘(13) This Regulation does not preclude parties from incorporating by reference into their contract a non-State body of law or an international convention. (14) Should the Community adopt, in an appropriate legal instrument, rules of substantive contract law, including standard terms and conditions, such instrument may provide that the parties may choose to apply those rules.’ The contract terms may therefore incorporate non-State rules, although they would then be simply terms of a contract the proper law of which is itself still governed by the domestic law of the relevant State; but the way is left open for a substantive European contract law by a further legal instrument which could itself take the step of allowing choice of law under Rome I. And in a resolution of the Parliament on 3 September 20089 the idea of a larger long-term outcome from the present work was still mentioned: ‘The European Parliament … 11. Points out that, when taking a decision about the content of the CFR, the Commission should bear in mind that the CFR could go well beyond a mere legislative tool and could result in an optional instrument; 12. Suggests that, if the future format of the CFR is likely to be that of an optional instrument, it should confine itself to those areas where the Community legislature has been active or is likely to be active in the near future, or which are closely linked with contract law; suggests that any optional instrument should be based on the DCFR …’ Given, therefore, that the DCFR is already presented in the form and structure of a ‘code’, and that the Acquis Principles purport to draw out of the acquis general principles which the Acquis Group propose should be used for the general development of European legislation on contract law, beyond the detail of the particular instances from which they derive the principles, compatibility of the DCFR and the ACQP with the domestic law of Member States is a serious question.

3. Two possible approaches In this context, there are two different ways of looking at the issue:

9

P6_TA(2008)0397.

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1. The very radical question. Could the influence of the CFR encourage the English courts to develop English law in the direction of a European contract law? How might the existing rules of English law be interpreted so as to conform to a ‘European’ contract law? Or are there rules which simply cannot be developed in the direction of the CFR without fundamentally changing the underlying English principles? 2. The less radical question. If the parties were to adopt the CFR as their contract terms, what would an English court make of it? What problems of interpretation would arise for the English courts faced with a contract which incorporated the CFR as terms? We shall consider principally question 2; indirectly, however, an answer to question 2 leads towards an answer to question 1. We shall test the question by focusing here on one particular aspect of the ACQP and the DCFR which appears to present a particular contradiction with English law: the imposition of overriding duties of good faith.

4. Overriding duties of good faith It is not surprising that a particular difference between English law and the ACQP/DCFR should fall within the adoption of overriding duties of good faith, both in the pre-contractual stage and during the performance of the contract. It is well known that the general approach of English law and other European civil law systems on this question is significantly different: the civil law systems are by no means identical in the detail of their approach, but they have in common a general acceptance of duties in negotiation and performance which are based on, or articulated through the language of, good faith. English law, however, has rejected any general duty of good faith in either formation or performance of the contract.10

4.1 Precontractual duties of good faith There are various provisions in both the ACQP and the DCFR relating to the duty to act in good faith during negotiations. The ACQP begins with general duties:

10

eg R. Zimmermann and S. Whittaker, Good Faith in European Contract Law (CUP: Cambridge 2000), ch 1, discussing in particular German, French and English law; J. Cartwright and M. Hesselink, Precontractual Liability in European Private Law (CUP: Cambridge 2008), ch 5, esp 461-470, discussing English and Dutch law in relation to the precontractual stage.

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ACQP Article 2:101: Good faith

In pre-contractual dealings, parties must act in accordance with good faith. ACQP Article 2:103: Negotiations contrary to good faith

(1) A party is free to negotiate and is not liable for failure to reach an agreement. (2) However, the party who has conducted or discontinued negotiations contrary to good faith is liable for loss caused to the other party. (3) In particular, a party acts contrary to good faith if it enters into or continues negotiations with no real intention of reaching an agreement. The DCFR also contains a list of negotiation duties: DCFR II.–3:301: Negotiations contrary to good faith and fair dealing

(1) A person is free to negotiate and is not liable for failure to reach an agreement. (2) A person who is engaged in negotiations has a duty to negotiate in accordance with good faith and fair dealing and not to break off negotiations contrary to good faith and fair dealing. This duty may not be excluded or limited by contract. (3) A person who is in breach of the duty is liable for any loss caused to the other party by the breach. (4) It is contrary to good faith and fair dealing, in particular, for a person to enter into or continue negotiations with no real intention of reaching an agreement with the other party. The ACQP goes further and includes a more particular section on precontractual information duties, not only duties in favour of consumers, but also the general duty on all contracting parties: ACQP Article 2:201: Duty to inform about goods or services

Before the conclusion of the contract, the party has a duty to give to the other party such information concerning the goods or services to be provided as the other party can reasonably expect, taking into account the standards of quality and performance which would be normal under the circumstances. This goes much further than English law, which rejects any general duty of disclosure.11 By way of illustration: the authors of the ACQP include examples12 11 12

Smith v Hughes (1871) LR 6 QB 597, below, n 17. ACQP (n 1) 79-80, esp examples 2 (seller’s duty to inform of defect in engine) and 3 (seller’s duty to inform that car is previous season’s model and will be replaced by

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under which a seller of a car (whether or not selling in the course of business) would be required to disclose information about the car, which do not reflect the seller’s duties under a contract of sale in English law. The DCFR also contains ‘information duties’, although they are couched in terms less distant from English law, whilst still extending beyond the present position. For example, the duty to disclose information about goods, other assets and services is only imposed on a business seller or supplier: DCFR II.–3:101: Duty to disclose information about goods, other assets

and services (1) Before the conclusion of a contract for the supply of goods, other assets or services by a business to another person, the business has a duty to disclose to the other person such information concerning the goods, other assets or services to be supplied as the other person can reasonably expect, taking into account the standards of quality and performance which would be normal under the circumstances. (2) In assessing what information the other party can reasonably expect to be disclosed, the test to be applied, if the other party is also a business, is whether the failure to provide the information would deviate from good commercial practice. There is also a range of more particular information duties relating to particular types of contract–sometimes in favour of consumers, but also sometimes in business-to-business contracts,13 as well as a general liability for fraudulent non-disclosure.14 Could English law be developed in this direction? There are well-known problems in English law with the specific language of ‘good faith’ as a duty between parties negotiating a contract, and the authors of the Acquis Principles relate the duty to act in accordance with good faith to the enforcement of the ‘standards of fairness and reasonableness in pre-contractual dealings’. This is an interesting statement, given the approach of the English and Scottish Law Commissions in a report in 2005 which proposed to re-enact the Directive on Unfair Terms in Consumer Contracts within English law in a form which would delete the problematic reference to ‘good faith’ and replace it with a test based on whether the contract term is ‘fair and reasonable’. Such a test,

13

14

new model within a few days). The basis of ACQP art 2:201 is said (at 76) to be art 2 of the Consumer Sales Directive and art 35 CISG. However, the generalisation to all goods and services contracts, and to the form of a general precontractual information duty, goes well beyond the approach taken in English law. eg DCFR IV.C–2:102 (service contracts: precontractual duty to warn); IV. E–2:101 (commercial agency, franchise, distributorship contracts: precontractual information duty). DCFR II.–7.205.

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they say,15 will be ‘easier for UK lawyers to apply than a more “European” test which makes express reference to good faith’. However, for English law it is not simply a matter of language. The rejection of the duty to negotiate in good faith is based both on a claim that such a duty is not sufficiently certain in content to be enforceable (and so even an expressly agreed duty to negotiate in good faith is inherently unacceptable), and a claim that such a duty would undermine the proper relationship between negotiating parties (so it would be contrary to principle to imply a duty of good faith in negotiations). There is a point of principle that the parties negotiating a contract should not be required to undertake as a matter of general law duties of good faith or loyalty towards each other, and that, as long as the other party has not positively misled the other, he should be free to break off negotiations without risking sanctions:16 ‘[T]he concept of a duty to carry on negotiations in good faith is inherently repugnant to the adversarial position of the parties when involved in negotiations. Each party to the negotiations is entitled to pursue his (or her) own interest, so long as he avoids making misrepresentations. To advance that interest he must be entitled, if he thinks it appropriate, to threaten to withdraw from further negotiations or to withdraw in fact in the hope that the opposite party may seek to reopen the negotiations by offering him improved terms. [Counsel arguing that liability be imposed should in the case], of course, accepts that the agreement upon which he relies does not contain a duty to complete the negotiations. But that still leaves the vital question: how is a vendor ever to know that he is entitled to withdraw from further negotiations? How is the court to police such an ‘agreement’? A duty to negotiate in good faith is as unworkable in practice as it is inherently inconsistent with the position of a negotiating party. It is here that the uncertainty lies.’ The emphasis here on liability flowing only from misrepresentations during the negotiations is also consistent with the general position taken in English law that neither party normally has duties of disclosure:17 ‘[E]ven if the vendor was aware that the purchaser thought that the article possessed that quality, and would not have entered into the contract unless he had so thought, still the purchaser is bound, unless the vendor was guilty of some fraud or deceit upon him, and ... a mere abstinence from disabusing the purchaser of that impression is not fraud or deceit; for, whatever may be the case in a court of morals, there is no legal obligation on the vendor 15 16 17

Law Commission Report No 292, Unfair Terms in Contracts (2005), para 3.89. Walford v Miles [1992] 2 AC 128 (HL) 138 (Lord Ackner). Smith v Hughes (1871) LR 6 QB 597, 607 (Blackburn J).

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to inform the purchaser that he is under a mistake, not induced by the act of the vendor.’ This view of the negotiations, and of the inherent duties (or absence of duties) between negotiating parties, is derived from a mid-19th century view of contracting: parties bargain at arm’s length, and the courts should normally have no role in intervening in the substance of the contract.18 Could this be rethought?

4.2 Good faith during performance The schemes of both the ACQP and the DCFR are based on contracting parties having mutual duties of good faith during performance. For example, the ACQP has general duties to perform in good faith, and to exercise the right to performance and remedies for non-performance in good faith: ACQP Article 7:101: Duty to perform

(1) The debtor must perform its obligations in accordance with good faith. ACQP Article 7:102: Good faith in the exercise of rights

The creditor must exercise its rights to performance and remedies for nonperformance in accordance with good faith. The DCFR brings the good faith performance duties together in art III.– 1:103: DCFR III.–1:103: Good faith and fair dealing (1) A person has a duty to act in accordance with good faith and fair dealing in performing an obligation, in exercising a right to performance, in

18

The view taken of possible duties of disclosure, and good faith in negotiating, in cases such as Smith v Hughes was not always held. In the mid-18th century, for example, Lord Mansfield had said ‘the governing principle is applicable to all contracts and dealings. Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain, from his ignorance of that fact, and his believing the contrary’: Carter v Boehm (1766) 3 Burr 1905, 1909-1910. But the model adopted in the formative period of the modern law of English contract law–the mid-19th century–was the arm’s length bargain. See further J. Cartwright, ‘The English Law of Contract: Time for Review?’ (inaugural lecture at the University of Leiden, 7 October 2008, published by the Meijers Institute, University of Leiden, no. MI-164, and in (2009) 17 ERPL 155).

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pursuing or defending a remedy for non-performance, or in exercising a right to terminate an obligation or contractual relationship. (2) The duty may not be excluded or limited by contract or other juridical act. (3) Breach of the duty does not give rise directly to the remedies for nonperformance of an obligation but may preclude the person in breach from exercising or relying on a right, remedy or defence which that person would otherwise have. In English law, there is no general duty to perform in good faith, nor to exercise rights and remedies in good faith. There are certain situations in which the courts will achieve similar results, typically by interpreting contractual obligations so as to limit the parties’ exercise of them,19 but it is clear that English law does not go as far as European civil legal systems in relation to duties of good faith in performance. The English courts emphasise certainty, and their reluctance to apply broad principles to justify intervention in the performance of the contract. For example, in Union Eagle Ltd v Golden Achievement Ltd20 Lord Hoffmann said: ‘The principle that equity will restrain the enforcement of legal rights when it would be unconscionable to insist upon them has an attractive breadth. But the reasons why the courts have rejected such generalisations are founded not merely upon authority … but also upon practical considerations of business. These are, in summary, that in many forms of transaction it is of great importance that if something happens for which the contract has made express provision, the parties should know with certainty that the terms of the contract will be enforced. The existence of an undefined discretion to refuse to enforce the contract on the ground that this would be ‘unconscionable’ is sufficient to create uncertainty. Even if it is most unlikely that a discretion to grant relief will be exercised, its mere existence enables litigation to be employed as a negotiating tactic. The realities of commercial life are that this may cause injustice which cannot be fully compensated by the ultimate decision in the case’.

19

20

eg Rice v Great Yarmouth Borough Council [2003] TCLR 1 (interpretation of termination clause so as to prevent one party exercising it in accordance with its literal terms); see S. Whittaker, ‘Termination Clauses’ in A. Burrows and E. Peel (eds), Contract Terms (OUP: Oxford 2007), 273-283. [1997] AC 514 (PC) 518. The purchaser under a contract of sale of land tendered the balance of the purchase price 10 minutes late, and thereby lost the contract and its deposit. The Privy Council refused to intervene to deny the vendor’s right to rescind the contract and forfeit the purchaser’s deposit.

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It would therefore be a significant step to interpret or develop English law in the direction of the approach set out in the ACQP and DCFR. A particularly strong example is the fact that so far English law has even rejected an express clause imposing a duty on the parties to renegotiate in good faith. As with the duty to negotiate in good faith, this appears to be based on concerns about the uncertainty of the meaning of ‘good faith’, although there are already signs that the English courts are unhappy with this and that there may be a development in the direction of admitting express duties of good faith. In Petromec Inc v Petroleo Brasilieiro SA21 Longmore LJ raised serious doubts about whether English law should refuse to give effect to clauses imposing the obligation to negotiate in good faith:22 ‘It would be a strong thing to declare unenforceable a clause into which the parties have deliberately and expressly entered. I have already observed that it is of comparatively narrow scope. To decide that it has ‘no legal content’ to use Lord Ackner’s phrase23 would be for the law deliberately to defeat the reasonable expectations of honest men, to adapt slightly the title of Lord Steyn’s Sultan Azlan Shah lecture delivered in Kuala Lumpur on 24 October 1996.24 At page 439 Lord Steyn hoped that the House of Lords might reconsider Walford v Miles with the benefit of fuller argument. That is not an option open to this court.’ Below the level of the House of Lords, then, it is not yet safe to assume that even in the strongest case–the express renegotiation clause–the duty to negotiate in good faith will be accepted in law, although we have a strong indication that the lower courts will wish to change this. But to go so far as to imply a duty of good faith into all contracts as a matter of general law would be a far too radical step for the English courts to take. The parties to the contract are still free, within the constraints of the obligations which they have freely accepted, to act in their own separate interests. Apart from certain particular types of contract, such as partnerships, there is

21 22 23

24

[2006] 1 Lloyd’s Rep 121 (CA). ibid [121]. Walford (n 16) 138: ‘A duty to negotiate in good faith is as unworkable in practice as it is inherently inconsistent with the position of a negotiating party. It is here that the uncertainty lies. In my judgment, while negotiations are in existence either party is entitled to withdraw from those negotiations, at any time and for any reason. There can be thus no obligation to continue to negotiate until there is a “proper reason” to withdraw. Accordingly a bare agreement to negotiate has no legal content’. Published under the title ‘Contract Law: Fulfilling the Reasonable Expectations of Honest Men’ in (1997) 113 LQR 433.

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no inherent duty of loyalty and good faith between contracting parties.25 To accept such a duty would be to change the relationship between contracting parties. And where both parties are acting in the course of business, the English courts would be likely to view such a general duty as undermining the certainty of contracting.

5. (Re-)interpretation of English law in light of the Common Frame of Reference? The courts may in due course be required to address questions of interpretation of provisions in the Common Frame of Reference, and their compatibility with English law, if parties were to incorporate the CFR – for example, in a form such as the present form of the Model Rules of the DCFR – into their contract. No doubt the parties would need to be careful to incorporate only the parts relating to contractual obligations. Given that the published DCFR contains, in addition to general contract provisions and provisions relating to special contracts, provisions which relate to ‘other juridical acts’, and also provisions on benevolent intervention in another’s affairs (book V), non-contractual liability arising out of damage caused to another (book VI), unjustified enrichment (book VII), acquisition and loss of ownership of goods (book VIII), proprietary security rights in movable assets (book IX) and trusts (book X), a wholesale incorporation into a private contract would hardly be appropriate.26 But it is entirely possible that we shall in due course see parties in international contracts, governed by English law, adopting into their contract the sections of the CFR dealing with contracts. An approach of his kind is not unknown in other contexts, such as in the incorporation of the UNIDROIT principles into international commercial contracts.27 Nor is it a question unique to English 25

26

27

Where performance of a contract requires the co-operation of both parties, there is normally an implied term that each party will provide that co-operation: Mackay v Dick (1881) 6 App Cas 251 (HL). But this is not broadly construed, and is certainly a long way from a general implied duty of loyalty and good faith between the parties in the performance of the contract. Indeed, anticipating this, the European Parliament has suggested that the CFR ‘should confine itself to those areas where the Community legislature has been active or is likely to be active in the near future, or which are closely linked with contract law’: Resolution of 3 September 2008, P6_TA(2008)0397 (n 9). Unidroit Principles of International Commercial Contracts 2004, Preamble: ‘These Principles set forth general rules for international commercial contracts. They shall be applied when the parties have agreed that their contract be governed by them. They may be applied when the parties have agreed that their contract be governed by general principles of law, the lex mercatoria or the like...’ See also S. Vogenauer in this volume.

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law: every legal system will have questions about the compatibility of the DCFR with its domestic rules. On one level, it may be that English law would have less difficulty than some other legal systems with the parties’ incorporation of the DCFR into their contract, for the reason that English law views a contract as the terms intended by the parties. There are relatively few mandatory terms in English contract law, and most of them tend to derive from EU directives which will in any event (one hopes) be covered within the scope of the DCFR anyway. But there would still be questions of technique for the courts to address. English law, and therefore the English courts, do not generally work from broad statements of principle but from detailed rules. In interpreting statutes and other domestic legislative texts the courts adopt a predominantly objective interpretation of the language of the text, and do not generally reason beyond the statute; this leads legislative draftsmen to draft the text of enactments in a very detailed and precise form.28 The terms of contracts also tend to be drafted in detail, and parties do not deliberately leave room for judicial interpretation and expansion of the framework which the parties have laid down themselves.29 If the DCFR were incorporated wholesale into a contract, the court would find itself having to interpret a text which is set out in the form of a code, with broad general principles as well as detailed provisions–although even the detailed provisions are not generally drafted in the English legislative style familiar to the English judges. Moreover, once the notes to the DCFR have been published, the court would be faced, presumably, not only with the text to interpret, but also the complete volume, which according to the authors of the DCFR30 ‘will be voluminous. It will invite study at one’s desk at home or in the office but it will be too bulky to pack into luggage taken to meetings or conferences’. In interpreting statutes which have been enacted to give effect to EC law, the English courts are learning new techniques of interpretation, given that the more restrictive, objective interpretation of language in English statutory texts gives way in a European context to broader interpretation techniques, including in particular teleological interpretation.31 There is a similarity in the English courts’ techniques of interpretation of statutory texts and contracts, both normally being based on an objective reading of the text without regard to what the draftsman might subjectively have intended the language to mean. 28

29 30 31

J. Cartwright, Contract Law: An Introduction to the English Law of Contract for the Civil Lawyer (Hart Publishing: Oxford 2007), 30-31, 40-43. Where there is no specific legislative provision, the English judges draw principles from the cases (the common law), in order to apply them to new cases–rather than starting from general statements of principle in legislative texts: ibid 31-40. ibid 192-193. DCFR (n 2) 5-6. J. Bell and G. Engle (eds), Cross, Statutory Interpretation (3rd edn, OUP: Oxford 1995), 105-112.

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If, however, the parties choose to incorporate the DCFR into their contract, the courts may decide that this shows an intention of the parties on the face of the contract to incorporate the DCFR as interpreted within broader context in Europe. And so the developing learning as to the interpretation of the DCFR may become a context which an English judge will have to consider. In relation to the particular issue which has been discussed in this paper– the apparent conflict between the approaches of English law and the DCFR to general duties of good faith in formation and performance of contracts–then if the parties incorporated the Model Rules of the DCFR into their contract the courts would have to interpret and apply the test of ‘good faith and fair dealing’ in the DCFR. Art. I.–1:103(1) gives it meaning, and there is a definition in the Annex to the DCFR (unless the context otherwise requires: I.–1:108): ‘“Good faith and fair dealing” is a standard of conduct characterised by honesty, openness and consideration for the interests of the other party to the transaction or relationship in question.” It is surely not beyond the English courts to make sense of this provision in a contract where the parties have expressly agreed to incorporate it. We have already seen that there is disquiet amongst some judges that English law apparently refuses to apply an expressly agreed duty to renegotiate a contract in good faith, and it is therefore reasonable to expect an openness to developing English law to allow such an agreement to succeed rather than to fail because of an insistence on the ‘uncertainty’ of such a provision.32 This ought to be facilitated by the existence of a definition in the DCFR of ‘good faith and fair dealing’–which, it should be noted, is an objective standard of conduct,33 and which the English courts might be more comfortable in applying. Moreover, in interpreting the language of ‘good faith’ in the Unfair Terms in Consumer Contracts Regulations 199434 Lord Bingham said that it was clear–a test of ‘fair and open dealing’:35 32 33

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Walford (n 16) 138, above, n 23. In Walford (n 16) Lord Ackner objected to the subjective meaning of ‘good faith’. Under the DCFR ‘good faith’ when used alone is subjective: ‘a mental attitude characterised by honesty and an absence of knowledge that an apparent situation is not the true situation’: see the definition in the Appendix to the DCFR. Transposing Council Directive 93/13/EEC. The 1994 Regulations were replaced by the Unfair Terms in Consumer Contracts Regulations 1999, which adhere more closely to the language of the Directive. Director-General of Fair Trading v First National Bank plc [2002] 1 AC 481 [17]. Note that the Law Commission Report No 292, Unfair Terms in Contracts (2005), para 3.89 (n 15) has proposed using in the English implementation of the Directive as a test of whether the term is ‘fair and reasonable’–a standard which the English courts can more comfortably apply.

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‘It is plain from the recitals to the Directive that one of its objectives was partially to harmonise the law in this important field among all member states of the European Union. The member states have no common concept of fairness or good faith, and the Directive does not purport to state the law of any single member state. It lays down a test to be applied, whatever their pre-existing law, by all member states. If the meaning of the test were doubtful, or vulnerable to the possibility of differing interpretations in differing member states, it might be desirable or necessary to seek a ruling from the European Court of Justice on its interpretation. But the language used in expressing the test, so far as applicable in this case, is in my opinion clear and not reasonably capable of differing interpretations. A term falling within the scope of the Regulations is unfair if it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer in a manner or to an extent which is contrary to the requirement of good faith. … The requirement of good faith in this context is one of fair and open dealing. Openness requires that the terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps. Appropriate prominence should be given to terms which might operate disadvantageously to the customer. Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer’s necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those listed in Schedule 2 to the Regulations. Good faith in this context is not an artificial or technical concept; nor, since Lord Mansfield was its champion, is it a concept wholly unfamiliar to British lawyers. It looks to good standards of commercial morality and practice’. Moreover, although the application of the notion of good faith (or functional equivalents) may vary in detail amongst the European civil law jurisdictions, many jurisdictions have well-settled bodies of case-law defining and giving concrete content to their respective approaches to ‘good faith’36 – case-law which, no doubt, will be drawn upon by the courts of those jurisdictions in their own interpretation and development of the DCFR. The scope of change involved should not be overstated. The incorporation by the parties into their contract of a set of terms along the lines of the DCFR would constitute express terms of the contract relating to good faith – perhaps in relation to negotiation,37 and certainly in relation to performance. This 36

37

For examples in relation to precontractual good faith, see the discussion of the reporters on the various jurisdictions in each of the case studies in Cartwright and Hesselink (n 10). If the parties simply agreed to be bound in their contract by the DCFR, would it mean that any breaches of the DCFR duties of good faith in the prior negotiations

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may enable the courts to discover meaning for the ‘duty to negotiate in good faith’ – and so it will be less easy to reject such duties on the ground that they are too uncertain. But the rejection in Walford v Miles38 of the duty to negotiate in good faith was based in part on its uncertainty, and in part on its inconsistency with the proper relationship between parties in negotiations–that is, the argument of principle that there cannot be an implied duty to negotiate. This fundamental position of English law, which is contrary to the approach taken both in continental jurisdictions and in the DCFR,39 would not in itself be challenged by the admission that the parties could expressly incorporate the DCFR into their contracts. On the other hand, one might think that such a development could have a much more significant long-term impact. If any significant number of parties were to accept the DCFR by incorporating it into their (domestic) contracts, and the courts began to develop a jurisprudence of interpretation of the provisions of the DCFR as contract terms there may be not only a gradual acceptance of the Common Frame of Reference in that context, but also less resistance to a development of the harmonisation of European contract law in a stronger form. But that is very long-term indeed, and entirely hypothetical.

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for that contract would become breaches of the contract once concluded? Similarly, since the DCFR contains duties of disclosure, the incorporation into the contract might be construed as contractual warranties that disclosure had been made in accordance with the rules. Walford (n 16). Cartwright and Hesselink (n 10) 483-488.

The White Paper on Damages Actions for Breach of the EC Antitrust Rules Erik-Jan Zippro*

1. Introduction Public enforcement and private enforcement form the two pillars of the antitrust enforcement policy. Public enforcement concerns enforcement of the antitrust rules by the Commission and the National Competition Authorities (henceforth NCAs) to ensure that competition is not restricted or distorted. The Commission and the NCAs have the power to investigate and to impose fines. Private enforcement is enforcement by means of legal action brought by a private party before a court or before arbitrators, in which the private party advances independent civil claims or counterclaims based on the competition provisions.1 The courts with responsibility for administering these actions in Europe are the national courts of the Member States.2 Private enforcement can take several forms, such as actions for damages (sword litigation), actions for injunctive relief (sword litigation) and actions for nullity (shield litigation). The EC Treaty itself refers explicitly to the sanction of nullity in Article 81(2) EC. Injunctive relief includes, for example, actions to stop anticompetitive behaviour or actions for enforcement of a contract. These injunctions can be awarded as an interim measure or as a final remedy. The duty of national courts to provide for actions for injunctive relief or damages can be deduced from Article 10 EC. Private enforcement has its roots in the case law of the Community Courts regarding the effective protection of Community rights by the national courts.

*

1

2

Erik-Jan Zippro is assistant professor of private law, Faculty of Law, Leiden University and fellow of the E. M. Meijers Institute of Leiden University Law School. See also A. P. Komninos, EC Private Antitrust Enforcement (Hart Publishing: Oxford 2008), 2; E.-J. Zippro, Privaatrechtelijke handhaving van mededingingsrecht (Kluwer: Deventer 2009), 1-2. Recital 7 of Regulation 1/2003.

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See for example Delimitis,3 Francovic,4 Van Gend en Loos5 and BRT/Sabam.6 In 2001 came the Courage v. Crehan7 ruling. In its judgment the European Court of Justice held that: ‘the full effectiveness of Article 81 of the Treaty and, in particular the practical effect of the prohibition laid down in Article 81(1) would be put at risk if it were not open to any individual to claim damages for loss caused to him by a contract or a conduct liable to restrict or distort competition.’8 In the recent Manfredi9 judgment the Court confirms the statements it made in Courage v. Crehan. It underlined the need for an effective redress for the victims of infringements of the antitrust rules and reiterated the importance of the principles of equivalence and effectiveness. However, successful claims in this field are rare in Europe. The modernisation and decentralisation of European competition law enforcement has led to Regulation 1/2003. This Regulation enhances the ability of national courts to play a greater role in the enforcement of competition law. The new system does away with authorization and notification, the application of competition law has been decentralised, and the subsequent inspection system has been reinforced. The Commission’s monopoly to grant individual exemptions under Article 81(3) of the EC Treaty has disappeared in Regulation 1/2003. In addition to the national competition authorities the national courts are also authorised to assess whether an agreement complies with the criteria set by the third paragraph of Article 81 EC. According to the European Competition Commissioner, Neelie Kroes, consumers and businesses lose billions of Euros each year as a result of competition law infringements. Therefore the Commission has been calling for the removal of obstacles in national laws that hinder victims of anticompetitive conduct from claiming compensation in national courts.

3 4

5

6

7 8 9

Case C-234/89, Stergios Delimitis v. Henniger Bräu AG, [1991] ECR I-935. Joined Cases C-6/0 and C-9/90, Andrea Francovic and Danila Bonifaci and others v. Italian Republic, [1991] ECR I-5357. Case 26/62 NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v. Netherlands Inland Revenue Administration, [1963] ECR1. Case 127/73, Belgische Radio en Televisie v. SV SABAM and NV Fonior, [1974] ECR 51. Case C-453/99, Courage Ltd v. Bernard Crehan, [2001] ECR I-6297. Case C-453/99, Courage Ltd v. Bernard Crehan, [2001] ECR I-6297, § 26. Joined cases C-295/04 to C-298/04, Manfredi v. Lloyd Adriatico Assicurazioni SpA et al, [2006] ECR I-6619.

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2. The Green Paper and the White Paper on Damages actions for breach of the EC Antitrust Rules In 2005, the Commission published a Green Paper on ‘Damages actions for breach of the EC antitrust rules’10 The aim of this was to stimulate private actions for damages. According to the Commission victims rarely obtain damages due to the obstructive nature of Member States’ rules and procedures governing antitrust damages actions. Following consultation on the Green Paper, on April 2008 the Commission published its long-awaited White Paper on damages actions for breach of the EC antitrust rules.11 The White Paper proposes several minimum rules in nine relevant areas that, according to the White Paper, should be incorporated into the national laws of the 27 EU Member States to remove the obstacles in national laws that hinder victims of anticompetitive conduct from claiming compensation in national courts. The proposals are designed to encourage victims of anti-competitive conduct to seek compensation in national courts and to level the playing field for such actions. The White Paper is accompanied by a ‘Commission Staff Working paper’ on damages actions and an ‘Impact Assessment Report’ on the proposed changes in policy.12

3. The proposed measures and policy choices in the White Paper 3.1 Standing and Collective Redress Individual consumers and small businesses are often deterred from bringing an individual action for damages due to the costs, risks and burdens involved. As a result, many of these victims remain uncompensated, especially those who have suffered scattered and relatively low-value damage. The Commission considers that there is a clear need for mechanisms of collective redress. Not only direct purchasers but also indirect purchasers should have the right to claim damages. The Commission therefore suggests a combination of two complementary mechanisms of collective redress. The first mechanism is a representative action. Such actions are brought by qualified entities, such as 10

COM(2005) 672 final, Green Paper, Damages actions for breach of the EC antitrust

11

COM (2008) 165 final, White Paper, Damages actions for breach of the EC antitrust

rules.

12

rules. SEC (2008) 404, Commission Staff Working Paper accompanying the White Paper on Damages actions for breach of the EC antitrust rules; SEC (2008) 405, Commission Staff Working Document, Accompanying document to the White Paper on Damages actions for breach of the EC antitrust rules, Impact Assessment.

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consumer associations, state bodies or trade associations, on behalf of identified or, in rather restricted cases, identifiable victims. According to the proposal from the Commission these entities are either officially designated in advance or certified on an ad hoc basis by a Member State for a particular antitrust infringement to bring an action on behalf of some or all of their members. The second mechanism is an opt-in collective action. In this type of action victims expressly decide to combine their individual claims for harm they suffered into one single action.

3.2 Access to evidence: disclosure inter partes The White Paper recognises that cartel victims will often have difficulties gathering sufficient evidence. The Commission recommends a minimum level of disclosure. It suggests that national courts should, under specific conditions, have the power to order parties to proceedings or third parties to disclose precise categories of relevant evidence. Conditions for a disclosure order should include a) that the claimant has presented all the facts and means of evidence that are reasonably available to him, provided that these show plausible grounds that he suffered harm as a result of an infringement of competition rules by the defendant, b) the claimant is unable otherwise to produce the requested evidence, and c) the claimant has specified sufficiently precise categories of evidence to be disclosed and has satisfied the court that the envisaged disclosure measure is both relevant to the case, and necessary and proportionate. According to the Commission, adequate protection should be given to corporate statements by leniency applicants and to the investigations of competition authorities. Otherwise private actions would discourage possible applicants from using leniency programs to come forth with vital evidence. Courts should have the power to impose sufficiently deterrent sanctions, including the option to draw adverse inferences in the civil proceedings for damages.

3.3 Binding effect of NCA decisions Infringement decisions of the Commission can be relied upon as binding proof in civil proceedings for damages (Masterfoods).13 In actions for damages where national courts need to rule on practices under Article 81 or 82 EC, the White Paper proposes that where a national competition authority (NCA) in the European Competition Network (ECN) has already given a final decision finding that the practice has infringed those articles, or where a review court has given a final judgment upholding the NCA decision or itself found an 13

Case C-344/98, Masterfoods Ltd, v HB Ice Cream Ltd [2000] ECR I-11369.

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infringement, the national court cannot take decisions running counter to any such decision or ruling. This proposal is meant as an incentive to encourage follow-on actions by making it easier for victims to rely on findings by the competition authorities.

3.4 Fault requirements The White Paper proposes that in cases where a breach of Article 81 or 82 EC has been proven and where a Member State still requires fault to be proved in a damages claim, defendants will be liable unless they can show that the infringement was based on a genuinely excusable error. An error would be excusable if a reasonable person applying a high standard of care could not have been aware that the conduct restricted competition. The Commission sees no policy difficulties with the fact that some Member States require no fault at all as a condition for an antitrust damages claim, or irrebuttably presume the existence of fault once an infringement has been proven.

3.5 Calculation of damages The White Paper states that victims of antitrust infringements must receive full compensation of the real value of the loss suffered. This was emphasised by the European Court of Justice as a minimum requirement in Manfredi. The entitlement to full compensation therefore extends not only to the actual loss due to an anti-competitive price increase, but also to the loss of profit as a result of any reduction in sales and corresponding interest (Manfredi).14 To raise awareness amongst potential infringers and to stimulate legal certainty, the Commission suggests codifying the current acquis communautaire on the scope of damages that victims of antitrust infringements can recover. The calculation of the quantum of the damages that victims of competition law infringements can recover involves a comparison with the economic situation of the victim in the hypothetical scenario of a competitive market. To facilitate the calculation of damages, the Commission intends to draw up a framework with pragmatic, non-binding guidance for quantification of damages in antitrust cases. For example by including approximate methods of calculation or simplified rules on estimating the loss. The Commission encourages national courts to accept some form of damages estimation in place of a precise calculation of damages. The exact calculation of damages is difficult and burdensome. 14

Joined cases C-295/04 to C-298/04, Manfredi v. Lloyd Adriatico Assicurazioni SpA et al, [2006] ECR I-6619, §§ 95, 97.

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3.6 Limitation periods Limitation periods play an important role in providing legal certainty, but they can also be a considerable obstacle to recovery of damages, both in stand-alone and follow-on cases. The Commission recommends that limitation periods should only begin to run after the victim can reasonably be expected to have knowledge of the infringement and the harm it has caused. In cases of continuous or repeated infringements the limitation period should not begin to run before the day on which the infringement ceases. The White Paper proposes that there should be another limitation period for follow-on claims that will start to run once an infringement decision of a NCA or a national court has become final. The Commission prefers the option of a new limitation period over the option of suspending limitation periods during an investigation by a NCA or the Commission. There are two reasons for this preference. Firstly, the precise calculation of the remaining period is difficult, especially when claimants don’t know about the opening and closure of proceedings by the competition authorities. Secondly, if a suspension were to commence at a very late stage of the limitation period, there may not be enough time left to prepare a civil claim.

3.7 Costs of damages actions The costs associated with antitrust damages claims and the ‘loser pays principle’, which apply in most Member States, could discourage victims from filing claims. Antitrust damages claims are costly, complex and time-consuming. The Commission therefore encourages Member States to take some action. Firstly, to design procedural rules fostering settlements, as a way to reduce costs; secondly, to set court fees in an appropriate manner so that they do not become a disproportionate disincentive to antitrust damages claims; thirdly, to give national courts the possibility of issuing cost orders derogating, in certain justified cases, from the normal cost rules, preferably upfront in the proceedings. Such cost orders would guarantee that the claimant, even if unsuccessful, would not have to bear all costs incurred by the defendant. The White Paper does not provide more detailed proposals on how to design such cost rules.

3.8 Protection of leniency applicants: the interaction between leniency programmes and actions for damages The threat of the disclosure of the confession submitted by a leniency applicant could have a negative influence on the quality of the applicants submissions, or even dissuade an infringer from applying for leniency altogether. The Commission therefore suggests that adequate protection against disclosure in

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private actions for damages should apply to all corporate statements submitted by all applicants for leniency in relation to a breach of Article 81 of the EC Treaty, regardless of whether the application for leniency is accepted, is rejected or leads to no decision by the competition authority. According to the White Paper this protection applies where disclosure is ordered by a court, before or after adoption of a decision by the competition authority. Voluntary disclosure of corporate statements by applicants for immunity and reduction of fines should be precluded at least until a statement of objections has been issued. In addition to the first suggestions in the White Paper, Member States should consider the possibility of limiting the civil liability of immunity recipients by removing the liability of a successful immunity applicant for loss caused by other co-infringers.

3.9 Passing-on defence and indirect purchaser standing The most discussed defence that can be put up against a damages action is the passing-on defence. An undertaking that purchases from a cartel member (the direct purchaser) could be in a position to reduce its economic loss by passing on the overcharge to its own customers (the indirect purchasers). The damages could therefore be passed on to subsequent market levels or even be born entirely by the ultimate purchaser (the final consumer). Denying the passing-on defence could result in unjust enrichment of purchasers who passed on the overcharge. It can also result in multiple compensation for the illegal overcharge by the defendant. In the Green paper the Commission set out to find the best possible solution to the issues of the passing on defence and indirect purchaser standing. Therefore, it formulated several policy options for the treatment of these matters. The first option is that the passing on defence is allowed and both direct and indirect purchasers can sue the infringer. The second option is that the passing on defence is excluded and only direct purchasers can sue the infringer. The third option is that the passing on defence is excluded and both direct and indirect purchasers can sue the infringer. The fourth option is that the passing on defence is excluded and only direct purchasers can sue the infringer. The fifth option is that the passing on defence is excluded and both direct and indirect purchasers can sue the infringer. The last policy option is a two-step procedure in which the passing on defence is excluded, the infringer can be sued by any victim and, in a second step, the overcharge is distributed between all the parties who have suffered a loss. The White Paper recalls the Court’s emphasis on the compensatory principle and its premise that damages should be available to any injured person who can show a sufficient causal link with the infringement. The Commission

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therefore suggests that defendants should be entitled to invoke the passing-on defence against a claim for compensation of the overcharge. The standard of proof for this defence should be not lower than the standard imposed on the claimant to prove the damage. Purchasers at the end of the distribution chain are often harmed by antitrust infringements, but given their distance from the infringement, they find it particularly difficult to produce sufficient proof of the existence and extent of passing-on of the illegal overcharge along the distribution chain. The White Paper proposes that indirect purchasers should be able to rely on the rebuttable presumption that the illegal overcharge was passed on to them in its entirety.

4. Comment The White Paper on damages actions announces a new stage of development for private enforcement of competition rules. The suggestions in the White Paper do not go as far as the Commission’s 2005 Green Paper on this subject; the more controversial suggestions in the Green paper, such as double or treble damages, were not included. Some proposals in the Green Paper would have little chance of being passed by the European Parliament or Council. The White Paper includes three guiding principles. Firstly, full compensation for all categories of victims. Secondly, balanced measures that are rooted in European legal culture and traditions. Finally, preservation of strong public enforcement; private enforcement should complement public enforcement. The scope of the measures proposed in the White Paper is limited to breaches of antitrust rules. This fragmented approach based on judicial area detracts from the internal cohesion of the national systems of private law and is not desirable. A more horizontal approach that in principle applies to all relevant judicial areas of private law would be better, but is difficult to achieve. I share the view that both direct and indirect purchasers must be able to claim damages. Exclusion of the right to claim damages would involve a limitation of the right of any individual who has suffered harm to institute legal proceedings to obtain reparation. The introduction of a rebuttable presumption for indirect purchasers that the overcharge was passed on in its entirety by direct purchasers will make it more easy for indirect purchasers to obtain damages. The suggestions in the White Paper relating to this presumption are likely to lead to tension between a direct purchaser and an indirect purchaser. The direct purchaser and the indirect purchaser will try to prove the opposite in relation to whether the overcharge was passed on. The ability of indirect purchasers to bring a damages claim in Europe is different from the US Federal approach. In the US Federal approach indirect purchasers are generally not

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entitled to redress (Illinois Brick) and US defendants are not allowed to invoke the passing-on defence (Hanover Shoe).15 The White Paper’s proposal on collective actions is not comparable with the US approach, which provides for opt-out collective actions where each victim is included in a claim unless it expressly chooses to be excluded. The proposals the Commission puts forth in the White Paper are a good starting point for the discussion of the development of new collective redress mechanisms. There are still a few unanswered questions. Firstly, it is unclear whether the Commission assumes that the court will be required to determine compensation for each individual. Secondly, what is the definition of identifiable victims? Finally, will it be possible for defendants to achieve settlements that guarantee defendants finality? I do not support the Commission’s proposal to attach binding conclusive force to final decisions of NCA’s. The proposal creates an impression of public enforcement primacy. Introducing a rule of primacy of public antitrust enforcement over private antitrust enforcement would be wrong because of the principles of judicial independence and the separation of powers.16 The primacy of the decisions of the Commission is not the primacy of the Commission, as a competition authority, over civil courts, but of the Commission, as supranational Community organ, over national courts (under the final control of the ECJ through Article 234 EC).17 There are also a few practical reasons for not supporting the Commission’s proposal. Firstly, defendants will be less likely to settle with NCA’s and will be forced to appeal adverse decisions. This will encourage more litigation instead of settlements out of court. Secondly, decisions by a NCA are open for review, but in some Member States (for example the Netherlands) the review is conducted by an administrative court that applies a marginal test (i. e. whether the NCA could reasonably have arrived at its decision that an infringement has occurred) instead of a full assessment of the facts (civil court).

5. Conclusion Although private law enforcement has its drawbacks, it also has advantages compared to public law enforcement. It is not necessary, however, to make a choice between a system of just public law enforcement on the one hand, or just private law enforcement on the other. Private law enforcement and public 15

16

17

Hanover Shoe Inc v. United Shoe Machinery Corp, 392 U. S. 481, 88 S. Ct. 2224, 20 L.Ed.2d 1231 (1968); Illinois Brick Co. v. Illinois, 431 U. S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977). A. P. Komninos, EC Private Antitrust Enforcement (Hart Publishing: Oxford/Portland 2008), 15 ff. ibid., 16.

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law enforcement can complement and reinforce each other; the advantages of both can be combined, and the drawbacks of one may be compensated in part by the other. Private law enforcement of competition law is both useful and necessary. The White Paper recommends a broad range of measures to ensure that all victims of anti-competitive behaviour are able to obtain full compensation for the harm they suffered. This is to be achieved through a combination of Community and Member State action. In certain Member States (for example the United Kingdom and Germany) the existing law already goes as far as the Commission’s proposals. In some areas the existing law in certain Member States goes even beyond the proposals of the Commission in the White Paper. Although the suggestions in the White Paper do not go as far as the Commission’s 2005 Green Paper on this subject, the recommendations suggest amendments to core areas of civil law and civil procedure law. The Commission will receive criticism from those who were hoping for more radical reforms, as well as criticism from those concerned by the Commission’s proposals to interfere with core areas of Member States’ civil law and civil procedure law. Time will tell if the proposals of the Commission in the White Paper will help to ensure that the right to compensation of the victims of infringements of the antitrust rules becomes a reality.